As filed with the Securities and Exchange Commission on June 25, 2021
1933 Act File No. 333-_____
1940 Act File No. 811-08568
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
☑ | REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
☐ | Pre-Effective Amendment No. | |
☐ | Post-Effective Amendment No. |
and/or
☑ | REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
☑ | Amendment No. 3 |
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-2805
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: 1-800-225-6020
Christopher Sechler, Esq.
200 Berkeley Street, Boston, Massachusetts 02116-2805
Name and Address (of Agent for Service)
Copies of Communications to:
Mark P. Goshko, Esq.
K&L Gates LLP
One Lincoln Street
Boston, Massachusetts 02111-2950
Approximate Date of Proposed Public Offering: From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection
with a dividend reinvestment plan, check the following box. ☑
If this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto, check the following
box ☑.
If this Form is a registration statement pursuant to General Instruction
B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities
Act, check the following box ☑.
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box ☐.
It is proposed that this filing will become effective (check appropriate box):
☐ | when declared effective pursuant to section 8(c) |
If appropriate, check the following box:
☐ | This post-effective amendment designates a new effective date for a previously filed registration statement. | |
☐ |
This form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is ________. |
|
☐ | This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is . | |
☐ | This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is . |
Check each box that appropriately characterizes the Registrant:
☒ Registered closed-end fund.
☐ Business
development company.
☐ Interval
fund.
☒ A.2
Qualified.
☒ Well-Known
Seasoned Issuer (as defined by Rule 405 under the Securities Act).
☐ Emerging
Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).
☐ New
Registrant.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered |
|
Proposed
|
Proposed
Maximum Aggregate Offering Price (1) |
Amount of Registration Fees (1)(2) |
Common Shares, no par value
|
1,500,000 Shares | $37.80 | $56,700,000.00 |
$6,185.97 |
(1) | Securities are being registered on an automatic shelf registration statement and fees have been calculated in accordance with Rule 457(r) of the Securities Act of 1933, as amended, based on the payment rate in effect on the date of payment. The proposed maximum offering price per unit has been estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low sales prices of the Common Shares of beneficial interest on June 21, 2021 as reported on the New York Stock Exchange. |
(2) | Transmitted prior to filing. |
Base Prospectus dated june 25, 2021
1,500,000 Shares
John Hancock Financial Opportunities Fund
Common Shares
John Hancock Financial Opportunities Fund (the “Fund” or “fund”) is a diversified, closed-end management investment company. The Fund commenced operations in August 1994 following an initial public offering.
Investment Objective. The Fund’s primary investment objective is to provide a high level of total return consisting of long-term capital appreciation and current income. There can be no assurance that the Fund will achieve its investment objective.
The Offering. The Fund may offer, from time to time, in one or more offerings, the Fund’s common shares of beneficial interest, no par value (“Common Shares”). Common Shares may be offered at prices and on terms to be set forth in one or more supplements to this Prospectus (each, a “Prospectus Supplement”). You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in Common Shares.
Common Shares may be offered directly to one or more purchasers, through agents designated from time to time by the Fund, or to or through underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the offer or sale of Common Shares, and will set forth any applicable offering price, sales, load, fee, commission or discount arrangement between the Fund and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds, and the terms of any sale. The Fund may not sell any Common Shares through agents, underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering of the Common Shares.
Investment Strategy. Under normal circumstances, the Fund will invest at least 80% (plus any borrowings for investment purposes) of its net assets in equity securities of U.S. and foreign financial services companies of any size. These companies may include, but are not limited to, banks, thrifts, finance and financial technology companies, brokerage and advisory firms, real estate-related firms, insurance companies and financial holding companies. The Fund may invest up to 20% of its total assets in common and preferred equity securities and other preferred securities of foreign banking, lending and financial services companies, including securities quoted in foreign currencies.
Investment Advisor and Subadvisor. The Fund’s investment advisor is John Hancock Investment Management LLC (the “Advisor” or “JHIM”) and its subadvisor is Manulife Investment Management (US) LLC (the “Subadvisor”).
Exchange listing. The Fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “BTO.” Any new Common Shares offered and sold hereby are expected to be listed on the NYSE and trade under this symbol. As of June 21, 2021, the last reported sale price for the Common Shares was $37.80.
Leverage. The Fund may use leverage to the extent permitted by the Investment Company Act of 1940 (the “1940 Act”), this Prospectus, and a liquidity agreement dated June 16, 2015 (the “LA”). See “—Other Investment Policies—Borrowing.” The LA includes a line of credit and may utilize securities lending and reverse repurchase agreements. The Fund’s leverage strategy may not be successful. In addition, new Rule 18f-4 may impact how the Fund uses leverage and certain borrowings and other investments, but the Fund is not required to comply with those requirements until August 19, 2022. See “Hedging, Derivative and Other Strategic Transactions Risk” for additional information.
The Common Shares have traded both at a premium and a discount to net asset value (“NAV”). The Fund cannot predict whether Common Shares will trade in the future at a premium or discount to NAV. The provisions of the 1940 Act generally require that the public offering price of common shares (less any
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underwriting commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within 48 hours of pricing). The Fund’s issuance of Common Shares may have an adverse effect on prices in the secondary market for the Fund’s Common Shares by increasing the number of Common Shares available, which may put downward pressure on the market price for the Fund’s Common Shares. Shares of common stock of closed-end investment companies frequently trade at a discount from NAV, which may increase investors’ risk of loss.
Investing in the Fund’s Common Shares involves certain risks. See “Risk Factors” beginning on page 26.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This Prospectus, together with any applicable Prospectus Supplement, sets forth concisely the information about the Fund that a prospective investor should know before investing. You should read this Prospectus and the applicable Prospectus Supplement, which contain important information, before deciding whether to invest in the Common Shares. You should retain the Prospectus and Prospectus Supplement for future reference. A Statement of Additional Information (“SAI”), dated June 25, 2021, containing additional information about the Fund, has been filed with the SEC and is incorporated by reference in its entirety into this Prospectus. The Table of Contents for the SAI is on page 59 of the Prospectus. A copy of the SAI may be obtained without charge by calling 800-225-6020 (toll-free) or from the SEC’s website at sec.gov. Copies of the Fund’s annual report and semi-annual report and other information about the Fund may be obtained upon request by writing to the Fund, by calling 800-225-6020, or by visiting the Fund’s website at https://www.jhinvestments.com/resources/all-resources/other/john-hancock-financial-opportunities-fund-annual-report. You also may obtain a copy of any information regarding the Fund filed with the SEC from the SEC’s website (sec.gov).
As of January 1, 2021, paper copies of the Fund's shareholder reports will no longer be sent by mail. Instead, the reports will be made available on a website, and you will be notified and provided with a link each time a report is posted to the website. You may request to receive paper reports from the Fund or from your financial intermediary, free of charge, at any time. You may also request to receive documents through e-delivery.
The Fund’s Common Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
Prospectus dated June 25, 2021
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You should rely only on the information contained in, or incorporated by reference into, this Prospectus and any related Prospectus Supplement in making your investment decisions. The Fund has not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Fund is not making an offer to sell the Common Shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this Prospectus and any Prospectus Supplement is accurate only as of the dates on their covers. The Fund’s business, financial condition and prospects may have changed since the date of its description in this Prospectus or the date of its description in any Prospectus Supplement.
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This is only a summary. You should review the more detailed information elsewhere in this prospectus (“Prospectus”), in any related supplement to this Prospectus (each, a “Prospectus Supplement”), and in the Statement of Additional Information (the “SAI”) prior to making an investment in the Fund. See “Risk Factors.”
The Fund | John Hancock Financial Opportunities Fund (the “Fund”) is a diversified, closed-end management investment company. The Fund commenced operations in August 1994 following an initial public offering. |
Investment Objective | The Fund’s primary investment objective is to provide a high level of total return consisting of long-term capital appreciation and current income. There can be no assurance that the Fund will achieve its investment objective. The Fund’s investment objective is not fundamental and may be changed without shareholder approval. |
The Offering | The Fund may offer, from time to time, in one or more offerings, up to 1,500,000 of the Fund’s common shares of beneficial interest, no par value (“Common Shares”), on terms to be determined at the time of the offering. The Common Shares may be offered at prices and on terms to be set forth in one or more Prospectus Supplements. You should read this Prospectus and the applicable Prospectus Supplement carefully before you invest in Common Shares. Common Shares may be offered directly to one or more purchasers, through agents designated from time to time by the Fund, or to or through underwriters or dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount arrangement between the Fund and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds, and the terms of any sale. See “Plan of Distribution.” The Fund may not sell any Common Shares through agents, underwriters or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering of Common Shares. |
Listing and Symbol | The Fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “BTO.” Any new Common Shares offered and sold hereby will be listed on the NYSE and trade under this symbol. As of June 21, 2021, the last reported sale price for the Common Shares was $37.80. |
Investment Strategy |
Under normal circumstances, the Fund will invest at least 80% of its net assets in equity securities of U.S. and foreign financial services companies of any size. These companies may include, but are not limited to, banks, thrifts, finance and financial technology companies, brokerage and advisory firms, real estate-related firms, insurance companies and financial holding companies. The equity securities in which the Fund may invest are common stocks, preferred stocks, warrants, stock purchase rights, securities convertible into other equity securities. “Net assets” is defined as net assets plus any borrowings for investment purposes. The Fund will notify shareholders at least 60 days prior to any change in this 80% policy.
The Fund may invest up to 20% of its total assets in common and preferred equity securities and other preferred securities of foreign banking, lending and financial services companies, including securities quoted in foreign currencies.
Under normal market conditions, the Fund may invest up to 20% of its net assets in the common and preferred equity securities and other preferred securities of non-financial services companies. The Fund may also invest in debt securities, and will invest in debt securities that are rated, at the time of purchase, BB or |
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below by Standard & Poor's Ratings Group ("Standard & Poor's") or Ba or below by Moody's Investors Service, Inc. ("Moody's"), or if unrated by such rating organizations, determined by the Adviser (as defined below) to be of comparable quality. The Fund will not purchase debt securities rated below C or which are in default at the time of purchase. Debt securities rated BB or Ba or below (or comparable unrated securities) are commonly referred to as "junk bonds" and are considered by Moody's and Standard & Poor’s to be predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure to adverse business financial or economic conditions. In some cases, such obligations may be highly speculative and have extremely poor prospects for reaching investment grade standing and may be in default. As a result, investment in such obligations will entail greater speculative risks than those associated with investment in investment grade obligations (i.e., obligations rated AAA, AA, A or BBB by Standard & Poor's or Aaa, Aa, A or Baa by Moody's). The descriptions of the investment grade rating categories by Moody’s and S&P, including a description of their speculative characteristics, are set forth in the SAI. With respect to the Fund’s investments in fixed-income or debt securities, the Fund may invest in higher quality instruments for temporary or defensive purposes. | |
Investment Advisor and Subadvisor | The Fund’s investment advisor is John Hancock Investment Management LLC (the “Advisor” or “JHIM”) and its subadvisor is Manulife Investment Management (US) LLC (the “Subadvisor”). |
JHIM, the Fund’s investment advisor, is an indirect principally owned subsidiary of Manulife Financial Corporation. The Advisor is responsible for overseeing the management of the Fund, including its day-to-day business operations and monitoring the Subadvisor. As of March 31, 2021, the Advisor had total assets under management of approximately $171.9 billion. | |
The Subadvisor handles the fund’s portfolio management activity, subject to oversight by the Advisor. The Subadvisor, organized in 1968, is a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial, a publicly held, Canadian-based company). As of March 31, 2021, the Subadvisor had total assets under management of approximately $217.5 billion. | |
See “Management of the Fund—The Advisor” and “—The Subadvisor.” | |
Distributions | The Fund makes regular quarterly distributions to holders of Common Shares (the “Common Shareholders”) sourced from the Fund’s cash available for distribution. “Cash available for distribution” consists of the Fund’s (i) investment company taxable income, which includes among other things, dividend and ordinary income after payment of Fund expenses, the excess of net short-term capital gain over net long-term capital loss, and income from certain hedging and interest rate transactions, and (ii) net long-term capital gain (gain from the sale of capital assets held longer than one year). The Board of Trustees of the Fund (the “Board”) may modify this distribution policy at any time without obtaining the approval of Common Shareholders. |
Pursuant to the requirements of the 1940 Act, in the event the Fund makes distributions from sources other than income, a notice will accompany each quarterly distribution with respect to the estimated sources of the distribution made. Such notices will describe the portion, if any, of the quarterly dividend which, in the Fund’s good faith judgment, constitutes long-term capital gain, short-term capital gain, net investment income or a return of capital. The actual character of such dividend distributions for U.S. federal income tax purposes, however, will only be determined finally by the Fund at the close of its fiscal |
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Shares will trade at, above or below NAV. In addition to NAV, the market price of the Fund’s Common Shares may be affected by such factors as the Fund’s dividend stability, dividend levels, which are in turn affected by expenses, and market supply and demand. | |
In recognition of the possibility that the Common Shares may trade at a discount from their NAV, and that any such discount may not be in the best interest of Common Shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to reduce any such discount. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in the Common Shares trading at a price equal to or close to NAV per Common Share. In the event that the Fund conducts an offering of new Common Shares and such offering constitutes a “distribution” under Regulation M, the Fund and certain of its affiliates may be subject to an applicable restricted period that could limit the timing of any repurchases by the Fund. | |
Summary of Risks | The Fund’s principal risk factors are listed below by general risks and strategy risks. The Fund’s main risks are listed below in alphabetical order, not in order of importance. Before investing, be sure to read the additional descriptions of these risks beginning on page 26 of this Prospectus. |
General Risks |
Anti-takeover Provisions. The Fund’s Declaration of Trust includes provisions that could limit the ability of other persons or entities to acquire control of the Fund or to change the composition of its Board. These provisions may deprive shareholders of opportunities to sell their Common Shares at a premium over the then current market price of the Common Shares. See “Certain Provisions in the Declaration of Trust and By-Laws—Anti-takeover provisions.”
Changes in U.S. Law. Changes in the state and U.S. federal laws applicable to the Fund, including changes to state and U.S. federal tax laws, or applicable to the Advisor, the Subadvisor and other securities or instruments in which the Fund may invest, may negatively affect the Fund’s returns to Common Shareholders. The Fund may need to modify its investment strategy in the future in order to satisfy new regulatory requirements or to compete in a changed business environment.
Cybersecurity and Operational Risk. Cybersecurity breaches may allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause the Fund or its service providers to suffer data corruption or lose operational functionality. Similar incidents affecting issuers of the Fund’s securities may negatively impact performance. Operational risk may arise from human error, error by third parties, communication errors, or technology failures, among other causes.
Defensive Positions Risk. During periods of adverse market or economic conditions, the Fund may temporarily invest all or a substantial portion of its total assets in short-term money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. The Fund will not be pursuing its investment objective in these circumstances and could miss favorable market developments.
Distribution Risk. There can be no assurance that quarterly distributions paid by the Fund to shareholders will be maintained at current levels or increase over time. The quarterly distributions shareholders receive from the Fund are derived from the Fund’s dividends and interest income after payment of Fund expenses. The Fund’s cash available for distribution may vary widely over the short- and long-term. If, for any calendar year, the total distributions made exceed the Fund’s net investment taxable income and net capital gain, the excess generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or |
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her potential loss on the subsequent sale of his or her Common Shares. Distributions in any year may include a substantial return of capital component.
Economic and market events risk. Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth, may at times result in unusually high market volatility, which could negatively impact performance. Reduced liquidity in credit and fixed-income markets could adversely affect issuers worldwide. Banks and financial services companies could suffer losses if interest rates rise or economic conditions deteriorate.
Industry or Sector Risk. The Fund generally invests a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the Fund's assets are economically tied to a single or small number of industries or sectors of the economy, the Fund will be less diversified than a more broadly diversified fund, and it may cause the Fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the Fund’s NAV more volatile. Further, a Fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors. Financial services companies can be hurt by economic declines, changes in interest rates, and regulatory and market impacts.
Inflation Risk. Inflation risk is the risk that the purchasing power of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and distributions thereon can decline.
Interest Rate Risk. Interest rate risk is the risk that fixed-income securities such as debt securities and preferred securities will decline in value because of changes in market interest rates. When market interest rates rise, the market value of such securities generally will fall. The Fund’s investments in debt securities and preferred securities means that the NAV and market price of the Common Shares will tend to decline if market interest rates rise. Given the historically low level of interest rates in recent years and the likelihood that interest rates will increase when the national economy strengthens, the risk of the potentially negative impact of rising interest rates on the value of the Fund’s portfolio may be significant. In addition, the longer the average maturity of the Fund’s portfolio of debt securities, the greater the potential impact of rising interest rates on the value of the Fund’s portfolio and the less flexibility the Fund may have to respond to the decreasing spread between the yield on its portfolio securities.
During periods of declining interest rates, an issuer may exercise its option to prepay principal of debt securities or to redeem preferred securities earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security’s duration and reduce the value of the security. This is known as extension risk. Recent and potential future changes in government monetary policy may affect the level of interest rates.
Investment and Market Risk. An investment in Common Shares is subject to investment and market risk, including the possible loss of the entire principal amount invested. An investment in Common Shares represents an indirect investment in the securities owned by the Fund, which generally are traded on a securities exchange or in the over-the-counter markets. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. Common Shares at any point in time may be worth |
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less than the original investment, even after taking into account any reinvestment of dividends and distributions.
Leverage Risk. The Fund is authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including the issuance of debt securities. The Fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.”
The Fund utilizes the LA to increase its assets available for investment. When the Fund leverages its assets, Common Shareholders bear the fees associated with the LA and have the potential to benefit or be disadvantaged from the use of leverage. In addition, the fee paid to the Advisor is calculated on the basis of the Fund’s average daily managed assets, including proceeds from borrowings and/or the issuance of any preferred shares, so the fee will be higher when leverage is utilized, which may create an incentive for the Advisor to employ financial leverage. Consequently, the Fund and the Advisor may have differing interests in determining whether to leverage the Fund’s assets. Leverage creates risks that may adversely affect the return for the Common Shareholders, including:
• the likelihood of greater volatility of NAV and market price of Common Shares;
• fluctuations in the interest rate paid for the use of the LA;
• increased operating costs, which may reduce the Fund’s total return;
• the potential for a decline in the value of an investment acquired through leverage, while the Fund’s obligations under such leverage remains fixed; and
• the Fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
To the extent the returns derived from securities purchased with proceeds received from leverage exceeds the cost of leverage, the Fund’s distributions may be greater than if leverage had not been used. Conversely, if the returns from the securities purchased with such proceeds are not sufficient to cover the cost of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the latter case, the Advisor, in its best judgment, may nevertheless determine to maintain the Fund’s leveraged position if it deems such action to be appropriate. The costs of a borrowing program and/or an offering of preferred shares would be borne by Common Shareholders and consequently would result in a reduction of the NAV of Common Shares.
In addition to the risks created by the Fund’s use of leverage, the Fund is subject to the risk that it would be unable to timely, or at all, obtain replacement financing if the LA is terminated. For more information regarding termination, see “—Description of Capital Structure—Liquidity Facility.”
LIBOR Discontinuation Risk. The LA utilizes LIBOR as the reference or benchmark rate for interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, is expected to cease publishing most LIBOR maturities, including some US LIBOR maturities, on December 31, 2021, and the remaining and most liquid US LIBOR maturities on June 30, 2023. It is expected that market participants such as the Fund and SSB will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date. However, although regulators have |
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encouraged the development and adoption of alternative rates such as the Secured Overnight Financing Rate, the future utilization of LIBOR or of any particular replacement rate remains unclear.
Management Risk. The Fund is subject to management risk because it relies on the Subadvisor’s ability to pursue the Fund’s investment objective. The Subadvisor applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that it will produce the desired results.
Market Discount Risk. The Fund’s Common Shares will be offered only when Common Shares of the Fund are trading at a price equal to or above the Fund’s NAV per Common Share plus the per Common Share amount of commissions. As with any security, the market value of the Common Shares may increase or decrease from the amount initially paid for the Common Shares. The Fund’s Common Shares have traded at both a premium and at a discount to NAV. The shares of closed-end management investment companies frequently trade at a discount from their NAV. This characteristic is a risk separate and distinct from the risk that the Fund’s NAV could decrease as a result of investment activities. Investors bear a risk of loss to the extent that the price at which they sell their shares is lower in relation to the Fund’s NAV than at the time of purchase, assuming a stable NAV.
Natural Disasters and Adverse Weather Conditions. Certain areas of the world historically have been prone to major natural disasters, such as hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, and have been economically sensitive to environmental events. Such disasters, and the resulting damage, could have a severe and negative impact on the Fund’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Fund invests to conduct their businesses in the manner normally conducted. Adverse weather conditions also may have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Secondary Market for the Common Shares. The issuance of new Common Shares may have an adverse effect on the secondary market for the Common Shares. When Common Shares are trading at a premium, the Fund may issue new Common Shares of the Fund. The increase in the amount of the Fund’s outstanding Common Shares resulting from the offering of new Common Shares may put downward pressure on the market price for the Common Shares of the Fund. Common Shares will not be issued at any time when Common Shares are trading at a price lower than a price equal to the Fund’s NAV per Common Share plus the per Common Share amount of commissions.
The Fund also issues Common Shares through its dividend reinvestment plan. Common Shares may be issued under the plan at a discount to the market price for such Common Shares, which may put downward pressure on the market price for Common Shares of the Fund.
The voting power of current Common Shareholders will be diluted to the extent that such shareholders do not purchase shares in any future Common Share offerings or do not purchase sufficient shares to maintain their percentage interest. In addition, if the proceeds of such offering are unable to be invested as intended, the Fund’s per Common Share distribution may decrease (or may consist of return of capital) and the Fund may not participate in market advances to the same extent as if such proceeds were fully invested as planned.
Tax Risk. To qualify for the special tax treatment available to regulated investment companies, the Fund must: (i) derive at least 90% of its annual gross income from certain kinds of investment income; (ii) meet certain asset diversification requirements at the end of each quarter; and (iii) distribute in |
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each taxable year at least 90% of its net investment income (including net interest income and net short-term capital gain). If the Fund failed to meet any of these requirements, subject to the opportunity to cure such failures under applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Fund would be subject to U.S. federal income tax at regular corporate rates on its taxable income, including its net capital gain, even if such income were distributed to its shareholders. All distributions by the Fund from earnings and profits, including distributions of net capital gain (if any), would be taxable to the shareholders as ordinary income. To the extent designated by the Fund, such distributions generally would be eligible (i) to be treated as qualified dividend income in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders, provided that in each case the shareholder meets applicable holding period requirements. In addition, in order to requalify for taxation as a regulated investment company, the Fund might be required to recognize unrealized gain, pay substantial taxes and interest, and make certain distributions. See “U.S. Federal Income Tax Matters.”
The tax treatment and characterization of the Fund’s distributions may vary significantly from time to time due to the nature of the Fund’s investments. The ultimate tax characterization of the Fund’s distributions in a calendar year may not finally be determined until after the end of that calendar year. The Fund may make distributions during a calendar year that exceed the Fund’s net investment income and net realized capital gain for that year. In such a situation, the amount by which the Fund’s total distributions exceed net investment income and net realized capital gain generally would be treated as a return of capital up to the amount of the Common Shareholder’s tax basis in his or her Common Shares, with any amounts exceeding such basis treated as gain from the sale of his or her Common Shares. The Fund’s income distributions that qualify for favorable tax treatment may be affected by Internal Revenue Service (“IRS”) interpretations of the Code and future changes in tax laws and regulations all of which may apply with retroactive effect. See “U.S. Federal Income Tax Matters.”
No assurance can be given as to what percentage of the distributions paid on the Common Shares, if any, will consist of long-term capital gain or what the tax rates on various types of income will be in future years. |
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Strategy Risks |
Banking Industry Risk. Commercial banks, savings and loan associations, and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries, and significant competition. Profitability of these businesses depends significantly upon the availability and cost of capital funds. Commercial banks and savings associations are subject to extensive federal and state regulation.
Corporate debt securities risk. Corporate
debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and
also may be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the
issuer and general market liquidity.
Credit and counterparty risk. The issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter derivatives contract, or a borrower of fund securities may not make timely payments or otherwise honor its obligations. U.S. government securities are subject to varying degrees of credit risk depending upon the nature of their support. A downgrade or default affecting any of the Fund’s securities could affect the Fund’s performance.
Equity securities risk. The price of equity securities may decline due to changes in a company’s financial condition or overall market conditions.
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may not make all interest payments or repay all or any of the principal borrowed. Changes in a security’s credit quality may adversely affect fund performance.
Foreign Securities Risk. Less information may be publicly available regarding foreign issuers. Foreign securities may be subject to foreign taxes and may be more volatile than U.S. securities. Currency fluctuations and political and economic developments may adversely impact the value of foreign securities. Any depositary receipts are subject to most of the risks associated with investing in foreign securities directly because the value of a depositary receipt is dependent upon the market price of the underlying foreign equity security. Depositary receipts are also subject to liquidity risk.
Hedging, derivatives and other strategic transactions risk. Hedging, derivatives, and other strategic transactions may increase the volatility of the Fund and, if the transaction does not have the desired outcome, could result in a significant loss to the Fund. The use of derivative instruments could produce disproportionate gain or loss, more than the principal amount invested. Investing in derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and, in a down market, could become harder to value or sell at a fair price. The following is a list of certain derivatives and other strategic transactions that the Fund may utilize and the main risks associated with each of them:
• Credit default swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk, settlement risk, risk of default of the underlying reference obligation and risk of disproportionate loss are the principal risks of engaging in transactions involving credit default swaps. • Foreign currency forward contracts. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), foreign currency risk and risk of disproportionate loss are the principal risks of engaging in transactions involving foreign currency forward contracts. • Foreign currency swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), foreign currency risk and risk of disproportionate loss are the principal risks of engaging in transactions involving foreign currency swaps. • Futures contracts. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions) and risk of disproportionate loss are the principal risks of engaging in transactions involving futures contracts. • Interest-rate swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk and risk of disproportionate loss are the principal risks of engaging in transactions involving interest-rate swaps. • Options and currency options. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions) and risk of disproportionate loss are the principal risks of engaging in transactions involving options, including currency options. Counterparty risk does not apply to exchange-traded options. • Swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk, settlement risk, risk of default of the underlying reference obligation and risk of disproportionate loss are the principal risks of engaging in transactions involving swaps, including credit default swaps and total return swaps. |
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Illiquid and restricted securities risk. The Fund may invest without limit in securities for which there is no readily available trading market or which are otherwise illiquid (i.e., investments that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment). The Fund may have significant exposure to restricted securities. Restricted securities are securities with restrictions on public resale, such as securities offered in accordance with an exemption under Rule 144A under the Securities Act of 1933 (the “1933 Act”), or commercial paper issued under Section 4(a)(2) of the 1933 Act. Restricted securities are often required to be sold in private sales to institutional buyers, markets for restricted securities may or may not be well developed, and restricted securities can be illiquid.
Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a particular security’s market price and the fund’s ability to see the security. Illiquid investments may become harder to value, especially in changing markets. The Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid investments at an advantageous time or price or possibly require the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations, which could prevent the Fund from taking advantage of other investment opportunities. Additionally, the market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer.
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by reduced market activity or participation, legal restrictions, or other economic and market impediments. Liquidity risk may be magnified in rising interest rate environments due to higher than normal redemption rates. Widespread selling of fixed-income securities to satisfy obligations during periods of reduced demand may adversely impact the price or salability of such securities. Periods of heavy redemption could cause the fund to sell assets at a loss or depressed value, which could negatively affect performance.
In addition, limited liquidity could affect the market price of the investments, thereby adversely affecting the Fund’s NAV and ability to make dividend distributions. The financial markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any time. The Fund has no limitation on the amount of its assets which may be invested in investments which are not readily marketable or are subject to restrictions on resale.
Large company risk. Larger companies may grow more slowly than smaller companies or be slower to respond to business developments. Large-capitalization securities may underperform the market as a whole.
Lower-rated and high-yield fixed-income securities risk. Lower-rated and high-yield fixed-income securities (junk bonds) are subject to greater credit quality risk, risk of default, and price volatility than higher-rated fixed-income securities, may be considered speculative, and can be difficult to resell. |
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Preferred and convertible securities risk. Unlike interest on debt securities, preferred stock dividends are payable only if declared by the issuer’s board. Also, preferred stock may be subject to optional or mandatory redemption |
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provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible preferred stock is converted, depending on whether the market price of the underlying security exceeds the conversion price.
Real estate investment trust securities risk. Securities of companies in the real estate industry include equity real estate investment trusts (“REITs”) and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the REIT, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax-free pass-through of income under the Code, as amended, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to a REIT. In the event of a default by a borrower or lessee, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, even the larger REITs in the industry tend to be small- to medium-sized companies in relation to the equity markets as a whole. Moreover, shares of REITs may trade less frequently and, therefore, are subject to more erratic price movements, than securities of larger issuers.
Repurchase agreement risk. The risk of a repurchase agreement transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument purchased may decline in value, interest payable on the instrument may be lost and there may be possible difficulties and delays in obtaining collateral and delays and expense in liquidating the instrument.
Reverse repurchase agreement risk. Reverse repurchase agreement transactions involve the risk that the market value of the securities that the Fund is obligated to repurchase under such agreements may decline below the repurchase price. Any fluctuations in the market value of either the securities transferred to the other party or the securities in which the proceeds may be invested would affect the market value of the Fund’s assets, thereby potentially increasing fluctuations in the market value of the Fund’s assets. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund’s use of proceeds received under the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities. An event of default of insolvency of the counterparty to a reverse repurchase agreement could result in delays or restrictions with respect to the Fund’s ability to dispose of the underlying securities, in addition, a reverse repurchase agreement may be considered a form of leverage and may, therefore, increase fluctuations in the Fund’s net asset value per share (NAV).
Small and mid-sized company risk. Small and mid-sized companies are generally less established and may be more volatile than larger companies. Small and/or mid-capitalization securities may underperform the market as a whole.
State/region risk. To the extent that the fund invests heavily in bonds from any given state or region, its performance could be disproportionately affected by factors particular to that state or region. These may include economic or policy changes, erosion of the tax base, and state legislative changes (especially those regarding budgeting and taxes). |
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U.S. government securities risk. No assurance can be given that the U.S. government will provide financial support in the future to U.S. government agencies, authorities or instrumentalities that are not supported by the full faith and credit of the U.S. Securities guaranteed as to principal and interest by the United States government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government or any of its agencies, authorities or instrumentalities; and (ii) participations in loans made to non-U.S. governments or other entities that are so guaranteed. The secondary market for certain of these participations is limited and therefore may be regarded as illiquid.
Warrants risk. Warrants are rights to purchase securities at specific prices and are valid for a specific period of time. Warrant prices do not necessarily move parallel to the prices of the underlying securities, and warrant holders receive no dividends and have no voting rights or rights with respect to the assets of an issuer. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants cease to have value if not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.
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Given the risks described above, an investment in Common Shares may not be appropriate for all investors. You should carefully consider your ability to assume these risks before making an investment in the Fund. |
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The purpose of the table below is to help you understand all fees and expenses that you, as a Common Shareholder, would bear directly or indirectly. In accordance with SEC requirements, the table below shows the Fund’s expenses as a percentage of its average net assets as of December 31, 2020, and not as a percentage of total assets. By showing expenses as a percentage of average net assets, expenses are not expressed as a percentage of all of the assets in which the Fund invests. The offering costs to be paid or reimbursed by the Fund are not included in the Annual Expenses table below. However, these expenses will be borne by Common Shareholders and may result in a reduction in the NAV of the Common Shares. See “Management of the Fund” and “Dividend Reinvestment Plan.” The table and example are based on the Fund’s capital structure as of December 31, 2020.
Shareholder Transaction Expenses | |
Sales load (as a percentage of offering price) (1) | _____% |
Offering expenses (as a percentage of offering price) (1) | _____% |
Dividend Reinvestment Plan fees (2) | None |
Annual Expenses (Percentage of Net Assets Attributable to Common Shares) | |
Management fees (3) | 1.44% |
Interest payments on borrowed funds(4) | 0.32% |
Other expenses | 0.45% |
Total Annual Operating Expenses | 2.21% |
Contractual Expense Reimbursement (5) | (0.20)% |
Total Annual Fund Operating Expenses After Expense Reimbursements | 2.01% |
(1) | If Common Shares are sold to or through underwriters, the Prospectus Supplement will set forth any applicable sales load and the estimated offering expenses. |
(2) | Participants in the Fund’s dividend reinvestment plan do not pay brokerage charges with respect to Common Shares issued directly by the Fund. However, whenever Common Shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested. Shareholders participating in the Plan may buy additional Common Shares of the Fund through the Plan at any time and will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. See “Distribution Policy” and “Dividend Reinvestment Plan.” |
(3) | See “Management of the Fund—The Advisor.” |
(4) | The Fund uses leverage by borrowing under a liquidity agreement. “Interest payments on borrowed funds” includes all interest paid in connection with outstanding loans. See “Other Investment Policies - Borrowing” and “Use of Leverage by the Fund. |
(5) The Advisor contractually agrees to waive a portion of its management fee and/or reimburse expenses for the Fund and certain other John Hancock funds according to an asset level breakpoint schedule that is based on the aggregate net assets of all the funds participating in the waiver or reimbursement. This waiver is allocated proportionally among the participating funds. During its most recent fiscal year, the fund’s reimbursement amounted to 0.01% of the fund’s average daily net assets. This agreement expires on July 31, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time. The Advisor contractually agrees to limit its administration fee to 0.10% of the fund’s average weekly gross assets. This agreement expires on April 30, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
EXAMPLE
The following example illustrates the expenses that Common Shareholders would pay on a $1,000 investment in Common Shares, assuming (i) total annual expenses set forth above, including any reimbursements through their current expiration date; (ii) a 5% annual return; and (iii) all distributions are reinvested at NAV:
1 Year | 3 Years | 5 Years | 10 Years | |
Total Expenses | $20 | $67 | $117 | $253 |
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The above table and example and the assumption in the example of a 5% annual return are required by regulations of the SEC that are applicable to all investment companies; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Fund’s Common Shares. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund.” In addition, while the example assumes reinvestment of all dividends and distributions at NAV, participants in the Fund’s dividend reinvestment plan may receive Common Shares purchased or issued at a price or value different from NAV. See “Distribution Policy” and “Dividend Reinvestment Plan.” The example does not include sales load or estimated offering costs, which would cause the expenses shown in the example to increase.
The example should not be considered a representation of past or future expenses, and the Fund’s actual expenses may be greater or less than those shown. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
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This table details the financial performance of the Common Shares, including total return information showing how much an investment in the Fund has increased or decreased each period (assuming reinvestment of all dividends and distributions).
The financial statements of the Fund as of December 31, 2020, have been audited by PricewaterhouseCoopers LLP (“PwC”), the Fund’s independent registered public accounting firm. The report of PwC is included, along with the Fund’s financial statements, in the Fund’s annual report for the fiscal year ended December 31, 2020, has been incorporated by reference into the SAI. Copies of the Fund’s most recent annual and semi-annual reports are available upon request.
Common Shares
Period ended | 12-31-20 | 12-31-19 | 12-31-18 | 12-31-17 | 12-31-16 |
Per share operating performance | |||||
Net asset value, beginning of period | $36.38 | $29.06 | $36.94 | $34.98 | $26.17 |
Net investment income1 | 0.60 | 0.50 | 0.39 | 0.37 | 0.50 |
Net realized and unrealized gain (loss) on investments | (6.30) | 9.02 | (6.61) | 3.07 | 9.79 |
Total from investment operations | (5.70) | 9.52 | (6.22) | 3.44 | 10.29 |
Less distributions | |||||
From net investment income | (0.65) | (0.48) | (0.40) | (0.42) | (0.40) |
From net realized gain | (1.55) | (1.72) | (1.26) | (1.06) | (1.08) |
Total distributions | (2.20) | (2.20) | (1.66) | (1.48) | (1.48) |
Anti-dilutive impact of repurchase plan | — | — | — | — | —2,3 |
Net asset value, end of period | $28.48 | $36.38 | $29.06 | $36.94 | $34.98 |
Per share market value, end of period | $30.35 | $36.30 | $27.93 | $39.33 | $36.27 |
Total return at net asset value (%)4,5 | (13.38) | 33.71 | (17.42) | 10.08 | 41.10 |
Total return at market value (%)4 | (7.49) | 38.81 | (25.46) | 13.03 | 36.60 |
Ratios and supplemental data | |||||
Net assets, end of period (in millions) | $535 | $680 | $543 | $689 | $651 |
Ratios (as a percentage of average net assets): | |||||
Expenses before reductions | 2.21 | 2.27 | 2.04 | 1.93 | 2.02 |
Expenses including reductions6 | 2.01 | 2.08 | 1.86 | 1.75 | 1.82 |
Net investment income | 2.50 | 1.52 | 1.04 | 1.07 | 1.88 |
Portfolio turnover (%) | 10 | 13 | 11 | 5 | 11 |
Senior securities | |||||
Total debt outstanding end of period (in millions) | $125 | $125 | $120 | $110 | $110 |
Asset coverage per $1,000 of debt7 | $5,278 | $6,440 | $5,522 | $7,265 | $6,922 |
1 | Based on average daily shares outstanding. |
2 | Less than $0.005 per share. |
3 | The repurchase plan was completed at an average repurchase price of $20.79 for 10,000 shares for the period ended 12-31-16. |
4 | Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested. |
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
6 | Expenses including reductions excluding interest expense were 1.69%, 1.50%, 1.44%, 1.45% and 1.58% for the periods ended 12-31-20, 12-31-19, 12-31-18, 12-31-17 and 12-31-16, respectively. |
7 | Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage. |
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Period ended | 12-31-15 | 10-31-15 | 10-31-14 | 10-31-13 | 10-31-12 | 10-31-11 | ||||||||||||
Per share operating performance | ||||||||||||||||||
Net asset value, beginning of period | 26.00 | $ | 25.19 | $ | 23.01 | $ | 18.91 | $ | 15.67 | $ | 16.90 | |||||||
Net investment income | 0.10 | 0.52 | 3 | 0.35 | 0.29 | 0.17 | 0.08 | |||||||||||
Net realized and unrealized gain (loss) on investments | 0.44 | 1.55 | 3.01 | 4.99 | 3.97 | (0.49) | ||||||||||||
Total from investment operations | 0.54 | 2.07 | 3.36 | 5.28 | 4.14 | (0.41) | ||||||||||||
Less distributions to common shareholders | ||||||||||||||||||
From net investment income | (0.10) | (0.47) | (0.35) | (0.22) | (0.17) | (0.09) | ||||||||||||
From net realized gain | (0.27) | (0.79) | (0.83) | (0.96) | (0.75) | (0.82) | ||||||||||||
From tax return of capital | — | — | — | — | (0.02) | — | ||||||||||||
Total distributions | (0.37) | (1.26) | (1.18) | (1.18) | (0.94) | (0.91) | ||||||||||||
Anti-dilutive impact of repurchase plan | — | — | — | — | 0.04 | 4 | 0.09 | 4 | ||||||||||
Net asset value, end of period | 26.17 | $ | 26.00 | $ | 25.19 | $ | 23.01 | $ | 18.91 | $ | 15.67 | |||||||
Per share market value, end of period | 28.03 | $ | 26.77 | $ | 22.97 | $ | 22.20 | $ | 18.03 | $ | 14.29 | |||||||
Total return at net asset value (%) | 2.05 | 7 | 8.60 | 15.16 | 29.03 | 27.70 | (1.81) | |||||||||||
Total return at market value (%) | 6.16 | 7 | 22.63 | 8.84 | 30.56 | 33.51 | 0.76 | |||||||||||
Ratios and supplemental data | ||||||||||||||||||
Net assets applicable to common shares, end of period (in millions) | 486 | $ | 482 | $ | 467 | $ | 426 | $ | 350 | $ | 298 | |||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||
Expenses before reductions | 2.02 | 8 | 1.99 | 1.99 | 1.88 | 1.53 | 1.52 | |||||||||||
Expenses including reductions | 1.83 | 8 | 1.80 | 1.81 | 1.71 | 1.38 | 1.37 | |||||||||||
Net investment income | 2.15 | 8 | 2.03 | 3 | 1.43 | 1.37 | 0.94 | 0.48 | ||||||||||
Portfolio turnover (%) | 2 | 18 | 15 | 20 | 19 | 23 | ||||||||||||
Total debt outstanding end of period (in millions) | 110 | $ | 110 | $ | 110 | $ | 95 | $ | — | $ | — | |||||||
Asset coverage per $1,000 of debt | 5,419 | $ | 5,385 | $ | 5,244 | $ | 5,487 | $ | — | $ | — |
1 | For the two-month period ended 12-31-15. The fund changed its fiscal year end from October 31 to December 31. |
2 | Based on average daily shares outstanding. |
3 | Net investment income per share and the percentage of average net assets reflects special dividends received by the fund, which amounted to $0.04 and 0.15%, respectively. |
4 | The repurchase plan was completed at an average repurchase price of $15.15 and $14.82 for 461,253 and 1,016,051 shares, and $6,987,727 and $15,062,318 for the years ended 10-31-12 and 10-31-11, respectively. |
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
6 | Total return based on net asset value reflects changes in the fund's net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the fund's shares traded during the period. |
7 | Not annualized. |
8 | Annualized. |
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Market and Net Asset Value Information
The Fund’s currently outstanding Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “BTO” and commenced trading on the NYSE in 1994.
The Fund’s Common Shares have traded both at a premium and at a discount to its net asset value (“NAV”). The Fund cannot predict whether its shares will trade in the future at a premium or discount to NAV. The provisions of the 1940 Act generally require that the public offering price of common shares (less any underwriting commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within 48 hours of pricing). The Fund’s issuance of Common Shares may have an adverse effect on prices in the secondary market for Common Shares by increasing the number of Common Shares available, which may put downward pressure on the market price for Common Shares. Shares of common stock of closed-end investment companies frequently trade at a discount from NAV. See “Risk Factors—General Risks—Market Discount Risk” and “—Secondary Market for the Common Shares.”
The following table sets forth for each of the periods indicated the high and low closing market prices for Common Shares on the NYSE, and the corresponding NAV per share and the premium or discount to NAV per share at which the Fund’s Common Shares were trading as of such date. NAV is determined once daily as of the close of regular trading of the NYSE (typically 4:00 P.M., Eastern Time). See “Determination of Net Asset Value” for information as to the determination of the Fund’s NAV.
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Market Price |
NAV per Share on Date of Market Price High and Low |
Premium/(Discount) on Date of Market Price High and Low |
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Fiscal Quarter Ended | High | Low | High | Low | High | Low |
June 30, 2019 | $34.61 | $30.56 | $34.29 | $31.37 | 0.93% | -2.58% |
September 30, 2019 | $33.42 | $29.53 | $34.28 | $30.35 | -2.51% | -2.70% |
December 31, 2019 | $36.30 | $30.69 | $36.38 | $31.34 | -0.22% | -2.07% |
March 31, 2020 | $36.81 | $12.35 | $36.44 | $14.87 | 1.02% | -16.95% |
June 30, 2020 | $27.45 | $16.16 | $26.00 | $16.33 | 5.58% | -1.04% |
September 30, 2020 | $24.10 | $19.76 | $22.58 | $19.61 | 6.73% | 0.76% |
December 31, 2020 | $30.93 | $21.23 | $28.33 | $19.51 | 9.18% | 8.82% |
March 31, 2021 | $39.09 | $29.41 | $37.77 | $28.18 | 3.49% | 4.36% |
The last reported sale price, NAV per share and percentage premium to NAV per share of the Common Shares as of June 21, 2021 were $37.80, $36.66 and 3.11%, respectively. As of June 21, 2021, the Fund had 18,789,888 Common Shares outstanding and net assets of the Fund were $688,871,007.
The Fund is a diversified, closed-end management investment company registered under the 1940 Act. The Fund was organized on June 16, 1994 as a Massachusetts business trust pursuant to an Agreement and Declaration of Trust (as amended and restated from time to time, the “Declaration of Trust”). The Fund commenced operations following an initial public offering on August 16, 1994, pursuant to which the Fund issued an aggregate of 22,500,000 Common Shares of beneficial interest, no par value. The Fund’s principal office is located at 200 Berkeley Street, Boston, Massachusetts 02116 and its phone number is 800-225-6020.
The following provides information about the Fund’s outstanding securities as of April 30, 2021.
Title of Class |
Amount Authorized |
Amount Held by the Fund or for its Account |
Amount Outstanding |
Common Shares, no par value | Unlimited | 0 | 18,789,888 |
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Subject to the remainder of this section, and unless otherwise specified in a Prospectus Supplement, the Fund currently intends to invest substantially all of the net proceeds of any sales of Common Shares pursuant to this Prospectus in accordance with its investment objective and policies as described under “Investment Objective” and “Investment Strategies” within three months of receipt of such proceeds. Such investments may be delayed up to three months if suitable investments are unavailable at the time or for other reasons, such as market volatility and lack of liquidity in the markets of suitable investments. Pending such investment, the Fund anticipates that it will invest the proceeds in short-term money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. A delay in the anticipated use of proceeds could lower returns and reduce the Fund’s distribution to Common Shareholders or result in a distribution consisting principally of a return of capital.
The Fund’s primary investment objective is to provide a high level of total return consisting of long-term capital appreciation and current income. There can be no assurance that the Fund will achieve its investment objective. The Fund’s investment objective is not a fundamental policy and may be changed without the approval of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund.
Under normal circumstances, the Fund will invest at least 80% of its net assets in equity securities of U.S. and foreign financial services companies of any size. These companies may include, but are not limited to, banks, thrifts, finance and financial technology companies, brokerage and advisory firms, real estate-related firms, insurance companies and financial holding companies. The equity securities in which the Fund may invest are common stocks, preferred stocks, warrants, stock purchase rights, securities convertible into other equity securities. “Net assets” is defined as net assets plus any borrowings for investment purposes. The Fund will notify shareholders at least 60 days prior to any change in this 80% policy.
The Fund may invest up to 20% of its total assets in common and preferred equity securities and other preferred securities of foreign banking, lending and financial services companies, including securities quoted in foreign currencies.
In selecting the Fund's portfolio securities, the Adviser intends to select securities of issuers that it believes are likely to benefit from the foregoing industry trends and developments as well to employ fundamental investment analysis. In general, the Adviser will emphasize those securities which appear undervalued by the marketplace as indicated by, among other factors: (1) the value and quality of the underlying assets of the financial services companies; and (2) the value of a financial services company relative to its earnings potential and to market valuations of comparable companies.
The Adviser may select securities of issuers that are small from a national perspective but have a significant share of their local market. In the opinion of the Adviser, such financial services companies frequently have a stable core base of assets or deposits, which may provide a greater level of earnings predictability, and provide financial services to the immediate geographic area. The Adviser believes that careful assessment of a financial service company’s asset quality is critical in determining the institution's value. In the Adviser's view, a high-quality asset base may lead to more predictable and potentially higher earnings. The Adviser intends to focus its investment analysis on delinquency trends, reserve levels and investment and loan portfolio compositions, among other things, in assessing asset quality.
Other factors that the Adviser will consider when determining which securities are undervalued are the historical and projected relationship of financial services company securities to the overall securities markets, using such valuation measures as price to earnings ratios, price to tangible book value ratios and current yields. In addition, the Adviser will focus upon, among other factors, each institution's capital position and competitive posture in the markets it serves, the amount of stock owned by insiders and regulatory developments. In addition to such factors, the Adviser also considers the nature and stability of an issuer's asset or deposit base, its market share, the economy of the region in which it is located, the quality of management and management's commitment to enhancing shareholder value.
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At any given time the Adviser may focus upon investments in a number of geographic regions, the Adviser anticipates that the portfolio typically will represent a geographically diverse group of financial services companies. However, to the extent that the Fund's portfolio from time to time is focused in a particular geographic region, the Fund will be more susceptible to the risks associated with changes in economic and other conditions in such region. The Adviser anticipates that its value based analysis and emphasis upon small and medium size financial services companies will result in a diversified portfolio which typically would be composed of equity securities of 75 to 150 issuers.
Under normal market conditions, the Fund may invest up to 20% of its net assets in the common and preferred equity securities and other preferred securities of non-financial services companies. The Fund may also invest in debt securities, and will invest in debt securities that are rated, at the time of purchase, BB or below by Standard & Poor's Ratings Group ("Standard & Poor's") or Ba or below by Moody's Investors Service, Inc. ("Moody's"), or if unrated by such rating organizations, determined by the Adviser (as defined below) to be of comparable quality. The Fund will not purchase debt securities rated below C or which are in default at the time of purchase. Debt securities rated BB or Ba or below (or comparable unrated securities) are commonly referred to as "junk bonds" and are considered by Moody's and Standard & Poor’s to be predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure to adverse business financial or economic conditions. In some cases, such obligations may be highly speculative and have extremely poor prospects for reaching investment grade standing and may be in default. As a result, investment in such obligations will entail greater speculative risks than those associated with investment in investment grade obligations (i.e., obligations rated AAA, AA, A or BBB by Standard & Poor's or Aaa, Aa, A or Baa by Moody's). The descriptions of the investment grade rating categories by Moody’s and S&P, including a description of their speculative characteristics, are set forth in the SAI. With respect to the Fund’s investments in fixed-income or debt securities, the Fund may invest in higher quality instruments for temporary or defensive purposes.
The fund may enter into interest-rate swaps for the purposes of reducing risk, obtaining efficient market exposure, and/or enhancing investment returns.
PORTFOLIO INVESTMENTS
Common Stocks
Common stocks are shares of a corporation or other entity that entitle the holder to a pro rata share of the profits, if any, of the corporation without preference over any other shareholder or class of shareholders, including holders of such entity’s preferred securities and other senior equity securities. Common stock usually carries with it the right to vote and frequently an exclusive right to do so. In selecting common stocks for investment, the Fund expects generally to focus more on the security’s dividend paying capacity than on its potential for capital appreciation.
Preferred Stocks
Preferred stock generally has a preference as to dividends and, upon liquidation, over an issuer's common stock but ranks junior to debt securities in an issuer's capital structure. Preferred stock generally pays dividends in cash (or additional shares of preferred stock) at a defined rate but, unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer's board of directors. Dividends on preferred stock may be cumulative, meaning that, in the event the issuer fails to make one or more dividend payments on the preferred stock, no dividends may be paid on the issuer's common stock until all unpaid preferred stock dividends have been paid. Preferred stock also may be subject to optional or mandatory redemption provisions. The Fund will not purchase preferred stock rated below C.
Convertible Securities
The Fund may invest in convertible securities, which are bonds, debentures, notes, preferred stock or other securities that may be converted into or exchanged for a specified amount of equity securities of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest generally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Convertible securities have unique investment characteristics in that they generally: (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities; (ii) are less subject to fluctuation in value than the underlying stock because they have fixed income characteristics;
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and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases.
The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security.
A convertible security might be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by the Fund is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on the Fund's ability to achieve its investment objective. In evaluating a convertible security, the Adviser will give primary emphasis to the attractiveness of the underlying equity security. The Fund will not purchase convertible securities rated below C or which are in default at the time of purchase.
Private Placements
The Fund may invest in securities that are sold in private placement transactions between their issuers and their purchasers and that are neither listed on an exchange nor traded in the over-the-counter secondary market. However, the Fund will not invest more than 25% of its total assets in privately placed securities. In many cases, privately placed securities will be subject to contractual or legal restrictions on transfer. As a result of the absence of a public trading market, privately placed securities may in turn be less liquid and more difficult to value than publicly traded securities. Although privately placed securities may be resold in privately negotiated transactions, the prices realized from the sales could, due to illiquidity, be less than if such securities were more widely traded. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded.
Debt Securities
The Fund may invest in U.S. and foreign debt securities including, but not limited to, bonds, notes, bills and debentures. Capital appreciation in debt securities in which the Fund invests may arise as a result of favorable changes in relative interest rate levels and/or in the creditworthiness of issuers. The Fund may also earn income on such debt securities. There is no requirement with respect to the maturity or duration of debt securities in which the Fund may invest. Debt securities in which the Fund may invest are subject to the risk of an issuer's inability to meet principal and interest payments on the obligations (credit risk) and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (market risk). Particular debt securities will be selected based upon credit risk analysis of potential issuers, the characteristics of the security and interest rate sensitivity of the various debt issues available with respect to a particular issuer and analysis of the anticipated volatility and liquidity of the particular debt instruments. Except for temporary or defensive investments, the Fund will invest only in debt securities rated BB or below by Standard & Poor's or Ba or below by Moody's or, if unrated by such rating organizations, of comparable quality as determined by the Adviser. For a description of such lower-rated and unrated debt securities, see "Risk Factors – Strategy Risks – Lower-Rated and High-Yield Fixed Income Securities Risk."
Warrants and Stock Purchase Rights
Warrants and stock purchase rights are securities permitting, but not obligating, their holder to subscribe for other securities on, or on or before, a fixed date in the future at a predetermined price. Generally, warrants and stock purchase rights do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their
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holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, an investment in warrants and stock purchases rights may be considered to entail greater investment risk than certain other types of investments. In addition, the value of warrants and stock purchase rights do not necessarily change with the value of the underlying securities, and they cease to have value if they are not exercised on or prior to their expiration date. Investment in warrants and stock purchase rights increases the potential profit or loss to be realized from the investment of a given amount of the Fund's assets as compared with an investment of the same amount in the stock which underlies such warrants or stock purchase rights.
Illiquid Securities
The Fund may invest without limit in illiquid securities (i.e., securities that are not readily marketable). For this purpose, “illiquid securities” may include certain securities that are not registered (“restricted securities”) under the Securities Act of 1933, as amended (the “1933 Act”), including commercial paper issued in reliance on Section 4(a)(2) of the 1933 Act and securities offered and sold to “qualified institutional buyers” under Rule 144A under the 1933 Act. The Board of Trustees (the “Board”) has adopted guidelines and delegated to the Advisor the daily function of determining the monitoring and liquidity of restricted securities. The Board will, however, retain sufficient oversight and be ultimately responsible for these determinations. The Board will carefully monitor the Fund’s investments in these securities, focusing on such important factors, among others, as valuation, liquidity and availability of information. This investment practice could have the effect of increasing the level of illiquidity in the Fund if qualified institutional buyers become for a time uninterested in purchasing these restricted securities.
Repurchase agreements maturing in more than seven days are considered illiquid, unless an agreement can be terminated after a notice period of seven days or less.
As long as the SEC maintains the position that most swap contracts, caps, floors, and collars are illiquid, the Fund will continue to designate these instruments as illiquid unless the instrument includes a termination clause or has been determined to be liquid based on a case-by-case analysis pursuant to procedures approved by the Board.
Repurchase Agreements
The Fund may engage in repurchase agreements with broker-dealers, banks and other financial institutions. A repurchase agreement is a contract pursuant to which the Fund, against receipt of securities of at least equal value, agrees to advance a specified sum to the financial institution which in turn agrees to reacquire the securities at a mutually agreed upon time and price. Repurchase agreements, which are usually for periods of one week or less, enable the Fund to invest its cash reserves at fixed rates of return. The Fund may enter into repurchase agreements, provided that the Fund's custodian always has possession of securities serving as collateral whose market value at least equals the amount of the repurchase obligation. To minimize the risk of loss, the Fund will enter into repurchase agreements only with financial institutions considered by the Adviser to be creditworthy under guidelines adopted by the Board of Trustees. If an institution enters an insolvency proceeding, the resulting delay in liquidation of the securities serving as collateral could cause the Fund some loss, as well as legal expense, should the value of the securities decline prior to liquidation.
Temporary Investments
The Fund may invest its assets in cash and temporary investments (as defined below) for cash management purposes, pending investment in accordance with the Fund's investment objective and polices, to pay distributions to shareholders and to meet its operating expenses and obligations under any tender offer or share repurchases. In addition, as described below, the Fund may take a temporary defensive posture and invest without limitation in Temporary Investments. To the extent that the Fund invests in Temporary Investments, it may not achieve its investment objective. Temporary Investments are debt securities including: (i) short-term (less than 12 months to maturity) and medium-term (not greater than five to seven years to maturity) obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities; (ii) finance company obligations, corporate commercial paper and other short-term commercial obligations, in each case rated, or issued by companies with similar securities outstanding that are rated, Prime-1 or A or better by Moody's or A-1 or A or better by S&P or, if unrated, of comparable quality as determined by the Adviser, (iii) obligations (including certificates of deposit, time deposits, demand deposits and bankers' acceptances) of banks and (iv) repurchase agreement with respect to securities in which the Fund may invest.
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TEMPORARY DEFENSIVE STRATEGIES
There may be times when, in the Subadvisor’s judgment, conditions in the securities markets would make pursuit of the Fund’s investment strategy inconsistent with achievement of the Fund’s investment objective. At such times, the Subadvisor may employ alternative strategies primarily to seek to reduce fluctuations in the value of the Fund’s assets. In implementing these temporary defensive strategies, depending on the circumstances, the Fund may invest an unlimited portion of its portfolio in short-term money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. It is impossible to predict when, or for how long, the Fund may use these alternative strategies.
ADDITIONAL PORTFOLIO INVESTMENTS
When-Issued and Delayed Delivery Purchases
The Fund may make contracts to purchase securities on a "when-issued" or "delayed delivery" basis. Pursuant to such contracts, delivery and payment for the securities occurs at a date later than the customary settlement date. The payment obligation and the interest rate on the securities will be fixed at the time the Fund enters into the commitment, but interest will not accrue to the Fund until delivery of and payment for the securities. An amount of cash or liquid, high grade debt securities equal to the amount of the Fund's commitment will be deposited in a segregated account at the Fund's custodian to secure the Fund's obligation. Although the Fund would generally purchase securities on a when-issued or delayed delivery basis with the intention of actually acquiring the securities for its portfolio (or for delivery pursuant to options or futures contracts it has entered into) and not for leverage purposes, the Fund could dispose of a security prior to settlement if the Adviser deemed it advisable. The purchase of securities on a when-issued or delayed delivery basis involves a risk of loss if the value of the security to be purchased declines prior to the settlement date. This risk is in addition to the risk of a decline in value of the Fund's other assets. Furthermore, when such purchases are made through a dealer, the dealer's failure to consummate the sale may result in the loss to the Fund of an advantageous yield or price.
Short Sales
The Fund may from time to time sell securities short, provided that the amount of such short sales does not exceed 5% of the Fund's total assets. The foregoing limitation does not apply to "short-sales against the box" where at all times a short position is open the Fund owns an equal amount of such securities or securities convertible or exchangeable into such securities without payment of additional consideration. A short sale is a transaction in which the Fund would sell securities it does not own (but has borrowed) in anticipation of a decline in the market price of the securities. When the Fund makes a short sale, the proceeds it receives from the sale will be held on behalf of a broker until the Fund replaces the borrowed securities. To deliver the securities to the buyer, the Fund will need to arrange through a broker to borrow the securities and, in so doing, the Fund will become obligated to replace the securities borrowed at their market price at the time of replacement, whatever the price may be. The Fund may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.
The Fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or liquid, high grade debt securities. In addition, the Fund will place in a segregated account with its custodian. or designated sub-custodian, an amount of cash, or liquid, high grade debt securities equal to the difference, if any, between (1) the market value of the securities sold at the time they were sold short and (2) any cash, or liquid, high grade debt securities deposited as collateral with the broker in connection with the short sale (not including the proceeds of the short sale). Until it replaces the borrowed securities, the Fund will maintain the segregated account daily at a level so that (1) the amount deposited in the account plus the amount deposited with the broker (not including the proceeds from the short sale) will equal the current market value of the securities sold short and (2) the amount deposited in the account plus the amount deposited with the broker (not including the proceeds from the short sale) will not be less than the market value of the securities at the time they were sold short. Short sales by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases can equal only the total amount invested.
Options on Securities and Securities Indices
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The Fund may write and purchase call and put options on securities and securities indices. The Fund typically will limit notional exposure of the options to 5% of the value of the Fund’s portfolio securities, although this amount is expected to vary over time based upon U.S. equity market conditions and other factors. A call option written by the Fund obligates the Fund to sell specified securities to the holder of the option at a specified price if the option is exercised before the expiration date. All call options written by the Fund will be covered, which means that the Fund will own the securities subject to the option so long as the option is outstanding. The purpose of writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, in writing covered call options for additional income, the Fund may forego the opportunity to profit from an increase in the market price of the underlying security. A put written by the Fund would obligate the Fund to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date. All put options written by the Fund will be covered, which means that the Fund would have deposited with its custodian cash or liquid, high grade debt securities with a value at least equal to the exercise price of the put option. The purpose of writing such options is to generate additional income for the Fund. However, in return for the option premium, the Fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the market value at the time of purchase. In addition, a written call or put option may be covered by maintaining cash or liquid, high grade debt securities in a segregated account or by entering into an offsetting forward contract and/or by purchasing an offsetting option which, by virtue of its exercise price or otherwise, reduces the Fund's net exposure on its written position. The Fund may terminate its obligations under an exchange traded call or put option written by the Fund by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counter party to such option. Such purchases are referred to as "closing purchase transactions."
The Fund may also write (sell) covered call and put options on any securities index composed of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security. The Fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities in its portfolio. The Fund may cover call and put options on a securities index by maintaining cash or liquid, high grade debt securities with a value equal to the exercise price in a segregated account with its custodian.
The Fund may purchase put and call options on any securities in which it may invest or options on any securities index based on securities in which it may invest. The Fund will purchase such options on securities that are listed on securities exchanges or traded in the over-the-counter market. The Fund would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it has purchased. The Fund would normally purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle the Fund, in return for the premium paid, to purchase specified securities at a specified price at any time during the option period. The Fund would ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs. Otherwise, the Fund would realize either no gain or a loss on the purchase of the call option. The Fund would normally purchase put options in anticipation of a decline in the market value of securities in its portfolio ("protective puts") or in securities in which it may invest. The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Fund's securities. Put options may also be purchased by the Fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the premium and transaction costs. Otherwise, the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of underlying portfolio securities.
OTHER INVESTMENT POLICIES
Borrowing
The Fund may use leverage to the extent permitted by the 1940 Act, this Prospectus, and the LA. The Fund is
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authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including the issuance of debt securities. The Fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.” Borrowings, together with the issuance of preferred shares, or other “senior securities” as that term is defined in the 1940 Act, may not be in an aggregate amount that would, immediately after giving effect to the drawdown, exceed 331/3% of the Fund’s total assets (including any assets attributable to financial leverage from senior securities) minus the sum of accrued liabilities (other than liabilities from senior securities).
Portfolio turnover
In general, the Fund intends to purchase and hold securities for long-term capital appreciation and not to trade in securities for short-term gain. The Fund's portfolio turnover rate is calculated by dividing the lesser of sales or purchases of portfolio securities by the average monthly value of the Fund's portfolio securities. For purposes of this calculation, portfolio securities exclude securities having a maturity when purchased of one year or less. Notwithstanding the foregoing, the Adviser may, from time to time, make short-term investments when it believes such investments are in the best interest of the Fund. The portfolio turnover rate for the Fund for the fiscal years ended December 31, 2020 and December 31, 2019 was 10% and 13%, respectively.
Securities loans
The Fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.” The Fund may seek to obtain additional income or portfolio leverage by making secured loans of its portfolio securities with a value of up to 331/3% of total assets. In such transactions, the borrower pays to the Fund an amount equal to any dividends or interest received on loaned securities. The Fund retains all or a portion of the dividends, interest, capital gains, and/or other distributions received on investment of cash collateral in short-term obligations of the U.S. government, cash equivalents (including shares of a fund managed by the Fund’s investment adviser or an affiliate thereof), or other investments consistent with the Fund’s investment objective, policies, and restrictions, or receives a fee from the borrower. If the Fund receives a fee in lieu of dividends with respect to securities on loan pursuant to a securities lending transaction, such income will not be eligible for the dividends-received deduction for corporate shareholders. As a result of investing such cash collateral in such investments, the Fund will receive the benefit of any gains and bear any losses generated by such investments. All securities loans will be made pursuant to agreements requiring that the loans be continuously secured by collateral in cash or short-term debt obligations at least equal at all times to the market value of the loaned securities. The Fund may pay reasonable finders’, administrative and custodial fees in connection with loans of its portfolio securities. Although voting rights or rights to consent accompanying loaned securities pass to the borrower, the Fund retains the right to call the loans at any time on reasonable notice, and it will do so in order that the securities may be voted by the Fund with respect to matters materially affecting the Fund’s investment. The Fund may also call a loan in order to sell the securities involved. Lending portfolio securities involves risks of delay in recovery of the loaned securities or, in some cases, loss of rights in the collateral should the borrower commence an action relating to bankruptcy, insolvency or reorganization. The use of securities lending collateral to obtain leverage in the Fund’s investment portfolio may subject the Fund to greater risk of loss than the use of traditional securities lending to earn incremental income via investing collateral solely in short-term U.S. government securities or cash equivalents.
Foreign currency transactions
The value of non-U.S. assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in foreign currency rates and exchange control regulations. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the U.S. or abroad. The Fund may (but is not required to) engage in transactions to hedge against changes in foreign currencies, and will use such hedging techniques when the Advisor or the Subadvisor deems appropriate. Foreign currency exchange transactions may be conducted on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into derivative currency transactions. Currency futures contracts are exchange-traded and change in value to reflect movements of a currency or a basket of currencies. Settlement must be made in a designated currency.
Forward foreign currency exchange contracts are individually negotiated and privately traded so they are dependent upon the creditworthiness of the counterparty. Such contracts may be used when a security denominated in a foreign
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currency is purchased or sold, or when the receipt in a foreign currency of dividend or interest payments on such a security is anticipated. A forward contract can then “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of such dividend or interest payment, as the case may be.
Additionally, when the Advisor or the Subadvisor believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or all of the securities held that are denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved generally will not be possible. In addition, it may not be possible to hedge against long-term currency changes. Cross-hedging may be performed by using forward contracts in one currency (or basket of currencies) to hedge against fluctuations in the value of securities denominated in a different currency if the Advisor or the Subadvisor determines that there is an established historical pattern of correlation between the two currencies (or the basket of currencies and the underlying currency). Use of a different foreign currency magnifies exposure to foreign currency exchange rate fluctuations. Forward contracts also may be used to shift exposure to foreign currency exchange rate changes from one currency to another. Short-term hedging provides a means of fixing the dollar value of only a portion of portfolio assets. Income or gain earned on any of the Fund’s foreign currency transactions generally will be treated as fully taxable income (i.e., income other than tax-advantaged dividends).
Currency transactions are subject to the risk of a number of complex political and economic factors applicable to the countries issuing the underlying currencies. Furthermore, unlike trading in most other types of instruments, there is no systematic reporting of last sale information with respect to the foreign currencies underlying the derivative currency transactions. As a result, available information may not be complete. In an over-the-counter trading environment, there are no daily price fluctuation limits. There may be no liquid secondary market to close out options purchased or written, or forward contracts entered into, until their exercise, expiration or maturity. There also is the risk of default by, or the bankruptcy of, the financial institution serving as counterparty.
USE OF LEVERAGE BY THE FUND
The Fund may use leverage to the extent permitted by the 1940 Act, this Prospectus, and the LA. The Fund is authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including the issuance of debt securities. See “—Other Investment Policies—Borrowing.” The Fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.”
The Fund’s leverage strategy may not be successful. By leveraging its investment portfolio, the Fund creates an opportunity for increased net income or capital appreciation. However, the use of leverage also involves risks, which can be significant. These risks include the possibility that the value of the assets acquired with such borrowing decreases although the Fund’s liability is fixed, greater volatility in the Fund’s NAV and the market price of the Fund’s Common Shares and higher expenses. Because the Advisor’s fee is based upon a percentage of the Fund’s managed assets, the Advisor’s fee will be higher if the Fund is leveraged and the Advisor will have an incentive to leverage the Fund. The Advisor intends only to leverage the Fund when it believes that the potential return on the additional investments acquired through the use of leverage is likely to exceed the costs incurred in connection with the offering.
At December 31, 2020, the Fund had borrowings under the LA of $125,000,000. The average daily loan balance, weighted average interest rate and maximum daily loan outstanding for the year ended December 31, 2020, were as follows:
Average Daily Loan Balance | Weighted Average Interest Rate% | Maximum Daily Loan Outstanding |
$125,000,000 | 1.14% | $150,000,000 |
The Fund’s borrowings under the LA as of December 31, 2020, equaled approximately 18.92% of the Fund’s total assets (including the proceeds of such leverage). The Fund’s asset coverage ratio as of December 31, 2020 was 528.61%. See “—Other Investment Policies—Borrowing” for a brief description of the Fund’s liquid facility agreement.
Assuming the utilization of leverage in the amount of 18.92% of the Fund’s total assets and an annual interest rate of 0.74% payable on such leverage based on market rates as of December 31, 2020, the additional income that the Fund must earn (net of expenses) in order to cover such leverage is approximately $925,000. Actual costs of leverage may
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be higher or lower than that assumed in the previous example. Under normal market conditions, interest charged under the LA is at the rate of one-month LIBOR plus 0.60%.
Following an offering of additional Common Shares from time to time, the Fund may increase the amount of leverage outstanding. The Fund may engage in additional borrowings, securities lending, and reverse repurchase agreements in order to maintain the Fund’s desired leverage ratio. Leverage creates a greater risk of loss, as well as a potential for more gain, for the Common Shares than if leverage was not used. Interest on borrowings may be at a fixed or floating rate and generally will be based on short-term rates. The costs associated with the Fund’s use of leverage, including the issuance of such leverage and the payment of dividends or interest on such leverage, will be borne entirely by the Common Shareholders. As long as the rate of return, net of applicable Fund expenses, on the Fund’s investment portfolio investments purchased with leverage exceeds the costs associated with such leverage, the Fund will generate more return or income than will be needed to pay such costs. In this event, the excess will be available to pay higher dividends to Common Shareholders. Conversely, if the Fund’s return on such assets is less than the cost of leverage and other Fund expenses, the return to the Common Shareholders will diminish. To the extent that the Fund uses leverage, the NAV and market price of the Common Shares and the yield to Common Shareholders will be more volatile. The Fund’s leveraging strategy may not be successful. See “Risk Factors—Leverage Risk.”
The following table is designed to illustrate the effect on the return to a holder of the Fund’s Common Shares of leverage in the amount of approximately 18.92% of the Fund’s total assets, assuming hypothetical annual returns of the Fund’s investment portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to Common Shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical. Actual returns may be greater or less than those appearing in the table.
Assumed Portfolio Return | (10.00)% | (5.00)% | 0.00% | 5.00% | 10.00% |
Corresponding Common Shares Total Return | -13.31% | -6.72% | -0.14% | 6.45% | 13.04% |
The principal risks of investing in the Fund are summarized in the Prospectus Summary above. Below are descriptions of the principal factors that may play a role in shaping the Fund’s overall risk profile. The descriptions appear in alphabetical order by general risks, equity strategy risks, and options strategy risks, not in order of importance. For further details about the Fund’s risks, including additional risk factors that are not discussed in this Prospectus because they are considered non-principal risk factors, see the Fund’s SAI.
General Risks
ANTI-TAKEOVER PROVISIONS
The Fund’s Declaration of Trust includes provisions that could limit the ability of other persons or entities to acquire control of the Fund or to change the composition of its Board. These provisions may deprive shareholders of opportunities to sell their Common Shares at a premium over the then current market price of the Common Shares. See “Certain Provisions in the Declaration of Trust and By-Laws—Anti-takeover provisions.”
BANKING INDUSTRY RISK
Commercial banks, savings and loan associations, and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries, and significant competition. Profitability of these businesses depends significantly upon the availability and cost of capital funds. Commercial banks and savings associations are subject to extensive federal and state regulation.
CHANGES IN U.S. LAW
Changes in the state and U.S. federal laws applicable to the Fund, including changes to state and U.S. federal tax laws, or applicable to the Advisor, the Subadvisor and other securities or instruments in which the Fund may invest, may negatively affect the Fund’s returns to Common Shareholders. The Fund may need to modify its investment strategy in the future in order to satisfy new regulatory requirements or to compete in a changed business environment.
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Cybersecurity and operational risk
Intentional cybersecurity breaches include unauthorized access to systems, networks, or devices (such as through “hacking” activity); infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. In addition, unintentional incidents can occur, such as the inadvertent release of confidential information (possibly resulting in the violation of applicable privacy laws).
A cybersecurity breach could result in the loss or theft of customer data or funds, the inability to access electronic systems (“denial of services”), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system repairs. Such incidents could cause the Fund, the advisor, a manager, or other service providers to incur regulatory penalties, reputational damage, additional compliance costs, or financial loss. In addition, such incidents could affect issuers in which the Fund invests, and thereby cause the fund’s investments to lose value.
Cyber-events have the potential to affect materially the Fund and the Advisor’s relationships with accounts, shareholders, clients, customers, employees, products, and service providers. The Fund has established risk management systems reasonably designed to seek to reduce the risks associated with cyber-events. There is no guarantee that the Fund will be able to prevent or mitigate the impact of any or all cyber-events.
The Fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties, or other third parties, failed or inadequate processes and technology or system failures.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises (such as the novel coronavirus (COVID-19) pandemic), may adversely affect the Fund’s ability to conduct business, in particular if the Fund’s employees or the employees of its service providers are unable or unwilling to perform their responsibilities as a result of any such event. Even if the Fund’s employees and the employees of its service providers are able to work remotely, those remote work arrangements could result in the Fund’s business operations being less efficient than under normal circumstances, could lead to delays in its processing of transactions, and could increase the risk of cyber-events.
DEFENSIVE POSITIONS RISK
During periods of adverse market or economic conditions, the Fund may temporarily invest all or a substantial portion of its total assets in short-term money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. The Fund will not be pursuing its investment objective in these circumstances and could miss favorable market developments.
DISTRIBUTION RISK
There can be no assurance that quarterly distributions paid by the Fund to shareholders will be maintained at current levels or increase over time. The quarterly distributions shareholders receive from the Fund are derived from the Fund’s dividends and interest income after payment of Fund expenses, net option premiums and net realized gain on equity securities investments. If stock market volatility and/or stock prices decline, the premiums available from writing call options and writing put options on individual stocks likely will decrease as well. Payments to purchase put options and to close written call and put options will reduce amounts available for distribution. Net realized gain on the Fund’s stock investments will be determined primarily by the direction and movement of the stock market and the equity securities held. The Fund’s cash available for distribution may vary widely over the short- and long-term. If, for any calendar year, the total distributions made exceed the Fund’s net investment taxable income and net capital gain, the excess generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of his or her Common Shares. Distributions in any year may include a substantial return of capital component. Dividends on common stocks are not fixed but are declared at the discretion of the issuer’s board of directors.
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ECONOMIC AND MARKET EVENTS RISK
Events in certain sectors historically have resulted, and may in the future result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included, but are not limited to: bankruptcies, corporate restructurings, and other similar events; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and state budget deficits; social, political and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in energy prices and currency exchange rates; and China’s economic slowdown. Interconnected global economies and financial markets increase the possibility that conditions in one country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected. Banks and financial services companies could suffer losses if interest rates were to rise or economic conditions deteriorate.
In addition, relatively high market volatility and reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. Actions taken by the U.S. Federal Reserve (Fed) or foreign central banks to stimulate or stabilize economic growth, such as interventions in currency markets, could cause high volatility in the equity and fixed-income markets. Reduced liquidity may result in less money being available to purchase raw materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging-market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
In addition, while interest rates have been unusually low in recent years in the United States and abroad, any decision by the Fed to adjust the target fed funds rate, among other factors, could cause markets to experience continuing high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. Also, regulators have expressed concern that rate increases may contribute to price volatility. These events and the possible resulting market volatility may have an adverse effect on the Fund.
Political turmoil within the United States and abroad
may also impact the fund. Although the U.S. government has honored its credit obligations, it remains possible that the United States
could default on its obligations. While it is impossible to predict the consequences of such an unprecedented event, it is likely that
a default by the United States would be highly disruptive to the United States and global securities markets and could significantly impair
the value of the fund’s investments. Similarly, political events within the United States at times have resulted, and may in the
future result, in a shutdown of government services, which could negatively affect the U.S. economy, decrease the value of many fund investments,
and increase uncertainty in or impair the operation of the United States or other securities markets. The U.S. is also renegotiating many
of its global trade relationships and has imposed or threatened to impose significant import tariffs. These actions could lead to price
volatility and overall declines in U.S. and global investment markets.
Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the world’s securities markets likely will be significantly disrupted. On January 31, 2020, the UK left the EU, commonly referred to as “Brexit,” and there commenced a transition period during which the EU and UK will negotiate and agree on the nature of their future relationship. Negotiators representing the United Kingdom and EU came to a preliminary trade agreement on December 24, 2020. The Trade Agreement was ratified by the UK Parliament and the European Parliament and took effect on January 1, 2021. Many aspects of the United Kingdom-EU trade relationship remain subject to further negotiation. There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. This uncertainty may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. In addition, Brexit may create additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the novel coronavirus (COVID-19) pandemic will stretch the resources and deficits of many countries in the EU and throughout the world, increasing the risk of default on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the performance of the fund.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading
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suspensions and closures, impact the ability to complete redemptions, and affect fund performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
The United States has responded to the novel coronavirus (COVID-19) pandemic and resulting economic distress with fiscal and monetary stimulus packages. In late March 2020, the government passed the Coronavirus Aid, Relief, and Economic Security Act, a stimulus package providing for over $2.2 trillion in resources to small businesses, state and local governments, and individuals that have been adversely impacted by the novel coronavirus (COVID-19) pandemic. In addition, in mid-March 2020 the Fed cut interest rates to historically low levels and promised unlimited and open-ended quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial markets, including expanding its reverse repurchase agreement operations, adding $1.5 trillion of liquidity to the banking system, establishing swap lines with other major central banks to provide dollar funding, establishing a program to support money market funds, easing various bank capital buffers, providing funding backstops for businesses to provide bridging loans for up to four years, and providing funding to help credit flow in asset-backed securities markets. The Fed also plans to extend credit to small- and medium-sized businesses.
Political and military events, including in North Korea, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
In addition, there is a risk that the prices of goods and services in the United States and many foreign economies may decline over time, known as deflation. Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely. If a country’s economy slips into a deflationary pattern, it could last for a prolonged period and may be difficult to reverse.
INDUSTRY OR SECTOR RISK
The Fund generally invests a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the Fund's assets are economically tied to a single or small number of industries or sectors of the economy, the Fund will be less diversified than a more broadly diversified fund, and it may cause the Fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the Fund’s NAV more volatile. Further, a Fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors. Financial services companies can be hurt by economic declines, changes in interest rates, and regulatory and market impacts.
INFLATION RISK
Inflation risk is the risk that the purchasing power of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of Common Shares and distributions thereon can decline.
INTEREST RATE RISK
Interest rate risk is the risk that fixed-income securities such as debt securities and preferred securities will decline in value because of changes in market interest rates. When market interest rates rise, the market value of such securities generally will fall. The Fund’s investments in debt securities and preferred securities means that the NAV and market price of the Common Shares will tend to decline if market interest rates rise. Given the historically low level of interest rates in recent years and the likelihood that interest rates will increase when the national economy strengthens, the risk of the potentially negative impact of rising interest rates on the value of the Fund’s portfolio may be significant. In addition, the longer the average maturity of the Fund’s portfolio of debt securities, the greater the potential impact of rising interest rates on the value of the Fund’s portfolio and the less flexibility the Fund may have to respond to the decreasing spread between the yield on its portfolio securities.
During periods of declining interest rates, an issuer may exercise its option to prepay principal of debt securities or to redeem preferred securities earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is
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known as call or prepayment risk. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security’s duration and reduce the value of the security. This is known as extension risk. Recent and potential future changes in government monetary policy may affect the level of interest rates.
The fixed-income securities market has been and may continue to be negatively affected by the novel coronavirus (COVID-19) pandemic. As with other serious economic disruptions, governmental authorities and regulators are responding to this crisis with significant fiscal and monetary policy changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
INVESTMENT AND MARKET RISK
An investment in Common Shares is subject to investment and market risk, including the possible loss of the entire principal amount invested. An investment in Common Shares represents an indirect investment in the securities owned by the Fund, which generally are traded on a securities exchange or in the over-the-counter markets. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably. Common Shares at any point in time may be worth less than the original investment, even after taking into account any reinvestment of dividends and distributions.
LEVERAGE RISK
By leveraging its investment portfolio, the Fund creates an opportunity for increased net income or capital appreciation. However, the use of leverage also involves risks, which can be significant. These risks include the possibility that the value of the assets acquired with such borrowing decreases although the Fund’s liability is fixed, greater volatility in the Fund’s NAV and the market price of the Fund’s Common Shares and higher expenses. Since the Advisor’s fee is based upon a percentage of the Fund’s managed assets, the Advisor’s fee will be higher if the Fund is leveraged and the Advisor will have an incentive to leverage the Fund. The Board will monitor this potential conflict. The Advisor intends to leverage the Fund only when it believes that the potential return on the additional investments acquired through the use of leverage is likely to exceed the costs incurred in connection with the offering.
The Fund is authorized to utilize leverage through borrowings, reinvestment of securities lending collateral or reverse repurchase agreement proceeds, and/or the issuance of preferred shares, including the issuance of debt securities. The Fund is party to the LA as described in “—Description of Capital Structure—Liquidity Facility.”
The Fund utilizes the LA to increase its assets available for investment. When the Fund leverages its assets, Common Shareholders bear the fees associated with the liquidity facility and have the potential to benefit or be disadvantaged from the use of leverage. In addition, the fee paid to the Advisor is calculated on the basis of the Fund’s average daily managed assets, including proceeds from borrowings and/or the issuance of preferred shares, so the fee will be higher when leverage is utilized, which may create an incentive for the Advisor to employ financial leverage. Consequently, the Fund and the Advisor may have differing interests in determining whether to leverage the Fund’s assets. Leverage creates risks that may adversely affect the return for the Common Shareholders, including:
• | the likelihood of greater volatility of NAV and market price of Common Shares; |
• | fluctuations in the interest rate paid for the use of the LA; |
• | increased operating costs, which may reduce the Fund’s total return; |
• | the potential for a decline in the value of an investment acquired through leverage, while the Fund’s obligations under such leverage remains fixed; and |
• | the Fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements. |
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To the extent the returns derived from securities purchased with proceeds received from leverage exceed the cost of leverage, the Fund’s distributions may be greater than if leverage had not been used. Conversely, if the returns from the securities purchased with such proceeds are not sufficient to cover the cost of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the latter case, the Advisor, in its best judgment, may nevertheless determine to maintain the Fund’s leveraged position if it deems such action to be appropriate. The costs of a borrowing program and/or an offering of preferred shares would be borne by Common Shareholders and consequently would result in a reduction of the NAV of Common Shares.
In addition to the risks created by the Fund’s use of leverage, the Fund is subject to the risk that the liquidity facility agreement is terminated due to the occurrence of one or more events of default under the LA. If the LA is terminated in such circumstances, the Fund would be subject to additional risk that it would be unable to timely, or at all, obtain replacement financing. The Fund might also be required to de-leverage, selling securities at a potentially inopportune time and incurring tax consequences. Further, the Fund’s ability to generate income from the use of leverage would be adversely affected.
The Fund may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a liquidity facility; either of these requirements will increase the cost of borrowing over the stated interest rate. To the extent that the Fund borrows through the use of reverse repurchase agreements, it would be subject to a risk that the value of the portfolio securities transferred may substantially exceed the purchase price received by the Fund under the reverse repurchase agreement transaction. Alternatively, during the life of any reverse repurchase agreement transaction, the Fund may be required to transfer additional securities if the market value of those securities initially transferred declines. In addition, capital raised through borrowing or the issuance of preferred shares will be subject to interest costs or dividend payments that may or may not exceed the income and appreciation on the assets purchased. The issuance of additional classes of preferred shares involves offering expenses and other costs, which will be borne by the Common Shareholders, and may limit the Fund’s freedom to pay dividends on Common Shares or to engage in other activities.
The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more nationally recognized statistical rating organizations which may issue ratings for the preferred shares or short-term debt instruments issued by the Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. Certain types of borrowings may result in the Fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the Fund’s ability to pay dividends and distributions on Common Shares in certain instances. The Fund also may be required to pledge its assets to the lenders in connection with certain types of borrowing. Under the current LA, the Fund is subject to covenants that include, but are not limited to, certain minimum net asset value and collateral requirements, as well as a requirement to provide timely certain financial information to the lender. The Advisor does not anticipate that these covenants or restrictions will adversely affect its ability to manage the Fund’s portfolio in accordance with the Fund’s investment objective and principal investment strategies. Due to these covenants or restrictions, the Fund may be forced to liquidate investments at times and at prices that are not favorable to the Fund, or the Fund may be forced to forego investments that the Advisor otherwise views as favorable.
The extent that the Fund employs leverage, if any, will depend on many factors, the most important of which are investment outlook, market conditions and interest rates. Successful use of a leveraging strategy depends on the Advisor’s ability to predict correctly interest rates and market movements. There is no assurance that a leveraging strategy will be successful during any period in which it is employed.
LIBOR DISCONTINUATION RISK
The LA utilizes LIBOR as the reference or benchmark rate for interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, is expected to cease publishing most LIBOR maturities, including some US LIBOR maturities, on December 31, 2021, and the remaining and most liquid US LIBOR maturities on June 30, 2023. It is expected that market participants such as the fund and SSB will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date. However, although regulators have encouraged the development and adoption of alternative rates such as the Secured
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Overnight Financing Rate (“SOFR”), the future utilization of LIBOR or of any particular replacement rate remains unclear.
Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation dates, the impact on the LA remains uncertain. It is expected that market participants will amend financial instruments referencing LIBOR, such as the LA, to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of such measures is known. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. However, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple alternative reference rates in new or existing financial instruments and products has not been determined. Certain proposed replacement rates to LIBOR, such as SOFR, which is a broad measure of secured overnight US Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an alternative reference rate is not completed in a timely manner.
As market participants transition away from LIBOR, LIBOR’s usefulness may deteriorate. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR’s deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR as a benchmark interest rate. The use of an alternative reference rate, or the transition process to an alternative reference rate, may result in increases to the interest paid by the fund pursuant to the LA and, therefore, may adversely affect the fund’s performance.
MANAGEMENT RISK
The Fund is subject to management risk because it relies on the Subadvisor’s ability to pursue the Fund’s investment objective. The Subadvisor applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that it will produce the desired results. The Subadvisor’s securities selections and other investment decisions might produce a loss or cause the Fund to underperform when compared to other funds with similar investment goals. If one or more key individuals leave the employ of the Subadvisor, then the Subadvisor may not be able to hire qualified replacements, or may require an extended time to do so. This could prevent the Fund from achieving its investment objective.
MARKET DISCOUNT RISK
The Fund’s Common Shares will be offered only when Common Shares of the Fund are trading at a price equal to or above the Fund’s NAV per Common Share plus the per Common Share amount of commissions. As with any security, the market value of the Common Shares may increase or decrease from the amount initially paid for the Common Shares. The Fund’s Common Shares have traded at both a premium and at a discount to NAV. The shares of closed-end management investment companies frequently trade at a discount from their NAV. This characteristic is a risk separate and distinct from the risk that the Fund’s NAV could decrease as a result of investment activities. Investors bear a risk of loss to the extent that the price at which they sell their shares is lower in relation to the Fund’s NAV than at the time of purchase, assuming a stable NAV.
NATURAL DISASTERS AND ADVERSE WEATHER CONDITIONS
Certain areas of the world historically have been prone to major natural disasters, such as hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, and have been economically sensitive to environmental events. Such disasters, and the resulting damage, could have a severe and negative impact on the Fund’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Fund invests to conduct their businesses in the manner normally conducted. Adverse weather conditions also may have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
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SECONDARY MARKET FOR THE COMMON SHARES
The issuance of new Common Shares may have an adverse effect on the secondary market for the Common Shares. When Common Shares are trading at a premium, the Fund may issue new Common Shares of the Fund. The increase in the amount of the Fund’s outstanding Common Shares resulting from the offering of new Common Shares may put downward pressure on the market price for the Common Shares of the Fund. Common Shares will not be issued at any time when Common Shares are trading at a price lower than a price equal to the Fund’s NAV per Common Share plus the per Common Share amount of commissions.
The Fund also issues Common Shares through its dividend reinvestment plan. Common Shares may be issued under the plan at a discount to the market price for such Common Shares, which may put downward pressure on the market price for Common Shares of the Fund.
The voting power of current Common Shareholders will be diluted to the extent that such shareholders do not purchase shares in any future Common Share offerings or do not purchase sufficient shares to maintain their percentage interest. In addition, if the proceeds of such offering are unable to be invested as intended, the Fund’s per Common Share distribution may decrease (or may consist of return of capital) and the Fund may not participate in market advances to the same extent as if such proceeds were fully invested as planned.
TAX RISK
To qualify for the special tax treatment available to regulated investment companies, the Fund must: (i) derive at least 90% of its annual gross income from certain kinds of investment income; (ii) meet certain asset diversification requirements at the end of each quarter; and (iii) distribute in each taxable year at least 90% of its net investment income (including net interest income and net short term capital gain). If the Fund failed to meet any of these requirements, subject to the opportunity to cure such failures under applicable provisions of the Code, the Fund would be subject to U.S. federal income tax at regular corporate rates on its taxable income, including its net capital gain, even if such income were distributed to its shareholders. All distributions by the Fund from earnings and profits, including distributions of net capital gain (if any), would be taxable to the shareholders as ordinary income. To the extent designated by the Fund, such distributions generally would be eligible (i) to be treated as qualified dividend income in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders, provided that in each case the shareholder meets applicable holding period requirements. In addition, in order to requalify for taxation as a regulated investment company, the Fund might be required to recognize unrealized gain, pay substantial taxes and interest, and make certain distributions. See “U.S. Federal Income Tax Matters.”
The tax treatment and characterization of the Fund’s distributions may vary significantly from time to time due to the nature of the Fund’s investments. The ultimate tax characterization of the Fund’s distributions in a calendar year may not finally be determined until after the end of that calendar year. The Fund may make distributions during a calendar year that exceed the Fund’s net investment income and net realized capital gain for that year. In such a situation, the amount by which the Fund’s total distributions exceed net investment income and net realized capital gain generally would be treated as a return of capital up to the amount of the Common Shareholder’s tax basis in his or her Common Shares, with any amounts exceeding such basis treated as gain from the sale of his or her Common Shares. The Fund’s income distributions that qualify for favorable tax treatment may be affected by the Internal Revenue Service’s (“IRS”) interpretations of the Code and future changes in tax laws and regulations. See “U.S. Federal Income Tax Matters.”
No assurance can be given as to what percentage of the distributions paid on Common Shares, if any, will consist of long-term capital gain or what the tax rates on various types of income will be in future years. See “U.S. Federal Income Tax Matters.”
Strategy Risks
CORPORATE DEBT SECURITIES RISK
Corporate debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and also may be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity.
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CREDIT AND COUNTERPARTY RISK
This is the risk that the issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter (OTC) derivatives contract (see “Hedging, derivatives, and other strategic transactions risk”), or a borrower of the Fund’s securities will be unable or unwilling to make timely principal, interest, or settlement payments, or otherwise honor its obligations. Credit risk associated with investments in fixed-income securities relates to the ability of the issuer to make scheduled payments of principal and interest on an obligation. A fund that invests in fixed-income securities is subject to varying degrees of risk that the issuers of the securities will have their credit ratings downgraded or will default, potentially reducing the fund’s share price and income level. Nearly all fixed-income securities are subject to some credit risk, which may vary depending upon whether the issuers of the securities are corporations, domestic or foreign governments, or their subdivisions or instrumentalities. U.S. government securities are subject to varying degrees of credit risk depending upon whether the securities are supported by the full faith and credit of the United States; the ability to borrow from the U.S. Treasury; only by the credit of the issuing U.S. government agency, instrumentality, or corporation; or otherwise supported by the United States. For example, issuers of many types of U.S. government securities (e.g., the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Banks), although chartered or sponsored by Congress, are not funded by congressional appropriations, and their fixed-income securities, including asset-backed and mortgage-backed securities, are neither guaranteed nor insured by the U.S. government. An agency of the U.S. government has placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac. As a result, these securities are subject to more credit risk than U.S. government securities that are supported by the full faith and credit of the United States (e.g., U.S. Treasury bonds). When a fixed-income security is not rated, a manager may have to assess the risk of the security itself. Asset-backed securities, whose principal and interest payments are supported by pools of other assets, such as credit card receivables and automobile loans, are subject to further risks, including the risk that the obligors of the underlying assets default on payment of those assets.
Funds that invest in below-investment-grade securities, also called junk bonds (e.g., fixed-income securities rated Ba or lower by Moody’s Investors Service, Inc. or BB or lower by Standard & Poor’s Ratings Services, at the time of investment, or determined by a manager to be of comparable quality to securities so rated) are subject to increased credit risk. The sovereign debt of many foreign governments, including their subdivisions and instrumentalities, falls into this category. Below-investment-grade securities offer the potential for higher investment returns than higher-rated securities, but they carry greater credit risk: their issuers’ continuing ability to meet principal and interest payments is considered speculative, they are more susceptible to real or perceived adverse economic and competitive industry conditions, and they may be less liquid than higher-rated securities.
In addition, the Fund is exposed to credit risk to the extent that it makes use of OTC derivatives (such as forward foreign currency contracts and/or swap contracts) and engages to a significant extent in the lending of fund securities or the use of repurchase agreements. OTC derivatives transactions can be closed out with the other party to the transaction. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will be able to meet its contractual obligations or that, in the event of default, the Fund will succeed in enforcing them. A fund, therefore, assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that those payments may be delayed or made only after the fund has incurred the costs of litigation. While the manager intends to monitor the creditworthiness of contract counterparties, there can be no assurance that the counterparty will be in a position to meet its obligations, especially during unusually adverse market conditions.
EQUITY SECURITIES RISK
Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate, and can decline and reduce the value of the Fund investing in equities. The price of equity securities fluctuates based on changes in a company’s financial condition and overall market and economic conditions. The value of equity securities purchased by the Fund could decline if the financial condition of the companies in which the Fund is invested declines, or if overall market and economic conditions deteriorate. An issuer’s financial condition could decline as a result of poor management decisions, competitive pressures, technological obsolescence, undue reliance on suppliers, labor issues, shortages, corporate restructurings, fraudulent disclosures, or other factors. Changes in the financial condition of a single issuer can impact the market as a whole.
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Even a fund that invests in high-quality, or blue chip, equity securities, or securities of established companies with large market capitalizations (which generally have strong financial characteristics), can be negatively impacted by poor overall market and economic conditions. Companies with large market capitalizations may also have less growth potential than smaller companies and may be less able to react quickly to changes in the marketplace.
The Fund generally does not attempt to time the market. Because of its exposure to equities, the possibility that stock market prices in general will decline over short or extended periods subjects the Fund to unpredictable declines in the value of its investments, as well as periods of poor performance.
PREFERRED AND CONVERTIBLE SECURITIES RISK. Unlike interest on debt securities, preferred stock dividends are payable only if declared by the issuer’s board. Also, preferred stock may be subject to optional or mandatory redemption provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible preferred stock is converted, depending on whether the market price of the underlying security exceeds the conversion price.
FIXED-INCOME SECURITIES RISK
Fixed-income securities are generally subject to two principal types of risk, as well as other risks described below: (1) interest-rate risk and (2) credit quality risk.
Credit quality risk. Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates after the Fund has purchased the security, the market value of the security may decrease and lead to a decrease in the value of the fund’s investments. An issuer’s credit quality could deteriorate as a result of poor management decisions, competitive pressures, technological obsolescence, undue reliance on suppliers, labor issues, shortages, corporate restructurings, fraudulent disclosures, or other factors. Funds that may invest in lower-rated fixed-income securities, commonly referred to as junk securities, are riskier than funds that may invest in higher-rated fixed-income securities. Additional information on the risks of investing in investment-grade fixed-income securities in the lowest rating category and lower-rated fixed-income securities is set forth below.
Interest-rate risk. Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline. The longer the duration or maturity of a fixed-income security, the more susceptible it is to interest-rate risk. Recent and potential future changes in government monetary policy may affect the level of interest rates.
The fixed-income securities market has been and may continue to be negatively affected by the novel coronavirus (COVID-19) pandemic. As with other serious economic disruptions, governmental authorities and regulators are responding to this crisis with significant fiscal and monetary policy changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
Investment-grade fixed-income securities in the lowest rating category risk. Investment-grade fixed-income securities in the lowest rating category (such as Baa by Moody’s Investors Service, Inc. or BBB by Standard and Poor’s Ratings Services or Fitch Ratings, as applicable, and comparable unrated securities) involve a higher degree of risk than fixed-income securities in the higher rating categories. While such securities are considered investment-grade quality and are deemed to have adequate capacity for payment of principal and interest, such securities lack outstanding investment characteristics and have speculative characteristics as well. For example, changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher-grade securities.
Prepayment of principal risk. Many types of debt securities, including floating-rate loans, are subject to prepayment risk. Prepayment risk occurs when the issuer of a security can repay principal prior to the security’s maturity. Securities subject to prepayment risk can offer less potential for gains when the credit quality of the issuer improves.
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Recent Fixed-Income Market Events. In addition to financial market volatility, relatively high market volatility and reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. Actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth, such as decreases or increases in short-term interest rates, or interventions in currency markets, could cause high volatility in the equity and fixed-income markets.
FOREIGN SECURITIES RISK
Funds that invest in securities traded principally in securities markets outside the United States are subject to additional and more varied risks, as the value of foreign securities may change more rapidly and extremely than the value of U.S. securities. Less information may be publicly available regarding foreign issuers. Foreign securities may be subject to foreign taxes and may be more volatile than U.S. securities. Currency fluctuations and political and economic developments may adversely impact the value of foreign securities. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally, issuers of foreign securities may not be subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. There are generally higher commission rates on foreign portfolio transactions, transfer taxes, higher custodial costs, and the possibility that foreign taxes will be charged on dividends and interest payable on foreign securities, some or all of which may not be reclaimable. Also, adverse changes in investment or exchange control regulations (which may include suspension of the ability to transfer currency or assets from a country); political changes; or diplomatic developments could adversely affect the Fund’s investments. In the event of nationalization, expropriation, confiscatory taxation, or other confiscation, the Fund could lose a substantial portion of, or its entire investment in, a foreign security.
Any depositary receipts are subject to most of the risks associated with investing in foreign securities directly because the value of a depositary receipt is dependent upon the market price of the underlying foreign equity security. Depositary receipts are also subject to liquidity risk.
Currency Risk. Currency risk is the risk that fluctuations in exchange rates may adversely affect the U.S. dollar value of the Fund’s investments. Currency risk includes both the risk that currencies in which a fund’s investments are traded, or currencies in which a fund has taken an active investment position, will decline in value relative to the U.S. dollar and, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly for a number of reasons, including the forces of supply and demand in the foreign exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments or central banks, or currency controls or political developments in the United States or abroad. Certain funds may engage in proxy hedging of currencies by entering into derivative transactions with respect to a currency whose value is expected to correlate to the value of a currency the fund owns or wants to own. This presents the risk that the two currencies may not move in relation to one another as expected. In that case, the fund could lose money on its investment and also lose money on the position designed to act as a proxy hedge. Certain funds may also take active currency positions and may cross-hedge currency exposure represented by their securities into another foreign currency. This may result in a fund’s currency exposure being substantially different than that suggested by its securities investments. All funds with foreign currency holdings and/or that invest or trade in securities denominated in foreign currencies or related derivative instruments may be adversely affected by changes in foreign currency exchange rates. Derivative foreign currency transactions (such as futures, forwards, and swaps) may also involve leveraging risk, in addition to currency risk. Leverage may disproportionately increase a fund’s portfolio losses and reduce opportunities for gain when interest rates, stock prices, or currency rates are changing.
HEDGING, DERIVATIVES AND OTHER STRATEGIC TRANSACTIONS RISK
The ability of the Fund to utilize hedging, derivatives and other strategic transactions to benefit the Fund will depend in part on the Subadvisor’s ability to predict pertinent market movements and market risk, counterparty risk, credit risk, interest-rate risk and other risk factors, none of which can be assured. The skills required to utilize hedging and other strategic transactions are different from those needed to select the Fund’s securities. Even if the Subadvisor only uses hedging and other strategic transactions in the Fund primarily for hedging purposes or to gain exposure to a particular securities market, if the transaction does not have the desired outcome, it could result in a significant loss to the Fund. The amount of loss could be more than the principal amount invested. These transactions also may
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increase the volatility of the Fund and may involve a small investment of cash relative to the magnitude of the risks assumed, thereby magnifying the impact of any resulting gain or loss. For example, the potential loss from the use of futures can exceed the Fund’s initial investment in such contracts. In addition, these transactions could result in a loss to the Fund if the counterparty to the transaction does not perform as promised.
The Fund may invest in derivatives, which are financial contracts with a value that depends on, or is derived from, the value of underlying assets, reference rates or indexes. Examples of derivative instruments include options, futures contracts, options on futures contracts, foreign currency forward contracts and swap agreements (including, but not limited to, interest-rate swaps, total return swaps, credit default swaps and swaps on exchange-traded funds). Derivatives may relate to stocks, bonds, interest rates, currencies or currency exchange rates and related indexes. The Fund may use derivatives for many purposes, including for hedging, and as a substitute for direct investment in securities or other assets. Derivatives may be used in a way to efficiently adjust the exposure of the Fund to various securities, markets and currencies without the Fund actually having to sell existing investments and make new investments. This generally will be done when the adjustment is expected to be relatively temporary or in anticipation of effecting the sale of fund assets and making new investments over time. Further, since many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When the Fund uses derivatives for leverage, investments in the Fund will tend to be more volatile, resulting in larger gain or loss in response to market changes. For a description of the various derivative instruments the Fund may utilize and certain risk measures the Fund may implement, refer to the SAI.
The regulation of the U.S. and non-U.S. derivatives markets has undergone substantial change in recent years and such change may continue. In particular, new Rule 18f-4 (the “Derivatives Rule”), adopted by the SEC on October 28, 2020, replaces the asset segregation regime of Investment Company Act Release No. 10666 (Release 10666) with a new framework for the use of derivatives by registered funds. For funds using a significant amount of derivatives, the Derivatives Rule mandates a fund adopt and/or implement: (i) value at risk limitations in lieu of asset segregation requirements; (ii) a written derivatives risk management program; (iii) new Board oversight responsibilities, and (iv) new reporting and recordkeeping requirements. The Derivative Rule provides an exception for funds with derivative exposure to 10% of its net assets, excluding certain currency and interest rate hedging transactions. In addition, the Derivatives Rule provides special treatment for reverse repurchase agreements, similar financing transactions and unfunded commitment agreements. On August 19, 2022, the SEC will rescind Release 10666 and withdraw letters and similar guidance addressing a fund’s use of derivatives and require funds to satisfy the requirements of the Derivatives Rule. Unless a Fund elects to comply early with the Derivatives Rule, a Fund may continue to engage in certain asset segregation practices in accordance with Release 10666 and related staff letters and guidance until August 19, 2022.
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulation proposed to be promulgated thereunder require many derivatives to be cleared and traded on an exchange, expand entity registration requirements, impose business conduct requirements on dealers that enter into swaps with a pension plan, endowment, retirement plan or government entity, and required banks to move some derivatives trading units to a non-guaranteed affiliate separate from the deposit-taking bank or divest them altogether. Although the CFTC has released final rules relating to clearing, reporting, recordkeeping and registration requirements under the legislation, many of the provisions are subject to further final rule making, and thus its ultimate impact remains unclear. New regulations could, among other things, restrict the Fund’s ability to engage in derivatives transactions (for example, by making certain types of derivatives transactions no longer available to the Fund) and/or increase the costs of such derivatives transactions (for example, by increasing margin or capital requirements), and the Fund may be unable to fully execute its investment strategies as a result. Limits or restrictions applicable to the counterparties with which the Fund engages in derivative transactions also could prevent the Fund from using these instruments or affect the pricing or other factors relating to these instruments, or may change the availability of certain investments.
At any time after the date of this prospectus, legislation may be enacted that could negatively affect the assets of the Fund. Legislation or regulation may change the way in which the Fund itself is regulated. The Adviser cannot predict the effects of any new governmental regulation that may be implemented, and there can be no assurance that any new governmental regulation will not adversely affect the Fund’s ability to achieve its investment objective.
The use of derivative instruments may involve risks different from, or potentially greater than, the risks associated with investing directly in securities and other, more traditional assets. In particular, the use of derivative instruments exposes the Fund to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to
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make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction, although either party may engage in an offsetting transaction that puts that party in the same economic position as if it had closed out the transaction with the counterparty or may obtain the other party’s consent to assign the transaction to a third party. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that, in the event of default, the Fund will succeed in enforcing them. For example, because the contract for each OTC derivatives transaction is individually negotiated with a specific counterparty, the Fund is subject to the risk that a counterparty may interpret contractual terms (e.g., the definition of default) differently than the Fund when the Fund seeks to enforce its contractual rights. If that occurs, the cost and unpredictability of the legal proceedings required for the Fund to enforce its contractual rights may lead it to decide not to pursue its claims against the counterparty. The Fund, therefore, assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that those payments may be delayed or made only after the Fund has incurred the costs of litigation. While a manager intends to monitor the creditworthiness of counterparties, there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market conditions. To the extent the Fund contracts with a limited number of counterparties, the Fund’s risk will be concentrated and events that affect the creditworthiness of any of those counterparties may have a pronounced effect on the Fund. Derivatives are also subject to a number of other risks, including market risk and liquidity risk. Since the value of derivatives is calculated and derived from the value of other assets, instruments, or references, there is a risk that they will be improperly valued. Derivatives also involve the risk that changes in their value may not correlate perfectly with the assets, rates, or indexes they are designed to hedge or closely track. Suitable derivatives transactions may not be available in all circumstances. The Fund is also subject to the risk that the counterparty closes out the derivatives transactions upon the occurrence of certain triggering events. In addition, a manager may determine not to use derivatives to hedge or otherwise reduce risk exposure. Government legislation or regulation could affect the use of derivatives transactions and could limit the Fund’s ability to pursue its investment strategies.
The following is a list of certain derivatives and other strategic transactions that the Fund may utilize and the main risks associated with each of them:
• | Credit default swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk, settlement risk, risk of default of the underlying reference obligation and risk of disproportionate loss are the principal risks of engaging in transactions involving credit default swaps. |
• | Foreign currency forward contracts. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), foreign currency risk and risk of disproportionate loss are the principal risks of engaging in transactions involving foreign currency forward contracts. |
• | Foreign currency swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), foreign currency risk and risk of disproportionate loss are the principal risks of engaging in transactions involving foreign currency swaps. |
• | Futures contracts. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions) and risk of disproportionate loss are the principal risks of engaging in transactions involving futures contracts. |
• | Interest-rate swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk and risk of disproportionate loss are the principal risks of engaging in transactions involving interest-rate swaps. |
• | Options and currency option. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions) and risk of disproportionate loss are the principal risks of engaging in transactions involving options, including currency options. Counterparty risk does not apply to exchange-traded options. |
• | Swaps. Counterparty risk, liquidity risk (i.e., the inability to enter into closing transactions), interest-rate risk, settlement risk, risk of default of the underlying reference obligation and risk of disproportionate loss are the principal risks of engaging in transactions involving swaps, including credit default swaps and total return swaps. |
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ILLIQUID AND RESTRICTED SECURITIES RISK
The Fund may invest without limit in securities for which there is no readily available trading market or which are otherwise illiquid (i.e., investments that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment). The Fund may have significant exposure to restricted securities. Restricted securities are securities with restrictions on public resale, such as securities offered in accordance with an exemption under Rule 144A under the Securities Act of 1933 (the “1933 Act”), or commercial paper issued under Section 4(a)(2) of the 1933 Act. Restricted securities are often required to be sold in private sales to institutional buyers, markets for restricted securities may or may not be well developed, and restricted securities can be illiquid.
Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a particular security’s market price and the fund’s ability to see the security. Illiquid investments may become harder to value, especially in changing markets. The Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid investments at an advantageous time or price or possibly require the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations, which could prevent the Fund from taking advantage of other investment opportunities. Additionally, the market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer.
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by reduced market activity or participation, legal restrictions or other economic and market impediments. Funds with principal investment strategies that involve investments in securities of companies with smaller market capitalizations, foreign securities, derivatives, or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk. Exposure to liquidity risk may be heightened for funds that invest in securities of emerging markets and related derivatives that are not widely traded, and that may be subject to purchase and sale restrictions.
The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond market’s growth. As a result, dealer inventories of corporate bonds, which indicate the ability to “make markets,” i.e., buy or sell a security at the quoted bid and ask price, respectively, are at or near historic lows relative to market size. Because market makers provide stability to fixed-income markets, the significant reduction in dealer inventories could lead to decreased liquidity and increased volatility, which may become exacerbated during periods of economic or political stress.
In addition, limited liquidity could affect the market price of the investments, thereby adversely affecting the Fund’s NAV and ability to make dividend distributions. The financial markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any time. The Fund has no limitation on the amount of its assets which may be invested in investments which are not readily marketable or are subject to restrictions on resale.
LOWER-RATED AND HIGH-YIELD FIXED-INCOME SECURITIES RISK
Lower-rated fixed-income securities and high-yield fixed-income securities (both commonly known as “junk bonds”) are subject to the same risks as other fixed-income securities but have greater credit quality risk and may be considered speculative. In addition, lower-rated corporate debt securities (and comparable unrated securities) tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated corporate fixed-income securities. Issuers of lower-rated corporate debt securities may also be highly leveraged, increasing the risk that principal and income will not be repaid. Lower-rated foreign government fixed-income securities are subject to the risks of investing in foreign countries described under “Foreign securities risk.” In addition, the ability and willingness of a foreign government to make payments on debt when due may be affected by the prevailing economic and political conditions within the country. Emerging-market countries may experience high inflation, interest rates and unemployment, as well as exchange rate fluctuations which adversely affect trade and political uncertainty or instability. These factors increase the risk that a foreign government will not make payments when due.
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Lower-rated fixed-income securities are defined as securities rated below investment grade (such as Ba and below by Moody’s Investors Service, Inc. and BB and below by Standard and Poor’s Ratings Services and Fitch Ratings, as applicable) (also called junk bonds). The general risks of investing in these securities are as follows:
Risk to principal and income. Investing in lower-rated fixed-income securities is considered speculative. While these securities generally provide greater income potential than investments in higher-rated securities, there is a greater risk that principal and interest payments will not be made. Issuers of these securities may even go into default or become bankrupt.
Price volatility. The price of lower-rated fixed-income securities may be more volatile than securities in the higher-rated categories. This volatility may increase during periods of economic uncertainty or change. The price of these securities is affected more than higher-rated fixed-income securities by the market’s perception of their credit quality, especially during times of adverse publicity. In the past, economic downturns or increases in interest rates have, at times, caused more defaults by issuers of these securities and may do so in the future. Economic downturns and increases in interest rates have an even greater effect on highly leveraged issuers of these securities.
Liquidity. The market for lower-rated fixed-income securities may have more limited trading than the market for investment-grade fixed-income securities. Therefore, it may be more difficult to sell these securities, and these securities may have to be sold at prices below their market value in order to meet redemption requests or to respond to changes in market conditions.
Dependence on manager’s own credit analysis. While a manager may rely on ratings by established credit rating agencies, it will also supplement such ratings with its own independent review of the credit quality of the issuer. Therefore, the assessment of the credit risk of lower-rated fixed-income securities is more dependent on the manager’s evaluation than the assessment of the credit risk of higher-rated securities.
Additional risks regarding lower-rated corporate fixed-income securities. Lower-rated corporate fixed-income securities (and comparable unrated securities) tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated corporate fixed-income securities. Issuers of lower-rated corporate fixed-income securities may also be highly leveraged, increasing the risk that principal and income will not be repaid.
PREFERRED AND CONVERTIBLE SECURITIES RISK
Unlike interest on debt securities, preferred stock dividends are payable only if declared by the issuer’s board. Also, preferred stock may be subject to optional or mandatory redemption provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. The value of convertible preferred stock can depend heavily upon the value of the security into which such convertible preferred stock is converted, depending on whether the market price of the underlying security exceeds the conversion price.
REAL ESTATE INVESTMENT TRUST SECURITIES RISK
Securities of companies in the real estate industry include equity REITs and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the REIT, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax-free pass-through of income under the Code, as amended, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to a REIT. In the event of a default by a borrower or lessee, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, even the larger REITs in the industry tend to be small- to medium-sized companies in relation to the equity markets as a whole. Moreover, shares of REITs may trade less frequently and, therefore, are subject to more erratic price movements, than securities of larger issuers.
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REPURCHASE AGREEMENT RISK
The risk of a repurchase agreement transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument purchased may decline in value, interest payable on the instrument may be lost and there may be possible difficulties and delays in obtaining collateral and delays and expense in liquidating the instrument. If an issuer of a repurchase agreement fails to repurchase the underlying obligation, the loss, if any, would be the difference between the repurchase price and the underlying obligation’s market value. The Fund might also incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings are commenced with respect to the seller, realization upon the underlying obligation might be delayed or limited.
REVERSE REPURCHASE AGREEMENT RISK
Reverse repurchase agreement transactions involve the risk that the market value of the securities that the Fund is obligated to repurchase under such agreements may decline below the repurchase price. Any fluctuations in the market value of either the securities transferred to the other party or the securities in which the proceeds may be invested would affect the market value of the Fund’s assets, thereby potentially increasing fluctuations in the market value of the Fund’s assets. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund’s use of proceeds received under the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.
U.S. GOVERNMENT SECURITIES RISK
The Fund may invest in U.S. government securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of the issuing agency or instrumentality, which depends entirely on its own resources to repay the debt. U.S. government securities that are backed by the full faith and credit of the United States include U.S. Treasuries and mortgage-backed securities guaranteed by the Government National Mortgage Association. Securities that are only supported by the credit of the issuing agency or instrumentality include Fannie Mae, FHLBs and Freddie Mac. See “Credit and counterparty risk” for additional information on Fannie Mae and Freddie Mac securities.
WARRANTS RISK
Warrants are rights to purchase securities at specific prices and are valid for a specific period of time. Warrant prices do not necessarily move parallel to the prices of the underlying securities, and warrant holders receive no dividends and have no voting rights or rights with respect to the assets of an issuer. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants cease to have value if not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.
Given the risks described above, an investment in Common Shares may not be appropriate for all investors. You should carefully consider your ability to assume these risks before making an investment in the Fund.
TRUSTEES
The overall management of the Fund, including supervision of the duties performed by the Advisor and the Subadvisor, is the responsibility of the Board of Trustees, under the laws of The Commonwealth of Massachusetts and the 1940 Act. The Board of Trustees is responsible for the Fund’s overall management, including adopting the investment and other policies of the Fund, electing and replacing officers and selecting and supervising the Fund’s Advisor and Subadvisor. The names and business addresses of the Trustees and officers of the Fund and their principal occupations and other affiliations during the past five years, as well as a description of committees of the Board, are set forth under “Those Responsible for Management” in the SAI.
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A discussion regarding the basis for the Trustees’ approval of the Advisory Agreement and the Subadvisory Agreement (each, as defined below) is available in the Fund’s most recent annual shareholder report for the period ended December 31.
THE ADVISOR
The Advisor is a Delaware limited liability company whose principal offices are located at 200 Berkeley Street, Boston, Massachusetts 02116 and serves as the Fund’s investment advisor. The Advisor is registered with the SEC as an investment advisor under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Founded in 1968, the Advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), a subsidiary of Manulife Financial Corporation (“Manulife Financial” or the “Company”). Manulife Financial is the holding company of The Manufacturers Life Insurance Company (the “Life Company”) and its subsidiaries. John Hancock Life Insurance Company (U.S.A.) and its subsidiaries (“John Hancock”) today offer a broad range of financial products and services, including whole, term, variable, and universal life insurance, as well as college savings products, mutual funds, fixed and variable annuities, long-term care insurance and various forms of business insurance.
The Advisor’s parent company has been helping individuals and institutions work toward their financial goals since 1862. The Advisor offers investment solutions managed by institutional money managers, taking a disciplined team approach to portfolio management and research, leveraging the expertise of seasoned investment professionals. The Advisor has been managing closed-end funds since 1971. As of March 31, 2021, the Advisor had total assets under management of approximately $171.9 billion.
Subject to general oversight by the Board of Trustees, the Advisor manages and supervises the investment operations and business affairs of the Fund. The Advisor selects, contracts with and compensates one or more subadvisors to manage all or a portion of the Fund’s portfolio assets, subject to oversight by the Advisor. In this role, the Advisor has supervisory responsibility for managing the investment and reinvestment of the Fund, as described in further detail below. In this role, the Advisor has supervisory responsibility for managing the investment and reinvestment of the Fund as described in further detail below. The Advisor is responsible for developing overall investment strategies for the Fund and overseeing and implementing the Fund’s continuous investment program and provides a variety of advisory oversight and investment research services. The Advisor also provides management and transition services associated with certain fund events (e.g., strategy, portfolio manager or subadvisor changes) and coordinates and oversees services provided under other agreements.
The Advisor has ultimate responsibility to oversee a subadvisor and recommended to the Board of Trustees its hiring, termination, and replacement. In this capacity, the Advisor, among other things: (i) monitors on a daily basis the compliance of the subadvisor with the investment objective and related policies of the fund; (ii) monitors significant changes that may impact the subadvisor’s overall business and regularly performs due diligence reviews of the subadvisor; (iii) reviews the performance of the subadvisor; and (iv) reports periodically on such performance to the Board of Trustees. The Advisor employs a team of investment professionals who provide these ongoing research and monitoring services.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). The waiver equals, on an annualized basis, 0.0100% of that portion of the aggregate net assets of all the participating portfolios that exceeds $75 billion but is less than or equal to $125 billion; 0.0125% of that portion of the aggregate net assets of all the participating portfolios that exceeds $125 billion but is less than or equal to $150 billion; 0.0150% of that portion of the aggregate net assets of all the participating portfolios that exceeds $150 billion but is less than or equal to $175 billion; 0.0175% of that portion of the aggregate net assets of all the participating portfolios that exceeds $175 billion but is less than or equal to $200 billion; 0.0200% of that portion of the aggregate net assets of all the participating portfolios that exceeds $200 billion but is less than or equal to $225 billion; and 0.0225% of that portion of the aggregate net assets of all the participating portfolios that exceeds $225 billion. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended December 31, 2020, this waiver amounted to 0.01% of the fund’s average daily net assets. This arrangement expires on July 31, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
Manulife Financial Corporation is a leading international financial services group with principal operations in Asia, Canada and the United States. Operating primarily as John Hancock in the United States and Manulife elsewhere, it
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provides financial protection products and advice, insurance, as well as wealth and asset management services through its extensive network of solutions for individuals, groups and institutions. As of March 31, 2021, it had over C$1.3 trillion (US$1.0 trillion) in assets under management and administration. Its global headquarters are in Toronto, Canada, and it trades as ‘MFC’ on the Toronto Stock Exchange, New York Stock Exchange (the “NYSE”), and the Philippine Stock Exchange, and under '945' in Hong Kong. Manulife Financial Corporation can be found on the Internet at manulife.com.
Advisory Agreement. The Fund entered into an investment management contract dated June 30, 2020 (the “Advisory Agreement”) with the Advisor. As compensation for its advisory services under the Advisory Agreement, the Advisor receives a fee from the Fund, calculated and paid daily, at an annual rate of the Fund’s average daily managed assets. “Managed assets” means, for the purposes of calculating the advisory fee, the total assets of the Fund (including any assets attributable to any leverage that may be outstanding) minus the sum of accrued liabilities (other than liabilities representing financial leverage). The liquidation preference of any preferred shares is not a liability.
Pursuant to the Advisory Agreement and subject to the general supervision of the Trustees, the Advisor selects, contracts with, and compensates the Subadvisor to manage the investments and determine the composition of the assets of the Fund. The Advisor does not itself manage any of the Fund’s portfolio assets but has ultimate responsibility to oversee the Subadvisor and recommend its hiring, termination and replacement. In this capacity, the Advisor monitors the Subadvisor’s management of the Fund’s investment operations in accordance with the investment objective and related investment policies of the Fund, reviews the performance of the Subadvisor and reports periodically on such performance to the Board.
Administration Agreement. The Fund entered into an administration contract dated August 15, 1994 (the “Administration Agreement”) with JHIM, under which the Fund receives Non-Advisory Services. These “Non-Advisory Services” include, but are not limited to, preparing tax returns, preparing and transmitting periodic reports to shareholders, preparing and submitting filings with the SEC and other regulatory authorities, maintaining Fund records, providing personnel and clerical services, and other services that are not investment advisory in nature. The Fund pays a monthly fee to JHIM equal to 0.25% of the Fund’s average weekly net assets for such Non-Advisory Services under the Administration Agreement. The Advisor has contractually agreed to limit its administration fee to 0.10% of the fund’s average weekly gross assets. This agreement expires on April 30, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
THE SUBADVISOR
Subadvisory Agreement. The Advisor entered into a Subadvisory Agreement dated December 31, 2005 with the Subadvisor (the “Subadvisory Agreement”). The Subadvisor handles the fund’s portfolio management activities, subject to oversight by the Advisor. The Subadvisor, organized in 1968, is a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial, a publicly held, Canadian-based company). As of March 31, 2021, the Subadvisor had total assets under management of approximately $217.5 billion. The Subadvisor is located at 101 Huntington Avenue, Boston, Massachusetts 02199.
Under the terms of the Subadvisory Agreement, the Subadvisor is responsible for managing the investment and reinvestment of the assets of the Fund, subject to the supervision and control of the Board and the Advisor. For services rendered by the Subadvisor under the Subadvisory Agreement, the Advisor (and not the Fund) pays the Subadvisor a fee.
PORTFOLIO MANAGERS
Below is a list of the Fund’s investment management team at the Subadvisor, listed in alphabetical order, which includes a brief summary of their business careers during the past five years. These managers are jointly and primarily responsible for the day-to-day management of the Fund’s portfolio. These managers are employed by the Subadvisor. For more details about these individuals, including information about their compensation, other accounts they manage and any investments they may have in the Fund, see the SAI.
Susan A. Curry
Managing Director and Portfolio Manager Manulife Investment Management (US) LLC since 2006
Managed the Fund since 2004
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Began business career in 1993
Ryan P. Lentell, CFA
Managing Director and Portfolio Manager, Manulife Investment Management (US) LLC since 2008
Managing Director, Manulife Investment Management(US) LLC (2005—2012)
Managed the Fund since 2008
Began business career in 1999
CUSTODIAN AND TRANSFER AGENT
The Fund’s portfolio securities are held pursuant to a custodian agreement between the Fund and State Street Bank and Trust Company (“State Street” or the “Custodian”), State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. Under the custodian agreement, State Street performs custody, foreign custody manager and fund accounting services.
Computershare Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233, is the transfer agent and dividend disbursing agent of the Fund.
Determination of Net Asset Value
The Fund’s net asset value per Common Share (“NAV”) is normally determined each business day at the close of regular trading on the NYSE (typically 4:00 p.m. Eastern Time, on each business day that the NYSE is open) by dividing the Fund’s net assets by the number of Common Shares outstanding. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the NAV may be determined as of the regularly scheduled close of the NYSE pursuant to the Fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission and applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and U.S. business holidays on which the Fund’s NAV is not calculated. Consequently, the Fund’s portfolio securities may trade and the NAV of the Fund’s Common Shares may be significantly affected on days when a shareholder will not be able to purchase or sell the Fund’s Common Shares.
Portfolio securities are valued by various methods that are generally described below. Portfolio securities also may be fair valued by the Fund’s Pricing Committee in certain instances pursuant to procedures established by the Trustees. Equity securities are generally valued at the last sale price or, for certain markets, the official closing price as of the close of the relevant exchange. Securities not traded on a particular day are valued using last available bid prices. A security that is listed or traded on more than one exchange is typically valued at the price on the exchange where the security was acquired or most likely will be sold. In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Equity securities traded principally in foreign markets are typically valued using the last sale price or official closing price in the relevant exchange or market, as adjusted by an independent pricing vendor to reflect fair value. On any day a foreign market is closed and the NYSE is open, any foreign securities will typically be valued using the last price or official closing price obtained from the relevant exchange on the prior business day adjusted based on information provided by an independent pricing vendor to reflect fair value. Debt obligations are typically valued based on evaluated prices provided by an independent pricing vendor. The value of securities denominated in foreign currencies is converted into U.S. dollars at the exchange rate supplied by an independent pricing vendor. Forward foreign currency contracts are valued at the prevailing forward rates which are based on foreign currency exchange spot rates and forward points supplied by an independent pricing vendor. Exchange-traded options are valued at the mid-price of the last quoted bid and ask prices. Futures contracts whose settlement prices are determined as of the close of the NYSE are typically valued based on the settlement price while other futures contracts are typically valued at the last traded price on the exchange on which they trade. Foreign equity index futures that trade in the electronic trading market subsequent to the close of regular trading may be valued
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at the last traded price in the electronic trading market as of the close of the NYSE, or may be fair valued based on fair value adjustment factors provided by an independent pricing vendor in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE. Swaps and unlisted options are generally valued using evaluated prices obtained from an independent pricing vendor. Shares of open-end investment companies that are not exchange-traded funds (“ETFs”) held by the Fund are valued based on the NAVs of such other investment companies.
Pricing vendors may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data, broker-dealer quotations, credit quality information, general market conditions, news, and other factors and assumptions. The Fund may receive different prices when it sells odd-lot positions than it would receive for sales of institutional round lot positions. Pricing vendors generally value securities assuming orderly transactions of institutional round lot sizes, but the Fund may hold or transact in such securities in smaller, odd lot sizes.
The Pricing Committee engages in oversight activities with respect to the Fund’s pricing vendors, which includes, among other things, monitoring significant or unusual price fluctuations above predetermined tolerance levels from the prior day, back-testing of pricing vendor prices against actual trades, conducting periodic due diligence meetings and reviews, and periodically reviewing the inputs, assumptions and methodologies used by these vendors. Nevertheless, market quotations, official closing prices, or information furnished by a pricing vendor could be inaccurate, which could lead to a security being valued incorrectly.
If market quotations, official closing prices, or information furnished by a pricing vendor are not readily available or are otherwise deemed unreliable or not representative of the fair value of such security because of market- or issuer-specific events, a security will be valued at its fair value as determined in good faith by the Trustees. The Trustees are assisted in their responsibility to fair value securities by the Fund’s Pricing Committee, and the actual calculation of a security’s fair value may be made by the Pricing Committee acting pursuant to the procedures established by the Trustees. In certain instances, therefore, the Pricing Committee may determine that a reported valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair value of the assets, which may differ from the reported valuation.
Fair value pricing of securities is intended to help ensure that the Fund’s NAV reflects the fair market value of the Fund’s portfolio securities as of the close of regular trading on the NYSE (as opposed to a value that no longer reflects market value as of such close). The use of fair value pricing has the effect of valuing a security based upon the price the Fund might reasonably expect to receive if it sold that security in an orderly transaction between market participants, but does not guarantee that the security can be sold at the fair value price. Further, because of the inherent uncertainty and subjective nature of fair valuation, a fair valuation price may differ significantly from the value that would have been used had a readily available market price for the investment existed and these differences could be material.
Regarding the Fund’s investment in an open-end investment company that is not an ETF, which (as noted above) is valued at such investment company’s NAV, the prospectus for such investment company explains the circumstances and effects of fair value pricing for that investment company.
The Fund makes regular quarterly distributions to Common Shareholders sourced from the Fund’s cash available for distribution. “Cash available for distribution” consists of the Fund’s (i) investment company taxable income, which includes among other things, dividend and ordinary income after payment of Fund expenses, the excess of net short-term capital gain over net long-term capital loss, and income from certain hedging and interest rate transactions and (ii) net long-term capital gain (gain from the sale of capital assets held longer than one year). The Board may modify this distribution policy at any time without obtaining the approval of Common Shareholders.
Expenses of the Fund are accrued each day. To the extent that the Fund’s net investment income for any year exceeds the total quarterly distributions paid during the year, the Fund may make a special distribution at or near year-end of such excess amount as may be required. If it does, over time, all of the Fund’s investment company taxable income will be distributed.
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If, for any calendar year, as discussed above, the total distributions made exceed the Fund’s net investment taxable income and net capital gain, the excess generally will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares. The amount treated as a return of capital reduces the Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of his or her Common Shares. Distributions in any year may include a substantial return of capital component.
Pursuant to the requirements of the 1940 Act, in the event the Fund makes distributions from sources other than income, a notice will accompany each quarterly distribution with respect to the estimated source of the distribution made. Such notices will describe the portion, if any, of the quarterly dividend which, in the Fund’s good faith judgment, constitutes long-term capital gain, short-term capital gain, net investment income or a return of capital. The actual character of such dividend distributions for U.S. federal income tax purposes, however, will only be determined finally by the Fund at the close of its fiscal year, based on the Fund’s full year performance and its actual net investment company taxable income and net capital gain for the year, which may result in a recharacterization of amounts distributed during such fiscal year from the characterization in the quarterly estimates.
At least annually, the Fund intends to distribute any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) or, alternatively, to retain all or a portion of the year’s net capital gain and pay U.S. federal income tax on the retained gain. As provided under U.S. federal tax law, Common Shareholders of record as of the end of the Fund’s taxable year will include their attributable share of the retained gain in their income for the year as a long-term capital gain, and will be entitled to a tax credit or refund for the tax deemed paid on their behalf by the Fund. The Fund may treat the cash value of tax credit and refund amounts in connection with retained capital gain as a substitute for equivalent cash distributions.
The tax treatment and characterization of the Fund’s distributions may vary substantially from time to time because of the varied nature of the Fund’s investments. If the Fund’s total quarterly distributions in any year exceed the amount of its net investment taxable income for the year, any such excess would be characterized as a return of capital for U.S. federal income tax purposes to the extent not designated as a capital gain dividend. Distributions in any year may include a substantial return of capital component. Under the 1940 Act, for any distribution that includes amounts from sources other than net income (calculated on a book basis), the Fund is required to provide Common Shareholders a written statement regarding the components of such distribution. Such a statement will be provided at the time of any distribution believed to include any such amounts. A return of capital is a distribution to Common Shareholders that is not attributable to the Fund’s earnings but, represents a return of part of the Common Shareholder’s investment. If the Fund’s distributions exceed the Fund’s current and accumulated earnings and profits, such excess will be treated first as a return of capital to the extent of the shareholder’s tax basis in Common Shares (thus reducing a shareholder’s adjusted tax basis in his or her Common Shares), and thereafter as capital gain assuming Common Shares are held as a capital asset. Upon the sale of Common Shares, a shareholder generally will recognize capital gain or loss equal to the difference between the amount realized on the sale and the shareholder’s adjusted tax basis in Common Shares sold. For example, in year one, a Common Shareholder purchased 100 shares of the Fund at $10 per Share. In year two, the Common Shareholder received a $1-per-share return of capital distribution, which reduced the basis in each share by $1, to give the Common Shareholder an adjusted basis of $9 per share. In year three, the Common Shareholder sells the 100 shares for $15 per Share. Assuming no other transactions during this period, a Common Shareholder would have a capital gain in year three of $6 per share ($15 minus $9) for a total capital gain of $600.
The Fund has adopted a managed distribution plan (Plan). Under the Plan, the Fund makes quarterly distributions of an amount equal to $0.5500 per share, which will be paid quarterly until further notice. The Fund may make additional distributions: (i) for purposes of not incurring federal income tax at the Fund level of investment company taxable income and net capital gain, if any, not included in such regular distributions; and (ii) for purposes of not incurring federal excise tax on ordinary income and capital gain net income, if any, not included in such regular distributions. The Plan provides that the Board of Trustees of the Fund may amend the terms of the Plan or terminate the Plan at any time without prior notice to the Fund’s shareholders. The Plan is subject to periodic review by the fund’s Board of Trustees.
Distribution rates are based on projected quarterly cash available for distribution, which may result in fluctuations in quarterly rates. As a result, the distributions paid by the Fund for any particular quarter may be more or less than the amount of cash available for distribution from that quarterly period. In certain circumstances, the Fund may be required to sell a portion of its investment portfolio to fund distributions. Distributions will reduce the Common Shares’ NAV.
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Common Shareholders may automatically reinvest some or all of their distributions in additional Common Shares under the Fund’s dividend reinvestment plan. See “Dividend Reinvestment Plan.”
Pursuant to the Fund’s Dividend Reinvestment Plan (the “Plan”), distributions of dividends and capital gain are automatically reinvested in Common Shares by Computershare Trust Company, N.A. (the “Plan Agent”). Every shareholder holding at least one full share of the Fund is automatically enrolled in the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash.
If the Fund declares a dividend or distribution payable either in cash or in Common Shares and the market price of shares on the payment date for the distribution or dividend equals or exceeds the Fund’s NAV per share, the Fund will issue Common Shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are payable only in cash, then participants will receive Common Shares purchased by the Plan Agent on participants’ behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per share purchase price may exceed NAV, resulting in fewer Common Shares being acquired than if the Fund had issued new Common Shares.
There are no brokerage charges with respect to Common Shares issued directly by the Fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
The reinvestment of dividends and net capital gain distributions does not relieve participants of any income tax that may be payable on such dividends or distributions even though cash is not received by the participant.
Shareholders participating in the Plan may buy additional Common Shares of the Fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. Shareholders will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the Fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the Fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each automatic purchase. Shareholders also can sell Fund shares held in the Plan account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor The Plan Agent will mail a check (less applicable brokerage trading fees) on settlement date (two business days after the shares have been sold). If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct Registration System.
Shareholders participating in the Plan may elect to receive all distributions in cash by withdrawing from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If you withdraw, your shares will be credited to your account; or, if you wish, the Plan Agent will sell your full and fractional shares and send you the proceeds, less a transaction fee of $5.00 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the Plan account, the Plan Agent may terminate such shareholder’s participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any fractional share in the Plan account, less any applicable broker commissions and taxes.
Shareholders who hold at least one full share of the Fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. If received in proper form by the Plan Agent before the record date of a dividend, the election will be effective with respect to all dividends paid after such record date. If you wish to participate in the Plan and your shares are held in the name of a brokerage firm, bank or other nominee, please contact your nominee to see if it will participate in the Plan for you. If you wish to participate in the Plan, but your brokerage firm, bank or other nominee is unable to participate on your behalf, you
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will need to request that your shares be re-registered in your own name, or you will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by you as representing the total amount registered in your name and held for your account by your nominee.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 90 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any dividend or distribution by the Fund.
All correspondence or additional information about the Plan should be directed to Computershare Trust Company, N.A. (Telephone: 800-852-0218 (within the U.S. and Canada), 201-680-6578 (International Telephone Inquiries), and 201-680-6610 (For the Hearing Impaired (TDD)).
Closed-end funds differ from open-end management investment companies (which generally are referred to as “mutual funds”) in that closed-end funds generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. Mutual funds do not trade on securities exchanges and issue securities redeemable at the option of the shareholder. The continuous outflows of assets in a mutual fund can make it difficult to manage the fund’s investments. Closed-end funds generally are able to stay more fully invested in securities that are consistent with their investment objective and also have greater flexibility to make certain types of investments and to use certain investment strategies, such as financial leverage and investments in illiquid securities. The Fund’s Common Shares are designed primarily for long-term investors; you should not purchase Common Shares if you intend to sell them shortly after purchase.
Common shares of closed-end funds frequently trade at prices lower than their NAV. Since inception, the market price of the Common Shares has fluctuated and at times has traded below the Fund’s NAV and at times has traded above the Fund’s NAV. The Fund cannot predict whether in the future the Common Shares will trade at, above or below NAV. In addition to NAV, the market price of the Fund’s Common Shares may be affected by such factors as the Fund’s dividend stability, dividend levels, which are in turn affected by expenses, and market supply and demand.
In recognition of the possibility that Common Shares may trade at a discount from their NAV, and that any such discount may not be in the best interest of Common Shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to reduce any such discount. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in Common Shares trading at a price equal to or close to NAV per Common Share. In the event that the Fund conducts an offering of new Common Shares and such offering constitutes a “distribution” under Regulation M, the Fund and certain of its affiliates may be subject to an applicable restricted period that could limit the timing of any repurchases by the Fund.
U.S. Federal Income Tax Matters
The following discussion of U.S. federal income tax matters is based on the advice of K&L Gates LLP. The Fund has elected to be treated and to qualify each year as a regulated investment company (a “RIC”) under the Code. Accordingly, the Fund intends to satisfy certain requirements relating to sources of its income and diversification of its total assets and to distribute substantially all of its net income and net short-term capital gain (after reduction by net long-term capital loss and any available capital loss carryforwards) in accordance with the timing requirements imposed by the Code, so as to maintain its RIC status and to avoid paying U.S. federal income or excise tax thereon. To the extent it qualifies for treatment as a RIC and satisfies the above-mentioned distribution requirements, the Fund will not be subject to U.S. federal income tax on income paid to its shareholders in the form of dividends or capital gain distributions.
At least annually, the Fund intends to distribute any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) or, alternatively, to retain all or a portion of the year’s net capital gain and pay U.S. federal income tax on the retained gain. As provided under U.S. federal tax law, Common Shareholders of record as of the end of the Fund’s taxable year will include their attributable share of the retained gain in their income for the year as long-term capital gain (regardless of holding period in Common Shares), and will be entitled to a tax credit or refund for the tax paid on their behalf by the Fund. Common Shareholders of record for the retained capital gain also will be entitled to increase their tax basis in their Common Shares by an amount equal to the deemed distribution less the tax credit. Distributions of the Fund’s net capital gain (“capital gain distributions”), if any, are taxable to Common
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Shareholders as long-term capital gain, regardless of their holding period in Common Shares. Distributions of the Fund’s net realized short-term capital gain will be taxable as ordinary income.
If, for any calendar year, the Fund’s total distributions exceed the Fund’s current and accumulated earnings and profits, the excess will be treated as a return of capital to each Common Shareholder (up to the amount of the Common Shareholder’s basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares (assuming Common Shares are held as a capital asset). The amount treated as a return of capital reduces the Common Shareholder’s adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale or other disposition of his or her Common Shares. See below for a summary of the current maximum tax rates applicable to long-term capital gain (including capital gain distributions).
For federal income tax purposes, the Fund is generally permitted to carry forward a net capital loss incurred in any taxable year, for an unlimited period to offset net capital gains, if any, during its taxable years following the year of the loss. Capital losses carried forward will retain their character as either short-term or long-term capital losses. To the extent subsequent net capital gains are offset by such losses, they would not result in federal income tax liability to the Fund and would not be distributed as such to shareholders.
To qualify as a RIC for income tax purposes, the Fund must derive at least 90% of its annual gross income from dividends, interest, payments with respect to securities loans, gain from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gain from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies, and net income derived from an interest in a qualified publicly traded partnership. A “qualified publicly traded partnership” is a publicly traded partnership that meets certain requirements with respect to the nature of its income. To qualify as a RIC, the Fund must also satisfy certain requirements with respect to the diversification of its assets. The Fund must have, at the close of each quarter of the taxable year, at least 50% of the value of its total assets represented by cash, cash items, U.S. government securities, securities of other regulated investment companies, and other securities that, in respect of any one issuer, do not represent more than 5% of the value of the assets of the Fund nor more than 10% of the voting securities of that issuer. In addition, at those times not more than 25% of the value of the Fund’s assets can be invested in securities (other than U.S. government securities or the securities of other regulated investment companies) of any one issuer, or of two or more issuers, which the Fund controls and which are engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships. If the Fund fails to meet the annual gross income test described above, the Fund will nevertheless be considered to have satisfied the test if (i) (a) such failure is due to reasonable cause and not due to willful neglect and (b) the Fund reports the failure, and (ii) the Fund pays an excise tax equal to the excess non-qualifying income. If the Fund fails to meet the asset diversification test described above with respect to any quarter, the Fund will nevertheless be considered to have satisfied the requirements for such quarter if the Fund cures such failure within 6 months and either (i) such failure is de minimis or (ii) (a) such failure is due to reasonable cause and not due to willful neglect and (b) the Fund reports the failure and pays an excise tax.
As a RIC, the Fund generally will not be subject to federal income tax on its investment company taxable income (as that term is defined in the Code, but without regard to the deductions for dividend paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes in each taxable year to its shareholders, provided that it distributes at least the sum of 90% of its investment company taxable income and 90% of its net tax-exempt interest income for such taxable year. The Fund intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income, net tax-exempt income and net capital gain. In order to avoid incurring a nondeductible 4% federal excise tax obligation, the Code requires that the Fund distribute (or be deemed to have distributed) by December 31 of each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for such year, (ii) 98.2% of its capital gain net income (which is the excess of its realized net long-term capital gain over its realized net short-term capital loss), generally computed on the basis of the one-year period ending on December 31 of such year, after reduction by any available capital loss carryforwards and (iii) 100% of any ordinary income and capital gain net income from the prior year (as previously computed) that were not paid out during such year and on which the Fund paid no U.S. federal income tax.
If the Fund does not qualify as a RIC for any taxable year, the Fund’s taxable income will be subject to corporate income taxes, and all distributions from earnings and profits, including distributions of net capital gain (if any), will be taxable to the shareholder as ordinary income. Such distributions generally would be eligible (i) to be treated as qualified dividend income in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction (“DRD”) in the case of corporate shareholders. In addition, in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gain, pay substantial taxes and interest, and make certain distributions.
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Certain of the Fund’s investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) convert dividends that would otherwise constitute qualified dividend income into ordinary income, (ii) treat dividends that would otherwise be eligible for the corporate DRD as ineligible for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain loss or deductions, (iv) convert long-term capital gain into short-term capital gain or ordinary income, (v) convert an ordinary loss or deduction into a capital loss (the deductibility of which is more limited), (vi) cause the Fund to recognize income or gain without a corresponding receipt of cash, (vii) adversely affect when a purchase or sale of stock or securities is deemed to occur, (viii) adversely alter the characterization of certain complex financial transactions, and (ix) produce income that will not qualify as good income for purposes of the income requirement that applies to RICs. While it may not always be successful in doing so, the Fund will seek to avoid or minimize the adverse tax consequences of its investment practices.
The Fund may recognize gain (but not loss) from a constructive sale of certain “appreciated financial positions” if the Fund enters into a short sale, offsetting notional principal contract, or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment include interests (including options and forward contracts and short sales) in stock and certain other instruments. Constructive sale treatment does not apply if the transaction is closed out not later than thirty days after the end of the taxable year in which the transaction was initiated, and the underlying appreciated securities position is held unhedged for at least the next sixty days after the hedging transaction is closed.
Gain or loss from a short sale of property generally is considered as capital gain or loss to the extent the property used to close the short sale constitutes a capital asset in the Fund’s hands. Except with respect to certain situations where the property used to close a short sale has a long-term holding period on the date the short sale is entered into, gain on short sales generally are short-term capital gain. A loss on a short sale will be treated as a long-term capital loss if, on the date of the short sale, “substantially identical property” has been held by the Fund for more than one year. In addition, entering into a short sale may result in suspension of the holding period of “substantially identical property” held by the Fund.
Gain or loss on a short sale generally will not be realized until such time as the short sale is closed. However, as described above in the discussion of constructive sales, if the Fund holds a short sale position with respect to securities that have appreciated in value, and it then acquires property that is the same as or substantially identical to the property sold short, the Fund generally will recognize gain on the date it acquires such property as if the short sale were closed on such date with such property. Similarly, if the Fund holds an appreciated financial position with respect to securities and then enters into a short sale with respect to the same or substantially identical property, the Fund generally will recognize gain as if the appreciated financial position were sold at its fair market value on the date it enters into the short sale. The subsequent holding period for any appreciated financial position that is subject to these constructive sale rules will be determined as if such position were acquired on the date of the constructive sale.
The Fund will inform Common Shareholders of the source and tax status of all distributions promptly after the close of each calendar year.
Selling Common Shareholders generally will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the Common Shareholder’s adjusted tax basis in the Common Shares sold. If Common Shares are held as a capital asset, the gain or loss will be a capital gain or loss. The maximum tax rate applicable to net capital gain recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate for gain recognized on the sale of capital assets held for one year or less (currently 37%), or (ii) for gain recognized on the sale of capital assets held for more than one year (as well as any capital gain distributions), 20%, 15%, or 0% for individuals depending on the amount of their taxable income for the year. An additional 3.8% Medicare tax will also apply in the case of some individuals.
Any loss on a disposition of Common Shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain distributions received with respect to those Common Shares. For purposes of determining whether Common Shares have been held for six months or less, the holding period is suspended for any periods during which the Common Shareholder’s risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of Common Shares will be disallowed to the extent those Common Shares are replaced by other Common Shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of Common
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Shares (whether through the reinvestment of distributions or otherwise). In that event, the basis of the replacement Common Shares will be adjusted to reflect the disallowed loss.
An investor should be aware that, if Common Shares are purchased shortly before the record date for any taxable distribution (including a capital gain distribution), the purchase price likely will reflect the value of the distribution and the investor then would receive a taxable distribution that is likely to reduce the trading value of such Common Shares, in effect resulting in a taxable return of some of the purchase price.
Taxable distributions to certain individuals and certain other non-corporate Common Shareholders, including those who have not provided their correct taxpayer identification number and other required certifications, may be subject to “backup” U.S. federal income tax withholding at the fourth lowest rate of tax applicable to a single individual (24%). Backup withholding is not an additional tax. Any amounts withheld may be refunded or credited against such shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service.
An investor also should be aware that the benefits of the reduced tax rate applicable to long-term capital gain and qualified dividend income may be impacted by the application of the alternative minimum tax to individual shareholders.
The Fund’s investments in non-U.S. securities may be subject to foreign withholding taxes on dividends, interest, or capital gain, which will decrease the Fund’s yield. Foreign withholding taxes may be reduced under income tax treaties between the U.S. and certain foreign jurisdictions.
Depending on the number of non-U.S. shareholders in the Fund, however, such reduced foreign withholding tax rates may not be available for investments in certain jurisdictions.
The foregoing briefly summarizes some of the important U.S. federal income tax consequences to Common Shareholders of investing in Common Shares, reflects the U.S. federal tax law as of the date of this Prospectus, and does not address special tax rules applicable to certain types of investors, such as corporate and non-U.S. investors. A more complete discussion of the tax rules applicable to the Fund and the Common Shareholders can be found in the SAI that is incorporated by reference into this Prospectus. Unless otherwise noted, this discussion assumes that an investor is a U.S. person and holds Common Shares as a capital asset. This discussion is based upon current provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change or differing interpretations by the courts or the IRS retroactively or prospectively. Investors should consult their tax advisors regarding other U.S. federal, state or local tax considerations that may be applicable in their particular circumstances, as well as any proposed tax law changes.
The Fund may sell the Common Shares being offered under this Prospectus in any one or more of the following ways: (i) directly to purchasers; (ii) through agents; (iii) to or through underwriters; or (iv) through dealers. The Prospectus Supplement relating to the offering will identify any agents, underwriters or dealers involved in the offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount arrangement between the Fund and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds, and the terms of any sale.
The Fund may distribute Common Shares from time to time in one or more transactions at: (i) a fixed price or prices, which may be changed; (ii) market prices prevailing at the time of sale; (iii) prices related to prevailing market prices; or (iv) negotiated prices; provided, however, that in each case the offering price per Common Share (less any underwriting commission or discount) must equal or exceed the NAV per Common Share.
The Fund from time to time may offer its Common Shares through or to certain broker-dealers, including [______], that have entered into selected dealer agreements relating to at-the-market offerings.
The Fund may directly solicit offers to purchase Common Shares, or the Fund may designate agents to solicit such offers. The Fund will, in a Prospectus Supplement relating to such offering, name any agent that could be viewed as an underwriter under the Securities Act of 1933, as amended (the “Securities Act”), and describe any commissions the Fund must pay. Any such agent will be acting on a best efforts basis for the period of its appointment or, if indicated
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in the applicable Prospectus Supplement or other offering materials, on a firm commitment basis. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for the Fund in the ordinary course of business.
If any underwriters or agents are used in the sale of Common Shares in respect of which this Prospectus is delivered, the Fund will enter into an underwriting agreement or other agreement with them at the time of sale to them, and the Fund will set forth in the Prospectus Supplement relating to such offering their names and the terms of the Fund’s agreement with them.
If a dealer is utilized in the sale of Common Shares in respect of which this Prospectus is delivered, the Fund will sell such Common Shares to the dealer, as principal. The dealer may then resell such Common Shares to the public at varying prices to be determined by such dealer at the time of resale.
The Fund may engage in at-the-market offerings to or through a market maker or into an existing trading market, on an exchange or otherwise, in accordance with Rule 415(a)(4) under the Securities Act. An at-the-market offering may be through an underwriter or underwriters acting as principal or agent for the Fund.
Agents, underwriters and dealers may be entitled under agreements which they may enter into with the Fund to indemnification by the Fund against certain civil liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the Fund in the ordinary course of business.
In order to facilitate the offering of Common Shares, any underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of Common Shares or any other Common Shares the prices of which may be used to determine payments on the Common Shares. Specifically, any underwriters may over-allot in connection with the offering, creating a short position for their own accounts. In addition, to cover over-allotments or to stabilize the price of Common Shares or of any such other Common Shares, the underwriters may bid for, and purchase, Common Shares or any such other Common Shares in the open market. Finally, in any offering of Common Shares through a syndicate of underwriters, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing Common Shares in the offering if the syndicate repurchases previously distributed Common Shares in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of Common Shares above independent market levels. Any such underwriters are not required to engage in these activities and may end any of these activities at any time.
The Fund may enter into derivative transactions with third parties, or sell Common Shares not covered by this Prospectus to third parties in privately negotiated transactions. If the applicable Prospectus Supplement indicates, in connection with those derivatives, the third parties may sell Common Shares covered by this Prospectus and the applicable Prospectus Supplement or other offering materials, including in short sale transactions. If so, the third parties may use Common Shares pledged by the Fund or borrowed from the Fund or others to settle those sales or to close out any related open borrowings of securities, and may use Common Shares received from the Fund in settlement of those derivatives to close out any related open borrowings of securities. The third parties in such sale transactions will be underwriters and, if not identified in this Prospectus, will be identified in the applicable Prospectus Supplement or other offering materials (or a post-effective amendment).
The Fund or one of the Fund’s affiliates may loan or pledge Common Shares to a financial institution or other third party that in turn may sell Common Shares using this Prospectus. Such financial institution or third party may transfer its short position to investors in Common Shares or in connection with a simultaneous offering of other Common Shares offered by this Prospectus or otherwise.
The maximum amount of compensation to be received by any member of the Financial Industry Regulatory Authority, Inc. will not exceed 8% of the initial gross proceeds from the sale of any security being sold with respect to each particular offering of Common Shares made under a single Prospectus Supplement.
Any underwriter, agent or dealer utilized in the initial offering of Common Shares will not confirm sales to accounts over which it exercises discretionary authority without the prior specific written approval of its customer.
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Description of Capital Structure
The Fund is a business trust established under the laws of The Commonwealth of Massachusetts by the Declaration of Trust. The Declaration of Trust provides that the Board may authorize separate classes of shares of beneficial interest. The Board has authorized an unlimited number of Common Shares. The Fund holds annual meetings of Common Shareholders in compliance with the requirements of the NYSE.
COMMON SHARES
The Declaration of Trust permits the Fund to issue an unlimited number of full and fractional Common Shares of beneficial interest, with or without par value. Each Common Share represents an equal proportionate interest in the assets of the Fund with each other Common Share in the Fund. Common Shareholders will be entitled to the payment of distributions when, and if declared by the Fund. The 1940 Act or the terms of any future borrowings or issuance of preferred shares may limit the payment of distributions to the Common Shareholders. Each whole Common Share is entitled to one vote and each fractional Common Share is entitled to a proportionate fractional vote as to matters on which it is entitled to vote pursuant to the terms of the Declaration of Trust. Upon termination of the Fund, after paying or adequately providing for the payment of all liabilities of the Fund and the liquidation preference with respect to any outstanding preferred shares, and upon receipt of such releases, indemnities and refunding agreements as the Trustees deem necessary , the Trustees may distribute the remaining assets of the Fund among the Common Shareholders. The Declaration of Trust provides that Common Shareholders are not liable for any liabilities of the Fund, and indemnifies shareholders against any such liability. Although shareholders of a business trust established under Massachusetts law, in certain limited circumstances, may be held personally liable for the obligations of the business trust as though they were general partners, the provisions of the Declaration of Trust described in the foregoing sentence make the likelihood of such personal liability remote. The Fund will not issue Common Share certificates.
The Fund has no current intention to issue preferred shares. However, if at some future time there are any preferred shares outstanding, subject to certain exceptions, the Fund might not be permitted to declare any cash distribution on its Common Shares, unless at the time of such declaration, (i) all accrued distributions on preferred shares and any accrued interest on borrowings, if any, have been paid and (ii) the value of the Fund’s total assets (determined after deducting the amount of such distribution), less all liabilities and indebtedness of the Fund not represented by senior securities, is at least 300% of the aggregate amount of any securities representing indebtedness and at least 200% of the aggregate amount of any securities representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares. In addition to the requirements of the 1940 Act, the Fund may be required to comply with other asset coverage requirements under a liquidity facility or as a condition of the Fund obtaining a rating of preferred shares from a nationally recognized statistical rating organization (a “Rating Agency”). These requirements may include an asset coverage test more stringent than under the 1940 Act. This limitation on the Fund’s ability to make distributions on its Common Shares could in certain circumstances impair the ability of the Fund to maintain its qualification for taxation as a RIC for U.S. federal income tax purposes. If the Fund were in the future to issue preferred shares, it would intend, however, to the extent possible, to purchase or redeem preferred shares from time to time to maintain compliance with such asset coverage requirements and may pay special distributions to the holders of the preferred shares in certain circumstances in connection with any potential impairment of the Fund’s status as a RIC. Depending on the timing of any such redemption or repayment, the Fund may be required to pay a premium in addition to the liquidation preference of the preferred shares to the holders thereof.
The Fund has no present intention of offering additional Common Shares, except as described herein. Other offerings of its Common Shares, if made, will require approval of the Board. Any additional offering will not be sold at a price per Common Share below the then current NAV (exclusive of underwriting discounts and commissions) except in connection with an offering to existing Common Shareholders or with the consent of a majority of the Fund’s outstanding Common Shares. Common Shares have no preemptive rights.
LIQUIDITY FACILITY
The Fund has entered into the LA with State Street Bank and Trust Company ("SSB") that allows it to borrow or otherwise access funds through a line of credit, securities lending and reverse repurchase agreements. The Fund pledges its assets as collateral to secure obligations under the LA. The Fund retains the risks and rewards of the ownership of assets pledged to secure obligations under the LA and makes these assets available for securities lending and reverse repurchase transactions with SSB acting as the Fund's authorized agent for these transactions. All transactions initiated through SSB are required to be secured with cash collateral received from the securities borrower
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or cash is received from the reverse repurchase agreement counterparties. Securities lending transactions (other than reverse repurchase) will be secured with cash collateral in amounts at least equal to 100% of the market value of the securities utilized in these transactions. Cash received by SSB from securities lending or reverse repurchase transactions is credited against the amounts borrowed under the line of credit.
Upon return of securities by the borrower or reverse repurchase counterparty, SSB will return the cash collateral to the borrower or proceeds from the reverse repurchase transaction, as applicable, which will eliminate the credit against the line of credit and will cause the drawdowns under the line of credit to increase by the amounts returned. Income earned on the loaned securities is retained by SSB, and any interest due on the reverse repurchase agreements is paid by SSB.
SSB has indemnified the fund for certain losses that may arise if the borrower or a reverse repurchase counterparty fails to return securities when due. With respect to securities lending transactions, upon a default of the securities borrower, SSB uses the collateral received from the borrower to purchase replacement securities of the same issue, type, class and series. If the value of the collateral is less than the purchase cost of replacement securities, SSB is responsible for satisfying the shortfall, but only to the extent that the shortfall is not due to any of the fund's losses on the reinvested cash collateral. Although the risk of the loss of the securities is mitigated by receiving collateral from the borrower or proceeds from the reverse repurchase counterparty and through SSB indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the borrower or reverse repurchase counterparty fails to return the securities on a timely basis.
Under normal circumstances, interest charged is at the rate of one month LIBOR (London Interbank Offered Rate) plus 0.60%, and is payable monthly on the aggregate balance of the drawdowns outstanding under the LA. As of December 31, 2020, the Fund had an average daily loan balance of $125,000,000 at an average interest rate of 1.14%.
After the six month anniversary of the effective date of the agreement, the Fund may terminate the LA with 60 days' notice. If certain asset coverage and collateral requirements, or other covenants are not met, the LA could be deemed in default and result in termination. Absent a default or facility termination event, SSB is required to provide the Fund with 360 days' notice prior to terminating the LA.
By leveraging its investment portfolio, the Fund creates an opportunity for increased net income or capital appreciation. However, the use of leverage also involves risks, which can be significant. See "Liquidity and Restricted Securities Risk."
REPURCHASE OF SHARES AND OTHER DISCOUNT MEASURES
In recognition of the possibility that Common Shares might trade at a discount to NAV and that any such discount may not be in the interest of the Fund’s shareholders, the Board, in consultation with the Advisor, from time to time may review possible actions to help reduce any such discount. The Board, in consultation with the Advisor, may review the possibility of open market repurchases and/or tender offers for the Common Shares and consider such factors as the market price of the Common Shares, the NAV of the Common Shares, the liquidity of the assets of the Fund, effect on the Fund’s expenses, whether such transactions would impair the Fund’s status as a RIC or result in a failure to comply with applicable asset coverage requirements, general economic conditions and such other events or conditions, which may have a material effect on the Fund’s ability to consummate such transactions. There are no assurances that the Board will, in fact, decide to undertake either of these actions or, if undertaken, that such actions will result in the Fund’s Common Shares trading at a price which is equal to or approximates their NAV.
In the event that the Fund conducts an offering of new Common Shares and such offering constitutes a “distribution” under Regulation M, the Fund and certain of its affiliates may be subject to an applicable restricted period that could limit the timing of any repurchases by the Fund.
PREFERRED SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest with preference rights, including preferred shares (“Preferred Shares”), having no par value per share or such other amount as the Board may establish, in one or more series, with rights as determined by the Board, by action of the Board without the approval of the Common Shareholders. The Board has no current intention to issue Preferred Shares.
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Under the requirements of the 1940 Act, the Fund must, immediately after the issuance of any Preferred Shares, have an “asset coverage” of at least 200%. Asset coverage means the ratio which the value of the total assets of the Fund, less all liability and indebtedness not represented by senior securities (as defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the Fund, if any, plus the aggregate liquidation preference of the Preferred Shares. If the Fund seeks a rating of the Preferred Shares, asset coverage requirements, in addition to those set forth in the 1940 Act, may be imposed. The liquidation value of the Preferred Shares is expected to equal their aggregate original purchase price plus redemption premium, if any, together with any accrued and unpaid dividends thereon (on a cumulative basis), whether or not earned or declared. The terms of the Preferred Shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the Board (subject to applicable law and the Declaration of Trust) if and when it authorizes the Preferred Shares. The Fund may issue Preferred Shares that provide for the periodic redetermination of the dividend rate at relatively short intervals through an auction or remarketing procedure, although the terms of the Preferred Shares also may enable the Fund to lengthen such intervals. At times, the dividend rate as redetermined on the Fund’s Preferred Shares may approach or exceed the Fund’s return after expenses on the investment of proceeds from the Preferred Shares and the Fund’s leveraged capital structure would result in a lower rate of return to Common Shareholders than if the Fund were not so structured.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the terms of any Preferred Shares may entitle the holders of Preferred Shares to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus redemption premium, if any, together with accrued and unpaid dividends, whether or not earned or declared and on a cumulative basis) before any distribution of assets is made to Common Shareholders. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of Preferred Shares would not be entitled to any further participation in any distribution of assets by the Fund.
Under the 1940 Act, if at any time dividends on the Preferred Shares are unpaid in an amount equal to two full years’ dividends thereon, the holders of all outstanding Preferred Shares, voting as a class, will be allowed to elect a majority of the Fund’s Trustees until all dividends in default have been paid or declared and set apart for payment. In addition, if required by the Rating Agency rating the Preferred Shares or if the Board determines it to be in the best interests of the Common Shareholders, issuance of the Preferred Shares may result in more restrictive provisions than required by the 1940 Act being imposed. In this regard, holders of the Preferred Shares may be entitled to elect a majority of the Board in other circumstances, for example, if one payment on the Preferred Shares is in arrears.
If the Fund were to issue Preferred Shares, it is expected that the Fund would seek a credit rating for the Preferred Shares from a Rating Agency. In that case, as long as Preferred Shares are outstanding, the composition of its portfolio would reflect guidelines established by such Rating Agency. Although, as of the date hereof, no such Rating Agency has established guidelines relating to any such Preferred Shares, based on previous guidelines established by such Rating Agencies for the securities of other issuers, the Fund anticipates that the guidelines with respect to the Preferred Shares would establish a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable requirements under the 1940 Act. Although, at this time, no assurance can be given as to the nature or extent of the guidelines, which may be imposed in connection with obtaining a rating of the Preferred Shares, the Fund currently anticipates that such guidelines will include asset coverage requirements, which are more restrictive than those under the 1940 Act, restrictions on certain portfolio investments and investment practices, requirements that the Fund maintain a portion of its total assets in short-term, high-quality, fixed-income securities and certain mandatory redemption requirements relating to the Preferred Shares. No assurance can be given that the guidelines actually imposed with respect to the Preferred Shares by such Rating Agency will be more or less restrictive than as described in this Prospectus.
Certain Provisions in the Declaration of Trust and By-Laws
Under Massachusetts law, shareholders, in certain circumstances, could be held personally liable for the obligations of the Fund. However, the Declaration of Trust contains an express disclaimer of shareholder liability in connection with Fund property or the acts, obligations or affairs of the Fund and provides for indemnification out of the assets of the Fund for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The Fund believes that the likelihood of such circumstances is remote.
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The Declaration of Trust provides that the Trustees may amend the Declaration of Trust without Common Shareholder approval to change the name of the Fund or to supply any omission, clear any ambiguity or correct or supplement a defective or inconsistent provision. The Declaration of Trust does not permit amendments that impair the exemption from personal liability of the shareholders, Trustees, officers, employees and agents of the Fund or permit assessments upon shareholders.
The By-laws provide that the Trustees have the power, to the exclusion of shareholders, to adopt, alter, amend or repeal any of the By-laws, except for any By-law that requires a vote of the shareholders to be amended, adopted or repealed by the terms of the Declaration of Trust, By-laws or applicable law.
ANTI-TAKEOVER PROVISIONS
The Declaration of Trust and By-laws include provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board and could have the effect of depriving Common Shareholders of an opportunity to sell their Common Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions may have the effect of discouraging attempts to acquire control of the Fund, which attempts could have the effect of increasing the expenses of the Fund and interfering with the normal operation of the Fund. They provide, however, the advantage of potentially requiring persons seeking control of the Fund to negotiate with its management regarding the price to be paid and facilitating the continuity of the Fund’s investment objective and policies. The Board has considered and approved the following anti-takeover provisions. The following is only a summary and is qualified in its entirety by reference to the Declaration of Trust and By-laws on file with the SEC.
The number of Trustees is currently twelve, but by action of a majority of the Trustees, the Board may from time to time be increased or decreased. If the Fund issues Preferred Shares, the Fund may establish a separate class for the Trustees elected by the holders of the Preferred Shares. Subject to applicable provisions of the 1940 Act, vacancies on the Board may be filled by a majority action of the remaining Trustees. Such provisions may work to delay a change in the majority of the Board.
Generally, the shareholders have power to vote only: (a) for the election of Trustees; (b) with respect to any investment advisory or management contract; (c) with respect to a termination of the Fund; (d) with respect to an amendment of the Declaration of Trust; (e) with respect to a merger, consolidation or sale of assets of the Fund; (f) with respect to incorporation of the Fund; (g) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Fund or the shareholders; and (h) with respect to such additional matters relating to the Fund as may be required by the Declaration of Trust or the By-Laws or by reason of the registration of the Fund or the shares with the SEC or any state or by any applicable law or any regulation or order of the SEC or any state or as the Trustees may consider necessary or desirable. On any matter required or permitted to be voted on by the shareholders, all shares then entitled to vote shall be voted in the aggregate as a single class without regard to class, except (i) when required by the Declaration of Trust, the By-Laws, the 1940 Act, or when the Trustees have determined that any matter to be submitted to a vote of the shareholders affects the rights or interests of the shareholders of one or more classes, if any, materially differently, shares shall be voted by each such affected class individually; and (ii) when the Trustees shall have determined that the matter affects only the interests of one or more classes, then only the shareholders of such affected class shall be entitled to vote thereon.
Additionally, the Fund’s By-laws contain certain provisions that may tend to make a change of control of the Fund more difficult. For example, the By-laws (i) require a shareholder to give written advance notice and other information to the Fund of the shareholder’s nominees for Trustees and proposals for other business to be considered at annual shareholders’ meetings, or in the event a shareholder proposes to seek a shareholder action by written consent or requests a special meeting of shareholders; (ii) require any such notice by a shareholder to be accompanied by certain information as provided in the By-laws; (iii) provide that Trustees may be nominated by shareholders only at an annual meeting of the Fund or special meeting in lieu of an annual meeting; and (iv) reserve to the Trustees the exclusive power to alter, amend or repeal any provision of the By-laws or to make new By-laws, except where the Declaration of Trust, By-laws or applicable law would also require a shareholder vote to effect such alteration, amendment or repeal. The foregoing description of the By-laws is qualified in its entirety by the full text of the Amended and Restated By-laws effective as of January 22, 2016, last amended March 10, 2016.
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POTENTIAL CONVERSION TO OPEN-END FUND
Conversion of the Fund to an open-end management investment company would require an amendment to the Fund’s Declaration of Trust. Such amendment would require approval by each of the following: (i) a majority of the Trustees then in office, (ii) a majority of the outstanding voting securities, and (iii) by such vote or votes of the holders of any class or classes or series of shares as may be required by the 1940 Act. In the event of conversion, the Common Shares would cease to be listed on the NYSE or other national securities exchange or market system. The Board believes, however, that the closed-end structure is desirable, given the Fund’s investment objective and policies. Investors should assume, therefore, that it is unlikely that the Board would vote to convert the Fund to an open-end management investment company. Shareholders of an open-end management investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at their NAV, less such redemption charge, if any, as might be in effect at the time of a redemption. The Fund would expect to pay all such redemption requests in cash, but intends to reserve the right to pay redemption requests in a combination of cash or securities. If such partial payment in securities were made, investors may incur brokerage costs in converting such securities to cash. If the Fund were converted to an open-end fund, it is likely that new Common Shares would be sold at NAV plus a sales load.
The Fund sends to its shareholders unaudited semi-annual and audited annual reports, including a list of investments held.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, who has offices at 101 Seaport Boulevard, Suite 500, Boston Massachusetts 02210, is the independent registered public accounting firm for the Fund and audits the Fund’s financial statements.
As noted above, this Prospectus is part of a registration statement filed with the SEC. Pursuant to the final rule and form amendments adopted by the SEC on April 8, 2020 to implement certain provisions of the Economic Growth,Regulatory Relief, and Consumer Protection Act, the Fund is permitted to “incorporate by reference” the information filed with the SEC, which means that the Fund can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this Prospectus, and later information that the Fund files with the SEC will automatically update and supersede this information.
The documents listed below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940 Act and Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering will be incorporated by reference into this Prospectus and deemed to be part of this Prospectus from the date of the filing of such reports and documents:
- The Fund’s Statement of Additional Information, dated June 25, 2021, filed with this Prospectus;
- The Fund’s Annual Report on Form N-CSR, filed on February 19, 2021;
- The Fund’s description of Common Shares on Form 8-A, filed on June 17, 1994
You may obtain copies of any information incorporated by reference into this Prospectus, at no charge, by calling 800-225-6020 (toll-free), from the Fund’s website https://www.jhinvestments.com/investments/closed-end-fund/sector-funds/financial-opportunities-fund-ce-bto, or from the SEC’s website at sec.gov. The Fund’s periodic reports filed pursuant to Section 30(b)(2) of the 1940 Act and Sections 13 and 15(d) of the Exchange Act, as well as this Prospectus and the Statement of Additional Information, are available on the Fund’s website https://www.jhinvestments.com/investments/closed-end-fund/sector-funds/financial-opportunities-fund-ce-bto. You also may obtain a copy of any information regarding the Fund filed with the SEC from the SEC’s website (sec.gov).
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The Fund has entered into contractual arrangements with various parties that provide services to the Fund, which may include, among others, the Advisor, Subadvisor, Custodian, and transfer agent, as described above and in the SAI. Fund shareholders are not parties to, or intended or “third-party” beneficiaries of, any of these contractual arrangements. These contractual arrangements are not intended to, nor do they, create in any individual shareholder or group of shareholders any right, either directly or on behalf of the fund, to either: (a) enforce such contracts against the service providers; or (b) seek any remedy under such contracts against the service providers.
This Prospectus provides information concerning the Fund that you should consider in determining whether to purchase shares of the Fund. Each of this prospectus, the SAI, or any contract that is an exhibit to the Fund’s registration statement, is not intended to, nor does it, give rise to an agreement or contract between the Fund and any investor. Each such document also does not give rise to any contract or create rights in any individual shareholder, group of shareholders, or other person. The foregoing disclosure should not be read to suggest any waiver of any rights conferred by federal or state securities laws.
This Prospectus and the SAI do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC (file No. ). The complete Registration Statement may be obtained from the SEC at sec.gov. See the cover page of this Prospectus for information about how to obtain a paper copy of the Registration Statement or SAI without charge.
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Table of Contents of the Statement of Additional Information
Page | |
Organization of the Fund | 2 |
Additional Investment Policies and Risks | 2 |
Investment Restrictions | 19 |
Portfolio Turnover | 21 |
Those Responsible for Management | 21 |
Shareholders of the Fund | 31 |
Investment Advisory and Other Services | 31 |
Determination of Net Asset Value | 38 |
Brokerage Allocation | 39 |
Additional Information Concerning Taxes | 42 |
Other Information | 49 |
Custodian and Transfer Agent | 50 |
Independent Registered Public Accounting Firm | 50 |
Reports to Shareholders | 50 |
Incorporation by Reference | 50 |
Legal and Regulatory Matters | 51 |
Codes of Ethics | 51 |
Additional Information | 51 |
Appendix A: Description of Ratings | A-1 |
Appendix B: Proxy Voting Policies and Procedures | B-1 |
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The Fund is committed to maintaining the privacy of its shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Fund collects, how the Fund protects that information and why, in certain cases, the Fund may share information with select other parties.
Generally, the Fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). The Fund may share information with unaffiliated third parties that perform various required services, such as transfer agents, custodians and broker/dealers.
The Fund restricts access to non-public personal information about its shareholders to employees of the Fund’s investment advisor and its affiliates with a legitimate business need for the information. The Fund maintains physical, electronic and procedural safeguards designed to protect the non-public personal information of its shareholders.
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1,500,000 Shares
John Hancock Financial Opportunities Fund
Common Shares
PROSPECTUS
June 25, 2021
As of January 1, 2021, paper copies of the Fund’s shareholder reports will no longer be sent by mail. Instead, the reports will be made available on a website, and you will be notified and provided with a link each time a report is posted to the website. You may request to receive paper reports from the Fund or from your financial intermediary, free of charge, at any time. You may also request to receive documents through e-delivery.
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
Statement of Additional Information
June 25, 2021
200 Berkeley Street
Boston, Massachusetts 02116
800-225-6020
This Statement of Additional Information (“SAI”) is not a prospectus and is authorized for distribution to prospective investors only if preceded or accompanied by the prospectus of John Hancock Financial Opportunities Fund (the “Fund”) dated June 25, 2021 (the “Prospectus”) and any related supplement thereto (“Prospectus Supplements”), which are incorporated herein by reference. This SAI should be read in conjunction with such Prospectus and any related Prospectus Supplements, copies of which may be obtained without charge by contacting your financial intermediary or calling the Fund at 800-225-6020.
Capitalized terms used in this SAI and not otherwise defined have the meanings given them in the Fund’s Prospectus and any related Prospectus Supplements.
The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund was organized on June 16, 1994 as a Massachusetts business trust pursuant to an Agreement and Declaration of Trust (as amended and restated from time to time, the “Declaration of Trust”).
John Hancock Investment Management LLC (the “Advisor” or “JHIM”) is the Fund’s investment advisor and is registered with the Securities and Exchange Commission (the “SEC”) as an investment advisor under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Advisor is responsible for overseeing the management of the Fund, including its day-to-day business operations and monitoring the subadvisor. The Advisor has been managing closed-end funds since 1971.
Founded in 1968, the Advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), a subsidiary of Manulife Financial Corporation (“Manulife Financial” or the “Company”). John Hancock Life Insurance Company (U.S.A.) and its subsidiaries (“John Hancock”) today offer a broad range of financial products, including life insurance, annuities, investments, 401(k) plans, college savings plans, and certain forms of business insurance. Additional information about John Hancock may be found on the Internet at johnhancock.com.
The Advisor’s parent company has been helping individuals and institutions work toward their financial goals since 1862. The Advisor offers investment solutions managed by institutional money managers, taking a disciplined team approach to portfolio management and research, leveraging the expertise of seasoned investment professionals.
Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Operating as Manulife in Canada and Asia, and primarily as John Hancock in the United States, the Manulife Financial group of companies offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents, and distribution partners.
The Fund’s subadvisor is Manulife Investment Management (US) LLC (the “Subadvisor”), formerly John Hancock Asset Management a Division of Manulife Asset Management (US) LLC). The Subadvisor is responsible for the day-to-day management of the Fund’s portfolio investments. The Subadvisor, organized in 1968, is a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial).
Additional Investment Policies and Risks
The principal strategies and risks of investing in the Fund are described in the Prospectus. Unless otherwise stated in the Prospectus or this SAI, the investment objective and policies of the Fund may be changed without shareholder approval. The Fund may invest in the instruments below, in accordance with its principal and non-principal investment strategies and such instruments and investment policies apply to the Fund, but only if and to the extent that such policies are consistent with and permitted by the Fund’s investment objective and policies. The Fund may also have indirect exposure to the instruments described below through derivative contracts.
Ratings as Investment Criteria. In general, the ratings of Moody’s and S&P represent the opinions of these agencies as to the quality of the securities which they rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality. There is no guarantee that these institutions will continue to provide ratings. These ratings will be used by the Fund as initial criteria for the selection of debt securities. Among the factors which will be considered are the long-term ability of the issuer to pay principal and interest and general economic trends. Appendix A contains further information concerning the ratings of Moody’s and S&P and their significance. Subsequent to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither of these events will require the sale of the securities by the Fund.
Repurchase Agreements, Reverse Repurchase Agreements, and Sale-Buybacks. Repurchase agreements are arrangements involving the purchase of an obligation and the simultaneous agreement to resell the same obligation on
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demand or at a specified future date and at an agreed-upon price. A repurchase agreement can be viewed as a loan made by a fund to the seller of the obligation with such obligation serving as collateral for the seller’s agreement to repay the amount borrowed with interest. Repurchase agreements provide the opportunity to earn a return on cash that is only temporarily available. Repurchase agreements may be entered with banks, brokers, or dealers. However, a repurchase agreement will only be entered with a broker or dealer if the broker or dealer agrees to deposit additional collateral should the value of the obligation purchased decrease below the resale price.
Generally, repurchase agreements are of a short duration, often less than one week but on occasion for longer periods. Securities subject
to repurchase agreements will be valued every business day and additional collateral will be requested if necessary so that the value
of the collateral is at least equal to the value of the repurchase obligation, including the interest accrued thereon.
A subadvisor shall engage in a repurchase agreement transaction only with those banks or broker dealers who meet the subadvisor’s quantitative and qualitative criteria regarding creditworthiness, asset size and collateralization requirements. The Advisor also may engage in repurchase agreement transactions on behalf of the fund. The counterparties to a repurchase agreement transaction are limited to a:
• | Federal Reserve System member bank; |
• |
primary government securities dealer reporting to the Federal Reserve Bank of New York’s Market Reports Division;
or |
• | broker dealer that reports U.S. government securities positions to the Federal Reserve Board. |
A fund also may participate in repurchase agreement transactions utilizing the settlement services of clearing firms that meet the subadvisors’
creditworthiness requirements.
The Advisor and the subadvisors will continuously monitor repurchase agreement transactions to ensure that the
collateral held with respect to a repurchase agreement equals or exceeds the amount of the obligation.
The risk of a repurchase agreement transaction is limited to the ability
of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument
purchased may decline in value, interest payable on the instrument may be lost and there may be possible difficulties and delays in obtaining
collateral and delays and expense in liquidating the instrument. If an issuer of a repurchase agreement fails to repurchase the underlying
obligation, the loss, if any, would be the difference between the repurchase price and the underlying obligation’s market value.
A fund also might incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings
are commenced with respect to the seller, realization upon the underlying obligation might be delayed or limited.
Under a reverse repurchase agreement, a fund sells a debt security and agrees to repurchase it at an agreed-upon time and at an agreed-upon price. The fund retains record ownership of the security and the right to receive interest and principal payments thereon. At an agreed-upon future date, the fund repurchases the security by remitting the proceeds previously received, plus interest. The difference between the amount the fund receives for the security and the amount it pays on repurchase is payment of interest. In certain types of agreements, there is no agreed-upon repurchase date and interest payments are calculated daily, often based on the prevailing overnight repurchase rate. A reverse repurchase agreement may be considered a form of leveraging and may, therefore, increase fluctuations in a fund’s NAV per share. A fund will cover its repurchase agreement transactions by maintaining in a segregated custodial account cash, Treasury bills, other U.S. government securities, or other liquid assets having an aggregate value at least equal to the amount of such commitment to repurchase including accrued interest, until payment is made.
A fund may effect simultaneous purchase and sale transactions that are known as “sale-buybacks.” A sale-buyback is similar to a reverse repurchase agreement, except that in a sale-buyback, the counterparty that purchases the security is entitled to receive any principal or interest payments made on the underlying security pending settlement of the fund’s repurchase of the underlying security. A fund’s obligations under a sale-buyback typically would be offset by liquid assets equal in value to the amount of the fund’s forward commitment to repurchase the subject security.
Foreign Repurchase Agreements. Foreign repurchase agreements involve an agreement to purchase a foreign security and to sell that security back to the original seller at an agreed-upon price in either U.S. dollars or foreign
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currency. Unlike typical U.S. repurchase agreements, foreign repurchase agreements may not be fully collateralized at all times. The value of a security purchased may be more or less than the price at which the counterparty has agreed to repurchase the security. In the event of default by the counterparty, a fund may suffer a loss if the value of the security purchased is less than the agreed-upon repurchase price, or if it is unable to successfully assert a claim to the collateral under foreign laws. As a result, foreign repurchase agreements may involve higher credit risks than repurchase agreements in U.S. markets, as well as risks associated with currency fluctuations. In addition, as with other emerging market investments, repurchase agreements with counterparties located in emerging markets, or relating to emerging markets, may involve issuers or counterparties with lower credit ratings than typical U.S. repurchase agreements.
Short-Term Bank and Corporate Obligations. The Fund may invest in depository-type obligations of banks and savings and loan associations and other high-quality money market instruments consisting of short-term obligations of the U.S. government or its agencies and commercial paper. Commercial paper represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations and finance companies. Depository-type obligations in which the Fund may invest include certificates of deposit, bankers’ acceptances and fixed time deposits. Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return.
Bankers’ acceptances are negotiable drafts or bills of exchange, normally drawn by an importer or exporter to pay for specific merchandise, which are “accepted” by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument at maturity. Fixed time deposits are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but may be subject to early withdrawal penalties which vary depending upon market conditions and the remaining maturity of the obligation. There are no contractual restrictions on the right to transfer a beneficial interest in a fixed time deposit to a third party, although there is no market for such deposits. Bank notes and bankers’ acceptances rank junior to domestic deposit liabilities of the bank and pari passu with other senior, unsecured obligations of the bank. Bank notes are not insured by the Federal Deposit Insurance Corporation or any other insurer. Deposit notes are insured by the Federal Deposit Insurance Corporation only to the extent of $100,000 per depositor per bank.
Preferred Securities. The Fund may invest in preferred securities. Preferred securities, like common stock, represent an equity ownership in an issuer. Generally, preferred securities have a priority of claim over common stock in dividend payments and upon liquidation of the issuer. Unlike common stock, preferred securities do not usually have voting rights. Preferred securities in some instances are convertible into common stock. Although they are equity securities, preferred securities have characteristics of both debt and common stock. Like debt, their promised income is contractually fixed. Like common stock, they do not have rights to precipitate bankruptcy proceedings or collection activities in the event of missed payments. Other equity characteristics are their subordinated position in an issuer’s capital structure and that their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows.
Distributions on preferred securities must be declared by the board of directors and may be subject to deferral, and thus they may not be automatically payable. Income payments on preferred securities may be cumulative, causing dividends and distributions to accrue even if not declared by the board or otherwise made payable, or they may be non-cumulative, so that skipped dividends and distributions do not continue to accrue. There is no assurance that dividends on preferred securities in which the Fund invests will be declared or otherwise made payable. The Fund may invest in non-cumulative preferred securities.
Shares of preferred securities have a liquidation value that generally equals the original purchase price at the date of issuance. The market values of preferred securities may be affected by favorable and unfavorable changes impacting the issuers’ industries or sectors, including companies in the utilities and financial services sectors, which are prominent issuers of preferred securities. They may also be affected by actual and anticipated changes or ambiguities in the tax status of the security and by actual and anticipated changes or ambiguities in tax laws, such as changes in corporate and individual income tax rates, and in the dividends received deduction for corporate taxpayers or the characterization of dividends as tax-advantaged as described herein.
Because the claim on an issuer’s earnings represented by preferred securities may become onerous when interest rates fall below the rate payable on the stock or for other reasons, the issuer may redeem preferred securities, generally after an initial period of call protection during which the stock is not redeemable. Thus, in declining interest rate
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environments in particular, the Fund’s holdings of higher dividend-paying preferred securities may be reduced and the Fund may be unable to acquire securities paying comparable rates with the redemption proceeds.
Foreign Government Securities. Foreign government securities include securities issued or guaranteed by foreign governments (including political subdivisions) or their authorities, agencies, or instrumentalities or by supra-national agencies. Different kinds of foreign government securities have different kinds of government support. For example, some foreign government securities are supported by the full faith and credit of a foreign national government or political subdivision and some are not. Foreign government securities of some countries may involve varying degrees of credit risk as a result of financial or political instability in those countries and the possible inability of the Fund to enforce its rights against the foreign government issuer. As with other fixed income securities, sovereign issuers may be unable or unwilling to make timely principal or interest payments. Supra-national agencies are agencies whose member nations make capital contributions to support the agencies’ activities.
Investments in Non-U.S. Securities. The Fund may invest directly in the securities of non-U.S. issuers as well as securities in the form of sponsored or unsponsored American Depository Receipts (“ADRs”), European Depository Receipts (“EDRs”) and Global Depository Receipts (“GDRs”) or other securities convertible into non-U.S. securities. The Fund may invest up to 30% of its total assets in securities denominated in non-U.S. currencies. ADRs are receipts typically issued by a U.S. bank or trust company which evidence ownership of underlying securities issued by a non-U.S. corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Issuers of unsponsored ADRs are not contractually obligated to disclose material information, including financial information, in the United States. Generally, ADRs are designed for use in the United States securities markets and EDRs are designed for use in European securities markets.
An investment in non-U.S. securities including ADRs may be affected by changes in currency rates and in exchange control regulations. Issuers of unsponsored ADRs are not contractually obligated to disclose material information, including financial information, in the United States and, therefore, there may not be a correlation between such information and the market value of the unsponsored ADR. Non-U.S. companies may not be subject to accounting standards or government supervision comparable to U.S. companies, and there is often less publicly available information about their operations. Non-U.S. companies may also be affected by political or financial instability abroad. These risk considerations may be intensified in the case of investments in ADRs of non-U.S. companies that are located in emerging market countries. ADRs of companies located in these countries may have limited marketability and may be subject to more abrupt or erratic price movements.
Emerging Markets Risk. In addition, the Fund may invest in the securities of issuers based in countries with “emerging market” economies. Funds that invest a significant portion of their assets in the securities of issuers based in countries with “emerging market” economies are subject to greater levels of foreign investment risk than funds investing primarily in more-developed foreign markets, since emerging market securities may present market, credit, currency, liquidity, legal, political and other risks greater than, or in addition to, the risks of investing in developed foreign countries. These risks include: high currency exchange-rate fluctuations; increased risk of default (including both government and private issuers); greater social, economic and political uncertainty and instability (including the risk of war); more substantial governmental involvement in the economy; less governmental supervision and regulation of the securities markets and participants in those markets; controls on foreign investment and limitations on repatriation of invested capital and on the Fund’s ability to exchange local currencies for U.S. dollars; unavailability of currency hedging techniques in certain emerging market countries; the fact that companies in emerging market countries may be newly organized, smaller and less seasoned; the difference in, or lack of, auditing and financial reporting standards, which may result in the unavailability of material information about issuers; different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions; difficulties in obtaining and/or enforcing legal judgments in foreign jurisdictions; and significantly smaller market capitalizations of emerging market issuers.
European Risk. Countries in Europe may be significantly affected by fiscal and monetary controls implemented by the European Union (“EU”) and European Economic and Monetary Union (“EMU”), which require member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls. Decreasing imports or exports, changes in governmental or other regulations on trade, changes in the exchange rate or dissolution of the Euro, the default or threat of default by one or more EU member countries on its sovereign debt, and/or an economic recession in one or more EU member countries may have a significant adverse effect on the other European economies and major trading partners outside Europe.
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In recent years, the European financial markets have experienced volatility and adverse trends due to concerns about economic downturns, rising government debt levels and the possible default of government debt in several European countries. The European Central Bank and IMF have previously bailed-out several European countries. There is no guarantee that these institutions will continue to provide financial support, and markets may react adversely to any reduction in financial support. A default or debt restructuring by any European country can adversely impact holders of that country’s debt and sellers of credit default swaps linked to that country’s creditworthiness, which may be located in countries other than those listed above, and can affect exposures to other EU countries and their financial companies as well.
Uncertainties regarding the viability of the EU have impacted and may continue to impact markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, securities markets would likely be significantly disrupted. On January 31, 2020, the UK left the EU, commonly referred to as “Brexit,” and there commenced a transition period during which the EU and UK will negotiate and agree on the nature of their future relationship. There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. This uncertainty may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. It is also possible that various countries within the UK, such as Scotland or Northern Ireland, could seek to separate and remain a part of the EU. Other secessionist movements including countries seeking to abandon the Euro or withdraw from the EU may cause volatility and uncertainty in the EU.
The UK has one of the largest economies in Europe and is a major trading partner with the other EU countries and the United States. If implemented, Brexit might negatively affect The City of London’s economy, which is heavily dominated by financial services, as banks might be forced to move staff and comply with two separate sets of rules or lose business to banks in Continental Europe. In addition, Brexit would likely create additional economic stresses for the UK, including the potential for decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty, and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. The events and the resulting market volatility may have an adverse effect on the performance of the Fund.
Investing in the securities of Eastern European issuers is highly speculative and involves risks not usually associated with investing in the more developed markets of Western Europe. Securities markets of Eastern European countries typically are less efficient and have lower trading volume, lower liquidity, and higher volatility than more developed markets. Eastern European economies also may be particularly susceptible to disruption in the international credit market due to their reliance on bank related inflows of capital.
To the extent that the Fund invests in European securities, it may be exposed to these risks through its direct investments in such securities, including sovereign debt, or indirectly through investments in money market funds and financial institutions with significant investments in such securities. In addition, Russia’s increasing international assertiveness could negatively impact EU and Eastern European economic activity.
Hedging and Other Strategies. Hedging refers to protecting against possible changes in the market value of securities or other assets that the Fund already owns or plans to buy, or protecting unrealized gains in the Fund. When securities prices are falling, the Fund can seek to offset a decline in the value of its current portfolio securities through the sale of futures contracts. When securities prices are rising, the Fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases.
If, in the opinion of the Advisor, there is a sufficient degree of correlation between price trends for the Fund’s portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the Fund may also enter into such futures contracts as part of its hedging strategy. Although under some circumstances prices of securities in the Fund’s portfolio may be more or less volatile than prices of such futures contracts, the Advisor will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any differential by having the Fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting the Fund’s portfolio securities.
When a short hedging position is successful, any depreciation in the value of portfolio securities will be substantially
6 |
offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the Fund’s portfolio securities would be substantially offset by a decline in the value of the futures position. On other occasions, the Fund may take a “long” position by purchasing futures contracts.
Options on Securities and Securities Indices. The Fund may purchase and write (sell) call and put options on any securities and securities indices. These options may be listed on national domestic securities exchanges or foreign securities exchanges or traded in the over-the-counter market. The Fund may write covered put and call options and purchase put and call options as a substitute for the purchase or sale of securities or to protect against declines in the value of portfolio securities and against increases in the cost of securities to be acquired.
Writing Covered Options. A call option on securities written by the Fund obligates the Fund to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the expiration date. A put option on securities written by the Fund obligates the Fund to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash settlement payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security. Writing covered call options may deprive the Fund of the opportunity to profit from an increase in the market price of the securities in its portfolio. Writing covered put options may deprive the Fund of the opportunity to profit from a decrease in the market price of the securities to be acquired for its portfolio.
All call and put options written by the Fund are covered. A written call option or put option may be covered by (i) maintaining cash or liquid securities in a segregated account with a value at least equal to the Fund’s obligation under the option, (ii) entering into an offsetting forward commitment and/or (iii) purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the Fund’s net exposure on its written option position. A written call option on securities is typically covered by maintaining the securities that are subject to the option in a segregated account. The Fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index.
The Fund may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as “closing purchase transactions.”
Illiquid and Restricted Securities Risk. The Fund may have significant exposure to restricted securities.
Restricted securities are securities with restrictions on public resale, such as securities offered in accordance with an exemption under
Rule 144A under the Securities Act of 1933 (the “1933 Act”), or commercial paper issued under Section 4(a)(2) of the 1933
Act. Restricted securities are often required to be sold in private sales to institutional buyers, markets for restricted securities may
or may not be well developed, and restricted securities can be illiquid. The extent (if at all) to which a security may be sold or a derivative
position closed without negatively impacting its market value may be impaired by reduced market activity or participation, legal restrictions
or other economic and market impediments. Funds with principal investment strategies that involve investments in securities of companies
with smaller market capitalizations, foreign securities, derivatives, or securities with substantial market and/or credit risk tend to
have the greatest exposure to liquidity risk. Exposure to liquidity risk may be heightened for funds that invest in securities of emerging
markets and related derivatives that are not widely traded, and that may be subject to purchase and sale restrictions.
The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond market’s growth. As a result, dealer inventories of corporate bonds, which indicate the ability to “make markets,” i.e., buy or sell a security at the quoted bid and ask price, respectively, are at or near historic lows relative to market size. Because market makers provide stability to fixed-income markets, the significant reduction in dealer inventories could lead to decreased liquidity and increased volatility, which may become exacerbated during periods of economic or political stress.
Libor Discontinuation Risk. The LA utilizes LIBOR as the reference or benchmark rate for interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K. Financial Conduct
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Authority, which regulates LIBOR, announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, is expected to cease publishing most LIBOR maturities, including some US LIBOR maturities, on December 31, 2021, and the remaining and most liquid US LIBOR maturities on June 30, 2023. It is expected that market participants such as the fund and SSB will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date. However, although regulators have encouraged the development and adoption of alternative rates such as the Secured Overnight Financing Rate (“SOFR”), the future utilization of LIBOR or of any particular replacement rate remains unclear.
Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation dates, the impact on the LA remains uncertain. It is expected that market participants will amend financial instruments referencing LIBOR, such as the LA, to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of such measures is known. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. However, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple alternative reference rates in new or existing financial instruments and products has not been determined. Certain proposed replacement rates to LIBOR, such as SOFR, which is a broad measure of secured overnight US Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an alternative reference rate is not completed in a timely manner.
As market participants transition away from LIBOR, LIBOR’s usefulness may deteriorate. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR’s deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR as a benchmark interest rate. The use of an alternative reference rate, or the transition process to an alternative reference rate, may result in increases to the interest paid by the fund pursuant to the LA and, therefore, may adversely affect the fund’s performance.
Multinational Companies Risk. To the extent that the Fund invests in the securities of companies with foreign business operations, it may be riskier than funds that focus on companies with primarily U.S. operations. Multinational companies may face certain political and economic risks, such as foreign controls over currency exchange; restrictions on monetary repatriation; possible seizure, nationalization or expropriation of assets; and political, economic or social instability. These risks are greater for companies with significant operations in developing countries.
Negative Interest Rates. Certain countries have recently experienced negative interest rates on deposits and debt instruments have traded at negative yields. A negative interest rate policy is an unconventional central bank monetary policy tool where nominal target interest rates are set with a negative value (i.e., below zero percent) intended to help create self-sustaining growth in the local economy. Negative interest rates may become more prevalent among non-U.S. issuers, and potentially within the U.S. For example, if a bank charges negative interest, instead of receiving interest on deposits, a depositor must pay the bank fees to keep money with the bank.
These market conditions may increase the Fund’s exposures to interest rate risk. To the extent the Fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the Fund would generate a negative return on that investment. While negative yields can be expected to reduce demand for fixed-income investments trading at a negative interest rate, investors may be willing to continue to purchase such investments for a number of reasons including, but not limited to, price insensitivity, arbitrage opportunities across fixed-income markets or rules-based investment strategies. If negative interest rates become more prevalent in the market, it is expected that investors will seek to reallocate assets to other income-producing assets such as investment grade and high-yield debt instruments, or equity investments that pay a dividend. This increased demand for higher yielding assets may cause the price of such instruments to rise while triggering a corresponding decrease in yield and the value of debt instruments over time.
Responsible Investing Risk. Certain subadvisors may integrate research on environmental, social and governance (ESG) factors into a fund’s investment process. ESG investments may be viewed as “sustainable,” “responsible,” or
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“socially conscious,” among other names. A subadvisor may also be a signatory of the United Nations Principles for Responsible Investment (PRI), which works to support its investor signatories in incorporating ESG factors into their investment and ownership decisions, or other similar global or regional initiatives. ESG factors may be utilized and evaluated differently by different subadvisors, and may mean different things to different people. The successful application of ESG factors is dependent on the subadvisor’s skill in properly identifying and analyzing material ESG issues, and the suitability of ESG investments may change over time. Integration of ESG factors into a fund’s investment process may impact its investment exposure, performance and proxy voting, among other elements.
Risks of Non-U.S. Securities. Investments in non-U.S. securities may involve a greater degree of risk than those in domestic securities. There is generally less publicly available information about non-U.S. companies in the form of reports and ratings similar to those that are published about issuers in the United States. Also, non-U.S. issuers generally are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers.
Because non-U.S. securities may be denominated in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the Fund’s net asset value (“NAV”), the value of dividends and interest earned, gains and losses realized on the sale of securities, and any net investment income and gains that the Fund distributes to shareholders. Securities transactions undertaken in some non-U.S. markets may not be settled promptly so that the Fund’s investments on non-U.S. exchanges may be less liquid and subject to the risk of fluctuating currency exchange rates pending settlement.
Non-U.S. securities will be purchased in the best available market, whether through OTC markets or exchanges located in the countries where principal offices of the issuers are located. Non-U.S. securities markets generally are not as developed or efficient as those in the United States. While growing in volume, they usually have substantially less volume than the NYSE, and securities of some non-U.S. issuers are less liquid and more volatile than securities of comparable U.S. issuers. Fixed commissions on non-U.S. exchanges generally are higher than negotiated commissions on U.S. exchanges; nevertheless, the Fund will endeavor to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed issuers than in the United States.
With respect to certain non-U.S. countries, there is the possibility of adverse changes in investment or exchange control regulations, expropriation, nationalization or confiscatory taxation limitations on the removal of funds or other assets of the Fund, political or social instability, or diplomatic developments, which could affect United States investments in those countries. Moreover, individual non-U.S. economies may differ favorably or unfavorably from the United States’ economy in terms of growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
The dividends, in some cases capital gains and interest payable on certain of the Fund’s non-U.S. portfolio securities, may be subject to non-U.S. withholding or other non-U.S. taxes, thus reducing the net amount of income or gains available for distribution to the Fund’s shareholders.
These risks may be intensified in the case of investments in emerging markets or countries with limited or developing capital markets.
The Fund’s ability and decision to purchase or sell portfolio securities may be affected by laws or regulations relating to the convertibility and repatriation of assets. Under present conditions, it is not believed that this consideration will have any significant effect on the Fund’s portfolio strategies.
Purchasing Options. The Fund would normally purchase call options in anticipation of an increase, or put options in anticipation of a decrease (“protective puts”), in the market value of securities of the type in which it may invest. The Fund may also sell call and put options to close out its purchased options.
The purchase of a call option would entitle the Fund, in return for the premium paid, to purchase specified securities or currency at a specified price during the option period. The Fund would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities or currency exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the call option.
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The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Fund’s portfolio securities. Put options may also be purchased by the Fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to cover the premium and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of put options may be offset by countervailing changes in the value of the Fund’s portfolio securities.
The Fund’s options transactions will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded. These limitations govern the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert, regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facilities or are held or written in one or more accounts or through one or more brokers. Thus, the number of options which the Fund may write or purchase may be affected by options written or purchased by other investment advisory clients of the Advisor. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid secondary market on a domestic or foreign options exchange will exist for any particular exchange-traded option or at any particular time. If the Fund is unable to effect a closing purchase transaction with respect to covered options it has written, the Fund will not be able to sell the underlying securities or dispose of assets held in a segregated account until the options expire or are exercised. Similarly, if the Fund is unable to effect a closing sale transaction with respect to options it has purchased, it would have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options). If trading were discontinued, the secondary market on that exchange (or in that class or series of options) would cease to exist. However, outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
The Fund’s ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. The Advisor will determine the liquidity of each over-the-counter option in accordance with guidelines adopted by the Board of Trustees of the Fund (the “Board”).
The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of options depends in part on the Advisor’s ability to predict future price fluctuations and, for hedging transactions, the degree of correlation between the options and securities or currency markets.
Futures Contracts and Options on Futures Contracts. The Fund may purchase and sell futures contracts based on various securities (such as U.S. government securities) and securities indices, and any other financial instruments and indices and purchase and write call and put options on these futures contracts. The Fund may also enter into closing purchase and sale transactions with respect to any of these contracts and options. All futures contracts entered into by the Fund are traded on U.S. or foreign exchanges or boards of trade that are licensed, regulated or approved by the Commodity Futures Trading Commission (“CFTC”).
Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments or currencies for an agreed price during a designated month (or to deliver the final
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cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).
Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions, which may result in a profit or a loss. While futures contracts on securities will usually be liquidated in this manner, the Fund may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures contracts are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.
The Fund may, for example, take a “short” position in the futures market by selling futures contracts in an attempt to hedge against an anticipated decline in market prices that would adversely affect the value of the Fund’s portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by the Fund or securities with characteristics similar to those of the Fund’s portfolio securities.
Options on Futures Contracts. The purchase of put and call options on futures contracts will give the Fund the right (but not the obligation) for a specified price to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, the Fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of the Fund’s assets. By writing a call option, the Fund becomes obligated, in exchange for the premium (upon exercise of the option) to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. Conversely, the writing of a put option on a futures contract generates a premium which may partially offset an increase in the price of securities that the Fund intends to purchase. However, the Fund becomes obligated (upon exercise of the option) to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. The loss incurred by the Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option of the same series. There is no guarantee that such closing transactions can be effected. The Fund’s ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.
Other Considerations. The Fund will engage in futures and related options transactions either for bona fide hedging or to facilitate portfolio management. The Fund will not engage in futures or related options for speculative purposes. To the extent that the Fund is using futures and related options for hedging purposes, futures contracts will be sold to protect against a decline in the price of securities that the Fund owns or futures contracts will be purchased to protect the Fund against an increase in the price of securities it intends to purchase. The Fund will determine that the price fluctuations in the futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the Fund or securities or instruments which it expects to purchase. To the extent that the Fund engages in non-hedging transactions in futures contracts and options on futures to facilitate portfolio management, the aggregate initial margin and premiums required to establish these nonhedging positions will not exceed 5% of the net asset value of the Fund’s portfolio, after taking into account unrealized profits and losses on any such positions and excluding the amount by which such options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in the case of contracts and options obligating the Fund to purchase securities, require the Fund to establish a segregated account consisting of cash or liquid securities in an amount equal to the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce certain risks, these transactions themselves entail certain other risks. For example, unanticipated changes in interest rates or securities prices may result in a poorer overall performance for the Fund than if it had not entered into any futures contracts or options transactions.
Perfect correlation between the Fund’s futures positions and portfolio positions will be impossible to achieve. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the Fund may be exposed to risk of loss.
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Some futures contracts or options on futures may become illiquid under adverse market conditions. In addition, during periods of market volatility, a commodity exchange may suspend or limit trading in a futures contract or related option, which may make the instrument temporarily illiquid and difficult to price. Commodity exchanges may also establish daily limits on the amount that the price of a futures contract or related option can vary from the previous day’s settlement price. Once the daily limit is reached, no trades may be made that day at a price beyond the limit. This may prevent the Fund from closing out positions and limiting its losses.
Interest Rate Swaps, Collars, Caps and Floors. In order to hedge the value of the Fund’s portfolio against interest rate fluctuations or to facilitate portfolio management, the Fund may, but is not required to, enter into various interest rate transactions such as interest rate swaps and the purchase or sale of interest rate caps and floors. To the extent that the Fund enters into these transactions, the Fund expects to do so primarily to preserve a return or spread on a particular investment or portion of its portfolio, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date or to manage the Fund’s interest rate exposure on any debt securities or preferred shares issued by the Fund for leverage purposes. The Fund intends to use these transactions only as a hedge or to facilitate portfolio management. The Fund is not required to hedge its portfolio and may choose not to do so. The Fund cannot guarantee that any hedging strategies it uses will work.
Interest Rate Swaps. In an interest rate swap, the Fund exchanges with another party their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). For example, if the Fund holds a debt instrument with an interest rate that is reset only once each year, it may swap the right to receive interest at this fixed rate for the right to receive interest at a rate that is reset every week. This would enable the Fund to offset a decline in the value of the debt instrument due to rising interest rates but would also limit its ability to benefit from falling interest rates. Conversely, if the Fund holds a debt instrument with an interest rate that is reset every week and it would like to lock in what it believes to be a high interest rate for one year, it may swap the right to receive interest at this variable weekly rate for the right to receive interest at a rate that is fixed for one year. Such a swap would protect the Fund from a reduction in yield due to falling interest rates and may permit the Fund to enhance its income through the positive differential between one week and one year interest rates, but would preclude it from taking full advantage of rising interest rates.
The Fund usually will enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out with the trust receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Fund’s obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis, and an amount of cash or liquid instruments having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Fund’s custodian. If the interest rate swap transaction is entered into on other than a net basis, the full amount of the Fund’s obligations will be accrued on a daily basis, and the full amount of the Fund’s obligations will be maintained in a segregated account by the Fund’s custodian.
Interest Rate Collars, Caps and Floors. The Fund also may engage in interest rate transactions in the form of purchasing or selling interest rate caps or floors. The Fund will not sell interest rate caps or floors that it does not own. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest equal to the difference of the index and the predetermined rate on a notional principal amount (i.e., the reference amount with respect to which interest obligations are determined although no actual exchange of principal occurs) from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest at the difference of the index and the predetermined rate on a notional principal amount from the party selling such interest rate floor.
Typically, the parties with which the Fund will enter into interest rate transactions will be broker-dealers and other financial institutions. The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Advisor to be equivalent to such rating. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with other similar instruments traded in the interbank market. Caps and floors,
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however, are less liquid than swaps. Certain federal income tax requirements may limit the Fund’s ability to engage in interest rate swaps.
Credit Default Swap Agreements. The Fund may enter into credit default swap agreements. The “buyer” in a credit default contract is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the “par value” (full notional value) of the reference obligation in exchange for the reference obligation. The Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no event of default occurs, the Fund loses its investment and recovers nothing. However, if an event of default occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, the Fund receives a fixed rate of income throughout the term of the contract, which can run between six months and ten years but is typically structured between three and five years, provided that there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation. Credit default swaps involve greater risks than if the Fund had invested in the reference obligation directly. In addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risks. The Fund will enter into swap agreements only with counterparties who are rated investment grade by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Advisor to be equivalent to such rating. A buyer also will lose its investment and recover nothing should an event of default occur. If an event of default were to occur, the value of the reference obligation received by the seller, coupled with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund.
If the Fund enters into a credit default swap, the Fund may be required to report the swap as a “listed transaction” for tax shelter reporting purposes on the Fund’s federal income tax return. If the Internal Revenue Service (the “IRS”) were to determine that the credit default swap is a tax shelter, the Fund could be subject to penalties under the Internal Revenue Code of 1986, as amended (the “Code”).
Warrants and Rights. Warrants and rights generally give the holder the right to receive, upon exercise and prior to the expiration date, a security of the issuer at a stated price. Funds typically use warrants and rights in a manner similar to their use of options on securities, as described in “General Characteristics of Options” above and elsewhere in this SAI. Risks associated with the use of warrants and rights are generally similar to risks associated with the use of options. Unlike most options, however, warrants and rights are issued in specific amounts, and warrants generally have longer terms than options. Warrants and rights are not likely to be as liquid as exchange-traded options backed by a recognized clearing agency. In addition, the terms of warrants or rights may limit the Fund’s ability to exercise the warrants or rights at such time, or in such quantities, as the Fund would otherwise wish.
The Fund may in the future employ new or additional investment strategies and hedging instruments if those strategies and instruments are consistent with the Fund’s investment objectives and are permissible under applicable regulations governing the Fund.
Additional Regulatory Limitations on the Use of Futures and Related Options, Interest Rate Floors, Caps and Collars and Interest Rate and Currency Swap Contracts. The CFTC has adopted regulations that subject registered investment companies and/or their investment advisors to regulation by the CFTC if the registered investment company invests more than a prescribed level of its NAV in commodity futures, options on commodities or commodity futures, swaps, or other financial instruments regulated under the Commodity Exchange Act (“CEA”) (“commodity interests”), or if the registered investment company markets itself as providing investment exposure to such commodity interests. The Advisor is registered as a commodity pool operator (“CPO”) under the CEA and is a National Futures Association member firm; however, the Advisor does not act in the capacity of a registered CPO with respect to the Fund.
Although the Advisor is a registered commodity pool operator (“CPO”) under the CEA and is a National Futures Association member firm, the Advisor has claimed an exclusion from CPO registration pursuant to CFTC Rule 4.5 with respect to the Fund. To remain eligible for this exclusion, the Fund must comply with certain limitations, including limits on trading in commodity interests, and restrictions on the manner in which the Fund markets its commodity interests trading activities. These limitations may restrict the Fund’s ability to pursue its investment strategy, increase the costs of implementing its strategy, increase its expenses and/or adversely affect its total return.
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Please see “Risk of Additional Government Regulation of Derivatives” for more information regarding governmental regulations of derivatives and similar transactions
Risk of Additional Government Regulation of Derivatives.
The regulation of the U.S. and non-U.S. derivatives markets has undergone substantial change in recent years and such change may continue. In particular, new Rule 18f-4 (the “Derivatives Rule”), adopted by the SEC on October 28, 2020, replaces the asset segregation regime of Investment Company Act Release No. 10666 (Release 10666) with a new framework for the use of derivatives by registered funds. For funds using a significant amount of derivatives, , the Derivatives Rule mandates a fund adopt and/or implement: (i) value at risk limitations in lieu of asset segregation requirements; (ii) a written derivatives risk management program; (iii) new Board oversight responsibilities, and (iv) new reporting and recordkeeping requirements. The Derivative Rule provides an exception for funds with derivative exposure up to 10% of its net assets, excluding certain currency and interest rate hedging transactions. In addition, the Derivatives Rule provides special treatment for reverse repurchase agreements, similar financing transactions and unfunded commitment agreements. On August 19, 2022, the SEC will rescind Release 10666 and withdraw letters and similar guidance addressing a fund’s use of derivatives and require funds to satisfy the requirements of the Derivatives Rule. Unless a Fund elects to comply early with the Derivatives Rule, a Fund may continue to engage in certain asset segregation practices in accordance with Release 10666 and related staff letters and guidance until August 19, 2022.
It is possible that additional government regulation of various types of derivative instruments, including futures, options on futures and swap agreements, may limit or prevent a fund from using such instruments as part of its investment strategy, which could negatively impact the fund. While many provisions of the Dodd-Frank Act have yet to be fully implemented and any regulatory or legislative activity may not necessarily have a direct, immediate effect upon a fund, it is possible that, upon implementation of these measures or any future measures, they could potentially limit or completely restrict the ability of a fund to use these instruments as a part of its investment strategy, increase the costs of using these instruments or make them less effective. In particular, new position limits imposed on a fund or its counterparty may impact the fund’s ability to invest in futures, options, and swaps in a manner that efficiently meets its investment objective.
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase and subsequent sale of a security after it has been held for a relatively brief period of time. The Fund may engage in short-term trading in response to stock market conditions, changes in interest rates or other economic trends and developments, or to take advantage of yield disparities between various fixed-income securities in order to realize capital gains or improve income. Short-term trading may have the effect of increasing portfolio turnover rate. A high rate of portfolio turnover (100% or greater) involves correspondingly greater brokerage expenses. The portfolio turnover rate for the Fund for the fiscal years ended December 31, 2020 and December 31, 2019 was 10% and 13%, respectively.
Real Estate Securities. Investing in securities of companies in the real estate industry subjects the Fund to the risks associated with the direct ownership of real estate. These risks include:
• | Declines in the value of real estate; |
• | Risks related to general and local economic conditions; |
• | Possible lack of availability of mortgage funds; |
• | Overbuilding; |
• | Extended vacancies of properties; |
• | Increased competition; |
• | Increases in property taxes and operating expenses; |
• | Changes in zoning laws; |
• | Losses due to costs resulting from the cleanup of environmental problems; |
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• | Liability to third parties for damages resulting from environmental problems; |
• | Casualty or condemnation losses; |
• | Limitations on rents; |
• | Changes in neighborhood values and the appeal of properties to tenants; |
• | Changes in interest rates; and |
• | Liquidity risk. |
Therefore, to the extent that the Fund invests a substantial amount of its assets in securities of companies in the real estate industry, the value of the Fund’s shares may change at different rates compared to the value of shares of the Fund with investments in a mix of different industries.
Securities of companies in the real estate industry include equity real estate investment trusts (“REITs”) and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the REIT, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax-free pass-through of income under the Code, as amended, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to a REIT. In the event of a default by a borrower or lessee, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.
In addition, even the larger REITs in the industry tend to be small- to medium-sized companies in relation to the equity markets as a whole. Moreover, shares of REITs may trade less frequently and, therefore, are subject to more erratic price movements, than securities of larger issuers.
Gaming-Tribal Authority Investments. The Fund may invest in securities issued by gaming companies, including gaming facilities operated by Indian (Native American) tribal authorities. The value of the Fund’s investments in gaming companies is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting the gaming sector. Securities of gaming companies may be considered speculative, and generally exhibit greater volatility than the overall market. The market value of gaming company securities may fluctuate widely due to unpredictable earnings, due in part to changing consumer tastes and intense competition, strong reaction to technological developments, and the threat of increased government regulation.
Securities issued by Indian tribal authorities are subject to particular risks. Indian tribes enjoy sovereign immunity, which is the legal privilege by which the United States federal, state, and tribal governments cannot be sued without their consent. In order to sue an Indian tribe (or an agency or instrumentality thereof), the tribe must have effectively waived its sovereign immunity with respect to the matter in dispute. Certain Indian tribal authorities have agreed to waive their sovereign immunity in connection with their outstanding debt obligations. Generally, waivers of sovereign immunity have been held to be enforceable against Indian tribes. Nevertheless, if a waiver of sovereign immunity is held to be ineffective, claimants, including investors in Indian tribal authority securities (such as the Fund), could be precluded from judicially enforcing their rights and remedies.
Further, in most commercial disputes with Indian tribes, it may be difficult or impossible to obtain federal court jurisdiction. A commercial dispute may not present a federal question, and an Indian tribe may not be considered a citizen of any state for purposes of establishing diversity jurisdiction. The U.S. Supreme Court has held that jurisdiction in a tribal court must be exhausted before any dispute can be heard in an appropriate federal court. In cases where the jurisdiction of the tribal forum is disputed, the tribal court first must rule as to the limits of its own jurisdiction. Such jurisdictional issues, as well as the general view that Indian tribes are not considered to be subject to ordinary bankruptcy proceedings, may be disadvantageous to holders of obligations issued by Indian tribal authorities, including the Fund.
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Cybersecurity and Operational Risk. Cybersecurity breaches are either intentional or unintentional events that allow an unauthorized party to gain access to Fund assets, customer data, or proprietary information, or cause the Fund or a Fund service provider to suffer data corruption or lose operational functionality. Intentional cybersecurity incidents include: unauthorized access to systems, networks, or devices (such as through “hacking” activity); infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. In addition, unintentional incidents can occur, such as the inadvertent release of confidential information.
A cybersecurity breach could result in the loss or theft of customer data or funds, the inability to access electronic systems (“denial of services”), loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system repairs, any of which could have a substantial impact on the Fund. For example, in a denial of service, Fund shareholders could lose access to their electronic accounts indefinitely, and employees of the Advisor, a Subadvisor, or the Fund’s other service providers may not be able to access electronic systems to perform critical duties for the Fund, such as trading, NAV calculation, shareholder accounting, or fulfilment of Fund share purchases and redemptions. Cybersecurity incidents could cause the Fund, the Advisor, a Subadvisor, or other service provider to incur regulatory penalties, reputational damage, compliance costs associated with corrective measures, or financial loss. They may also result in violations of applicable privacy and other laws. In addition, such incidents could affect issuers in which the Fund invests, thereby causing the Fund’s investments to lose value.
Cyber-events have the potential to materially affect the Fund and the Advisor’s relationships with accounts, shareholders, clients, customers, employees, products, and service providers. The Fund has established risk management systems reasonably designed to seek to reduce the risks associated with cyber-events. There is no guarantee that the Fund will be able to prevent or mitigate the impact of any or all cyber-events.
The Fund is exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the fund’s service providers, counterparties, or other third parties, failed or inadequate processes and technology or system failures.
The Advisor, each subadvisor, and their affiliates have established risk management or operational failure systems that seek to reduce cybersecurity and operational risks, and business continuity plans in the event of a cybersecurity breach or operational failure. However, there are inherent limitations in such plans, including that certain risks have not been identified, and there is no guarantee that such efforts will succeed, especially since none of the Advisor, the Subadvisors, or their affiliates controls the cybersecurity or operational systems of the Fund’s third-party service providers (including the Fund’s custodian), or those of the issuers of securities in which the Fund invests.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises (such as the novel coronavirus (COVID-19) pandemic), may adversely affect the Fund’s ability to conduct business, in particular if the Fund’s employees or the employees of its service providers are unable or unwilling to perform their responsibilities as a result of any such event. Even if the Fund’s employees and the employees of its service providers are able to work remotely, those remote work arrangements could result in the Fund’s business operations being less efficient than under normal circumstances, could lead to delays in its processing of transactions, and could increase the risk of cyber-events.
Market Events. Events in certain sectors have resulted, and may in the future result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included, but are not limited to : bankruptcies, corporate restructurings, and other events related to the sub-prime mortgage crisis in 2008; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and state budget deficits, social, political, and economic instability in Europe; economic stimulus by the Japanese central bank; steep declines in oil prices; dramatic changes in energy prices and currency exchange rates; and China’s economic slowdown. Interconnected global economies and financial markets increase the possibility that conditions in one country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected, and it is uncertain when these conditions will recur. Banks and financial services companies could suffer losses if interest rates were to rise or economic conditions deteriorate.
In addition to relatively high market volatility and reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. Actions taken by the U.S. Federal Reserve (Fed) or foreign central banks to stimulate or stabilize economic growth, such as interventions in currency markets, could cause high volatility in the equity and
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fixed-income markets. Reduced liquidity may result in less money being available to purchase raw materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging-market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
In addition, while interest rates have been unusually low in recent years in the United States and abroad, any decision by the Fed to adjust the target fed funds rate, among other factors, could cause markets to experience continuing high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. Also, regulators have expressed concern that rate increases may contribute to price volatility. These events and the possible resulting market volatility may have an adverse effect on the Fund. The U.S. is also considering significant new investments in infrastructure and national defense which, coupled with lower federal taxes, could lead to increased government borrowing and higher interest rates. While these proposed policies are going through the political process, the equity and debt markets may react strongly to expectations, which could increase volatility, especially if the market’s expectations for changes in government policies are not borne out. The U.S. is also renegotiating many of its global trade relationships and has imposed or threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
Political turmoil within the United States and abroad may also impact the Funds. Although the U.S. government has honored its credit obligations, it remains possible that the United States could default on its obligations. While it is impossible to predict the consequences of such an unprecedented event, it is likely that a default by the United States would be highly disruptive to the United States and global securities markets and could significantly impair the value of the Fund’s investments. Similarly, political events within the United States at times have resulted, and may in the future result, in a shutdown of government services, which could negatively affect the U.S. economy, decrease the value of many Fund investments, and increase uncertainty in or impair the operation of the United States or other securities markets. The U.S. is also renegotiating many of its global trade relationships and has imposed or threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the world’s securities markets likely will be significantly disrupted. On January 31, 2020, the UK left the EU, commonly referred to as “Brexit.”, and there commenced a transition period during which the EU and UK will negotiate and agree on the nature of their future relationship. Negotiators representing the United Kingdom and EU came to a preliminary trade agreement on December 24, 2020. The trade agreement was ratified by the UK Parliament and the European Parliament and took effect on January 1, 2021. Many aspects of the United Kingdom-EU trade relationship remain subject to further negotiation. There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. This uncertainty may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. In addition, Brexit may create additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the novel coronavirus (COVID-19) pandemic will stretch the resources and deficits of many countries in the EU and throughout the world, increasing the risk of default on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the performance of the Fund.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, impact the ability to complete redemptions, and affect Fund performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
The United States has responded to the novel coronavirus (COVID-19) pandemic and resulting economic distress with
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fiscal and monetary stimulus packages. In late March 2020, the government passed the Coronavirus Aid, Relief, and Economic Security Act, a stimulus package providing for over $2.2 trillion in resources to small businesses, state and local governments, and individuals that have been adversely impacted by the novel coronavirus (COVID-19) pandemic. In addition, in mid-March 2020 the Fed cut interest rates to historically low levels and promised unlimited and open-ended quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial markets, including expanding its reverse repurchase agreement operations, adding $1.5 trillion of liquidity to the banking system, establishing swap lines with other major central banks to provide dollar funding, establishing a program to support money market funds, easing various bank capital buffers, providing funding backstops for businesses to provide bridging loans for up to four years, and providing funding to help credit flow in asset-backed securities markets. The Fed also plans to extend credit to small- and medium-sized businesses.
Political and military events, including in North Korea, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
In addition, there is a risk that the prices of goods and services in the United States and many foreign economies may decline over time, known as deflation. Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely. If a country’s economy slips into a deflationary pattern, it could last for a prolonged period and may be difficult to reverse.
Use of Segregated and Other Special Accounts
As noted under “Risk of Additional Government Regulation of Derivatives”, on October 28, 2020, the SEC announced it would rescind Release 10666. However, unless the Fund elects to comply early with the Derivatives Rule, the Fund may continue to engage in certain asset segregation practices in accordance with Release 10666 and related staff letters and guidance until August 19, 2022, as described in this subsection.
Use of extensive hedging and other strategic transactions by the Fund will require, among other things, that the Fund post collateral with counterparties or clearinghouses and/or segregate cash or other liquid assets with its custodian, or a designated subcustodian, to the extent that the Fund’s obligations are not otherwise “covered” through ownership of the underlying security, financial instrument or currency.
In general, either the full amount of any obligation by the Fund to pay or deliver securities or assets under a transaction or series of transactions must be covered at all times by (a) holding the securities, instruments or currency required to meet the Fund’s obligations under such transactions or series of transactions, or (b) subject to any regulatory restrictions, segregating an amount of cash or other liquid assets at least equal to the current amount of the obligation. The segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate them. Some examples of cover requirements are set forth below.
Call Options. A call option on securities written by the Fund will require the Fund to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or to segregate cash or other liquid assets sufficient to purchase and deliver the securities if the call is exercised. A call option sold by the Fund on an index will require the Fund to own portfolio securities that correlate with the index or to segregate cash or other liquid assets equal to its obligations under the option.
Put Options. A put option on securities written by the Fund will require the Fund to segregate cash or other liquid assets equal to the exercise price.
OTC Options. OTC options entered into by the Fund, including those on securities, currency, financial instruments or indices, and OTC-issued and exchange-listed index options generally will provide for cash settlement, although the Fund will not be required to do so. As a result, when the Fund sells these instruments it will segregate an amount of cash or other liquid assets equal to its obligations under the options. OTC-issued and exchange-listed options sold by the Fund other than those described above generally settle with physical delivery, and the Fund will segregate an amount of cash or liquid high grade debt securities equal to the full value of the option. OTC options settling with physical delivery or with an election of either physical delivery or cash settlement will be treated the same as other options settling with physical delivery.
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Currency Contracts. Except when the Fund enters into a forward contract in connection with the purchase or sale of a security denominated in a foreign currency or for other non-speculative purposes, which requires no segregation, a currency contract that obligates the Fund to buy or sell a foreign currency generally will require the Fund to hold an amount of that currency or liquid securities denominated in that currency equal to the Fund’s obligations or to segregate cash or other liquid assets equal to the amount of the Fund’s obligations.
Futures Contracts and Options on Futures Contracts. In the case of a futures contract or an option on a futures contract, the Fund must deposit initial margin and, in some instances, daily variation margin, in addition to segregating assets sufficient to meet its obligations under the contract. These assets may consist of cash, cash equivalents, liquid debt, equity securities or other acceptable assets.
Swaps. The Fund will calculate the net amount, if any, of its obligations relating to swaps on a daily basis and will segregate an amount of cash or other liquid assets having an aggregate value at least equal to this net amount.
Caps, Floors and Collars. Caps, floors and collars require segregation of assets with a value equal to the Fund’s net obligation, if any.
Hedging and other strategic transactions may be covered by means other than those described above when consistent with applicable regulatory policies. The Fund also may enter into offsetting transactions so that its combined position, coupled with any segregated assets, equals its net outstanding obligation. The Fund could purchase a put option, for example, if the exercise price of that option is the same or higher than the exercise price of a put option sold by the Fund. In addition, if it holds a futures contract or a forward contract, the Fund could, instead of segregating assets, purchase a put option on the same futures contract or forward contract with an exercise price as high as or higher than the price of the contract held. Other hedging and strategic transactions also may be offset in combinations. If the offsetting transaction terminates on or after the time the primary transaction terminates, no segregation is required, but if it terminates prior to that time, assets equal to any remaining obligation would need to be segregated.
The investment policies and strategies of the Fund described in this SAI and the Prospectus, except for the nine investment restrictions designated as fundamental policies under this caption, are not fundamental and may be changed by the Board without shareholder approval.
Fundamental Investment Restrictions
As referred to above, the following nine investment restrictions of the Fund are designated as fundamental policies and as such cannot be changed without the approval of the holders of a majority of the Fund’s outstanding voting securities, which as used in this SAI means the lesser of (a) 67% of the shares of the Fund present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares are present or represented at the meeting or (b) more than 50% of outstanding shares of the Fund. As a matter of fundamental policy, the Fund may not:
(1) | Issue senior securities, except as permitted under the Investment Company Act of 1940, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
(2) | Borrow money, except as permitted under the Investment Company Act of 1940, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
(3) | Purchase securities on margin, except the Fund may obtain such short-term credits as may be necessary for the clearance of security transactions and may make margin deposits in connection with transactions in options, swap transactions and risk management transactions. |
(4) | Underwrite securities issued by other persons, except to the extent that in connection with the disposition of its portfolio investments it may be deemed to be an underwriter under the federal securities laws. |
(5) | Purchase or sell real estate, although the Fund may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate and securities representing interests in real estate. |
(6) | Purchase or sell commodities or commodity contracts, except that the Fund may purchase or sell financial futures contracts, related options and enter into swap transactions. |
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(7) | Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, by entering into repurchase agreements, or through the lending of its portfolio securities. |
(8) | Invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer or acquire more than 10% of the outstanding voting securities of any issuer, provided that this limitation does not apply to obligations issued or guaranteed as to interest and principal by the U.S. Government or its agencies or instrumentalities or to repurchase agreements secured by such obligations and that up to 25% of the Fund’s total assets (at current value) may be invested without regard to this limitation. |
(9) | Invest more than 25% of the value of its total assets in the securities of issuers primarily engaged in any one industry, provided that this limitation does not apply to (i) securities of issuers in the banking and thrift industry or (ii) obligations issued or guaranteed as to interest and principal by the U.S. Government or its agencies or instrumentalities or to repurchase agreements secured by such obligations. |
The Fund does not have a fundamental policy with respect to short sales.
In regard to restriction (2), the Fund may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Fund securities. The 1940 Act currently requires that the Fund have 300% asset coverage at the time of borrowing with respect to all borrowings other than temporary borrowings.
With respect to restriction (8), a diversified fund, as to at least 75% of the value of its total assets, generally may not, except with respect to government securities and securities of other investment companies, invest more than 5% of its total assets in the securities, or own more than 10% of the outstanding voting securities, of any one issuer. In determining the issuer of a municipal security, each state, each political subdivision, agency, and instrumentality of each state and each multi-state agency of which such state is a member is considered a separate issuer. In the event that securities are backed only by assets and revenues of a particular instrumentality, facility or subdivision, such entity is considered the issuer.
For purposes of construing restriction (9), securities of the U.S. government, its agencies, or instrumentalities are not considered to represent industries. Tax-exempt municipal obligations backed by the credit of a governmental entity also are not considered to represent industries.
Whenever an investment policy or investment restriction set forth in the Prospectus or this SAI states a maximum percentage of assets that may be invested in any security or other asset or describes a policy regarding quality standards, such percentage limitation or standard shall be determined immediately after and as a result of the Fund’s acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change in values, assets or other circumstances or any subsequent rating change made by a rating agency (or as determined by the Subadvisor if the security is not rated by a rating agency) will not compel the Fund to dispose of such security or other asset. Notwithstanding the foregoing, the Fund must always be in compliance with the borrowing policies set forth above.
Non-fundamental Investment Restrictions
The Fund has adopted the following non-fundamental investment policies, which may be changed by the Board without approval of the Fund’s shareholders:
(1) | The Fund will not purchase additional portfolio securities if, after giving effect to such purchase, the borrowings referred to in investment restriction (2) above exceed 5% of the Fund’s total assets. |
(2) | The Fund will not invest more than 10% of its total assets in the securities of any one issuer, except securities issued by the U.S. Government, its agencies and instrumentalities. |
(3) | The Fund, together with certain other advisory clients of the Advisor, generally may not acquire 10% or more of the voting securities of a bank, thrift, or bank holding company without regulatory approval. |
(4) | The Fund, together with certain other advisory clients of the Advisor and its affiliates, will not acquire 5% or |
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more of the voting securities of any bank, if an officer or director of such bank also is an officer or director of the Advisor, or one of its affiliates.
In general, the Fund intends to purchase and hold securities for long-term capital appreciation and not to trade in securities for short-term gain. It is anticipated that the annual portfolio turnover rate will not exceed 50%. Notwithstanding the foregoing, the Adviser may, from time to time, make short-term investments when it believes such investments are in the best interest of the Fund. The Fund’s annual rate of portfolio turnover may vary from year to year as well as within a year. A high rate of portfolio turnover (100% or more) generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the Fund and could generate short-term capital gain taxable as ordinary income, which could have a negative impact on the Fund’s performance over time. Portfolio turnover is calculated by dividing the lesser of purchases or sales of Fund securities during the fiscal year by the monthly average of the value of the Fund’s securities. (Excluded from the computation are all securities, including options, with maturities at the time of acquisition of one year or less.) The portfolio turnover rate for the Fund for the fiscal years ended December 31, 2020 and December 31, 2019 was 10% and 13%, respectively.
Those Responsible for Management
The business of the Fund is managed by the Board, including certain Trustees who are not “interested persons” (as defined in the 1940 Act) of the fund (the “Independent Trustees”). The Trustees elect officers who are responsible for the day-to-day operations of the fund and who execute policies formulated by the Trustees. Several of the Trustees and officers of the Fund also are officers or directors of the Advisor. Each Trustee oversees the fund and other funds in the John Hancock Fund Complex (as defined below).
The tables below present certain information regarding the Trustees and officers of the Fund, including their principal occupations which, unless specific dates are shown, are of at least five years’ duration. In addition, the table includes information concerning other directorships held by each Trustee in other registered investment companies or publicly traded companies. Information is listed separately for each Trustee who is an “interested person” (as defined in the 1940 Act) of the Fund (each a “Non-Independent Trustee”) and the Independent Trustees. As of May 7, 2021, the John Hancock Fund Complex consisted of 190 funds (including separate series of series mutual funds). The Board appointed Ms. Rathke to serve as Independent Trustee on September 15, 2020. As of March 22, 2018, James R. Boyle is considered an Independent Trustee. The address of each Trustee and officer of the Fund is 200 Berkeley Street, Boston, Massachusetts 02116. The Board consists of twelve members.
Non-Independent Trustees | |||
Name (Birth Year) |
Positions with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Andrew G. Arnott2 (1971) |
Trustee (since 2017); President (Since 2014) |
Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Director and Executive Vice President, John Hancock Investment Management LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Variable Trust Advisers LLC (since 2006, including prior positions); President, John Hancock Investment Management Distributors LLC (since 2004, including prior positions); President of various trusts within the John Hancock Fund Complex (since 2007, including prior positions). Trustee of various trusts within the John Hancock Fund Complex (since 2017). |
190
|
21 |
Non-Independent Trustees | |||
Name (Birth Year) |
Positions with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Marianne Harrison2
(1963) |
Trustee (since 2018) |
President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013 – 2017); Member, Board of Directors, CAE Inc. (since 2019); Member, Board of Directors, MA Competitive Partnership Board (since 2018); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led innovation center that fosters technology companies in Canada (2017 - 2019); Member, Board of Directors, Manulife Assurance Canada (2015-2017); Board Member, St. Mary’s General Hospital Foundation (2014-2017); Member, Board of Directors, Manulife Bank of Canada (2013-2017); Member, Standing Committee of the Canadian Life & Health Assurance Association (2013-2017); Member, Board of Directors, John Hancock USA, John Hancock Life & Health, John Hancock New York (2012 – 2013).
Trustee of various trusts within the John Hancock Fund Complex (since 2018). |
190
|
Independent Trustees
Name (Birth Year) |
Position(s) with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Charles L. Bardelis (1941) |
Trustee (since 2012) |
Director, Island Commuter Corp. (marine transport).
Trustee of various trusts within the John Hancock Fund Complex (since 1988).
|
190
|
James R. Boyle3 (1959) |
Trustee (since 2015) |
Chief Executive Officer, Foresters Financial (since 2018); Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc. (insurance) (January 2014–July 2014); Senior Executive Vice President, Manulife Financial, President and Chief Executive Officer, John Hancock (1999-2012); Chairman and Director, John Hancock Investment Management LLC, John Hancock Investment Management Distributors LLC, and John Hancock Variable Trust Advisers LLC (2005–2010).
Trustee of various trusts within the John Hancock Fund Complex (2005–2014 and since 2015).
|
190
|
22 |
Name (Birth Year) |
Position(s) with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Peter S. Burgess (1942) |
Trustee (since 2012) |
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (2004-2021); Director, Symetra Financial Corporation (2010–2016); Director, PMA Capital Corporation (2004–2010).
Trustee of various trusts within the John Hancock Fund Complex (since 2005).
|
190
|
William H. Cunningham (1944) |
Trustee (since 2005) |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000); former Director, LIN Television (2009-2014).
|
190
|
Grace K. Fey (1946) |
Trustee (since 2012) |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009).
|
190
|
Deborah C. Jackson (1952) |
Trustee (since 2008) |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, Amwell Corporation (since 2020); Board of Directors, Massachusetts Women’s Forum (2018-2020); Board of Directors, National Association of Corporate Directors/New England (2015-2020); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (2014-2017); Chief Executive Officer, American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of American Student Assistance Corporation (1996–2009); Board of Directors of Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011).
Trustee of various trusts within the John Hancock Fund Complex (since 2008).
|
190
|
23 |
Name (Birth Year) |
Position(s) with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Hassell H. McClellan (1945) |
Trustee (since 2012) and Chairperson of the Board (since 2017) |
Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston College (retired 2013).
|
190
|
Steven R. Pruchansky (1944) |
Trustee (since 2005) and Vice Chairperson of the Board (since 2012) |
Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (2014-2020); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (2014-2017); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991).
|
190
|
Frances G. Rathke (1960) |
Trustee
|
Director, Northern New England Energy Corporation (since 2017); Director, Audit Committee Chair and Compensation Committee Member, Green Mountain Power Corporation (since 2016); Director, Treasurer and Finance & Audit Committee Chair, Flynn Center for Performing Arts (since 2016); Director, Audit Committee Chair and Compensation Committee Member, Planet Fitness (since 2016); Director, Citizen Cider, Inc. (high-end hard cider and hard seltzer company) (since 2016); Chief Financial Officer and Treasurer, Keurig Green Mountain, Inc. (2003-retired 2015); Independent Financial Consultant, Frances Rathke Consulting (strategic and financial consulting services) (2001-2003); Chief Financial Officer and Secretary, Ben & Jerry’s Homemade, Inc. (1989-2000, including prior positions); Senior Manager, Coopers & Lybrand, LLC (independent public accounting firm) (1982-1989).
|
190
|
Gregory A. Russo (1949) |
Trustee (since 2008) |
Director and Audit Committee Chairman (2012-2020), and Member, Audit Committee and Finance Committee (2011-2020), NCH Healthcare System, Inc. (holding company for multi-entity healthcare system); Director and Member (2012- |
190
|
24 |
Name (Birth Year) |
Position(s) with the Fund1 |
Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
2018), and Finance Committee Chairman (2014-2018), The Moorings, Inc. (nonprofit continuing care community); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer, Westchester County, New York, Chamber of Commerce (1986–1992); Director, Treasurer and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990–1995).
Trustee of various trusts within the John Hancock Fund Complex (since 2008). |
1 | Mr. Arnott, Ms. Jackson, and Mr. Pruchansky serve as Trustees for a term expiring in 2022; Mr. Boyle, Mr. Cunningham, Ms. Fey, Mr. McClellan and Mr. Russo serve as Trustees for a term expiring in 2023; Mr. Bardelis, Mr. Burgess, Ms. Harrison and Ms. Rathke serve as Trustees for a term expiring in 2024. |
2 | The Trustee is a Non-Independent Trustee due to his position with the Advisor and certain of its affiliates. |
3 | Mr. Boyle served as Trustee at various time periods prior to 2015. |
Correspondence intended for any of the Trustees may be sent to the attention of the individual Trustee or to the Board c/o the Secretary of the Fund at 200 Berkeley Street, Boston, Massachusetts 02116-2805. All communications addressed to the Board or individual Trustee will be logged and sent to the Board or individual Trustee. The Secretary may determine not to forward any letter to Trustees that does not relate to the business of the Fund.
Principal Officers who are not Trustees
The following table presents information regarding the current principal officers of the Fund who are not Trustees, including their principal occupations which, unless specific dates are shown, are of at least five years’ duration. Each of the officers is an affiliated person of the Advisor. All of the officers listed are officers or employees of the Advisor or its affiliates. All of the officers also are officers of all of the other funds for which the Advisor serves as investment advisor.
Principal Officers who are not Trustees
Name
|
Position(s) with
|
Principal Occupation(s) During Past 5 Years |
Charles A. Rizzo (1957) |
Chief Financial Officer (since 2007) |
Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2008); Chief Financial Officer of various trusts within the John Hancock Fund Complex (since 2007).
|
Salvatore Schiavone (1965) |
Treasurer (2007-2009 and since 2010, including prior positions) |
Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2007); Treasurer of various trusts within the John Hancock Fund Complex (since 2007, including prior positions).
|
25 |
Name
|
Position(s) with
|
Principal Occupation(s) During Past 5 Years |
Christopher (Kit)
Sechler
(1973) |
Secretary and Chief Legal Officer (Since 2018); Assistant Secretary (2009-2018) |
Vice President and Deputy Chief Counsel, John Hancock Investment Management (since 2015); Assistant Vice President and Senior Counsel (2009–2015), John Hancock Investment Management; Assistant Secretary of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2009); Chief Legal Officer and Secretary of various trusts within the John Hancock Fund Complex (since 2009, including prior positions).
|
Trevor Swanberg
(1979) |
Chief Compliance Officer (since 2020) |
Chief Compliance Officer, John Hancock Investment Management LLC, and John Hancock Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2019–2020); Assistant Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2016–2019); Vice President, State Street Global Advisors (2015–2016); Chief Compliance Officer of various trusts within the John Hancock Fund Complex (since 2016, including prior positions). |
1 | Each officer holds office for an indefinite term until his or her successor is duly elected and qualified or until he/she dies, retires, resigns, is removed or becomes disqualified. |
Additional Information about the Trustees
In addition to the description of each Trustee’s Principal Occupation(s) and Other Directorships set forth above, the following provides further information about each Trustee’s specific experience, qualifications, attributes or skills with respect to the Fund. The information in this section should not be understood to mean that any of the Trustees is an “expert” within the meaning of the U.S. federal securities laws.
There are no specific required qualifications for Board membership. The Board believes that the different perspectives, viewpoints, professional experience, education, and individual qualities of each Trustee represent a diversity of experiences and a variety of complementary skills. Each Trustee has experience as a Trustee of the Fund, as well as experience as a Trustee of other John Hancock funds. It is the Trustees’ belief that this allows the Board, as a whole, to oversee the business of the Fund in a manner consistent with the best interests of the Fund’s shareholders. When considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Trustees.
Independent Trustees
Charles L. Bardelis — As a director and former chief executive of an operating company, Mr. Bardelis has experience with a variety of financial, staffing, regulatory and operational issues. He also has experience as a director of publicly traded companies.
James R. Boyle — Through his former positions as chairman and director of the Advisor, position as a senior executive of
MFC, the Advisor’s parent company, and positions with other affiliates of the Advisor, Mr. Boyle has leadership and operational
experience in the development and management of registered investment companies, variable annuities and retirement products, enabling
him to provide management input to the Board. He also has experience as a senior executive of healthcare and insurance companies, and
an auditor.
26 |
Peter S. Burgess — As a financial consultant, Certified Public Accountant, and former partner in a major international public accounting firm, Mr. Burgess has experience in the auditing of financial services companies and mutual funds. He also has experience as a director of publicly traded operating companies.
William H. Cunningham — Mr. Cunningham has management and operational oversight experience as a former Chancellor and President of a major university. Mr. Cunningham regularly teaches a graduate course in corporate governance at the law school and at the Red McCombs School of Business at The University of Texas at Austin. He also has oversight and corporate governance experience as a current and former director of a number of operating companies, including an insurance company.
Grace K. Fey — Ms. Fey has significant governance, financial services, and asset management industry expertise based on her
extensive non-profit board experience, as well as her experience as a consultant to non-profit and corporate boards, and as a former director
and executive of an investment management firm.
Deborah C. Jackson — Ms. Jackson has leadership, governance, management, and operational oversight experience as the lead director of a large bank, president of a college, and as the former chief executive officer of a major charitable organization. She also has expertise in financial services matters and oversight and corporate governance experience as a current and former director of various other corporate organizations, including an insurance company, a regional stock exchange, a telemedicine company, and non-profit entities.
Hassell H. McClellan — As a former professor of finance and policy in the graduate management department of a major university,
a current director of a public company, and as a former director of several privately held companies, Mr. McClellan has experience in
corporate and financial matters. He also has experience as a director of other investment companies not affiliated with the Trust.
Steven R. Pruchansky — Mr. Pruchansky has entrepreneurial, executive and financial experience as a senior officer and chief executive of business in the retail, service and distribution companies and a current and former director of real estate and banking companies.
Frances G. Rathke — Through her former positions in senior financial roles, as a former certified public accountant, and
as a consultant on strategic and financial matters, Ms. Rathke has experience as a leader overseeing, conceiving, implementing, and analyzing
strategic and financial growth plans, and financial statements. Ms. Rathke also has experience in the auditing of financial statements
and related materials. In addition, she has experience as a director of various organizations, including a publicly traded company and
a non-profit entity.
Gregory A. Russo — As a retired Certified Public Accountant, Mr. Russo served as a partner and Global Vice Chairman in a major
independent registered public accounting firm as well as a member of its geographic boards of directors and International Executive Team.
He has also served on a number of boards of directors for various operating entities. As a result of Mr. Russo’s diverse global
responsibilities, he possesses accounting, finance and executive operating experience.
Non-Independent Trustees
Andrew G. Arnott — Through his positions as Executive Vice President of John Hancock Financial Services; Director and Executive Vice President of the Advisor and an affiliated investment advisor, John Hancock Variable Trust Advisers LLC; President of John Hancock Investment Management Distributors LLC; and President of the John Hancock Fund Complex, Mr. Arnott has experience in the management of investments, registered investment companies, variable annuities and retirement products, enabling him to provide management input to the Board.
Marianne Harrison — Through her position as President and CEO, John Hancock, and previous experience as President and CEO, Manulife Canadian Division, President and General Manager for John Hancock Long-Term Care Insurance, and Executive Vice President and Controller for Manulife, Ms. Harrison has experience as a strategic business builder expanding product offerings and distribution, enabling her to provide management input to the Board.
27 |
Duties of Trustees; Committee Structure
The Fund is organized as a Massachusetts business trust. Under the Declaration of Trust, the Trustees are responsible for managing the affairs of the Fund, including the appointment of advisors and subadvisors. Each Trustee has the experience, skills, attributes or qualifications described above (see “—Principal Occupation(s) and Other Directorships” and “—Additional Information about the Trustees” above). The Board appoints officers who assist in managing the day-to-day affairs of the Fund. The Board met 6 times during the latest fiscal year.
The Board has appointed an Independent Trustee as Chairperson. The Chairperson presides at meetings of the Trustees and may call meetings of the Board and any Board committee whenever he deems it necessary. The Chairperson participates in the preparation of the agenda for meetings of the Board and the identification of information to be presented to the Board with respect to matters to be acted upon by the Board. The Chairperson also acts as a liaison with the Fund’s management, officers, attorneys, and other Trustees generally between meetings. The Chairperson may perform such other functions as may be requested by the Board from time to time. The Board has also designated a Vice Chairperson to serve in the absence of the Chairperson. Except for any duties specified in this SAI or pursuant to the Fund’s Declaration of Trust or Amended and Restated By-Laws (the “By-Laws), or as assigned by the Board, the designation of a Trustee as Chairperson or Vice Chairperson does not impose on that Trustee any duties, obligations or liability that are greater than the duties, obligations or liability imposed on any other Trustee, generally. The Board has designated a number of standing committees as further described below, each of which has a Chairperson. The Board also may designate working groups or ad hoc committees as it deems appropriate.
The Board believes that this leadership structure is appropriate because it allows the Board to exercise informed and independent judgment over matters under its purview, and it allocates areas of responsibility among committees or working groups of Trustees and the full Board in a manner that enhances effective oversight. The Board considers leadership by an Independent Trustee as Chairperson to be integral to promoting effective independent oversight of the Fund’s operations and meaningful representation of the shareholders’ interests. The Board also believes that having a super-majority of Independent Trustees is appropriate and in the best interest of the Fund’s shareholders. Nevertheless, the Board also believes that having interested persons serve on the Board brings corporate and financial viewpoints that are, in the Board’s view, helpful elements in its decision-making process. In addition, the Board believes that Messrs. Arnott and Boyle and Ms. Harrison, as current or former executives of the Advisor (or of its parent company, MFC), and of other affiliates of the Advisor, provide the Board with the perspective of the Advisor in managing and sponsoring the Fund. The leadership structure of the Board may be changed, at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of the Fund.
Board Committees
The Board has established an Audit Committee; Compliance Committee; Contracts, Legal & Risk Committee; Nominating and Governance Committee; and Investment Committee.
Audit Committee. The Board has a standing Audit Committee composed solely of Independent Trustees (Messrs. Bardelis, Burgess, and Ms. Rathke). Mr. Burgess serves as Chairperson of this Committee. This Committee met 4 times during the fiscal year ended December 31, 2020, to review the internal and external accounting and auditing procedures of the Fund and, among other things, to consider the selection of an independent registered public accounting firm for the Fund, to approve all significant services proposed to be performed by its independent registered public accounting firm and to consider the possible effect of such services on its independence.
Compliance Committee. The Board also has a standing Compliance Committee (Mses. Fey and Jackson and Mr. Cunningham). This Committee reviews and makes recommendations to the full Board regarding certain compliance matters relating to the Fund. Ms. Fey serves as Chairperson of this Committee. This Committee met 4 times during the fiscal year ended December 31, 2020.
Contracts, Legal & Risk Committee. The Board also has a standing Contracts, Legal & Risk Committee (Messrs. Boyle, Pruchansky and Russo). This Committee oversees the initiation, operation, and renewal of the various contracts between the funds and other entities. These contracts include advisory and subadvisory agreements, custodial and transfer agency agreements and arrangements with other service providers. The Committee also reviews the significant legal affairs of the funds, as well as any significant regulatory and legislative actions or proposals affecting or relating to the funds or their service providers. The Committee also assists the Board in its oversight role with respect to the processes pursuant to which the Advisor and the Subadvisor identify, manage and report the various risks that affect or could affect the funds. Mr. Russo serves as Chairperson of this Committee. The Contracts, Legal & Risk Committee
28 |
held 4 meetings during the fiscal year ended December 31, 2020.
Nominating and Governance Committee. The Board also has a Nominating and Governance Committee composed of all of the Independent Trustees. This Committee will consider nominees recommended by Trust shareholders. Nominations should be forwarded to the attention of the Secretary of the Trust at 200 Berkeley Street, Boston, Massachusetts 02116. Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in order to be considered by this Committee. This Committee met 5 times during the fiscal year ended December 31, 2020.
Investment Committee. The Board also has an Investment Committee composed of all of the Trustees. The Investment Committee has 5 subcommittees with the Trustees divided among the five subcommittees (each an “Investment Sub- Committee”). Ms. Jackson and Messrs. Bardelis, Boyle, and Cunningham serve as Chairpersons of the Investment Sub-Committees. Each Investment Sub-Committee reviews investment matters relating to a particular group of funds in the John Hancock Fund Complex and coordinates with the full Board regarding investment matters. The Investment Committee met 5 times during the fiscal year ended December 31, 2020.
Annually, the Board evaluates its performance and that of its Committees, including the effectiveness of the Board’s Committee structure.
Risk Oversight
As a registered investment company, the Fund is subject to a variety of risks, including investment risks (such as, among others, market risk, credit risk and interest rate risk), financial risks (such as, among others, settlement risk, liquidity risk and valuation risk), compliance risks, and operational risks. As a part of its overall activities, the Board oversees the Fund’s risk management activities that are implemented by the Advisor, the Fund’s Chief Compliance Officer (“CCO”) and other service providers to the Fund. The Advisor has primary responsibility for the Fund’s risk management on a day-to-day basis as a part of its overall responsibilities. The Fund’s Subadvisor, subject to oversight of the Advisor, is primarily responsible for managing investment and financial risks as a part of its day-to-day investment responsibilities, as well as operational and compliance risks at its firm. The Advisor and the CCO also assist the Board in overseeing compliance with investment policies of the Fund and regulatory requirements, and monitor the implementation of the various compliance policies and procedures approved by the Board as a part of its oversight responsibilities.
The Advisor identifies to the Board the risks that it believes may affect the Fund and develops processes and controls regarding such risks. However, risk management is a complex and dynamic undertaking and it is not always possible to comprehensively identify and/or mitigate all such risks at all times since risks are at times impacted by external events. In discharging its oversight responsibilities, the Board considers risk management issues throughout the year with the assistance of its various Committees as described below. Each Committee meets at least quarterly and presents reports to the Board, which may prompt further discussion of issues concerning the oversight of the Fund’s risk management. The Board as a whole also reviews written reports or presentations on a variety of risk issues as needed and may discuss particular risks that are not addressed in the Committee process.
The Board has established an Investment Committee, which consists of five Investment Sub-Committees. Each Investment Sub-Committee assists the Board in overseeing the significant investment policies of the Fund and the performance of its subadvisors. The Advisor monitors these policies and subadvisor activities and may recommend changes in connection with the Fund to the relevant Investment Sub-Committee in response to subadvisor requests or other circumstances. On at least a quarterly basis, the Investment Sub-Committee reviews reports from the Advisor regarding the Fund’s investment performance, which include information about investment and financial risks and how they are managed, and from the CCO or his/her designee regarding subadvisor compliance matters. In addition, the Investment Sub-Committee meets periodically with the portfolio managers of the Fund’s subadvisor to receive reports regarding management of the Fund, including with respect to risk management processes.
The Audit Committee assists the Board in reviewing with the independent auditors, at various times throughout the year, matters relating to the Fund’s financial reporting. In addition, this Committee oversees the process of the Fund’s valuation of its portfolio securities, assisted by the Fund’s Pricing Committee (composed of officers of the Fund), which calculates fair value determinations pursuant to procedures adopted by the Board.
29 |
The Compliance Committee assists the Board in overseeing the activities of the Fund’s CCO with respect to the compliance programs of the Fund, the Advisor, the subadvisor, and certain of the Fund’s other service providers (the distributor and transfer agent). This Committee and the Board receive and consider periodic reports from the CCO throughout the year, including the CCO’s annual written report, which, among other things, summarizes material compliance issues that arose during the previous year and any remedial action taken to address these issues, as well as any material changes to the compliance programs
The Contracts, Legal & Risk Committee assists the Board in its oversight role with respect to the processes pursuant to which the Advisor and the subadvisor identify, assess, manage and report the various risks that affect or could affect the Fund. This Committee reviews reports from the Fund’s Advisor on a periodic basis regarding the risks facing the Fund, and makes recommendations to the Board concerning risks and risk oversight matters as the Committee deems appropriate. This Committee also coordinates with the other Board Committees regarding risks relevant to the other Committees, as appropriate.
In addressing issues regarding the Fund’s risk management between meetings, appropriate representatives of the Advisor communicate with the Chairperson of the Board, the relevant Committee Chair, or the Fund’s CCO, who is directly accountable to the Board. As appropriate, the Chairperson of the Board, the Committee Chairs and the Trustees confer among themselves, with the Fund’s CCO, the Advisor, other service providers, external fund counsel, and counsel to the Independent Trustees, to identify and review risk management issues that may be placed on the full Board’s agenda and/or that of an appropriate Committee for review and discussion.
In addition, in its annual review of the Fund’s advisory, subadvisory and distribution agreements, the Board reviews information provided by the Advisor, the subadvisor and the distributor relating to their operational capabilities, financial condition, risk management processes and resources.
The Advisor also has its own, independent interest in risk management. In this regard, the Advisor has appointed a Risk and Investment Operations Committee, consisting of senior personnel from each of the Advisor’s functional departments. This Committee reports periodically to the Board and the Contracts, Legal & Risk Committee on risk management matters. The Advisor’s risk management program is part of the overall risk management program of John Hancock, the Advisor’s parent company. John Hancock’s Chief Risk Officer supports the Advisor’s risk management program, and at the Board’s request will report on risk management matters.
Compensation of Trustees
The Fund pays fees to its Independent Trustees. Trustees also are reimbursed for travel and other out-of-pocket expenses. Each Independent Trustee receives in the aggregate from the Fund and the other closed-end funds in the John Hancock Fund Complex an annual retainer of $40,000.
The following table provides information regarding the compensation paid by the Fund and the other investment companies in the John Hancock Fund Complex to the Independent Trustees for their services during the Fund’s fiscal year ended December 31, 2020.
Compensation Table1
Independent Trustees | Fund | John Hancock Fund Complex |
Charles L. Bardelis | $4,000 | $410,000 |
James R. Boyle | $4,000 | $388,000 |
Peter S. Burgess | $4,000 | $430,000 |
William H. Cunningham | $4,000 | $410,000 |
Grace K. Fey | $4,000 | $430,000 |
Deborah C. Jackson | $4,000 | $410,000 |
Hassell H. McClellan | $4,000 | $550,000 |
James M. Oates2 | $4,000 | $410,000 |
Steven R. Pruchansky | $4,000 | $410,000 |
Frances G. Rathke3 | $1,000 | $126,082 |
Gregory A. Russo | $4,000 | $430,000 |
Non-Independent Trustees | ||
Andrew G. Arnott | $0 | $0 |
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Independent Trustees | Fund | John Hancock Fund Complex |
Marianne Harrison | $0 |
$0 |
1 The Trust does not have a pension or retirement plan for any of its Trustees or officers.
2 Mr. Oates retired as Trustee effective April 30, 2021.
3 Appointed to the Board on September 15, 2020.
Trustee Ownership of Shares of John Hancock Funds
The table below sets forth the aggregate dollar range of equity securities beneficially owned by the Trustees in the Fund and in all John Hancock funds overseen by each Trustee as of December 31, 2020. The information as to beneficial ownership is based on statements furnished to the Fund by the Trustees. Each of the Trustees has all voting and investment powers with respect to the shares indicated.
Trustees | Fund | John Hancock Fund Complex |
Independent Trustees | ||
Charles L. Bardelis | $10,001-$50,000 | Over $100,000 |
James R. Boyle | $10,001-$50,000 | Over $100,000 |
Peter S. Burgess | $10,001-$50,000 | Over $100,000 |
William H. Cunningham | $10,001-$50,000 | Over $100,000 |
Grace K. Fey | $10,001-$50,000 | Over $100,000 |
Deborah C. Jackson | $10,001-$50,000 | Over $100,000 |
Hassell H. McClellan | $10,001-$50,000 | Over $100,000 |
Steven R. Pruchansky | $10,001-$50,000 | Over $100,000 |
Frances G. Rathke1 | $10,001-$50,000 | Over $100,000 |
Gregory A. Russo | $10,001-$50,000 | Over $100,000 |
Non-Independent Trustees |
||
Andrew G. Arnott | None | Over $100,000 |
Marianne Harrison | None | Over $100,000 |
1 Appointed to the Board on September 15, 2020.
As of June 15, 2021, the officers and Trustees of the Fund as a group owned beneficially less than 1% of the outstanding shares of the Fund.
A control person is a person who owns, either directly or indirectly, beneficially more than 25% of the voting securities of a company. To the best knowledge of the Fund, the shareholders (principal holders) listed below owned more than 5% of the fund’s shares as of June 15, 2021.
Name and Address of Owner | Amount | Percent |
Morgan Stanley Smith Barney LLC
New York, NY 10036 |
1,402,914 | 7.50%1 |
1 Based on a Schedule 13G filing dated February 11, 2021.
Investment Advisory and Other Services
A discussion regarding the basis for the Trustees’ approval of the Advisory Agreement and the Subadvisory Agreements is available in the Fund’s most recent shareholder report for the fiscal year ended December 31.
THE ADVISOR
The Advisor is a Delaware limited liability company whose principal offices are located at 200 Berkeley Street,
31 |
Boston, Massachusetts 02116 and serves as the Fund’s investment advisor. The Advisor is registered with the SEC as an investment advisor under the Advisers Act.
Founded in 1968, the Advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), a subsidiary of Manulife Financial Corporation (“Manulife Financial” or the “Company”). Manulife Financial is the holding company of The Manufacturers Life Insurance Company (the “Life Company”) and its subsidiaries. John Hancock Life Insurance Company (U.S.A.) and its subsidiaries (“John Hancock”) today offer a broad range of financial products and services, including whole, term, variable, and universal life insurance, as well as college savings products, mutual funds, fixed and variable annuities, long-term care insurance and various forms of business insurance. Additional information about John Hancock may be found on the Internet at johnhancock.com.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended December 31, 2020, this waiver amounted to 0.01% of the fund’s average daily net assets. This arrangement expires on July 31, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
The Advisor’s parent company has been helping individuals and institutions work toward their financial goals since 1862. The Advisor offers investment solutions managed by institutional money managers, taking a disciplined team approach to portfolio management and research, leveraging the expertise of seasoned investment professionals. The Advisor has been managing closed-end funds since 1971. As of March 31, 2021, the Advisor had total assets under management of approximately $171.9 billion.
Manulife Financial Corporation is a leading international financial services group with principal operations in Asia, Canada and the United States. Operating primarily as John Hancock in the United States and Manulife elsewhere, it provides financial protection products and advice, insurance, as well as wealth and asset management services through its extensive network of solutions for individuals, groups and institutions. As of March 31, 2021, it had over C$1.3 trillion (US$1 trillion) in assets under management and administration. Its global headquarters are in Toronto, Canada, and it trades as ‘MFC’ on the Toronto Stock Exchange, New York Stock Exchange (the “NYSE”), and the Philippine Stock Exchange, and under ‘945’ in Hong Kong. Manulife Financial Corporation can be found on the Internet at manulife.com.
The Advisor serves as investment advisor to the Fund and is responsible for monitoring the Subadvisor’s services to the Fund.
Advisory Agreement. The Fund has entered into an investment management contract dated July 1, 2009 (the “Advisory Agreement”) with the Advisor. As compensation for its advisory services under the Advisory Agreement, the Advisor receives a fee from the Fund, calculated and paid daily, at an annual rate of the Fund’s average daily managed assets.
The following table shows the advisory fee that the Fund incurred and paid to the Advisor for the last three fiscal years ended December 31, 2020, December 31, 2019, and December 31, 2018.
Advisory Fee Paid in Fiscal Year Ended | |||
2020
($) |
2019
($) |
2018
($) |
|
Gross Fees | 6,491,591 | 8,215,429 | 8,832,893 |
Waivers | (41,394) | (55,220) | (67,086) |
Net Fees | 6,450,197 | 8,160,209 | 8,765,807 |
Pursuant to the Advisory Agreement and subject to the general supervision of the Trustees, the Advisor selects, contracts with, and compensates the Subadvisor to manage the investments and determine the composition of the assets of the Fund; provided, that any contract with a Subadvisor (a “Subadvisory Agreement”) shall be in compliance
32 |
with and approved as required by the 1940 Act, except for such exemptions therefrom as may be granted to the Fund or the Advisor. The Advisor monitors the Subadvisor’s management of the Fund’s investment operations in accordance with the investment objectives and related investment policies of the Fund, reviews the performance of the Subadvisor and reports periodically on such performance to the Board.
Pursuant to the Advisory Agreement, the Advisor has entered into a Subadvisory Agreement with the Subadvisor to provide day-to-day portfolio management of the Fund and to implement the Fund’s portfolio management strategies and investment objective. The Advisory Agreement provides that the Advisor may terminate the Subadvisory Agreement entered into and directly assume any functions performed by the Subadvisor, upon approval of the Board.
The Fund pays all expenses of its organization, operations and business.
The Advisory Agreement had an initial period of two years and continues from year to year so long as such continuance is approved at least annually: (i) by the vote of a majority of the Independent Trustees; and (ii) either by the Board or by the vote of a majority of the outstanding shares of the Fund.
The Advisory Agreement may be terminated at any time without penalty upon sixty (60) days’ written notice by the Board or the Advisor, as applicable, or by the vote of the majority of the outstanding shares of the Fund. The Advisory Agreement will terminate automatically in the event of its assignment. The Subadvisory Agreement terminates automatically upon the termination of the Advisory Agreement.
The Advisory Agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties to the Fund under such agreements on the part of the Advisor, the Advisor shall not be liable to the Fund or to any shareholder for any loss sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Fund.
Administration Agreement. The Fund has entered into an administration contract dated August 15, 1994 (the “Administration Agreement”) with JHIM, under which the Fund receives Non-Advisory Services. These “Non-Advisory Services” include, but are not limited to, preparing tax returns, preparing and transmitting periodic reports to shareholders, preparing and submitting filings with the SEC and other regulatory authorities, maintaining Fund records, providing personnel and clerical services, and other services that are not investment advisory in nature.
The Fund pays a monthly fee to JHIM equal to 0.25% of the Fund’s average weekly net assets for such Non-Advisory Services under the Administration Agreement. The Advisor has contractually agreed to limit its administration fee to 0.10% of the fund’s average weekly gross assets. This agreement expires on April 30, 2023, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time. The following table shows the expenses incurred by JHIM in providing services under the Administration Agreement for the last three fiscal years ended December 31, 2020, December 31, 2019, and December 31, 2018.
Administration Fee Paid in Fiscal Year Ended | |||
2020
($) |
2019
($) |
2018
($) |
|
Gross Fees | 1,439,472 | 1,865,155 | 2,022,948 |
Waivers | (863,684) | (1,119,093) | (1,213,769) |
Net Fees | 575,788 | 746,062 | 809,179 |
The Administration Agreement had an initial period of two years and continues from year to year so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Independent Trustees. The Fund or JHIM may terminate the Administration Agreement at any time without penalty upon 60 days’ written notice to the other party. The Administration Agreement may be amended by mutual written agreement of the parties, without obtaining shareholder approval.
JHIM is not liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which the Administration Agreement relates, except losses resulting from willful misfeasance, bad faith
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or gross negligence by JHIM in the performance of its duties or from reckless disregard by JHIM of its obligations under the Administration Agreement.
THE SUBADVISOR
Subadvisory Agreement. The Advisor entered into a Subadvisory Agreement dated December 31, 2005 with the Subadvisor (the “Subadvisory Agreement”). The Subadvisor handles the fund’s portfolio management activity, subject to oversight by the Advisor. The Subadvisor, organized in 1968, is a wholly owned subsidiary of John Hancock Life
Insurance Company (U.S.A.) (a subsidiary of Manulife Financial, a publicly held, Canadian-based company). As of March 31, 2021, the Subadvisor had total assets under management of approximately $217.5 billion. The Subadvisor is located at 200 Berkeley Street, Boston, Massachusetts 02116.
Under the terms of the Subadvisory Agreement, the Subadvisor is responsible for managing the investment and reinvestment of the assets of the Fund, subject to the supervision and control of the Board and the Advisor.
The Subadvisory Agreement had an initial period of two years and continues from year to year so long as such continuance is approved at least annually: (i) by the Board or by the holders of a majority of its outstanding voting securities and (ii) by a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of any party to the Subadvisory Agreement. The Subadvisory Agreement terminates automatically in the event of its assignment or upon termination of the Advisory Agreement and may be terminated without penalty upon 60 days’ written notice at the option of the Advisor, the Subadvisor, by the Board or by a vote of a majority of the Fund’s outstanding shares. As discussed above, the Advisor may terminate the Subadvisory Agreement and directly assume responsibility for the services provided by the Subadvisor upon approval by the Board without the need for approval of the shareholders of the Fund.
The Subadvisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard for its obligations and duties thereunder, the Subadvisor is not liable for any error or judgment or mistake of law or for any loss suffered by the Fund.
Both the Advisor and the Subadvisor are controlled by Manulife Financial. Advisory arrangements involving an affiliated subadvisor may present certain potential conflicts of interest. Manulife Financial benefits not only from the net advisory fee retained by the Advisor, but also from the subadvisory fee paid by the Advisor to the Subadvisor. Consequently, Manulife may be viewed as benefiting financially from the appointment of or continued service of the Subadvisor to manage the Fund. However, both the Advisor, in recommending to the Board the appointment or continued service of an affiliated subadvisor, and the Subadvisor have a fiduciary duty to act in the best interests of the Fund and its shareholders. The Independent Trustees are aware of and monitor these potential conflicts of interest.
PORTFOLIO MANAGERS
The Subadvisor handles the Fund’s portfolio management activities, subject to oversight by the Advisor. The individuals jointly and primarily responsible for the day-to-day management of the Fund’s portfolio are listed below.
The following tables present information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees based on account performance, information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable date. Also shown below the chart is each portfolio manager’s investment in the Fund.
The following table reflects approximate information as of December 31, 2020:
Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | |||||||||
Number of Accounts | Total Assets $Million | Number of Accounts | Total Assets $Million | Number of Accounts | Total Assets $Million | ||||||
Susan A. Curry | 4 | 5,163 | 2 | 176 | 0 | 0 | |||||
Ryan P. Lentell, CFA | 3 | 1,783 | 2 | 176 | 0 | 0 |
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Performance-Based Fees for Other Accounts Managed
Number and value of accounts within the total accounts that are subject to a performance-based advisory fee: None.
Portfolio Manager Ownership of Shares of the Fund
The following table indicates as of December 31, 2020, the value of shares beneficially owned by the portfolio managers in the Fund.
Portfolio Manager | Range of Beneficial Ownership in the Fund |
Susan A. Curry | $10,001-$50,000 |
Ryan P. Lentell, CFA | $100,001-$500,000 |
Conflicts of Interest. When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a portfolio manager’s responsibility for the management of the Fund as well as one or more other accounts. The Advisor and Subadvisor have adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally, the risks of such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The Advisor and Subadvisor have structured their compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See “Compensation of Portfolio Managers” below.
• | A portfolio manager could favor one account over another in allocating new investment opportunities that have limited supply, such as initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation on the initial public offering. The Subadvisor has policies that require a portfolio manager to allocate such investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives. |
• | A portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the policies of the Subadvisor generally require that such trades be “bunched,” which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the Subadvisor will place the order in a manner intended to result in as favorable a price as possible for such client. |
• | A portfolio manager could favor an account if the portfolio manager’s compensation is tied to the performance of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio manager’s bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if the Subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that |
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account directly determines the portfolio manager’s compensation. The investment performance on specific accounts is not a factor in determining the portfolio manager’s compensation. See “Compensation of Portfolio Managers” below. Neither the Advisor nor the Subadvisor receives a performance-based fee with respect to any of the accounts managed by the portfolio managers. |
• | A portfolio manager could favor an account if the portfolio manager has a beneficial interest in the account, in order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager would have an economic incentive to favor the account in which the portfolio manager held an interest. The Subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members have a personal interest in order to confirm that such accounts are not favored over other accounts. |
• | If the different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest may arise. For example, if a portfolio manager purchases a security for one account and sells the same security short for another account, such trading pattern could disadvantage either the account that is long or short. In making portfolio manager assignments, the Subadvisor seeks to avoid such potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security. |
Compensation of Portfolio Managers
The Subadvisor has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied systematically among investment professionals. At the Subadvisor, the structure of compensation of investment professionals is currently composed of the following basic components: base salary and short-and long-term incentives. The following describes each component of the compensation package for the individuals identified as a portfolio manager for the Funds.
• | Base salary. Base compensation is fixed and normally reevaluated on an annual basis. The Subadvisor seeks to set compensation at market rates, taking into account the experience and responsibilities of the investment professional. |
• | Incentives. Only investment professionals are eligible to participate in the short-and long-term incentive plan. Under the plan, investment professionals are eligible for an annual cash award. The plan is intended to provide a competitive level of annual bonus compensation that is tied to the investment professional achieving superior investment performance and aligns the financial incentives of the Subadvisor and the investment professional. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be well in excess of base salary. Payout of a portion of this bonus may be deferred for up to five years. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses under the plan: |
• | Investment Performance: The investment performance of all accounts managed by the investment professional over one, three and five-year periods are considered. With respect to fixed income accounts, relative yields are also used to measure performance. The pre-tax performance of each account is measured relative to an appropriate benchmark and universe as identified in the table below. |
• | Financial Performance: The profitability of the Subadvisor and its parent company are also considered in determining bonus awards. |
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• | Non-Investment Performance: To a lesser extent, intangible contributions, including the investment professional’s support of client service and sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are also evaluated when determining bonus awards. |
• | In addition to the above, compensation may also include a revenue component for an investment team derived from a number of factors including, but not limited to, client assets under management, investment performance, and firm metrics. |
• | Manulife Equity Awards. A limited number of senior investment professionals may receive options to purchase shares of Manulife Financial stock. Generally, such option would permit the investment professional to purchase a set amount of stock at the market price on the date of grant. The option can be exercised for a set period (normally a number of years or until termination of employment) and the investment professional would exercise the option if the market value of Manulife Financial stock increases. Some investment professionals may receive restricted stock grants, where the investment professional is entitled to receive the stock at no or nominal cost, provided that the stock is forgone if the investment professional’s employment is terminated prior to a vesting date. |
• | Deferred Incentives. Investment professionals may receive deferred incentives which are fully invested in strategies managed by the team/individuals as well as other Manulife Asset Management strategies. |
The Subadvisor also permits investment professionals to participate on a voluntary basis in a deferred compensation plan, under which the investment professional may elect on an annual basis to defer receipt of a portion of their compensation until retirement. Participation in the plan is voluntary.
Other Services
Proxy voting
The Fund’s proxy voting policies and procedures (the “Fund’s Procedures”) delegate to the Subadvisor the responsibility to vote all proxies relating to securities held by the Fund in accordance with the Subadvisor’s proxy voting policies and procedures. The Subadvisor has a duty to vote such proxies in the best interests of the Fund and its shareholders. Complete descriptions of the Fund’s Procedures and the proxy voting procedures of the Subadvisor are set forth in Appendix B to this SAI.
It is possible that conflicts of interest could arise for the Subadvisor when voting proxies. Such conflicts could arise, for example, when the Subadvisor or its affiliate has a client or other business relationship with the issuer of the security being voted or with a third party that has an interest in the vote. A conflict of interest also could arise when the Fund, its investment advisor or principal underwriter or any of their affiliates has an interest in the vote.
In the event that the Subadvisor becomes aware of a material conflict of interest, the Fund’s Procedures generally require the Subadvisor to follow any conflicts procedures that may be included in the Subadvisor’s proxy voting procedures. The conflict procedures generally will include one or more of the following:
(a) | voting pursuant to the recommendation of a third party voting service; |
(b) | voting pursuant to pre-determined voting guidelines; or |
(c) | referring voting to a special compliance or oversight committee. |
The specific conflicts procedures of the Subadvisor are set forth in the Subadvisor’s proxy voting procedures included in Appendix B. While these conflicts procedures may reduce, they will not necessarily eliminate, any influence on proxy voting of conflicts of interest.
Although the Subadvisor has a duty to vote all proxies on behalf of the Fund, it is possible that the Subadvisor may not be able to vote proxies under certain circumstances. For example, it may be impracticable to translate in a timely manner voting materials that are written in a foreign language or to travel to a foreign country when voting in person
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rather than by proxy is required. In addition, if the voting of proxies for shares of a security prohibits the Subadvisor from trading the shares in the marketplace for a period of time, the Subadvisor may determine that it is not in the best interests of the Fund to vote the proxies. The Subadvisor also may choose not to recall securities that have been lent in order to vote proxies for shares of the security since the Fund would lose security lending income if the securities were recalled.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, on jhinvestments.com and (ii) on the SEC’s website at http://www.sec.gov.
Determination of Net Asset Value
The Fund’s net asset value per Common Share (“NAV”) is normally determined each business day at the close of regular trading on the NYSE (typically 4:00 p.m. Eastern Time, on each business day that the NYSE is open) by dividing the Fund’s net assets by the number of Common Shares outstanding. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the NAV may be determined as of the regularly scheduled close of the NYSE pursuant to the Fund’s Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission and applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and U.S. business holidays on which the Fund’s NAV is not calculated. Consequently, the Fund’s portfolio securities may trade and the NAV of the Fund’s Common Shares may be significantly affected on days when a shareholder will not be able to purchase or sell the Fund’s Common Shares.
Portfolio securities are valued by various methods that are generally described below. Portfolio securities also may be fair valued by the Fund’s Pricing Committee in certain instances pursuant to procedures established by the Trustees. Equity securities are generally valued at the last sale price or, for certain markets, the official closing price as of the close of the relevant exchange. Securities not traded on a particular day are valued using last available bid prices. A security that is listed or traded on more than one exchange is typically valued at the price on the exchange where the security was acquired or most likely will be sold. In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market. Equity securities traded principally in foreign markets are typically valued using the last sale price or official closing price in the relevant exchange or market, as adjusted by an independent pricing vendor to reflect fair value. On any day a foreign market is closed and the NYSE is open, any foreign securities will typically be valued using the last price or official closing price obtained from the relevant exchange on the prior business day adjusted based on information provided by an independent pricing vendor to reflect fair value. Debt obligations are typically valued based on evaluated prices provided by an independent pricing vendor. The value of securities denominated in foreign currencies is converted into U.S. dollars at the exchange rate supplied by an independent pricing vendor. Forward foreign currency contracts are valued at the prevailing forward rates which are based on foreign currency exchange spot rates and forward points supplied by an independent pricing vendor. Exchange-traded options are valued at the mid-price of the last quoted bid and ask prices. Futures contracts whose settlement prices are determined as of the close of the NYSE are typically valued based on the settlement price while other futures contracts are typically valued at the last traded price on the exchange on which they trade. Foreign equity index futures that trade in the electronic trading market subsequent to the close of regular trading may be valued at the last traded price in the electronic trading market as of the close of the NYSE, or may be fair valued based on fair value adjustment factors provided by an independent pricing vendor in order to adjust for events that may occur between the close of foreign exchanges or markets and the close of the NYSE. Swaps and unlisted options are generally valued using evaluated prices obtained from an independent pricing vendor. Shares of open-end investment companies that are not exchange-traded funds (“ETFs”) held by the Fund are valued based on the NAVs of such other investment companies.
Pricing vendors may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data, broker-dealer quotations, credit quality information, general market conditions, news, and other factors and assumptions. The Fund may receive different prices when it sells odd-lot positions
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than it would receive for sales of institutional round lot positions. Pricing vendors generally value securities assuming orderly transactions of institutional round lot sizes, but the Fund may hold or transact in such securities in smaller, odd lot sizes.
The Pricing Committee engages in oversight activities with respect to the Fund’s pricing vendors, which includes, among other things, monitoring significant or unusual price fluctuations above predetermined tolerance levels from the prior day, back-testing of pricing vendor prices against actual trades, conducting periodic due diligence meetings and reviews, and periodically reviewing the inputs, assumptions and methodologies used by these vendors. Nevertheless, market quotations, official closing prices, or information furnished by a pricing vendor could be inaccurate, which could lead to a security being valued incorrectly.
If market quotations, official closing prices, or information furnished by a pricing vendor are not readily available or are otherwise deemed unreliable or not representative of the fair value of such security because of market- or issuer-specific events, a security will be valued at its fair value as determined in good faith by the Trustees. The Trustees are assisted in their responsibility to fair value securities by the Fund’s Pricing Committee, and the actual calculation of a security’s fair value may be made by the Pricing Committee acting pursuant to the procedures established by the Trustees. In certain instances, therefore, the Pricing Committee may determine that a reported valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair value of the assets, which may differ from the reported valuation.
Fair value pricing of securities is intended to help ensure that the Fund’s NAV reflects the fair market value of the Fund’s portfolio securities as of the close of regular trading on the NYSE (as opposed to a value that no longer reflects market value as of such close). The use of fair value pricing has the effect of valuing a security based upon the price the Fund might reasonably expect to receive if it sold that security in an orderly transaction between market participants, but does not guarantee that the security can be sold at the fair value price. Further, because of the inherent uncertainty and subjective nature of fair valuation, a fair valuation price may differ significantly from the value that would have been used had a readily available market price for the investment existed and these differences could be material.
Regarding the Fund’s investment in an open-end investment company that is not an ETF, which (as noted above) is valued at such investment company’s NAV, the prospectus for such investment company explains the circumstances and effects of fair value pricing for that investment company.
Pursuant to the Subadvisory Agreement, the Subadvisor is responsible for placing all orders for the purchase and sale of portfolio securities of the Fund. The Subadvisor has no formula for the distribution of the Fund’s brokerage business; rather it places orders for the purchase and sale of securities with the primary objective of obtaining the most favorable overall results for the Fund and the Subadvisor’s other clients. The cost of securities transactions for the Fund primarily consists of brokerage commissions or dealer or underwriter spreads. Fixed-income securities and money market instruments generally are traded on a net basis and normally do not involve either brokerage commissions or transfer taxes.
Occasionally, securities may be purchased directly from the issuer. For securities traded primarily in the OTC market, the Subadvisor will, where possible, deal directly with dealers who make a market in the securities unless better prices and execution are available elsewhere. Such dealers usually act as principals for their own account.
Brokerage Commissions Paid
The following table shows the aggregate amount of brokerage commissions paid by the Fund for the last three fiscal years ended December 31, 2020, December 31, 2019, and December 31, 2018.
December 31, 2020 | December 31, 2019 | December 31, 2018 |
$116,305 | $137,942 | $106,881 |
No brokerage commissions paid by the Fund during the last three fiscal years were to any broker that: (i) is an affiliated
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person of the Fund; (ii) is an affiliated person of an affiliated person of the Fund; or (iii) has an affiliated person that is an affiliated person of the Fund, Advisor, Subadvisor, or principal underwriter.
Approved Trading Counterparties
The Subadvisor maintains and periodically updates a list of approved trading counterparties. Portfolio managers may execute trades only with pre-approved broker-dealer/counterparties. A sub-group of the Subadvisor’s Brokerage Practices Committee, through a delegation from the Subadvisor’s Senior Investment Policy Committee, reviews and approves all broker-dealers/counterparties.
Selection of Brokers, Dealers, and Counterparties
In placing orders for purchase and sale of securities and selecting trading counterparties (including banks or broker-dealers) to effect these transactions, the Subadvisor seeks prompt execution of orders at the most favorable prices reasonably obtainable. The Subadvisor will consider a number of factors when selecting trading counterparties, including the overall direct net economic result to the Fund (including commissions, which may not be the lowest available, but which ordinarily will not be higher than the generally prevailing competitive range), the financial strength, reputation and stability of the counterparty, the efficiency with which the transaction is effected, the ability to effect the transaction when a large block trade is involved, the availability of the counterparty to stand ready to execute possibly difficult transactions in the future, and other matters involved in the receipt of brokerage and research services.
The Subadvisor periodically prepares and maintains a list of broker-dealer firms that have been deemed to provide valuable research as determined periodically by the investment staff, together with a suggested non-binding amount of brokerage commissions (“non-binding target”) to be allocated to each of these research firms, subject to certain requirements. Neither the Subadvisor nor any client has an obligation to any research firm if the amount of brokerage commissions paid to the research firms is less than the applicable non-binding target.
In seeking best execution, traders have a variety of venues available for execution. Traders may, in their discretion, use algorithmic strategies through direct market access (“DMA”) tools and electronic crossing networks (“ECNs”). DMA allows the trader to act in the market without a full service or other broker. ECNs give the trader additional options when searching for liquidity and the ability to trade block positions in a more efficient manner. In selecting a broker, dealer or trading venue, traders consider the full range of available trading platforms in seeking best execution.
Best Execution
The Subadvisor owes a duty to its clients to seek best execution when executing trades on behalf of clients. “Best execution” generally is understood to mean the most favorable cost or net proceeds reasonably obtainable under the circumstances. The Subadvisor is not obligated to choose the broker-dealer offering the lowest available commission rate if, in the Subadvisor’s reasonable judgment, there is a material risk that the total cost or proceeds from the transaction might be less favorable than may be obtained elsewhere, or, if a higher commission is justified by the trading provided by the broker-dealer, or if other considerations dictate using a different broker-dealer. Negotiated commission rates generally will reflect overall execution requirements of the transaction without regard to whether the broker may provide other services in addition to execution.
The Subadvisor may pay higher or lower commissions to different brokers that provide different categories of services. Under this approach, the Subadvisor periodically may classify different brokers in different categories based on execution abilities, the quality of research, brokerage services, block trading capability, speed and responsiveness, or other services provided by the brokers. Some examples of these categories may include, without limitation, full service brokers, alternative trading systems, client commission and execution-only brokers.
The reasonableness of brokerage commission is evaluated on an ongoing basis and at least annually on a formal basis.
When more than one broker-dealer is believed to be capable of providing the best combination of price and execution with respect to a particular portfolio transaction, the Subadvisor often selects a broker-dealer that furnishes research and other related services or products. The amount of brokerage allotted to a particular broker-dealer is not made pursuant to any binding agreement or commitment with any selected broker-dealer. However, the Subadvisor maintains an internal allocation procedure to identify those broker-dealers who have provided us with effective research and the amount of research provided, and the Subadvisor endeavors to direct sufficient commissions to it to ensure the continued receipt of research that the Subadvisor believes is useful.
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Soft Dollar Considerations
The Subadvisor may pay for research and brokerage services with the commission dollars generated by Fund account transactions (known as “soft dollar benefits”), subject to certain conditions. Further, the Subadvisor may cause the Fund to pay up in return for soft dollar benefits (pay commissions, markups or markdowns higher than those charged by other broker-dealers).
The research provided may be either proprietary (created and provided by the broker-dealer, including tangible research products as well as access to analysts, traders and issuers) or third-party (created by a third party, but provided by broker-dealer). Proprietary research is generally part of a “bundle” of brokerage and research and the research is not separately priced. In the case of third party research, the cost of products and services is generally more transparent, and payment is made by the broker to the preparer in “hard dollars.” The Subadvisor may receive both proprietary and third party research and execution services.
The Subadvisor considers three factors with respect to all third-party research and execution services received through soft dollars:
• | Whether the product or service is eligible research or brokerage under SEC rules and regulations; |
• | Whether an eligible product or service actually provides “lawful and appropriate assistance” in the performance of the Subadvisor’s investment decision-making responsibilities; and |
• | Whether the amount of the commission paid is reasonable in light of the value of the product or service provided by the broker-dealer (viewed in terms of the particular transaction or the Subadvisor’s overall responsibilities with respect to the Subadvisor’s client accounts). |
Research services currently purchased with soft dollars include: reports on the economy, industries, sectors and individual companies or issuers; introduction to issuers, invitations to trade conferences, statistical information; statistical models; political and country analyses; reports on legal developments affecting portfolio securities; information on technical market actions; and credit analyses.
The overriding consideration in selecting brokers to execute trade orders is the maximization of client profits through a combination of controlling transaction and securities costs and seeking the most effective use of brokers’ proprietary research and execution capabilities, while maintaining relationships with those broker-dealers who consistently provide superior service. When the Subadvisor uses client brokerage commissions (or markups or markdowns) to obtain research or other products or services, the Subadvisor receives a soft dollar benefit because the Subadvisor does not have to produce or pay for the research, products or services. The Subadvisor may have an incentive to select a broker-dealer based on the Subadvisor’s interest in receiving research or other products or services, rather than on the Subadvisor’s clients’ interest in receiving most favorable execution.
Any research received is used to service all clients to which it is applicable, whether or not the client’s commissions were used to obtain the research. For example, commissions of equity clients may be used to obtain research that is used with respect to fixed-income clients. The Subadvisor does not attempt to allocate the relative costs or benefits of research among client accounts because the Subadvisor believe that, in the aggregate, the research the Subadvisor receives benefits clients and assists the Subadvisor in fulfilling its overall duty to its clients.
The Subadvisor does not enter into any agreement or understanding with any broker-dealer which would obligate it to direct a specific amount of brokerage transactions or commissions in return for such services. However, certain broker-dealers may state in advance the amount of brokerage commissions they expect for certain services and the applicable cash equivalent.
The Subadvisor may seek to obtain client commission benefits through client commission arrangements in compliance with applicable laws and regulations. Under these types of arrangements, the Subadvisor can request that executing brokers allocate a portion of total commissions paid to a pool of “credits” maintained by the broker that can be used to obtain client commission benefits. After accumulating a number of credits within the pool, the Subadvisor may subsequently direct that those credits be used to pay appropriate parties in return for eligible client commission benefits
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provided by the broker to the Subadvisor.
In summary, as noted above, the Sub advisor has three types of “soft dollar” arrangements through which the Subadvisor receives benefits:
(1) | Full service brokers – In addition to receiving execution services, the Subadvisor also receives a variety of research and related services from these brokers, including, for example, proprietary research reports on companies, markets or investment related reports, meetings with senior management teams of companies, and discussions with the broker’s analysis and market experts. |
(2) | Client commission arrangements (“CCA”) - Through CCA arrangements with brokers with whom the Subadvisor places equity trades for execution, the Subadvisor generates commission credits with these CCA brokers that the Subadvisor can direct and use to compensate third party research providers, including other brokers, for research received. The level of compensation to such research providers is determined by the equity portfolio management teams using a quarterly voting process. The number of votes determines the relative level of compensation paid to a research provider. |
(3) | Third party research vendors - The Subadvisor may have soft dollar arrangements. Under these arrangements, the Subadvisor will identify research services that it wants to obtain and subject to the approval of the soft dollar broker, the soft dollar broker will directly contract with research providers for services provided to the Subadvisor. When the Subadvisor executes equity trades with the soft dollar broker, the soft dollar broker allocates and pays a portion of the commission to the research providers. |
Trade Aggregation by the Subadvisor
Because investment decisions often affect more than one client, the Subadvisor frequently will attempt to acquire or dispose of the same security for more than one client at the same time. The Subadvisor, to the extent permitted by applicable law, regulations and advisory contracts, may aggregate purchases and sales of securities on behalf of its various clients for which it has discretion, provided that in the Subadvisor’s opinion, all client accounts are treated equitably and fairly and that block trading will result in a more favorable overall execution. Trades will not be combined when a client has directed transactions to a particular broker-dealer or when the Subadvisor determines that combined orders would not be efficient or practical.
When appropriate, the Subadvisor will allocate such block orders at the average price obtained or according to a system that the Subadvisor considers to be fair to all clients over time. Generally speaking, such allocations are made on the basis of proportional capital under management in the respective client accounts.
Affiliated Underwriting Transactions by the Subadvisor
The Board has approved procedures in conformity with Rule 10f-3 under the 1940 Act whereby the Fund may purchase securities that are offered in underwritings in which an affiliate of the Advisor or a Subadvisor participates. These procedures prohibit the Fund from directly or indirectly benefiting an Advisor or Subadvisor affiliate in connection with such underwritings. In addition, for underwritings where an Advisor or Subadvisor affiliate participates as a principal underwriter, certain restrictions may apply that could, among other things, limit the amount of securities that the Fund could purchase.
Commission Recapture Program
The Board has approved the Fund’s participation in a commission recapture program. Commission recapture is a form of institutional discount brokerage that returns commission dollars directly to the Fund. It provides a way to gain control over the commission expenses incurred by the Subadvisor, which can be significant over time and thereby reduces expenses, improves cash flow and conserves assets. The Fund can derive commission recapture dollars from both equity trading commissions and fixed-income (commission equivalent) spreads. From time to time, the Board reviews whether participation in the recapture program is in the best interests of the Fund.
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Additional Information Concerning Taxes
The following discussion of U.S. federal income tax matters is based on the advice of K&L Gates LLP, counsel to the Fund. The Fund intends to elect to be treated and to qualify each year as a regulated investment company (“RIC”) under the Code.
To qualify as a RIC for income tax purposes, the Fund must derive at least 90% of its annual gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies, and net income derived from an interest in a qualified publicly traded partnership. A “qualified publicly traded partnership” is a publicly traded partnership that meets certain requirements with respect to the nature of its income. To qualify as a RIC, the Fund must also satisfy certain requirements with respect to the diversification of its assets. The Fund must have, at the close of each quarter of the taxable year, at least 50% of the value of its total assets represented by cash, cash items, U.S. government securities, securities of other regulated investment companies, and other securities that, in respect of any one issuer, do not represent more than 5% of the value of the assets of the Fund nor more than 10% of the voting securities of that issuer. In addition, at those times not more than 25% of the market value (or fair value if market quotations are unavailable) of the Fund’s assets can be invested in securities (other than United States government securities or the securities of other regulated investment companies) of any one issuer, or of two or more issuers, which the Fund controls and which are engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships. If the Fund fails to meet the annual gross income test described above, the Fund will nevertheless be considered to have satisfied the test if (i) (a) such failure is due to reasonable cause and not due to willful neglect and (b) the Fund reports the failure, and (ii) the Fund pays an excise tax equal to the excess non-qualifying income. If the Fund fails to meet the asset diversification test described above with respect to any quarter, the Fund will nevertheless be considered to have satisfied the requirements for such quarter if the Fund cures such failure within 6 months and either (i) such failure is de minimis or (ii) (a) such failure is due to reasonable cause and not due to willful neglect and (b) the Fund reports the failure and pays an excise tax.
As a RIC, the Fund generally will not be subject to U.S. federal income tax on its investment company taxable income (as that term is defined in the Code, but without regard to the deductions for dividends paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes in each taxable year to its shareholders; provided that it distributes at least the sum of 90% of its investment company taxable income and 90% of its net tax-exempt interest income for such taxable year. The Fund intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income, net tax-exempt interest income and net capital gain. In order to avoid incurring a nondeductible 4% U.S. federal excise tax obligation, the Code requires that the Fund distribute (or be deemed to have distributed) by December 31 of each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for such year, (ii) 98.2% of its capital gain net income (which is the excess of its realized net long-term capital gain over its realized net short-term capital loss), generally computed on the basis of the one-year period ending on December 31 of such year, after reduction by any available capital loss carryforwards and (iii) 100% of any ordinary income and capital gain net income from the prior year (as previously computed) that were not paid out during such year and on which the Fund paid no U.S. federal income tax. Under current law, provided that the Fund qualifies as a RIC for U.S. federal income tax purposes, the Fund should not be liable for any income, corporate excise or franchise tax in the Commonwealth of Massachusetts.
If the Fund does not qualify as a RIC or fails to satisfy the 90% distribution requirement for any taxable year, subject to the opportunity to cure such failures under applicable provisions of the Code as described above, the Fund’s taxable income will be subject to corporate income taxes, and distributions from earnings and profits, including distributions of net capital gain (if any), will generally constitute ordinary dividend income for U.S. federal income tax purposes. To the extent so designated by the Fund, such distributions generally would be eligible (i) to be treated as qualified dividend income in the case of individual and other noncorporate shareholders and (ii) for the dividends received deduction (“DRD”) in the case of corporate shareholders. In addition, in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions.
For U.S. federal income tax purposes, distributions paid out of the Fund’s current or accumulated earnings and profits will, except in the case of distributions of qualified dividend income and capital gain dividends described below, be taxable as ordinary dividend income. Certain income distributions paid by the Fund (whether paid in cash or reinvested in additional Fund shares) to individual taxpayers that are attributable to the Fund’s qualified dividend income and
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capital gain are taxed at rates applicable to net long-term capital gains (maximum rates of 20% 15%, or 0% for individuals depending on the amount of their taxable income for the year). This tax treatment applies only if certain holding period requirements and other requirements are satisfied by the shareholder and the dividends are attributable to qualified dividend income received by the Fund itself. For this purpose, “qualified dividend income” means dividends received by the Fund from United States corporations and “qualified foreign corporations,” provided that the Fund satisfies certain holding period and other requirements in respect of the stock of such corporations. Only a small portion, if any of the distributions from the Fund may consist of income eligible to be treated as qualified dividend income. An additional 3.8% Medicare tax will also apply in the case of some individuals.
Shareholders receiving any distribution from the Fund in the form of additional shares pursuant to the dividend reinvestment plan will be treated as receiving a taxable distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Distributions of net capital gain, if any, reported as capital gains dividends are taxable to a shareholder as long-term capital gains, regardless of how long the shareholder has held Fund shares. A distribution of an amount in excess of the Fund’s current and accumulated earnings and profits will be treated by a shareholder as a return of capital which is applied against and reduces the shareholder’s basis in his or her shares. To the extent that the amount of any such distribution exceeds the shareholder’s basis in his or her shares, the excess will be treated by the shareholder as gain from a sale or exchange of the shares. Distributions of gains from the sale of investments that the Fund owned for one year or less will be taxable as ordinary income.
The Fund may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be treated as if each received a distribution of his pro rata share of such gain, with the result that each shareholder will (i) be required to report his pro rata share of such gain on his tax return as long-term capital gain, (ii) receive a refundable tax credit for his pro rata share of tax paid by the Fund on the gain and (iii) increase the tax basis for his shares by an amount equal to the deemed distribution less the tax credit.
Selling shareholders generally will recognize gain or loss in an amount equal to the difference between the shareholder’s adjusted tax basis in the shares sold and the sale proceeds. If the shares are held as a capital asset, the gain or loss will be a capital gain or loss. The current maximum tax rate applicable to net capital gains recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate for gains recognized on the sale of capital assets held for one year or less, or (ii) for gains recognized on the sale of capital assets held for more than one year (as well as certain capital gain distributions) (20%, 15%, or 0% for individuals depending on the amount of their taxable income for the year). An additional 3.8% Medicare tax will also apply in the case of some individuals.
Any loss realized upon the sale or exchange of Fund shares with a holding period of six months or less will be treated as a long-term capital loss to the extent of any capital gain distributions received (or amounts designated as undistributed capital gains) with respect to such shares. In addition, all or a portion of a loss realized on a sale or other disposition of Fund shares may be disallowed under “wash sale” rules to the extent the shareholder acquires other shares of the Fund (whether through the reinvestment of distributions or otherwise) within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the Common Shares. Any disallowed loss will result in an adjustment to the shareholder’s tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares cannot be taken into account for purposes of determining gain or loss on a sale of the shares before the 91st day after their purchase to the extent a sales charge is reduced or eliminated in a subsequent acquisition of shares of the Fund (or of another fund), during the period beginning on the date of such sale and ending on January 31 of the calendar year following the calendar year in which such sale was made, pursuant to the reinvestment or exchange privilege. Any disregarded amounts will result in an adjustment to the shareholder’s tax basis in some or all of any other shares acquired.
For federal income tax purposes, a fund is permitted to carry forward a net capital loss incurred in any year to offset net capital gains, if any, in any subsequent year until such loss carry forwards have been fully used. Capital losses carried forward will retain their character as either short-term or long-term capital losses. The fund’s ability to utilize capital losses in a given year or in total may be limited. To the extent subsequent net capital gains are offset by such losses, they would not result in federal income tax liability to the fund and would not be distributed as such
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to shareholders.
Below are the capital loss carryforwards available to the fund as of December 31, 2020 to the extent provided by
regulations, to offset future net realized capital gains:
Fund | Short-term Losses | Long-term Losses | Total |
John Hancock Financial Opportunities Fund | $0.00 | $0.00 | $0.00 |
Certain net investment income received by an individual having adjusted gross income in excess of $200,000 (or $250,000 for married individuals filing jointly) will be subject to a tax of 3.8%. Undistributed net investment income of trusts and estates in excess of a specified amount will also be subject to this tax. Dividends and capital gains distributed by the Fund, and gain realized on redemption of Fund shares, will constitute investment income of the type subject to this tax.
Only a small portion, if any, of the distributions from the Fund may qualify for the dividends-received deduction for corporations, subject to the limitations applicable under the Code. The qualifying portion is limited to properly designated distributions attributed to dividend income (if any) the Fund receives from certain stock in U.S. domestic corporations and the deduction is subject to holding period requirements and debt-financing limitations under the Code.
If the Fund should have dividend income that qualifies for the reduced tax rate applicable to qualified dividend income, the maximum amount allowable will be designated by the Fund. This amount will be reflected on Form 1099-DIV for the current calendar year.
Dividends and distributions on the Fund’s shares generally are subject to U.S. federal income tax as described herein to the extent they do not exceed the Fund’s realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder’s investment. Such distributions are likely to occur in respect of shares purchased at a time when the Fund’s net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized gains may be required to be distributed even when the Fund’s net asset value also reflects unrealized losses. Certain distributions declared in October, November or December to shareholders of record of such month and paid in the following January will be taxed to shareholders as if received on December 31 of the year in which they were declared. In addition, certain other distributions made after the close of a taxable year of the Fund may be “spilled back” and treated as paid by the Fund (except for purposes of the non-deductible 4% U.S. federal excise tax) during such taxable year. In such case, shareholders will be treated as having received such dividends in the taxable year in which the distributions were actually made.
The Fund will inform shareholders of the source and tax status of all distributions promptly after the close of each calendar year.
Legislation passed by Congress in 2008 requires the Fund (or its administrative agent) to report to the IRS and furnish to shareholders the cost basis information and holding period for the Fund’s shares purchased on or after January 1, 2012, and repurchased by the Fund on or after that date. The Fund will permit shareholders to elect from among several permitted cost basis methods. In the absence of an election, the Fund will use a default cost basis method. The cost basis method a shareholder elects may not be changed with respect to a repurchase of shares after the settlement date of the repurchase. Shareholders should consult with their tax advisors to determine the best permitted cost basis method for their tax situation and to obtain more information about how the new cost basis reporting rules apply to them.
The benefits of the reduced tax rates applicable to long-term capital gains and qualified dividend income may be impacted by the application of the alternative minimum tax to individual shareholders.
Special tax rules apply to investments through defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisor to determine the suitability of shares of the Fund as an investment through such plans.
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The Fund may invest in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income, and whether exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by the Fund if it acquires such obligations in order to reduce the risk of distributing insufficient income to preserve its status as a regulated investment company and to seek to avoid becoming subject to federal income or excise tax.
The Fund is required to accrue income on any debt securities that have more than a de minimis amount of original issue discount (or debt securities acquired at a market discount, if the Fund elects to include market discount in income currently) prior to the receipt of the corresponding cash payments. The mark to market or constructive sale rules applicable to certain options, futures, forwards, short sales or other transactions also may require the Fund to recognize income or gain without a concurrent receipt of cash. Additionally, some countries restrict repatriation, which may make it difficult or impossible for the Fund to obtain cash corresponding to its earnings or assets in those countries. However, the Fund must distribute to shareholders for each taxable year substantially all of its net income and net capital gains, including such income or gain, to qualify as a regulated investment company and avoid liability for any federal income or excise tax. Therefore, the Fund may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or borrow cash, to satisfy these distribution requirements.
The Fund may recognize gain (but not loss) from a constructive sale of certain “appreciated financial positions” if the Fund enters into a short sale, offsetting notional principal contract, or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment include interests (including options and forward contracts and short sales) in stock and certain other instruments. Constructive sale treatment does not apply if the transaction is closed out not later than thirty days after the end of the taxable year in which the transaction was initiated, and the underlying appreciated securities position is held unhedged for at least the next sixty days after the hedging transaction is closed.
Gain or loss from a short sale of property generally is considered as capital gain or loss to the extent the property used to close the short sale constitutes a capital asset in the Fund’s hands. Except with respect to certain situations where the property used to close a short sale has a long-term holding period on the date the short sale is entered into, gains on short sales generally are short-term capital gains. A loss on a short sale will be treated as a long-term capital loss if, on the date of the short sale, “substantially identical property” has been held by the Fund for more than one year. In addition, entering into a short sale may result in suspension of the holding period of “substantially identical property” held by the Fund.
Gain or loss on a short sale generally will not be realized until such time as the short sale is closed. However, as described above in the discussion of constructive sales, if the Fund holds a short sale position with respect to securities that have appreciated in value, and it then acquires property that is the same as or substantially identical to the property sold short, the Fund generally will recognize gain on the date it acquires such property as if the short sale were closed on such date with such property. Similarly, if the Fund holds an appreciated financial position with respect to securities and then enters into a short sale with respect to the same or substantially identical property, the Fund generally will recognize gain as if the appreciated financial position were sold at its fair market value on the date it enters into the short sale. The subsequent holding period for any appreciated financial position that is subject to these constructive sale rules will be determined as if such position were acquired on the date of the constructive sale.
The Fund’s transactions in futures contracts and options will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized by the Fund (i.e., may affect whether gains or losses are ordinary or capital, or short-term or long-term), may accelerate recognition of income to the Fund and may defer Fund losses. These rules could, therefore, affect the character, amount and timing of distributions to shareholders. These provisions also (a) will require the Fund to mark-to-market certain types of the positions in its portfolio (i.e., treat them as if they were closed out), and (b) may cause the Fund to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the 90% distribution requirement for qualifying to be taxed as a RIC and the distribution requirement for avoiding excise taxes. The Fund will monitor its transactions, will make the appropriate tax elections and will make the appropriate entries in its books and records when it acquires any futures contract, option or hedged investment in order to mitigate the effect of these rules and prevent disqualification
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of the Fund from being taxed as a RIC.
For the Fund’s options and futures contracts that qualify as “section 1256 contracts,” Code Section 1256 generally will require any gain or loss arising from the lapse, closing out or exercise of such positions to be treated as 60% long-term and 40% short-term capital gain or loss. In addition, the Fund generally will be required to “mark to market” (i.e., treat as sold for fair market value) each outstanding “section 1256 contract” position at the close of each taxable year (and on December 31 of each year for excise tax purposes). If a “section 1256 contract” held by the Fund at the end of a taxable year is sold in the following year, the amount of any gain or loss realized on such sale will be adjusted to reflect the gain or loss previously taken into account under the “mark to market” rules. The Fund’s options that do not qualify as “section 1256 contracts” under the Code generally will be treated as equity options governed by Code Section 1234. Pursuant to Code Section 1234, if a written option expires unexercised, the premium received is short-term capital gain to the Fund. If the Fund enters into a closing transaction, the difference between the premium received for writing the option, and the amount paid to close out its position generally is short-term capital gain or loss. If a call option written by the Fund that is not a “section 1256 contract” is cash settled, any resulting gain or loss will be short-term.
The Code contains special rules that apply to “straddles,” defined generally as the holding of “offsetting positions with respect to personal property.” For example, the straddle rules normally apply when a taxpayer holds stock and an offsetting option with respect to such stock or substantially identical stock or securities. In general, investment positions will be offsetting if there is a substantial diminution in the risk of loss from holding one position by reason of holding one or more other positions. If two or more positions constitute a straddle, recognition of a realized loss from one position generally must be deferred to the extent of unrecognized gain in an offsetting position. In addition, long-term capital gain may be recharacterized as short-term capital gain, or short-term capital loss as long-term capital loss. Interest and other carrying charges allocable to personal property that is part of a straddle are not currently deductible but must instead be capitalized. Similarly, “wash sale” rules apply to prevent the recognition of loss by the Fund from the disposition of stock or securities at a loss in a case in which identical or substantially identical stock or securities (or an option to acquire such property) is or has been acquired within a prescribed period.
The Code allows a taxpayer to elect to offset gain and loss from positions that are part of a “mixed straddle.” A “mixed straddle” is any straddle in which one or more but not all positions are “section 1256 contracts.” The Fund may be eligible to elect to establish one or more mixed straddle accounts for certain of its mixed straddle trading positions. The mixed straddle account rules require a daily “marking to market” of all open positions in the account and a daily netting of gain and loss from all positions in the account. At the end of a taxable year, the annual net gain or loss from the mixed straddle account are recognized for tax purposes. The net capital gain or loss is treated as 60% long-term and 40% short-term capital gain or loss if attributable to the “section 1256 contract” positions, or all short-term capital gain or loss if attributable to the non-section 1256 contract positions.
Further, certain of the Fund’s investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) convert dividends that would otherwise constitute qualified dividend income into short-term capital gain or ordinary income taxed at the higher rate applicable to ordinary income, (ii) treat dividends that would otherwise be eligible for the corporate dividends received deduction as ineligible for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (iv) convert long-term capital gain into short-term capital gain or ordinary income, (v) convert an ordinary loss or deduction into a capital loss (the deductibility of which is more limited), (vi) cause the Fund to recognize income or gain without a corresponding receipt of cash, (vii) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (viii) adversely alter the characterization of certain complex financial transactions, and (ix) produce income that will not qualify as good income for purposes of the 90% annual gross income requirement described above. While it may not always be successful in doing so, the Fund will seek to avoid or minimize any adverse tax consequences of its investment practices.
Dividends and interest received, and gains realized, by the Fund on non-U.S. securities may be subject to income, withholding or other taxes imposed by foreign countries and United States possessions (collectively “foreign taxes”) that would reduce the return on its securities. Tax conventions between certain countries and the United States, however, may reduce or eliminate foreign taxes, and many foreign countries do not impose taxes on capital gains in respect of investments by U.S. investors. Depending on the number of non-U.S. shareholders in the Fund, however, such reduced foreign withholding tax rates may not be available for investments in certain jurisdictions.
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The Fund may invest in the stock of “passive foreign investment companies” (“PFICs”). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests: (1) at least 75% of its gross income is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, the Fund will be subject to U.S. federal income tax on a portion of any “excess distribution” received on the stock of a PFIC or of any gain from disposition of that stock (collectively “PFIC income”), plus interest thereon, even if the Fund distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Fund’s investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” (“QEF”), then in lieu of the foregoing tax and interest obligation, the Fund will be required to include in income each year its pro rata share of the QEF’s annual ordinary earnings and net capital gain—which it may have to distribute to satisfy the distribution requirement and avoid imposition of the excise tax—even if the QEF does not distribute those earnings and gain to the Fund. In most instances it will be very difficult, if not impossible, to make this election because of certain of its requirements.
The Fund may elect to “mark-to-market” its stock in any PFIC. “Marking-to-market,” in this context, means including in ordinary income each taxable year the excess, if any, of the fair market value of a PFIC’s stock over the Fund’s adjusted basis therein as of the end of that year. Pursuant to the election, the Fund also would be allowed to deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains (reduced by any prior deductions) with respect to that stock included by the Fund for prior taxable years under the election. The Fund’s adjusted basis in each PFIC’s stock with respect to which it has made this election will be adjusted to reflect the amounts of income included and deductions taken thereunder. The reduced rates for “qualified dividend income” are not applicable to (i) dividends paid by a foreign corporation that is a PFIC, (ii) income inclusions from a QEF election with respect to a PFIC, and (iii) ordinary income from a “mark-to-market” election with respect to a PFIC.
Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Fund accrues income or receivables or expenses or other liabilities denominated in a non-U.S. currency and the time the Fund actually collects such income or receivables or pays such liabilities generally are treated as ordinary income or loss. Similarly, gains or losses on non-U.S. currency forward contracts and the disposition of debt securities denominated in a non-U.S. currency, to the extent attributable to fluctuations in exchange rate between the acquisition and disposition dates, also are treated as ordinary income or loss.
If a shareholder realizes a loss on disposition of the Fund’s shares of $2 million or more in any single taxable year (or $4 million or more in any combination of taxable years in which the transaction is entered into and the five succeeding taxable years) for an individual shareholder, corporation or Trust or $10 million or more in any single taxable year (or $20 million or more in any combination of taxable years in which the transaction is entered into and the five succeeding taxable years) for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Amounts paid by the Fund to individuals and certain other shareholders who have not provided the Fund with their correct taxpayer identification number (“TIN”) and certain certifications required by the IRS as well as shareholders with respect to whom the Fund has received certain information from the IRS or a broker may be subject to “backup” withholding of U.S. federal income tax arising from the Fund’s taxable dividends and other distributions as well as the gross proceeds of sales of shares, at a rate of 24%. An individual’s TIN generally is his or her social security number. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a shareholder may be refunded or credited against such shareholder’s U.S. federal income tax liability, if any; provided that the required information is furnished to the IRS.
Distributions will not be subject to backup withholding to the extent they are subject to the withholding tax on foreign persons described in the next paragraph.
Dividend distributions are in general subject to a U.S. withholding tax of 30% when paid to a nonresident alien individual, foreign estate or trust, a foreign corporation, or a foreign partnership (“foreign shareholder”). Persons
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who are resident in a country, such as the U.K., that has an income tax treaty with the U.S. may be eligible for a reduced withholding rate (upon filing of appropriate forms), and are urged to consult their tax advisors regarding the applicability and effect of such a treaty. Distributions of capital gain dividends paid by the Fund to a foreign shareholder, and any gain realized upon the sale of Fund shares by such a shareholder, will ordinarily not be subject to U.S. taxation, unless the recipient or seller is a nonresident alien individual who is present in the United States for more than 182 days during the taxable year. Such distributions and sale proceeds may be subject, however, to backup withholding, unless the foreign investor certifies his non-U.S. residency status. Also, foreign shareholders with respect to whom income from the Fund is “effectively connected” with a U.S. trade or business carried on by such shareholder will in general be subject to U.S. federal income tax on a net basis on the income derived from the Fund at the graduated rates applicable to U.S. citizens, residents or domestic corporations, whether such income is received in cash or reinvested in shares, and, in the case of a foreign corporation, also may be subject to a branch profits tax. Properly-designated dividends are generally exempt from U.S. federal withholding tax where they are (i) “interest-related dividends” paid in respect of the Fund’s “qualified net interest income” (generally, the Fund’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the Fund is at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) “short-term capital gain dividends” paid in respect of the Fund’s “qualified short-term gains” (generally, the excess of the Fund’s net short-term capital gain over the Fund’s long-term capital loss for such taxable year). Depending on its circumstances, the Fund may designate all, some or none of its potentially eligible dividends as such interest-related dividends or as short-term capital gain dividends and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. The Fund’s capital gain distributions are also exempt from such withholding. Foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results, and are urged to consult their tax advisors.
The Foreign Account Tax Compliance Act (FATCA), imposes a 30% U.S. withholding tax on certain U.S. source payments, including interest (even if the interest is otherwise exempt from the withholding rules described above), dividends and other fixed or determinable annual or periodical income (“Withholdable Payments”), if paid to a foreign financial institution, unless such institution registers with the IRS and enters into an agreement with the IRS or a governmental authority in its own jurisdiction to collect and provide substantial information regarding U.S. account holders, including certain account holders that are foreign entities with U.S. owners, with such institution. The legislation also generally imposes a withholding tax of 30% on Withholdable Payments made to a non-financial foreign entity unless such entity provides the withholding agent with a certification that it does not have any substantial U.S. owners or a certification identifying the direct and indirect substantial U.S. owners of the entity. These withholding and reporting requirements generally apply to income payments made after June 30, 2014. A withholding tax that would apply to the gross proceeds from the disposition of certain investment property and that was scheduled to go into effect in 2019 would be eliminated by proposed regulations (having an immediate effect while pending). Holders are urged to consult with their own tax advisors regarding the possible implications of this recently enacted legislation on their investment in the Fund.
The foregoing briefly summarizes some of the important U.S. federal income tax consequences to Common Shareholders of investing in Common Shares, reflects U.S. federal tax law as of the date of this SAI, and does not address special tax rules applicable to certain types of investors, such as corporate and non-U.S. investors. Unless otherwise noted, this discussion assumes that an investor is a United States person and holds Common Shares as a capital asset. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change or differing interpretations by the courts or the IRS retroactively or prospectively. Investors should consult their tax advisors regarding other U.S. federal, state or local tax considerations that may be applicable to their particular circumstances, as well as any proposed tax law changes.
The Fund is an organization of the type commonly known as a “Massachusetts business trust.” Under Massachusetts law, shareholders of such a trust may, in certain circumstances, be held personally liable as partners for the obligations of the trust. The Declaration of Trust contains an express disclaimer of shareholder liability in connection with Fund property or the acts, obligations or affairs of the Fund. The Declaration of Trust also provides for indemnification out of Fund property of any shareholder held personally liable for the claims and liabilities to which a shareholder may become subject by sole reason of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself is unable to meet its obligations. The Fund has been advised by its counsel that the risk of any shareholder incurring any liability for the
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obligations of the Fund is remote.
The Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law; but nothing in the Declaration of Trust protects a Trustee against any liability to the Fund or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. Voting rights are not cumulative with respect to the election of Trustees, which means that the holders of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees and, in such event, the holders of the remaining less than 50% of the shares voting on the matter will not be able to elect any Trustees.
Effective January 22, 2016, the Board of Trustees of the Fund amended and restated in its entirety the Declaration of Trust and the By-Laws for the Fund. The amendments to the Declaration of Trust include, among other changes, provisions that: (i) clarify certain duties, responsibilities, and powers of the Trustees; and (ii) clarify that shareholders are not intended to be third-party beneficiaries of Fund contracts. The amendments to the By-Laws include, among other changes, provisions that: (i) clarify that, other than as provided under federal securities laws, the shareholders may only bring actions involving the Fund derivatively; and (ii) provide that any action brought by a shareholder related to the Fund will be brought in Massachusetts state or federal court, and that, if a claim is brought in a different jurisdiction and subsequently changed to a Massachusetts venue, the shareholder will be required to reimburse the Fund for such expenses. The foregoing description of the Declaration of Trust and By-Laws are qualified in their entirety by the full text of the Declaration of Trust and By-Laws, each effective as of January 22, 2016, which is available by writing to the Secretary of the Fund at 200 Berkeley Street, Boston, Massachusetts 02116, and are available on the SEC’s website. The Declaration of Trust also is available on the Secretary of the Commonwealth of Massachusetts’ website.
The Fund’s portfolio securities are held pursuant to a custodian agreement between the Fund and State Street Bank and Trust Company (“State Street”), State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. Under the custodian agreement, State Street performs custody, foreign custody manager and fund accounting services.
Computershare Shareowner Services, LLC, P.O. Box 505000, Louisville, KY 40233 is the transfer agent, dividend paying agent and registrar of the Fund.
Independent Registered Public Accounting Firm
The financial statements of the Fund for the fiscal period ended December 31, 2020, including the related financial highlights that appear in the Prospectus, have been reviewed by PricewaterhouseCoopers LLP (“PwC”), independent registered public accounting firm, as indicated in their report with respect thereto, and are incorporated herein by reference.
PwC is the independent registered public accounting firm for the Fund, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the SEC.
The financial statements of the Fund for the fiscal year ended December 31, 2020, are incorporated herein by reference from the Fund’s most recent Annual Report to Shareholders filed with the Securities and Exchange Commission (the “SEC”) on Form N-CSR pursuant to Rule 30b2-1 under the 1940 Act.
As noted above, this SAI is part of a registration statement filed with the SEC. Pursuant to the final rule and form amendments adopted by the SEC on April 8, 2020 to implement certain provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Fund is permitted to “incorporate by reference” the information filed with the SEC, which means that the Fund can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this SAI, and later information that the Fund files with the SEC will automatically update and supersede this information.
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The documents listed below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the 1940 Act and Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering will be incorporated by reference into this SAI and deemed to be part of this Prospectus from the date of the filing of such reports and documents:
- The Fund’s Prospectus, dated June 25, 2021, filed with this SAI;
- The Fund’s Annual Report on Form N-CSR, filed on February 19, 2021;
- The Fund’s description of Common Shares on Form 8-A, filed on June 17, 1994.
You may obtain copies of any information incorporated by reference into this SAI, at no charge, by calling 800-225-6020 (toll-free), from the Fund’s website https://www.jhinvestments.com/investments/closed-end-fund/sector-funds/financial-opportunities-fund-ce-bto, or from the SEC’s website at sec.gov. The Fund’s periodic reports filed pursuant to Section 30(b)(2) of the 1940 Act and Sections 13 and 15(d) of the Exchange Act, as well as the Prospectus and the Statement of Additional Information, are available on the Fund’s website https://www.jhinvestments.com/investments/closed-end-fund/sector-funds/financial-opportunities-fund-ce-bto. You also may obtain a copy of any information regarding the Fund filed with the SEC from the SEC’s website (sec.gov).
There are no legal proceedings to which the Fund, the Advisor, or any of its affiliates is a party that are likely to have a material adverse effect on the Fund, or the ability of the Advisor to perform its contract with the Fund.
The Fund, the Advisor, the Subadvisor and John Hancock Investment Management Distributors LLC each have adopted Codes of Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code of Ethics permits personnel subject to that Code of Ethics to invest in securities, including securities that may be purchased or held by the Fund.
These Codes of Ethics may be obtained by calling the SEC at 202-942-8090. These Codes of Ethics also are available on the EDGAR Database on the SEC’s website at sec.gov. Copies of these Codes of Ethics may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: public info@sec.gov.
The Fund’s Prospectus, any related Prospectus Supplements, and this SAI do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its Rules and Regulations.
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John Hancock Investors Trust
Statement of Additional Information
June 25, 2021
Investment Advisor
John Hancock Investment Management LLC
200 Berkeley Street
Boston, Massachusetts 02116
1-800-225-6020
Subadvisor
Manulife Investment Management (US) LLC
200 Berkeley Street
Boston, Massachusetts 02116
Custodian
State Street Bank and Trust Company
State Street Financial Center
One Lincoln Street
Boston, Massachusetts 02111
Transfer Agent
Computershare Shareowner Services, LLC
P.O. Box 505000
Louisville, KY 40233
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
101 Seaport Boulevard, Suite 500
Boston, Massachusetts 02210
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DESCRIPTION OF BOND RATINGS
DESCRIPTIONS OF CREDIT RATING SYMBOLS AND DEFINITIONS
The ratings of Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“S&P Global Ratings”) and Fitch Ratings (“Fitch”) represent their respective opinions as of the date they are expressed and not statements of fact as to the quality of various long-term and short-term debt instruments they undertake to rate. It should be emphasized that ratings are general and are not absolute standards of quality. Consequently, debt instruments with the same maturity, coupon and rating may have different yields while debt instruments of the same maturity and coupon with different ratings may have the same yield.
Ratings do not constitute recommendations to buy, sell, or hold any security, nor do they comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of any payments of any security.
IN GENERAL
Moody’s. Ratings assigned on Moody’s global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities.
Note that the content of this Appendix A, to the extent that it relates to the ratings determined by Moody’s, is derived directly from Moody’s electronic publication of “Ratings Symbols and Definitions” which is available at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
S&P Global Ratings. . An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of
an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program
(including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors,
insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P Global Ratings’ view of the obligor’s capacity and willingness to meet its financial commitments
as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment
in the event of default.
Issue ratings are an assessment of default risk but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy.
Note that the content of this Appendix A, to the extent that it relates to the ratings determined by S&P Global Ratings, is derived directly from S&P Global Ratings’ electronic publication of “S&P’s Global Ratings Definitions,” which is available at: https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352.
Fitch. Fitch’s opinions are forward looking and include Fitch’s views of future performance. In many cases, these views on future performance may include forecasts, which may in turn (i) be informed by non-disclosable management projections, (ii) be based on a trend (sector or wider economic cycle) at a certain stage in the cycle, or (iii) be based on historical performance. As a result, while ratings may include cyclical considerations and attempt to assess the likelihood of repayment at “ultimate/final maturity,” material changes in economic conditions and expectations (for a particular issuer) may result in a rating change.
The terms “investment grade” and “speculative grade” have established themselves over time as shorthand to describe the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The terms investment grade and speculative grade are market conventions and do not imply any recommendation or endorsement of a specific security for investment purposes. Investment grade categories indicate relatively low to
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moderate credit risk, while ratings in the speculative categories either signal a higher level of credit risk or that a default has already occurred. For the convenience of investors, Fitch may also include issues relating to a rated issuer that are not and have not been rated on its web page. Such issues are also denoted as ‘NR’.
Note that the content of this Appendix A, to the extent that it relates to the ratings determined by Fitch, is derived directly from Fitch’s electronic publication of “Definitions of Ratings and Other Forms of Opinion” which is available at: https://www.fitchratings.com/site/dam/jcr:6b03c4cd-611d-47ec-b8f1-183c01b51b08/Rating%20Definitions%20-%20Jan%2024%202018.pdf.
GENERAL PURPOSE RATINGS
LONG-TERM ISSUE RATINGS
MOODY’S GLOBAL LONG-TERM RATING SCALE
Long-term ratings are assigned to issuers
or obligations with an original maturity of one year or more and reflect both on the likelihood of a default or impairment on contractual
financial obligations and the expected financial loss suffered in the event of default or impairment.
Aaa: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A: Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B: Obligations rated B are considered speculative and are subject to high credit risk.
Caa: Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note: Addition of a Modifier 1, 2 or 3: Moody’s appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms. By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment.
Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.
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S&P GLOBAL RATINGS LONG-TERM ISSUE CREDIT RATINGS
Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.
AAA: An obligation rated ‘AAA’ has the highest rating assigned by S&P Global Ratings. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
A: An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments on the obligation.
BB, B, CCC, CC and C: Obligations rated ‘BB’, ‘B’, ‘CCC’ ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation.
CCC: An obligation rated ‘CCC’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.
CC: An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
C: An obligation rated ‘C’ is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D: An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer.
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Note: Addition of a Plus (+) or minus (-) sign: The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Dual Ratings – Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U. S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, ‘SP-1+/A-1+’).
FITCH CORPORATE FINANCE OBLIGATIONS – LONG-TERM RATING SCALES
Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment. This notably applies to covered bond ratings, which incorporate both an indication of the probability of default and of the recovery given a default of this debt instrument.
AAA: Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality. ‘AA’ ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. ‘A’ ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality. ‘BBB’ ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative. ‘BB’ ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B: Highly speculative. ‘B’ ratings indicate that material credit risk is present.
CCC: Substantial credit risk. “CCC” ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk. “CC” ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk. “C” indicates exceptionally high levels of credit risk.
Corporate finance defaulted obligations typically are not assigned ‘RD’ or ‘D’ ratings but are instead rated in the ‘CCC’ to ‘C’ rating categories, depending on their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Note: Addition of a Plus (+) or minus (-) sign: Within rating categories, Fitch may use modifiers. The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. For example, the rating category ‘AA’ has three notch-specific rating levels (‘AA+’; ‘AA’; ‘AA-’; each a rating level). Such suffixes
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are not added to ‘AAA’ ratings and ratings below the ‘CCC’ category. For the short-term rating category of ‘F1’, a ‘+’ may be appended. For Viability Ratings, the modifiers ‘+’ or ‘-’ may be appended to a rating to denote relative status within categories from ‘aa’ to ‘ccc’.
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
SHORT-TERM ISSUE RATINGS
MOODY’S GLOBAL SHORT-TERM RATING SCALE
Ratings assigned on Moody’s global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.
Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
P-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
The following indicates the long-term ratings
consistent with different short-term ratings when such long-term ratings exist. (Note: Structured finance short-term ratings are usually
based either on the short-term rating of a support provider or on an assessment of cash flows available to retire the financial obligation).
S&P’S SHORT-TERM ISSUE CREDIT RATINGS
S&P Global Ratings’ short-term
ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings are also used to
indicate the creditworthiness of an obligor with respect to put features on long-term obligations. Medium term notes are assigned long-term
ratings. Ratings are graded into several categories, ranging from ‘A’ for the highest-quality obligations to ‘D’
for the lowest. These categories are as follows:
A-1: A short-term obligation rated ‘A-1’ is rated in the highest category by S&P Global Ratings. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitments on these obligations is extremely strong.
A-2: A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitments on the obligation is satisfactory.
A-3: A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor’s capacity to meet its financial commitments on the obligation.
B: A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor’s inadequate capacity to meet its financial commitments.
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C: A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.
D: A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer.
Dual Ratings - Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, ‘SP-1+/A-1+’).
FITCH’S SHORT-TERM ISSUER OR OBLIGATION RATINGS
A short-term issuer or obligation rating
is based in all cases on the short-term vulnerability to default of the rated entity and relates to the capacity to meet financial obligations
in accordance with the documentation governing the relevant obligation. Short-term deposit ratings may be adjusted for loss severity.
Short-term deposit ratings may be adjusted for loss severity. Short-Term Ratings are assigned to obligations whose initial maturity is
viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured
obligations, and up to 36 months for obligations in U.S. public finance markets.
F1: Highest short-term credit quality.
Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added (“+”) to denote
any exceptionally strong credit feature.
F2: Good short-term credit quality.
Good intrinsic capacity for timely payment of financial commitments.
F3: Fair short-term credit quality.
The intrinsic capacity for timely payment of financial commitments is adequate.
B: Speculative short-term credit quality.
Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial
and economic conditions.
C: High short-term default risk. Default
is a real possibility.
RD: Restricted default. Indicates
an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically
applicable to entity ratings only.
D: Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.
TAX-EXEMPT NOTE RATINGS
MOODY’S U.S. MUNICIPAL SHORT-TERM DEBT RATINGS
While the global short-term ‘prime’ rating scale is applied to US municipal tax-exempt commercial A-8 paper, these programs are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the long-term rating of the enhancing bank or financial institution and not to the municipality’s rating. Other short-term municipal obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales (i.e., the MIG and VMIG scale discussed below).
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The Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of up to five years maturity. Municipal notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the maturity of the obligation, and the issuer’s long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levels—MIG 1 through MIG 3—while speculative grade short-term obligations are designated SG.
MIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG 2: This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
MIG 3: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
Variable Municipal Investment Grade (VMIG) ratings of demand obligations with unconditional liquidity support are mapped from the short-term debt rating (or counterparty assessment) of the support provider, or the underlying obligor in the absence of third party liquidity support, with VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime. For example, the VMIG rating for an industrial revenue bond with Company XYZ as the underlying obligor would normally have the same numerical modifier as Company XYZ’s prime rating. Transitions of VMIG ratings of demand obligations with conditional liquidity support, as shown in the diagram below, differ from transitions on the Prime scale to reflect the risk that external liquidity support will terminate if the issuer’s long-term rating drops below investment grade.
VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG 2: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG 3: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
SG: This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
* For VRDBs supported with conditional liquidity support, short-term ratings transition down at higher long-term ratings to reflect the risk of termination of liquidity support as a result of a downgrade below investment grade.
VMIG ratings of VRDBs with unconditional liquidity support reflect the short-term debt rating (or counterparty assessment) of the liquidity support provider with VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime.
For more complete discussion of these rating transitions, please see Annex B of Moody’s Methodology titled Variable Rate Instruments Supported by Conditional Liquidity Facilities.
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S&P’S GLOBAL RATINGS’ MUNICIPAL SHORT-TERM NOTE RATINGS
MUNICIPAL SHORT-TERM NOTE RATINGS
An S&P Global Ratings municipal note rating reflects S&P Global Ratings’ opinion about the liquidity factors and market
access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity
of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P
Global Ratings’ analysis will review the following considerations:
■ | Amortization schedule – the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
■ | Source of payment – the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
D: ‘D’ is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.
FITCH PUBLIC FINANCE RATINGS
See FITCH SHORT-TERM ISSUER OR OBLIGATIONS RATINGS above.
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PROXY VOTING POLICIES OF THE ADVISOR, THE JOHN HANCOCK FUNDS AND THE SUBADVISOR
JOHN HANCOCK INVESTMENT MANAGEMENT LLC
PROXY VOTING POLICIES AND PROCEDURES
General |
The SEC adopted Rule 206(4)-6 under the Advisers Act, which requires investment advisers with voting authority to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser votes client securities in the best interest of clients. The procedures must include how the investment adviser addresses material conflicts that may arise between the interests of the investment adviser and those of its clients. The Advisers are registered investment advisers under the Advisers Act and serve as the investment advisers to the Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the Funds, including voting proxies with respect to a Fund’s portfolio securities. From time to time, however, the Advisers may elect to manage directly the assets of a Fund, including voting proxies with respect to such Fund’s portfolio securities, or a Fund’s Board may otherwise delegate to the Advisers authority to vote such proxies. Rule 206(4)-6 under the Advisers Act requires that a registered investment adviser adopt and implement written policies and procedures reasonably designed to ensure that it votes proxies with respect to a client’s securities in the best interest of the client.
Firms are required by Advisers Act Rule 204-2(c)(2) to maintain records of their voting policies and procedures, a copy of each proxy statement that the investment adviser receives regarding client securities, a record of each vote cast by the investment adviser on behalf of a client, a copy of any document created by the investment adviser that was material to making a decision how to vote proxies on behalf of a client, and a copy of each written client request for information on how the adviser voted proxies on behalf of the client, as well as a copy of any written response by the investment adviser to any written or oral client request for information on how the adviser voted that client’s proxies.
Investment companies must disclose information about the policies and procedures used to vote proxies on the investment company’s portfolio securities and must file the fund’s proxy voting record with the SEC annually on Form N-PX.
Pursuant thereto, the Advisers have adopted and implemented these proxy voting policies and procedures (the “Proxy Procedures”). |
Policy |
It is the Advisers’ policy to comply with Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act as described above. In general, the Advisers delegate proxy voting decisions to the sub-advisers managing the funds. If an instance occurs where a conflict of interest arises between the shareholders and a particular sub-adviser, however, the Adviser retains the right to influence and/or direct the conflicting proxy voting decisions. |
Procedure |
Fiduciary Duty The Advisers have a fiduciary duty to vote proxies on behalf of a Fund in the best interest of the Fund and its shareholders.
Voting of Proxies The Advisers will vote proxies with respect to a Fund’s portfolio securities when authorized to do so by the Fund and subject to the Fund’s proxy voting policies and procedures and any further direction or delegation of authority by the Fund’s Board. The decision on how to vote a proxy will be made by the person(s) to whom the Advisers have from time to time delegated such responsibility (the “Designated Person”). The Designated Person may include the Fund’s portfolio manager(s) or a Proxy Voting Committee, as described below.
When voting proxies with respect to a Fund’s portfolio securities, the following standards will apply: |
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• The Designated Person will vote based on what it believes is in the best interest of the Fund and its shareholders and in accordance with the Fund’s investment guidelines.
• Each voting decision will be made independently. To assist with the analysis of voting issues and/or to carry out the actual voting process the Designated Person may enlist the services of (1) reputable professionals (who may include persons employed by or otherwise associated with the Advisers or any of its affiliated persons) or (2) independent proxy evaluation services such as Institutional Shareholder Services. However, the ultimate decision as to how to vote a proxy will remain the responsibility of the Designated Person.
• The Advisers believe that a good management team of a company will generally act in the best interests of the company. Therefore, the Designated Person will take into consideration as a key factor in voting proxies with respect to securities of a company that are held by the Fund the quality of the company’s management. In general, the Designated Person will vote as recommended by company management except in situations where the Designated Person believes such recommended vote is not in the best interests of the Fund and its shareholders.
• As a general principle, voting with respect to the same portfolio securities held by more than one Fund should be consistent among those Funds having substantially the same investment mandates.
• The Advisers will provide the Fund, from time to time in accordance with the Fund’s proxy voting policies and procedures and any applicable laws and regulations, a record of the Advisers’ voting of proxies with respect to the Fund’s portfolio securities.
Material Conflicts of Interest In carrying out its proxy voting responsibilities, the Advisers will monitor and resolve potential material conflicts (“Material Conflicts”) between the interests of (a) a Fund and (b) the Advisers or any of its affiliated persons. Affiliates of the Advisers include Manulife Financial Corporation and its subsidiaries. Material Conflicts may arise, for example, if a proxy vote relates to matters involving any of these companies or other issuers in which the Advisers or any of their affiliates has a substantial equity or other interest.
If the Advisers or a Designated Person become aware that a proxy voting issue may present a potential Material Conflict, the issue will be referred to the Advisers’ Legal Department and/or the Office of the CCO. If the Legal Department and/or the Office of the CCO, as applicable determines that a potential Material Conflict does exist, a Proxy Voting Committee will be appointed to consider and resolve the issue. The Proxy Voting Committee may make any determination that it considers reasonable and may, if it chooses, request the advice of an independent, third-party proxy service on how to vote the proxy.
Voting Proxies of Underlying Funds of a Fund of Funds The Advisers or the Designated Person will vote proxies with respect to the shares of a Fund that are held by another Fund that operates as a Fund of Funds”) in the manner provided in the proxy voting policies and procedures of the Fund of Funds (including such policies and procedures relating to material conflicts of interest) or as otherwise directed by the board of trustees or directors of the Fund of Funds. Proxy Voting Committee(s) The Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers’ CCO and may include legal counsel. The terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Records Retention The Advisers will retain (or arrange for the retention by a third party of) such records relating to proxy voting pursuant to these Proxy Procedures as may be required from time to time by applicable law and regulations, including the following: |
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1. These Proxy Procedures and all amendments hereto;
2. All proxy statements received regarding Fund portfolio securities;
3. Records of all votes cast on behalf of a Fund;
4. Records of all Fund requests for proxy voting information;
5. Any documents prepared by the Designated Person or a Proxy Voting Committee that were material to or memorialized the basis for a voting decision;
6. All records relating to communications with the Funds regarding Conflicts; and
7. All minutes of meetings of Proxy Voting Committees.
The Office of the CCO, and/or the Legal Department are responsible for maintaining the documents set forth above as needed and deemed appropriate. Such documents will be maintained in the Office of the CCO, and/or the Legal Department for the period set forth in the Records Retention Schedule.
Voting of Proxies – SubAdvisers In the case of proxies voted by a sub-adviser to a Fund pursuant to the Fund’s proxy voting procedures, the Advisers will request the sub-adviser to certify to the Advisers that the sub-adviser has voted the Fund’s proxies as required by the Fund’s proxy voting policies and procedures and that such proxy votes were executed in a manner consistent with these Proxy Procedures and to provide the Advisers with a report detailing any instances where the sub-adviser voted any proxies in a manner inconsistent with the Fund’s proxy voting policies and procedures. The COO of the Advisers will then report to the Board on a quarterly basis regarding the sub-adviser certification and report to the Board any instance where the sub-adviser voted any proxies in a manner inconsistent with the Fund’s proxy voting policies and procedures.
The Fund Administration Department maintains procedures affecting all administration functions for the mutual funds. These procedures detail the disclosure and administration of the Trust’s proxy voting records.
The Trust’s Chief Legal Counsel is responsible for including, in the SAI of each Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting to Fund Boards The CCO of the Advisers will provide the Board with a copy of these Proxy Procedures, accompanied by a certification that represents that the Proxy Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, the Advisers will provide the Board with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCO’s annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Fund’s proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions.
December 1, 2019 |
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JOHN HANCOCK INVESTMENT MANAGEMENT DISTRIBUTORS LLC
PROXY VOTING POLICIES AND PROCEDURES
The Majority of the Independent Board of Trustees (the “Board”) of each registered investment company of the Trusts, has adopted these proxy voting policies and procedures (the “Trust Proxy Policy”).
Each fund of the Trust or any other registered investment company (or series thereof) (each, a “fund”) is required to disclose its proxy voting policies and procedures in its registration statement and, pursuant to Rule 30b1-4 under the 1940 Act, file annually with the Securities and Exchange Commission and make available to shareholders its actual proxy voting record. In this regard, the Trust Policy is set forth below.
Policy It is the Advisers’ policy to comply with Rule 206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act as described above. In general, Advisers defer proxy voting decisions to the sub-advisers managing the Funds. It is the policy of the Trusts to delegate the responsibility for voting proxies relating to portfolio securities held by a Fund to the Fund’s respective Adviser or, if the Fund’s Adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the fund’s sub-adviser(s), subject to the Board’s continued oversight. The sub-adviser for each Fund shall vote all proxies relating to securities held by each Fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Advisers Act. If an instance occurs where a conflict of interest arises between the shareholders and the designated sub-adviser, however, Advisers retain the right to influence and/or direct the conflicting proxy voting decisions in the best interest of shareholders.
Investment Company Act An investment company is required to disclose in its SAI either (a) a summary of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities or (b) a copy of its proxy voting policies.
A fund is also required by Rule 30b1-4 of the Investment Company Act of 1940 to file Form N-PX annually with the SEC, which contains a record of how the fund voted proxies relating to portfolio securities. For each matter relating to a portfolio security considered at any shareholder meeting, Form N-PX is required to include, among other information, the name of the issuer of the security, a brief identification of the matter voted on, whether and how the fund cast its vote, and whether such vote was for or against management. In addition, a fund is required to disclose in its SAI and its annual and semi-annual reports to shareholders that such voting record may be obtained by shareholders, either by calling a toll-free number or through the fund’s website, at the fund’s option.
Advisers Act Under Advisers Act Rule 206(4)-6, investment advisers are required to adopt proxy voting policies and procedures, and investment companies typically rely on the policies of their advisers or sub-advisers.
Delegation of Proxy Voting Responsibilities It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held by a fund to the fund’s investment adviser (“adviser”) or, if the fund’s adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the fund’s sub-adviser(s), subject to the Board’s continued oversight. The sub-adviser for each fund shall vote all proxies relating to securities held by each fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Except as noted below under Material Conflicts of Interest, the Trust Proxy Policy with respect to a Fund shall incorporate that adopted by the Fund’s sub-adviser with respect to voting proxies held by its clients (the “Sub-adviser Proxy Policy”). Each Sub-adviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Proxy Policy. Each sub-adviser to a Fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the Fund’s adviser and by the Board. Each Adviser to a Fund retains the responsibility, and is directed, to oversee each sub-adviser’s |
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compliance with these policies and procedures, and to adopt and implement such additional policies and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trust’s Chief Compliance Officer (“CCO”) shall conduct such monitoring and supervisory activities as the CCO or the Board deems necessary or appropriate in order to appropriately discharge the CCO’s role in overseeing the sub-advisers’ compliance with these policies and procedures.
The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time.
Voting Proxies of Underlying Funds of a Fund of Funds A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund With respect to voting proxies relating to the shares of an underlying fund (an “Underlying Fund”) held by a Fund of the Trust operating as a fund of funds (a “Fund of Funds”) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.
B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the Adviser to the Fund of Funds or the Trusts will vote proxies relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.
1. Where Both the Underlying Fund and the Fund of Funds are Voting on Substantially Identical Proposals
In the event that the Underlying Fund and the Fund of Funds are voting on substantially identical proposals (the “Substantially Identical Proposal”), then the Adviser or the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of the shareholders of the Fund of Funds on the Substantially Identical Proposal.
2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on by the Fund of Funds
(a) Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is no material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Adviser will vote proxies relating to the shares of the Underlying Fund pursuant to its Proxy Voting Procedures.
(b) Where there is a Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is a material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Fund of Funds will seek voting instructions from the shareholders of the Fund of Funds on the proposal and will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders. A material conflict is generally defined as a proposal involving a matter in which the Adviser or one of its affiliates has a material economic interest.
Material Conflicts of Interest If (1) a sub-adviser to a Fund becomes aware that a vote presents a material conflict between the interests of (a) shareholders of the Fund; and (b) the Fund’s Adviser, sub-adviser, principal underwriter, or any of their affiliated persons, and (2) the sub-adviser does not propose to vote on the particular issue in the manner prescribed by its |
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Sub-adviser Proxy Policy or the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy are otherwise triggered, then the sub-adviser will follow the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy when voting such proxies.
If a Sub-adviser Proxy Policy provides that in the case of a material conflict of interest between Fund shareholders and another party, the sub-adviser will ask the Board to provide voting instructions, the sub-adviser shall vote the proxies, in its discretion, as recommended by an independent third party, in the manner prescribed by its Sub-adviser Proxy Policy or abstain from voting the proxies.
Proxy Voting Committee(s) The Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers’ CCO and may include legal counsel. The terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy in the name of a Fund must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Securities Lending Program Certain of the Funds participate in a securities lending program with the Trusts through an agent lender. When a Fund’s securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion. Where a sub-adviser determines, however, that a proxy vote (or other shareholder action) is materially important to the client’s account, the sub-adviser should request that the agent recall the security prior to the record date to allow the sub-adviser to vote the securities.
Disclosure of Proxy Voting Policies and Procedures in the Trust’s Statement of Additional Information (“SAI”) The Trust shall include in its SAI a summary of the Trust Proxy Policy and of the Sub-adviser Proxy Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Proxy Policy and Sub-adviser Proxy Policy in the SAI.)
Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy, including the Sub-adviser Proxy Policy, and the Trusts’ proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commission’s (“SEC”) website, and without charge, upon request, by calling a specified toll-free telephone number. The Trusts will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. The Fund Administration Department is responsible for preparing appropriate disclosure regarding proxy voting for inclusion in shareholder reports and distributing reports. The Legal Department supporting the Trusts is responsible for reviewing such disclosure once it is prepared by the Fund Administration Department.
Filing of Proxy Voting Record on Form N-PX The Trusts will annually file their complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year. The Fund Administration department, supported by the Legal Department supporting the Trusts, is responsible for the annual filing. |
Procedure |
Review of Sub-advisers’ Proxy Voting The Trusts have delegated proxy voting authority with respect to Fund portfolio securities in accordance with the Trust Policy, as set forth above.
Consistent with this delegation, each sub-adviser is responsible for the following: 1. Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the sub-adviser votes portfolio securities in the best interest of shareholders of the Trusts. 2. Providing the Advisers with a copy and description of the Sub-adviser Proxy Policy prior to being approved by the Board as a sub-adviser, accompanied by a certification that represents that the Sub-adviser |
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Proxy Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the Advisers with notice of any amendment or revision to that Sub-adviser Proxy Policy or with a description thereof. The Advisers are required to report all material changes to a Sub-adviser Proxy Policy quarterly to the Board. The CCO’s annual written compliance report to the Board will contain a summary of the material changes to each Sub-adviser Proxy Policy during the period covered by the report. 3. Providing the Adviser with a quarterly certification indicating that the sub-adviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Sub-adviser Proxy Policy. If the sub-adviser voted any proxies in a manner inconsistent with the Sub-adviser Proxy Policy, the sub-adviser will provide the Adviser with a report detailing the exceptions.
Adviser Responsibilities The Trusts have retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trust’s reports on Form N-PX with the SEC.
The Advisers, in accordance with their general oversight responsibilities,
will periodically review the voting records maintained by the proxy voting service in accordance with the following procedures:
1. Receive a file with the proxy voting information directly from each sub-adviser on a quarterly basis. 2. Select a sample of proxy votes from the files submitted by the sub-advisers and compare them against the proxy voting service files for accuracy of the votes. 3. Deliver instructions to shareholders on how to access proxy voting information via the Trust’s semi-annual and annual shareholder reports.
The Fund Administration Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
Proxy Voting Service Responsibilities Proxy voting services retained by the Trusts are required to undertake the following procedures:
• Aggregation of Votes: The proxy voting service’s proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple sub-advisers or third-party voting services.
• Reporting: The proxy voting service’s proxy disclosure system will provide the following reporting features: 1. multiple report export options; 2. report customization by fund-account, portfolio manager, security, etc.; and 3. account details available for vote auditing.
• Form N-PX Preparation and Filing: The Advisers will be responsible for oversight and completion of the filing of the Trusts’ reports on Form N-PX with the SEC. The proxy voting service will prepare the EDGAR version of Form N-PX and will submit it to the adviser for review and approval prior to filing with the SEC. The proxy voting service will file Form N-PX for each twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year. The Fund Administration Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
The Fund Administration Department in conjunction with the CCO oversees compliance with this policy.
The Fund Administration Department maintains operating procedures affecting the administration and disclosure of the Trusts’ proxy voting records.
The Trusts’ Chief Legal Counsel is responsible for including in the Trusts’ SAI information regarding the Advisers’ and each sub-advisers proxy voting policies as required by applicable rules and form requirements.
The Fund Administration Department and The CCO’s Office is responsible for maintaining all documentation |
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created in connection with this policy. Documents will be maintained for the period set forth in the Records Retention Schedule.
December 10, 2019 |
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Manulife Investment Management Global Proxy Voting
Policy and Procedures (External)
March 2020
Executive Summary
Each investment team at Manulife Investment Management (“Manulife IM”)1 is responsible for investing in line with its investment philosophy and clients’ objectives. Manulife IM’s approach to proxy voting aligns with its organizational structure and encourages best practices in governance and management of environmental and social risks and opportunities. Manulife IM has adopted and implemented proxy voting policies and procedures to ensure that proxies are voted in the best interests of its clients for whom it has proxy voting authority.
This Global Proxy Voting Policy and Procedures (“Policy”) applies to each of the Manulife IM advisory affiliates listed in Appendix A. In seeking to adhere to local regulatory requirements of the jurisdiction in which an advisory affiliate operates, additional procedures specific to that affiliate may be implemented to ensure compliance, where applicable. The Policy is not intended to cover every possible situation that may arise in the course of business, but rather to act as a decision-making guide. It is therefore subject to change and interpretation from time-to-time as facts and circumstances dictate.
Statement of Policy
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The right to vote is a basic component of share ownership and is an important control mechanism to ensure that a company is managed
in the best interests of its shareholders. Where clients delegate proxy voting authority to Manulife IM, Manulife IM has a fiduciary duty
to exercise voting rights responsibly.
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Where Manulife IM is granted and accepts responsibility for voting proxies for client accounts, it will seek to ensure proxies are
received and voted in the best interests of the client with a view to maximize the economic value of their equity securities, unless it
determines that it is in the best interests of the client to refrain from voting a given proxy.
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If there is any potential material proxy-related conflict of interest between Manulife IM and its clients, identification and resolution
processes are in place to provide for determination in the best interests of the client.
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Manulife IM will disclose information about its proxy voting policies and procedures to its clients.
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• | Manulife IM will maintain certain records relating to proxy voting. |
Philosophy on Sustainable Investing
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Manulife IM’s commitment to sustainable investment2 is focused on protecting and enhancing the value of our clients’
investments and, as active owners in the companies in which we invest, we believe that voting at shareholder meetings can contribute to
the long-term sustainability of our investee companies. Manulife IM will seek to exercise the rights and responsibilities associated with
equity ownership, on behalf of its clients, with a focus on maximizing long-term shareholder returns, as well as enhancing and improving
the operating strength of the companies to create sustainable value for shareholders.
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• | Manulife IM invests in a wide range of securities across the globe, ranging from large multinationals to smaller early stage companies, and from well-developed markets to emerging and frontier markets. Expectations of those companies vary by market to reflect local standards, regulations and laws. Manulife IM believes, however, that successful companies across regions are generally better positioned over the long-term if they have: |
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Robust oversight including a strong and effective board with independent and objective leaders working on behalf of shareholders;
Mechanisms to mitigate risk such as effective internal controls, board expertise covering a firm’s unique risk profile, and routine use of KPIs to measure and assess long-term risks;
A management team aligned with shareholders through remuneration structures that incentivize long-term performance through the judicious and sustainable stewardship of company resources;
Transparent and thorough reporting of the components of the business that are most significant to shareholders and stakeholders with focus on the firm’s long-term success and,
Management focused on all forms of capital including environmental, social and human capital.
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The Manulife Investment Management Voting Principles (“Voting Principles”) outlined in Appendix B provide guidance for
our voting decisions. An active decision to invest in a firm reflects a positive conviction in the investee company and we generally expect
to be supportive of management for that reason. Manulife IM may seek to challenge management’s recommendations, however, if they
contravene these Voting Principles or Manulife IM otherwise determines that doing so is in the best interest of its clients.
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Manulife IM also regularly engages with boards and management on environmental, social or corporate governance issues consistent with
the principles stipulated in our Sustainable Investing Statement and our ESG Engagement Policy. Manulife IM may, through these engagements, request
certain changes of the portfolio company to mitigate risks or maximize opportunities. In the context of preparing for a shareholder meeting,
Manulife IM will review progress on requested changes for those companies engaged. In an instance where Manulife IM determines that the
issuer has not made sufficient improvements on an issue, then we may take voting action to demonstrate our concerns.
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In rare circumstances Manulife IM may consider filing, or co-filing, a shareholder resolution at an investee company. This may occur
where our team has engaged with management regarding a material sustainability risk or opportunity, and where we determine that the company
has not made satisfactory progress on the matter within a reasonable time period. Any such decision will be in the sole discretion of
Manulife IM and acted on where we believe filing, or co-filing, a proposal is in the best interests of our clients.
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• | Manulife IM may also divest of holdings in a company where Portfolio Managers are dissatisfied with company financial performance, strategic direction and/or management of material sustainability risks or opportunities. |
Procedures
Receipt of Ballots and Proxy Materials
• | Proxies received are reconciled against the client’s holdings, and the custodian bank will be notified if proxies have not been forwarded to the proxy service provider when due. |
Voting Proxies
• | Manulife IM has adopted the Voting Principles contained in Appendix B of this Policy. |
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• | Manulife IM has deployed the services of a proxy voting services provider to ensure the timely casting of votes, and to provide relevant and timely proxy voting research to inform our voting decisions. Manulife IM periodically reviews the detailed policies created by the proxy voting service provider to ensure consistency with our Voting Principles, to the extent this is possible. | |
• | Portfolio managers actively review voting options and make voting decisions for their holdings. Where Manulife IM holds a significant ownership position in an issuer, the rationale for a portfolio manager’s voting decision is specifically recorded, including whether the vote cast aligns with the recommendations of the proxy voting services provider or has been voted differently. A significant ownership position in an investment is defined as those cases where Manulife IM holds at least 2% of a company’s issued share capital in aggregate across all Manulife IM client accounts. | |
• | The Manulife IM ESG Research and Integration Team (“ESG Team”) is an important resource for portfolio management teams on proxy matters. This team provides advice on specific proxy votes for individual issuers if needed. ESG Team advice is supplemental to the research and recommendations provided by our proxy voting services provider. In particular, ESG analysts actively review voting resolutions for companies in which: | |
Manulife IM’s aggregated holdings across all client accounts represent 2% or greater of issued capital;
A meeting agenda includes shareholder resolutions related to environmental and social risk management issues, or where the subject of a shareholder resolution is deemed to be material to our investment decision; or
The issuer has been engaged by Manulife IM within the past two years seeking a change in behavior
After review, the ESG Team may provide research and advice to investment staff in line with the Voting Principles.
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Manulife IM also has an internal Proxy Voting Working Group (“Working Group”) comprising senior managers from across Manulife
IM including the equity investment team, Legal, Compliance, and the ESG Team. The Working Group operates under the auspices of the Manulife
IM Public Markets Sustainable Investing Committee. The Working Group regularly meets to review and discuss voting decisions on shareholder
proposals or instances where a portfolio manager recommends a vote different than the recommendation of the proxy voting services provider.
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Manulife IM clients retain the authority, and may choose, to lend shareholdings. Manulife IM, however, generally retains the ability
to recall shares in order to execute proxy votes. Manulife IM will, where feasible, weigh the benefit of casting votes at a given meeting
when deciding whether to recall lent shares for voting.
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• | Manulife IM may refrain from voting a proxy where we have agreed with a client in advance to limit the situations in which we will execute votes. Manulife may also refrain from voting due to logistical considerations that may have a detrimental effect on our ability to vote. These issues may include, but are not limited to: |
o | Costs associated with voting the proxy exceed the expected benefits to clients; | |
o | Underlying securities have been lent out pursuant to a client’s securities lending program and have not been subject to recall; | |
o | Short notice of a shareholder meeting; | |
o | Requirements to vote proxies in person; | |
o | Restrictions on a non-national’s ability to exercise votes, determined by local market regulation; | |
o | Restrictions on the sale of securities in proximity to the shareholder meeting (i.e. “share blocking”); |
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o | Requirements to disclose commercially sensitive information that may be made public (i.e. “re-registration”); | |
o | Requirements to provide local agents with power of attorney to facilitate the voting instructions (such proxies are voted on a best-efforts basis); or | |
o | Inability of a client’s custodian to forward and process proxies electronically. | |
• |
If a Manulife IM portfolio manager believes it is in the best interest of a client to vote proxies in a manner inconsistent with the
Policy, the portfolio manager will submit new voting instructions to a member of the ESG Team with rationale for the new instructions.
The ESG Team will then support the portfolio manager in developing voting decision rationale that aligns with this Policy and the Voting Principles.
The ESG Team will then submit the vote change to the Working Group. The Working Group will review the change
and ensure that the rationale is sound and the decision will promote the long-term success of the issuer.
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• |
On occasion, there may be proxy votes which are not within the research and recommendation coverage universe of the proxy voting service
provider. Portfolio managers responsible for the proxy votes will provide voting recommendations to the ESG Team and those items may be
escalated to the Proxy Voting Working Group for review to ensure that the voting decision rationale is sound and the decision will promote
the long-term success of the issuer. the Manulife IM Proxy Operations Team will be notified of the voting decisions and execute the votes
accordingly.
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• | Manulife IM does not engage in the practice of “empty voting” (a term embracing a variety of factual circumstances that result in a partial, or total, separation of the right to vote at a shareholders meeting from beneficial ownership of the shares on the meeting date). Manulife IM prohibits investment managers from creating large hedge positions solely to gain the vote while avoiding economic exposure to the market. Manulife IM will not knowingly vote borrowed shares (for example, shares borrowed for short sales and hedging transactions). |
Engagement of the Proxy Voting Service Provider
• | Manulife IM has contracted with a third-party proxy service provider to assist with the proxy voting process. Except in instances where a client retains voting authority, Manulife IM will instruct custodians of client accounts to forward all proxy statements and materials received in respect of client accounts to the proxy service provider. |
Manulife IM has engaged its proxy voting service provider to:
o | Research and make voting recommendations; |
o | Ensure proxies are voted and submitted in a timely manner; |
o | Perform other administrative functions of proxy voting; |
o | Maintain records of proxy statements and provide copies of such proxy statements promptly upon request; |
o | Maintain records of votes cast; and |
o | Provide recommendations with respect to proxy voting matters in general. |
Scope of Proxy Voting Authority
• | Manulife IM and our clients shape the proxy voting relationship by agreement provided there is full and fair disclosure and informed consent. Manulife IM may agree with clients to other proxy voting arrangements in which Manulife IM does not assume proxy voting responsibility or will only vote in limited circumstances.3 |
• | While the application of our fiduciary duty in the context of proxy voting will vary with the scope of the voting authority we assume, we acknowledge the relationship in all cases remains that of a fiduciary to the client. Beyond the general discretion retained by Manulife IM to withhold from voting as outlined above, |
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Manulife IM may enter a specific agreement with a client not to exercise voting authority on certain matters where the cost of voting would be high or the benefit to the client would be low. |
Disclosure of Proxy Votes
• |
Manulife IM may inform company management of our voting intentions ahead of casting the vote. This is in line with Manulife IM’s
objective to provide the opportunity for companies to better understand our investment process, policies and objectives.
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• |
We will not intentionally disclose to anyone else, including other investors, our voting intention prior to casting the vote.
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• | Manulife IM keeps records of proxy voting available for inspection by clients, regulatory authorities or government agencies. |
• | Manulife IM will annually disclose voting records aggregated across funds. |
Conflicts of Interest
Manulife IM has an established infrastructure designed to identify conflicts of interest throughout all aspects of the business. Proxy voting proposals may raise conflicts between the interests of Manulife IM’s clients and the interests of Manulife IM, its affiliates, or employees. Apparent conflicts are reviewed by the Working Group to determine whether there is a conflict of interest and, if so, whether the conflict is material. Manulife IM shall consider any of the following circumstances a potential material conflict of interest:
• | Manulife IM has a business relationship or potential relationship with the issuer; |
• | Manulife IM has a business relationship with the proponent of the proxy proposal; or |
• | Manulife IM members, employees or consultants have a personal or other business relationship with managers of the business such as top-level executives, corporate directors or director candidates. |
In addressing any such potential material conflict Manulife IM will seek to ensure proxy votes are cast in the advisory client’s best interests and are not affected by Manulife IM’s potential conflict. In the event a potential material conflict of interest exists, the Proxy Voting Working Group or its designee will either (i) review the proxy voting decisions to ensure robust rationale, that the voting decision will protect or enhance shareholder value over the long-term, and is in line with the best interest of the client; (ii) vote such proxy according to the specific recommendation of the proxy voting services provider; (iii) abstain; or (iv) request the client vote such proxy. The basis for the voting decision, including the process for the determination of the decision that is in the best interests of the client, is recorded.
Voting Shares of Manulife Financial Corporation
Manulife Financial Corporation (“MFC”) is the publicly listed parent company of Manulife IM. Generally, legislation restricts the ability of a public company (and its subsidiaries) to hold shares in itself within its own accounts. Accordingly, the MFC Share Investment Policy outlines the limited circumstances in which MFC or its subsidiaries may, or may not, invest or hold shares in MFC on behalf of MFC or its subsidiaries.4
The MFC Share Investment Policy does not apply to investments made on behalf of unaffiliated third parties, which remain assets of the client.5 Such investing may be restricted, however, by specific client guidelines, other Manulife policies or other applicable laws.
Where Manulife IM is charged with voting MFC shares we will execute votes in proportion with all other shareholders (i.e. proportional or ‘echo’ vote). This is intended to neutralize the effect of our vote on the meeting outcome.
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Policy Responsibility and Oversight
• |
The Working Group oversees and monitors the Policy and Manulife IM’s proxy voting function. The Working Group is responsible
for reviewing regular reports, potential conflicts of interest, vote changes and non-routine proxy voting items. The Working Group also
oversees the third-party proxy voting service provider. The Working Group will meet at least monthly and report to the Public Markets
Sustainable Investing Committee and, where requested, the Manulife IM Operating Committee.
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• |
Manulife IM’s Proxy Operations Team is responsible for the daily administration of the proxy voting process for all Manulife
IM operations that have contracted with a third-party proxy voting services provider. Significant proxy voting issues identified by Manulife
IM’s Proxy Operations Team are escalated to the Chief Compliance Officer or its designee and the Working Group.
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• | The Working Group is responsible for the proper oversight of any service providers hired by Manulife IM to assist it in the proxy voting process. This oversight includes: |
Annual Due Diligence: Manulife IM conducts an annual due diligence review of the proxy voting research service provider. This oversight includes an evaluation of the service provider’s industry reputation, points of risk, compliance with laws and regulations and technology infrastructure. Manulife IM also reviews the provider’s capabilities to meet Manulife IM’s requirements including reporting competencies; the adequacy and quality of the proxy advisory firm’s staffing and personnel; the quality and accuracy of sources of data and information; the strength of policies and procedures that enable it to make proxy voting recommendations based on current and accurate information; and the strength of policies and procedures to address conflicts of interest of the service provider related to its voting recommendations.
Regular Updates: Manulife also requests that the proxy voting research service provider deliver updates regarding any business changes that alter that firm’s ability to provide independent proxy voting advice and services aligned with our policies.
Additional Oversight in Process: Manulife IM has additional control mechanisms built into the proxy voting process to act as checks on the service provider and ensure that decisions are made in the best interest of our clients. These mechanisms include:
Sampling pre-populated votes: Where we utilize a third-party research provider for either voting recommendations or voting execution (or both), we may assess “pre-populated” votes shown on the vendor’s electronic voting platform before such votes are cast to ensure alignment with the Voting Principles.
Consideration of additional information: Where Manulife IM utilizes a proxy service provider for voting recommendations, we consider additional information that may become available regarding voting items. This additional information may include filings by an issuer or shareholder proponent that are issued subsequent to the filing of meeting materials.
Decision scrutiny from the Working Group: Where our voting policies and procedures do not address how to vote on a particular matter, or where the matter is highly contested or controversial (e.g. major acquisitions involving takeovers or contested director elections where a shareholder has proposed its own slate of directors), review by the Working Group may be necessary or appropriate to ensure votes cast on behalf of its client are cast in the client’s best interest.
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Record-Keeping and Reporting
• | Manulife IM provides clients with a copy of the Voting Policy upon request and it is also available on our website at www.manulifeim.com/institutional. Manulife IM describes its proxy voting procedures to its clients in the relevant or required disclosure document and discloses to its clients the process to obtain information on how Manulife IM voted that client’s proxies. |
• | Manulife IM keeps records of proxy voting activities and those records include proxy voting policies and procedures, records of votes cast on behalf of clients, records of client requests for proxy voting information; and any documents generated in making a vote decision. These documents are available for inspection by clients, regulatory authorities or government agencies. |
• | Manulife IM will disclose voting records on its website and those records will be updated on an annual basis. The voting records will generally reflect the voting decisions made for retail, institutional and other client funds in the aggregate. |
Policy Amendments and Exceptions
• | This policy is subject to periodic review by the Proxy Voting Working Group. The Working Group may suggest amendments to this Policy and any such amendments must be approved by the Manulife IM Public Markets Sustainable Investing Committee and the Manulife IM Operating Committee. |
• | Any deviation from this Policy will only be permitted with the prior approval of the Chief Investment Officer or Chief Administrative Officer (or their designee), with the counsel of the Chief Compliance Officer / General Counsel. |
APPENDIX A
MANULIFE IM ADVISORY AFFILIATES IN SCOPE OF POLICY
+Investment management business only.
Manulife Investment Management Limited
Manulife Investment Management (North America) Limited
Manulife Investment Management (Hong Kong) Limited
PT Manulife Aset Manajemen Indonesia*
Manulife Investment Management (Japan) Limited
Manulife Investment Management (Malaysia) Bhd.
Manulife Investment Management and Trust Corporation
Manulife Investment Management (Singapore) Pte. Ltd.
Manulife IM (Switzerland) LLC
Manulife Investment Management (Taiwan) Co., Ltd.*
Manulife Investment Management (Europe) Limited
Manulife Investment Management (US) LLC
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Manulife Investment Fund Management (Vietnam) Company Limited*
*By reason of certain local regulations and laws with respect to voting, e.g.: manual/physical voting processes or the absence of a third-party proxy voting service provider for those jurisdictions, Manulife Investment Fund Management (Vietnam) Company Limited, and PT Manulife Aset Manajemen Indonesia do not engage a third-party service provider to assist in their proxy voting processes. Manulife Investment Management (Taiwan) Co., Ltd. Uses the third-party proxy voting service provider to execute votes for non-Taiwanese entities only.
APPENDIX B
MANULIFE IM VOTING PRINCIPLES
Manulife Investment Management (“Manulife IM”) believes that strong management of all forms of corporate capital, whether financial, social or environmental will mitigate risks, create opportunities and drive value over the long-term. Manulife IM reviews and considers environmental, social and corporate governance risks and opportunities in our investment decisions. Once invested, Manulife IM continues its oversight through active ownership which includes portfolio company engagement and proxy voting of underlying shares. We believe proxy voting is a vital component of this continued oversight as it provides a voice for minority shareholders regarding management actions.
Manulife IM has developed some key principles that drive our proxy voting decisions and engagements. We believe these principles preserve value and generally lead to outcomes that drive positive firm performance. These principles dictate our voting on issues ranging from director elections and executive compensation to the preservation of shareholder rights and stewardship of environmental and social capital. The facts and circumstances of each issuer are unique, and Manulife IM may deviate from these principles where we believe doing so will preserve or create value over the long-term. These principles also do not address the specific content of all proposals voted around the globe, but provide a general lens of value preservation, value creation, risk management and protection of shareholder rights through which Manulife IM analyzes all voting matters.
I. Boards and Directors: Manulife IM uses the following principles to review proposals covering director elections and board structure in the belief that they encourage engaged and accountable leadership of a firm.
a. Board Independence: The most effective boards are composed of directors with a diverse skill set that can provide an objective view of the business, oversee management, and make decisions in the best interest of the shareholder body at large. To create and preserve this voice, boards should have a significant number of non-executive, independent directors. The actual number of independent directors can vary by market and Manulife IM accounts for these differences when reviewing the independence of the board. Ideally, however, there is an independent majority among directors at a given firm.
b. Committee Independence: Manulife IM also prefers that key board committees are composed of independent directors. Specifically, the audit, nomination and compensation committees should be entirely or majority composed of independent directors.
c. Attendance: A core part of a director’s duties is to remain an engaged and productive participant at board and committee meetings. Directors should, therefore, attend at least 75% of board and committee meetings in the aggregate over the course of a calendar year.
d. Gender Diversity: In line with the principles expressed in relation to ‘Board Independence’ above, Manulife IM believes boards with strong gender representation are better equipped to manage risks and oversee business resilience over the long-term compared to firms with low gender balance. Manulife IM generally expects boards to have at least one woman on the board and encourages companies to aspire to a higher balance of gender representation.
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e. Classified/Staggered Boards: Manulife IM prefers that directors be subject to election and re-election on an annual basis. Annual elections operate to hold directors accountable for their actions in a given year in a timely manner. Shareholders should have the ability to voice concerns through a director vote and to potentially remove problematic directors if necessary. Manulife IM generally opposes the creation of classified or staggered director election cycles designed to extend director terms beyond one year. Manulife IM also supports proposals to eliminate these structures.
f. Overboarding: Manulife IM believes directors should limit their outside board seats in order to ensure that they have the time and attention to provide their director role at a firm in question. Generally, this means directors should not sit on more than 5 public company boards. The role of CEO requires an individual’s significant time and attention. Directors holding the role of CEO at any public firm, therefore, should not sit on more than 3 public company boards inclusive of the firm at which they hold the CEO role.
g. Independent Chair/CEO: Governance failures can occur where a manager has firm control over a board through the combination of the Chair/CEO roles. Manulife IM generally supports the separation of the Chair/CEO roles as a means to prevent board ‘capture’ by management. We will evaluate proposals to separate the Chair/CEO roles on a case-by-case basis, for example, however considering such factors as the establishment of a strong lead independent director role or the temporary need for the combination of the CEO/Chair roles to help the firm through a leadership transition.
h. Vote Standard: Manulife IM supports a vote standard that allows resolutions to pass, or fail, based on a majority voting standard. Manulife IM expects companies to adopt a majority vote standard for director elections and supports the elimination of a plurality vote standard except in the case of contested elections.
i. Contested Elections: Where there is a proxy contest or a director’s election is otherwise contested, Manulife IM evaluates the proposals on a case-by-case basis. Consideration is given to firm performance, whether there have been significant failures of oversight, and whether the proponent for change makes a compelling case that board turnover will drive firm value.
j. Significant and Problematic Actions or Omissions: Manulife IM believes boards should be held accountable to shareholders in instances where there is a significant failure of oversight that has led to a loss of firm value or otherwise curtailed shareholder rights. Manulife IM considers withholding from, or voting against, certain directors where the board acted, or failed to act, in a way that significantly affected shareholder rights or otherwise negatively affected firm value. Some examples of actions that might warrant a vote against directors include, but are not limited to, the following:
i. Failure of Oversight: Manulife IM may take action against directors where there has been a significant negative event leading to a loss of shareholder value and stakeholder confidence. A failure may manifest itself in multiple ways including adverse auditor opinions, material misstatements, failures of leadership and governance and environmental or human rights violations.
ii. Adoption of Anti-Takeover Mechanism: Boards should generally review takeover offers independently and objectively in consideration of the potential value created or lost for shareholders. Manulife IM holds boards accountable when they create or prolong certain mechanisms, bylaws or article amendments that act to frustrate genuine offers that may lead to value creation for shareholders. These can include ‘poison pills’; classes of shares with differential voting rights; classified, or staggered, board structures; unilateral bylaw amendments and supermajority voting provisions.
iii. Problematic Executive Compensation Practices: Manulife IM encourages companies to adopt best practices for executive compensation in the markets in which they operate. Generally, this means that pay should be aligned with performance. Manulife IM may hold directors accountable where this alignment is not robust. We may also hold boards accountable where they have not adequately responded to shareholder votes against a previous proposal on remuneration or have adopted problematic agreements or practices (e.g. ‘golden parachutes’, repricing of options).
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iv. Bylaw/Article Adoption and Amendments: Shareholders should have the ability to vote on any change to company articles or bylaws that will materially change their rights as shareholders. Any amendments should require only a majority of votes to pass. Manulife IM will hold directors accountable where a board has amended or adopted bylaw and/or article provisions that significantly curtail shareholder rights.
v. Engagement Responsiveness: Manulife IM regularly engages with issuers to discuss ESG risks and opportunities and may request changes from firms during these discussions. Manulife IM may vote against certain directors where we have engaged with an issuer and requested certain changes but the firm has not made sufficient progress on those matters.
II. Environmental and Social Proposals: Manulife IM expects its portfolio companies to manage material environmental and social issues affecting its business, whether risks or opportunities, with a view towards long-term value preservation and creation.6 Manulife IM expects firms to identify material environmental and social risks and opportunities specific to their business, to develop strategies to manage those matters, and to provide meaningful, substantive reporting while demonstrating progress year-over-year against their plans. Proposals touching on management of risks and opportunities related to environmental and social issues are often put forth as shareholder proposals but can be proposed by management as well. Manulife IM reviews these proposals on a case-by-case basis considering, among other factors:
a. The Magnitude of the Risk/Opportunity: Manulife IM evaluates the level of materiality of a certain environmental or social issue identified in a proposal as it pertains to the firm’s ability to generate value over the long-term. This review includes deliberation of the effect an issue will have on the financial statements and/or the cost of capital.
b. The Firm’s Current Management of the Risk/Opportunity: Manulife IM analyzes a firm’s current approach to an issue to determine whether the firm has robust plans, infrastructure and reporting to mitigate the risk or embrace the opportunity.
c. Firm’s Current Disclosure Framework: Manulife IM expects firms to disclose enough information for shareholders to assess the company’s management of environmental and social risks and opportunities material to the business. Manulife IM may support proposals calling for enhanced firm disclosure regarding environmental and social issues where additional information would help our evaluation of a company’s exposure, and response, to those factors.
d. Legislative or Regulatory Action of a Risk/Opportunity: When reviewing proposals on environmental or social factors, Manulife IM considers whether a given risk or opportunity is currently addressed by local regulation or law in the markets in which a firm operates and whether those rules are designed to adequately manage an issue. Manulife IM also considers whether a firm should proactively address a matter in anticipation of future legislation or regulation.
e. Cost to, or Disruption of, the Business: When reviewing environmental and social proposals Manulife IM assesses the potential cost of the requested action against the benefit provided to the firm and its shareholders. Particular attention is paid to proposals that request actions that are overly prescriptive on management or that request a firm exit markets or operations that are essential to its business.
III. Shareholder Rights: Manulife IM generally supports management or shareholder proposals that protect, or improve, shareholder rights and opposes proposals that remove, or curtail, existing rights.
a. Shareholder Rights Plans (“Poison Pills”): Manulife IM opposes mechanisms intended to frustrate genuine takeover offers. Manulife IM may, however, support shareholder rights plans where the plan has a trigger of 20% ownership or more and will expire in three years or less. In conjunction with these requirements Manulife IM evaluates the company’s strategic rationale for adopting the poison pill.
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b. Supermajority Voting: Shareholders should have the ability to direct change at a firm based on a majority vote. Manulife IM opposes the creation, or continuation, of any bylaw, charter or article provisions that require approval of more than a majority of shareholders for amendment of those documents. Manulife IM may consider supporting such a standard where the supermajority requirement is intended to protect minority shareholders.
c. Proxy Access: Manulife IM believes that shareholders have a right to appoint representatives to the board that best protect their interests. The power to propose nominees without holding a proxy contest is a way to protect that right and is potentially less costly to management and shareholders. Accordingly, Manulife IM supports creation of a proxy access right (or similar power at non-U.S. firms) provided there are reasonable thresholds of ownership and a reasonable number of shareholders can aggregate ownership to meet those thresholds.
d. Written Consent: Written consent provides shareholders the power to formally demand board action outside of the context of an annual general meeting. Shareholders can use written consent as a nimble method of holding boards accountable. Manulife IM supports the right of written consent so long as that right is reasonably tailored to reflect the will of a majority of shareholders. Manulife IM may not support such a right, however, where there is a holder with a significant, or controlling, stake. Manulife IM evaluates the substance of any written actual consent proposal in-line with these principles.
e. Right to Call a Special Meeting: Manulife IM is supportive of the shareholder right to call a special meeting. This right allows shareholders to quickly respond to events which can significantly affect firm value. Manulife IM believes that a 10% ownership threshold to call a special meeting reasonably protects this shareholder right while reducing the possibility of undue distraction for management.
IV. Executive Compensation: Manulife IM encourages companies to align executive incentives with shareholder interests when designing executive compensation plans. Companies should provide shareholders with transparent, comprehensive and substantive disclosure regarding executive compensation that aids shareholder assessment of the alignment between executive pay and firm performance. Companies should also have the flexibility to design remuneration programs that fit a firm’s business model, business sector and industry and overall corporate strategy. No one template of executive remuneration can fit all companies.
a. Advisory Votes on Executive Compensation: While acknowledging that there is no singular model for executive compensation, Manulife IM scrutinizes companies closely that have certain practices. Some concerning practices can include:
i. Misalignment Between Pay and Company Performance: Pay should generally move in tandem with corporate performance. Firms where CEO pay remains flat, or increases, though corporate performance remains down relative to peers are particularly concerning.
ii. One-Time Grants: A firm’s one-time grant to an executive, outside of the normal salary, bonus and long-term award structure, may be indicative of an overall failure of the board to design an effective remuneration plan. A company should have a robust justification for making grants outside of the normal remuneration framework.
iii. Significant Quantity of Non-Performance Based Pay: Executive pay should generally be weighted more heavily towards performance-based remuneration to create the alignment between pay and performance. Companies should provide a robust explanation for any significant awards made that vest solely based on time or are not otherwise tied to performance.
iv. Lack of Rigor in Performance Targets: Performance targets should challenge managers to improve corporate performance and outperform peers. Targets should, where applicable, generally align with, or even outpace, guidance; incentivize outperformance against a peer group; and otherwise remain challenging.
v. Lack of Disclosure: Transparency is essential to shareholder analysis and understanding of executive remuneration at a company. Manulife IM expects firms to clearly disclose all major components of remuneration. This includes disclosure of amounts, performance metrics and targets, vesting terms, and pay outcomes.
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vi. Repricing of Options: Resetting the exercise price of outstanding options significantly undermines the incentive nature of the initial option grant. Though a firm may have a strong justification for repricing options, Manulife IM believes that firms should put such decisions to a shareholder vote. Manulife IM may oppose an advisory vote on executive compensation where a company has repriced outstanding options for executives without that shareholder approval.
vii. Adoption of Problematic Severance Agreements (“Golden Parachutes”): Manulife IM believes managers should be incentivized to pursue and complete transactions that may benefit shareholders. Severance agreements, if structured appropriately, can provide such inducements. At the same time, however, the significant payment associated with severance agreements could potentially drive managers to pursue transactions at the expense of shareholder value. Manulife IM may oppose an executive remuneration proposal where a firm has adopted, or amended, an agreement with an executive that contains an excise tax gross-up provision, permits accelerated vesting of equity upon a change-in-control, allows an executive to unilaterally trigger the severance payment, or pays out in an amount greater than 300% of salary and bonus combined.
V. Capital Structure: Manulife IM believes firms should balance the need to raise capital and encourage investment with the rights and interests of the existing shareholder body. Evaluation of proposals to issue shares, repurchase shares, conduct stock splits or otherwise restructure capital are evaluated on a case-by-case basis with some specific requests covered here:
a. Common Stock Authorization: Requests to increase the pool of shares authorized for issuance are evaluated on a case-by-case basis with consideration given to the size of the current pool, recent use of authorized shares by management, and the company rationale for the proposed increase. Manulife IM also supports these increases where the company intends to execute a split of shares or pay a stock dividend.
b. Reverse Stock Splits: Manulife IM generally supports proposals for a reverse stock split if the company plans to proportionately reduce the number of shares authorized for issue in order to mitigate against the risk of excessive dilution to our holdings. We may also support these proposals in instances where the firm needs to quickly raise capital in order to continue operations.
c. Dual Class Voting Structure: Voting power should align with economic interest at a given firm. Manulife IM opposes the creation of new classes of stock with differential voting rights and supports the elimination of these structures.
VI. Corporate Transactions and Restructurings: Manulife IM reviews mergers, acquisitions, restructurings and reincorporations on a case-by-case basis through the lens of whether the transaction will create shareholder value. Considerations include fairness of the terms, valuation of the event, changes to management and leadership, realization of synergies and efficiencies and whether the rationale for a strategic shift is compelling.
VII. Audit-related Issues: Manulife IM believes that an effective auditor will remain independent and objective in their review of company reporting. Firms should be transparent regarding auditor fees and other services provided by an auditor which may create a conflict of interest. Manulife IM uses the below principles to guide voting decisions related to auditors.
a. Auditor Ratification: Manulife IM generally approves the reappointment of the auditor absent evidence that they have either failed in their duties or appear to have a conflict that may not allow independent and objective oversite of a firm.
b. Auditor Rotation: If Manulife IM believes that the independence and objectivity of an auditor may be impaired at a firm, we may support a proposal requesting a rotation of auditor. Reasons to support the rotation of the auditor can include a significant failure in the audit function and excessive tenure of the auditor at the firm.
1 Manulife Investment Management is the unified global brand for Manulife’s Global Wealth and Asset Management (GWAM) business which serves individual investors and institutional clients in three businesses: Retirement, Retail and Institutional Asset
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Management (Public Markets and Private Markets).
2 Further information on Sustainable Investing at Manulife IM can be found at manulifeim.com/institutional.
3 We acknowledge SEC guidance on this issue from August 2019 which lists several non-exhaustive examples of possible voting
arrangements between the client and investment advisor including: (i) an agreement with the client to exercise voting authority pursuant
to specific parameters designed to serve the client’s best interest; (ii) an agreement with the client to vote in favor of all proposals
made by particular shareholder proponents; or (iii) an agreement with the client to vote in accordance with the voting recommendations
of management of the issuer. All such arrangements could be subject to conditions depending on instruction from the client.
4 This includes general funds, affiliated segregated funds or separate accounts, and affiliated mutual / pooled funds.
5 This includes assets managed or advised for unaffiliated third parties, such as unaffiliated mutual/pooled funds and unaffiliated
institutional advisory portfolios.
6 For more information on issues generally of interest to our firm please see the Manulife Investment Management Engagement
Policy and the Manulife Investment Management Sustainable Investing Policy.
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JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
PART C
OTHER INFORMATION
Item 25. Financial Statements and Exhibits
(1) | FINANCIAL STATEMENTS: |
Included in Part A: Financial Highlights
(2) | EXHIBITS: |
(a) | Amended and Restated Agreement and Declaration of Trust dated January 22, 2016 – FILED HEREWITH |
(1) Amendment dated December 13, 2018 to the Amended and Restated Agreement and Declaration of Trust dated January 22, 2016 - FILED HEREWITH
(b) | Amended and Restated By-laws dated September 27, 2013 (“By-Laws”) – FILED HEREWITH |
(1) Amendment dated March 10, 2016 to the Amended and Restated By-Laws dated September 27, 2013 – FILED HEREWITH
(c) | Voting Trust Agreements. Not applicable. |
(d) | Instruments Defining Rights of Security Holders. See exhibits (2)(a) and (2)(b), above. |
(e) | Dividend Reinvestment Plan. Dividend Reinvestment Plan dated June 25, 2021 – FILED HEREWITH |
(f) | Instruments Defining Rights of Long-term Debt Holders. Not applicable. |
(g) | Investment Advisory Contracts. |
(1) | Amended and Restated Investment Advisory Agreement dated June 30, 2020 between the Fund and John Hancock Investment Management LLC1 (the “Advisor”) – FILED HEREWITH |
(2) | Sub-Advisory Agreement dated December 31, 2005 with the Advisor and Manulife Investment Management (US) LLC2 – FILED HEREWITH |
(3) | Sub-Advisory Agreement Amendment Dated January 18, 2013 FILED HEREWITH |
(h) | Underwriting or Distribution Contracts. |
(1) | Form of Distribution Agreement between John Hancock Investment Management Distributors LLC3 (the “Distributor”), and the Fund – FILED HEREWITH. |
(2) | Form of Dealer Agreement between the Distributor and the Dealer – FILED HEREWITH. |
(i) | Bonus or Profit Sharing Contracts. Not applicable. |
(j) | Custodian Agreement. Master Custodian Agreement dated September 10, 2008 between the Fund and State Street Bank and Trust Company – FILED HEREWITH |
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(1) | Amendment dated October 1, 2015 to the Master Custodian Agreement dated September 10, 2008 between the Fund and State Street Bank and Trust Company – FILED HEREWITH |
(k) | Other Material Contracts. |
(1) | Administration Agreement Dated August 15, 1994 – FILED HEREWITH |
(a) Amendment dated September 11, 2012 to the Administration Agreement – FILED HEREWITH
(b) Form of Expense Limitation Agreement between the Advisor and the Fund with respect to the Administration Agreement - FILED HEREWITH
(2) | Service Agreement dated June 30, 2020 among the Fund, the Advisor, and the Fund’s Chief Compliance Officer – FILED HEREWITH |
(3) | Service Agreement for Transfer Agent Services dated June 1, 2002 with Computershare Inc4 – FILED HEREWITH |
(a) |
Amendment
dated July 1, 2007 to the Service Agreement for Transfer Agent Services – FILED HEREWITH
|
(b) | Amendment dated September 25, 2007 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(c) | Amendment dated October 10, 2007 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(d) | Amendment dated July 1, 2010 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(e) | Amendment dated October 18, 2010 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(f) | Amendment dated April 6, 2011 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(g) | Amendment dated March 31, 2013 to the Service Agreement for Transfer Agent Services – FILED HEREWITH | |
(h) | Amendment dated June 30, 2014 to the Service Agreement for Transfer Agent Services – FILED HEREWITH | |
(i) | Amendment dated June 30, 2016 to the Service Agreement for Transfer Agent Services – FILED HEREWITH | |
(j) | Amendment dated July 1, 2018 to the Service Agreement for Transfer Agent Services – FILED HEREWITH |
(4) | Agreement to Waive Advisory Fees and Reimburse Expenses dated June 25, 2020 – FILED HEREWITH | |
(1) | Legal Opinion – FILED HEREWITH | |
(m) | Non-resident Consent to Service of Process. Not applicable. |
(n) | Other Opinions. Consent of Independent Registered Public Accounting Firm – FILED HEREWITH. |
(o) | Omitted Financial Statements. Not applicable. |
(p) | Agreement Related to Initial Capital. Not applicable. |
(q) | Model Retirement Plan. Not applicable. | |
(r) | Codes of Ethics. |
C-23 |
(1) | John Hancock Code of Ethics dated January 1, 2008 (as revised September 17, 2020) for John Hancock Investment Management LLC1 and John Hancock Variable Trust Advisers LLC (each, a “John Hancock Adviser”) and John Hancock Investment Management Distributors LLC, John Hancock Distributors, LLC, each open-end fund, closed-end fund, and exchange traded fund advised by a John Hancock Adviser (the “John Hancock Affiliated Funds”), (together, called “John Hancock”) – FILED HEREWITH |
(2) | Code of Ethics dated January 20, 2020 for Global Wealth and Asset Management and General Account Investments a division of Manulife Investment Management (US) LLC – FILED HEREWITH |
(3) | Code of Ethics Effective December 6, 2005 Amended and Restated January 1, 2020 for the Independent Trustees of the John Hancock Funds – FILED HEREWITH |
(s) |
Power
of Attorney. Power of Attorney dated December 10, 2020 – FILED HEREWITH
|
1 | Prior to June 28, 2019, John Hancock Investment Management LLC was known as John Hancock Advisers, LLC. |
2 | Prior to May 7, 2019, Manulife Investment Management (US) LLC was known as John Hancock Asset Management a division of Manulife Asset Management (US) LLC (formerly known as MFC Global Investment Management (U.S.) LLC). |
3 | Prior to June 28, 2019, John Hancock Investment Management Distributors LLC was known as John Hancock Funds, LLC (formerly known as John Hancock Broker Distribution Services, Inc.). |
4 | Computershare Inc. was previously known as Computershare Shareowner Services LLC (formerly, Mellon Investor Services, LLC). |
ITEM 26. MARKETING ARRANGEMENTS
See Form of Distribution Agreement and Form of Dealer Agreement – TO BE FILED BY AMENDMENT
ITEM 27. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The approximate expenses in connection with the offering are as follows:
Registration and Filing Fees | $6,190 |
Financial Industry Regulatory Authority Fee | $9,005 |
New York Stock Exchange Fee | $2,500 |
Cost of Printing and Engraving | $0.00 |
Accounting Fee and Expenses | $6,541 |
Legal Fees and Expenses | $175,000 |
Total | $199,236 |
ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
John Hancock Investment Management LLC (the “Advisor”) is the investment advisor to the Fund. The Advisor is a an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife Financial Corporation (“Manulife Financial”), a publicly traded company based in Toronto, Canada. A corporate organization list is set forth below.
ITEM 29. NUMBER OF HOLDERS OF SECURITIES
Set forth below is the number of record holders as of June 1, 2021, of each class of securities of the Fund:
Title of Class | Number of Record Holders |
Shares of Common Stock, no par value | 367 |
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ITEM 30. INDEMNIFICATION
Indemnification provisions relating to the Fund’s Trustees, officers, employees and agents are set forth in Section 4.3 of Article IV of Fund’s Declaration of Trust, as previously filed.
The form of Underwriting Agreement contains provisions limiting the liability and providing for indemnification of the Trustees and officers under certain circumstances.
The Fund’s Trustees and officers are insured under a standard investment company errors and omissions insurance policy covering loss incurred by reason of negligent errors and omissions committed in their official capacities as such. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to Trustees, officers and controlling persons of the Fund pursuant to the provisions described in this Item 30, or otherwise, the Fund has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Fund of expenses incurred or paid by a Trustee, officer or controlling person of the Fund in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Fund will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Article V of the Limited Liability Company Agreement of the Advisor provides as follows:
“Section 5.06. Indemnity and Exculpation.
(a) | No Indemnitee, and no shareholder, director, officer, member, manager, partner, agent, representative, employee or Affiliate of an Indemnitee, shall have any liability to the Company or to any Member for any loss suffered by the Company (or the Corporation) which arises out of any action or inaction by such Indemnitee with respect to the Company (or the Corporation) if such Indemnitee so acted or omitted to act (i) in the good faith (A) belief that such course of conduct was in, or was not opposed to, the best interests of the Company (or the Corporation), or (B) reliance on the provisions of this Agreement, and (ii) such course of conduct did not constitute gross negligence or willful misconduct of such Indemnitee. |
(b) | The Company shall, to the fullest extent permitted by applicable law, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a Director or Officer, or is or was serving, or has agreed to serve, at the request of the Company (or previously at the request of the Corporation), as a director, officer, manager or trustee of, or in a similar capacity with, another corporation, partnership, limited liability company, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of an Indemnitee in connection with such action, suit or proceeding and any appeal therefrom. |
(c) | As a condition precedent to his right to be indemnified, the Indemnitee must notify the Company in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity hereunder will or could be sought. With respect to any action, suit, proceeding or investigation of which the Company is so notified, the Company will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. |
(d) | In the event that the Company does not assume the defense of any action, suit, proceeding or investigation of which the Company receives notice under this Section 5.06, the Company shall pay in advance of the final disposition of such matter any expenses (including attorneys’ fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom; provided, however, that the payment of such expenses incurred by an Indemnitee in advance |
C-25 |
of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company as authorized in this Section 5.06, which undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such repayment; and further provided that no such advancement of expenses shall be made if it is determined that (i) the Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company, or (ii) with respect to any criminal action or proceeding, the Indemnitee had reasonable cause to believe his conduct was unlawful.
(e) | The Company shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board of Directors. In addition, the Company shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Company makes any indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund such indemnification payments to the Company to the extent of such insurance reimbursement. |
(f) | All determinations hereunder as to the entitlement of an Indemnitee to indemnification or advancement of expenses shall be made in each instance by (a) a majority vote of the Directors consisting of persons who are not at that time parties to the action, suit or proceeding in question (“Disinterested Directors”), whether or not a quorum, (b) a majority vote of a quorum of the outstanding Common Shares, which quorum shall consist of Members who are not at that time parties to the action, suit or proceeding in question, (c) independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Company), or (d) a court of competent jurisdiction. |
(h) | The indemnification rights provided in this Section 5.06 (i) shall not be deemed exclusive of any other rights to which an Indemnitee may be entitled under any law, agreement or vote of Members or Disinterested Directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of the Indemnitees. The Company may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Company or other persons serving the Company and such rights may be equivalent to, or greater or less than, those set forth in this Section 5.06. Any indemnification to be provided hereunder may be provided although the person to be indemnified is no longer a Director or Officer.” |
ITEM 31. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
For information as to the business, profession, vocation or employment of a substantial nature of each of the directors and executive officers of the Advisor and the Subadvisor, reference is made to the information set forth under: (i) the caption “Investment Advisory and Other Services” in the Statement of Additional Information; (ii) Item 6 of the Form ADV Part II of John Hancock Investment Management LLC (File No. 801-8124) filed with the SEC; and (iii) Item 6 of the Form ADV Part II of Manulife Investment Management (US) LLC (File No. 801-42023) filed with the SEC, all of which are incorporated herein by reference.
ITEM 32. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by the Fund by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder are in the possession and custody of the Fund’s custodian, State Street Bank and Trust Company, Corporate Headquarters, State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111, and its transfer agent, Computershare, Inc., 250 Royall Street, Canton, Massachusetts, 02021, with the exception of certain corporate documents and portfolio trading documents that are in the possession and custody of the Advisor, 200 Berkeley Street, Boston, Massachusetts, 02116, and the Subadvisor, 101 Huntington Avenue, Boston, MA 02199-7603. The Fund is informed that all applicable accounts, books and documents required to be maintained by registered investment advisors are in the custody and possession of the Advisor and the Subadvisor.
C-26 |
ITEM 33. MANAGEMENT SERVICES
Not applicable.
ITEM 34. UNDERTAKINGS
1. | Not applicable. |
2. | Not applicable. |
3. | The Common Shares being registered will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act. Accordingly, the Fund undertakes: |
a. | To file, during any period in which offers or sales are being made, a post-effective amendment to the Registration Statement: |
(1) | To include any prospectus required by Section 10(a)(3) of the Securities Act; |
(2) | To reflect in the prospectus any facts or events after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the Registration Statement; and |
(3) | To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. |
Provided, however, that paragraphs a(1), a(2), and a(3) of this section do not apply if the registration statement is filed pursuant to General Instruction A.2 of this Form and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference into the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
b. | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof. |
c. | To remove from registration by means of a post-effective amendment any of the Common Shares being registered which remain unsold at the termination of the offering. |
d. | That, for the purpose of determining liability under the Securities Act to any purchaser: |
(1) if the Fund is subject to Rule 430B:
(A) Each prospectus filed by the Fund pursuant to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the date the filed prospectus was deemed part of and included in the Registration Statement; and
C-27 |
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a Registration Statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the Registration Statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the Registration Statement relating to the securities in the Registration Statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a Registration Statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such effective date; or
(2) if the Fund is subject to Rule 430C: Each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a Registration Statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A under the Securities Act, shall be deemed to be part of and included in the Registration Statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a Registration Statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such date of first use.
e. | That for the purpose of determining liability of the Fund under the Securities Act to any purchaser in the initial distribution of Common Shares: |
The undersigned Fund undertakes that in a primary offering of securities of the undersigned Fund pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Fund will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
(1) | any preliminary prospectus or prospectus of the undersigned Fund relating to the offering required to be filed pursuant to Rule 424 under the Securities Act; |
(2) | free writing prospectus relating to the offering prepared by or on behalf of the undersigned Fund or used or referred to by the undersigned Fund; |
(3) | the portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act relating to the offering containing material information about the undersigned Fund or its securities provided by or on behalf of the undersigned Fund; and |
(4) | any other communication that is an offer in the offering made by the undersigned Fund to the purchaser. |
4. | The Fund undertakes that, for the purpose of determining any liability under the Securities Act: |
a. | the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Fund pursuant to 424(b)(1) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective; and |
C-28 |
b. | each post- effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
5. | The undersigned Fund hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Fund’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference into the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
6. | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Fund pursuant to the foregoing provisions, or otherwise, the Fund has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Fund of expenses incurred or paid by a trustee, officer or controlling person of the Fund in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Fund will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
7. | The Fund undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of an oral or written request, its Statement of Additional Information. |
C-29 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston and The Commonwealth of Massachusetts, on the 25th day of June 2021.
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND | ||||
By: | /s/ Andrew G. Arnott | |||
Name: | Andrew G. Arnott | |||
Title: | President and Trustee |
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
Signature | Title | Date |
/s/ Andrew G. Arnott | President and Trustee | June 25, 2021 |
Andrew G. Arnott | ||
/s/ Charles A. Rizzo | Chief Financial Officer | June 25, 2021 |
Charles A. Rizzo | (Principal Financial Officer and Principal Accounting Officer) | |
/s/ Charles L. Bardelis * | Trustee | June 25, 2021 |
Charles L. Bardelis | ||
/s/ James R. Boyle * | Trustee | June 25, 2021 |
James R. Boyle | ||
/s/ Peter S. Burgess * | Trustee | June 25, 2021 |
Peter S. Burgess | ||
/s/ William H. Cunningham * | Trustee | June 25, 2021 |
William H. Cunningham | ||
/s/ Grace K. Fey * | Trustee | June 25, 2021 |
Grace K. Fey | ||
/s/ Marianne Harrison * | Trustee | June 25, 2021 |
Marianne Harrison | ||
/s/ Deborah C. Jackson * | Trustee | June 25, 2021 |
Deborah C. Jackson | ||
/s/ Hassell H. McClellan * | Trustee | June 25, 2021 |
Hassell H. McClellan | ||
/s/ Steven R. Pruchansky * | Trustee | June 25, 2021 |
Steven R. Pruchansky |
|
|
/s/ Frances G. Rathke* | Trustee | June 25, 2021 |
Frances G. Rathke |
Signature | Title | Date |
/s/ Gregory A. Russo * | Trustee | June 25, 2021 |
Gregory A. Russo |
*By: | Power of Attorney | |||
By: | /s/ Ariel Ayanna | |||
Ariel Ayanna | ||||
Attorney-In-Fact |
*Pursuant to Power of Attorney filed herewith.
EXHIBIT (2)(a)
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST OF
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
601 Congress St.
Boston, Massachusetts
02210
Dated: January 22, 2016
TABLE OF CONTENTS
Page | ||
Article I THE TRUST | 1 | |
Section 1.1 | Trust Name | 1 |
Section 1.2 | Offices’ Resident Agent | 1 |
Section 1.3 | Nature of Trust | 2 |
Section 1.4 | Definitions | 2 |
Article II PURPOSE OF THE TRUST | 3 | |
Article III SHARES OF BENEFICIAL INTEREST | 3 | |
Section 3.1 | Division of Beneficial Interest | 3 |
Section 3.2 | Ownership of Shares | 3 |
Section 3.3 | Investment in the Trust | 3 |
Section 3.4 | No Preemptive Rights | 4 |
Section 3.5 | Status of Shares; Limitation of Personal Liability | 4 |
Section 3.6 | Consideration for Shares | 4 |
Article IV TRUSTEES | 4 | |
Section 4.1 | Number; Designation, Election, Terms, etc. | 4 |
Section 4.2 | Powers | 6 |
Section 4.3 | Payment of Trust Expenses; Compensation of Trustees | 11 |
Section 4.4 | Ownership of Trust Assets | 11 |
Section 4.5 | Certain Contracts | 11 |
Article V SHAREHOLDERS’ VOTING POWERS AND MEETINGS | 13 | |
Section 5.1 | Voting Powers | 13 |
Section 5.2 | Meetings | 13 |
Section 5.3 | Record Dates | 14 |
Section 5.4 | Quorum and Required Vote | 14 |
Section 5.5 | Action by Written Consent | 14 |
Section 5.6 | Inspection of Records | 15 |
Section 5.7 | Additional Provisions | 15 |
Article VI LIMITATION OF LIABILITY; INDEMNIFICATION | 15 | |
Section 6.1 | Trustees, Shareholders, etc.; Not Personally Liable; Notice. | 15 |
Section 6.2 | Trustees’ Good Faith Action; Expert Advice; No Bond or Surety | 15 |
Section 6.3 | Apparent Authority of the Trustees | 16 |
Section 6.4 | Indemnification of Trustees, Officers, etc. | 16 |
Section 6.5 | Compromise Payment | 18 |
Section 6.6 | Indemnification Not Exclusive, etc | 18 |
i |
Section 6.7 | Indemnification of Shareholders | 19 |
Article VII MISCELLANEOUS | 19 | |
Section 7.1 | Duration and Termination | 19 |
Section 7.2 | Reorganization | 19 |
Section 7.3 | Conversion | 20 |
Section 7.4 | Amendments, etc | 20 |
Section 7.5 | Filing of Copies | 21 |
Section 7.6 | Applicable Law | 21 |
Section 7.7 | References; Gender; Headings; Counterparts | 21 |
Section 7.8 | Provisions in Conflict with Law or Regulations | 21 |
ii |
AMENDED AND RESTATED AGREEMENT AND DECLARATION
OF TRUST OF
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
AGREEMENT AND DECLARATION OF TRUST, amended and restated on January 22, 2016, by the Trustees (together with all other persons from time to time duly elected, qualified and serving as Trustees in accordance with the provisions of Article IV hereof, the “Trustees”);
WHEREAS, pursuant to a declaration of trust executed and delivered on June 16, 1994 (the “Original Declaration”), the Trustees established a trust for the investment and reinvestment of funds contributed thereto;
WHEREAS, the Trust has been established as a Massachusetts business trust for the investment and reinvestment of funds contributed thereto;
WHEREAS, the beneficial interest in the Trust assets are divided into transferable shares of beneficial interest, as further set forth herein; and
WHEREAS, the Trustees desire to amend and restate the Declaration of Trust in its entirety;
NOW, THEREFORE, the Trustees hereby amend and restate this Declaration of Trust as follows:
Article I
THE TRUST
Section 1.1 Trust Name. The name of the Trust shall be “John Hancock Financial Opportunities Fund”, and so far as may be practicable the Trustees shall conduct the Trust’s activities, execute all documents and sue or be sued under that name, which name (and the word “Trust” wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees in their capacity as Trustees, and not individually or personally, and shall not refer to the officers, agents or employees of the Trust or of such Trustees, or to the Shareholders. If the Trustees determine that the use of such name is not practicable, legal or convenient at any time or in any jurisdiction, or if the Trust is required to discontinue the use of such name, then the Trustees may use such other designation or adopt such other name for the Trust as they deem proper, and the Trust may hold property and conduct its activities under such other designation or name.
Section 1.2 Offices’ Resident Agent. The Trust shall have an office at 601 Congress Street, Boston, Massachusetts, unless changed by the Trustees to another location in Massachusetts or elsewhere, but such office need not be the sole or principal office of the Trust. The Trust may have such other offices or places of business as the Trustees may from time to time determine to be necessary or expedient. The Trustees may appoint, and from time to time replace, a resident agent for the Trust in The Commonwealth of Massachusetts.
-1- |
Section 1.3 Nature of Trust. The Trust shall be a voluntary association with transferable shares under the laws of The Commonwealth of Massachusetts, of the type referred to in Section 1 of Chapter 182 of the Massachusetts General Laws and commonly known as a Massachusetts business trust. The Trust is not intended to be, shall not be deemed to be and shall not be treated as, a general partnership, limited partnership, joint venture, corporation or joint stock company. The Shareholders’ relationship to the Trustees shall be solely in accordance with the rights conferred upon them hereunder. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners, members or joint venturers. Duties of the Trustees are limited to those imposed by applicable law or expressly stated herein.
Section 1.4 Definitions. As used in this Declaration of Trust, the following terms shall have the meanings set forth below unless the context thereof otherwise requires:
“By-Laws” means the By-Laws of the Trust, as amended from time to time.
“Class” or “Class of Shares” refer to the division of Shares into two or more Classes as provided in Article III, Section 3.1 hereof.
“Commission” means the Securities and Exchange Commission.
“Contracting Party” has the meaning designated in Section 4.5 hereof.
“Declaration” and “Declaration of Trust” mean this Agreement and Declaration of Trust and all amendments or modifications thereof as from time to time in effect.
“Majority of the Trustees” means a majority of the Trustees in office at the time in question. At any time at which there shall be only one Trustee in office, such phrase shall mean such Trustee.
“1940 Act” means the Investment Company Act of 1940 and the rules and regulations thereunder, both as amended from time to time, and any order or orders thereunder which may from time to time be applicable to the Trust.
“Series” or “Series of Shares” refers to the division of Shares representing any Class into two or more Series as provided in Article III, Section 3.1 hereof.
“Shareholder” means a record owner of Shares.
“Shares” means the transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time, or if more than one Class or Series of Shares is authorized by the Trustees, the equal proportionate transferable units into which each Class or Series of Shares shall be divided from time to time.
“Trust” means the Massachusetts business trust established by this Declaration of Trust, as amended from time to time.
-2- |
“Trustees” means the persons who have signed this Declaration of Trust, so long as they shall continue in office, and all other individuals who at the time in question have been duly elected or appointed as Trustees of the Trust in accordance with the provisions hereof and who have qualified and are then in office. Reference herein to a Trustee or the Trustees shall refer to such person or persons in his or her capacity or their capacities as trustees hereunder. At any time at which there shall be only one Trustee in office, such term shall mean such single Trustee.
Article II
PURPOSE OF THE TRUST
The purpose of the Trust is to provide investors a managed investment primarily in securities, debt instruments and other instruments and rights of a financial character and to enter into, or engage in, any and all activities which investment companies are not prohibited from entering into pursuant to the 1940 Act whether or not the Trust is registered or required to be registered under the 1940 Act.
Article III
SHARES OF BENEFICIAL INTEREST
Section 3.1 Division of Beneficial Interest. The beneficial interest in the Trust shall at all times be divided into an unlimited number of transferrable Shares without par value. Subject to the provisions of the Declaration of Trust and the By-Laws regarding the powers, preferences or special or relative rights or privileges of any outstanding Class or Series of Shares, the Trustees may divide the Shares into two or more Classes and each such Class into one or more Series, Shares of each such Class or Series having such provisions, including without limitation, preferences or special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in the By-Laws. The number of Shares of any such Class or Series authorized shall be unlimited, except as the By-Laws may otherwise provide. The Trustees may from time to time divide or combine the Shares of any Class or Series into a greater or lesser number without thereby changing the proportionate beneficial interest in the Class or Series.
Section 3.2 Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust or of a transfer or similar agent. No certificates evidencing the ownership of Shares shall be issued by the Trust except as specifically provided herein or as the Trustees may otherwise determine from time to time. The Trustees shall have the power to call outstanding Share certificates and to cause ownership of such Shares to be recorded only on the books of the Trust. The Trustees may make such rules as they consider appropriate for the issuance of share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each Class or Series and as to the number of Shares of each Class or Series held from time to time by each Shareholder.
Section 3.3 Investment in the Trust. The Trustees may accept investments in the Trust from such persons and on such terms and for such consideration, which may consist of cash or tangible or intangible property or a combination thereof, as they or the By-Laws from time to time authorize.
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Section 3.4 No Preemptive Rights. Shareholders shall have no preemptive or other right to subscribe for any additional Shares or other securities issued by the Trust.
Section 3.5 Status of Shares; Limitation of Personal Liability. Shares shall be deemed to be personal property, giving only the rights provided in this Declaration of Trust or the By-Laws. For the avoidance of doubt, Shareholders shall have no rights, privileges, claims or remedies under any contract or agreement entered into by the Trust or any Series thereof with any service provider or other agent to or contractor with the Trust or a Series thereof, including, without limitation, any third party beneficiary rights. Every Shareholder by virtue of having become a Shareholder shall be bound by the terms of this Declaration of Trust and the By-Laws. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the Trust nor to entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Declaration of Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or any right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder nor, except as specifically provided herein, to call upon any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay.
Section 3.6 Consideration for Shares. The Trustees may issue Shares of any Class or Series for such consideration and on such terms as they may determine (or for no consideration if pursuant to a Share dividend or split up), all without action or approval of the Shareholders. All Shares when so issued on the terms determined by the Trustees shall be fully paid and non-assessable.
Article IV
TRUSTEES
Section 4.1 Number; Designation, Election, Terms, etc.
(a) Number. Each of the Trustees’ address is c/o John Hancock Financial Opportunities Fund, 601 Congress Street, Boston, Massachusetts 02210. The initial Trustees shall be the persons signing this Declaration. Except as otherwise provided herein or in the By-Laws, the Trustees may increase or decrease the number of Trustees by a written instrument signed by a majority of the Trustees; provided that, unless otherwise approved by more than 75% of the Trustees then in office, the number of Trustees shall not be greater than fourteen (14). No decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to subsection (d) of this Section 4.1.
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(b) Election and Term. Except for the Trustees named herein or appointed to fill vacancies pursuant to Section 4.1(e) hereof, the Trustees shall be elected by the Shareholders at a meeting called and held for that purpose for the terms as provided in this Declaration. Subject to the 1940 Act and except as otherwise provided herein or in the By-Laws, the Trustees shall have the power to set and alter the terms of office of the Trustees, and at any time to lengthen or shorten their own terms or make their terms of unlimited duration, to appoint their own successors and, pursuant to subsection (e) of this Section 4.1, to fill vacancies; provided, that a Trustee or Trustees shall be elected by the Shareholders at any such time or times such action is required under this Declaration of Trust, the By-Laws, the 1940 Act and the rules and regulations of any securities exchange on which the Shares are listed; and provided, further, that after the initial election of Trustees by the Shareholders, the term of office of any incumbent Trustee shall continue (unless specifically provided otherwise herein or in the By-Laws) until the termination of this Trust or his earlier death, resignation, retirement, bankruptcy, adjudicated incompetency, or other incapacity or removal, or if not so terminated, until the appointment or election of such Trustee’s successor in office has become effective.
(c) Class. The Board of Trustees shall be divided into three Classes, each Class to consist, as nearly as may be, of one-third of the number of Trustees then constituting the whole Board of Trustees. At any time the Board of Trustees shall consist of less than three Trustees, such Trustees may, by unanimous vote of such Trustees and without Shareholder approval, terminate the division of the Board of Trustees into three Classes, which vote is binding on any subsequent Board of Trustees. The Trustees shall be elected to each Class as provided in the By-Laws.
(d) Resignation, Retirement and Removal. Any Trustee may resign his trust or retire as a Trustee, by a written instrument signed by him and delivered to the other Trustees or to any officer of the Trust, and such resignation or retirement shall take effect upon such delivery or upon such later date as is specified in such instrument. At any meeting called for the purpose, a Trustee may be removed from his office during his term, but only for cause and only by action of the holders of at least 75% of the outstanding Shares; provided, however, that if termination of a Trustee is recommended by more than 75% of the total number of Trustees then in office, the vote of a majority of the Shares then outstanding shall be sufficient authorization. Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any trust property or property of any Series or Class of the Trust held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence.
(e) Vacancies. Any vacancy or anticipated vacancy resulting from any reason, including without limitation the death, resignation, retirement, removal or incapacity of any of the Trustees, or an increase in the number of Trustees, may (unless otherwise required by the 1940 Act) be filled by a Majority of the Trustees, subject to the provisions of this Declaration of
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Trust, the By-Laws and the 1940 Act; provided, that if required by the 1940 Act or if there shall be no Trustees in office, such vacancy or vacancies shall be filled by the Shareholders. Any such appointment or election shall take effect immediately, except that an appointment or election in anticipation of a vacancy to occur by reason of retirement, resignation or increase in the number of Trustees to be effective at a later date shall become effective only at or after the effective date of said retirement, resignation or increase in the number of Trustees.
(f) Effect of Death, Resignation, etc. The death, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul or terminate the Trust or to revoke or terminate any existing agency or contract created or entered into pursuant to the terms of this Declaration of Trust. Whenever a vacancy shall occur, until such vacancy is filled, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.
(g) No Accounting. Except under circumstances which would justify his removal for cause, no individual ceasing to be a Trustee (nor the estate of any such individual) shall be required to make an accounting to the Shareholders or remaining Trustees upon such cessation.
Section 4.2 Powers. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Trustees, and they shall have all powers necessary or convenient to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business and affairs of the Trust and, subject to Section 7.4 hereof, may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders of one or more Classes or Series; they may select, and from time to time change, the fiscal year of the Trust; they may as they consider appropriate elect and remove officers, appoint and terminate agents and consultants, and hire and terminate employees, any one or more of the foregoing of whom may be a Trustee, and may provide for the compensation of all of the foregoing; they may appoint from their own number, and terminate, any one or more committees consisting of one or more Trustees, including without implied limitation an executive committee, which may, when the Trustees are not in session and subject to the 1940 Act, exercise some or all of the power and authority of the Trustees as the Trustees may determine; they may employ one or more custodians of the assets of the Trust and may authorize any such custodian to employ sub-custodians or agents and to deposit all or any part of such assets in a system or systems for the central handling of securities; they may retain investment advisers, administrative agents, transfer agents, dividend disbursing agents, accounting agents or shareholder servicing agents, or any of the foregoing; they may provide for the distribution of securities issued by the Trust through one or more underwriters, distributors or otherwise; they may set record dates or times for the determination of Shareholders entitled to participate in, benefit from or act with respect to various matters; and in general they may delegate to any officer of the Trust, to any committee of the Trustees, and to any employee, agent or consultant of the Trust such authority, powers, functions and duties as they consider desirable or appropriate for the conduct of the business and affairs of the Trust, including, without implied limitation, the power and authority to act in the name of the Trust and of the Trustees, to sign documents and to act as attorney-in-fact for the Trustees.
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Without limiting the foregoing, the Trustees shall have power and authority:
(a) to invest and reinvest cash and other property, and to hold cash uninvested;
(b) to sell, exchange, lend, pledge, mortgage, hypothecate, write options on, lease, grant security interests in, negotiate, convey, transfer or otherwise dispose of and trade in the assets of the Trust;
(c) to vote or give assent or exercise any rights of ownership with respect to stock or other securities or property; and to receive powers of attorney from, and to execute and deliver proxies or powers of attorney to, such person or persons as the Trustees shall deem proper, receiving from or granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper;
(d) to exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities;
(e) to hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in the name of the Trustees, or in the name of a custodian, sub-custodian or other depositary or a nominee or nominees, or otherwise;
(f) to consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security of which is or was held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by any such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust;
(g) to join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper;
(h) to compromise, arbitrate or otherwise adjust claims in favor of or against the Trust for any matter in controversy, including but not limited to claims for taxes;
(i) to enter into joint ventures, general or limited partnerships and any other combinations or associations;
(j) to borrow funds and in this connection to issue notes or other evidence of indebtedness;
(k) to endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; and to mortgage or pledge the Trust property or any part thereof to secure any part of or all such obligations;
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(l) to purchase and pay for entirely out of the Trust property such insurance as they may deem necessary or appropriate for the conduct of the business of the Trust, including without limitation insurance policies insuring the assets of the Trust, or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers, underwriters, or other independent contractors, of the Trust individually against all claims and liabilities of every nature arising by reason of holding or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person in any such capacity, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify any such person against such liability;
(m) to pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust;
(n) to the extent necessary or appropriate to give effect to preferences, special or relative rights and privileges of any Class or Series of Shares, to allocate assets, liabilities, income and expenses of the Shares or to apportion the same among two or more Classes or Series;
(o) to enter into, make and perform all such obligations, contracts, agreements and undertakings of every kind and description, with any person or persons, as the Trustees shall in their discretion deem expedient in the conduct of the business of the Trust, for such terms as they shall see fit, whether or not extending beyond the term of office of the Trustees, or beyond the possible expiration of the Trust; and to amend, extend, release or cancel any such obligations, contracts, agreements or understandings; and to execute, acknowledge, deliver and record all written instruments which they may deem necessary or expedient in the exercise of their powers;
(p) Without limiting the foregoing, the Trustees shall have the following power and authority:
(i) The Trustees shall have the power to engage in and to prosecute, defend, compromise, abandon, or adjust by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust or arising out of or relating to the Trustees’ service to the Trust, and out of the assets of the Trust or any Series thereof to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include without limitation the power of the Trustees or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to
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dismiss any action, suit, proceeding, dispute, claim, or demand, derivative or otherwise, brought by any person, including a Shareholder in its own name or the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust or any Series or Class thereof. To the maximum extent permitted by law, any exercise of power described in this Section 4.2(p) shall be final and binding on all Persons, including Shareholders.
(ii) Any suit, action or proceeding brought by or in the right of any Shareholder or any Person claiming any interest in any Shares seeking to enforce any provision of, or based on any matter arising out of, related to, or in connection with, this Declaration or the Trust, any Series or Class or any Shares, including without limitation any claim (whether direct, derivative or otherwise) of any nature against or on behalf of the Trust, any Series or Class, the Trustees or officers of the Trust, or the investment adviser, shall be brought exclusively in the United States District Court for the District of Massachusetts, or to the extent such court does not have jurisdiction then such actions and/or claims, shall be brought in the Superior Court of Suffolk County for the Commonwealth of Massachusetts. If a Shareholder or group of Shareholders bring a claim in a jurisdiction other than as specified above, and venue for such claim is subsequently changed through legal process to the United States District Court for the District of Massachusetts or the Superior Court of Suffolk County for the Commonwealth of Massachusetts, such Shareholder(s) shall reimburse all expenses incurred by the Trust or any other Person in effecting such change of venue.
(iii) A Shareholder or group of Shareholders may bring a derivative action on behalf of the Trust only in accordance with the terms of this Section 4.2(p) in addition to any requirements applicable to shareholders of a Massachusetts business corporation that are not inconsistent with the terms of this Declaration.
(iv) Except to the extent expressly permitted under the federal securities laws, no Shareholder or group of Shareholders shall have the right to bring or maintain any court action, proceeding or claim on behalf of the Trust or any Series or Class of Shares without first making demand on the Trustees requesting the Trustees to bring or maintain such action, proceeding or claim. Such demand shall not be excused under any circumstances, including claims of alleged interest on the part of the Trustees, unless the demanding Shareholder(s) make a specific showing that irreparable nonmonetary injury to the Trust or Series or Class of Shares that the Shareholder(s) could not reasonably have prevented would otherwise result. Such demand shall be mailed to the Secretary of the Trust at the Trust’s principal office and shall set forth with particularity the nature of the proposed court action, proceeding or claim and the essential facts relied upon by the Shareholder(s) to support the allegations made in the demand. The Trustees shall consider the merits of the claim and determine whether commencing or maintaining a suit would be in the best interests of the Trust or the affected Series or Class, as applicable. In their sole discretion, the Trustees may submit the
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question of whether to proceed with the claim to a vote of Shareholders of the Trust or a Series or Class of Shares, as appropriate. To the maximum extent permitted by law, any decision by the Trustees to bring, maintain or settle (or not to bring, maintain or settle) such court action, proceeding or claim, or to submit the matter to a vote of Shareholders, shall be final and binding upon the Shareholders.
(v) Any Trustee acting in connection with any demand or any proceeding relating to a claim on behalf of or for the benefit of the Trust or any Series or Class thereof who is not an Interested Person of the Trust shall be deemed to be independent and disinterested with respect to any actions taken in connection with any such demand, proceeding, or claim. Without limiting the foregoing, a Trustee otherwise independent for purposes of considering the demand shall not be considered not to be independent and disinterested by virtue of (i) the fact that such Trustee receives remuneration for his service as a Trustee of the Trust or as a trustee or director of one or more investment companies with the same or an affiliated investment adviser or underwriter, (ii) the amount of such remuneration, (iii) the fact that such Trustee was identified in the demand as a potential defendant or witness or was named as a defendant in any derivative action, or (iv) the fact that the Trustee approved or participated in the act being challenged in the demand if the act resulted in no material personal benefit to the Trustee or, if the Trustee is also a Shareholder, no material personal benefit that is not shared pro rata with other Shareholders of the Series or Class of which the Trustee is a Shareholder.
(vi) For purposes of this Section 4.2(p), the Trustees may designate a committee to consider a demand by Shareholders. Such committee (or the Trustees in the absence of a committee) shall be entitled to retain counsel or other advisers in considering the merits of the demand.
(vii) Any diminution in the value of the Shareholder’s shares, or any other claim arising out of or relating to an allegation regarding the actions, inaction, or omissions of or by the Trustees, the Trust’s officers, or the investment adviser is a legal claim belonging only to the Trust and not to the Shareholders individually. Accordingly, all Shareholders shall be bound to bring any and all such claims pursuant only to the provisions of Section 4.2(p)(iii) - (v). For these purposes, the Trust is deemed to be a separate and distinct legal entity.
(viii) In the event that any current or former Shareholder or anyone on such a Shareholder’s behalf (each, a “Claiming Party”) initiates or asserts any claim in a derivative action brought by or in the right of the Trust or a Series (“Claim”) or joins, offers substantial assistance to or has a direct financial interest in any Claim against the Trust or Series and/or any Trustee, Trust officer or the investment adviser (the “Defendants”), then to the fullest extent permitted by law, either (i) if the Claiming Parties are found to have brought or maintained the Claim without reasonable cause or for an improper purpose, then each Claiming Party shall be obligated jointly and severally to reimburse the Defendants’
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reasonable expenses, including counsel fees, incurred in defending the Claim or (ii) if the Claim is found to have resulted in a substantial benefit to the Trust or Series, the Trust or Series shall be obligated to reimburse the Claiming Parties’ reasonable expenses, including counsel fees, incurred in pursuing the Claim; and
(q) to do all such other acts and things and to conduct, operate, carry on and engage in such other lawful businesses or business activities as they shall in their sole and absolute discretion consider to be incidental to the business of the Trust as an investment company, and to exercise all powers which they shall in their discretion consider necessary, useful or appropriate to carry on the business of the Trust, to promote any of the purposes for which the Trust is formed, whether or not such things are specifically mentioned herein, in order to protect or promote the interests of the Trust or otherwise to carry out the provisions of this Declaration.
The Trustees shall not in any way be bound or limited by any present or future law or custom concerning investments by trustees, nor shall the Trustees be limited to investing in obligations maturing before the possible termination of the Trust. The Trustees shall not be required to obtain a court order to deal with any assets of the Trust or take any other actions hereunder.
Except as otherwise provided herein or from time to time in the By-Laws, any action to be taken by the Trustees may be taken by a Majority of the Trustees present at a meeting of Trustees (a quorum being present), within or without Massachusetts, or by written consent of a Majority of the Trustees. Any meeting of Trustees may be held by means of a telephone conference call or other communications facility and participation by such means shall constitute presence in person at such meeting.
Section 4.3 Payment of Trust Expenses; Compensation of Trustees. The Trustees are authorized to pay or to cause to be paid out of the assets of the Trust, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including, but not limited to, the Trustees’ compensation and such expenses and charges for the services of the Trust’s officers, employees, investment adviser, sub-adviser, administrator, underwriter, auditor, counsel, custodian, sub-custodian, transfer agent, dividend disbursing agent, shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges, as the Trustees may deem necessary or proper to incur. Without limiting the generality of any other provision hereof, the Trustees shall be entitled to reasonable compensation from the Trust for their services as Trustees and may fix the amount of such compensation.
Section 4.4 Ownership of Trust Assets. Title to all of the assets of the Trust shall at all times be considered as vested in the Trustees.
Section 4.5 Certain Contracts. Subject to compliance with the provisions of the 1940 Act, but notwithstanding any limitations of present and future law or custom concerning delegation of powers by trustees generally, the Trustees may, at any time and from time to time and without limiting the generality of their powers and authority otherwise set forth herein, enter into one or more contracts with any one or more corporations, trusts, associations, partnerships, limited partnerships, other type of organizations, or individuals (a “Contracting Party”), to
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provide for the performance and assumption of some or all of the following services, duties and responsibilities to, for or on behalf of the Trust or the Trustees, and to provide for the performance and assumption of such other services, duties and responsibilities in addition to those set forth below as the Trustees may deem appropriate:
(a) to manage the Trust’s assets, to make investment decisions with respect thereto, and to place purchase and sale orders for portfolio transactions relating to such investments;
(b) to supervise all or any part of the operations of the Trust and to provide all or any part of the administrative and clerical personnel, office space, and office equipment and services appropriate for the efficient administration and operation of the Trust;
(c) to distribute the Shares or other securities issued by the Trust, to be principal underwriter of such Shares or securities, or to act as agent of the Trust in the sale of such Shares or securities and the acceptance or rejection of orders for the purchase thereof;
(d) to act as depositary for and to maintain custody of the property of the Trust and accounting records in connection therewith;
(e) to maintain records of ownership of outstanding Shares, the issuance and redemption and the transfer thereof, and to disburse any dividends declared by the Trustees and in accordance with the policies of the Trustees and the instructions of any particular Shareholder to reinvest any such dividends; and
(f) to handle all or any part of the accounting responsibilities, whether with respect to the Trust’s properties, Shareholders or otherwise.
The same person may be a Contracting Party for some or all of the services, duties and responsibilities to, for and of the Trust or the Trustees, and the contracts with respect thereto may contain such terms interpretive of or in addition to the delineation of the services, duties and responsibilities provided for, including provisions relating to the standard of care and the rights to indemnification of the Contracting Party and others, as the Trustees may determine. Nothing herein shall preclude, prevent or limit the Trust or a Contracting Party from entering into sub-contractual arrangements relative to any of the matters referred to in this Section 4.5.
The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, investment adviser, principal underwriter or distributor, or agent of or for any Contracting Party or of or for any parent or affiliate of any Contract Party, or that any Contracting Party or any parent or affiliate thereof is a Shareholder or has an interest in the Trust, or that
(b) any Contracting Party may have a contract providing for the rendering of any similar services to one or more other corporations, trusts, associations, partnerships, limited partnerships or other organizations, or have other businesses or interests;
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shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same or create any liability or accountability to the Trust or to the Shareholders.
Article V
SHAREHOLDERS’ VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. Subject to the voting powers of one or more Classes or Series of Shares as set forth in this Declaration of Trust or in the By-Laws, Shareholders shall have power to vote only (i) for the election of Trustees as provided herein, (ii) for the removal of Trustees as provided herein, (iii) with respect to any matter as to which shareholder action is required by the 1940 Act, (iv) with respect to any voluntary liquidation, dissolution, winding up, merger or consolidation or sale of all or substantially all of the assets of the Trust to the extent and as provided herein, (v) with respect to any amendment of this Declaration of Trust or the By-Laws to the extent provided in Section 7.4 herein or the By-Laws, (vi) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a Class action on behalf of the Trust or the Shareholders, and (vii) with respect to such additional matters as may be required or as the Trustees may consider necessary or desirable. On any matter required or permitted to be voted on by the Shareholders, all Shares then entitled to vote shall be voted in the aggregate as a single Class without regard to Class or Series, except (i) when required by this Declaration of Trust, the By-Laws or by the 1940 Act, or when the Trustees shall have determined that any matter to be submitted to a vote of the Shareholders affects the rights or interests of the Shareholders of one or more Classes or Series materially differently, Shares shall be voted by individual Class or Series; and (ii) when the Trustees shall have determined that the matter affects only the interests of one or more Classes or Series, then only the Shareholders of such Class or Classes or Series shall be entitled to vote thereon. Each Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 Meetings. Meetings of the Shareholders may be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the Shareholders as herein provided, or upon any other matter deemed by the Trustees to be necessary or desirable. Except as otherwise provided in the By-Laws, written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by mailing such notice at least ten days before such meeting, postage prepaid, stating the time, place and purpose of the meeting, to each Shareholder entitled to vote at such meeting at the Shareholder’s address as it appears on the records of the Trust. If the Trustees shall fail to call or give notice of any
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meeting of Shareholders for a period of 30 days after written application by Shareholders holding at least 25% of the then outstanding Shares entitled to vote at such meeting requesting that a meeting be called for a purpose requiring action by the Shareholders as provided herein or in the By-Laws, then Shareholders holding at least 25% of the then outstanding Shares entitled to vote at such meeting may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. Notice of a meeting need not be given to any Shareholder if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Shareholder who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him.
Section 5.3 Record Dates. Except as otherwise provided in the By-Laws, for the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding 30 days (except at or in connection with the termination of the Trust), as the Trustees may determine; or without closing the transfer books the Trustees may fix a reasonable date and time prior to the date of any meeting of Shareholders or other action as the date and time of record for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to be treated as Shareholders of record for purposes of such other action, and any Shareholder who was a Shareholder at the date and time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action, even though he has since that date and time disposed of his Shares, and no Shareholder becoming such after that date and time shall be so entitled to vote at such meeting or any adjournment thereof or to be treated as a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled to vote and present in person or by proxy at the meeting shall be a quorum for the transaction of business at a Shareholders’ meeting, except that where the By-Laws so require or the Trustees provide that holders of any Class or Classes or Series shall vote as a Class or Classes or Series, then a majority of the aggregate number of Shares of that Class or Classes or Series entitled to vote and present in person or by proxy at the meeting shall be necessary to constitute a quorum for the transaction of business by that Class or Classes or Series. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without the necessity of further notice. Except when a different vote is required by any provision of the 1940 Act, the By-Laws or this Declaration of Trust or, when such a different vote is not specifically provided in this Declaration of Trust or the By-Laws, the Trustees shall in their discretion require a different vote or the vote of a majority of a different percentage of the Shares of one or more particular Classes or Series, a majority of the Shares voted shall decide any question and a plurality of the Shares voted shall elect a Trustee.
Section 5.5 Action by Written Consent. Any action taken by Shareholders may be taken without a meeting if a majority of Shareholders entitled to vote on the matter (or such different proportion thereof as shall be required by any express provision of this Declaration of Trust or the By-Laws or as shall be permitted by the Trustees) consent to the action in writing
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and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be open to inspection by Shareholders to the same extent as is permitted stockholders of a Massachusetts business corporation under the Massachusetts Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include further provisions for Shareholders’ votes and meetings and related matters.
Article VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc.; Not Personally Liable; Notice. All persons extending credit to, contracting with or having any claim against the Trust shall look only to the assets of the Trust for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees, nor any of the Trust’s officers, employees or agents, whether past, present, or future, shall be personally liable therefor. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Notwithstanding the foregoing, nothing in this Declaration of Trust or the By-Laws shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, grass negligence or reckless disregard of the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officer or officers shall give notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and shall recite that the same was executed or made by or on behalf of the Trust or by them as Trustee or Trustees or as officer or officers and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust, and may contain such further recital as he or they may deem appropriate, but the omission thereof shall not operate to bind any Trustee or Trustees or officer or officers or Shareholder or Shareholders individually.
Section 6.2 Trustees’ Good Faith Action; Expert Advice; No Bond or Surety. The exercise by the Trustees of their powers and discretion hereunder shall be binding upon everyone interested. A Trustee shall be liable for his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, consultant or Contracting Party, nor shall any Trustee be responsible for the act or omission of any other Trustee; (ii) the Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration
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of Trust, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice; and (iii) in discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon this Declaration, the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent accountant, and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of a Contracting Party. The Trustees shall not be required to give any bond as such, nor any surety or any other security if a bond is required. To the extent that, at law or in equity, a Trustee is found to have duties and liabilities relating thereto to the Trust, the Shareholders or any other Person, a Trustee acting under this Declaration shall not be liable to the Trust, the Shareholders or any other Person if the Trustee has relied in good faith on the provisions of this Declaration.
Section 6.3 Apparent Authority of the Trustees. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order.
Section 6.4 Indemnification of Trustees, Officers, etc.
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer, employee or agent of the Trust (including any individual who serves at its request as director, officer, partner, trustee or the like of another organization in which it has any interest as a shareholder, creditor or otherwise shall be indemnified by the Trust, or by one or more Series thereof if the claim arises from his or her conduct with respect to only such Series (unless the Series was terminated prior to any such liability or claim being known to the Trustees, in which case such obligations, to the extent not satisfied out of the assets of a Series, the obligation shall be an obligation of the Trust), to the fullest extent permitted by law against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement hereof; and
(ii) the words “claim,” “action,” “suit,” or “proceeding” shall apply to all claims, actions, suits or proceedings (civil, criminal, or other, including appeals), actual or threatened; and the words “liability” and “expenses” shall include, without limitation, attorneys’ fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
(b) To the extent required by the 1940 Act, no indemnification shall be provided hereunder to a Trustee or officer:
(i) with respect to any matter as to which he shall have been fully adjudicated to be liable to the Trust, a Series thereof or the shareholders by reason
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of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office as expressly set forth herein;
(ii) in the event of a settlement or other disposition not involving a final adjudication as provided in paragraph (b)(i) resulting in a payment by a Trustee or officer, unless there has been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office as expressly set forth herein:
(1) | by the court or other body approving the settlement or other disposition; |
(2) | based upon a review of readily available facts (as opposed to a full trial-type inquiry) by (x) vote of a majority of the Non-interested Trustees acting on the matter (provided that a majority of the Non-interested Trustees then in office act on the matter) or (y) written opinion of independent legal counsel; or |
(3) | by a vote of a majority of the Shares outstanding and entitled to vote (excluding Shares owned of record or beneficially by such individual). |
(iii) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Trustee or officer may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors, administrators and assigns of such a person. Nothing contained herein shall affect any rights to indemnification to which personnel of the Trust or any Series thereof other than Trustees and officers may be entitled by contract or otherwise under law;
(iv) Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in paragraph (a) of this Section 6.4 may be advanced by the Trust or a Series thereof prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 6.4, provided that either:
(1) | such undertaking is secured by a surety bond or some other appropriate security provided by the recipient, or the Trust or Series thereof shall be insured against losses arising out of any such advances; or |
(2) | a majority of the Non-interested Trustees acting on the matter (provided that a majority of the Non-interested Trustees act on the matter) or an independent legal counsel in a written opinion shall determine, based upon a review of readily available facts (as |
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opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification.
As used in this Section 6.4, a “Non-interested Trustee” is one who (i) is not an interested person of the Trust (including anyone who has been exempted from being an interested person by any rule, regulation or order of the Commission), and (ii) is not involved in the claim, action, suit or proceeding; and
(v) Any repeal or modification of this Article VI or adoption or modification of any other provision of this Declaration inconsistent with this Article VI shall be prospective only to the extent that such repeal or modification would, if applied retroactively, adversely affect any limitation on the liability of any person or indemnification or right to advancement of any expense available to any person with respect to any act or omission that occurred prior to such repeal, modification or adoption.
Section 6.5 Compromise Payment. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without a final decision on the merits by a court, or by any other body before which the proceeding was brought, that such indemnified person either did not act in good faith in the reasonable belief that his action was in the best interests of the Trust or is liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, indemnification shall be provided if (i) approved as in the best interests of the Trust by a majority of the Disinterested Trustees upon a determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that such indemnified person acted in good faith in the reasonable belief that his action was in the best interests of the Trust and is not liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (ii) there has been obtained an opinion of independent legal counsel, based upon a review of the readily available facts (as opposed to a full trial-type inquiry), to the effect that such indemnified person appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and that such indemnification would not protect such indemnified person against any liability to the Trust to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any such approval or opinion shall not prevent the recovery from any indemnified person of any amount paid to such indemnified person in accordance with this Article if such indemnified person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust or to have been liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Section 6.6 Indemnification Not Exclusive, etc. The right of indemnification provided by this Article shall not be exclusive of or affect any other rights to which any indemnified person may be entitled. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees or officers, and other
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persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person.
Section 6.7 Indemnification of Shareholders. If any Shareholder or former Shareholder shall be held to be personally liable solely by reason of being or having been a Shareholder and not because of such Shareholder’s acts or omissions or for some other reason, the Shareholder or former Shareholder (or his/her heirs, executors, administrators or other legal representatives, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability.
Article VII
MISCELLANEOUS
Section 7.1 Duration and Termination. Unless terminated as herein provided, the Trust shall continue without limitation of time. The Trust may not be terminated unless authorized at a meeting of Shareholders called for the purpose, by the vote of the holders of at least 67% of the Shares then outstanding, provided, however, if such termination is recommended by more than 75% of the total number of Trustees then in office, the vote of at least a majority of the Shares then outstanding shall be sufficient authorization. Subject to the provisions of the Declaration of Trust and By-Laws regarding the powers, preferences or special or relative rights or privileges of any Class or Series of Shares, the Trust may also be terminated by the Trustees upon notice to Shareholders by means of an instrument in writing signed by a majority of Trustees stating that a majority of Trustees has determined that the continuation of the Trust is not in the best interest of the Trust or its Shareholders. Upon termination of the Trust, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, the Trust shall in accordance with such procedures as the Trustees consider appropriate reduce the remaining assets to distributable form in cash, securities or other property, or any combination thereof, and distribute the proceeds to the Shareholders, ratably according to the number of Shares held by the several Shareholders on the date of termination, except to the extent otherwise required or permitted by the relative preferences, rights and privileges of any Classes or Series of Shares, provided that any distribution to the Shareholders of a particular Class or Series of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such Class or Series held by each of them.
Section 7.2 Reorganization. The Trust may not merge or consolidate with any other corporation, association, trust or other organization, or sell, lease or exchange all or substantially all of its assets, including its good will, and thereafter be terminated, unless authorized at a meeting of Shareholders called for the purpose, by the vote of at least 67% of the Shares then outstanding, provided, however, if such termination is recommended by more than 75% of the total number of Trustees then in office, the vote of at least a majority of the Shares then outstanding shall be sufficient authorization. Nothing contained herein shall be construed as requiring approval of Shareholders for any sale of assets in the ordinary course of business of the Trust.
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Section 7.3 Conversion. The Trust may not be converted from a “closed-end company” to an “open-end company” as those terms are defined in the 1940 Act unless authorized by the vote of at least a majority of the Shares then outstanding at a meeting of Shareholders called for such purpose; provided that such conversion has been approved by the vote of more than 75% of the total number of Trustees then in office. If the conversion from a closed-end company to an open-end company is not approved by a vote of more than 75% of the total number of Trustees then in office, such conversion may be authorized by (x) the vote of at least a majority of the total number of Trustees then in office and (y) the vote of at least 75% of the Shares then outstanding, voting at a meeting of Shareholders called for such purpose. Upon the adoption of such proposal and related amendments by the Trust’s Shareholders and Trustees as provided above, the Trust shall, upon complying with any requirements of the 1940 Act and state law, become an “open-end” investment company. Such affirmative vote or consent shall be in addition to the vote or consent of the Shareholders otherwise required by law or any agreement between the Trust and any national securities exchange.
Section 7.4 Amendments, etc.
(a) All rights granted to the Shareholders under this Declaration of Trust are granted subject to the reservation to the Trustees of the right to amend this Declaration of Trust as herein provided, except that no amendment shall repeal or adversely affect the limitation on personal liability of any Shareholder or Trustee, or the prohibition of assessment upon the Shareholders except as herein provided, without the express consent of each Shareholder or Trustee involved. Subject to the foregoing and to the specific rights of amendment reserved to Shareholders as set forth in paragraph (b) to this Section 7.4, this Declaration of Trust may be amended at any time by the Trustees without approval of the Shareholders.
(b) The Trustees may not amend this Declaration of Trust to eliminate the rights of Shareholders of any Class or Series as set forth in this Section 7.4(b) to vote on any amendment of this Declaration of Trust or the By-Laws or alter or amend the percentage of voting Shares required to approve any amendment or action which requires a specific Shareholder vote under this Declaration of Trust or the By-Laws unless an equivalent vote has authorized such an amendment of the Declaration of Trust or By-Laws. Any amendment which adversely affects the holders of one or more Classes or Series of Shares shall require a vote of the Shareholders holding a majority of the Shares of each Class or Series so adversely affected and entitled to vote thereon and no vote of Shareholders of any Class or Series not so adversely affected shall be required, except that any amendment of any provision of
(i) Section 7.1, 7.2 or this subclause (i) of Section 7.4 of Article VII shall require a vote of the Shareholders holding 67% of the shares of each Class and Series entitled to vote thereon, regardless of the percentage of Trustees recommending such amendment, or
(ii) Section 4.1(a), Section 4.1(c) or Section 4.1(d) of Article IV, Section 5.4 of Article V or this subclause (ii) of Section 7.4 of Article VII shall require the vote of the Shareholders holding 75% of the shares of each Class and Series entitled to vote thereon, regardless of the percentage of Trustees recommending such amendment.
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Any amendment of any provision of Section 7.3 of Article VII shall require (x) the vote of a majority of the total number of Trustees then in office if such amendment is approved by a vote of at least 75% of the Shares then outstanding or (y) the vote of more than 75% of the total number of Trustees then in office, if such amendment is approved by a vote of a majority of the Shares then outstanding.
(c) A certificate signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust.
(d) The Trust’s filings with the Securities and Exchange Commission (including but not limited to: registration statements and supplements thereto, proxy statements, annual and semi-annual shareholder reports, Form N-Q, Form N-PX and related filings and disclosures) shall not be deemed to modify the provisions of this Declaration of Trust.
Section 7.5 Filing of Copies. The original or a copy of this instrument and of each amendment hereto shall be kept at the principal office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of State of The Commonwealth of Massachusetts and may be filed with any other governmental office where such filing may from time to time be required or is desirable, but the failure to make any such filing shall not impair the effectiveness of this instrument or any such amendment. Anyone dealing with the Trust may relay on a certificate by an officer of the Trust as to whether or not any such amendments have been made, as to the identities of the Trustees and officers, and as to matters in connection with the Trust hereunder, and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments.
Section 7.6 Applicable Law. This Declaration of Trust is made in The Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth.
Section 7.7 References; Gender; Headings; Counterparts. In this instrument and in any amendment, references to this instrument, and all expressions like “herein,” “hereof,” and “hereunder” shall be deemed to refer to this instrument as a whole as the same may be amended or affected by any such amendments. The masculine gender shall include the feminine and neuter genders. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original.
Section 7.8 Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with requirements of the 1940 Act, would be inconsistent with any of the conditions necessary for qualification of the Trust as a regulated investment company under the United States Internal
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Revenue Code or is inconsistent with other applicable laws and regulations or the rules of any securities exchange on which the Shares are listed, such provision shall be deemed never to have constituted a part of this Declaration, provided that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the undersigned have executed this instrument as of the 22nd day of January, 2016.
/s/ James M. Oates | /s/ Charles L. Bardelis | |
James M. Oates | Charles L. Bardelis | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ Peter S. Burgess | /s/ William H. Cunningham | |
Peter S. Burgess | William H. Cunningham | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ Grace K. Fey | /s/ Theron S. Hoffman | |
Grace K. Fey | Theron S. Hoffman | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ Deborah C. Jackson | /s/ Hassell H. McClellan | |
Deborah C. Jackson | Hassell H. McClellan | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ Steven R .Pruchansky | /s/ Gregory A. Russo | |
Steven R .Pruchansky | Gregory A. Russo | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ James R. Boyle | /s/ Craig Bromley | |
James R. Boyle | Craig Bromley | |
As Trustee and not individually, | As Trustee and not individually, | |
601 Congress Street | 601 Congress Street | |
Boston, MA 02210 | Boston, MA 02210 | |
/s/ Warren A. Thomson | ||
Warren A. Thomson | ||
As Trustee and not individually, | ||
601 Congress Street | ||
Boston, MA 02210 |
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EXHIBIT (2)(a)(1)
AMENDMENT TO DECLARATION OF TRUST
John Hancock Financial Opportunities Fund
To the Secretary of State of
Commonwealth of Massachusetts
It is hereby stated that:
1. | This document constitutes an Amendment to the Amended and Restated Declaration of Trust (hereinafter called the “Declaration”) of John Hancock Financial Opportunities Fund (hereinafter called the “business trust”). |
2. | The Declaration amended by this document was filed with the Secretary of State of the Commonwealth of Massachusetts on February 8, 2016. |
3. | The amendment to the Declaration effected by this document is as follows: |
The principal office address as stated on the front cover of the Declaration has been changed effective December 31, 2018:
200 Berkeley Street
Boston, Massachusetts 02116
4. | The amendment herein provided for was authorized in accordance with law. |
IN WITNESS WHEREOF, the undersigned has signed these presents all on December 13, 2018.
/s/ Mara Moldwin | |
Mara Moldwin | |
Authorized Signatory |
(This document may be executed by an officer of the business trust.)
EXHIBIT (2)(b)
AMENDED AND RESTATED BY-LAWS
OF
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
SEPTEMBER 27, 2013
TABLE OF CONTENTS
Page | |
ARTICLE I - DEFINITIONS | 1 |
ARTICLE II - OFFICES | 3 |
Section 2.1 Principal Office | 3 |
Section 2.2 Other Offices | 3 |
ARTICLE III - SHAREHOLDERS | 3 |
Section 3.1 Meetings | 3 |
Section 3.2 Conduct of Meetings | 3 |
Section 3.3 Annual Meetings | 3 |
Section 3.4 Special Meetings. | 3 |
Section 3.5 Notice of Meetings | 5 |
Section 3.6 Postponements; Adjournments | 5 |
Section 3.7 Proxies | 6 |
Section 3.8 Nominations and Proposals by Shareholders. | 6 |
Section 3.9 Quorum and Required Vote | 10 |
Section 3.10 Abstentions and Broker Non-Votes | 11 |
Section 3.11 Inspectors of Election | 11 |
Section 3.12 Action without Meeting | 11 |
Section 3.13 Record Date | 13 |
ARTICLE IV - TRUSTEES | 14 |
Section 4.1 Meetings of the Trustees | 14 |
Section 4.2 Term of Office of Trustees | 14 |
Section 4.3 Quorum and Manner of Acting | 15 |
Section 4.4 Retirement Age | 15 |
Section 4.5 Chairman of the Trustees | 15 |
Section 4.6 Powers and Duties of the Vice Chairman | 15 |
Section 4.7 Interested Trustees | 15 |
Section 4.8 Governance | 16 |
Section 4.9 Records | 16 |
Section 4.10 Incorporation | 16 |
ARTICLE V - COMMITTEES | 16 |
Section 5.1 Executive and Other Committees | 16 |
Section 5.2 Meetings, Quorum and Manner of Acting | 17 |
i |
ARTICLE VI - OFFICERS | 17 |
Section 6.1 General Provisions | 17 |
Section 6.2 Election, Term of Office and Qualifications | 17 |
Section 6.3 Resignation; Removal | 17 |
Section 6.4 Powers and Duties of the President | 17 |
Section 6.5 Powers and Duties of Vice Presidents | 18 |
Section 6.6 Powers and Duties of the Treasurer | 18 |
Section 6.7 Powers and Duties of the Secretary | 18 |
Section 6.8 Powers and Duties of Assistant Treasurers | 18 |
Section 6.9 Powers and Duties of Assistant Secretaries | 18 |
Section 6.10 Compensation of Officers and Trustees and Members of the Advisory Board | 18 |
Section 6.11 Designation of Principal Accounting Officer(s) and Principal Financial Officer(s) | 19 |
ARTICLE VII - SHARES OF BENEFICIAL INTEREST | 19 |
Section 7.1 Share Certificates | 19 |
Section 7.2 Regulations | 19 |
Section 7.3 Lost, Destroyed or Mutilated Certificates | 19 |
Section 7.4 Disclosure of Holdings | 20 |
Section 7.5 Register of Shares | 20 |
Section 7.6 Transfer of Shares | 20 |
ARTICLE VIII - INDEMNIFICATION | 20 |
Section 8.1 Indemnification of Employees and Agents | 20 |
Section 8.2 Indemnification Agreements | 20 |
ARTICLE IX - TERMS OF COMMON SHARES | 21 |
Section 9.1 Common Shares | 21 |
ARTICLE X - FISCAL YEAR | 21 |
ARTICLE XI - INSPECTION OF BOOKS | 21 |
ARTICLE XII - SEAL | 22 |
ARTICLE XIII - REPORTS TO SHAREHOLDERS | 22 |
ARTICLE XIV - SUFFICIENCY AND WAIVERS OF NOTICE | 22 |
ARTICLE XV - PROVISIONS IN CONFLICT WITH LAW OR REGULATION | 22 |
Section 15.1 Severability | 22 |
Section 15.2 Invalidity | 22 |
ii |
ARTICLE XVI - GOVERNING LAW | 23 |
ARTICLE XVII - AMENDMENTS | 23 |
ARTICLE XVIII – NET ASSET VALUE | 23 |
iii |
AMENDED AND RESTATED BY-LAWS
OF
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
SEPTEMBER 27, 2013
The Amended and Restated By-Laws (the “By-Laws”) of the John Hancock Financial Opportunities Fund (the “Trust”) have been adopted pursuant to the authority granted by the Trust’s Agreement and Declaration of Trust dated June 16, 1994, as amended or restated from time to time (the “Declaration of Trust”).
ARTICLE I - DEFINITIONS
All capitalized terms used and not defined herein have the respective meanings given them in the Declaration of Trust.
“Board of Trustees” shall have the meaning set forth in Section 3.8.
“Broker Non-Vote” shall have the meaning set forth in Section 3.10.
“Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which commercial banks in New York City, New York are required or authorized by law to close.
“Common Shares” shall mean the Trust’s common Shares.
“Custodian” shall mean any Person other than the Trust who has custody of any Trust Property as required by Section 17(f) of the 1940 Act, but does not include a system for the central handling of securities described in said Section 17(f).
“Delivery Date” shall have the meaning set forth in Section 3.4.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
“Hedging Activities” shall have the meaning set forth in Section 3.8.
“Independent Trustee” shall mean a Trustee who is not an “interested person” as defined under Section 2(a)(19) of the 1940 Act.
“Meeting Record Date” shall have the meaning set forth in Section 3.4.
“NYSE” shall mean the New York Stock Exchange.
“Outstanding Shares” shall mean those Shares shown from time to time on the books of the Trust or its transfer agent as then issued and outstanding, but shall not include Shares which have been redeemed or repurchased by the Trust and which are at the time held in the treasury of the Trust.
“Person” shall mean and include individuals, corporations, partnerships, trusts, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof.
“Preferred Shares” shall have the meaning set forth in Section 9.1(a).
“Proposed Nominee” shall mean each person whom a Shareholder proposes to nominate for election as a Trustee.
“Proposed Nominee Associated Person” of any Proposed Nominee shall mean (A) any Person acting in concert with such Proposed Nominee, (B) any direct or indirect beneficial owner of Shares owned of record or beneficially by such Proposed Nominee or Person acting in concert with the Proposed Nominee and (C) any Person controlling, controlled by or under common control with such Proposed Nominee or a Proposed Nominee Associated Person.
“public announcement” shall have the meaning set forth in Section 3.8.
“Shareholder Associated Person” of any beneficial or record holder of Shares shall mean (A) any Person acting in concert with such shareholder, (B) any direct or indirect beneficial owner of Shares owned of record or beneficially by such shareholder or any Person acting in concert with such shareholder, (C) any Person controlling, controlled by or under common control with such shareholder or a Shareholder Associated Person and (D) any member of the immediate family of such shareholder or Shareholder Associated Person.
“Shareholder Requested Meeting” shall have the meaning set forth in Section 3.4.
“Special Meeting in Lieu of an Annual Meeting” shall mean a special meeting of Shareholders called by Trustees for the purpose of electing Trustees in the event that an annual meeting is not held on or before such date as may be required by the 1940 Act, the NYSE or such other exchange or trading system on which shares are principally traded, if applicable.
“Special Meeting Percentage” shall have the meaning set forth in Section 3.4.
“Special Meeting Request” shall have the meaning set forth in Section 3.4.
“Trust Property” shall mean any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust or the Trustees, including any and all assets of or allocated to any Class or Series, as the context may require.
“Written Request” shall have the meaning set forth in Section 3.12.
2 |
ARTICLE II - OFFICES
Section 2.1 Principal Office. Until changed by the Trustees, the principal office of the Trust shall be in Boston, Massachusetts.
Section 2.2 Other Offices. The Trust may have offices in such other places without as well as within the Commonwealth of Massachusetts as the Trustees may from time to time determine.
ARTICLE III - SHAREHOLDERS
Section 3.1 Meetings. Meetings of the Shareholders of the Trust or a Series or Class thereof shall be held as provided in the Declaration of Trust or required by the 1940 Act at such place within or without the Commonwealth of Massachusetts as the Trustees shall designate.
Section 3.2 Conduct of Meetings. The Trustees may adopt by resolution such rules and regulations for the conduct of any meeting of the Shareholders as they shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Trustees, the chair of any meeting of the Shareholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Trustees or prescribed by the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (c) rules and procedures for maintaining order at the meeting and the safety of those present; (d) limitations on attendance at and participation in the meeting to Shareholders, their duly authorized and constituted proxies or such other persons as the chair of the meeting shall determine; (e) restrictions on entry to the meeting after the time fixed for the commencement thereof; (f) limitations on the time allotted to questions or comments by Shareholders; and (g) the extent to which, if any, other participants are permitted to speak.
Section 3.3 Annual Meetings. To the extent required by the 1940 Act or the rules and regulations of the NYSE, or such other exchange or trading system on which the Shares are principally traded, annual meetings of the Shareholders of the Trust or a Series or Class thereof shall be held on such date and at such time as the Trustees shall designate.
Section 3.4 Special Meetings.
a) Special meetings of the Shareholders may be called at any time by the Chairman, the President, any Vice President or will be called by the President or the Secretary at the request, in writing or by resolution, of a Majority of the Trustees. Subject to subsection (b) of this Section 3.4, a special meeting of Shareholders shall also be called by the President or the Secretary of the Trust upon the written request of the Shareholders holding twenty-five percent (25%) or more of the total number of the Outstanding Shares of the Trust entitled to vote at such meeting.
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b) In order for any Shareholder to request a special meeting, one or more written requests for a special meeting signed by Shareholders (or their duly authorized agents) as of the date of such request entitled to cast not less than twenty-five percent (25%) (the “Special Meeting Percentage”) of all of the votes entitled to be cast at such meeting (the “Special Meeting Request”) shall be delivered to the Secretary by registered mail, return receipt requested. In addition, the Special Meeting Request shall set forth the purpose of the meeting and the matters proposed to be acted on at the special meeting, shall bear the date of signature of each such Shareholder (or other agent) signing the Special Meeting Request, shall set forth the name and address, as they appear in the Trust’s books, of each Shareholder signing such request (or on whose behalf the Special Meeting Request is signed), the class and number of shares of the Trust which are owned of record and beneficially by each such Shareholder, and shall set forth all information that each such Shareholder and, with respect to the beneficial owners of Shares on whose behalf such request is being made, each such beneficial owner of Shares would be required to disclose in a proxy statement or other filings required to be made in connection with solicitations of proxies with respect to the proposed business to be brought before the meeting pursuant to Section 14 of the Securities Exchange Act of 1934 (the “Exchange Act”), as well as the additional information required by 3.8(b) of these By-Laws. Proof of the requesting Shareholder’s or Shareholders’ ownership of Shares at the time of request for a special meeting must accompany the Special Meeting Request. Any requesting Shareholder may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary.
c) The Secretary shall inform the requesting Shareholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Trust’s proxy materials). The Secretary shall not be required to call a special meeting upon Shareholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (b) of this Section 3.4, the Secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting.
d) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the Chairman, the President, the Vice President or the Trustees, whoever has called for the meeting. In the case of any special meeting called by the President or the Secretary upon the request of Shareholders (a “Shareholder Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Trustees; provided, however, that the date of any Shareholder Requested Meeting shall be not more than ninety (90) days after the record date for such meeting (the “Meeting Record Date”); and provided further that if the Trustees fail to designate, within thirty (30) days after the date that a valid and complete Special Meeting Request is actually received by the Secretary (the “Delivery Date”), a date and time for a Shareholder Requested Meeting, then such meeting shall be held at 2:00 p.m. Eastern Time on the ninetieth (90th) day after the date the valid and complete request for such meeting is actually received by the Trust or, if such ninetieth (90th) day is not a Business Day, on the first preceding Business Day; and provided further that in the event that the Trustees fail to designate a place for a Shareholder Requested Meeting within thirty (30) days after the Delivery Date, then such meeting shall be held at the principal executive offices of the Trust. In fixing a date for any special meeting, the Chairman, the President, the Vice President or the Trustees may consider such factors as he, she, or they deem(s) relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for a meeting and any plan of
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the Trustees to call an annual meeting or a special meeting. In the case of any Shareholder Requested Meeting, if the Trustees fail to fix a Meeting Record Date that is a date within thirty (30) days after the Delivery Date, then the close of business on the thirtieth (30th) day after the Delivery Date shall be the Meeting Record Date or if such thirtieth (30th) day after the Delivery Date is not a Business Day, the close of business on the first Business Day following such date shall be the Meeting Record Date.
e) If at any time as a result of written revocations of requests for the special meeting, Shareholders (or their duly authorized agents) entitled to cast less than the Special Meeting Percentage shall have delivered and not revoked requests for a special meeting, the Secretary may refrain from mailing the notice of the meeting or, if the notice of the meeting has been mailed, the Secretary may revoke the notice of the meeting at any time before the meeting by notice sent to all other requesting Shareholders. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.
f) The Chairman, the President, the Vice President or the Trustees may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Trust for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the Secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the Secretary until such date as the independent inspectors certify to the Trust that the valid requests received by the Secretary represent at least 25% or more of the issued and Outstanding Shares of stock that would be entitled to vote at such meeting. Nothing contained in this paragraph (f) shall in any way be construed to suggest or imply that the Trust or any Shareholder shall not be entitled to contest the validity of any request, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
Section 3.5 Notice of Meetings. Notice of all meetings of the Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail, telegraphic or electronic means to each Shareholder at such Shareholder’s address as recorded on the register of the Trust mailed or, if the notice is provided electronically, furnished or delivered at least seven (7) days before the meeting, provided, however, that notice of a meeting need not be given to a Shareholder to whom such notice need not be given under the proxy rules of the Commission under the 1940 Act and the Exchange Act. No notice need be given to any Shareholder who shall have failed to inform the Trust of such Shareholder’s current address or if a written waiver of notice, executed before or after the meeting by the Shareholder or such Shareholder’s attorney thereunto authorized, is filed with the records of the meeting.
Section 3.6 Postponements; Adjournments. The Trustees may, prior to a meeting of Shareholders being convened, postpone such meeting from time to time to a date that is a reasonable time after the date set for the original meeting. The chair of any meeting of the Shareholders may adjourn the meeting from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the date, time and place are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the
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Trust may transact such business which properly may have been transacted at the original meeting. Any adjourned meeting may be held as adjourned one or more times without further notice on a date that is a reasonable time after the date of the original meeting. If after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of this Section 3.6 shall be given to each Shareholder entitled to vote at the meeting and each other Shareholder entitled to notice of the meeting.
Section 3.7 Proxies. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. A proxy shall be deemed signed if the Shareholder’s name is placed on the proxy (whether by manual signature, typewriting or telegraphic transmission or other electronic means) by the Shareholder or the Shareholder’s attorney-in-fact. Proxies may be solicited in the name of one or more Trustees or one or more of the officers of the Trust. Only Shareholders of record shall be entitled to vote. When any Share is held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy, including a photographic or similar reproduction thereof and a telegram, cablegram, wireless, electronic or similar transmission thereof, purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or the legal control of any other person as regards the charge or management of such Share, he or she may vote by such Shareholder’s guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. The placing of a Shareholder’s name on a proxy pursuant to telephonic or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such Shareholder shall constitute execution of such proxy by or on behalf of such Shareholder.
Section 3.8 Nominations and Proposals by Shareholders.
a) Annual Meetings of Shareholders; Special Meeting in Lieu of an Annual Meeting. Nominations of persons for election as a Trustee and the proposal of other business to be considered by the Shareholders may be made at an annual meeting of Shareholders or Special Meeting in Lieu of an Annual Meeting (i) pursuant to the Trust’s notice of meeting (or any supplement thereto), (ii) by or at the direction of the Trustees or any committee thereof or (iii) by any Shareholder of the Trust who was a Shareholder both at the time of giving of notice provided for in this Section 3.8(a) and at the time of the annual meeting or Special Meeting in Lieu of an Annual Meeting, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 3.8(a).
For nominations for election to the Trustees or other business to be properly brought before an annual meeting or a Special Meeting in Lieu of an Annual Meeting by a Shareholder pursuant to this Section 3.8(a), the Shareholder must have given timely notice thereof in writing
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to the Secretary of the Trust and any such proposed business must otherwise be a proper matter for Shareholder action. To be timely, a Shareholder’s notice must be delivered to the Secretary of the Trust at the principal executive office of the Trust by not later than the close of business on the ninetieth (90th) day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the mailing of the notice for the annual meeting is advanced or delayed by more than thirty (30) days from the anniversary date of the mailing of the notice for the preceding year’s annual meeting, notice by the Shareholder to be timely must be so delivered not later than the tenth (10th) day following the day on which public announcement of the date such meeting is first made by the Trust, provided, further, in the case of a Special Meeting in Lieu of an Annual Meeting, notice by the Shareholder to be timely must be so delivered not later than the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Trust. In no event shall the postponement of an annual meeting or Special Meeting in Lieu of Annual Meeting or of an adjournment or postponement of an annual meeting or a Special Meeting in Lieu of an Annual Meeting to a later date or time commence a new time period for the giving of a Shareholder’s notice as described above.
A Shareholder’s notice with respect to an annual meeting or a Special Meeting in Lieu of an Annual Meeting to be proper must set forth (i) as to each person whom the Shareholder proposes to nominate for election or reelection as a trustee (A) the name, age, business address,residence address and principal occupation or employment of such person and any Proposed Nominee Associated Person, (B) the class and number of shares of stock of the Trust that are beneficially owned or owned of record by such person and any Proposed Nominee Associated Person, (C) the date such shares were acquired and the investment intent of such acquisition, and (D) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such Proposed Nominee or any Proposed Nominee Associated Person, with respect to Shares, (E) a representation as to whether such Proposed Nominee is an “interested person” (as defined under Section 2(a)(19) of the 1940 Act) of the Trust and sufficient information about the Proposed Nominee to permit counsel to the Trust to confirm such representation, including information with respect to each relationship set forth in Section 2(a)(19) of the 1940 Act which may cause such Proposed Nominee to be an “interested person” (as defined under Section 2(a)(19) of the 1940 Act) of the Trust or a representation that no such relationship exists, (F) information to establish to the satisfaction of the Trust’s board of Trustees (“Board of Trustees”) that the Proposed Nominee satisfies any Trustee qualifications that may from time to time be adopted by the Board of Trustees, and (G) all other information relating to such person and any Proposed Nominee Associated Person that is required to be disclosed in solicitations of proxies for election of trustees in an election contest, or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a trustee if elected); (ii) as to any other business that the Shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Shareholder and any Proposed Nominee Associated Person (including any anticipated benefit to
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the Shareholder and any Proposed Nominee Associated Person therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made; (iii) as to the Shareholder giving the notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made and any Shareholder Associated Person, (1) the name and address of such Shareholder, as they appear on the Trust’s stock ledger and current name and address, if different, and of such beneficial owner and any Shareholder Associated Person, (2) the class and number of Shares which are owned beneficially or of record by such Shareholder and such beneficial owner and any Shareholder Associated Person, and the date such shares were acquired and the investment intent of such acquisition, (3) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such Shareholder or beneficial owner or any Shareholder Associated Person with respect to any Share (collectively “Hedging Activities”), (4) whether and the extent to which any derivative instrument, swap, option, warrant, short interest or profit interest or other transaction has been entered into by or on behalf of such Shareholder or such beneficial owner, or any Shareholder Associated Person, with respect to Shares, (5) a representation that the Shareholder giving notice intends to appear in person or by proxy at the annual meeting or Special Meeting in Lieu of an Annual Meeting to bring such business before the meeting (6) information relating to such Shareholder or such beneficial owner or any Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before an annual meeting pursuant to Section 14 of the Exchange Act, (7) the extent to which such Shareholder or such beneficial owner or any Shareholder Associated Person, if any, has engaged in Hedging Activities with respect to shares or other equity interests of any other trust or company, and (8) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such Shareholder or such beneficial owner, or any Shareholder Associated Person, and any other Person or Persons (including their names) in connection with the proposal of such business and any material interest of such Shareholder or such beneficial owner or any Shareholder Associated Person, in such business, including any anticipated benefit therefrom to such Shareholder or such beneficial owner, or any Shareholder Associated Person and (iv) to the extent known by the Shareholder giving the notice, the name and address of any other Shareholder or beneficial owner supporting the nominee for election or reelection as a Trustee or the proposal of other business on the date of such Shareholder’s notice. Notwithstanding anything in this paragraph (a) of Section 3.8 to the contrary, in the event that the number of Trustees to be elected is increased and there is no public announcement by the Trust of such action or specifying the size of the increased Trustees at least one hundred (100) days prior to the first anniversary of the date of the preceding year’s annual meeting, a Shareholder’s notice required by this Section 3.8(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if the notice is delivered to the Secretary at the principal executive offices of the Trust not later than the close of business on the tenth (10th) day immediately following the day on which such public announcement is first made by the Trust.
b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of Shareholders (other than any Special Meeting in Lieu of an Annual Meeting) as shall
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have been brought before the meeting (i) pursuant to the Trust’s notice of meeting (or any supplement thereto), (ii) by or at the direction of the Trustees or any committee thereof or (iii) by any Shareholder who was a Shareholder both at the time of giving of notice provided for in this Section 3.8(a) and at the time of the special meeting, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 3.8(b).
For any business to be properly brought before a special meeting by a Shareholder pursuant to this Section 3.8(b) (other than nominations for election of Trustees which may only be brought at an annual meeting or Special Meeting in Lieu of an Annual Meeting and in accordance with the provisions of Section 3.8(a)), the Shareholder must have given timely notice thereof in writing to the Secretary of the Trust and any such proposed business must otherwise be a proper matter for Shareholder action. To be timely, a Shareholder’s notice must be delivered to the Secretary of the Trust at the principal executive office of the Trust by not later than the close of business on the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a Shareholder’s notice as described above.
A Shareholder’s notice with respect to a special meeting to be proper must set forth: (i) as to any business that the Shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Shareholder and any Shareholder Associated Person (including any anticipated benefit to the Shareholder and any Shareholder Associated Person therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made, (ii) as to the Shareholder giving the notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made and any Shareholder Associated Person, (1) the name and address of such Shareholder, as they appear on the Trust’s stock ledger and current name and address, if different, and of such beneficial owner and any Shareholder Associated Person, (2) the Class and number of Shares which are owned beneficially or of record by such Shareholder and such beneficial owner and any Shareholder Associated Person, and the date such shares were acquired and the investment intent of such acquisition (3) whether the Shareholder or such beneficial owner or any Shareholder Associated Person has engaged in any Hedging Activities , (4) whether and the extent to which any derivative instrument, swap, option, warrant, short interest or profit interest or other transaction has been entered into by or on behalf of such Shareholder or such beneficial owner, or any Shareholder Associated Person, with respect to Shares, (5) a representation that the Shareholder giving notice intends to appear in person or by proxy at the annual meeting to bring such business before the meeting, (6) information relating to such Shareholder or such beneficial owner or any Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such Shareholder or such beneficial owner or any Shareholder Associated Person with respect to the proposed business to be brought by such person before the annual meeting pursuant to Section 14 of the Exchange Act, (7) the extent to which such Shareholder or such beneficial owner or any Shareholder Associated Person, if any, has engaged in Hedging Activities with respect to shares or other equity interests of any other trust or company, and (8) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such Shareholder or such beneficial owner, or any
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Shareholder Associated Person, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such Shareholder or such beneficial owner or any Shareholder Associated Person, in such business, including any anticipated benefit therefrom to such person, or any Shareholder Associated Person and(iii) to the extent known by the Shareholder giving the notice, the name and address of any other Shareholder or beneficial owner supporting the nominee for election or reelection as a trustee or the proposal of other business on the date of such Shareholder’s notice.
c) General. Only such persons who are nominated in accordance with the procedures set forth in Section 3.8(a) shall be eligible to serve as trustee, and only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 3.8, provided that nothing herein shall prohibit the Trustees from submitting matters to Shareholders at any special meeting requested by any Shareholder. The chair of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 3.8 and, if any proposed nomination or other business is not in compliance with this Section 3.8, to declare that such nomination or proposal shall be disregarded. For purposes of this Section 3.8, the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of trustees and “public announcement” shall mean disclosure (i) in a press release either transmitted to the principal securities exchange on which Shares are traded or reported by a recognized news service or (ii) in a document publicly filed by the Trust with the Commission.
d) Compliance with State and Federal Law. Notwithstanding the foregoing provisions of this Section 3.8, a Shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 3.8. Nothing in this Section 3.8 shall be deemed to affect any right of a Shareholder to request inclusion of a proposal in, nor the right of the Trust to omit a proposal from, the Trust’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.
Section 3.9 Quorum and Required Vote. Except as otherwise provided by the Declaration of Trust or by law, to constitute a quorum for the transaction of any business at any meeting of Shareholders, there must be present, in person or by proxy, holders of a majority of the total number of Outstanding Shares of the Trust entitled to vote at such meeting; provided that if a Class (or Series) of Shares is entitled to vote as a separate Class (or Series) on any matter, then in the case of that matter, a quorum shall consist of the holders of a majority of the total number of Outstanding Shares of that Class (or Series) entitled to vote at the meeting. Shares owned directly or indirectly by the Trust, if any, shall not be deemed outstanding for this purpose. Except as otherwise required by law or by the Declaration of Trust or by these By- Laws, all matters shall be decided by a majority of the votes cast, as provided herein, by persons entitled to vote thereon; and except as otherwise required by law or by the Declaration of Trust or by these By-Laws the Trustees shall be elected by a plurality of the votes cast, as provided herein, by persons entitled to vote.
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Section 3.10 Abstentions and Broker Non-Votes. Outstanding Shares represented in person or by proxy (including Broker Non-Votes and Shares which abstain with respect to one or more proposals presented for Shareholder approval) will be counted for purposes of determining whether a quorum is present at a meeting. Except as otherwise provided by law, abstentions will be treated as Shares that are present and entitled to vote for purposes of determining the number of Shares that are present and entitled to vote with respect to any particular proposal, but will not be counted as a vote cast on such proposal. A “Broker Non-Vote” occurs if a broker or nominee holding Shares in “street name” indicates on the proxy that it does not have discretionary authority to vote as to a particular proposal. Except as otherwise provided by law, Broker Non- Votes will be treated as present and entitled to vote for purposes of determining the number of Shares that are present and entitled to vote with respect to such proposal, but will not be counted as a vote cast on such proposal.
Section 3.11 Inspectors of Election. In addition to any other inspector of election provided for in these By-Laws, in advance of any meeting of the Shareholders, the Trustees, by resolution, may appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is appointed or able to act at a meeting of the Shareholders, the chair of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable binding law, inspectors may be officers, employees or agents of the Trust. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law or assigned by the chair of the meeting and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable binding law.
Section 3.12 Action without Meeting.
a) Action by Written Consent. Any action which may be taken by Shareholders may be taken without a meeting if a majority of Outstanding Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by law, the Declaration of Trust or the By- Laws) consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consents shall be treated for all purposes as a vote taken at a meeting of Shareholders. Any action by written consent must be a proper subject for Shareholder action by written consent under applicable law.
b) Request for Record Date. Shareholders may act by written consent if Shareholders who own in the aggregate at least a majority of Outstanding Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by law, the Declaration of Trust, or the By- Laws), shall (i) by written notice to the Secretary request that the Trustees fix a record date (a “Written Request”) prior to soliciting any written consents in respect of such action, (ii) solicit consents to take such action from all Shareholders, and (iii) continuously own (as determined in accordance with the Trustees) not less than a majority of Outstanding Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by law, the Declaration of Trust, or the By-Laws) through the date of delivery of written consents signed by Shareholders having the requisite votes to take such action. Delivery of such Written Request shall be by hand, by
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registered U.S. mail, or by courier service to the attention of the Secretary at the principal executive offices of the Trust. A Shareholder may revoke a Written Request with respect to such Shareholder’s Shares at any time by written revocation delivered to the Secretary. In addition, any disposition of Shares of the Trust’s stock made at any time prior to the delivery of the first written consent with respect to the action for which the Written Request is submitted shall constitute a revocation, with respect to such disposed Shares, of any such Written Request.
c) Contents of Written Request. A Written Request shall be signed and dated by each Shareholder, or duly authorized agent of such Shareholder, submitting the Written Request and shall be accompanied by (i) the information required by Section 3.4(b) and Section 3.8 to the extent such information would be required if such Shareholder were requesting a special meeting or proposing business under such Sections instead of making a Written Request and (ii) an acknowledgment that any disposition of Shares described in Section 3.12(b) constitutes a revocation of the Written Request with respect to such disposed Shares. In addition, the Shareholders shall promptly provide any other information reasonably requested by the Trust.
d) Record Date. The Trustees shall promptly, but in all events within thirty (30) days after the date on which a Written Request complying fully with these By-Laws (including Section 3.12(e)) is received by the Secretary, adopt a resolution fixing the record date for determining Shareholders entitled to take action by written consent. If no record date has been fixed by the Trustees within thirty (30) days after the date on which a Written Request fully complying with these By-Laws is received by the Secretary, and the Written Request involves a matter that is a proper subject for action by written consent under Section 3.12(e), the record date shall be the date on which the first Shareholder signs the written consent setting forth the action taken or proposed to be taken in accordance with this Section 3.12.
e) Actions Which May Be Taken by Written Consent. Notwithstanding the foregoing, the Trustees shall not be obligated to set a record date for an action by written consent if (i) such action is not a proper subject for Shareholder action, either by written consent or otherwise, under applicable law, (ii) the Trustees have called or call for an annual meeting or special meeting to be held within ninety (90) days after the Secretary receives the Written Request and the Trustees determine in good faith that the business of such annual meeting or special meeting is to include (among any other matters properly to be brought before the annual or special meeting) the business specified in the Written Request, or (iii) an annual or special meeting that included the business specified in the Written Request (as determined in good faith by the Trustees) was held not more than ninety (90) days before the Written Request was received by the Secretary, or (iv) the Written Request or any solicitation of consents to such action by written consent was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law.
f) Inspectors of Election. In the event of the delivery, in the manner provided by this Section 3.12 and applicable law, to the Trust of the requisite written consent or consents to take action and any related revocation or revocations, the Chairman, the President, the Vice President, or the Trustees may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Trust for the purpose of promptly performing a ministerial review of the validity of any purported consent or revocation received by the Secretary. For the purpose of permitting the inspectors to perform such review, no action by written consent
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without a meeting shall be effective until such date as the independent inspectors certify to the Trust that the consents delivered to the Trust in accordance with this Section 3.12 represent not less than the minimum number of votes necessary to take the action at a meeting at which all Shareholders entitled to vote on the action are present and voting. Nothing contained in this paragraph (f) shall in any way be construed to suggest or imply that the Trust or any Shareholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
g) Date of Written Consent; Notice to Shareholders. Every written consent shall bear the date of signature of each Shareholder who signs the consent, and no written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered in accordance with this Section 3.12, a written consent or consents signed by Shareholders having the requisite votes to take such action are delivered to the Secretary in the manner prescribed in this Section 3.12. The action by written consent will take effect as of the date and time of the certification of the written consents in accordance with Section 3.12(f) of these By-Laws, unless otherwise provided by law.
h) Effectiveness of Written Consent. Notwithstanding anything in these By-Laws to the contrary, no action may be taken by the Shareholders by less than unanimous written consent except in accordance with the Declaration of Trust and these By-Laws. If the Trustees shall determine that any request to fix a record date or to take Shareholder action by written consent was not properly made in accordance with the Declaration of Trust and these By-Laws, or the Shareholder or Shareholders seeking to take such action do not otherwise comply with the Declaration of Trust and these By-Laws, then the Trustees shall not be required to fix a record date and any such purported action by written consent shall be null and void to the fullest extent permitted by applicable law. In addition to the requirements of the Declaration of Trust and these By-Laws with respect to Shareholders seeking to take an action by written consent, any Shareholder seeking to have the Shareholders authorize or take corporate action by written consent shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to such action. Notwithstanding anything in the Declaration of Trust or these By-Laws to the contrary (i) Shareholders may act without a meeting by unanimous written consent, and none of the foregoing provisions shall apply to such action, and (ii) where written consents are solicited by or at the direction of the Trustees, Shareholders may act upon the action for which consents are solicited by or at the direction of the Trustees without a meeting if the action is taken by Shareholders having not less than the minimum number of votes necessary to take that action at a meeting at which all Shareholders entitled to vote on the action are present and voting, and none of the foregoing provisions shall apply to such action.
Section 3.13 Record Date. In order that the Trust may determine the Shareholders entitled to notice of or to vote at any meeting of the Shareholders or any adjournment thereof, the Trustees may fix a record date, which record date shall be a reasonable date and time prior to the date of any meeting of the Shareholders and shall not precede the date upon which the resolution fixing the record date is adopted by the Trustees, and shall not be less than ten (10) days before the date of such meeting. If no record date is fixed by the Trustees, the record date for determining Shareholders entitled to notice of or to vote at a meeting of the Shareholders shall be
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at the close of business on the day preceding the day on which notice is given, or, if no notice is given, at the close of business on the day preceding the day on which the meeting is held. A determination of Shareholders entitled to notice of or to vote at a meeting of the Shareholders shall apply to any adjournment of the meeting; provided, however, that the Trustees may fix a new record date for the adjourned meeting.
ARTICLE IV - TRUSTEES
Section 4.1 Meetings of the Trustees. The Trustees may in their discretion provide for regular or stated meetings of the Trustees. Notice of regular or stated meetings need not be given. Meetings of the Trustees other than regular or stated meetings shall be held whenever called by the President, the Chairman, the Vice Chairman or by a Majority of the Trustees, at the time being in office. Notice of the time and place of each meeting other than regular or stated meetings shall be given by the Secretary or an Assistant Secretary or by the officer or Trustee calling the meeting and shall be mailed to each Trustee at least two days before the meeting, or shall be given by telephone, cable, wireless, facsimile or electronic means to each Trustee at such Trustee’s business address, or personally delivered to such Trustee at least one day before the meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by such Trustee before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to such Trustee. Subject to the requirements of the 1940 Act, a notice or waiver of notice need not specify the purpose of any meeting. Subject to the requirements of the 1940 Act, the Trustees may meet by means of a telephone conference circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall be deemed to have been held at a place designated by the Trustees at the meeting. Subject to the requirements of the 1940 Act, participation in a telephone conference meeting shall constitute presence in person at such meeting. Subject to the requirements of the 1940 Act, any action required or permitted to be taken at any meeting of the Trustees may be taken by the Trustees without a meeting if a Majority of the Trustees consent to the action in writing and the written consents are filed with the records of the Trustees’ meetings. Subject to the requirements of the 1940 Act, such consents shall be treated as a vote for all purposes. Only the Trustees and any additional persons invited by the President, the Chairman or by a Majority of the Trustees shall be allowed to participate in or attend any meeting of the Trustees.
Section 4.2 Term of Office of Trustees. The Board of Trustees shall be divided into three classes. Within the limits provided by the Declaration of Trust, the number of the Trustees in each class and the class which each Trustee is assigned shall be determined by resolution of the Board of Trustees. The term of office of the first class shall expire on the date of the 2014 annual meeting of Shareholders or a special meeting in lieu thereof. The term of office of the second class shall expire on the date of the 2015 annual meeting of Shareholders or special meeting in lieu thereof. The term of office of the third class shall expire on the date of the 2016 annual meeting of Shareholders or special meeting in lieu thereof. Upon expiration of the term of office of each class as set forth above, the number of Trustees in such class, as determined by
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the Board of Trustees, shall be elected for a term expiring on the date of the third annual meeting of Shareholders or special meeting in lieu thereof following such expiration to succeed the Trustees whose terms of office expire.
Section 4.3 Quorum and Manner of Acting. A Majority of the Trustees shall be present in person at any regular or special meeting of the Trustees in order to constitute a quorum for the transaction of business at such meeting and (except as otherwise required by law, the Declaration of Trust or these By-Laws) the act of a Majority of the Trustees present at any such meeting, at which a quorum is present, shall be the act of the Trustees. In the absence of a quorum, a Majority of the Trustees present may adjourn the meeting from time to time until a quorum shall be present. Notice of an adjourned meeting need not be given.
Section 4.4 Retirement Age. The retirement age for Trustees shall be seventy five (75) and therefore each Trustee shall retire from service on December 31 of the year in which he or she reaches his or her seventy-fifth (75th) birthday unless the Trustees resolve that it is in the interest of the Trust to permit such Trustee to serve as a Trustee until such later date as may be designated by the Trustees.
Section 4.5 Chairman of the Trustees. The Trustees shall appoint from among their number a Chairman. The Chairman shall preside at the meetings of the Trustees and may call meetings of the Trustees and of any committee thereof whenever he or she deems it necessary or desirable to do so. The Chairman may in his or her discretion preside at any meeting of the shareholders, and may delegate such authority to another Trustee or officer of the Trust. The Chairman shall exercise and perform such additional powers and duties as from time to time may be assigned to him or her by the Trustees, and shall have the resources and authority appropriate to discharge the responsibilities of the office.
Section 4.6 Powers and Duties of the Vice Chairman. The Trustees may, but need not, appoint one or more Vice Chairman of the Trust. Each Vice Chairman shall perform such duties as may be assigned to him or her from time to time by the Trustees or the Chairman.
Section 4.7 Interested Trustees. No contract or transaction between the Trust and one or more of its Trustees or officers, or between the Trust and any other Trust, partnership, association or other organization in which one or more of its Trustees or officers are Trustees or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the Trustee or officer is present at or participates in the meeting of the Trustees or committee thereof which authorizes the contract or transaction, or solely because any such Trustee’s or officer’s vote is counted for such purpose if: (i) the material facts as to the Trustee’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Trustees or the committee, and the Trustees or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Trustees, even though the Independent Trustees be less than a quorum; or (ii) the material facts as to the Trustee’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the Shareholders; or (iii) the contract or transaction is fair as to the Trust as of the time it is authorized, approved or ratified by the Trustees, a committee thereof or the Shareholders.
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Section 4.8 Governance. The Trustees may from time to time require all its members (including any individual nominated to serve as a Trustee) to agree in writing as to matters of corporate governance, business ethics and confidentiality while such persons serve as a Trustee, such agreement to be on the terms and in a form determined satisfactory by the Trustees, as amended and supplemented from time to time in the discretion of the Trustees.
Section 4.9 Records. The results of all actions taken at a meeting of the Trustees, or by unanimous written consent of the Trustees, shall be recorded by the Secretary of the meeting appointed by the Board of Trustees.
Section 4.10 Incorporation. Pursuant to Section 4.2 of the Declaration of Trust, the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction or any other trust, partnership, association or other organization to take over all or any portion of the Trust Property or the Trust Property allocated or belonging to such Class or Series or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer all or any portion of the Trust Property or the Trust Property allocated or belonging to such Class or Series to any such corporation, trust, association or organization in exchange for the shares or securities thereof or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, partnership, association or organization, or any corporation, partnership, trust, association or organization in which the Trust or such Class or Series holds or is about to acquire shares or any other interest. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, partnership, association or other organization if and to the extent permitted by law, as provided under the law then in effect. Nothing contained herein shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations and selling, conveying or transferring all or a portion of the Trust Property to such organization or entities.
ARTICLE V - COMMITTEES
Section 5.1 Executive and Other Committees. The Trustees by vote of a majority of all the Trustees may elect from their own number an Executive Committee to consist of not less than two (2) members to hold office at the pleasure of the Trustees, which shall have the power to conduct the current and ordinary business of the Trust while the Trustees are not in session, including the purchase and sale of securities and the designation of securities to be delivered upon redemption of Shares of the Trust or a Class or a Series thereof, and such other powers of the Trustees as the Trustees may, from time to time, delegate to them except those powers which by law, the Declaration of Trust or these By-Laws they are prohibited from delegating.
The Trustees may also elect from their own number other committees from time to time; the number composing such committees, the powers conferred upon the same (subject to the same limitations as with respect to the Executive Committee) and the term of membership on such committees to be determined by the Trustees. The Trustees may designate a chair of any such committee. In the absence of such designation the committee may elect its own chair.
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Section 5.2 Meetings, Quorum and Manner of Acting. The Trustees may (1) provide for stated meetings of any committee, (2) specify the manner of calling and notice required for special meetings of any committee, (3) specify the number of members of a committee required to constitute a quorum and the number of members of a committee required to exercise specified powers delegated to such committee, (4) authorize the making of decisions to exercise specified powers by written assent of the requisite number of members of a committee without a meeting, and (5) authorize the members of a committee to meet by means of a telephone conference circuit.
Each committee shall keep regular minutes of its meetings and records of decisions taken without a meeting and cause them to be recorded in a book designated for that purpose and kept in the office of the Trust.
ARTICLE VI - OFFICERS
Section 6.1 General Provisions. The officers of the Trust shall be a President, a Treasurer and a Secretary, who shall be elected by the Trustees. The Trustees may elect or appoint such other officers or agents as the business of the Trust may require, including a Chief Financial Officer, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may delegate to any officer or committee the power to appoint any subordinate officers or agents.
Section 6.2 Election, Term of Office and Qualifications. The officers of the Trust and any Class or Series thereof shall be elected by the Trustees. Each officer elected by the Trustees shall hold office at the pleasure of the Trustees. Any two or more offices may be held by the same person.
Section 6.3 Resignation; Removal.
a) The Trustees, at any regular or special meeting of the Trustees, may remove any officer with or without cause, by a vote of a Majority of the Trustees present at any such meeting, at which a quorum is present. Any officer or agent appointed by an officer or committee may be removed with or without cause by such appointing officer or committee.
b) Any officer of the Trust may resign by filing a written resignation with the President or with the Trustee or with the Secretary, which shall take effect on being so filed or at any time as may otherwise be specified therein.
Section 6.4 Powers and Duties of the President. The President shall be the chief executive officer of the Trust and shall preside at all meetings of the Trustees and Shareholders in the absence of the Chairman or a Vice Chairman. Subject to the control of the Trustees and to the control of any committees of the Trustees, within their respective spheres as provided by the Trustees, the President shall at all times exercise general supervision over the business and policies of the Trust. The President shall have the power to employ attorneys and counsel for the Trust or any Series or Class thereof and to employ such subordinate officers, agents, clerks and employees as the President may find necessary to transact the business of the Trust or any Series
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or Class thereof. The President shall also have the power to grant, issue, execute or sign such powers of attorney, proxies or other documents as may be deemed advisable or necessary in furtherance of the interests of the Trust or any Class or Series thereof. The President shall have such other powers and duties, as from time to time may be conferred upon or assigned to the President by the Trustees.
Section 6.5 Powers and Duties of Vice Presidents. In the absence or disability of the President, the Vice President or, if there be more than one Vice President, any Vice President designated by the Trustees, shall perform all the duties and may exercise any of the powers of the President, subject to the control of the Trustees. Each Vice President shall perform such other duties as may be assigned to him or her from time to time by the Trustees and the President.
Section 6.6 Powers and Duties of the Treasurer. The Treasurer shall deliver all funds of the Trust or any Series or Class thereof which may come into his or her hands to such Custodian as the Trustees may employ. The Treasurer shall render a statement of condition of the finances of the Trust or any Series or Class thereof to the Trustees as often as they shall require the same and the Treasurer shall in general perform all the duties incident to the office of a Treasurer and such other duties as from time to time may be assigned to him or her by the Trustees. The Treasurer shall give a bond for the faithful discharge of his or her duties, if required so to do by the Trustees, in such sum and with such surety or sureties as the Trustees shall require.
Section 6.7 Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Trustees and of the Shareholders in proper books provided for that purpose; the Secretary shall have custody of the seal of the Trust; the Secretary shall have charge of the Share transfer books, lists and records unless the same are in the charge of a transfer agent. The Secretary shall attend to the giving and serving of all notices by the Trust in accordance with the provisions of these By-Laws and as required by law; and subject to these By-Laws, the Secretary shall in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Trustees.
Section 6.8 Powers and Duties of Assistant Treasurers. In the absence or disability of the Treasurer, any officer designated by the Trustees shall perform all the duties, and may exercise any of the powers, of the Treasurer. Each officer shall perform such other duties as from time to time may be assigned to him or her by the Trustees. Each officer performing the duties and exercising the powers of the Treasurer, if any, and any Assistant Treasurer, shall give a bond for the faithful discharge of his or her duties, if required so to do by the Trustees, in such sum and with such surety or sureties as the Trustees shall require.
Section 6.9 Powers and Duties of Assistant Secretaries. In the absence or disability of the Secretary, any Assistant Secretary designated by the Trustees shall perform all the duties, and may exercise any of the powers, of the Secretary. Each Assistant Secretary shall perform such other duties as from time to time may be assigned to him or her by the Trustees.
Section 6.10 Compensation of Officers and Trustees and Members of the Advisory Board. Subject to any applicable provisions of the Declaration of Trust, the compensation of the officers and Trustees and members of an advisory board shall be fixed from time to time by the Trustees or, in the case of officers, by any committee or officer upon whom such power may be
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conferred by the Trustees. No officer shall be prevented from receiving such compensation as such officer by reason of the fact that such officer is also a Trustee.
Section 6.11 Designation of Principal Accounting Officer(s) and Principal Financial Officer(s). The Trustees shall designate by resolution one or more officers of the Trust as the principal accounting officer(s) and the principal financial officer(s) for all purposes required by the Securities Act of 1933, as amended from time to time.
ARTICLE VII - SHARES OF BENEFICIAL INTEREST
Section 7.1 Share Certificates. The Trustees may issue Shares either in certificated or uncertificated form, and if they have issued Shares in certificated form, they may, by written notice to the holders of such Shares, require the surrender of their certificates to the Trust for cancellation, which surrender and cancellation shall not affect the ownership of such Shares. For any Shares issued without certificates, the Trust or its transfer agent may either issue receipts therefor or may keep accounts upon the books of the Trust for the record holders of such Shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of such Shares as if they had received certificates therefor and shall be held to have expressly assented and agreed to the terms hereof and of the Declaration of Trust. For any Shares for which the Trustees shall issue certificates, each holder of such Shares shall be entitled to a certificate stating the number of Shares owned by him or her in such form as shall be prescribed from time to time by the Trustees. The certificates representing Shares shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Trust. Any or all of the signatures or the seal of the Trust on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate which shall have ceased to be such officer, transfer agent or registrar before such certificate shall be issued, it may be issued by the Trust with the same effect as if such officer, transfer agent or registrar were still in office at the date of issue.
Section 7.2 Regulations. The Trustees may make such additional rules and regulations, not inconsistent with these By-Laws, as they may deem expedient concerning the issue, transfer and registration of certificates for Shares of the Trust. They may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for Shares to bear the signature or signatures of any of them.
Section 7.3 Lost, Destroyed or Mutilated Certificates. The holder of any certificates representing Shares of the Trust shall immediately notify the Trust of any loss, destruction or mutilation of such certificate, and the Trust may issue a new certificate in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the Trustees may, in their discretion, require such owner or such owner’s legal representative to give to the Trust a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Trustees in their absolute discretion shall determine, to indemnify the Trust against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or issuance of a new certificate.
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Section 7.4 Disclosure of Holdings. The record or beneficial holders of Shares or other securities of the Trust, including any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction with respect to Shares, shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares or other securities of the Trust, including any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction with respect to Shares, as the Trustees deem necessary or appropriate.
Section 7.5 Register of Shares. A register shall be kept at the principal office of the Trust or an office of the transfer agent or other similar agent which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof in accordance with the Declaration of Trust, and such register shall be conclusive as to who are the holders of the Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No shareholder shall be entitled to receive payment of any dividend or distribution, nor be entitled to receive notice as provided herein, until the shareholder has given their address to the transfer agent or such other officer or agent of the Trustees as shall keep the said register for entry thereon.
Section 7.6 Transfer of Shares. Shares shall be transferable on the records of the Trust only by Shareholder thereof or by a bona fide agent of such Shareholder duly authorized in writing, upon delivery to the Trustees, the transfer agent or other similar agent of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the register of the Trust, and until such record is made, the Shareholder shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any transfer agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer.
ARTICLE VIII - INDEMNIFICATION
Section 8.1 Indemnification of Employees and Agents. Employees and agents of the Trust (including any individuals who serve at its request as directors, officers, or trustees of another organization in which it has any interest as a shareholder, creditor or otherwise) shall have the same rights to indemnification and advancement of expenses granted to Trustees and officers of the Trust in the Declaration of Trust.
Section 8.2 Indemnification Agreements. The Trust may enter into indemnification agreements with any Trustee of the Trust and with any officer of the Trust subject to such other qualifications, limitations or restrictions as provided in the Declaration of Trust.
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ARTICLE IX - TERMS OF COMMON SHARES
Section 9.1 Common Shares.
a) The Common Shares shall rank junior to any issued and outstanding preferred shares (“Preferred Shares”) with respect to payment of dividends and distributions on liquidation or dissolution and shall have such other qualifications, limitations or restrictions as provided in the Declaration of Trust.
b) Except as otherwise provided herein or by law and the Declaration of Trust, the holders of the Common Shares shall be entitled to one vote for each whole Share on each matter submitted to a vote of the Shareholders of the Trust. If Preferred Shares are issued and outstanding, the holders of the Common Shares and the holders of the Preferred Shares shall vote together as a single class except as herein provided or to the extent otherwise required by the 1940 Act or the Declaration of Trust.
c) After all accumulated and unpaid dividends upon all Preferred Shares, if any, for all previous dividend periods have been paid, and full dividends on all outstanding Preferred Shares, if any, for the then-current dividend period have been paid or declared and a sum sufficient for the payment thereof set apart therefore, then and not otherwise, dividends or other distributions may be declared upon and paid to the holders of the Common Shares, to the exclusion of the holders of the Preferred Shares, if any.
d) In the event of the dissolution, liquidation, or winding up of the Trust, whether voluntary or involuntary, after payment in full of the amounts, if any, required to be paid to the holders of the Preferred Shares, the holders of the Common Shares shall be entitled, to the exclusion of the holders of the Preferred Shares, if any, to share ratably in all remaining assets of the Trust.
ARTICLE X - FISCAL YEAR
The fiscal year of the Trust and any Class or Series thereof shall be established by resolution of the Trustees.
ARTICLE XI - INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions and regulations the accounts and books of the Trust or any of them shall be open to the inspection of the Shareholders; and no Shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by applicable law or authorized by the Trustees.
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ARTICLE XII - SEAL
The Trustees may adopt a seal which shall be in such form and shall have such inscription thereon as the Trustees may from time to time prescribe but the absence of a seal shall not impair the validity or execution of any document.
ARTICLE XIII - REPORTS TO SHAREHOLDERS
The Trustees shall submit to Shareholders such written financial reports of the transactions of the Trust and any Class or Series thereof, as required by applicable law.
ARTICLE XIV - SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the Declaration of Trust or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. A notice shall be deemed to have been sent by mail, telegraph, cable, wireless, facsimile or electronic means for the purposes of these By-Laws when it has been delivered to a representative of any entity holding itself out as capable of sending notice by such means with instructions that it be so sent.
ARTICLE XV - PROVISIONS IN CONFLICT WITH LAW OR REGULATION
Section 15.1 Severability. The provisions of these By-Laws are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code of 1986 or with other applicable binding laws and regulations, the conflicting provision shall be construed in such a manner consistent with such law as may most closely reflect the intention of the offending provision; provided, however, that such determination shall not affect any of the remaining provisions of these By-Laws or render invalid or improper any action taken or omitted prior to such determination.
Section 15.2 Invalidity. If any provision of these By-Laws shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of these By-Laws in any jurisdiction.
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ARTICLE XVI - GOVERNING LAW
These By-Laws shall be subject to and construed according to the laws of the Commonwealth of Massachusetts.
ARTICLE XVII - AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new By-Laws may be adopted by a vote of a Majority of the Trustees, provided, however, that no By-Law may be amended, adopted or repealed by the Trustees if such amendment, adoption or repeal requires, pursuant to federal or state law, the Declaration of Trust or these By-Laws, a vote of the Shareholders, in which case such vote of Shareholders, together with a vote of a Majority of the Trustees, shall be required.
ARTICLE XVIII – NET ASSET VALUE
The net asset value of each Outstanding Common Share of the Trust or of each series or class thereof shall be determined on such days and at such time or times as the Trustees may determine. The value of the assets of the Trust or any series thereof and the net asset value of Outstanding Shares may be determined in such manner as shall be approved by the Trustees and consistent with the 1940 Act.
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EXHIBIT (2)(b)(1)
AMENDMENT DATED MARCH 10, 2016
TO THE AMENDED AND
RESTATED
BY-LAWS OF
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
DATED SEPTEMBER 27, 2013
Section 4.4 of ARTICLE IV is hereby amended and replaced in its entirety by the following:
Section 4.4 Retirement Age. The retirement age for Trustees shall be determined from time to time by a resolution of the majority of the Trustees.
EXHIBIT (2)(e)
John Hancock Closed-End Funds
Dividend Reinvestment Plan
Dear Shareholder:
Thank you for selecting a John Hancock Closed-End Fund (the “Fund”) for your investment portfolio. Every shareholder holding at least one full share of the Fund is entitled to participate in the Fund’s Dividend Reinvestment Plan (the “Plan”). In addition, every shareholder who became a shareholder of the Fund after June 30, 2011 (May 25, 2011 with respect to John Hancock Hedged Equity & Income Fund) and holds at least one full share of the Fund will be automatically enrolled in the Plan. The Terms and Conditions of the Plan, as well as the procedures to either continue dividend reinvestment or have your dividends paid in cash, are included in this brochure. The brochure also describes the costs you will pay as a Plan participant. Appendix A to this brochure lists the Funds that currently offer the Plan.
The Plan offers an opportunity to earn compounded returns. Compounding your investment returns over time by reinvesting in shares of the Fund may afford benefits to you not achieved by taking your investment returns in cash. The Plan also enables you to purchase additional shares of the Fund, deposit Fund shares that were not acquired through the Plan, and sell shares held in your Plan account. In addition, as a participant in the Plan, you will benefit from the safekeeping provided by the Administrator for all shares purchased on your behalf by the Administrator and other Fund shares you may deposit in the Plan account. This service protects against theft or loss of certificates. Recordkeeping also is provided by the Administrator for participants. Monthly statements will detail distributions, purchases, sales (if any), prices and total shares held in your Plan account.
Computershare Trust Company, N.A (“Computershare” or the “Administrator”) acts as Administrator for shareholders in reinvesting all dividends and distributions in additional shares of the Fund for individual accounts. If you hold at least one full share of the Fund and would like automatic dividend reinvestment and your shares are held in the name of a nominee (broker, bank or other), please contact your nominee to see if it will participate in the Plan for you. If your nominee can participate in the Plan, your monthly statements will reflect the reinvestment. If your nominee cannot participate in the Plan for you, have your shares re-registered in your name so you may participate.
If you do not wish to participate in the Plan, please notify the Administrator by telephone at the number in the enclosed materials or by visiting the Administrator’s Web site at www.computershare.com/investor.
What is the Dividend Reinvestment Plan?
The Dividend Reinvestment Plan (the “Plan”) offers shareholders of each of the John Hancock Closed-End Funds listed in Appendix A (each a “Fund”) a prompt and simple way to reinvest their dividend and net capital gains distributions in shares of the Fund, purchase additional shares of the Fund, and safekeep shares of the Fund. Each Fund expects to declare dividends out of its income and net capital gains available for distribution, in accordance with its usual practice, as stated in its shareholder reports.
Computershare acts as Administrator for shareholders in administering the Plan. The complete Terms and Conditions of the Plan appear later in this brochure. Except where noted, references to a “Fund” in this brochure and in the Terms and Conditions apply equally to each Fund.
Who can participate in the Plan?
If you own at least one full share of the Fund in your own name, you are entitled to participate in the Plan. In addition, if you are a new shareholder holding at least one full share of the Fund, you will be automatically enrolled in the Plan. This automatic enrollment feature of the Plan applies only to shareholders who became shareholders of the Fund after June 30, 2011 (May 25, 2011 with respect to John Hancock Hedged Equity & Income Fund). If you own shares that are held in the name of a brokerage firm, bank or other nominee, you should instruct your nominee to participate on your behalf with respect to the Fund or Funds that you designate. If you wish to participate in the Plan, but your brokerage firm, bank or other nominee is unable to participate on your behalf, you should request it to re-register your shares in your own name, which will enable your participation in the Plan. The Administrator will administer the Plan on the basis of the number of shares certified from time to time by you as representing the total amount registered in your name and held for your account by your nominee.
How does the Plan work?
If the Fund declares a dividend or distribution payable either in cash or in shares of the Fund and the market price of shares on the valuation date equals or exceeds the Fund’s net asset value per share (“NAV”), the Fund will issue new shares to you at the greater of NAV or 95% of the current market price. If the market price is lower than NAV, or if dividends or distributions are payable only in cash, then you will receive shares purchased by the Administrator on your behalf on the New York Stock Exchange (the “NYSE”) or otherwise on the open market. If the market price exceeds NAV before the Administrator has completed its purchases, the average purchase price may exceed NAV, resulting in fewer shares being acquired than if the Fund had issued new shares.
All reinvestments are in full and fractional shares, carried to four decimal places.
Can I invest additional cash under the Plan?
You may buy additional shares of the Fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. You will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the Fund will be made on the open market.
To purchase additional Fund shares, you may make a one-time online bank debit from your designated U.S. bank account by going to www.computershare.com/investor and follow the instructions provided. You may also send the Administrator a check payable to “Computershare” along with written instructions to use the investment to purchase shares of the Fund for your Plan account. A form for use in purchasing additional Fund shares will be attached to your Plan account statements. The Administrator will not accept cash, traveler’s checks, money orders or third-party checks. In addition, you may contact the Administrator to purchase Fund shares through monthly recurring electronic fund transfers from your designated U.S bank account at any qualified financial institution that participates in the Automated Clearing House. Recurring automatic purchases by fund transfer are made on the 23rd day of each month, or if such date is not a business day, on the next business day. You will be charged a $2 transaction fee plus $0.05 per share fee for each recurring automatic purchase. The automatic purchases will continue until you notify the Administrator to change or discontinue them.
Cash investments will be invested monthly by the Administrator by the last business day of the month; no interest will be paid to you on cash investments held pending investment. There is no obligation to invest additional cash.
The Administrator will wait up to three business days after receipt of the check or electronic funds transfer to ensure it receives good funds and will then seek to purchase shares from additional cash investments promptly on the investment date.
If your cash investment cannot be collected by the Administrator due to insufficient funds, you will be charged $35. In addition, shares in your Plan account will be sold to the extent necessary to pay the $35 charge and the sales charges related to the sale, and to reimburse the Administrator for any amounts expended to purchase shares that were added to your account in connection with the investment.
Safekeeping
All shares purchased pursuant to the Plan benefit from the safekeeping provided by the Administrator. In addition, you may deposit for safekeeping by the Administrator Fund shares that were not purchased under the Plan, provided that the shares to be deposited are registered in your name, or if such shares are registered in another name, you have satisfied the requirements for transfer of such shares.
Safekeeping protects your shares against loss, theft or accidental destruction and also provides a convenient way for you to keep track of your Fund shares. Only shares deposited with the Administrator for safekeeping may be sold through the Plan. If you own Fund shares in certificated form, you may deposit your certificates for those shares free of charge with the Administrator. Upon receipt of your certificate(s), the Administrator will cancel the certificate(s) and deposit the shares in a book entry form. If you wish to deposit your certificate(s), you must send the unsigned certificates to Computershare, P.O. Box 43006, Providence, RI 02940-3006. We strongly recommend that you send certificate(s) via overnight delivery or another form of traceable mail, with return receipt requested, and ensure that the certificates are properly insured.
Sale of shares
You can sell Fund shares held in your Plan account at any time by contacting the Administrator over the Internet, by telephone or in writing. Your sale request will be processed and your shares will, subject to market conditions and other factors, generally be sold within 24 hours of receipt
of your request. Please note that the Administrator cannot and does not guarantee the actual sale date or price, nor can it stop or cancel any outstanding sales or issuance requests. All requests are final. The Administrator will mail a check to you (less applicable brokerage trading fees) on settlement date, which is two business days after your shares have been sold.
Alternatively, you may choose to sell your shares through your stockbroker, in which case you would have to request that the Administrator electronically transfer your shares to your stockbroker through the Direct Registration System.
Is there a cost to participate?
There are no brokerage charges for shares issued directly by the Fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
What are the tax implications for participants?
You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and net capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. The amount of the dividend to be reported on Form 1099-DIV should be: (1) in the case of shares issued by the Fund, the fair market value of such shares on the dividend payment date; and (2) in the case of shares purchased by the Administrator in the open market, the amount of cash used to purchase them (including the amount of cash allocable to brokerage trading fees paid on such purchases).
Once enrolled in the Plan, may I withdraw from it?
You may withdraw from the Plan at any time by contacting the Administrator by telephone, in writing or by visiting the Administrator’s Web site at www.computershare.com/investor. Your withdrawal will be effective as specified in the Terms and Conditions.
If you withdraw, your shares will be credited to your account; or, if you wish, the Administrator will sell your full and fractional shares and send you the proceeds, less a transaction fee of $5.00 and less brokerage trading fees of $0.05 per share.
May the Administrator terminate your participation in the Plan?
Yes. If you do not maintain at least one whole share of common stock in the Plan account, the Administrator may terminate your participation in the Plan. If your participation has been terminated, you will be sent a check for the cash value of any fractional share in the Plan account, less any applicable broker commissions and taxes.
How do participating shareholders benefit?
By reinvesting your dividends in additional shares of the Fund, you will build holdings in the Fund easily and automatically. In addition, you will be able to safekeep all your Fund shares in your Plan account, which provides a convenient way for you to keep track of your Fund shares. You can also buy and sell Fund shares through the Plan.
You will receive a detailed account statement from the Administrator showing total dividends and distributions, date of investment, shares acquired or sold (if applicable) and price per share, and total shares of record held by you and by the Administrator for you. You will receive a proxy for your existing shares as well as the shares purchased for you by the Administrator pursuant to the Plan. As long as you participate in the Plan, the Administrator will hold the shares it has acquired for you in safekeeping, in non-certificated form. This convenience provides added protection against loss, theft or inadvertent destruction of certificates.
Whom should I contact for additional information?
You may address all notices, correspondence, questions or other communications regarding the Plan to the following:
Telephone
Customer Service (within the U.S. and Canada):
1-800-852-0218
An automated voice response system is available 24 hours a day, 7 days a week. Customer service representatives are available from 9:00 a.m. to 5:00 p.m., Eastern Time, Monday through Friday (except holidays).
International Telephone Inquiries:
1-201-680-6578
For the Hearing Impaired (TDD):
1-800-368-0328
Internet
You can withdraw from the Plan, obtain information and perform certain transactions on your Fund account online via Investor Center a www.computershare.com/investor.
In writing
You also may write to the Administrator at the following address:
Computershare,
P.O. Box 505000
Louisville, KY 40233-5000
Be sure to include your name, address, daytime telephone number, account number and a reference to the relevant Fund on all correspondence.
If your shares are not held in your name, you should contact your brokerage firm, bank or other nominee for more information and to see if your nominee will participate in the plan on your behalf.
Each Fund and the Administrator may amend or terminate the Plan. Participants generally will receive written notice at least 30 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 30 days before the record date for the payment of any dividend or distribution by a Fund.
The Terms and Conditions of the Plan apply to shareholders who participate in the Plan. Please review this brochure and the Terms and Conditions of the Dividend Reinvestment Plan carefully to determine which alternative is best for you.
Terms and Conditions of the Dividend Reinvestment Plan
1. You, Computershare Trust Company, N.A., will act as agent (the “Administrator”) for me, and will open an account for me under the Dividend Reinvestment Plan (the “Plan”) in the same name as my present shares of the relevant John Hancock Closed-End Fund or Funds listed on Appendix A hereto (each a “Fund”) are registered, and put the Plan into effect for me as of the earlier of the first cash purchase under the Plan or the first record date for a dividend or distribution. Unless otherwise noted, references to a “Fund” in these Terms and Conditions shall apply equally to each Fund.
2. Whenever the Fund declares any dividend or distribution and the market price of the common shares on the payment date for the distribution or dividend payable is equal to or exceeds its net asset value per share as determined on the payment date (“NAV”), the Fund will issue, and you will receive as my agent, common shares at a value equal to the higher of NAV or
95% of the market price. The number of additional shares to be credited to my account shall be determined by dividing the equivalent dollar amount of the distribution or dividend payable to me by the higher NAV or 95% of the market price.
3. Whenever the Fund declares any dividend or distribution and the NAV of the common shares exceeds the market price of the common shares on the dividend payment date, or if the Board of Trustees of the Fund declares a dividend payable only in cash, you will, as Administrator for me, apply the amount of such dividend or distribution payable to me (less my pro rata share of brokerage trading fees incurred with respect to open-market purchases in connection with the reinvestment of such dividend or distribution) to the purchase on the open market of shares for my account. Such purchases will be made on or shortly after the payable date for such dividend or distribution, and in no event later than the day preceding the next ex- dividend date, except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities laws.
4. For purposes of Sections 2 and 3 of the Plan: (a) the market price of the Fund’s shares on a particular date shall be the last sale price for the Fund’s shares in the market on that date as of the close of regular trading on the New York Stock Exchange (NYSE), or, if there is no sale in the market on that date or sale prices are not available, then the mean between the closing bid and asked quotations for such shares on such date; and (b) the Fund’s NAV on a particular date shall be as determined by or on behalf of the Fund.
5. I understand that I have the option to purchase additional Fund shares for cash under the Plan. Such purchases will be made on the open market. I may make cash investments of not less than $50, up to a maximum of $10,000 per investment, not to exceed a total of $100,000 in any calendar year. A $5 transaction fee plus $0.05 per share brokerage trading fee will be charged for each optional cash investment by check or one-time online bank debit. Cash investments may be made upon enrollment in the Plan or at any time. Cash investments may be made by going online at www.computershare.com/investor and authorizing a one-time online bank debit from my designated U.S. bank account or by submitting to the Administrator a check payable to “Computershare” along with written instructions to use the investment to purchase Fund shares for my Plan account. A form for use in making cash investments will be attached to the statements of account sent by the Administrator to participants. The Administrator will not accept cash, traveler’s checks, money orders or third-party checks.
I understand that I may contact the Administrator to arrange for cash investments to be submitted by me to the Administrator by monthly recurring electronic funds transfer from my designated U.S. bank account at any qualified financial institution that participates in the Automated Clearing House. Fund transfers are made on the 25th day of each month, or if such date is not a business day, on the next business day. A $2 transaction fee plus $0.05 per share brokerage trading fee will be charged for each recurring automatic purchase. I agree that my fund transfers will continue until I notify the Administrator to change or discontinue them.
I understand that cash investments will be invested monthly by the Administrator and that no interest will be paid to me on cash investments held until the investment. There is no obligation to make a cash investment. The number of shares to be added to my Plan account with respect to a cash investment will be determined by dividing the cash investment by the price of the shares, including fractions of a share computed to four decimal places.
I understand that the Administrator will wait up to three business days after receipt of the check or electronic funds transfer to ensure it receives good funds and will then seek to purchase shares from additional cash investments promptly on the investment date.
I agree that if a cash investment submitted by me cannot be collected by the Administrator due to insufficient funds, I will be charged $35. In addition, I authorize the Administrator to sell shares in my Plan account to the extent necessary to pay the $35 charge and to pay the sales charges related to the sale, and to reimburse the Administrator for any amounts expended to purchase shares that were added to my account in connection with the investment.
6. I may sell Fund shares held in my Plan account at any time by contacting the Administrator over the Internet, by telephone or in writing. My sale request will be processed and my shares will, subject to market conditions and other factors, generally be sold within 24 hours of receipt of your request. I acknowledge that you cannot and do not guarantee the actual sale date or price, and cannot stop or cancel any outstanding sales or issuance requests. All requests are final. The Administrator will mail a check to me (less applicable sales fees) on settlement date, which is two business days after my shares have been sold.
Alternatively, I may sell my shares through my stockbroker, in which case I agree to request that the Administrator electronically transfer my shares to my stockbroker through the Direct Registration System.
7. I understand that all Fund shares acquired through the Plan will be deposited for safekeeping with the Administrator. I also may deposit for safekeeping by the Administrator Fund shares that I did not purchase under the Plan, including shares in certificated form, provided that the shares to be deposited are registered in my, or if such shares are registered in another name, I have satisfied the requirements for transfer of such shares. I also understand that shares deposited for safekeeping with the Administrator, which were in certificated form, will be canceled and deposited in a book entry form.
8. Open-market purchases and sales provided for above may be made on any securities exchange where the Fund’s shares are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as you shall determine. It is understood that, in any event, you shall have no liability in connection with any inability to purchase or sell shares within 30 days after the initial date of such purchases as herein provided, or with the timing of any purchases effected. You shall have no responsibility as to the value of the Fund’s shares acquired or sold for my account. For the purposes of purchases and sales in the open market, you may aggregate my purchases and sales with those of other shareholders of the Fund for whom you similarly act as Administrator, and the average price (including brokerage trading fees) of all shares purchased or sold by you as Administrator shall be the price per share allocable to me in connection therewith.
9. You may hold my shares acquired together with the shares of other shareholders of the Fund acquired pursuant to similar authorizations, in non-certificated form in your name or that of your nominee. You will forward to me any proxy solicitation material and will vote any shares so held for me only in accordance with the proxy returned by me to the Fund.
10. You will confirm to me each acquisition or sale made for my account as soon as practicable, but not later than 60 days after the date thereof. Although I may from time to time have an undivided fractional interest (computed to four decimal places) in a share of the Fund, I acknowledge that no certificate for a fractional share will be issued to me. I acknowledge, however, that dividends and distributions on fractional shares will be credited to my account. In the event of termination of my account under the Plan, you will adjust for any such undivided fractional interest in cash at the market value of the Fund’s shares at the time of termination, less the pro rata expense of any sale required to make such an adjustment.
11. Any share dividends or split shares distributed by the Fund on shares held by you for me will be credited to my account. In the event that the Fund makes available to its shareholders rights to purchase additional shares or other securities, the shares held for me under the Plan will be added to other shares held by me in calculating the number of rights to be issued to me.
12. Your service fee for handling distributions or dividends will be paid by the Fund. I will be charged a pro rata share of brokerage trading fees on all open market purchases.
13. I may terminate my account under the Plan by notifying you in writing, by telephone or by visiting your Web site. Such termination will be effective immediately if my notice is received by you prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. The Plan may be terminated by you or the Fund upon notice in writing mailed to me at least 90 days prior to any record date for the payment of any dividend or distribution by the Fund. If I elect by notice to you in advance of such termination to have you sell part or all of my shares and remit the proceeds to me, you are authorized to deduct from the proceeds a $5.00 fee plus $0.05 per share brokerage trading fees for this transaction.
14. After terminating my account under the Plan, I may reopen my account at any time by notifying you in writing, by telephone or by visiting your Web site. In such case, you will reopen my account in the same manner as set forth in Section 1 above and will put the Plan into effect for me as of the earlier of the first cash purchase under the Plan or the first record date for a dividend or distribution after you receive authorization from me.
15. If I do not have at least one whole share of the Fund, you may terminate my participation in the Plan after written notice, to be given reasonably in advance of such termination and is mailed to me at my address of record. Upon such termination, my account shall be treated as if I had elected to terminate my participation in the Plan pursuant to Section 13 hereof, except that you shall sell any such fractional share on the open market and remit the proceeds to me, less any applicable broker commissions and taxes.
16. These Terms and Conditions may be amended or supplemented by you or the Fund at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to me appropriate written notice at least 90 days prior to the effective date thereof. The amendment or supplement shall be deemed to be accepted by me unless, prior to the effective date thereof, you receive notice of the termination of my account under the Plan. Any such amendment may include, without limitation, an appointment by you in your place and stead of a successor Administrator under these Terms and Conditions, with full power and authority to perform all or any of the acts to be performed by the Administrator under these Terms and Conditions. Upon any such appointment of any Administrator for the purpose of receiving dividends and distributions, the Fund will be authorized to pay such successor Administrator, for my account, all dividends and distributions payable on shares of the Fund held in my name or under the Plan for retention or application by such successor Administrator as provided in these Terms and Conditions.
17. You shall at all times act in good faith and agree to use your best efforts within reasonable limits to ensure the accuracy of all services performed under this Agreement and to comply with applicable law, but assume no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by your negligence, bad faith or willful misconduct or that of your employees.
18. This agreement shall be governed by the laws of The Commonwealth of Massachusetts.
Appendix A
John Hancock Closed-End Funds Offering the Dividend Reinvestment Plan
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
EXHIBIT (2)(g)(1)
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
AMENDED AND RESTATED ADVISORY AGREEMENT
Amended and Restated Advisory Agreement dated ___ June 30 _____, 2020, between John Hancock Financial Opportunities Fund, a Massachusetts business trust (the “Fund”), and John Hancock Investment Management LLC, a Delaware limited liability company (“JHIM” or the “Adviser”). In consideration of the mutual covenants contained herein, the parties agree as follows:
1. APPOINTMENT OF ADVISER
The Fund hereby appoints JHIM, subject to the supervision of the Trustees of the Fund and the terms of this Agreement, as the investment adviser for the Fund. The Adviser accepts such appointment and agrees to render the services and to assume the obligations set forth in this Agreement commencing on its effective date. The Adviser will be an independent contractor and will have no authority to act for or represent the Fund in any way or otherwise be deemed an agent unless expressly authorized in this Agreement or another writing by the Fund and the Adviser.
2. DUTIES OF THE ADVISER
a. | Subject to the general supervision of the Trustees of the Fund and the terms of this Agreement, the Adviser will at its own expense, except as noted below, select and contract with investment subadvisers (“Subadvisers”) to manage the investments and determine the composition of the assets of the Fund; provided, that any contract with a Subadviser (a “Subadvisory Agreement”) shall be in compliance with and approved as required by the Investment Company Act of 1940, as amended (the “1940 Act”), except for such exemptions therefrom as may be granted to the Fund or the Adviser. Subject always to the direction and control of the Trustees of the Fund, the Adviser will monitor each Subadviser’s management of the Fund’s investment operations in accordance with the investment objectives and related investment policies, as set forth in the registration statement with the Securities and Exchange Commission of the Fund under the management of such Subadviser, and review and report to the Trustees of the Fund on the performance of such Subadviser. |
b. The Adviser shall furnish to the Fund the following:
i. | Office and Other Facilities. - The Adviser shall furnish to the Fund office space in the offices of the Adviser or in such other place as may be agreed upon by the parties hereto from time to time, and all necessary office facilities and equipment. |
ii. | Trustees and Officers. - The Adviser agrees to permit individuals who are directors, officers or employees of the Adviser to serve (if duly elected or appointed) as Trustees or President of the Fund without remuneration from or other cost to the Fund. |
iii. | Investment Personnel. - The Adviser shall furnish to the Fund any personnel necessary for the oversight and/or conduct of the investment operations of the Fund. For the elimination of doubt, however, the Adviser shall not be obligated to furnish to the Fund pursuant to this Agreement personnel for the performance of functions: (a) related to and to be performed under any other separate contract from time-to-time in effect between the Fund and the Adviser or another party for legal, accounting, administrative and other any other non-investment related services; (b) related to and to be performed under the Fund contract for custodial, bookkeeping, transfer and dividend disbursing agency services by the bank or other financial institution selected to perform such services; or (c) related to the investment subadvisory services to be provided by any Subadviser pursuant to a Subadvisory Agreement. |
iv. | Reports to Fund. - The Adviser shall furnish to, or place at the disposal of, the Fund such information, reports, valuations, analyses and opinions as the Fund may, at any time or from time to time, reasonably request or as the Adviser may deem helpful to the Fund, provided that the expenses associated with any such materials furnished by the Adviser at the request of the Fund shall be borne by the Fund. |
c. | In addition to negotiating and contracting with Subadvisers as set forth in section (2)(a) of this Agreement and providing facilities, personnel and services as set forth in section (2)(b), the Adviser will pay the compensation of the President and Trustees of the Fund who are also directors, officers or employees of the Adviser or its affiliates. |
d. | The Adviser may elect to manage the investments and determine the composition of the assets of the Fund, subject to the approval of the Trustees of the Fund. In the event of such election, the Adviser, subject always to the direction and control of the Trustees of the Fund, will manage the investments and determine the composition of the assets of the Fund in accordance with the Fund’s registration statement, as amended. In fulfilling its obligations to manage the investments and reinvestments of the assets of the Fund, the Adviser: |
i. | will obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in the Fund or are under consideration for inclusion in the Fund; |
ii. | will formulate and implement a continuous investment program for the Fund consistent with the investment objectives and related investment policies for the Fund as described in the Fund’s registration statement, as amended; |
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iii. | will take whatever steps are necessary to implement these investment programs by the purchase and sale of securities including the placing of orders for such purchases and sales; |
iv. | will regularly report to the Trustees of the Fund with respect to the implementation of these investment programs; |
v. | will provide assistance to the Fund’s Custodian regarding the fair value of securities held by the Fund for which market quotations are not readily available; |
vi. | will furnish, at its expense: (i) all necessary investment and management facilities, including salaries of personnel required for it to execute its duties faithfully; and (ii) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the investment affairs of the Fund (excluding any such services that are the subject of a separate agreement as may from time to time be in effect between the Fund and the Adviser or another party); |
vii. | will select brokers and dealers to effect all transactions subject to the following conditions: the Adviser will place all necessary orders with brokers, dealers, or issuers, and will negotiate brokerage commissions if applicable; the Adviser is directed at all times to seek to execute brokerage transactions for the Fund in accordance with such policies or practices as may be established by the Trustees and described in the Fund’s registration statement as amended; the Adviser may pay a broker-dealer which provides research and brokerage services a higher spread or commission for a particular transaction than otherwise might have been charged by another broker-dealer, if the Adviser determines that the higher spread or commission is reasonable in relation to the value of the brokerage and research services that such broker-dealer provides, viewed in terms of either the particular transaction or the Adviser’s overall responsibilities with respect to accounts managed by the Adviser; and the Adviser may use for the benefit of its other clients, or make available to companies affiliated with the Adviser for the benefit of such companies or their clients, any such brokerage and research services that the Adviser obtains from brokers or dealers; |
viii. | to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, on occasions when the Adviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other clients of the Adviser, aggregate the securities to be purchased or sold to attempt to obtain a more favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Adviser in the manner the Adviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to its other clients; |
ix. | will maintain all accounts, books and records with respect to the Fund as are required of an investment adviser of a registered investment company pursuant to the 1940 Act and the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and the rules thereunder; and |
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x. | will vote all proxies received in connection with securities held by the Fund. |
3. EXPENSES ASSUMED BY THE FUND
The Fund will pay all expenses of its organization, operations and business not specifically assumed or agreed to be paid by the Adviser, as provided in this Agreement, or by a Subadviser, as provided in a Subadvisory Agreement. Without limiting the generality of the foregoing, in addition to certain expenses described in section 2 above, the Fund shall pay or arrange for the payment of the following:
a. | Edgarization, Printing and Mailing. - Costs of edgarization, printing and mailing (i) all registration statements (including all amendments thereto) and prospectuses/statements of additional information (including all supplements thereto), all annual, semiannual and periodic reports to shareholders of the Fund, regulatory authorities or others, (ii) all notices and proxy solicitation materials furnished to shareholders of the Fund or regulatory authorities and (iii) all tax returns; |
b. | Compensation of Officers and Trustees. - Compensation of the officers and Trustees of the Fund (other than persons serving as President or Trustee of the Fund who are also directors, officers or employees of the Adviser or its affiliates); |
c. | Registration and Filing Fees. - Registration, filing, blue-sky and other fees in connection with requirements of regulatory authorities, including, without limitation, all fees and expenses of registering and maintaining the registration of the Fund under the 1940 Act and the registration of the Fund’s shares under the Securities Act of 1933, as amended; |
d. | Custodial Services. - The charges and expenses of the custodian appointed by the Fund for custodial services; |
e. | Accounting Fees. - The charges and expenses of the independent accountants retained by the Fund; |
f. | Legal, Accounting and Administrative Services. - The charges and expenses of the Adviser or any other party pursuant to any separate contract with the Fund from time to time in effect with respect to the provision of legal services (including registering and qualifying Fund shares with regulatory authorities), as well as accounting, administrative and any other non-investment related services; |
g. | Transfer, Bookkeeping and Dividend Disbursing Agents. - The charges and expenses of any transfer, bookkeeping and dividend disbursing agents appointed by the Fund; |
h. | Commissions. - Broker’s commissions and issue and transfer taxes chargeable to the Fund in connection with securities transactions to which the Fund is a party; |
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i. | Taxes. - Taxes and corporate fees payable by the Fund to federal, state or other governmental agencies and the expenses incurred in the preparation of all tax returns; |
j. | Stock Certificates. - The cost of stock certificates, if any, representing shares of the Fund; |
k. | Membership Dues. - Association membership dues, as explicitly approved by the Trustees; |
l. | Insurance Premiums. - Insurance premiums for fidelity, errors and omissions, directors and officers and other coverage; |
m. | Shareholders and Trustees Meetings. - Expenses of shareholders and Trustees meetings; |
n. | Pricing. - Pricing of the Fund’s shares, including the cost of any equipment or services used for obtaining price quotations and valuing Fund portfolio investments; |
o. | Interest. - Interest on borrowings; |
p. | Communication Equipment. - All charges for equipment or services used for communication between the Adviser or the Fund and the custodian, transfer agent or any other agent selected by the Fund; and |
q. | Nonrecurring and Extraordinary Expense. - Such nonrecurring expenses as may arise, including the costs of actions, suits, or proceedings to which the Fund is, or is threatened to be made, a party and the expenses the Fund may incur as a result of its legal obligation to provide indemnification to its Trustees, officers, agents and shareholders. |
4. COMPENSATION OF ADVISER
Subject to the provisions of section 2(d) of this Agreement, the Adviser shall be entitled to a fee, paid daily, at such annual percentage rates, as specified in Appendix A to this Agreement, of the average daily gross assets of the Fund.
5. NON-EXCLUSIVITY
The services of the Adviser to the Fund are not to be deemed to be exclusive, and the Adviser shall be free to render investment advisory or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that the directors, officers and employees of the Adviser are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors, trustees or employees of any other firm or corporation, including other investment companies.
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6. SUPPLEMENTAL ARRANGEMENTS
The Adviser may enter into arrangements with other persons affiliated with the Adviser to better enable it to fulfill its obligations under this Agreement for the provision of certain personnel and facilities to the Adviser.
7. CONFLICTS OF INTEREST
It is understood that Trustees, officers, agents and shareholders of the Fund are or may be interested in the Adviser as directors, officers, stockholders, or otherwise; that directors, officers, agents and stockholders of the Adviser are or may be interested in the Fund as Trustees, officers, shareholders or otherwise; that the Adviser may be interested in the Fund; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided in the Agreement and Declaration of Trust of the Fund or the organizational documents of the Adviser or by specific provision of applicable law.
8. REGULATION
The Adviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations.
9. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of (i) its execution and (ii) the date of the meeting of the shareholders of the Fund, at which meeting this Agreement is approved by the vote of a “majority of the outstanding voting securities” (as defined in the 1940 Act) of the Fund. The Agreement will continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually either by the Trustees of the Fund or by the vote of a majority of the outstanding voting securities of the Fund provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the Fund who are not “interested persons” (as defined in the 1940 Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective if a majority of the outstanding voting securities of the Fund votes to approve the Agreement or its continuance.
Following the effectiveness of the Agreement, if the Agreement terminates because the shareholders of the Fund fail to provide any requisite approval under the 1940 Act for the continued effectiveness of the Agreement, the Adviser will continue to act as investment adviser with respect to the Fund pending the required approval of the Agreement or its continuance or of a new contract with the Adviser or a different adviser or other definitive action; provided, that the compensation received by the Adviser in respect of the Fund during such period will be no more than its actual costs incurred in furnishing investment advisory and management services to the Fund or the amount it would have received under the Agreement in respect of the Fund, whichever is less; provided further, for the elimination of doubt, the failure of shareholders of the Fund to approve a proposed amendment to the
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Agreement is not a termination of the Agreement with respect to the Fund and, in such event, the Agreement shall continue with respect to the Fund as previously in force and effect.
This Agreement may be terminated at any time, without the payment of any penalty, by the Trustees of the Fund, by the vote of a majority of the outstanding voting securities of the Fund, on sixty days’ written notice to the Adviser, or by the Adviser on sixty days’ written notice to the Fund. This Agreement will automatically terminate, without payment of any penalty, in the event of its “assignment” (as defined in the 1940 Act).
10. PROVISION OF CERTAIN INFORMATION BY ADVISER.
The Adviser will promptly notify the Fund in writing of the occurrence of any of the following:
a. | the Adviser fails to be registered as an investment adviser under the Advisers Act or under the laws of any jurisdiction in which the Adviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement; |
b. | the Adviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Fund; and |
c. | the chief executive officer or managing member of the Adviser or the portfolio manager of the Fund changes. |
11. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of a majority of the outstanding voting securities of the Fund and by the vote of a majority of the Trustees of the Fund who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval shall be effective if a majority of the outstanding voting securities of the Fund vote to approve the amendment.
12. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the parties.
13. HEADINGS
The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof.
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14. NOTICES
All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the Fund or Adviser in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this section.
15. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein.
16. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the 1940 Act. To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the 1940 Act, the latter shall control.
17. NAME OF THE FUND
The Fund may use the name “John Hancock” or any name or names derived from or similar to the names “John Hancock Investment Management LLC,” or “John Hancock Life Insurance Company (U.S.A.),” a Michigan domiciled insurance company, only for so long as this Agreement remains in effect as to the Fund. At such time as this Agreement shall no longer be in effect as to the Fund, the Fund will (to the extent it lawfully can) cease to use such a name or any other name indicating that the Fund is advised by or otherwise connected with the Adviser. The Fund acknowledges that it has adopted the name John Hancock Financial Opportunities Fund through permission of John Hancock Life Insurance Company (U.S.A.), and agrees that John Hancock Life Insurance Company (U.S.A.) reserves to itself and any successor to its business the right to grant the non-exclusive right to use the name “John Hancock” or any similar name or names to any other corporation or entity, including but not limited to any investment company of which John Hancock Life Insurance Company (U.S.A.) or any subsidiary or affiliate thereof shall be the investment adviser.
18. LIMITATION OF LIABILITY UNDER THE DECLARATION OF TRUST
The Amended and Restated Declaration of Trust establishing the Fund, dated January 22, 2016, a copy of which, together with all amendments thereto (the “Declaration”), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that no Trustee, shareholder, officer, employee or agent of the Fund shall be subject to any personal liability in connection with Fund property or the affairs of the Fund and that all persons should shall look solely to the Fund property for satisfaction of claims of any nature arising in connection with the affairs of the Fund.
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19. LIABILITY OF THE ADVISER
In the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Adviser in performance of its obligations and duties hereunder, (b) reckless disregard by the Adviser of its obligations and duties hereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not be subject to any liability whatsoever to the Fund, or to any shareholder for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Fund.
20. INDEMNIFICATION
a. | To the fullest extent permitted by applicable law, the Fund shall indemnify the Adviser, its affiliates and the officers, directors, employees and agents of the Adviser and its affiliates (each an “indemnitee”) against any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit relating to the Fund and not resulting from the willful misfeasance, bad faith, gross negligence, or reckless disregard of the indemnitee in the performance of the obligations and duties of the indemnitee’s office. The federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing in this Agreement will waive or limit any rights that the Fund may have under those laws. An indemnitee will not confess any claim or settle or make any compromise in any instance in which the Fund will be asked to provide indemnification, except with the Fund’s prior written consent. Any amounts payable by the Fund under this section shall be satisfied only against the assets of the Fund. |
b. | Any indemnification or advancement of expenses made in accordance with this section shall not prevent the recovery from any indemnitee of any amount if the indemnitee subsequently is determined in a final judicial decision on the merits in any action, suit, investigation or proceeding involving the liability or expense that gave rise to the indemnification to be liable to the Fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of the indemnitee’s office. |
c. | The rights of indemnification provided in this section shall not be exclusive of or affect any other rights to which any person may be entitled by contract or otherwise under law. Nothing contained in this section shall affect the power of the Fund to purchase and maintain liability insurance on behalf of the Adviser or any indemnitee. |
21. EXECUTION
This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above.
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND | ||
By: | /s/ Andrew G. Arnott | |
Name: | Andrew G. Arnott | |
Title: | President |
JOHN HANCOCK INVESTMENT | ||
MANAGEMENT LLC | ||
By: | /s/ Jay Aronowitz | |
Name: | Jay Aronowitz | |
Title: | Chief Investment Officer |
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APPENDIX A
Advisory Fee Schedule
Fund | Fees |
John Hancock Financial Opportunities Fund | 1.150% on the first $500 Million of Average Daily Gross Assets |
1.00% on the Average Daily Gross Assets in Excess of $500 Million |
“Gross assets” of the Fund means total assets of the fund, including any form of investment leverage minus all accrued expenses incurred in the normal course of operations but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility/commercial paper program or other forms of borrowings or the issuance of debt securities), (ii) the issuance of preferred shares or other similar preference securities, and/or (iii) any other means.
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EXHIBIT (2)(g)(2)
Execution Copy
JOHN HANCOCK FUNDS
SUB-ADVISORY AGREEMENT
AGREEMENT made this 31th day of December, 2005, among John Hancock Advisers, LLC, a Delaware limited liability company (the “Adviser”), Sovereign Asset Management LLC, a Delaware limited liability company (the “Sub-adviser”), and each of the trusts that is a signatory hereto (each, a “Trust” and together, as applicable, the “Trusts”). In consideration of the mutual covenants contained herein, the parties agree as follows:
1. | APPOINTMENT OF SUB-ADVISER |
The Sub--adviser undertakes to act as investment sub-adviser to each of the Trusts and the series thereof (each a “Fund”), in each case listed on Appendix A to this Agreement, as such Appendix may be amended by the affected Trust(s), the Adviser and the Sub-adviser from time to time, and, subject to the supervision and control of the Trustees of each Trust and the terms of this Agreement, to manage the investment and reinvestment of the assets of the Funds. The Sub-adviser will be an independent contractor and will have no authority to act for or represent any Trust, any Fund or the Adviser in any way except as expressly authorized in this Agreement or another writing by the applicable Trust or the Adviser. The Sub-adviser and the Adviser are currently affiliates under the common control of Manulife Financial Corporation.
2. | SERVICES TO BE RENDERED BY THE SUB-ADVISER TO THE TRUSTS AND THE FUNDS |
a. | Subject always to the direction and control of the Trustees of each Trust, the Sub-adviser shall have investment discretion over the assets of each Fund and will manage the investments and determine the composition of these assets in accordance with the applicable Trust’s registration statement, as amended. In fulfilling its obligations to manage the investments and reinvestments of the assets of each Fund, the Sub-adviser will: |
i. | obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in a Fund’s portfolio or are under consideration for inclusion in a Fund’s portfolio; |
ii. | formulate and implement a continuous investment program for each Fund that is consistent with the investment objectives and related investment policies for such Fund as described in the applicable Trust’s registration statement, as amended, copies of which shall be furnished to the Sub-adviser promptly upon amendment; |
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iii. | take whatever steps are necessary to implement these investment programs by the purchase and sale of securities, including the placing of orders for such purchases and sales; |
iv. | regularly report to the Trustees of each Trust and to the Adviser with respect to the implementation of these investment programs; and |
v. | provide assistance to each Trust’s custodian regarding the fair value of securities held by each Fund for which market quotations are not readily available. |
b. | The Sub-adviser, at its expense, will furnish all necessary investment and management facilities, including salaries of personnel required for it to execute its duties faithfully. |
c. | The Sub-adviser will select brokers and dealers to effect all transactions subject to the following conditions: The Sub-adviser will place all necessary orders with brokers, dealers, or issuers and will negotiate brokerage commissions, if applicable. The Sub-adviser is directed at all times to seek to execute brokerage transactions for each Fund in accordance with such policies or practices as may be established by the Trustees and described in the applicable Trust’s registration statement, as amended, and consistent with its fiduciary obligation to seek best execution. Subject to policies established from time to time by the Board of Trustees of the Trusts, the Sub-adviser may pay a broker-dealer which provides research and brokerage services a higher spread or commission for a particular transaction than otherwise might have been charged by another broker-dealer if the Sub-adviser determines that the higher spread or commission is reasonable in relation to the value of the brokerage and research services that such broker-dealer provides, viewed in terms of either the particular transaction or the Sub-adviser’s overall responsibilities with respect to accounts managed by the Sub-adviser. The Sub-adviser may use for the benefit of the Sub-adviser’s other clients, or make available to companies affiliated with the Sub-adviser or to its directors for the benefit of their clients, any such brokerage and research services that the Sub-adviser obtains from brokers or dealers. |
d. | On occasions when the Sub-adviser deems the purchase or sale of a security to be in the best interest of a Fund as well as other clients of the Sub-adviser, the Sub-adviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be purchased or sold to attempt to obtain a more favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Sub-adviser in the manner the Sub-adviser considers to be the most equitable and consistent with its fiduciary obligations to each Fund and to its other clients. |
e. | The Sub-adviser will maintain all accounts, books and records with respect to each Fund as are required of an investment sub-adviser of a registered investment company pursuant to the Investment Company Act of 1940, as amended (the “Investment Company Act”) and Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”) and the rules thereunder. |
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f. | The Sub-adviser shall vote proxies relating to each Fund’s investment securities in accordance with the applicable Trust’s proxy voting policies and procedures, which provide that the Sub-adviser shall vote all proxies relating to securities held by a Fund and, subject to the applicable Trust’s policies and procedures, shall use proxy voting policies and procedures adopted by the Sub-adviser in conformance with Rule 206(4)-6 under the Investment Advisers Act. The Sub-adviser shall review its proxy voting activities on a periodic basis with the Trustees and with the Adviser. |
3. | COMPENSATION OF SUB-ADVISER |
The Adviser will pay the Sub-adviser with respect to each Fund the compensation specified in Appendix A to this Agreement.
4. | LIABILITY OF SUB-ADVISER |
Neither the Sub-adviser nor any of its directors, officers or employees shall be liable to the Adviser or any Trust or Fund for any error of judgment or mistake of law or for any loss suffered by the Adviser, Trust or Fund in connection with the matters to which this Agreement relates, except for losses resulting from willful misfeasance, bad faith or gross negligence in the performance of, or from the reckless disregard of, the duties of the Sub-adviser or any of its directors.
5. | CONFLICTS OF INTEREST |
It is understood that trustees, officers, agents, members and shareholders of the Trusts are or may be interested in the Sub-adviser as trustees, officers, partners, shareholders, members or otherwise; that employees, agents, shareholders, members and partners of the Sub-adviser are or may be interested in a Trust as trustees, officers, shareholders, members or otherwise; that the Subadviser may be interested in the Trusts; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder, except as otherwise provided in the Agreement and Declaration of Trust of the applicable Trust and the limited liability company agreement of the Sub-adviser, respectively, or by specific provision of applicable law.
6. | REGULATION |
The Sub-adviser shall comply with all applicable laws and regulations in providing the services contemplated hereunder. Without limiting the foregoing, the Sub-adviser shall provide all information reasonably requested of it by the Board of Trustees of the Trusts in accordance with its duty to do so under Section 15(c) of the Investment Company Act and the Sub-adviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body, by reason of this Agreement, may request or require pursuant to applicable laws and regulations.
7. | DURATION AND TERMINATION OF AGREEMENT |
This Agreement shall become effective with respect to each Fund on the later of its execution, (ii) the date of the meeting of the Board of Trustees of the applicable Trust, at which
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meeting this Agreement is approved as described below and (iii) immediately following the close of business on December 31, 2005. The Agreement will continue in effect with respect to a Fund for a period more than two years from its effective date only so long as such continuance is specifically approved at least annually either by the Trustees of the applicable Trust or by a majority of the outstanding voting securities of the applicable Fund, provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the applicable Trust who are not interested persons (as defined in the Investment Company Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. Any required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective with respect to any Fund if a majority of the outstanding voting securities of the series (as defined in Rule 18f-2(h) under the Investment Company Act) of shares of that Fund votes to approve the Agreement or its continuance, notwithstanding that the Agreement or its continuance may not have been approved by a majority of the outstanding voting securities of any other Fund affected by the Agreement.
If any required shareholder approval of this Agreement or any continuance of the Agreement is not obtained, the Sub-adviser will continue to act as investment sub-adviser with respect to such Fund pending the required approval of the Agreement or its continuance or of a new contract with the Sub-adviser or a different adviser or sub-adviser or other definitive action; provided, that the compensation received by the Sub-adviser in respect of such Fund during such period is in compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at anytime, without the payment of any penalty, as to a Fund by the Trustees of the applicable Trust or by the vote of a majority of the outstanding voting securities of the applicable Fund, on sixty days’ written notice to the Adviser and the Sub-adviser, or by the Adviser or Sub-adviser on sixty days’ written notice to the applicable Trust and the other party. This Agreement will automatically terminate, without the payment of any penalty, in the event of its assignment (as defined in the Investment Company Act) or in the event the advisory agreement between the Adviser and the applicable Trust terminates for any reason.
8. | PROVISION OF CERTAIN INFORMATION BY SUB-ADVISER |
The Sub-adviser will promptly notify the Adviser and the Trusts in writing of the occurrence of any of the following events:
a. | the Sub-adviser fails to be registered as an investment adviser under the Investment Advisers Act or under the laws of any jurisdiction in which the Sub-adviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement; |
b. | the Sub-adviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of any Trust; and |
c. | any change in actual control or management of the Sub-adviser or the portfolio manager of any Fund. |
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9. | SERVICES TO OTHER CLIENTS |
The Adviser understands, and has advised each Trust’s Board of Trustees, that the Sub-adviser now acts, or may in the future act, as an investment adviser to fiduciary and other managed accounts and as investment adviser or sub-adviser to other investment companies. Further, the Adviser understands, and has advised each Trust’s Board of Trustees, that the Sub-adviser and its affiliates may give advice and take action for other accounts, including investment companies, which differs from advice given or the timing or nature of action taken for a Fund. The Sub-adviser is not obligated to initiate transactions for a Fund in any security that the Sub-adviser, its partners, affiliates or employees may purchase or sell for their own accounts or other clients.
10. | CONSULTATION WITH OTHER SUB-ADVISERS |
As required by Rule 17a-10 under the Investment Company Act, the Sub-adviser is prohibited from consulting with the entities listed below concerning transactions for a Fund in securities or other assets:
1. other sub-advisers to the Fund
2. other sub-advisers to any other Fund
3. other sub-advisers to a Fund under common control with such Fund
provided, however, the Sub-adviser may consult with any entity listed above that is an affiliate of the Sub-adviser.
11. | ONGOING RESPONSIBILITIES OF THE ADVISER. |
The Adviser understands, and has advised the Trustees of the Trusts, that during the term of this Agreement the Adviser shall retain responsibility for (i) providing the services set forth in Section 2 of this Agreement to the Trusts in the event the Sub-adviser fails, for whatever reason, to provide such services and (ii) ensuring that the services provided by the Sub-adviser to the Trusts pursuant to this Agreement are rendered in a manner such that the nature and quality of such services are at least comparable to the nature and quality of the investment advisory services heretofore rendered to the Trusts by the Adviser. Nothing in this Agreement is intended to limit or terminate the Adviser’s responsibilities under the Advisory Agreement, which obligations, including the indemnification provisions thereof, shall remain in full force and effect.
12. | AMENDMENTS TO THE AGREEMENT |
This Agreement (with the exception of Appendix A, which may be amended by the Adviser and the Sub-adviser from time to time) may be amended by the parties hereto only if such amendment is specifically approved by the vote of a majority of the Trustees of each affected Trust and by the vote of a majority of the Trustees of each affected Trust who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting ort such approval. Any required shareholder approval shall be effective with respect to any Fund if a majority of the outstanding voting securities of that Fund votes to approve the amendment, notwithstanding that the amendment may not have been approved by a majority of the outstanding voting securities of (a) any other Fund affected by the amendment or (b) all the Funds of the applicable Trust. No amendment shall be effective unless it is in writing and signed by all parties hereto.
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13. | ENTIRE AGREEMENT |
This Agreement contains the entire understanding and agreement of the parties.
14. | HEADINGS |
The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof.
15. | NOTICES |
All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the affected Trusts or applicable party in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this paragraph.
16. | SEVERABILITY |
Should any portion of this Agreement for any reason be held to be void in law or in equity, this Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein.
17. | GOVERNING LAW |
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the Investment Company Act. To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the Investment Company Act, the latter shall control.
18. | LIMITATION OF LIABILITY |
The Agreement and Declaration of Trust of each Trust, a copy of which, together with all amendments thereto (the “Declaration”), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that the name of the applicable Trust refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of the Trust shall be held to any personal liability, nor shall resort be had to their private property, for the satisfaction of any obligation or claim, in connection with the affairs of the Trust or any Fund thereof, but only the assets belonging to the Trust, or to the particular Fund with respect to which such obligation or claim arose, shall be liable.
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19. | CONFIDENTIALITY OF FUND HOLDINGS |
The Sub-adviser agrees to treat the portfolio security positions of each Fund as confidential information in accordance with the applicable Trust’s “Policy Regarding Disclosure of Fund Holdings,” as such policy may be amended from time to time, and to prohibit its employees from trading on any such confidential information. The policy and any such amendment shall not be binding upon the Sub-adviser until a copy has been provided to the Sub-adviser.
20. | COMPLIANCE |
Upon execution of this Agreement, the Sub-adviser shall provide the Adviser and the Trusts with the Sub-adviser’s written policies and procedures (“Compliance Policies”) as required by Rule 206(4)-7 under the Investment Advisers Act. Throughout the term of this Agreement, the Sub-adviser shall promptly submit to the affected Trust and the Adviser: (i) any material changes to the Compliance Policies, (ii) notification of the commencement of any regulatory examination of the Sub-adviser and documentation describing the results of any such examination and of any periodic testing of the Compliance Policies, and (iii) notification of any material compliance matter that relates to the services provided by the Sub-adviser to any Trust, including but not limited to any material violation of the Compliance Policies or of the Sub-adviser’s code of ethics. Throughout the term of this Agreement, the Sub-adviser shall provide the Adviser and the Trust with any certifications, information and access to personnel and resources (including those resources that will permit testing of the Compliance Policies by the Adviser) that the Trust and/or the Adviser may reasonably request to enable the Trusts to comply with Rule 38a-1 under the Investment Company Act.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above.
JOHN HANCOCK ADVISERS, LLC
|
||
By: | /s/ John G. Vrysen | |
Name: | John G. Vrysen | |
Title: |
Executive Vice President and Chief
Financial Officer |
SOVEREIGN ASSET MANAGEMENT LLC
|
||
By: | /s/ Barry H. Evans | |
Name: | Barry H. Evans | |
Title: |
Senior Vice President and Chief
Operating Officer |
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above.
JOHN HANCOCK CURRENT INTEREST | |
on behalf of | |
John Hancock Money Market Fund John Hancock U.S. Government Cash Reserve |
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JOHN HANCOCK SOVEREIGN BOND FUND | |
on behalf of | |
John Hancock Bond Fund | |
JOHN HANCOCK STRATEGIC SERIES | |
on behalf of | |
John Hancock Strategic Income Fund | |
JOHN HANCOCK BOND TRUST | |
on behalf of | |
John Hancock Government Income Fund | |
John Hancock High Yield Fund | |
John Hancock Investment Grade Bond Fund | |
JOHN HANCOCK TAX-EXEMPT SERIES FUND | |
on behalf of | |
John Hancock Massachusetts Tax-Free Income Fund | |
John Hancock New York Tax-Free Income Fund | |
JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND | |
JOHN HANCOCK MUNICIPAL SERIES TRUST | |
on behalf of | |
John Hancock High Yield Municipal Bond Fund | |
John Hancock Tax-Free Bond Fund | |
JOHN HANCOCK EQUITY TRUST | |
on behalf of | |
John Hancock Growth Trends Fund |
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John Hancock Technology Leaders Fund | |
JOHN HANCOCK INVESTMENT TRUST II | |
on behalf of | |
John Hancock Financial Industries Fund | |
John Hancock Regional Bank Fund John Hancock Small Cap Equity Fund
|
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JOHN HANCOCK INVESTMENT TRUST III | |
on behalf of | |
John Hancock Mid Cap Growth Fund | |
JOHN HANCOCK WORLD FUND | |
on behalf of John Hancock Health Sciences Fund |
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JOHN HANCOCK SERIES TRUST | |
on behalf of | |
John Hancock Focused Equity Fund | |
John Hancock Mid Cap Equity Fund | |
John Hancock Multi Cap Growth Fund
John Hancock Real Estate Fund |
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John Hancock Small. Cap Growth Fund,
|
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JOHN HANCOCK INVESTMENT TRUST | |
on behalf of | |
John Hancock Balanced Fund John Hancock Large Cap Equity Fund |
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John Hancock Large Cap Intrinsic Value Fund | |
John Hancock Small Cap Intrinsic Value Fund
John Hancock Sovereign Investors Fund |
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JOHN HANCOCK PATRIOT PREFERRED DIVIDEND FUND | |
JOHN HANCOCK PREFERRED INCOME FUND III |
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JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST | |
JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND | |
JOHN HANCOCK PREFERRED INCOME FUND | |
JOHN HANCOCK PREFERRED INCOME FUND II | |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I | |
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND | |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II | |
JOHN HANCOCK INCOME SECURITIES TRUST | |
JOHN HANCOCK INVESTORS TRUST | |
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND | |
Executed on behalf of each Trust and its relevant Series referenced above: |
By: | /s/ Keith F. Hartstein | |
Name: | Keith F. Hartstein | |
Title: | President and Chief Executive Officer |
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APPENDIX A
The Sub-adviser shall serve as investment sub-adviser for each Fund listed below. The Adviser will pay the Sub-adviser, as full compensation for all services provided under this Agreement with respect to each Fund, the fee computed separately for such Fund at an annual rate as follows (the “Sub-adviser Fee”):
Trust and Fund |
Percentage of
Average Daily Net Assets |
(See attachment to Appendix A)
The Sub-adviser Fee for each Fund shall be accrued for each calendar day, and the sum of the daily fee accruals shall be paid monthly to the Sub-adviser within 30 calendar days of the end of each month. The daily fee accruals will be computed by multiplying the fraction of one over the number of calendar days in the year, by the applicable Sub-adviser Fee, and multiplying this product by the net assets of the Fund. The Adviser shall provide the Sub-adviser with such information as the Sub-adviser may reasonably request supporting the calculation of the fees paid to it hereunder. Fees shall be paid either by wire transfer or check, as directed by the Sub-adviser.
If, with respect to any Fund, this Agreement becomes effective or terminates, or if the manner of determining the applicable Sub-adviser Fee changes, before the end of any month, the fee (if any) for the period from the effective date to the end of such month or from the beginning of such month to the date of termination or from the beginning of such month to the date of such change, as the case may be, shall be pro rated according to the proportion which such period bears to the full month in which such effectiveness or termination or change occurs.
A-1 |
APPENDIX A
The Sub-adviser shall serve as investment sub-adviser for each Fund listed below. The Adviser will pay the Sub-adviser, as full compensation for all services provided under this Agreement with respect to each Fund, the fee computed separately for such Fund at an annual rate as follows (the “Sub-adviser Fee”):
Trust and Fund |
Percentage of
Average Daily Net Assets |
(See attachment to Appendix A)
The Sub-adviser Fee for each Fund shall be accrued for each calendar day, and the sum of the daily fee accruals shall be paid monthly to the Sub-adviser within 30 calendar days of the end of each month. The daily fee accruals will be computed by multiplying the fraction of one over the number of calendar days in the year, by the applicable Sub-adviser Fee, and multiplying this product by the net assets of the Fund. The Adviser shall provide the Subadviser with such information as the Sub-adviser may reasonably request supporting the calculation of the fees paid to it hereunder. Fees shall be paid either by wire transfer or check, as directed by the Sub-adviser.
If, with respect to any Fund, this Agreement becomes effective or terminates, or if the manner of determining the applicable Sub-adviser Fee changes, before the end of any month, the fee (if any) for the period from the effective date to the end of such month or from the beginning of such month to the date of termination or from the beginning of such month to the date of such change, as the case may be, shall be pro rated according to the proportion which such period bears to the full month in which such effectiveness or termination or change occurs.
A-1 |
EXHIBIT (2)(g)(3)
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
AMENDMENT TO SUBADVISORY AGREEMENT
Appendix A referenced in Section 3 COMPENSATION OF SUB-ADVISER of the Fund’s Subadvisory Agreement dated December 31, 2005, is hereby amended, effective January 18, 2013, to reflect the following:
Fund | Percentage of Average Daily Gross Assets |
John Hancock Financial Opportunities Fund Subadvisory |
All Gross Assets [ ]%
|
“Gross assets” of the Fund means total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility/commercial paper program or other forms of borrowings or the issuance of debt securities), (ii) the issuance of preferred shares or other similar preference securities, and/or (iii) any other means.
Executed this 18th day of January, 2013.
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND | ||
By: | /s/ Andrew G. Arnott | |
Name: | Andrew G. Arnott | |
Title: | Executive Vice President | |
JOHN HANCOCK ASSET MANAGEMENT | ||
A DIVISION OF MANULIFE ASSET | ||
MANAGEMENT (US) LLC | ||
By: | /s/ Diane R. Landers | |
Name: | Diane R. Landers | |
Title: | Chief Administrative Officer | |
JOHN HANCOCK ADVISERS, LLC | ||
By: | /s/ Jeffrey H. Long | |
Name: | Jeffrey H. Long | |
Title: | Chief Financial Officer |
EXHIBIT (2)(h)(1)
FORM OF DISTRIBUTION AGREEMENT
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
200 Berkeley Street
Boston, Massachusetts 02116
[__________], 2021
John Hancock Investment Management Distributors LLC
200 Berkeley Street
Boston, Massachusetts 02116
Re: Distribution Agreement Relating to At-the-Market Offerings
Ladies and Gentlemen:
John Hancock Financial Opportunities Fund is a Massachusetts business trust operating as a closed-end management investment company (hereinafter referred to as the “Fund”). The Fund has filed an “automatic shelf registration statement” as defined under Rule 405 under the Securities Act of 1933, as amended (the “1933 Act”) on Form N-2 (File Nos. __________ and 811-08658) (the “Registration Statement”) pursuant to the Investment Company Act of 1940, as amended, and the1933 Act, to register additional common shares of the Fund, which may be issued and sold from time to time through various specified transactions, including at-the-market (“ATM”) offerings. “Registration Statement” as used herein includes the Prospectus, Statement of Additional Information, including materials incorporated therein and any supplements or amendments thereto, and any free writing prospectus as defined under Rule 433 of the 1933 Act (the “Free Writing Prospectus”).
You have informed us that John Hancock Investment Management Distributors LLC is registered as a broker-dealer under the provisions of the Securities Exchange Act of 1934, as amended, and is a member in good standing with the Financial Industry Regulatory Authority, Inc. (“FINRA”). You have indicated your desire to act as distributor for the Fund’s common shares issued pursuant to the Registration Statement. We have been authorized by the Fund to execute and deliver this Agreement to you by a resolution of our Board of Trustees (the “Trustees”) adopted at a meeting of the Trustees, at which a majority of Trustees, including a majority of our Trustees who are not otherwise interested persons of our investment manager or its related organizations, were present and voted in favor of said resolution approving this Agreement.
1. APPOINTMENT OF DISTRIBUTOR. Upon the execution of this Agreement and in consideration of the agreements on your part herein expressed and upon the terms and conditions set forth herein, we hereby appoint you as the distributor for up to 1,500,000 of the common shares of the Fund to be issued pursuant to the Registration Statement through ATM offerings (the “Shares”) and agree that we will issue such Shares as you may sell. You agree to use reasonable efforts to identify opportunities for the sale of Shares, but you are not obligated to sell any specific number of the Shares. The Shares will be sold only on such days as shall be agreed to by you and the Fund.
2. SELECTED DEALERS. You may enter into selected dealer agreements, on such terms and conditions as you determine are not inconsistent with this Agreement, with broker-dealers to act as your agent to effect the sale of the Shares. Such selected broker-dealers shall sell Shares only at market prices subject to a minimum price to be established each day by you and the Fund (see paragraph 3 below). This Agreement shall not be construed as authorizing any dealer or other person to accept orders for sale on our behalf or to otherwise act as our agent for any purpose. You shall not be responsible for the acts of other dealers or agents except as and to the extent that they shall be acting for you or under your direction or authority.
3. SHARE PRICE. The price per Share shall be determined by reference to trades on the Fund’s primary exchange. In no event shall the price be less than the current net asset value per share plus the per share amount of the commission to be paid to you (the “Minimum Price”). You shall suspend the sale of Shares if the per share price of the Shares is less than the Minimum Price.
4. SALES COMMISSION.
(a) You shall be entitled to receive a sales commission from the Fund in an amount equal to 1.00% of the gross sales price per Share, of which 0.80% will be re-allowed to the sub-sales agent.
(b) You may pay to selected broker-dealers such selling agent commissions (not exceeding 80% of the total sales commission) (the “ATM Sales Agent Commission”) as you shall deem advisable, which shall be payable from the commissions payable to you under Section 4(a) above.
5. FURNISHING OF INFORMATION. We will furnish you with copies of the Registration Statement, and we warrant that the statements therein contained are true and correct as of the date of the Registration Statement, as it may be amended or supplemented from time to time. We will also furnish you with such other information that you may reasonably request for use in connection with the distribution of the Shares, including, at least annually, audited financial statements of our books and accounts certified by independent public accountants.
6. CONDUCT OF BUSINESS. Other than the currently effective Prospectus, Statement of Additional Information, or Free Writing Prospectus, you will not use any sales materials or statements except literature or advertising that conforms to the requirements of federal and state securities laws and regulations and that have been filed, where necessary, with the appropriate regulatory authorities. You will furnish us with copies of all material prior to their use and no such material shall be published if we shall reasonably and promptly object.
You shall comply with the applicable federal and state laws and regulations where our shares are offered for sale and conduct your affairs with us and with dealers, brokers or investors in accordance with the Conduct Rules of FINRA.
7. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold you, your officers, and Directors, and any person who controls you within the meaning of Section 15 of the 1933 Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), free and harmless from and against any and all claims, demands or liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which you, your officers, Directors or any such controlling persons may incur under the 1933 Act, the 1934 Act, or under common law or otherwise, arising out of or based upon (i) any untrue statement of a material fact contained in the Fund’s Registration Statement or arising out of or based upon any alleged omission to state a material fact required to be stated in it or necessary to make the statements in it not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by you to the Fund for use in the Registration Statement, (ii) any untrue statement of a material fact contained in the Fund’s advertisement or sales literature or arising out of or based upon any alleged omission to state a material fact required to be stated in either thereof or necessary to make the statements in either thereof not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished in writing by you to the Fund for use in such advertisement or sales literature or (iii) any action taken or omitted by the Fund prior to the date of this Agreement. You agree to comply with all of the applicable terms and provisions of the 1934 Act.
(b) You agree to indemnify, defend, and hold the Fund, its officers, Trustees, employees shareholders and agents, and any person who controls the Fund within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending against such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its Trustees, officers, employees, shareholders and agents, or any such controlling person may incur under the 1933 Act, the 1934 Act or under common law or otherwise arising out of or based upon any untrue statement of a material fact contained in information furnished in writing by you to the Fund for use in the Registration Statement, or arising out of or based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement necessary to make such information not misleading.
- 2 - |
A party seeking indemnification hereunder (the Indemnitee) shall give prompt written notice to the party from whom indemnification is sought (“Indemnitor”) of a written assertion or claim of any threatened or pending legal proceeding which may be subject to indemnity under this Section; provided, however, that failure to notify the Indemnitor of such written assertion or claim shall not relieve the indemnitor of any liability arising from this Section. The Indemnitor shall be entitled, if it so elects, to assume the defense of any suit brought to enforce a claim subject to this Agreement and such defense shall be conducted by counsel chosen by the Indemnitor and satisfactory to the Indemnitee; provided, however, that if the defendants include both the Indemnitee and the Indemnitor, and the Indemnitee shall have reasonably concluded that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnitor (“conflict of interest”), the Indemnitor shall have the right to select separate counsel to defend such claim on behalf of the Indemnitee. In the event that the Indemnitor elects to assume the defense of any suit pursuant to the preceding sentence and retains counsel satisfactory to the Indemnitee, the Indemnitee shall bear the fees and expenses of additional counsel retained by it except for reasonable investigation costs which shall be borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the defense of a claim, (ii) elects to assume the defense of a claim but chooses counsel that is not satisfactory to the Indemnitee or (iii) has no right to assume the defense of a claim because of a conflict of interest, the Indemnitor shall advance or reimburse the Indemnitee, at the election of the Indemnitee, reasonable fees and disbursements of any counsel retained by Indemnitee, including reasonable investigation costs.
8. OTHER ACTIVITIES. Your services pursuant to this Agreement shall not be deemed to be exclusive and you may render similar services and act as an underwriter, distributor, or dealer for other investment companies in the offering of their shares.
9. SUSPENSION OF SALES. We reserve the right at all times to suspend or limit the offering of the shares upon written notice to you and to reject any order in whole or in part.
10. PAYMENT OF EXPENSES.
(a) You shall bear all expenses incurred by you in connection with your duties and activities under this Agreement including the payment to selected dealers of any sales commissions for sales of the Fund’s Shares.
(b) The Fund shall bear all costs and expenses of the Fund, including expenses (including legal fees) pertaining to the preparation and filing of the Registration Statement and Prospectus and any amendment or supplement thereto, including any Free Writing Prospectus, and expenses pertaining to the preparation, printing and distribution of any reports or communications to shareholders, including Prospectuses,Statements of Additional Information, Free Writing Prospectuses, annual and interim reports, or proxy materials.
11. TERMINATION. This Agreement (i) may be terminated by the Fund at any time without the payment of any penalty and (ii) may be terminated by you at any time without the payment of any penalty. This Agreement shall remain in full force and effect unless terminated pursuant to this provision or by the mutual agreement of the parties.
12. MISCELLANEOUS. This Agreement shall be subject to the laws of the State of Massachusetts and shall be interpreted and construed to further and promote the operation of the Fund as a closed-end management investment company.
13. STANDARD OF CARE. You shall be responsible for exercising reasonable care in carrying out the provisions of this Agreement.
14. DECLARATION OF TRUST AND LIMITATION OF LIABILITY. A copy of the Declaration of Trust of the Fund is on file with the Secretary of State of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed by an officer of the Fund on behalf of the Trustees, as trustees and not individually, and that the obligations of this Agreement with respect to the Fund shall be binding upon the assets and properties of the Fund only and shall not be binding upon the assets or properties of the Trustees, officers, employees, agents or shareholders of the Fund individually.
- 3 - |
If the foregoing meets with your approval, please acknowledge your acceptance by signing each of the enclosed counterparts hereof and returning such counterparts to us, whereupon this shall constitute a binding agreement as of the date first above written.
Very truly yours, | |
John Hancock Financial Opportunities Fund | |
Name: Andrew G. Arnott | |
Title: President | |
John Hancock Investment Management Distributors LLC | |
Name: Jeffrey H. Long | |
Title: Chief Financial Officer |
- 4 - |
EXHIBIT (2)(h)(2)
FORM OF DEALER AGREEMENT
John Hancock Investment Management Distributors LLC
200 Berkeley Street
Boston, Massachusetts 02116
__________, 2021
UBS Securities LLC
1285 Avenue of the Americas
New York, New York 10019
RE: At-the-Market Offerings by John Hancock Financial Opportunities Fund
Ladies and Gentlemen:
From time to time John Hancock Investment Management Distributors LLC (the “Manager”, “we” or “us”) will act as manager of registered at-the-market offerings by John Hancock Financial Opportunities Fund, a Massachusetts business trust (the “Fund”), of up to __________ common shares (the “Shares”) of beneficial interest, with no par value, of the Fund (the “Common Shares”). In the case of such offerings, the Fund has agreed with the Manager to issue and sell through or to the Manager, as sales agent and/or principal, the Shares.
We hereby agree to retain UBS Securities LLC (the “Dealer” or “you”) as a sub- placement agent with respect to the offerings of the Shares to be issued and sold by the Fund (the “Offerings”), and you agree to act in such capacity, all upon, and subject to, the terms and conditions set forth below:
SECTION 1. Description of Offerings.
(a) The Shares are to be sold on a daily basis or otherwise as shall be agreed to by the Fund and the Manager on any day (each, an “Offering Date”) that is a trading day for the exchange on which the Fund’s Shares are listed and primarily trade (the “Stock Exchange”) (other than a day on which the Stock Exchange is scheduled to close prior to its regular weekday closing time). Promptly after the Fund and the Manager have determined the maximum amount of the Shares to be sold by the Manager for any Offering Date, the Manager shall advise the Dealer of such amount, which shall not in any event exceed the amount available for issuance under the currently effective Registration Statement (as defined below). Subject to the terms and conditions hereof, the Dealer shall use its reasonable best efforts to sell all of the Shares designated in accordance with the plan of distribution set forth in the Prospectus Supplement (as defined below). The gross sales price of the Shares sold under this Section 1(a) shall be the market price at which the Dealer sells such Shares.
(b) Notwithstanding the foregoing, the Manager may instruct the Dealer by telephone (confirmed promptly by e-mail or telecopy) not to sell the Shares if such sales cannot be effected at or above a price agreed to by the Fund and the Manager with respect to
1 |
such Shares. In addition, the Manager may, upon notice to the Dealer by telephone (confirmed promptly by e-mail or telecopy), suspend the offering of the Shares at any time; provided, however, that such suspension or termination shall not affect or impair the parties’ respective obligations with respect to the Shares sold hereunder prior to the giving of such notice.
(c) The Dealer agrees not to make any sales of the Shares on behalf of the Manager pursuant to this Section 1, other than through transactions for which compliance with Rule 153 under the Securities Act of 1933, as amended (the “Securities Act”), will satisfy the prospectus delivery requirements of Section 5(b)(2) of the Securities Act.
(d) The compensation to the Dealer, as a sub-placement agent of the Manager, for each sale of the Shares pursuant to this Section 1, shall be the Applicable Selling Agent Commission with respect to the Shares sold, multiplied by the Gross Sales Proceeds, as further described in the Addendum to this Agreement. The Dealer shall not be responsible for any fees imposed by any governmental or self-regulatory organization on the Fund or the Manager in respect of such sales. The compensation to the Manager, as manager of registered at-the-market offerings by the Fund, for each sale of the Shares pursuant to this Section 1, before any fees imposed by any governmental or self-regulatory organization on the Fund or the Manager in respect of such sales, shall be the Manager Retention with respect to the Shares sold, multiplied by the Gross Sales Proceeds, as further described in the Addendum to this Agreement.
(e) The Dealer shall provide written confirmation to the Manager following the close of trading on the Stock Exchange on each Offering Date setting forth for each sale the number of Shares sold, the time of sale, the Gross Sales Price per Share, the compensation payable to the Manager with respect to such sales, and the compensation payable by the Manager to the Dealer with respect to such sales.
(f) Settlement for sales of the Shares pursuant to this Section 1 will occur on the second business day following the date on which such sales are made (each such day, a “Settlement Date”). On each Settlement Date, the Shares sold through the Dealer for settlement on such date shall be delivered by the Manager to the Dealer against payment of the Gross Proceeds for the sale of such Shares. Settlement for all such Shares shall be effected by free delivery of the Shares to the Dealer’s account at The Depository Trust Company in return for payments in same day funds delivered to the account designated by the Manager. If the Manager shall default on its obligation to deliver the Shares on any Settlement Date, subject to the terms of Section 4 herein, the Manager shall (A) hold the Dealer harmless against any reasonable loss, claim or damage arising from or as a result of such default by the Manager and (B) pay the Dealer any commission to which it would otherwise be entitled absent such default. If the Dealer breaches this Agreement by failing to deliver proceeds on any Settlement Date for the Shares delivered by the Manager, the Dealer will pay the Manager interest based on the effective overnight Federal Funds rate.
2 |
(g) In connection with this Agreement and the Offerings, the Manager shall provide to the Dealer, at the Dealer’s request no more than once per calendar quarter, (i) a certificate signed by the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Treasurer, the President, an Executive Vice President or a Senior Vice President of the Manager to the effect that (A) the representations and warranties of the Manager in this Agreement are true and correct with the same force and effect as though expressly made at and as of the date thereof and the Manager has performed or complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the date thereof, (B) to their knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or threatened by the Securities and Exchange Commission (the “Commission”) and (C) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change or development involving a prospective material adverse change to the business, properties, financial condition or results of operations of the Fund; (ii) a certificate signed by the Secretary or Assistant Secretary of the Manager relating to authorization, capacity and incumbency matters; and (iii) such other certificates and documents related to the Offerings at the Dealer’s reasonable request.
SECTION 2. Representations and Warranties by the Manager. The Manager represents, warrants to and agrees with the Dealer, as of the date hereof and as of each Offering Date and Settlement Date, that:
(a) An “automatic shelf registration statement” as defined under Rule 405 under the Securities Act on Form N-2 (File Nos. __________ and 811-08568) (the “Registration Statement”) (i) has been prepared by the Fund in conformity with the requirements of the Securities Act and the rules and regulations thereunder the Investment Company Act of 1940, as amended, and the rules and regulations thereunder (collectively called the “1940 Act”); and (ii) has been filed with the Commission under the Securities Act and the 1940 Act; no notice of objection of the Commission to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act has been received by the Fund; the Registration Statement, including any amendments thereto, became effective upon filing; no stop order of the Commission preventing or suspending the use of any Basic Prospectus (as defined below), the Prospectus Supplement (as defined below) or the Prospectus (as defined below), or the effectiveness of the Registration Statement, has been issued, and no proceedings for such purpose have been instituted or, to the Fund’s knowledge, are contemplated by the Commission. Except where the context otherwise requires, “Registration Statement,” as used herein, means, collectively, the various parts of the Registration Statement, as amended at the time of effectiveness for purposes of Section 11 of the Securities Act (the “Effective Time”), as such section applies to the Manager, including (1) all documents filed as a part thereof or incorporated or deemed deemed pursuant to Rule 430B or Rule 430C under the Securities Act to be incorporated by reference therein, (2) any information contained or incorporated by reference in a prospectus filed with the Commission pursuant to Rule 424 under the Securities Act, to the extent such information is deemed to be part of the registration statement at the Effective Time, and (3) any registration statement filed to register the offer and sale of Shares pursuant to Rule 462(b) under the Securities Act, “Basic Prospectus,” as used herein, means the final prospectus filed as part of the Registration Statement, including the related Statement of Additional
3 |
Information, together with any amendments or supplements thereto as of the date of the Agreement, “Prospectus Supplement,” as used herein, means the final prospectus supplement, including the related statement of additional information, relating to the Shares, filed by the Fund with the Commission pursuant to Rule 424 under the Securities Act on or before the second business day after the date hereof (or such earlier time as may be required under the Securities Act), in the form furnished by the Fund to the Manager in connection with the offering of the Shares, “Prospectus,” as used herein, means the Prospectus Supplement and the then-issued Issuer Free Writing Prospectus(es) (as defined below) together with the Basic Prospectus attached to or used with the Prospectus Supplement, and “Issuer Free Writing Prospectus,” as used herein, means any “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, relating to the Shares, including without limitation any “free writing prospectus” (as defined in Rule 405 under the Securities Act) that (1) is required to be filed with the Commission by the Fund, (2) is a “road show” that is a “written communication” within the meaning of Rule 433(d)(8)(i) under the Securities Act whether or not required to be filed with the Commission, or (3) is exempt from filing pursuant to Rule 433(d)(5)(i) under the Securities Act because it contains a description of the Shares or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Fund’s records pursuant to Rule 433(g) under the Securities Act Any reference herein to the registration statement, the Registration Statement, any Basic Prospectus, the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus shall be deemed to refer to and include the documents, if any, incorporated by reference, or deemed to be incorporated by reference, therein (the “Incorporated Documents”), including, unless the context otherwise requires, the documents, if any, filed as exhibits to such Incorporated Documents.
(b) The Fund is duly registered under the 1940 Act as a closed-end management investment company. A notification of registration of the Fund as an investment company under the 1940 Act on Form N-8A (the “1940 Act Notification”) has been prepared by the Fund in conformity with the 1940 Act and has been filed with the Commission and, at the time of filing thereof and at the time of filing any amendment or supplement thereto, conformed in all material respects with all applicable provisions of the 1940 Act. The Fund has not received any notice from the Commission pursuant to Section 8(e) of the 1940 Act with respect to the 1940 Act Notification or the Registration Statement (or any amendment or supplement to either of them). No person is serving or acting as an officer, trustee or investment adviser of the Fund except in accordance with the provisions of the 1940 Act and the Investment Advisers Act of 1940, as amended and the rules and regulations thereunder.
(c) The Registration Statement, the 1940 Act Notification, the Prospectus and any Issuer Free Writing Prospectus, as from time to time amended or supplemented, each complied when it became effective or was filed, complies as of the date hereof and, as amended or supplemented, will comply, at each time of purchase of Shares in connection with each Offering and at all times during which a prospectus is required by the Securities Act to be delivered in connection with any sale of Shares, in all material respects, with the requirements of the Securities Act and the 1940 Act; the Registration Statement did not, as of the Effective Time, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; the 1940 Act Notification did not, as of the Effective Time, contain an untrue statement of a material fact or
4 |
omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; at no time during the period that begins on the earlier of the date of the Basic Prospectus and the date such Basic Prospectus was filed with the Commission and ends at the later of each time of purchase of Shares in connection with each Offering, and the end of the period during which a prospectus is required by the Securities Act to be delivered in connection with any sale of Shares did or will the Prospectus, as from time to time amended or supplemented, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; each Issuer Free Writing Prospectus, as of its issue date, as of each time of purchase of Shares in connection with each Offering and during the period that begins on the earlier of the date of the Basic Prospectus and the date the Basic Prospectus was filed with the Commission and ends at the later of each time of purchase of Shares in connection with each Offering, and the end of the period during which a prospectus is required by the Securities Act to be delivered in connection with any sale of Shares, did not and will not include any information that conflicts with the information contained in the Registration Statement or the Prospectus, including any incorporated document deemed to be a part thereof that has not been superseded or modified; provided, however, that the Manager does not make any representation or warranty with respect to any statement contained in the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus in reliance upon and in conformity with information concerning the Dealer and furnished in writing by the Dealer or on the Dealer’s behalf to the Manager or the Fund expressly for use in the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus. The Dealer confirms that [(i) the Dealer’s name on the front cover and under the headings “Prospectus Supplement Summary—The Offering” and “Plan of Distribution” in the Prospectus Supplement and (ii) the [_____] paragraph under the heading “Plan of Distribution” of the Prospectus Supplement] was the only information furnished in writing to the Manager and the Fund by or on behalf of the Dealer expressly for use in the Prospectus.
(d) The financial statements incorporated by reference in the Registration Statement or the Prospectus, together with the related notes and schedules, present fairly the financial position of the Fund as of the dates indicated and the results of operations, cash flows and changes in stockholders’ equity of the Fund for the periods specified and have been prepared in compliance in all material respects with the requirements of the Securities Act, the 1940 Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and in conformity in all material respects with U.S. generally accepted accounting principles applied on a consistent basis during the periods involved; the other financial and statistical data contained or incorporated by reference in the Registration Statement or the Prospectus are accurately and fairly presented and prepared on a basis consistent with the financial statements and books and records of the Fund; there are no financial statements that are required to be included or incorporated by reference in the Registration Statement, any Basic Prospectus or the Prospectus that are not included or incorporated by reference as required; the Fund does not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described in the Registration Statement (excluding the exhibits thereto); and all disclosures contained or incorporated by reference in the Registration Statement or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Item 10 of Regulation S-K under the Securities Act, to the extent applicable.
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(e) As of the date of this Agreement, the Fund has an authorized and outstanding capitalization as set forth in the sections of the Registration Statement, the Basic Prospectus and the Prospectus entitled “The Fund” and “Description of Capital Structure,” and, with respect to any issuance and sale under this Agreement, the Fund shall have as of the date of the most recent amendment or supplement to the Registration Statement or Prospectus, an authorized and outstanding capitalization as set forth in the sections of the Registration Statement and the Prospectus entitled “The Fund” and “Description of Capital Structure;” all of the issued and outstanding shares of capital stock, including the Common Shares, of the Fund have been duly authorized and validly issued and are fully paid and non-assessable (except as described below and in the Registration Statement), have been issued in material compliance with all applicable securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right; the Shares will be duly listed, and admitted and authorized for trading, subject to official notice of issuance, on the Stock Exchange.
(f) The Fund has been duly formed, is validly existing and is in good standing as a voluntary association with transferable shares of beneficial interest commonly referred to as a “Massachusetts business trust” under the laws of The laws of the Commonwealth of Massachusetts, with full power and authority to own, lease and operate and conduct its business as described in the Registration Statement, the Basic Prospectuses and the Prospectus, and to issue, sell and deliver the Shares as contemplated herein. The Fund is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, (i) have a material adverse effect on the business, properties, financial condition or results of operations of the Fund (a “Material Adverse Effect”), (ii) prevent or materially interfere with consummation of the transactions contemplated hereby or (iii) result in the delisting of Common Shares from the Stock Exchange (the occurrence of any such effect or any such prevention or interference or any such result described in the foregoing clauses (i), (ii) and (iii) being herein referred to as a “Material Adverse Effect”).
(g) The Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable (except as described below and in the Registration Statement) and free of statutory and contractual preemptive rights, resale rights, rights of first refusal and similar rights; the Shares, when issued and delivered against payment therefor as provided herein, will be free of any restriction upon the voting or transfer thereof pursuant to the Fund’s Declaration of Trust or bylaws or any agreement or other instrument to which the Fund is a party. The capital stock of the Fund, including the Shares, conforms in all material respects to each description thereof, if any, contained or incorporated by reference in the Registration Statement, any Basic Prospectus or the Prospectus; and the certificates for the Shares, if any, are in due and proper form. The Fund is in material compliance with the rules of the Stock Exchange, including, without limitation, the requirements for continued listing of the Common Shares on the Stock Exchange and the Fund has not received any notice from the Stock Exchange regarding the delisting of the Common Shares from the Stock Exchange.
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(h) The Manager has full corporate power and authority to enter into this Agreement and the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Manager. This Agreement constitutes a valid and binding agreement of the Manager and is enforceable against the Manager in accordance with its terms, except as the enforceability hereof and thereof may be limited by applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors’ rights generally and moratorium laws in effect from time to time and by equitable principles restricting the availability of equitable remedies.
(i) No approval, authorization, consent or order of or filing with any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, or of or with any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, the Stock Exchange), or approval of the stockholders of the Fund, is required in connection with the issuance and sale of the Shares or the consummation by the Fund of the transactions contemplated hereby, other than (i) the registration of the Shares under the Securities Act and the 1940 Act, which has been effected, (ii) the listing of the Shares with the Stock Exchange, upon official notice of issuance, (iii) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Manager or (iv) any necessary qualification under the Conduct Rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
(j) (j) Prior to the execution of the Distribution Agreement, the Fund has not, directly or indirectly, offered or sold any Shares by means of any “prospectus” or “free writing prospectus” (in each case within the meaning of the Securities Act) or used any “prospectus” or “free writing prospectus” (in each case within the meaning of the Securities Act) in connection with the offer or sale of the Shares, and from and after the execution of this Agreement, the Fund will not, directly or indirectly, offer or sell any Shares by means of any “prospectus” or “free writing prospectus” (in each case within the meaning of the Securities Act) or use any “prospectus” or “free writing prospectus” (in each case within the meaning of the Securities Act) in connection with the offer or sale of the Shares, other than the Prospectus, as amended or supplemented from time to time in accordance with the provisions of this Agreement, or any Issuer Free Writing Prospectus to which the Manager and the Dealer have consented; and the Fund is not an “ineligible issuer” (as defined in Rule 405 under the Securities Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Securities Act with respect to the offering of the Shares contemplated by the Registration Statement.
SECTION 3. Additional Covenants.
(a) The Dealer hereby confirms that it is actually engaged in the investment banking and securities business and is a member in good standing with FINRA and hereby agrees that it will undertake to comply with all applicable FINRA rules (as amended from time to time, including, without limitation, any successor provision) in connection with acting as sub- placement agent for the sale of the Shares. The Dealer further agrees that in acting as sub-placement agent for the sale of the Shares, it will comply with all applicable laws, rules and regulations, including the applicable provisions of the Securities Act and the Exchange Act, the applicable rules and regulations of the Commission thereunder, and the applicable rules and regulations of any state or any securities exchange or self-regulatory organization having jurisdiction over the relevant Offering.
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(b) The Dealer hereby agrees that in acting as sub-placement agent for the sale of the Shares, it will not use, authorize use of, refer to, or participate in the planning for use of any written communication (as defined in Rule 405 under the Securities Act) concerning any Offering, other than the Prospectus or any Issuer Free Writing Prospectus to which the Manager and the Dealer have consented. The Dealer further agrees that in acting as sub-placement agent for the sale of the Shares, it is not authorized by the Manager or the Fund or any other seller of the Shares offered pursuant to the Prospectus to give any information or to make any representation not contained in the Prospectus in connection with the sale of such Shares.
(c) The Manager shall not be under any obligation to the Dealer except for obligations assumed hereunder or in writing by the Manager in connection with any Offering. Nothing contained herein or in any communication in writing from us shall constitute the Manager and the Dealer an association or partners with one another. If such parties should be deemed to constitute a partnership for Federal income tax purposes, then the Dealer elects to be excluded from the application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and agrees not to take any position inconsistent with that election. The Dealer authorizes the Manager, in its discretion, to execute and file on its behalf such evidence of that election as may be required by the Internal Revenue Service. In connection with any Offering, each party shall be liable for its proportionate amount of any tax, claim, demand or liability that may be asserted against it alone, based upon the claim that either of them constitutes an association, an unincorporated business or other entity, including, in each case, its proportionate amount of any expense incurred in defending against any such tax, claim, demand or liability.
(d) The parties acknowledge and agree that all share related numbers contained in this Agreement shall be adjusted to take into account any stock split effected with respect to the Shares.
(e) The Dealer shall at all times comply with the offering requirements as set forth under the heading “Plan of Distribution” in the Prospectus.
(f) The Fund shall use its best efforts to list, subject to official notice of issuance, the Shares on the Stock Exchange and to maintain such listing.
SECTION 4. Indemnification and Contribution.
(a) The Manager agrees to indemnify, defend and hold harmless the Dealer, its partners, directors and officers, and any person who controls the Dealer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any reasonable loss, damage, expense, liability or claim (including the reasonable cost of investigation) which the Dealer or any such person may incur under the Securities Act, the 1940 Act, the Exchange Act, the common law
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or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any material breach of any representation, warranty, covenant or agreement of the Manager contained in this Agreement, (ii) any material violation by the Manager of any law, rule or regulation (including any rule of any self-regulatory organization) applicable to the Offerings, or (iii) any untrue statement of a material fact appearing in the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, except to the extent such statements were provided in writing by the Dealer for inclusion in the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus in reliance upon and in conformity with the Dealer Provided Information.
(b) The Dealer agrees to indemnify, defend and hold harmless the Manager, the Fund, their partners, trustees, directors and officers, and any person who controls the Manager or the Fund within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which the Manager or any such person may incur under the Securities Act, the 1940 Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any material breach of any representation, warranty, covenant or agreement of the Dealer contained in this Agreement or (ii) any material violation by the Dealer of any law, rule or regulation (including any rule of any self-regulatory organization), or (iii) any untrue statement or omission made in the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus in reliance upon and in conformity with the Dealer Provided Information.
(c) An indemnified person under Section 4 of this Agreement (the “Indemnified Party”) shall give written notice to the other party (the “Indemnifying Party”) of any loss, damage, expense, liability or claim in respect of which the Indemnifying Party has a duty to indemnify such Indemnified Party under Section 4(a) or (b) of this Agreement (a “Claim”), specifying in reasonable detail the nature of the loss, damage, expense, liability or claim for which indemnification is sought, except that any delay or failure so to notify such other party shall only relieve such other party of its obligations hereunder to the extent, if at all, that you are actually prejudiced by reason of such delay or failure.
(d) If a Claim results from any action, suit or proceeding brought or asserted against an Indemnified Party, the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses. The Indemnified Party shall have the right to employ separate counsel in such action, suit or proceeding and participate in such defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (i) the Indemnifying Party has agreed in writing to pay such fees and expenses, (ii) the Indemnifying Party has failed within a reasonable time to assume the defense and employ counsel or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Indemnified Party and Indemnifying Party and such Indemnified Party shall have been advised by its counsel that representation of such Indemnified Party and Indemnifying Party by the same counsel would be inappropriate under
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applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between the Indemnifying Party and the Indemnified Party (in which case the Indemnifying Party shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Indemnified Party). It is understood, however, that the Indemnifying Party shall, in connection with any one action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties not having actual or potential differing interests with the Indemnifying Party or among themselves, which firm shall be designated in writing by an authorized representative of such parties and that all such fees and expenses shall be reimbursed promptly as they are incurred. The Indemnifying Party shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Indemnifying Party agrees to indemnify and hold harmless any Indemnified Party from and against any loss, liability, damage or expense by reason by such settlement or judgment.
(e) With respect to any Claim not within Paragraph (d) of Section 4 hereof, the Indemnifying Party shall have 20 days from receipt of notice from the Indemnified Party of such Claim within which to respond thereto. If the Indemnifying Party does not respond within such twenty-day period, it shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such Claim. If the Indemnifying Party notifies the Indemnified Party within such twenty-day period that it rejects such Claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party under applicable law.
(f) If the indemnification provided for in this Section 4 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless in respect of any losses, damages, expenses, liabilities or claims referred to therein, then each applicable Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, damages, expenses, liabilities or claims in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnified Party and its Affiliates (treated jointly as one person for this purpose), on the one hand, and the Indemnifying Party and its Affiliates, on the other hand, from the offering of the Shares; or (ii) if, but only if, the allocation provided for in clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Indemnified Party and its Affiliates (treated jointly as one person for this purpose), on the one hand, and of the Indemnifying Party and its Affiliates, on the other, in connection with any statements or omissions or other matters which resulted in such losses, damages, expenses, liabilities or claims, as well as any other relevant equitable considerations. The relative benefits received by the Indemnified Party and its Affiliates (treated jointly as one person for this purpose), on the one hand, and the Indemnifying Party and its Affiliates, on the other, shall be deemed to be in the same respective proportions as the total proceeds from the Offering received by each such party and its Affiliates bear to the aggregate public offering price of the Shares. The relative fault of the parties and their Affiliates shall be determined by reference to, among other things, whether the untrue
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statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by such party or its Affiliate, on one hand, or by the other party or its Affiliate on the other hand and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, damages, expenses, liabilities and claims referred to in this subsection shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any Proceeding.
(g) The parties agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (f) above. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
(h) The indemnity and contribution agreements contained in this Section 4 and the covenants, warranties and representations of the parties contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the Dealer, its partners, directors or officers or any person (including each partner, officer or director of such person) who controls the Dealer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on behalf of the Manager, its directors or officers or any person who controls the Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall survive any termination of this Agreement or the issuance and delivery of the Shares.
SECTION 5. Representations and Agreements to Survive Delivery. The representations, warranties, covenants and agreements of the parties contained in this Agreement, including, without limitation, the indemnity agreement contained in Section 4 hereof, shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any party or any person controlling any party, or their directors or officers, (ii) acceptance of any Shares and payment therefor and (iii) any termination of this Agreement.
SECTION 6. Termination.
(a) This Agreement shall continue in full force and effect until terminated by either party by thirty days’ written notice to the other; provided, that if this Agreement has become effective with respect to any Offering pursuant to this Agreement, this Agreement may not be terminated by either party with respect to such Offering.
(b) This Agreement shall remain in full force and effect unless terminated pursuant to Section 6(a) above or otherwise by mutual agreement of the parties; provided that any such termination by mutual agreement shall in all cases be deemed to provide that Section 4 and Section 5 shall remain in full force and effect.
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(c) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Manager or the Dealer, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of the Shares, such sale shall settle in accordance with the provisions of Section 1 of this Agreement.
SECTION 7. Notices. Except as otherwise herein provided, all statements, requests, notices and agreements under this Agreement shall be in writing and delivered by hand, overnight courier, mail or facsimile and, if to the Manager, it shall be sufficient in all respects if delivered or sent to:
John Hancock Investment Management Distributors LLC
200 Berkeley Street
Boston, Massachusetts 02116
Attn: Andrew Arnott
with a copy for information purposes to:
John Hancock Investment Management Distributors LLC
200 Berkeley Street
Boston, Massachusetts 02116
Attn: General Counsel
and if to the Dealer, it shall be sufficient in all respects if delivered or sent to:
UBS Securities LLC
1285 Avenue of the Americas
New York, New York 10019
Attn: Saawan Pathange
Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.
SECTION 8. Parties at Interest. The Agreement herein set forth has been and is made solely for the benefit of the Manager, the Fund, and the Dealer and to the extent provided in Section 4 of this Agreement the controlling persons, trustees, directors and officers referred to in such section, and their respective successors, assigns, heirs, personal representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from the Manager) shall acquire or have any right under or by virtue of this Agreement.
SECTION 9. No Fiduciary Relationship. The Manager hereby acknowledges that the Dealer is acting solely as sub-sales agent in connection with the sale of the Shares and that the Dealer is acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s-length basis, and in no event do the parties intend that the Dealer act or be responsible as a fiduciary to the Manager or the Fund, their respective management, stockholders or creditors, or any other person in connection with any activity that the Dealer may undertake or have undertaken in furtherance of the sale of the Shares, either before or after the date hereof.
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SECTION 10. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof.
SECTION 11. Counterparts; Heading. This Agreement may be signed by the parties in one or more counterparts which together shall constitute one and the same agreement among the parties. The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.
SECTION 12. Law; Construction. This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement (“Claim “), directly or indirectly, shall be governed by, and construed in accordance with, the internal laws of the State of New York.
SECTION 13. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and each of the Manager and the Dealer consents to the jurisdiction of such courts and personal service with respect thereto. Each of the Manager and the Dealer hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by any third party against the Manager or any indemnified party. Each of the Manager and the Dealer (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. Each of the Manager and the Dealer agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Manager and the Dealer and may be enforced in any other courts to the jurisdiction of which the Manager or the Dealer is or may be subject, by suit upon such judgment.
SECTION 14. Successors and Assigns. This Agreement shall be binding upon the Manager and the Dealer and their successors and assigns and any successor or assign of any substantial portion of the Manager’s and the Dealer’s respective businesses and/or assets.
If the foregoing correctly sets forth the understanding between the Manager and the Dealer, please so indicate in the space provided below for that purpose, whereupon this Agreement and your acceptance shall constitute a binding agreement between the Manager and the Dealer. Alternatively, the execution of this Agreement by the Manager and the acceptance by or on behalf of the Dealer may be evidenced by an exchange of telegraphic or other written communications.
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Very truly yours,
JOHN HANCOCK INVESTMENT MANAGEMENT DISTRIBUTORS LLC |
||||
By: | ||||
Name: | Jeffrey H. Long | |||
Title: | Chief Financial Officer |
UBS SECURITIES LLC
(as sub-placement agent)
By: | ||||
Name: | ||||
Title: |
By: | ||||
Name: | ||||
Title: |
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ADDENDUM
TO
DEALER AGREEMENT
BETWEEN
JOHN HANCOCK INVESTMENT MANAGEMENT DISTRIBUTORS LLC
AND
UBS SECURITIES LLC
Compensation payable to the Dealer for acting as a sub-placement agent on behalf of the Manager with respect to a specified sale of Shares pursuant to this Agreement shall be determined by multiplying the Gross Sales Proceeds by the Applicable Selling Agent Commission as set forth in the table below:
Gross Sales Commission |
Manager Retention |
Applicable Selling Agent Commission | ||
1.00% | 0.20% | 0.80% |
Where:
“Gross Sales Proceeds” with respect to each sale of Shares shall be the Gross Sales Price multiplied by the number of Shares sold;
“Gross Sales Price” with respect to each sale of Shares sold pursuant to this Agreement shall be the gross sales price per share of such Shares.
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Exhibit (2)(j)
Execution Copy
Master Custodian Agreement
This Agreement is made as of September 10, 2008 by and among each management investment company identified on Appendix A hereto (each such investment company and each management investment company made subject to this Agreement in accordance with Section 22.5 below, shall hereinafter be referred to as a “Fund”), and State Street Bank and Trust Company, a Massachusetts trust company (the “Custodian”).
WITNESSETH:
Whereas, each Fund may or may not be authorized to issue shares of common stock or shares of beneficial interest in separate series (“Shares”), with each such series representing interests in a separate portfolio of securities and other assets;
Whereas, each Fund so authorized intends that this Agreement be applicable to each of its series set forth on Appendix A hereto (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 22.6 below, shall hereinafter be referred to as the “Portfolio(s)”);
Whereas, each Fund not so authorized intends that this Agreement be applicable to it and all references hereinafter to one or more “Portfolio(s)” shall be deemed to refer to such Fund(s); and
Now, Therefore, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
Section 1. Employment of Custodian and Property to be Held by It
Each Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States (“domestic securities”) and securities it desires to be held outside the United States (“foreign securities”). Each Fund, on behalf of its Portfolio(s), agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio which is not received by it or which is delivered out in accordance with Proper Instructions (as such term is defined in Section 9 hereof) including, without limitation, Portfolio property (i) held by brokers, private bankers or other entities on behalf of the Portfolio (each a “Local Agent”), (ii) held by Special Sub-Custodians (as such term is defined in Section 7 hereof), (iii) held by entities which have advanced monies to or on behalf of the Portfolio and which have received Portfolio property as security for such advance(s) (each a “Pledgee”), or (iv) delivered or otherwise removed from the custody of the Custodian (a) in connection with any Free Trade (as such term is defined in Sections 2.2(14) and 2.6(7) hereof) or (b) pursuant to Special Instructions (as such term is defined in Section 9 hereof). With respect to uncertificated shares (the “Underlying Shares”) of registered “investment companies” (as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the “1940 Act”)), whether in the same “group of investment companies” (as defined in Section 12(d)(1)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the “Underlying Portfolios”) the holding of confirmation statements that identify the shares as being recorded in the Custodian’s name on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees or the Board of Directors of the Fund (as appropriate, and in each case, the “Board”) on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may place and maintain each Fund’s foreign securities with foreign banking institution sub-custodians employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.
Section 2. Duties of the Custodian with Respect to Property of the Portfolios to be Held in the United States
Section 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, including collateral of a U.S. registered broker-dealer held by the Portfolio, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a “U.S. Securities System”) and (b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the “Underlying Transfer Agent”).
Section 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) | Upon sale of such securities for the account of the Portfolio in accordance with customary or established market practices and procedures, including, without limitation, delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment; |
2) | Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; |
3) | In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof; |
4) | To the depository agent in connection with tender or other similar offers for securities of the Portfolio; |
5) | To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; |
-2- |
6) | To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; |
7) | Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with “street delivery” custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian’s own negligence or willful misconduct; |
8) | For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; |
9) | In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; |
10) | For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf of the Portfolio, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agent’s custodian, in accordance with written Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund; |
11) | For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio; |
12) | For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the “Exchange Act”) and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA,” formerly known as The National Association of Securities Dealers, Inc.), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund on behalf of a Portfolio; |
13) | For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, the Custodian, and a futures commission merchant registered under the |
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Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the “CFTC”) and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund on behalf of a Portfolio;
14) | Upon the sale or other delivery of such investments (including, without limitation, to one or more (a) Special Sub-Custodians or (b) additional custodians appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), each a “Repo Custodian”), and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as applicable, shall each be referred to herein as a “Free Trade”), provided that such Proper Instructions shall set forth (a) the securities of the Portfolio to be delivered and (b) the person(s) to whom delivery of such securities shall be made; |
15) | Upon receipt of instructions from the Fund’s transfer agent (the “Transfer Agent”) for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the “Prospectus”), in satisfaction of requests by holders of Shares for repurchase or redemption; |
16) | In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof; |
17) | For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and |
18) | For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio specifying (a) the securities of the Portfolio to be delivered and (b) the person or persons to whom delivery of such securities shall be made. |
Section 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be in “street name” or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in “street name”, the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
Section 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than
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cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
Section 2.5 Collection of Income. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. The Custodian shall credit income to the Portfolio as such income is received or in accordance with the Custodian’s then current payable date income schedule. Any credit to the Portfolio in advance of receipt may be reversed when the Custodian determines that payment will not occur in due course and the Portfolio may be charged at the Custodian’s applicable rate for time credited. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
Section 2.6 Payment of Fund Monies. The Custodian shall pay out monies of a Portfolio as provided in Section 5 and otherwise upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, derivatives or other instruments for the account of the Portfolio but only (a) in accordance with customary or established market practices and procedures, including, without limitation, delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such securities, derivatives or other instruments or evidence of title to such derivatives or other instruments to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of FINRA, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian’s account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the
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Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;
2) | In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof; |
3) For the redemption or repurchase of Shares issued as set forth in Section 8 hereof;
4) | For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; |
5) | For the payment of any dividends on Shares declared pursuant to the Fund’s articles of incorporation or organization and by-laws or agreement or declaration of trust, as applicable, and Prospectus (collectively, “Governing Documents”); |
6) For payment of the amount of dividends received in respect of securities sold short;
7) | Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a “Free Trade”), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made; |
8) | For payment as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and |
9) | For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio specifying (a) the amount of such payment and (b) the person or persons to whom such payment is to be made. |
Section 2.7 Appointment of Agents. The Custodian may at any time or times in its discretion, upon notice to the Fund, appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
Section 2.8 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions of Rule 17f-4 under the 1940 Act, as amended from time to time.
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Section 2.9 Segregated Account. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities of the Portfolio, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof and collateral of a broker-dealer held by the Portfolio, (a) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the FINRA (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (c) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “SEC”), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered management investment companies, and (d) for any other purpose in accordance with Proper Instructions.
Section 2.10 Deposit of Fund Assets with the Underlying Transfer Agent. Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an account or accounts maintained with an Underlying Transfer Agent and the Custodian’s only responsibilities with respect thereto shall be limited to the following:
1) | Upon receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian (or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of such Portfolio. |
2) | In respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall pay out monies of such Portfolio as so directed, and record such payment from the account of such Portfolio on the Custodian’s books and records. |
3) | In respect of the sale or redemption of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares as so directed, record such transfer from the account of such Portfolio on the Custodian’s books and records and, upon the Custodian’s receipt of the proceeds therefor, record such payment for the account of such Portfolio on the Custodian’s books and records. |
The Custodian shall not be liable to the Fund for any loss or damage to the Fund or any Portfolio resulting from the maintenance of Underlying Shares with an Underlying Transfer Agent except for losses resulting directly from the fraud, negligence or willful misconduct of the Custodian or any of its agents or of any of its or their employees.
Section 2.11 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities.
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Section 2.12 Proxies. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), the Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.
Section 2.13 Communications Relating to Portfolio Securities. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the applicable Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Fund on behalf of the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with domestic securities or other property of the Portfolios at any time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall also transmit promptly to the applicable Fund for each Portfolio all written information received by the Custodian regarding any class action or other litigation in connection with Portfolio securities or other assets issued in the United States and then held, or previously held, during the term of this Agreement by the Custodian for the account of the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section 2.13.
Section 3. Provisions Relating to Rules 17f-5 and 17f-7
Section 3.1. Definitions. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
“Country Risk” means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
“Eligible Foreign Custodian” has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
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“Eligible Securities Depository” has the meaning set forth in section (b)(1) of Rule 17f-7.
“Foreign Assets” means any of the Portfolios’ investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios’ transactions in such investments.
“Foreign Custody Manager” has the meaning set forth in section (a)(3) of Rule 17f-5.
“Rule 17f-5” means Rule 17f-5 promulgated under the 1940 Act.
“Rule 17f-7” means Rule 17f-7 promulgated under the 1940 Act.
Section 3.2. The Custodian as Foreign Custody Manager.
3.2.1 Delegation to the Custodian as Foreign Custody Manager. Each Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2 Countries Covered. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund’s Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to such Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Forty-five (45) days (or such shorter or longer period to which the parties may agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian’s acceptance of delegation is withdrawn.
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3.2.3 Scope of Delegated Responsibilities:
(a) Selection of Eligible Foreign Custodians. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) Contracts With Eligible Foreign Custodians. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c) Monitoring. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 Guidelines for the Exercise of Delegated Authority. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.
3.2.5 Reporting Requirements. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.
3.2.6 Standard of Care as Foreign Custody Manager of a Portfolio. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 Representations with Respect to Rule 17f-5. The Foreign Custody Manager represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
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3.2.8 Effective Date and Termination of the Custodian as Foreign Custody Manager. Each Board’s delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective forty-five (45) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
Section 3.3 Eligible Securities Depositories.
3.3.1 Analysis and Monitoring. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 Standard of Care. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.
Section 4. Duties of the Custodian with Respect to Property of the Portfolios to be Held Outside the United States
Section 4.1 Definitions. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
“Foreign Securities System” means an Eligible Securities Depository listed on Schedule B hereto.
“Foreign Sub-Custodian” means a foreign banking institution serving as an Eligible Foreign Custodian.
Section 4.2. Holding Securities. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
Section 4.3. Foreign Securities Systems. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
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Section 4.4. Transactions in Foreign Custody Account.
4.4.1. Delivery of Foreign Assets. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) | Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System; | |
(ii) | In connection with any repurchase agreement related to foreign securities; | |
(iii) | To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios; | |
(iv) | To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; | |
(v) | To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; | |
(vi) | To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodian’s own negligence or willful misconduct; | |
(vii) | For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; | |
(viii) | In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; | |
(ix) | For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio; | |
(x) | In connection with trading in options and futures contracts, including delivery as original margin and variation margin; | |
(xi) | Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made; |
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(xii) | In connection with the lending of foreign securities; and | |
(xiii) | For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made. |
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i) | Upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; | |
(ii) | In connection with the conversion, exchange or surrender of foreign securities of the Portfolio; | |
(iii) | For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses; | |
(iv) | For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; | |
(v) | In connection with trading in options and futures contracts, including delivery as original margin and variation margin; | |
(vi) | Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made; | |
(vii) | For payment of part or all of the dividends received in respect of securities sold short; | |
(viii) | In connection with the borrowing or lending of foreign securities; and | |
(ix) | For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made. |
4.4.3. Market Conditions. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the
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transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to each Board and Fund the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board or Fund being provided with substantively less information than had been previously provided hereunder.
Section 4.5. Registration of Foreign Securities. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
Section 4.6 Bank Accounts. The Custodian shall identify on its books as belonging to the applicable Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.
Section 4.7. Collection of Income. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. The Custodian shall credit income to the applicable Portfolio as such income is received or in accordance with Custodian’s then current payable date income schedule. Any credit to the Portfolio in advance of receipt may be reversed when the Custodian determines that payment will not occur in due course and the Portfolio may be charged at the Custodian’s applicable rate for time credited. Income on securities loaned other than from the Custodian’s securities lending program shall be credited as received.
Section 4.8 Shareholder Rights. With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of such Fund to exercise shareholder rights.
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Section 4.9. Communications Relating to Foreign Securities. The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall also transmit promptly to the applicable Fund all written information received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios regarding any class action or other litigation in connection with Portfolio foreign securities or other assets issued outside the United States and then held, or previously held, during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section 4.9.
Section 4.10. Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian’s performance of such obligations. At a Fund’s election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
Section 4.11 Tax Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on such Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibilities of the Custodian with regard to such tax law shall be to use reasonable efforts to effect the withholding of local taxes and related charges with regard to market entitlements/payments in accordance with local law and subject to local market practice or custom, and to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which such Fund has provided such information. Except as specifically provided in this Agreement or otherwise agreed to in writing by the Custodian, the Custodian shall have no independent obligation to determine the tax obligations now or hereafter imposed on any of the Funds by any taxing authority or to obtain or provide information relating thereto, and shall have no obligation or liability with respect to such tax obligations, it being specifically understood and agreed that the Custodian shall not thereby or otherwise be considered any Fund’s tax advisor or tax counsel.
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Section 4.12. Liability of Custodian. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.
Section 5. Contractual Settlement Services (Purchase / Sales)
Section 5.1 The Custodian shall, in accordance with the terms set out in this section, debit or credit the appropriate cash account of each Portfolio in connection with (i) the purchase of securities for such Portfolio, and (ii) proceeds of the sale of securities held on behalf of such Portfolio, on a contractual settlement basis.
Section 5.2 The services described above (the “Contractual Settlement Services”) shall be provided for such instruments and in such markets as the Custodian may advise from time to time. The Custodian may terminate or suspend any part of the provision of the Contractual Settlement Services under this Agreement at its sole discretion immediately upon notice to the applicable Fund on behalf of each Portfolio, including, without limitation, in the event of force majeure events affecting settlement, any disorder in markets, or other changed external business circumstances affecting the markets or the Fund.
Section 5.3 The consideration payable in connection with a purchase transaction shall be debited from the appropriate cash account of the Portfolio as of the time and date that monies would ordinarily be required to settle such transaction in the applicable market. The Custodian shall promptly recredit such amount at the time that the Portfolio or the Fund notifies the Custodian by Proper Instruction that such transaction has been canceled.
Section 5.4 With respect to the settlement of a sale of securities, a provisional credit of an amount equal to the net sale price for the transaction (the “Settlement Amount”) shall be made to the account of the Portfolio as if the Settlement Amount had been received as of the close of business on the date that monies would ordinarily be available in good funds in the applicable market. Such provisional credit will be made conditional upon the Custodian having received Proper Instructions with respect to, or reasonable notice of, the transaction, as applicable; and the Custodian or its agents having possession of the asset(s) (which shall exclude assets subject to any third party lending arrangement entered into by a Portfolio) associated with the transaction in good deliverable form and not being aware of any facts which would lead them to believe that the transaction will not settle in the time period ordinarily applicable to such transactions in the applicable market.
Section 5.5. Simultaneously with the making of such provisional credit, the Portfolio agrees that the Custodian shall have, and hereby grants to the Custodian, a security interest in any property at any time held for the account of the Portfolio to the full extent of the credited amount, and each Portfolio hereby pledges, assigns and grants to the Custodian a continuing security interest and a lien on any and all such property under the Custodian’s possession, in accordance with the terms of this Agreement. In the event that the applicable Portfolio fails to promptly repay any provisional credit, the Custodian shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of The Commonwealth of Massachusetts.
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Section 5.6 The Custodian shall have the right to reverse any provisional credit or debit given in connection with the Contractual Settlement Services at any time when the Custodian believes, in its reasonable judgment, that such transaction will not settle in accordance with its terms or amounts due pursuant thereto, will not be collectable or where the Custodian has not been provided Proper Instructions with respect thereto, as applicable, and the Portfolio shall be responsible for any costs or liabilities resulting from such reversal. Upon such reversal, a sum equal to the credited or debited amount shall become immediately payable by the Portfolio to the Custodian and may be debited from any cash account held for benefit of the Portfolio.
Section 5.7 In the event that the Custodian is unable to debit an account of the Portfolio, and the Portfolio fails to pay any amount due to the Custodian at the time such amount becomes payable in accordance with this Agreement, (i) the Custodian may charge the Portfolio for costs and expenses associated with providing the provisional credit, including without limitation the cost of funds associated therewith, (ii) the amount of any accrued dividends, interest and other distributions with respect to assets associated with such transaction may be set off against the credited amount, (iii) the provisional credit and any such costs and expenses shall be considered an advance of cash for purposes of the Agreement and (iv) the Custodian shall have the right to setoff against any property and to sell, exchange, convey, transfer or otherwise dispose of any property at any time held for the account of the Portfolio to the full extent necessary for the Custodian to make itself whole.
Section 6. Loan Servicing Provisions
Section 6.1 General. The following provisions shall apply with respect to investments, property or assets in the nature of loans, or interests or participations in loans, including without limitation interests in syndicated bank loans and bank loan participations, whether in the U.S. or outside the U.S. (collectively, “Loans”) entered into by a Fund on behalf of one or more of its Portfolios (referred to in this Section 5 as the “Fund”).
Section 6.2 Safekeeping. Instruments, certificates, agreements and/or other documents which the Custodian may receive with respect to Loans, if any (collectively “Financing Documents”), from time to time, shall be held by the Custodian at its offices in Boston, Massachusetts.
Section 6.3 Duties of the Custodian. The Custodian shall accept such Financing Documents, if any, with respect to Loans as may be delivered to it from time to time by the Fund. The Custodian shall be under no obligation to examine the contents or determine the sufficiency of any such Financing Documents or to provide any certification with respect thereto, whether received by the Custodian as original documents, photocopies, by facsimile or otherwise. Without limiting the foregoing, the Custodian is under no duty to examine any such Financing Documents to determine whether necessary steps have been taken or requirements met with respect to the assignment or transfer of the related Loan or applicable interest or participation in such Loan. The Custodian shall be entitled to assume the genuineness, sufficiency and completeness of any Financing Documents received, and the genuineness and due authority of any signature appearing on such documents. Notwithstanding any term of this Agreement to the contrary, with respect to any Loans, (i) the Custodian shall be under no obligation to determine, and shall have no liability for, the sufficiency of, or to require delivery of, any instrument, document or agreement constituting, evidencing or representing such Loan, other than to receive such Financing Documents, if any, as may be delivered or caused to be delivered to it by the Fund (or its investment manager acting on its behalf), (ii) without limiting the generality of the foregoing, delivery of any such Loan (including without limitation, for purposes of Section 2.6 above) may be made to the Custodian by, and may be represented solely by, delivery to the Custodian of a facsimile or photocopy of an assignment agreement (an “Assignment Agreement”) or a confirmation or certification from the Fund (or the investment manager) to the effect that it has acquired such Loan and/or has received or will receive, and will deliver to the Custodian,
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appropriate Financing Documents constituting, evidencing or representing such Loan (such confirmation or certification, together with any Assignment Agreement, collectively, an “Assignment Agreement or Confirmation”), in any case without delivery of any promissory note, participation certificate or similar instrument (collectively, an “Instrument”), (iii) if an original Instrument shall be or shall become available with respect to any such Loan, it shall be the sole responsibility of the Fund (or the investment manager acting on its behalf) to make or cause delivery thereof to the Custodian, and the Custodian shall be under no obligation at any time or times to determine whether any such original Instrument has been issued or made available with respect to such Loan, and shall not be under any obligation to compel compliance by the Fund to make or cause delivery of such Instrument to the Custodian, and (iv) any reference to Financing Documents appearing in this Section 5 shall be deemed to include, without limitation, any such Instrument and/or Assignment Agreement or Confirmation.
If payments with respect to a Loan (“Loan Payment”) are not received by the Custodian on the date on which they are due, as reflected in the Payment Schedule (as such term is defined in Section 5.4 below) of the Loan (“Payment Date”), or in the case of interest payments, not received either on a scheduled interest payable date, as reported to the Custodian by the Fund (or the investment manager acting on its behalf) for the Loan (the “Interest Payable Date”), or in the amount of their accrued interest payable, the Custodian shall promptly, but in no event later than one business day after the Payment Date or the Interest Payable Date, give telephonic notice to the party obligated under the Financing Documents to make such Loan Payment (the “Obligor”) of its failure to make timely payment, and (2) if such payment is not received within three business days of its due date, shall notify the Fund (or the investment manager on its behalf) of such Obligor’s failure to make the Loan Payment. The Custodian shall have no responsibility with respect to the collection of Loan Payments which are past due, other than the duty to notify the Obligor and the Fund (or the investment manager acting on its behalf) as provided herein.
The Custodian shall have no responsibilities or duties whatsoever under this Agreement, with respect to Loans or the Financing Documents, except for such responsibilities as are expressly set forth herein. Without limiting the generality of the foregoing, the Custodian shall have no obligation to preserve any rights against prior parties or to exercise any right or perform any obligation in connection with the Loans or any Financing Documents (including, without limitation, no obligation to take any action in respect of or upon receipt of any consent solicitation, notice of default or similar notice received from any bank agent or Obligor, except that the Custodian shall undertake reasonable efforts to forward any such notice to the Fund or the investment manager acting on its behalf). In case any question arises as to its duties hereunder, the Custodian may request instructions from the Fund and shall be entitled at all times to refrain from taking any action unless it has received Proper Instructions from the Fund or the investment manager and the Custodian shall in all events have no liability, risk or cost for any action taken, with respect to a Loan, pursuant to and in compliance with the Proper Instructions of such parties.
The Custodian shall be only responsible and accountable for Loan Payments actually received by it and identified as for the account of the Fund; any and all credits and payments credited to the Fund, with respect to Loans, shall be conditional upon clearance and actual receipt by the Custodian of final payment thereon.
The Custodian shall promptly, upon the Fund’s request, release to the Fund’s investment manager or to any party as the Fund or the Fund’s investment manager may specify, any Financing Documents being held on behalf of the Fund. Without limiting the foregoing, the Custodian shall not be deemed to have or be charged with knowledge of the sale of any Loan, unless and except to the extent it shall have received written notice and instruction from the Fund (or the investment manager acting on its behalf) with respect thereto, and except to the extent it shall have received the sale proceeds thereof.
In no event shall the Custodian be under any obligation or liability to make any advance of its own funds with respect to any Loan.
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Section 6.4 Responsibility of the Fund. With respect to each Loan held by the Custodian hereunder in accordance with the provisions hereof, the Fund shall (a) cause the Financing Documents evidencing such Loan to be delivered to the Custodian; (b) include with such Financing Documents an amortization schedule of payments (the “Payment Schedule”) identifying the amount and due dates of scheduled principal payments, the Interest Payable Date(s) and related payment amount information, and such other information with respect to the related Loan and Financing Documents as the Custodian reasonably may require in order to perform its services hereunder (collectively, “Loan Information”), in such form and format as the Custodian reasonably may require; (c) take, or cause the investment manager to take, all actions necessary to acquire good title to such Loan (or the participation in such Loan, as the case may be), as and to the extent intended to be acquired; and (d) cause the Custodian to be named as its nominee for payment purposes under the Financing Documents or otherwise provide for the direct payment of the Payments to the Custodian. The Custodian shall be entitled to rely upon the Loan Information provided to it by the Fund (or the investment manager acting on its behalf) without any obligation on the part of the Custodian independently to verify, investigate, recalculate, update or otherwise confirm the accuracy or completeness thereof; and the Custodian shall have no liability for any delay or failure on the part of the Fund in providing necessary Loan Information to the Custodian, or for any inaccuracy therein or incompleteness thereof. With respect to each such Loan, the Custodian shall be entitled to rely on any information and notices it may receive from time to time from the related bank agent, Obligor or similar party with respect to the related Loan, and shall be entitled to update its records on the basis of such information or notices received, without any obligation on its part independently to verify, investigate or recalculate such information.
Section 6.5 Instructions; Authority to Act. The certificate of the Secretary or an Assistant Secretary of the Fund’s Board of Directors, identifying certain individuals to be officers of the Fund or employees of the Fund’s investment manager authorized to sign any such instructions, may be received and accepted as conclusive evidence of the incumbency and authority of such to act and may be considered by the Custodian to be in full force and effect until it receives written notice to the contrary from the Secretary or Assistant Secretary of the Fund’s Board. Notwithstanding any other provision of this Agreement, the Custodian shall have no responsibility to ensure that any investment by the Fund with respect to Loans has been authorized.
Section 6.6 Attachment. In case any portion of the Loans or the Financing Documents shall be attached or levied upon pursuant to an order of court, or the delivery or disbursement thereof shall be stayed or enjoined by an order of court, or any other order, judgment or decrees shall be made or entered by any court affecting the property of the Fund or any act of the Custodian relating thereto, the Custodian is hereby expressly authorized in its sole discretion to obey and comply with all orders, judgments or decrees so entered or issued, without the necessity of inquire whether such court had jurisdiction, and, in case the Custodian obeys or complied with any such order, judgment or decree, it shall not be liable to anyone by reason of such compliance.
Section 7. Special Sub-Custodians
Upon receipt of Special Instructions (as such term is defined in Section 9 hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian for the purposes of effecting such transaction(s) as may be designated by a Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a “Special Sub-Custodian.” Each such duly appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by a Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian, and in accordance with Special Instructions,
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the Custodian shall enter into a sub-custodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
Section 8. Payments for Sales or Repurchases or Redemptions of Shares
The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
Section 9. Proper Instructions and Special Instructions
“Proper Instructions,” which may also be standing instructions, as such term is used throughout this Agreement shall mean instructions received by the Custodian from a Fund, a Fund’s duly authorized investment manager or investment adviser, or a person or entity duly authorized by either of them. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the applicable Fund and the Custodian including, but not limited to, the security procedures selected by the Fund via the form of Funds Transfer Addendum hereto. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to provide such instructions with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.
“Special Instructions” as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the applicable Fund or any other person designated in writing by the Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.
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Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by such Fund’s Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.
Section 10. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the applicable Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
Section 11. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
1) | Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio; |
2) Surrender securities in temporary form for securities in definitive form;
3) | Endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and |
4) | In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the applicable Board. |
Section 12. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the applicable Board to keep the books of account of each Portfolio and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by a Fund on behalf of a Portfolio, shall itself keep such books of account and/or compute such net asset value per Share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its
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various components. Each Fund acknowledges and agrees that, with respect to investments maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is the sole source of information on the number of shares of a fund held by it on behalf of a Portfolio and that the Custodian has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Custodian in performing its duties under this Agreement, including without limitation, the duties set forth in this Section 12 and in Section 13 hereof; provided, however, that the Custodian shall be obligated to reconcile information as to purchases and sales of Underlying Shares contained in trade instructions and confirmations received by the Custodian and to report promptly any discrepancies to the Underlying Transfer Agent. The calculations of the net asset value per Share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Prospectus. Each Fund acknowledges that, in keeping the books of account of the Portfolio and/or making the calculations described herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.
Section 13. Records
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Fund’s request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.
Section 14. Opinion of Fund’s Independent Accountant
The Custodian shall take all reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the Fund’s Form N-1A or Form N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.
Section 15. Reports to Fund by Independent Public Accountants
The Custodian shall provide the applicable Fund, on behalf of each of the Portfolios at such times as such Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a “Securities System”), relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
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Section 16. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf of each applicable Portfolio and the Custodian.
Section 17. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to any Fund or Portfolio for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.
Except as may arise from the Custodian’s own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian’s sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, any Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (viii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.
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The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as such term is defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement.
If a Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee’s own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio’s assets to the extent necessary to obtain reimbursement.
Except as may arise from the Custodian’s own negligence or willful misconduct, each Fund shall indemnify and hold the Custodian harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities which may be asserted against the Custodian (a) acting in accordance with any Proper Instruction or Special Instruction including, without limitation, any Proper Instruction with respect to Free Trades including, but not limited to, cost, expense, loss, damage, liability, tax, charge, assessment or claim resulting from (i) the failure of the applicable Fund to receive income with respect to purchased investments, (ii) the failure of the applicable Fund to recover amounts invested on maturity of purchased investments, (iii) the failure of the Custodian to respond to or be aware of notices or other corporate communications with respect to purchased investments, or (iv) the Custodian’s reliance upon information provided by the applicable Fund, such Fund’s counterparty(ies) or the agents of either of them with respect to Fund property released, delivered or purchased pursuant to either of Section 2.2(14) or Section 2.6(7) hereof; (b) for the acts or omissions of any Special Sub-Custodian; or (c) for the acts or omissions of any Local Agent or Pledgee.
In the event of equipment failure, work stoppage, governmental action, communication disruption or other impossibility of performance beyond the Custodian’s control, the Custodian shall take reasonable steps to minimize service interruptions. The Custodian shall enter into and shall maintain in effect, at all times during the term of this Agreement, with appropriate parties one or more agreements making reasonable provision for (i) periodic back-up of the computer files and data with respect to the Funds; and (ii) emergency use of electronic data processing equipment to provide services under this Agreement. Upon reasonable request, the Custodian shall discuss with senior management of the Funds such disaster recovery plan and/or provide a high-level presentation summarizing such plan.
In no event shall the Custodian be liable for indirect, special or consequential damages.
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Section 18. Effective Period, Termination and Amendment
This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days or, in the exercise of the sole discretion of the Funds, no later than ninety (90) days after the date of such delivery or mailing; provided, however, that no Fund shall amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of such Fund’s Governing Documents, and further provided, that any Fund on behalf of one or more of the Portfolios may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Termination of this Agreement with respect to any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio.
Upon termination of the Agreement, the applicable Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
Section 19. Successor Custodian
If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent. Custodian shall also provide to the successor custodian a Fund’s records (as described in Section 13 of this Agreement) as reasonably requested by the Fund.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a “bank” as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.
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In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.
Section 20. Audit Rights; Additional Sub-Certifications and Reports
Section 20.1 Audit Rights. To the extent required by applicable law, rule or regulation and upon request of a Fund (which shall include reasonable advance notice), the Custodian shall allow such Fund’s regulators or supervisory authorities to perform periodic on-site audits as may be reasonably required to examine the Custodian’s performance of the services contemplated by this Agreement (the “Services”). Notwithstanding the foregoing, prior to the performance of any audits of the Custodian’s performance of the Services, the Fund will request that such regulator or supervisory authority to the extent possible shall coordinate such audit through the Custodian’s primary regulator, the United States Federal Reserve Bank of Boston. Nothing contained in this section shall obligate the Custodian to provide access to or otherwise disclose: (i) any information that is unrelated to the relevant Fund and the provision of the Services to such Fund; (ii) any information that is treated as confidential under the Custodian’s corporate policies, including, without limitation, internal audit reports, compliance or risk management plans or reports, work papers and other reports and information relating to management functions; or (iii) any other documents, reports or other information that the Custodian is obligated to maintain in confidence as a matter of law or regulation. In addition, any access provided hereunder to technology shall be limited to a demonstration by the Custodian of the functionality thereof and a reasonable opportunity to communicate with the Custodian’s personnel regarding such technology.
Section 20.2 Additional Sub-Certifications and Reports. The Custodian shall provide to the Funds: (a) sub-certifications in connection with Sarbanes-Oxley Act of 2002 certification requirements; and (b) periodic reports and reasonable documentation for delivery to the Funds’ Chief Compliance Officer in connection with Rule 38a-1 under the 1940 Act with respect to the Services and the Custodian’s compliance with its operating policies and procedures related thereto.
Section 21. Confidentiality; Information Security.
Section 21.1 Confidentiality. The parties hereto agree that each shall treat confidentially all information provided by each party to the other party regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering or receiving services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party.
The foregoing shall not be applicable to any information (i) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, or that is independently derived by any party hereto without the use of any information provided by the other party hereto in connection with this Agreement, (ii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or regulation, or (iii) where the party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not be unreasonably withheld. Furthermore, and notwithstanding anything in this Section to the contrary, the Custodian may aggregate Fund or Portfolio data
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with similar data of other customers of the Custodian (“Aggregated Data”) and may use Aggregated Data for purposes of constructing statistical models so long as such Aggregated Data represents a sufficiently large sample that no Fund or Portfolio data can be identified either directly or by inference or implication.
The undertakings and obligations contained in this Section 21.1 shall survive the termination or expiration of this Agreement for a period of three (3) years.
Section 21.2 Information Security. The Custodian has implemented information security controls and procedures reasonably designed to protect the information and data owned and/or used by the Custodian applicable to a Fund. Upon reasonable request, the Custodian shall discuss with senior management of the Funds such controls and procedures and/or provide a high-level presentation summarizing such controls and procedures.
Section 22. General
Section 22.1 Massachusetts Law to Apply. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
Section 22.2 Prior Agreements. This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between each Fund on behalf of each of the Portfolios and the Custodian relating to the custody of such Fund’s assets.
Section 22.3 Assignment. This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund.
Section 22.4 Interpretive and Additional Provisions. In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of a Fund’s Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 22.5 Additional Funds. In the event that any management investment company in addition to those listed on Appendix A hereto desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such management investment company shall become a Fund hereunder and be bound by all terms and conditions and provisions hereof including, without limitation, the representations and warranties set forth in Section 22.7 below.
Section 22.6 Additional Portfolios. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
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Section 22.7 The Parties; Representations and Warranties; Recourse to Funds. All references herein to the “Fund” are to each of the management investment companies listed on Appendix A hereto, and each management investment company made subject to this Agreement in accordance with Section 22.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series corporation, trust or other entity, all references herein to the “Portfolio” are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to “the parties” shall mean the Custodian and such other individual Fund as to which the matter pertains.
22.7.1 Representations and Warranties.
Each Fund hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its constituent documents and its Governing Documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it; and (f) its undertakings as set forth in this Agreement comply with applicable provisions of the 1940 Act and rules promulgated thereunder.
The Custodian hereby represents and warrants that (a) it is duly organized and validly existing in its jurisdiction of organization; (b) it has the requisite power and authority under applicable law to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its execution of this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Custodian or any law or regulation applicable to it.
22.7.2 Recourse to the Funds.
A copy of the Agreement and Declaration of Trust of each Fund that is a Massachusetts business trust is on file with the Secretary of State of The Commonwealth of Massachusetts. The parties hereto acknowledge and agree that: (i) recourse with respect to this Agreement and instruments referenced and contemplated hereby is limited to the assets and property of each respective Fund; and (ii) the obligations of, or arising under, this Agreement are not binding upon any of the trustees, officers or shareholders of each Fund individually, but are binding only upon the assets and property of each respective Fund.
Section 22.8 Remote Access Services Addendum. The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
Section 22.9 Notices. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To any Fund: | c/o John Hancock |
601 Congress Street Boston, MA 02110-2805 Attention: Charles A. Rizzo Telephone: 617-663-4006 Telecopy: 617-663-2198 |
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To the Custodian: | State Street Bank and Trust Company |
Lafayette Corporate Center Two Avenue de Lafayette – LCC/5 Attention: Thomas Forrester, Senior Vice President Telephone: 617-662-7018 Telecopy: |
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
Section 22.10 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.
Section 22.11 Severability. If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
Section 22.12 Reproduction of Documents. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
Section 22.13 Shareholder Communications Election. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian to provide such Fund’s name, address, and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian “no,” the Custodian will not provide this information to requesting companies. If a Fund tells the Custodian “yes” or does not check either “yes” or “no” below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a Fund’s protection, the Rule prohibits the requesting company from using the Fund’s name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
YES [ ] | The Custodian is authorized to release the Fund’s name, address, and share positions. |
NO [X] | The Custodian is not authorized to release the Fund’s name, address, and share positions. |
[The remainder of this page intentionally left blank.]
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Signature Page
In WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative under seal as of the date first above-written.
Fund Signature attested to By: | EACH OF THE ENTITIES SET FORTH ON APPENDIX A HERETO | |||
By: | /s/ Betsy Anne Seel | By: | /s/ Gordon Shone | |
Name | Betsy Anne Seel | Name | Gordon Shone | |
Title: | Assistant Secretary | Title: | Treasurer |
Signature Attested to By: | State Street Bank and trust company | |||
By: | /s/ A. Elizabeth Howard | By: | /s/ Joseph C. Antonellis | |
Elizabeth Howard | Joseph C. Antonellis | |||
Vice President and Senior Counsel | Vice Chairman |
Master Custodian Agreement
Appendix A
to the
Master Custodian Agreement
dated September 10, 2008
between
John Hancock Funds and
State Street Bank and Trust Company
JOHN HANCOCK FUNDS
John Hancock Bond Trust
John Hancock Government Income Fund
John Hancock High Yield Fund
John Hancock Investment Grade Bond Fund
John Hancock California Tax-Free Income Fund
John Hancock California Tax-Free Income Fund
John Hancock Capital Series
John Hancock Classic Value Fund
John Hancock Classic Value Fund II
John Hancock International Classic Value Fund
John Hancock Large Cap Select Fund
John Hancock U.S. Global Leaders Growth Fund
John Hancock Current Interest
John Hancock Money Market Fund
John Hancock Equity Trust
John Hancock Small Cap Fund
John Hancock Investment Trust
John Hancock Balanced Fund
John Hancock Global Opportunities Fund
John Hancock Large Cap Equity Fund
John Hancock Small Cap Intrinsic Value Fund
John Hancock Sovereign Investors Fund
John Hancock Investment Trust II
John Hancock Financial Industries Fund
John Hancock Regional Bank Fund
John Hancock Small Cap Equity Fund
John Hancock Investment Trust III
John Hancock Greater China Opportunities Fund
John Hancock Municipal Securities Trust
John Hancock High Yield Municipal Bond Fund
John Hancock Tax-Free Bond Fund
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Appendix A
John Hancock Series Trust
John Hancock Global Real Estate Fund
John Hancock Mid Cap Equity Fund
John Hancock Sovereign Bond Fund
John Hancock Bond Fund
John Hancock Strategic Series
John Hancock Strategic Income Fund
John Hancock Tax-Exempt Series Fund
John Hancock Massachusetts Tax-Free Income Fund
John Hancock New York Tax-Free Income Fund
John Hancock World Fund
John Hancock Health Sciences Fund
John Hancock Closed End Funds
John Hancock Bank and Thrift Opportunity Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Patriot Premium Dividend Fund II
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Tax Advantaged Global Shareholder Yield Fund
John Hancock Tax-Advantaged Dividend Income Fund
JOHN HANCOCK FUNDS III
John Hancock Classic Mega Cap Fund
John Hancock Global Shareholder Yield Fund
John Hancock Growth Fund
John Hancock Growth Opportunities Fund
John Hancock International Core Fund
John Hancock International Growth Fund
John Hancock Intrinsic Value Fund
John Hancock Leveraged Companies Fund
John Hancock Rainier Growth Fund
John Hancock US Core Fund
John Hancock Value Opportunities Fund
FOF - Index
John Hancock International Allocation Portfolio
NON-CUSTODY ACCOUNTS
John Hancock Bulk Trading Account
John Hancock Joint Repo Account
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REMOTE ACCESS SERVICES ADDENDUM TO MASTER CUSTODIAN AGREEMENT
ADDENDUM to that certain Master Custodian Agreement dated as of September 10, 2008 (the “Custodian Agreement”) by and among each management investment company identified on Appendix A thereto or made subject thereto pursuant to Section 22.5 thereof (each, a “Customer”) and State Street Bank and Trust Company, including its subsidiaries and affiliates (“State Street”).
State Street has developed and/or utilizes proprietary or third-party accounting and other systems in conjunction with the services that State Street provides to the Customer. In this regard, State Street maintains certain information in databases under its ownership and/or control that it makes available to its customers (the “Remote Access Services”).
The Services
State Street agrees to provide the Customer, and its designated investment advisors, consultants or other third parties who agree to abide by the terms of this Addendum (“Authorized Designees”) with access to State Street propriety and third-party systems as may be offered by State Street from time to time (each, a “System”) on a remote basis.
Security Procedures
The Customer agrees to comply, and to cause its Authorized Designees to comply, with remote access operating standards and procedures and with user identification or other password control requirements and other security devices and procedures as may be issued or required from time to time by State Street or its third-party vendors for use of the System and access to the Remote Access Services. The Customer is responsible for any use and/or misuse of the System and Remote Access Services by its Authorized Designees. The Customer agrees to advise State Street immediately in the event that it learns or has reason to believe that any person to whom it has given access to the System or the Remote Access Services has violated or intends to violate the terms of this Addendum and the Customer will cooperate with State Street in seeking injunctive or other equitable relief. The Customer agrees to discontinue use of the System and Remote Access Services, if requested, for any security reasons cited by State Street and State Street may restrict access of the System and Remote Access Services by the Customer or any Authorized Designee for security reasons or noncompliance with the terms of this Addendum at any time.
Fees
Fees and charges for the use of the System and the Remote Access Services and related payment terms shall be as set forth in the fee schedule in effect from time to time between the parties. The Customer shall be responsible for any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.
Proprietary Information/Injunctive Relief
The System and Remote Access Services described herein and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, know- how, algorithms, programs, training aids, printed materials, methods, books, records, files, documentation and other information made available to the Customer by State Street as part of the Remote Access Services and through the use of the System and all copyrights, patents, trade secrets and other proprietary and intellectual property rights of State Street and third-party vendors related thereto are the exclusive, valuable
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and confidential proprietary property of State Street and its relevant licensors and third-party vendors (the “Proprietary Information”). The Customer agrees on behalf of itself and its Authorized Designees to keep the Proprietary Information confidential and to limit access to its employees and Authorized Designees (under a similar duty of confidentiality) who require access to the System for the purposes intended. The foregoing shall not apply to Proprietary Information in the public domain or required by law to be made public.
The Customer agrees to use the Remote Access Services only in connection with the proper purposes of this Addendum. The Customer will not, and will cause its employees and Authorized Designees not to, (i) permit any third party to use the System or the Remote Access Services, (ii) sell, rent, license or otherwise use the System or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Remote Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street’s databases, including data from third-party sources, available through use of the System or the Remote Access Services, to be published, redistributed or retransmitted for other than use for or on behalf of the Customer, as State Street’s customer.
The Customer agrees that neither it nor its Authorized Designees will modify the System in any way, enhance, copy or otherwise create derivative works based upon the System, nor will the Customer or its Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.
The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street or its third-party licensors and vendors inadequately compensable in damages at law and that State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.
Limited Warranties
State Street represents and warrants that it is the owner of and/or has the right to grant access to the System and to provide the Remote Access Services contemplated herein. Because of the nature of computer information technology including, but not limited to the use of the Internet, and the necessity of relying upon third-party sources, and data and pricing information obtained from third parties, the System and Remote Access Services are provided “AS IS” without warranty express or implied including as to availability of the System, and the Customer and its Authorized Designees shall be solely responsible for the use of the System and Remote Access Services and investment decisions, results obtained, regulatory reports and statements produced using the Remote Access Services. State Street and its relevant licensors and third-party vendors will not be liable to the Customer or its Authorized Designees for any direct or indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the System or the Remote Access Services, nor shall any party be responsible for delays or nonperformance under this Addendum arising out of any cause or event beyond such party’s control.
EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS RELEVANT LICENSORS AND THIRD-PARTY VENDORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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Infringement
State Street will defend or, at its option, settle any claim or action brought against the Customer to the extent that it is based upon an assertion that access to or use of State Street proprietary systems by the Customer under this Addendum constitutes direct infringement of any United States patent or copyright or misappropriation of a trade secret, provided that the Customer notifies State Street promptly in writing of any such claim or proceeding, cooperates with State Street in the defense of such claim or proceeding and allows State Street sole control over such claim or proceeding. Should the State Street proprietary system or any part thereof become, or in State Street’s opinion be likely to become, the subject of a claim of infringement or the like under any applicable patent, copyright or trade secret laws, State Street shall have the right, at State Street’s sole option, to (i) procure for the Customer the right to continue using the State Street proprietary system (ii) replace or modify the State Street proprietary system so that the State Street proprietary system becomes noninfringing, or (iii) terminate this Addendum without further obligation. This section constitutes the sole remedy to the Customer for the matters described in this section.
Termination
Each party to the Custodian Agreement may terminate this Addendum immediately for failure of any other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. This Addendum shall in any event terminate with and in connection with the termination of the Custodian Agreement. The Customer’s use of any third-party System is contingent upon its compliance with any terms of use of such system imposed by such third party and State Street’s continued access to, and use of, such third-party system. In the event of termination, the Customer will return to State Street all copies of documentation and other confidential information in its possession or in the possession of its Authorized Designees and immediately cease access to the System and Remote Access Services. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.
Miscellaneous
This Addendum constitutes the entire understanding of the parties to the Custodian Agreement with respect to access to the System and the Remote Access Services. This Addendum cannot be modified or altered except in a writing duly executed by each of State Street and the Customer and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.
By its execution of the Custodian Agreement, the Customer: (a) confirms to State Street that it informs all Authorized Designees of the terms of this Addendum; (b) accepts responsibility for its and its Authorized Designees’ compliance with the terms of this Addendum; and (c) indemnifies and holds State Street harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities arising from any failure of the Customer or any of its Authorized Designees to abide by the terms of this Addendum.
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FUNDS TRANSFER ADDENDUM
OPERATING GUIDELINES |
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1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit Client’s account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client’s instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day.
2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client agrees that the Security Procedures are reasonable and adequate for its wire transfer transactions and agrees to be bound by any payment orders, amendments and cancellations, whether or not authorized, issued in its name and accepted by State Street after being confirmed by any of the selected Security Procedures. The Client also agrees to be bound by any other valid and authorized payment order accepted by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client’s authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. Financial institutions that receive payment orders initiated by State Street at the instruction of the Client may also process payment orders on the basis of account numbers, regardless of any name included in the payment order. State Street will also rely on any financial institution identification numbers included in any payment order, regardless of any financial institution name included in the payment order.
4. REJECTION: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street’s receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street’s sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order.
8. AUTOMATED CLEARING HOUSE (“ACH”) CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of State Street’s execution of payment orders shall ordinarily be provided within 24 hours. Notice may be delivered through State Street’s proprietary information systems, such as, but not limited to Horizon and GlobalQuest®, account statements, advices, or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days.
FUNDS TRANSFER ADDENDUM
10. LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to repay any deposit made at a non-U.S. branch of State Street, or any deposit made with State Street and denominated in a non-U.S. dollar
Serving Institutional Investors Worldwide sm
currency, if repayment of such deposit or the use of assets denominated in the non-U.S. dollar currency is prevented, prohibited or otherwise blocked due to: (a) an act of war, insurrection or civil strife; (b) any action by a non-U.S. government or instrumentality or authority asserting governmental, military or police power of any kind, whether such authority be recognized as a defacto or a dejure government, or by any entity, political or revolutionary movement or otherwise that usurps, supervenes or otherwise materially impairs the normal operation of civil authority; or(c) the closure of a non-U.S. branch of State Street in order to prevent, in the reasonable judgment of State Street, harm to the employees or property of State Street. The obligation to repay any such deposit shall not be transferred to and may not be enforced against any other branch of State Street.
The foregoing provisions constitute the disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.
While State Street is not obligated to repay any deposit made at a non-U.S. branch or any deposit denominated in a non-U.S. currency during the period in which its repayment has been prevented, prohibited or otherwise blocked, State Street will repay such deposit when and if all circumstances preventing, prohibiting or otherwise blocking repayment cease to exist.
11. MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to recover any funds erroneously paid to the wrong party or parties, regardless of any fault of State Street or the Client, but the party responsible for the erroneous payment shall bear all costs and expenses incurred in trying to effect such recovery. These Guidelines may not be amended except by a written agreement signed by the parties.
FUNDS TRANSFER ADDENDUM
Security Procedure(s) Selection Form |
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Please select one or more of the funds transfer security procedures indicated below. | Serving Institutional Investors Worldwide SM |
SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient networks for the delivery of funds transfer instructions. Selection of this security procedure would be most appropriate for existing SWIFT members.
Standing Instructions
Standing Instructions may be used where funds are transferred to a broker on the Client’s established list of brokers with which it engages in foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the Standing Instruction will be confirmed by telephone prior to execution.
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☐ Remote Batch Transmission
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers.
Clients selecting this option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.
Global Horizon Interchangesm Funds Transfer Service
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street. This delivery mechanism is most appropriate for Clients with a low-to-medium number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.
Telephone Confirmation (Callback)
Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client’s location to authenticate the instruction. Selection of this alternative is appropriate for Clients who do not have the capability to use other security procedures.
☐ Repetitive Wires
For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually. This alternative is recommended whenever funds are frequently transferred between the same two accounts.
Transfers Initiated by Facsimile
The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund Services once or several times a day.
FUNDS TRANSFER ADDENDUM
Instruct |
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Instruct is a State Street web-based application designed to provide internet-enabled remote access that allows for the capturing, verification and processing of various instruction types, including securities, cash and foreign exchange transactions. Instruct is designed using industry standard formats to facilitate straight-through processing. Instruct provides a number of security features through user entitlements, industry standard encryption protocols, digital security certificates and multiple tiers of user authentication requirements. |
Serving Institutional Investors Worldwide sm
Secure Transport
Secure Transport is a file transfer application based upon the Secure File Transfer Protocol standard that is designed to enable State Street clients/ investment managers to send file based transfer and transaction instructions over the internet. Secure Transport features multi-factor authenticators such as SecurID and digital certificates, and incorporates industry-standard encryption protocols.
Automated Clearing House (ACH)
State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options:
Global Horizon Interchange Automated Clearing House Service
Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats.
Transmission from Client PC to State Street Mainframe with Telephone Callback
Transmission from Client Mainframe to State Street Mainframe with Telephone Callback
Transmission from DST Systems to State Street Mainframe with Encryption
Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective for payment orders initiated by our organization.
Key Contact Information
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT
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ALTERNATE CONTACT |
Name | Name |
Address | Address |
City/State/Zip Code | City/State/Zip Code |
Telephone Number | Telephone Number |
Facsimile Number | Facsimile Number |
SWIFT Number | |
Telex Number |
FUNDS TRANSFER ADDENDUM |
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INSTRUCTION(S) | |
TELEPHONE CONFIRMATION |
Fund | Serving Institutional Investors Worldwide sm |
Investment Adviser
Authorized Initiators
Please Type or Print
Please provide a listing of Fund officers or other individuals who are currently authorized to INITIATE wire transfer instructions to State Street:
NAME | TITLE (Specify whether position is with Fund or Investment Adviser) | SPECIMEN SIGNATURE | ||
Authorized Verifiers
Please Type or Print
Please provide a listing of Fund officers or other individuals who will be CALLED BACK to verify the initiation of repetitive wires of $10 million or more and all non-repetitive wire instructions:
NAME | CALLBACK PHONE NUMBER | DOLLAR LIMITATION (IF ANY) | ||
SCHEDULE A
STATE STREET |
GLOBAL CUSTODY NETWORK |
SUBCUSTODIANS |
Market | Subcustodian |
Argentina | Citibank, N.A. |
Australia | The Hongkong and Shanghai Banking Corporation Limited |
Citigroup Pty. Limited | |
Austria | Bank Austria Creditanstalt AG |
Bahrain | HSBC Bank Middle East Limited |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Bangladesh | Standard Chartered Bank |
Belgium | Deutsche Bank AG, Netherlands (operating through its Amsterdam branch) |
Benin | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
Bermuda | Bank of Bermuda Limited |
Botswana | Barclays Bank of Botswana Limited |
Brazil | Citibank, N.A. |
Bulgaria | ING Bank N.V. |
Burkina Faso | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
Canada | State Street Trust Company Canada |
Cayman Islands | Close Trustees (Cayman) Limited |
Chile | Banco Itaú Chile |
06/30/08
1 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Market | Subcustodian |
People’s Republic | HSBC Bank (China) Company Limited |
of China | (as delegate of The Hongkong and Shanghai Banking Corporation Limited) |
(Shanghai and Shenzhen) | |
Colombia | Cititrust Colombia S.A. Sociedad Fiduciaria |
Costa Rica | Banco BCT S.A. |
Croatia | Privredna Banka Zagreb d.d |
Cyprus Czech | BNP Paribas Securities Services, S.A., Greece (operating through its Athens branch) |
Republic | Ceskoslovenská obchodní Banka, a.s. |
Denmark | Skandinaviska Enskilda Banken AB, Sweden (operating through its Copenhagen branch) |
Ecuador | Banco de la Producción S.A. PRODUBANCO |
Egypt | HSBC Bank Egypt S.A.E. |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Estonia | |
AS Hansapank | |
Finland | |
Skandinaviska Enskilda Banken AB, Sweden (operating through its Helsinki branch) | |
France | |
Deutsche Bank AG, Netherlands (operating through its Paris branch) | |
Germany | |
Deutsche Bank AG | |
Ghana | |
Barclays Bank of Ghana Limited | |
Greece | |
National Bank of Greece S.A. |
06/30/08
2 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
06/30/08
3 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Market | Subcustodian |
Republic of Korea | Deutsche Bank AG |
The Hongkong and Shanghai Banking Corporation Limited | |
Kuwait | HSBC Bank Middle East Limited |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Latvia | A/s Hansabanka |
Lebanon | HSBC Bank Middle East |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Lithuania | SEB Bankas AB |
Malaysia | Standard Chartered Bank Malaysia Berhad |
Mali | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
Malta | The Hongkong and Shanghai Banking Corporation Limited |
Mauritius | The Hongkong and Shanghai Banking Corporation Limited |
Mexico | Banco Nacional de México S.A. |
Morocco | Attijariwafa bank |
Namibia | Standard Bank Namibia Limited |
Netherlands | Deutsche Bank AG |
New Zealand | The Hongkong and Shanghai Banking Corporation Limited |
Niger | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
06/30/08
4 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Market | Subcustodian |
Nigeria | Stanbic IBTC Bank Plc. |
Norway | Skandinaviska Enskilda Banken AB, Sweden (operating through its Oslo branch) |
Oman | HSBC Bank Middle East Limited |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Deutsche Bank AG | |
Pakistan | |
HSBC Bank Middle East Limited | |
Palestine | (as delegate of The Hongkong and Shanghai Banking Corporation Limited) |
HSBC Bank (Panama) S.A. | |
Panama Peru | |
Citibank del Perú, S.A. | |
Philippines | |
Standard Chartered Bank | |
Poland | |
Bank Handlowy w Warszawie S.A. | |
Portugal | |
Banco Comercial Português S.A. | |
Puerto Rico | |
Citibank N.A. | |
Qatar | |
HSBC Bank Middle East Limited | |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) | |
Romania | |
ING Bank N.V. | |
Russia | |
ING Bank (Eurasia) ZAO, Moscow | |
Saudi Arabia | Saudi British Bank |
(as delegate of The Hongkong and Shanghai Banking Corporation Limited) |
06/30/08
5 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Market | Subcustodian |
Senegal | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
Serbia | Unicredit Bank Serbia JSC |
Singapore | DBS Bank Limited |
United Overseas Bank Limited | |
Slovak Republic | Ceskoslovenská obchodní Banka, a.s. |
Slovenia | UniCredit Bank Slovenija d.d. |
South Africa | Nedbank Limited |
Standard Bank of South Africa Limited | |
Spain | |
Deutsche Bank S.A.E. | |
Sri Lanka | |
The Hongkong and Shanghai Banking Corporation Limited | |
Swaziland | |
Standard Bank Swaziland Limited | |
Sweden | |
Skandinaviska Enskilda Banken AB | |
Switzerland | |
UBS AG | |
Taiwan - R.O.C. | Credit Suisse |
Bank of Taiwan | |
Thailand | |
Standard Chartered Bank (Thai) Public Company Limited | |
Togo | via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast |
Trinidad & Tobago | Republic Bank Limited |
Tunisia | Banque Internationale Arabe de Tunisie |
06/30/08
6 |
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
06/30/08
7 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Argentina | Caja de Valores S.A. |
Australia | Austraclear Limited |
Austria | Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) |
Bahrain | Clearing, Settlement, and Depository System of the Bahrain Stock Exchange |
Bangladesh | Central Depository Bangladesh Limited |
Belgium | Banque Nationale de Belgique |
Euroclear Belgium | |
Benin | Dépositaire Central – Banque de Règlement |
Bermuda | Bermuda Securities Depository |
Brazil | Central de Custódia e de Liquidação Financeira de Títulos Privados (CETIP) |
Companhia Brasileira de Liquidação e Custódia Sistema Especial de | |
Liquidação e de Custódia (SELIC) | |
Bulgaria | Bulgarian National Bank |
Central Depository AD | |
Burkina Faso | Dépositaire Central – Banque de Règlement The |
Canada | Canadian Depository for Securities Limited |
Chile | Depósito Central de Valores S.A. |
People’s Republic of China | China Securities Depository and Clearing Corporation Limited, |
Shanghai Branch | |
China Securities Depository and Clearing Corporation Limited | |
Shenzhen Branch |
06/30/08
1 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
06/30/08
2 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Hong Kong | Central Moneymarkets Unit |
Hong Kong Securities Clearing Company Limited | |
Hungary | Központi Elszámolóház és Értéktár (Budapest) Zrt. (KELER) |
Iceland | Icelandic Securities Depository Limited |
India | Central Depository Services (India) Limited |
National Securities Depository Limited | |
Reserve Bank of India | |
Indonesia | Bank Indonesia |
PT Kustodian Sentral Efek Indonesia | |
Israel | Tel Aviv Stock Exchange Clearing House Ltd. (TASE C |
Italy | Monte Titoli S.p.A. |
Ivory Coast | Dépositaire Central – Banque de Règlement |
Jamaica | Jamaica Central Securities Depository |
Japan | Bank of Japan - Net System |
Japan Securities Depository Center (JASDEC) Incorpor | |
Jordan | Securities Depository Center |
Kazakhstan | Central Securities Depository |
Kenya | Central Depository and Settlement Corporation Limited |
Central Bank of Kenya | |
Republic of Korea | Korea Securities Depository |
06/30/08
3 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Kuwait | Kuwait Clearing Company |
Latvia | Latvian Central Depository |
Lebanon | Banque du Liban |
Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (Midclear) S.A.L. | |
Lithuania | Central Securities Depository of Lithuania |
Malaysia | Bank Negara Malaysia |
Bursa Malaysia Depository Sdn. Bhd. | |
Mali | Dépositaire Central – Banque de Règlement |
Malta | Central Securities Depository of the Malta Stock Exchange |
Mauritius | Bank of Mauritius |
Central Depository and Settlement Co. Ltd. | |
Mexico | |
S.D. INDEVAL, S.A. de C.V. | |
Morocco | |
Maroclear | |
Namibia | |
Bank of Namibia | |
Netherlands | |
Euroclear Nederland | |
New Zealand | |
New Zealand Central Securities Depository Limited | |
Niger | |
Dépositaire Central – Banque de Règlement | |
Nigeria | |
Central Securities Clearing System Limited |
06/30/08
4 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Norway | Verdipapirsentralen |
Oman | Muscat Depository & Securities Registration Company, SAOC |
Pakistan | Central Depository Company of Pakistan Limited |
State Bank of Pakistan | |
Palestine | Clearing, Depository and Settlement, a department |
of the Palestine Securities Exchange | |
Panama | Central Latinoamericana de Valores, S.A. (LatinClear) |
Peru | Caja de Valores y Liquidaciones, Institución de |
Compensación y Liquidación de Valores S.A. | |
Philippines | Philippine Depository & Trust Corporation |
Registry of Scripless Securities (ROSS) of the Bureau of Treasury | |
Poland | Rejestr Papierów Wartościowych |
Krajowy Depozyt Papierów Wartos´ciowych S.A. | |
Portugal | INTERBOLSA – Sociedad Gestora de Sistemas de Liquidação |
e de Sistemas Centralizados de Valores Mobiliários, S.A. | |
Qatar | Central Clearing and Registration (CCR), a |
department of the Doha Securities Market | |
Romania | S.C. Depozitarul Central S.A. |
National Bank of Romania | |
Russia | Vneshtorgbank, Bank for Foreign Trade of the Russian Federation |
National Depository Center | |
Saudi Arabia | Tadawul Central Securities Depository |
06/30/08
5 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Senegal | Dépositaire Central – Banque de Règlement |
Serbia | Central Registrar and Central Depository for Securities |
Singapore | The Central Depository (Pte) Limited |
Monetary Authority of Singapore | |
Slovak Republic | Národná banka slovenska |
Centralny depozitar cenných papierov SR, a.s. | |
Slovenia | KDD – Centralna klirinsko depotna druzba d.d. |
South Africa | Strate Ltd. |
Spain | IBERCLEAR |
Sri Lanka | Central Depository System (Pvt) Limited |
Sweden | Värdepapperscentralen VPC AB |
Switzerland | SegaIntersettle AG |
Taiwan - R.O.C. | Taiwan Depository and Clearing Corporation |
Thailand | Thailand Securities Depository Company Limited |
Togo | Dépositaire Central – Banque de Règlement |
Trinidad and Tobago | Central Bank of Trinidad and Tobago |
Tunisia | Société Tunisienne Interprofessionelle pour la Compensation et de Dépôts des Valeurs Mobilières (STICODEVAM) |
06/30/08
6 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
Turkey | Central Bank of Turkey |
Central Registry Agency | |
Uganda | Bank of Uganda |
Ukraine | Mizhregionalny Fondovy Souz |
National Bank of Ukraine | |
United Arab Emirates | Clearing and Depository System, a department of the Dubai Financial Market |
Dubai Financial Market | |
United Arab Emirates | Central Securities depository department of the Dubai International Financial Exchange |
Dubai International | |
Financial Center | |
United Arab Emirates | Clearing, Settlement, Depository and Registry department of the Abu Dhabi |
Abu Dhabi | Securities Exchange |
United Kingdom | Euroclear UK & Ireland Limited |
Uruguay | Banco Central del Uruguay |
Banco Central de Venezuela | |
Venezuela | |
Caja Venezolana de Valores | |
Vietnam | Vietnam Securities Depository |
Zambia | Bank of Zambia |
LuSE Central Shares Depository Limited |
TRANSNATIONAL
Euroclear Bank S.A./N.V.
Clearstream Banking, S.A
06/30/08
7 |
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country | Depositories |
06/30/08
8 |
SCHEDULE C
MARKET INFORMATION
Publication/Type of Information (scheduled frequency) | Brief Description |
The Guide to Custody in World Markets (hardcopy annually and regular website updates) | An overview of settlement and safekeeping procedures, custody practices and foreign investor considerations for the markets in which State Street offers custodial services. |
Global Custody Network Review (annually) | Information relating to Foreign Sub-Custodians in State Street’s Global Custody Network. The Review stands as an integral part of the materials that State Street provides to its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street’s market expansion and Foreign Sub-Custodian selection processes, as well as the procedures and controls used to monitor the financial condition and performance of our Foreign Sub-Custodian banks. |
Securities Depository Review (annually) | Custody risk analyses of the Foreign Securities Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7. |
Global Legal Survey (annually) | With respect to each market in which State Street offers custodial services, opinions relating to whether local law restricts (i) access of a fund’s independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) a fund’s ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) a fund’s ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. |
Subcustodian Agreements (annually) | Copies of the contracts that State Street has entered into with each Foreign Sub-Custodian that maintains U.S. mutual fund assets in the markets in which State Street offers custodial services. |
Global Market Bulletin (daily or as necessary) | Information on changing settlement and custody conditions in markets where State Street offers custodial services. Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street’s clients. |
Foreign Custody Advisories (as necessary) | For those markets where State Street offers custodial services that exhibit special risks or infrastructures impacting custody, State Street issues market advisories to highlight those unique market factors which might impact our ability to offer recognized custody service levels. |
Material Change Notices (presently on a quarterly basis or as otherwise necessary) | Informational letters and accompanying materials confirming State Street’s foreign custody arrangements, including a summary of material changes with Foreign Sub-Custodians that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories. |
SCHEDULE D to Master
Custodian Agreement
Special Sub-Custodians
None.
D-1 |
EXHIBIT (2)(j)(1)
AMENDMENT TO MASTER CUSTODIAN AGREEMENT
This Amendment to Master Custodian Agreement (“Amendment”) is made as of [•], 2015, by and among each registered investment company party thereto (each, a “Fund” and collectively, the “Funds”) and State Street Bank and Trust Company (the “Custodian”).
WHEREAS, each Fund and the Custodian entered into that certain Master Custodian Agreement dated as of September 10, 2008 (as amended, modified and supplemented from time to time, the “Agreement”); and
WHEREAS, each Fund and the Custodian desire to amend the Agreement as set forth herein.
NOW THEREFORE, in consideration of the foregoing, each Fund, acting on its own behalf separately from all of the other investment companies and not jointly or jointly and severally with any of the other investment companies, and the Custodian hereby agree to amend the Agreement, pursuant to the terms thereof, as follows:
1. A new Section 23 shall be added to the Agreement, as follows.
“Section 23. Foreign Exchange.
Section 23.1. Generally. Upon receipt of Proper Instructions, which for purposes of this section may also include security trade advices, the Custodian shall facilitate the processing and settlement of foreign exchange transactions. Such foreign exchange transactions do not constitute part of the services provided by the Custodian under this Agreement.
Section 23.2. Fund Elections. Each Fund (or its investment manager or investment advisor (“Investment Advisor”) acting on its behalf) may elect to enter into and execute foreign exchange transactions with third parties that are not affiliated with the Custodian, with State Street Global Markets, which is the foreign exchange division of State Street Bank and Trust Company and its affiliated companies (“SSGM”), or with a sub-custodian. Where the Fund or its Investment Advisor gives Proper Instructions for the execution of a foreign exchange transaction using an indirect foreign exchange service described in the Client Publications (which means the general client publications of State Street Bank and Trust Company available from time to time to clients and their investment managers), the Fund (or its Investment Advisor) instructs the Custodian, on behalf of the Fund, to direct the execution of such foreign exchange transaction to SSGM or, when the relevant currency is not traded by SSGM, to the applicable sub-custodian. The Custodian shall not have any agency (except as contemplated in preceding sentence), trust or fiduciary obligation to the Fund, its Investment Advisor or any other person in connection with the execution of any foreign exchange transaction. The Custodian shall have no responsibility under this Agreement for the selection of the counterparty to, or the method of execution of, any foreign exchange transaction entered into by the Fund (or its Investment Advisor acting on its behalf) or the reasonableness of the execution rate on any such transaction.
Section 23.3. Fund Acknowledgement. Each Fund acknowledges that in connection with all foreign exchange transactions entered into by the Fund (or its Investment Advisor acting on its behalf) with SSGM or any sub-custodian, SSGM and each such sub-custodian:
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(i) shall be acting in a principal capacity and not as broker, agent or fiduciary to the Fund or its Investment Advisor;
(ii) shall seek to profit from such foreign exchange transactions, and are entitled to retain and not disclose any such profit to the Fund or its Investment Advisor; and
(iii) shall enter into such foreign exchange transactions pursuant to the terms and conditions, including pricing or pricing methodology, (a) agreed with the Fund or its Investment Advisor from time to time or (b) in the case of an indirect foreign exchange service, (i) as established by SSGM and set forth in the Client Publications with respect to the particular foreign exchange execution services selected by the Fund or the Investment Advisor or (ii) as established by the sub-custodian from time to time.
Section 23.4. Transactions by State Street. The Custodian or its affiliates, including SSGM, may trade based upon information that is not available to the Fund (or its Investment Advisor acting on its behalf), and may enter into transactions for its own account or the account of clients in the same or opposite direction to the transactions entered into with the Fund (or its Investment Manager), and shall have no obligation, under this Agreement, to share such information with or consider the interests of their respective counterparties, including, where applicable, the Fund or the Investment Advisor.
Section 23.5. No Retroactive Effect. The parties agree that this Section 23 shall have no retroactive effect as to the Funds.”
2. That parties agree that the John Hancock Exchange-Traded Fund Trust and its portfolios shall not be covered by this Amendment but rather shall be covered by the separate letter agreement dated as of [], 2015 containing the same foreign exchange provision set forth herein.
3. Except as expressly amended by this Amendment, the provisions of the Agreement shall remain in full force and effect.
[The remainder of this page intentionally left blank.]
2 |
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first written above.
EACH REGISTERED INVESTMENT COMPANY PARTY TO THE AGREEMENT |
|||
By: | |||
Name: | |||
Title: | |||
STATE STREET BANK AND TRUST COMPANY | |||
By: | |||
Name: | Gunjan Kedia | ||
Title: | Executive Vice President |
3 |
EXHIBIT (2)(k)(1)
ADMINISTRATION AGREEMENT
August 15, 1994
John Hancock Advisers, Inc. 101
Huntington Avenue Boston,
Massachusetts 02199
Dear Sir:
John Hancock Bank and Thrift Opportunity Fund (the “Fund”) has been organized as a business trust under the laws of The Commonwealth of Massachusetts to engage in the business of an investment company. The Trustees of the Fund (the “Trustees”) have selected John Hancock Advisers, Inc. (the “Administrator”).to provide certain administrative services for the Fund, as more fully set forth below, and you are willing to provide such services under the terms and conditions hereinafter set forth. Accordingly, the Fund agrees with you as follows:
1. Delivery of Documents. The Fund has furnished you with copies, properly certified or otherwise authenticated, of each of the following:
(a) | Agreement and Declaration of Trust of the Fund, dated June 16, 1994, as amended July 20, 1994 (the -Declaration of Trust”); |
(b) | By-Laws of the Fund as in effect on the date hereof; and |
(c) | Resolutions of the Trustees approving the form of this Agreement. |
The Fund will furnish you from time to time with copies, properly certified or otherwise authenticated, of all amendments of or supplements to the foregoing, if any.
2. Administrative Services. Subject to the general supervision of the Board of Trustees of the Fund, you will provide certain administrative services to the Fund. You will, to the extent such services are not required to be performed by others pursuant to an investment advisory agreement, services agreement, custodian agreement or transfer agency agreement, (i) provide supervision of all aspects of the Fund’s operations not referred to in the current Investment Advisory Agreement between the Fund
and you; (ii) provide the Fund with personnel to perform such executive, administrative and clerical services as are reasonably necessary to provide effective administration of the Fund; (iii) arrange for, at the Fund’s expense, {a) the preparation for the Fund of all required tax returns, (b) the preparation and submission of reports to existing shareholders and (c) the preparation of reports filed with the Securities and Exchange Commission and other regulatory authorities; (iv) maintain all of the Fund’s records; and (v) provide the Fund with adequate office space and all necessary office equipment and services including telephone service, heat, utilities, stationery supplies and similar items. You will also provide to the Fund’s Board of Trustees such periodic and special reports as the Board may reasonably request.
3. Expenses Paid by You. You will pay:
(a) | except as may otherwise be provided in an investment advisory agreement, the expenses of office, rent, telephone and other utilities, office furniture, equipment, supplies and other office facilities, goods or services you furnish for the Fund; and |
(b) | any other expenses incurred by you in connection with the performance of your duties hereunder. |
4. Expenses Not Paid by You. You will not be required to pay any expenses which this Agreement does not expressly make payable by you. In particular, and without limiting the generality of the foregoing but subject to the provisions of Section 3, you will not be required to pay:
(a) | any and all expenses, taxes and governmental fees incurred by the Fund prior to the date hereof; |
(b) | the compensation and expenses of Trustees and of independent advisers, independent contractors, consultants, managers and other unaffiliated agents employed by the Fund other than through you; |
(c) | legal, accounting and auditing fees and expenses of the Fund; |
(d) | the fees or disbursements of custodians and depositories of the Fund’s assets, transfer agents, disbursing agents, plan agents and registrars; |
(e) | taxes and governmental fees assessed against the Fund’s assets and payable by the Fund; |
- 2 - |
(f) | the cost of preparing and mailing dividends, distributions, reports, notices and proxy materials to shareholders of the Fund; |
(g) | the fees of any securities exchange on which the Fund’s shares are listed; |
(h) | brokers’ commissions and underwriting fees; and |
(i) | the expense of periodic calculations of the net asset value of the shares of the Fund. |
5. Compensation of the Administrator. For all services to be rendered, facilities furnished and expenses paid or assumed by you as herein provided, the Fund will pay you monthly a Fee equal to 0.25% annually of the Fund’s average weekly net assets.
6. Mo Partnership or Joint Venture. The Fund and you are not partners of or joint venturers with each other and nothing herein shall be construed so as to make you such partners or joint venturers or impose any liability as such on any of you.
7. Limitation of Liability of the Adviser. You shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on your part in the performance of your duties or from reckless disregard by you of your obligations and duties under this Agreement. Any person, even though also employed by you, who may be or become an employee of and paid by the Fund shall be deemed, when acting within the scope of his or her employment by the Fund, to be acting in such employment solely for the Fund and not as your employee or agent.
8. Duration and Termination of this Agreement. This Agreement shall remain in force until the second anniversary of the date upon which this Agreement was executed by the parties hereto, and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by a majority of the Trustees. This Agreement may, on 60 days’ written notice, be terminated at any time without the payment of any penalty by the Fund by vote of a majority of the Trustees or majority of the outstanding voting securities of the Fund, or by you.
9. Amendment of this Agreement. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver or termination is sought.
- 3 - |
10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to the choice of law provisions thereof.
11. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A copy of the Declaration of Trust is on file with the Secretary of State of the Commonwealth of Massachusetts. The obligations of the Fund are not personally binding upon, nor shall resort be had to the private property of, any of the Trustees, shareholders, officers, employees or agents of the Fund, but only the Fund’s property shall be bound.
Yours very truly, | ||||
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND | ||||
By: | /s/ John A. Morin | |||
John A. Morin | ||||
Vice President |
The foregoing contract is hereby agreed to as of the date hereof.
JOHN HANCOCK ADVISERS, INC. | ||||
By: | /s/ John A. Morin | |||
John A. Morin | ||||
Vice President |
- 4 - |
EXHIBIT (2)(k)(1)(a)
AMENDMENT TO ADMINISTRATION AGREEMENT
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
AMENDMENT made as of this 11th day of September, 2012 to the Administration Agreement dated August 15, 1994, between John Hancock Bank and Thrift Opportunity Fund (the “Fund”) and John Hancock Advisers, LLC. In consideration of the mutual covenants contained herein, the parties agree as follows:
1. AMENDMENT TO SECTION 5
Section 5 of the Agreement is hereby amended as follows:
5. Compensation of the Administrator. For all services to be rendered, facilities furnished and expenses paid or assumed by you as herein provided, the Fund will pay you monthly a fee equal to 0.25% annually of the Fund’s average weekly gross assets. “Gross assets” of the Fund means total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility/commercial paper program or other forms of borrowings or the issuance of debt securities), (ii) the issuance of preferred shares or other similar preference securities, and/or (iii) any other means.
2. EFFECTIVE DATE
This Amendment shall become effective as of the date first mentioned above.
3. DEFINED TERMS
Unless otherwise defined herein, capitalized terms used herein have the meanings specified in or pursuant to the Agreement.
4. OTHER TERMS OF THE AGREEMENT
Except as specifically amended hereby, all of the terms and conditions of the Agreement shall continue to be in full force and effect and shall be binding upon the parties in accordance with their respective terms.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the date first mentioned above.
John Hancock Bank and Thrift Opportunity Fund | |||
By: | /s/ Salvatore Schiavone | ||
Name: Salvatore Schiavone | |||
Title: Treasurer | |||
JOhn Hancock Advisers, LLC | |||
By: | /s/ Jeff Long | ||
Name: Jeff Long | |||
Title: Chief Financial Officer |
EXHIBIT (2)(k)(1)(b)
John Hancock Investment Management LLC
200 Berkeley Street
Boston, Massachusetts 02116
As of June 24, 2021
To the Trustees of
John Hancock Financial Opportunities Fund
200 Berkeley Street
Boston, Massachusetts 02116
Re: Expense Limitation Regarding Administration Agreement
With reference to the Administration Agreement, dated August 15, 1994 (“Administration Agreement”), entered into between John Hancock Financial Opportunities Fund (the “Fund”) and John Hancock Investment Management LLC (the “Adviser”), as amended, we hereby notify you as follows:
The Adviser agrees to limit its fee applicable to the Administration Agreement to 0.10% annually of the Fund’s average weekly gross assets (the “Expense Limitation”).
“Gross assets” of the Fund means total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility/commercial paper program or other forms of borrowings or the issuance of debt securities), (ii) the issuance of preferred shares or other similar preference securities, and/or (iii) any other means.
The Expense Limitation expires on April 30, 2023 unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at the time.
This Agreement is effective as of June 24, 2021 and supersedes the prior Letter Agreement from the Adviser to the Trustees relating to the same subject matter.
Very truly yours,
JOhn Hancock INVESTMENT MANAGEMENT LLC
By: | ||
Name: Jeff Long | ||
Title: Chief Financial Officer |
EXHIBIT (2)(k)(2)
CHIEF COMPLIANCE OFFICER
SERVICES AGREEMENT
THIS AGREEMENT (the “Agreement”) is made as of this 30th day of June, 2020 by and among the trusts listed in Appendix A (the “Trusts”), on behalf of themselves and each of their funds (the “Funds”), John Hancock Investment Management LLC (formerly, John Hancock Advisers, LLC) (“John Hancock”) and the Trust’s Chief Compliance Officer, Frank Knox (the “CCO”).
WHEREAS, Rule 38a-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), requires each Trust to: (i) establish a compliance program that is reasonably designed to prevent violations of the Federal Securities Laws (as defined in Rule 38a-1); and (ii) designate an individual to serve as the CCO, with overall responsibility for administering the Trust’s compliance program;
WHEREAS, each Trust desires to retain the CCO to provide the services set forth below to the Trust and each of its Funds and the CCO is willing to furnish such services in the manner and on the terms hereinafter set forth; and
WHEREAS, each Trust desires to retain John Hancock to provide administrative services to the CCO as described below and John Hancock is willing to furnish such services in the manner and on the terms hereinafter set forth.
NOW, THEREFORE, each Trust, the CCO and John Hancock hereby agree as follows:
1. CCO and CCO Services. Subject to the general supervision of the Boards of Trustees of the Trusts (the “Board”), the CCO will provide the Trusts and each of the Funds the CCO services set forth below as are reasonably necessary for the operation of the Trusts and each Fund (the “CCO Services”). The CCO Services include, but are not limited to:
(1) | coordinating the implementation of policies and procedures reasonably designed to prevent violation of federal securities laws by the Funds, including policies and procedures that provide for the oversight of compliance by each investment adviser, subadviser, principal underwriter, administrator, and transfer agent of the Funds; |
(2) | reviewing, at least annually, the adequacy of the policies and procedures of the Funds and each investment adviser, subadviser, principal underwriter, administrator and transfer agent of the Funds; and |
(3) | providing, at least annually, a written report to the Board that at minimum, addresses: |
(a) | the operation of the policies and procedures of the Funds and each investment adviser, subadviser, principal underwriter, administrator, and transfer agent of the Funds, any material changes made to those policies and procedures since the date of the last report, and any material changes to the policies and procedures recommended as a result of the annual review described in Section 1.2 above; and |
1 |
(b) | each material compliance matter that occurred since the date of the last report. |
(4) | Monitoring of post-trade compliance of each Fund with applicable regulatory requirements. |
In connection with the provision of the CCO Services by the CCO, John Hancock will at the expense of the Trusts:
(1) | either provide such staff and personnel to the CCO as are reasonably necessary to perform the CCO Services or assist the CCO in hiring such staff and personnel; |
(2) | provide the Trusts with all office space, office equipment, utilities and other office support as the CCO may reasonably request to perform the CCO Services (“Office Support”); |
(3) | provide the CCO with computer hardware and software (and the development thereof) used to support CCO Services and IT support relating to such computer hardware and software; and |
(4) | provide the CCO with such other services as the CCO may reasonably request in order to perform his or her duties as the CCO of the Funds including, without limitation, services provided by third parties such as Charles River, Diligence Vault and Bloomberg that are related to John Hancock’s provision of CCO Services to the Funds; |
Expenses of providing the services set forth in (1) through (4) above to be paid by the Trust include overhead expenses (including Manulife Financial Corporation (“Manulife”) corporate overhead) related to Office Support and personnel who provide services to each Fund pursuant to this Agreement (the “Reimbursement”), provided that overhead expenses related to Office Support shall not exceed levels that are allocated ordinarily to other Manulife business units. John Hancock shall determine, subject to Board approval, the expenses to be reimbursed by each Fund pursuant to this Agreement (the “Reimbursement”); provided, however, that such expenses shall not exceed levels that are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Reimbursement shall be calculated and paid monthly in arrears.
The CCO Services do not include services performed and personnel provided pursuant to contracts with the Trust or the Funds by third-party custodians, transfer agents and other service providers.
2. Compensation. In consideration for the CCO Services provided by the CCO pursuant to this Agreement, each Fund will pay the CCO such compensation as may be approved by the Board in accordance with Rule 38a-1 from time to time. Any services provided to the CCO or the Funds relating to the CCO Services by a person or entity other than John Hancock and its affiliates, including, without limitation, services provided by attorneys not affiliated with John Hancock, are not covered under this Agreement and are an expense of the Funds.
2 |
3. No Partnership or Joint Venture. Each Trust, on behalf of itself and each of its Funds, John Hancock and the CCO are not partners of or joint venturers with each other, and nothing herein shall be construed so as to make any of the Trusts, on behalf of itself or any of its Funds, John Hancock or the CCO partners or joint venturers or impose any liability as such on the Trust, any Fund, John Hancock or the CCO.
4. Limitation of Liability. Neither the CCO nor John Hancock shall be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with the matters to which this Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by the CCO or John Hancock in the performance of its duties or from reckless disregard by the CCO or John Hancock of its obligations under this Agreement. Any person, even though also employed by John Hancock, who may be or become an employee of and paid by any of the Trusts shall be deemed, when acting within the scope of his or her employment by the Trust, to be acting in such employment solely for the Trusts and not as John Hancock’s employee or agent.
5. Duration and Termination of Agreement. This Agreement shall remain in effect until the second anniversary of the date on which it was executed, and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Independent Trustees. The Agreement may be terminated: (a) at any time on written notice without the payment of any penalty by any of the Trusts on behalf of itself or any of its Funds (by vote of a majority of the Trustees of the Trust); or (b) on 30 days’ written notice to the Trusts by the CCO or John Hancock.
6. Amendment. No provision of this Agreement may be amended, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is sought.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to the choice of law provisions thereof.
8. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions of this Agreement or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A copy of the Declaration of Trust of each Trust which is organized as a Massachusetts business trust is on file with the Secretary of State of the Commonwealth of Massachusetts and provides that no Trustee, shareholder, officer, employee or agent of the Trust shall be subject to any personal liability in connection with Trust property or the affairs of the Trust, but that only the assets belonging to the Trust, or to the particular Fund with respect to which an obligation or claim arose, shall be liable.
9. Execution. This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by authorized officers as of the date first written above.
By: | /s/ Frank Knox | |||
Name: | Frank Knox | |||
Title: | CCO of the Trusts |
JOHN HANCOCK INVESTMENT MANAGEMENT LLC (formerly, John Hancock Advisers, LLC) |
||||
By: | /s/ Jay Aronowitz | |||
Name: | Jay Aronowitz | |||
Title: | Chief Investment Officer |
BY ALL THE TRUSTS LISTED IN APPENDIX A
By: | /s/ Andrew G. Arnott | |||
Name: | Andrew G. Arnott | |||
Title: | President and Chief Executive Officer |
4 |
APPENDIX A
JOHN HANCOCK BOND TRUST
JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND
JOHN HANCOCK CAPITAL SERIES
JOHN HANCOCK COLLATERAL TRUST
JOHN HANCOCK CURRENT INTEREST
JOHN HANCOCK EXHANGE-TRADED FUND TRUST
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
JOHN HANCOCK FUNDS II
JOHN HANCOCK FUNDS III
JOHN HANCOCK HEDGED EQUITY & INCOME FUND
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK INVESTMENT TRUST
JOHN HANCOCK INVESTMENT TRUST II
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK MUNICIPAL SECURITIES TRUST
JOHN HANCOCK PREFERRED INCOME FUND
JOHN HANCOCK PREFERRED INCOME FUND II
JOHN HANCOCK PREFERRED INCOME FUND III
JOHN HANCOCK PREMIUM DIVIDEND FUND
JOHN HANCOCK SOVEREIGN BOND FUND
JOHN HANCOCK STRATEGIC SERIES
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND
JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND
A-1 |
EXHIBIT (2)(k)(3)
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
TO
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II
JOHN HANCOCK PATRIOT PREFERRED DIVIDEND FUND
JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND
JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
THIS TRANSFER AGENT AGREEMENT (this “Agreement”) between John Hancock Patriot Premium Dividend Fund I, John Hancock Patriot Premium Dividend Fund II, John Hancock Patriot Preferred Dividend Fund, John Hancock Patriot Global Dividend Fund, John Hancock Patriot Select Dividend Trust, John Hancock Investors Trust, John Hancock Income Securities Trust, John Hancock Bank And Thrift Opportunity Fund, each a Massachusetts Business Trust, a Maryland corporation (each a “Client” and collectively the “Clients”) and Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), is dated as of June 1, 2002.
1. Appointment. Clients appoint Mellon as their transfer agent, registrar and dividend disbursing agent and Mellon accepts such appointment in accordance with the following terms and conditions for all authorized shares of each class of common stock listed in Exhibit A hereto (the “Shares”).
2. Term and Termination of Agreement.
(a) This Agreement shall commence on the date hereof and shall continue for a term of two years. Unless either party gives written notice of termination of this Agreement at least 60 days prior to the end of the initial two year term, or any successive one year term, this Agreement shall automatically renew for an additional one year term.
(b) This Agreement may be terminated at any time by either party upon a material breach of a representation, covenant or term of this Agreement by the other which is not cured within a period not to exceed thirty (30) days after the date of written notice thereof by the other party.
(c) Prior to termination of this Agreement, Clients must provide Mellon with written instructions as to the disposition of records, as well as any additional documentation reasonably requested by Mellon. Except as otherwise expressly provided in this Agreement, the respective rights and duties of Clients and Mellon under this Agreement shall cease upon termination of the appointment.
(d) Upon receipt of written notice of termination, Mellon shall follow its standard procedures to facilitate the transition of services hereunder to a successor agent, and both parties agree to use commercially practicable efforts to effect an orderly termination of this Agreement.
3. Duties of Mellon. Mellon will provide the services listed in Exhibit B hereto, in the performance of its duties as transfer agent, registrar, and dividend disbursing agent.
4. Representations and Warranties of Mellon and Client.
(a) Mellon represents, warrants and covenants to Clients that:
(i) it is a limited liability company duly organized and existing and in good standing under the laws of the State of New Jersey;
(ii) it is empowered under applicable laws and by its organizational documents to enter into and perform the Transfer Agent function per this Agreement; and
(iii) all requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
(b) each Client represents, warrants and covenants to Mellon that:
(i) the Shares issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable; and any Shares to be issued hereunder, when issued, shall have been duly authorized, validly issued and fully paid and will be non-assessable;
(ii) the Shares issued and outstanding on the date hereof have been duly registered under the Securities Act of 1933, as amended, and such registration has become effective, or are exempt from such registration; and have been duly registered under the Securities Exchange Act of 1934, as amended, or are exempt from such registration;
(iii) any Shares to be issued hereunder, when issued shall have been duly registered under the Securities Act of 1933, as amended, and such registration shall have become effective or shall be exempt from such registration; and shall have been duly registered under the Securities Exchange Act of 1934, as amended, or shall be exempt from such registration;
(iv) such Client has paid or caused to be paid all taxes, if any, that were payable upon or in respect of the original issuance of the Shares issued and outstanding on the date hereof;
(v) the execution and delivery of this Agreement, and the issuance and any subsequent transfer of the Shares hereunder, do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the charter or the by-laws of such Client, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which such Client is a party or by which it is bound; and this Agreement is enforceable against such Client in accordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting the enforcement of creditors’ rights generally; and
(vi) such Client shall provide the documentation and notifications listed in Exhibit C hereto. Such Client further agrees to deliver an opinion of counsel as provided in Exhibit C, Section 7(a) and (b) upon any future original issuance of Shares for which Mellon will act as transfer agent hereunder.
5. Compensation and Expenses. Each Client shall compensate Mellon for its services hereunder in accordance with the fee schedules listed in Exhibit D hereto. In accordance with Exhibit D hereto, each Client shall reimburse Mellon for all reasonable expenses, disbursements or advances incurred by it in accordance herewith. All amounts owed to Mellon hereunder are due upon receipt of the invoice. Delinquent payments are
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subject to a late payment charge of one and one half percent (1.5%) per month commencing forty-five (45) days from the invoice date. Clients agree to reimburse Mellon for any reasonable attorney’s fees and any other costs associated with collecting delinquent payments.
6. Scope of Agency.
(a) Mellon shall act solely as agent for Clients under this Agreement and owes no duties hereunder to any other person. Mellon undertakes to perform the duties and only the duties that are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against Mellon.
(b) Mellon may rely upon, and shall be protected in acting or refraining from acting in reliance upon, (i) any Client communication authorized by this Agreement, (ii) any communication from any predecessor Transfer Agent or co-Transfer Agent or from any Registrar (other than Mellon), predecessor Registrar or co-Registrar, and (iii) any other written instruction, notice, request, direction, consent, report, certificate, or other instrument, paper, document or electronic transmission believed by Mellon to be genuine and to have been signed or given by the proper party or parties. In addition, Mellon is authorized to refuse to make any transfer it deems improper.
(c) Mellon may consult with counsel (including internal counsel) whose advice shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(d) Any instructions given by a Client to Mellon orally shall be confirmed in writing by such Client as soon as practicable. Mellon shall not be liable or responsible and shall be fully authorized and protected for acting, or failing to act, in accordance with any oral instructions which do not conform with the written confirmation received in accordance with this Section.
(e) Mellon may perform any of its duties hereunder either directly or by or through agents or attorneys.
(f) Mellon shall not be obligated to take any legal action hereunder; if, however, Mellon determines to take any legal action hereunder, and, where the taking of such legal action might in Mellon’s judgment subject or expose Mellon to any expense or liability, Mellon shall not act unless it shall have been furnished with an indemnity satisfactory to it.
7. Indemnification.
(a) Clients shall indemnify Mellon for, and hold it harmless against, any loss, liability, claim or expense (“Loss”) arising out of or in connection with its duties under this Agreement or this appointment, including the costs and expenses of defending itself against any Loss or enforcing this Agreement, except to the extent that such Loss shall have been determined by a court of competent jurisdiction to be a result of Mellon’s negligence or intentional misconduct.
-3- |
(b) Mellon shall indemnify Clients for, and hold them harmless against, any Loss arising out of or in connection with Mellon’s duties under this Agreement or this appointment, including the costs and expenses of defending Clients against any Loss or enforcing this Agreement, to the extent that such Loss shall have been determined by a court of competent jurisdiction to be a result of Mellon’s negligence or intentional misconduct.
(c) In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which one party may be required to indemnify another, the indemnified party shall promptly notify the indemnifying party of such assertion, and shall keep such party advised with respect to all developments concerning such claim; provided, however, that a party’s failure to so notify or advise the other party shall not limit such other party’s indemnification obligation hereunder except to the extent that such other party has been materially prejudiced by such failure. The indemnifying party shall have the option to participate with the indemnified party in the defense of any such claim or to defend against said claim. In no case shall an indemnified party confess any claim or make any compromise in any case in which an indemnifying party may be required to indemnify it except with such indemnifying party’s written consent.
8. Limitation of Liability.
(a) In the absence of negligence or intentional misconduct on its part, Mellon shall not be liable for any action taken, suffered, or omitted by it or for any error of judgment made by it in the performance of its duties under this Agreement. Mellon’s liability to each Client shall be limited in the aggregate to an amount equal to (12) times the flat monthly fee to be paid by such Client as set forth in Exhibit D hereto. In no event will Mellon be liable for special, indirect, incidental or consequential loss or damages of any kind whatsoever (including but not limited to lost profits), even if Mellon has been advised of the possibility of such damages.
(b) In the event any question or dispute arises with respect to Mellon’s duties hereunder, Mellon shall not be required to act or be held liable or responsible for its failure or refusal to act until the question or dispute has been (i) judicially settled (and, if appropriate, Mellon may file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction that is binding on all parties interested in the matter and is no longer subject to review or appeal, or (ii) settled by a written document in form and substance satisfactory to Mellon and executed by Client. In addition, Mellon may require for such purpose, but shall not be obligated to require, the execution of such written settlement by parties that may have an interest in the settlement.
9. Force Majeure. Mellon shall not be liable for any failures, delays or losses, arising directly or indirectly out of conditions beyond its reasonable control, including, but not limited to, acts of government, exchange or market ruling, suspension of trading, work stoppages or labor disputes, civil disobedience, riots, rebellions, electrical or mechanical failure, computer hardware or software failure, communications facilities failures including telephone failure, war, fires, earthquakes, storms, floods, acts of God or similar occurrences.
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10. Market Data. Each Client acknowledges that Mellon may provide real-time or delayed quotations and other market information and messages (“Market Data”), which Market Data is provided to Mellon by certain national securities exchanges and associations who assert a proprietary interest in Market Data disseminated by them but do not guarantee the timeliness, sequence, accuracy or completeness thereof. Each Client agrees and acknowledges that Mellon shall not be liable in any way for any loss or damage arising from or occasioned by any inaccuracy, error, delay in, omission of, or interruption in any Market Data or the transmission thereof.
11. Bankruptcy; Non-payment; Reorganization. Subject to a reasonable opportunity for Clients to cure, Mellon may suspend transfers and/or terminate this Agreement with respect to a Client if (i) such Client fails to pay amounts due or defaults on any of its material obligations hereunder; (ii) any proceeding in bankruptcy, reorganization, receivership or insolvency is commenced by or against such Client, such Client shall become insolvent, or shall cease paying its obligations as they become due or makes any assignment for the benefit of its creditors; or (iii) such Client is acquired by or is merged with or into another entity where such Client is not the surviving company, or such Client sells all or substantially all of its assets. Each Client agrees that if any of the foregoing events shall occur and such Client failures to cure, all fees to which Mellon is or shall be entitled hereunder shall be immediately due and payable to Mellon. Unrealized fees will be calculated from the termination date to the expiration date of the then current term based on the services and number of shareholders as of the termination date.
12. Notices. All notices, demands and other communications given pursuant to the terms and provisions hereof shall be in writing, shall be deemed effective on the date of receipt, and may be sent by facsimile, overnight delivery services, or by certified or registered mail, return receipt requested to:
If to a Client: | with an additional copy to: |
(see title page for Client names) c/o John Hancock Advisers 101 Huntington Avenue Boston, MA 02199 Attn: Susan S. Newton Tel: 617 375 1702 Fax: 617 375 1770 |
[additional notice name and address] None |
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13. Submission to Jurisdiction; Foreign Law.
(a) Each Client hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in New York City or the United States District Court for the Southern District of New York and any appellate court from any thereof in any action or proceeding arising out of or relating to this Agreement, and each Client hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such United States Federal court. Each Client hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding or a defense based on the grounds of jurisdiction with respect thereto. Each Client agrees that, to the fullest extent permitted by applicable laws, a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Mellon is not required hereunder to comply with the laws or regulations of any country other than the United States of America or any political subdivision thereof. After consultation with a Client, Mellon may consult with foreign counsel, at such Client’s expense, to resolve any foreign law issues that may arise as a result of such Client or any other applicable party being subject to the laws or regulations of any foreign jurisdiction.
14. Miscellaneous.
(a) Amendments. This Agreement may not be amended or modified in any manner except by a written agreement signed by both Clients and Mellon. Clients and Mellon agree to enter into discussions to amend the Fee Schedule (Exhibit D) if the number of shareholders increases or decreases by more than 7% in any 12 month period or the nature of services provided materially changes or if Mellon enters into Transfer Agent contract negotiations with John Hancock Financial Services, Inc.
(b) Governing Law. This Agreement shall be governed by, construed and interpreted in accordance with the laws of the State of New York, without regard to principles of conflicts of law.
(c) Survival of Terms. Sections 5, 7 and 8 hereof shall survive termination of this Agreement.
(d) Assignment. This Agreement may not be assigned, or otherwise transferred, in whole or in part, by either party without the prior written consent of the other party, which the other party will not unreasonably withhold, condition or delay. Any attempted assignment in violation of the foregoing will be void.
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(e) Headings. The headings contained in this Agreement are for the purposes of convenience only and are not intended to define or limit the contents of this Agreement.
(f) Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is found to violate a law, it will be severed from the rest of the Agreement and ignored.
(g) Counterparts. This Agreement may be executed manually in any number of counterparts, each of which such counterparts, when so executed and delivered, shall be deemed an original, and all such counterparts when taken together shall constitute one and the same original instrument.
(h) Entire Agreement. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and merges all prior written or oral communications, understandings, and agreements with respect to the subject matter of this Agreement. The parties acknowledge that the Exhibits hereto are an integral part of this Agreement.
(i) Benefits of this Agreement. Nothing in this Agreement shall be construed to give any person or entity other than Mellon and Clients any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of Mellon and Clients.
15. Confidentiality.
(a) Mellon and each Client agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any lists, trade secrets, cost figures and projections, profit figures and projections, or any other secret or confidential information whatsoever, whether of Mellon or of a Client, used or gained by Mellon or a Client during performance under this Agreement. Each Client and Mellon further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of Mellon or the Client and their successors and assigns. The above prohibition of disclosure shall not apply to the extent that Mellon must disclose such data to its sub-contractor or Client agent for purposes of providing services under this Agreement, however, such sub-contractor shall be bound by the provisions of this Section.
(b) In the event that any requests or demands are made for the inspection of the Shareholder records of the Client, other than request for records of Shareholders pursuant to standard subpoenas from state or federal government authorities (e.g., in divorce and criminal actions), Mellon will endeavor to notify the Client and to secure instructions from an authorized officer of the Client as to such inspection. Mellon expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order.
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16. Privacy of Consumer Information. Whereas, it is reasonably necessary for Client to furnish to Mellon certain information about Client customers or prospective customers (“customer information”), to enable Mellon to perform its services for Client; and Client and/or its representative has provided and/or will provide customer information to Mellon for the purpose of performing one or more tasks for Client; and Client is legally required to protect the confidentiality of customer information; Mellon and Client agree as follows:
(a) Mellon will not disclose any customer information provided to it by or on behalf of Client to any affiliated or unaffiliated third party except to the extent Mellon reasonably believes necessary to satisfy the purpose for which the customer information was provided to Mellon, and provided that Mellon will take reasonable efforts to impose on such third party the same confidentiality requirements that Mellon is required to abide by with respect to the customer information.
(b) Mellon will not use customer information for any purpose other than the specific purpose for which it was provided to Mellon by or on behalf of Client, and will make customer information available to its employees only as reasonably necessary to satisfy the purpose for which the customer information was provided to Mellon.
(c) Mellon will maintain reasonable security guidelines to ensure its ability to comply with the requirements of this Section 16.
(d) This Agreement shall be in addition to any confidentiality provisions in any existing agreement between the parties; provided, however, that in the event of a conflict, the provision that provides the most confidentiality or security protection for customer information shall prevail.
[The remainder of this page has been intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the day and year above written.
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II
JOHN HANCOCK PATRIOT PREFERRED DIVIDEND FUND
JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND
JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
By: | /s/ Susan S. Newton | |||
Name: | Susan S. Newton | |||
Title: | Senior Vice President and Corporate Secretary |
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Beverly A Verrico | |||
Name: | Beverly A. Verrico | |||
Title: | Vice President |
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|
Exhibit A |
STOCK SUBJECT TO THE AGREEMENT
Client Name |
Common Shares
|
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I | 14,979,601 |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II | 15,002,724 |
JOHN HANCOCK PATRIOT PREFERRED DIVIDEND FUND | 7,257,200 |
JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND | 8,334,700 |
JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST | 9,885,027 |
JOHN HANCOCK INVESTORS TRUST | 7,978,242 |
JOHN HANCOCK INCOME SECURITIES TRUST | 10,898,374 |
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND | 84,400,000 |
A-1 |
|
Exhibit B |
SERVICES TO BE PROVIDED
Account Maintenance Functions
• | Opening new accounts |
• | Posting debits and credits |
• | Maintaining certificate history |
• | Placing and releasing stop transfer notations |
• | Consolidating accounts |
• | Coding accounts requiring special handling (e.g. “bad address,” “do not mail,” “VIP,” etc.) |
• | Processing address changes |
• | Responding to shareholder correspondence |
• | Providing a dedicated toll-free phone number for shareholder inquiries |
• | Obtaining and posting Taxpayer Identification Number certifications pursuant to IDTCA regulations |
• | Maintaining inactive accounts for the purpose of research and tax reporting |
• | Closing (purging) inactive accounts that meet selective criteria |
• | Providing Client and its shareholders with on-line access to shareholder records |
• | Training on all aspects of Mellon’s stock transfer system |
• | Create and generate management reports which Client and Mellon agree upon. |
• | Handle buck-slip inserts into statements or privacy statement and or special mailings. |
Security Issuance Functions
• | Qualifying under the rules of the NYSE and NASDAQ/AMEX to act in the dual capacity as transfer agent and registrar |
• | Maintaining mail and window facilities for the receipt of transfer requests |
• | Maintaining and securing unissued certificate inventory and supporting documents |
• | Examining issuance or transfer requests to ensure that proper authority is being exercised |
• | Verifying (to the extent possible) that surrendered certificates are genuine and have not been altered |
• | Verifying that original issuances are properly authorized and have necessary regulatory approval |
• | In connection with requests for transfer, verifying that Shares issued equal the amount surrendered |
B-1 |
• | Place and remove stop orders on Shares |
• | Verifying that no stop orders are held against Shares submitted for transfer |
• | Issuing and registering new securities |
• | Recording canceled and issued securities |
• | Canceling surrendered certificates |
• | Delivering completed transfers |
• | Processing restricted and legal transfers upon presentment of appropriate supporting documentation |
• | Preparing daily transfer or management summary journals |
• | Replacing lost, destroyed or stolen certificates provided that Mellon is in receipt of (a) evidence acceptable to it of the loss, theft or destruction, and (b) a surety bond acceptable to Mellon sufficient to indemnify and hold it and Client harmless (charge imposed on shareholder) |
Proxy and Annual Meeting Functions
• | Assisting in annual meeting planning |
• | Processing and mailing proxy material and Annual Report |
• | Tabulating physical proxies (both scanner and manual) returned by shareholders |
• | Identifying shareholders who will attend the Annual Meeting |
• | Providing Inspector(s) of Election for the Annual Meeting |
• | Supporting efforts of any proxy solicitor |
• | Preparing certified list of record date holders |
• | Preparing report of final vote |
• | Providing remote access to proxy tabulation system |
• | Maintaining an automated link with (i) DTC to redistribute record date Cede & Co. share positions to participants and (ii) ADP to receive transmissions of broker votes |
• | Processing omnibus proxies for respondent banks |
Cash Dividend Disbursement Functions (If Applicable)
• | Disburse regularly scheduled dividends for each fund as outlined in Exhibit D hereto |
• | Preparing and mailing checks |
• | Reconciling checks |
• | Preparing payment register in list form |
• | Withholding and filing taxes for non-resident aliens and others |
• | Filing federal tax information returns |
• | Processing “B” and “C” notices received from the IRS |
• | Mailing required statements (Form 1099DIV or Form 1042) to registered holders |
• | Maintaining stop payment files and issuing replacement checks |
• | Maintaining separate dividend addresses |
• | Receiving, verifying and posting funds to cover entire dividend distribution on mailing date of checks |
B-2 |
Escheatment Services
• | Taking all necessary steps to establish compliance with the unclaimed property requirements of all jurisdictions that may have a claim on escheatable property held by your organization |
• | Identifying specific records and property subject to reporting based upon current state statutes, rules, and regulations |
• | Executing state mandated due diligence mailings for lost property owners as required, organizing records into acceptable formats for reporting, and remitting property due each state when and as required |
• | Obtaining penalty and interest release agreements and indemnification from future claim agreements (on property remitted) from the states that offer such agreements |
• | Identifying all property that has become escheatable since the last filing date |
• | Reviewing the applicable state regulations to determine if there have been any changes in reporting procedures |
• | Reporting and remitting to each state when and as required |
• | Executing a mailing to all accounts with uncashed checks or RPO certificates as required by state laws |
• | Executing SEC mandated lost shareholder database searches |
Quality Standards
• | Establish mutually agreed upon set of service performance standards. |
• | Provide client with monthly service performance reports and formal quarterly service performance reports for review by Board of Trustees. |
B-3 |
Other Services (Optional Services - Subject to additional fees):
• | ACH, Direct Deposit Services |
• | Bank/Broker Distributions |
• | Confidential Proxy Voting |
• | Corporate Stock Buy-Backs |
• | Custodial Services |
• | Direct Purchase & Dividend Reinvestment Services |
• | Direct Registration System/Profile Services |
• | Dividends – special cash dividends |
• | Solicitation, processing and maintenance of consents for electronic distribution of materials |
• | Electronic distribution of material |
• | Electronic Proxy Voting (e.g. telephone, internet, intranet) |
• | Employee Stock Option Plan administration |
• | Employee Stock Purchase Plan Administration |
• | Escrow Services |
• | Exchanges or Tender Offers |
• | Foreign Tax Re-claim |
• | Solicitation, processing and maintenance of consents for delivery of materials to households |
• | Logistics services including document transportation, fulfillment, printing and media placement |
• | Mailing Quarterly or Periodic Reports |
• | Maintaining Mail Lists |
• | Odd-Lot Programs |
• | Proxy Solicitation |
• | Secondary Offerings or Closings |
• | Special Meetings |
• | Standby Rights Agency |
• | Stock Splits and Stock Dividends |
• | StockWatch (beneficial owner identification) |
• | Subscription Agent Services |
• | Survey Tabulation |
• | Warrant Agency |
B-4 |
|
Exhibit C |
DOCUMENTS AND NOTIFICATIONS TO BE DELIVERED TO MELLON
UPON EXECUTION OF THIS AGREEMENT
Client shall provide Mellon with the following:
1. An adequate supply of Share certificates.
2. | A copy of the resolutions adopted by the Board of Directors of Client appointing or authorizing the appointment of Mellon as Transfer Agent and/or Registrar and Dividend Disbursing Agent, as the case may be, duly certified by the Secretary or Assistant Secretary of Client under the corporate seal. |
3. | A copy of the Certificate of Incorporation of Client, and all amendments thereto, certified by the Secretary of State of the state of incorporation. |
4. | A copy of the By-laws of Client as amended to date, duly certified by the Secretary of Client under the corporate seal. |
5. | A certificate of the Secretary or an Assistant Secretary of Client, under its corporate seal, stating that: |
a) this Agreement has been executed and delivered pursuant to the authority of Client’s Board of Directors;
b) the attached specimen Share certificate(s) are in substantially the form submitted to and approved by Client’s Board of Directors for current use and the attached specimen Share certificates for each Class of Stock with issued and outstanding Shares are in the form previously submitted to and approved by Client’s Board of Directors for past use;
c) the attached list of existing agreements pursuant to which Shares have been reserved for future issuance specifying the number of reserved Shares subject to each such existing agreement and the substantive provisions thereof, is true and complete, or no Shares have been reserved for future issuance.
d) each shareholder list provided is true and complete (such certification may state that it is based upon the certification of the predecessor Transfer Agent or predecessor Registrar that prepared the list) or no Shares are outstanding;
e) the name of each stock exchange upon which any of the Shares are listed and the number and identity of the Shares so listed;
f) the name and address of each co-Transfer Agent, Registrar (other than Mellon) or co-Registrar for any of the Shares and the extent of its appointment, or there are no co-Transfer Agents, Registrars (other than Mellon) or co-Registrars for any of the Shares; and
C-1 |
g) the officer(s) of Client, who executed this Agreement as well as any certificates or papers delivered to Mellon pursuant to this Agreement, were validly elected to, and the incumbents of, the offices they purported to hold at the time of such execution and delivery, and that their signatures on all documentation are genuine; and upon which is subscribed a certificate of an officer of Client, other than the officer executing the certificate of the Secretary, stating that the person who executed the certificate of the Secretary was validly elected to, and is the Secretary or an Assistant Secretary of Client and that his signature on the certificate is genuine.
6. | A shareholder list, preferably in machine readable format, certified as true and complete by the person preparing the list, for the issued and outstanding Shares, setting forth as to each holder, his/her name and address, tax identification number certified by the shareholder pursuant to requirements of the Internal Revenue Code and applicable regulations, the number of Shares held, the Share certificate numbers and the existence of any stop orders or other transfer restrictions. |
7. Opinion of in-house counsel for Client, addressed to Mellon, to the effect that:
a) the Shares issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable;
b) the Shares issued and outstanding on the date hereof have been duly registered under the Securities Act of 1933, as amended, and such registration has become effective, or are exempt from such registration; and have been duly registered under the Securities Exchange Act of 1934, as amended, or are exempt from such registration;
c) Client has paid or caused to be paid all taxes, if any, which were payable upon or in respect of the original issuance of the Shares issued and outstanding on the date hereof; and
d) the execution and delivery of this Agreement and the issuance of the Shares do not and will not conflict with, violate, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the charter or the by-laws of Client, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which Client is a party or by which it is bound and this Agreement is enforceable against Client in accordance with it terms, except as limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting the enforcement of creditors’ rights generally.
8. A completed Internal Revenue Service Form 2678.
C-2 |
NOTIFICATION OF CHANGES
Client shall promptly notify Mellon of the following:
1. | Any change in the name of Client, amendment of its certificate of incorporation or its by-laws; |
2. | Any change in the title of a Class of Stock from that set forth in the first column of Exhibit A; |
3. | Any change in the Number of Authorized Shares from that set forth in the second column of Exhibit A; |
4. | Any change in existing agreements or any entry into new agreements changing the Number of Authorized Shares Reserved for Future Issuance Under Existing Agreements from that listed in the fourth column of Exhibit A hereto; |
5. | Any change in the number of outstanding Shares subject to stop orders or other transfer limitations; |
6. The listing or delisting of any Shares on any stock exchange;
7. | The appointment after the date hereof of any co-Transfer Agent, Registrar (other than Mellon) or any co-Registrar for any of the Shares; |
8. | The merger of Client into, or the consolidation of Client with, or the sale or other transfer of the assets of Client substantially as an entirety to, another person; or the merger or consolidation of another person into or with Client; and |
9. | Any other change in the affairs of Client of which Mellon must have knowledge to perform properly its duties under this Agreement. |
C-3 |
|
Exhibit D |
FEE SCHEDULE
TO
JOHN HANCOCK bank & thrift opportunities Fund
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $10,000 |
Annual Dividend Reinvestment Administrative Fee: | $6,300 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 1,487 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 10 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 1 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 10 |
Number of certificates cancelled and book-entry debits | 300 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
500 |
Number of shareholder written or E-mail inquiries | 25 |
Number of Investor ServiceDirect ℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-1 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-2 |
FEE SCHEDULE
TO
JOHN HANCOCK income securities Trust
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $18,000 |
Annual Dividend Reinvestment Administrative Fee: | $7,500 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 5,132 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 75 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 4 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 150 |
Number of certificates cancelled and book-entry debits | 900 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative | 800 |
Number of shareholder written or E-mail inquiries | 100 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required | 25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-3 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-4 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-5 |
FEE SCHEDULE
TO
JOHN HANCOCK Investors Trust
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $18,000 |
Annual Dividend Reinvestment Administrative Fee: | $7,500 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 4,428 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 75 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 4 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 1,000 |
Number of certificates cancelled and book-entry debits | 900 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System | 50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative | 800 |
Number of shareholder written or E-mail inquiries | 100 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required | 25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-6 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-7 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-8 |
FEE SCHEDULE
TO
JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $12,000 |
Annual Dividend Reinvestment Administrative Fee: | $10,000 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 444 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 25 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 12 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 15 |
Number of certificates cancelled and book-entry debits | 150 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
150 |
Number of shareholder written or E-mail inquiries | 50 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-9 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-10 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-11 |
FEE SCHEDULE
TO
JOHN HANCOCK PATRIOT Preferred DIVIDEND FUND
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $12,500 |
Annual Dividend Reinvestment Administrative Fee: | $10,000 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 681 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 25 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 12 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 10 |
Number of certificates cancelled and book-entry debits | 150 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
150 |
Number of shareholder written or E-mail inquiries | 50 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-12 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-13 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-14 |
FEE SCHEDULE
TO
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $12,500 |
Annual Dividend Reinvestment Administrative Fee: | $10,000 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 1,299 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 25 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 12 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 20 |
Number of certificates cancelled and book-entry debits | 300 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
400 |
Number of shareholder written or E-mail inquiries | 80 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-15 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-16 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-17 |
FEE SCHEDULE
TO
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $15,000 |
Annual Dividend Reinvestment Administrative Fee: | $10,000 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 844 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 25 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 12 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 10 |
Number of certificates cancelled and book-entry debits | 200 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
300 |
Number of shareholder written or E-mail inquiries | 50 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-18 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-19 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-20 |
FEE SCHEDULE
TO
JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST
Initial Term of Agreement: | Two (2) Years |
Annual Administrative Fee: | $12,500 |
Annual Dividend Reinvestment Administrative Fee: | $10,000 |
Annual Fee Per Active Shareholder Account: | $2.50 |
Annual Fee Per Inactive Shareholder Account: | $1.00 |
Annual Fee Per Dividend Reinvestment Account: | $4.00 |
The above fee will be charged for all services listed in Exhibit B and will be subject to the following annual allowances and additional charges:
Number of active accounts maintained | 846 |
Number of option items processed | 50 |
Number of restricted items processed | 25 |
Number of legal items processed | 25 |
Number of mailings per year (including one enclosure) | 1 |
Number of cash dividends paid per fiscal year | 12 |
Number of semi-annual report mailings | 2 |
Number of reports, analyses, list or labels | 6 |
Number of Inspectors of Election | 1 |
Number of respondent bank omnibus proxies | 15 |
Number of certificates issued and book-entry credits | 10 |
Number of certificates cancelled and book-entry debits | 150 |
Number of DWACS | 25 |
Number of shareholder telephone calls handled by Interactive Voice Response System |
50 |
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative |
300 |
Number of shareholder written or E-mail inquiries | 50 |
Number of Investor ServiceDirect℠ transactions | 50 |
Number of state mandated due diligence mailings for lost property, as required |
25 |
Number of SEC mandated lost shareholder database searches | 25 |
D-21 |
To the extent the above annual allowances are exceeded, the following unit fees will apply:
For each active account maintained (per year) | $2.50 |
For each inactive account maintained | 40% of active account fee |
For each option issued | $25.00 |
For each legal item processed | $50.00 |
Mailings | See Attached |
Lists / Labels / Analyses | See Attached |
For each additional Inspector of Election | $1,500.00 |
For each respondent bank omnibus proxy | $100.00 |
For each DWAC delivery | $25.00 |
For each certificate issued or cancelled | $2.00 |
For each book-entry credit or debit posted | $1.50 |
For each shareholder telephone call via CSR | $5.25 |
For each shareholder telephone call via IVR | $1.50 |
For each correspondence responding to a shareholder | $15.00 |
For each Investor ServiceDirect transaction | $1.50 |
For each stop maintained on a lost certificate (per month) | $0.05 |
For each stop removed from a lost certificate | $0.05 |
For each stop placed on or removed from a restricted security | $50.00 |
For the purposes of this agreement the following definitions apply:
1. | Investor ServiceDirect (ISD) transactions will include any shareholder transaction initiated through ISD including, but not limited to, the following: |
• | Purchasing or selling shares |
• | Duplicate 1099 requests |
• | Updating or changing consent to electronic delivery |
• | Forms or document requests |
• | Taxpayer certification |
• | Certificate issuance |
• | Update dividend reinvestment selection |
• | Duplicate book entry statement |
• | PIN change |
2. | Active and Inactive accounts will be defined as follows: |
• | Active accounts are defined as accounts with a share balance greater than zero or outstanding cash balances or taxable income that has not yet been reported to the Internal Revenue Service. |
D-22 |
• | Inactive accounts are defined as accounts with a share balance equal to zero and no outstanding cash balances and no taxable income to be reported to the Internal Revenue Service. |
D-23 |
LISTS / LABELS / ANALYSES
FEE SCHEDULE
(Applicable to all Clients)
LISTS
Per name listed | $0.05 |
LABELS
Per label printed | $0.05 |
ANALYSES
Per name passed on data base | $0.02 |
Per name listed in report | $0.05 |
(Minimum charge for each of the above services will be $250.)
D-24 |
MAILING SERVICES
FEE SCHEDULE
(Applicable to all Clients)
ADDRESSING
Addressing mailing medium (per name) | $0.05 |
AFFIXING
Affixing labels (per label) | $0.04 |
INSERTING
Inserting Enclosures (Machine) | |
1st Enclosure (per piece) | $0.05 |
2nd Enclosure (per piece) | $0.04 |
Each Enclosure thereafter (per piece) | $0.03 |
Inserting Enclosures (Manual)
Charge will be determined based on analysis of work to be performed.
(Minimum charge for any mailing will be $500.)
D-25 |
EXPENSES AND OTHER CHARGES (Applicable to all Clients)
Fees and Out of Pocket Expenses: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, out of pocket costs, expenses and disbursements of Mellon are due and payable by Client upon receipt of an invoice from Mellon.
With respect to any shareholder mailing processed by Mellon, client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
If Client participates in the Direct Registration System, Mellon will provide a “sell” feature for liquidation of book-entry shares held on behalf of a shareholder. Upon receipt of a sell request by the registered shareholder, Mellon Bank, N.A. will process the request and remit the proceeds to the shareholder in the form of a check (less the appropriate fees). The charge for each such sale is $15.00 plus $0.12 per share or, if applicable, the fees quoted in the Client’s stock purchase and / or dividend reinvestment plan.
Offering Administration Fee: A minimum fee of $5,000 will be imposed for activities associated with initial public offerings (IPO’s), secondary offerings and / or closings. The fee covers the coordination of efforts necessary between Mellon, the Client’s underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and /or book-entry credits. Certificates and / or book-entry credits over this amount will be billed at $2.00 each. This fee is in addition to any fees Mellon may charge for coordination of selling shareholders, custody services and / or escrow services.
Conversion: There shall be no charge for converting the Client’s files to Mellon’s systemunless extraordinary efforts will be required to complete the conversion, such as account history conversion or file format conversion. Mellon will review the conversion requirements and any charge will be discussed with and approved by the Client prior to work commencing. In addition, if an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 days of such conversion, Client agrees to provide Mellon with funds or shares sufficient to resolve the out-of-proof condition promptly after the 90th day.
Deconversion Fee: In the event Client requests that Mellon provide records to a successor agent, in connection with the expiration or termination of this Agreement, Client shall pay Mellon a fee for deconversion services (e.g., providing shareholder lists
D-26 |
and files, producing and shipping records, answering successor agent inquiries). This fee will be based on Mellon’s then-current deconversion fee schedule. Mellon may withhold the Client’s records, reports and unused certificate stock from a successor agent pending the Client’s payment in full of all fees and expenses owed to Mellon under this Agreement.
Legal, Technological Expenses: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Mellon’s expenses (including the cost of external or internal counsel) in resolving such matters; provided that any legal expenses charged to the Clients shall be reasonable. Mellon shall use best efforts to consult with Client prior to incurring any material expenses in accordance with this paragraph.
In the event any Federal regulation and/or state or local law are enacted which require Mellon to make any technological improvements and/or modifications to its current system, Client shall compensate Mellon, on a pro rata basis proportionate to the Client’s registered shareholder base, for the costs associated with making such required technological improvements and/or modifications.
Record Storage: Monthly fee of $2.50 per box, with a minimum charge of $50.00.
Lost Shareholder Services: A fee of $3.00 will be charged for each lost account searched per database searched. A fee of $2.50 will be charged per account for each state mandated due diligence mailing.
Other Services: Fees for any services provided to Client by or on behalf of Mellon hereunder that are not set forth in Exhibit B hereto or in this Exhibit D will be based on Mellon’s standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
D-27 |
EXHIBIT (2)(k)(3)(a)
AMENDMENT TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this “Amendment”), dated July 1, 2007, is entered into between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), and John Hancock Patriot Premium Dividend Fund I, John Hancock Patriot Premium Dividend Fund II, John Hancock Patriot Preferred Dividend Fund, John Hancock Patriot Global Dividend Fund, John Hancock Patriot Select Dividend Trust, John Hancock Investors Trust, John Hancock Income Securities Trust, John Hancock Bank and Thrift Opportunity Fund, John Hancock Preferred Income Fund I, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III and John Hancock Tax-Advantaged Dividend Income Fund, each a Massachusetts Business Trust and a Maryland corporation (each a “Client” and collectively the “Clients”).
WHEREAS, Mellon and the Clients entered into that certain Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the “Agreement”), pursuant to which Mellon is providing transfer agent and related services to the Clients. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, John Hancock Patriot Premium Dividend Fund I, John Hancock Patriot Global Dividend Fund and John Hancock Patriot Preferred Dividend Fund (collectively, the “Terminated Funds”) have merged into John Hancock Patriot Premium Dividend Fund II, and Mellon and Clients desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments. |
(a) | The Agreement, including the applicable Exhibits, is hereby terminated solely with respect to the Terminated Funds. |
(b) | Exhibit D of the Agreement is amended to replace the Fee Schedule to John Hancock Patriot Premium Dividend Fund II with the revised Exhibit D-l attached hereto. |
(c) | Exhibit D of the Agreement is hereby amended to replace the Investor Plan Services Fee Schedule for each of the Clients with revised Exhibit D-2 attached hereto. |
2. | Term of the Amendment. This Amendment shall become effective on the date hereof, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
1 |
Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.
Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Mellon and the Clients have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND I JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II JOHN HANCOCK PATRIOT PREFERRED DIVIDEND FUND JOHN HANCOCK PATRIOT GLOBAL DIVIDEND FUND JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST JOHN HANCOCK INVESTORS TRUST JOHN HANCOCK INCOME SECURITIES TRUST JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND JOHN HANCOCK PREFERRED INCOME FUND I JOHN HANCOCK PREFERRED INCOME FUND II JOHN HANCOCK PREFERRED INCOME FUND III JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND |
||||
By: | /s/ Alfred P. Ouellette | |||
Name: | Alfred P. Ouellette | |||
Title: | Assistant Secretary |
2 |
Exhibit D-l FEE SCHEDULE TO
John Hancock Patriot Premium Dividend II
Initial Term of Agreement: | One (1) Year |
Fees Not Subject to Increase | One (1) Year |
(During initial term only) | |
Administration & Account Maintenance | |
Administration (Per month) | $ |
Mellon will assign a Client Service Manager to consult with Client on all facets of stock transfer administration, including, but not limited to, securities regulations, transfer requirements, structuring of annual meetings, stock option exercises, cash and stock dividends, etc. | |
OFAC Reporting Fee (Per month) | |
(the Administration and Account Maintenance fees cover all of the services, and are subject to the allowances, listed below) |
Allowance | Fee | |
Number of active accounts maintained | $/year | |
Number of inactive accounts maintained | % of | |
Active a/c Fee | ||
Number of dividend reinvestment accounts maintained | $ | |
Number of legal review items processed | $ | |
Number of certificates issued and book entry credits | ||
Number of certificates cancelled and book entry debits | ||
Number of additional mailings per year (including one enclosure) | See Below | |
Number of reports, analyses, lists, or labels | See Below | |
Number of Inspectors of Election | $ | |
Number of respondent bank omnibus proxies | $ | |
Number of shareholder telephone calls handled by Interactive Voice Response System Response System |
||
Number of shareholder telephone calls transferred out of the IVR to a Customer Service Representative | ||
Number of correspondence items responding to shareholder inquiries | ||
Number of Investor ServiceDirect® transactions |
||
(ISD transactions are defined as any shareholder transaction initiated through ISD, including, but not limited to, share sales or purchases, duplicate statement or tax form requests, address or pin changes, account changes or updates and certificate requests) |
||
Number of state mandated due diligence mailings for lost property , as required | ||
Number of SEC mandated lost shareholder database searches | ||
MLink Administration fee (Electronic delivery of material) | ||
Evote Administration fee | ||
Telephone Votes | ||
Internet | ||
Dividend Disbursement Fee | ||
Number of dividends processed per year (including one enclosure) (the dividend disbursement fee includes all of the services listed below) | ||
Preparing and mailing checks | ||
Reconciling checks | ||
Preparing payment register in list form | ||
Withholding and filing taxes for non-resident aliens and others | ||
Filing federal tax information returns | ||
Processing “B” and “C” notices received from the IRS | ||
Mailing required statements (Form 1099DIV or Form 1042) to registered holders | ||
Maintaining stop payment files and issuing replacement checks | ||
Maintaining separate dividend addresses | ||
Receiving, verifying and posting funds to cover entire dividenddistribution on mailing date of checks |
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 2
Escheatment Services | |
Annual Compliance Services | |
SEC mandated electronic database and new address retrieval mailing | $ |
(subject to the following minimum) | $ |
Each state mandated due diligence mailing | $ |
(subject to the following minimum) | $ |
In-Depth Search and Location Services | |
(Annual compliance services include all of the services listed below) | |
Assist in establishing compliance with the unclaimed property requirements of all jurisdictions that may have a claim on escheatable property held by your organization | |
Processing records and property subject to reporting based upon current state statutes, rules, and regulations | |
Requesting penalty and interest release agreements and indemnification from future claim agreements (on property remitted) from the states that offer such agreements | |
Identifying property that has become escheatable since the last filing date | |
Assist in reviewing state regulations to determine if there have been any changes in reporting procedures | |
Reporting and remitting property to states |
CLIENT SERVICE DIRECT® System Access
(the Client ServiceDirect fee includes all of the services listed below)
• | Providing client access to Mellon’s mainframe inquiry and internet based system for management reporting and shareholder records |
• Providing daily data on registered shareholders
• Providing daily access to proxy tabulation file during proxy season
DIRECT REGISTRATION/PROFILE SYSTEM | |
Enrollment Fee | |
Annual Surety Fee | |
Stock Distribution Event - full, full and fractional shares | $ |
DRS Fee, per statement | $ |
Investor directed movement of shares, each | $ |
Broker directed movement of shares, each | $ |
DRS/Profile reject fee, each | $0 |
DRS/Profile Broker Authorization Form, each | $ |
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 3
ACH/DIRECT DEPOSIT SERVICES | |
Initial Setup Fee | |
Annual Maintenance Fee | |
ACH file transmission, each distribution, per item | |
Placement of Stop Payment Order | $ |
Returns/Reversals, per occurrence | $ |
(Annual Maintenance includes all of the services listed below) |
Processing returned authorization forms | |
Posting bank information to accounts | |
Creating pre-note transactions and sending to clearinghouse | |
Following up on rejects | |
Produce and mail checks for returned items |
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 4
ADDITIONAL SERVICES AVAILABLE UPON REQUEST
SHAREHOLDER LISTS AND ANALYSES | |
(Minimum charge for each of the below services) | $ |
Lists, per name listed | $ |
Labels, per label printed | $ |
Analysis, per name passed on database | $ |
Analysis, per name listed in report | $ |
Custom Lists or Analyses |
STANDARD MAILING SERVICES | |
(Minimum charge for each of the below services) | $ |
Addressing mailing medium, per name | $ |
Affixing labels, per label | $ |
Machine Inserting | |
1st Enclosure, per piece | $ |
2nd Enclosure, per piece | $ |
Each Enclosure thereafter, per piece | $ |
Manual Inserting |
OTHER SERVICES | |
Confidential Proxy Voting | |
Dividends - Special Cash Dividends | |
Electronic Distribution of Materials | |
Foreign Tax Re-claim | |
Householding of Annual Meeting and Other Materials | |
Interactive Online Meeting Services | |
Logistics Services (including document transportation, fulfillment, | |
printing and media placement) | |
Mailing Quarterly or Periodic Reports | |
Maintaining Mail Lists | |
Secondary Offerings or Closings | |
Stock Splits and Stock Dividends | |
Special Meetings | |
Survey Tabulation |
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 5
ADDITIONAL SERVICES PROVIDED BY MELLON
In addition to transfer agent services, Mellon Investor Services also provides the following related services. Contact your Sales Representative or Client Service Manager for additional information.
Bank/Broker Distributions Corporate Stock Buy-Back Services Custodial Services Direct Purchase & Dividend Reinvestment Services Employee Stock Option Plan Administration Employee Stock Purchase Plan Administration Escrow Services Exchange or Tender Offer Processing Financial Planning Services Odd-Lot Program Administration Proxy Solicitation StockWatch (beneficial owner identification) Subscription Agent Services Rights Agency Warrant Agency |
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 6
EXPENSES AND OTHER CHARGES
Fees and Out of Pocket Expenses: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, out of pocket costs, expenses and disbursements of Mellon are due and payable by Client upon receipt of an invoice from Mellon.
With respect to any shareholder mailing processed by Mellon, Client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, Client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
Share Sale Program: Client may appoint Mellon to administer, through Mellon’s affiliate, Mellon Bank, N.A., a program allowing Client’s shareholders to liquidate book-entry shares, held in the Direct Registration System (“DRS”), pursuant to the Client’s stock purchase and/or dividend reinvestment plan. The charge for each such sale, and the process for selling such shares, shall be as described in the Client’s plan. If Client does not have a separate stock purchase or dividend reinvestment plan, then Client hereby appoints and directs Mellon to implement and administer, through Mellon Bank, N.A., a share selling program allowing Client’s shareholders to liquidate DRS shares. The transaction fee for each such sale shall be $ plus $ per share. Under the program, upon receipt of a sell request by a registered shareholder, Mellon Bank, N.A. will process the request through FutureShare Financial (“FSF”), a registered broker/dealer and member of NASD/SIPC and an affiliate of Mellon. Proceeds of the sale will be sent to the shareholder in the form of a check (less the transaction fee). Sale requests will typically be combined with other sale requests received from Client shareholders and shares will be submitted in bulk to FSF for sale. Shares will be sold usually within one business day of Mellon’s receipt of the sale request, but in no event more than five business days (except where deferral is necessary under state or federal regulations). The price per share received by the selling shareholder will equal the market price Mellon receives for the shares (or if more than one bulk trade is executed on the day the shares are sold, then the price per share shall equal the weighted average market price received for all Client shares sold that day).
Offering Administration Fee: A minimum fee of $ will be imposed for activities associated with initial public offerings (IPO’s), secondary offerings and/or closings. The fee covers the coordination of efforts necessary between Mellon, the Client’s underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and/or book-entry credits. Certificates and/or book-entry credits over this amount will be billed at $ each. This fee is in addition to any fees Mellon may charge for coordination of selling shareholders, custody services and/or escrow services.
Conversion: If an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 calendar days of such conversion, Client agrees to provide Mellon with funds or shares sufficient to resolve the out-of-proof condition promptly after the expiration of such 90 day period.
Deconversion: Upon expiration or termination of this Agreement, Client shall pay Mellon a fee for deconversion services (e.g., providing shareholder lists and files, producing and shipping records, answering successor agent inquiries). This fee shall be based on Mellon’s then-current deconversion fee schedule. Mellon may withhold the Client’s records, reports and unused certificate stock pending Client’s payment in full of all fees and expenses owed to Mellon under this Agreement.
Legal Expenses, System Modifications: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Mellon’s expenses (including the cost of external or internal counsel) in resolving such matters; provided that any legal expenses charged to the Client shall be reasonable.
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 7
In the event any federal, state or local laws, rules or regulations are enacted that require Mellon to (i) make any adjustments and/or modifications to its current system, or (ii) provide additional services to Client for which Mellon is not being compensated hereunder, then Client shall compensate Mellon (a) on a pro rata basis proportionate to the Client’s registered shareholder base, for the costs associated with making such required adjustments and/or modifications, or (b) according to Mellon’s standard fees established, in good faith, with respect to such additional services.
Other Services: Fees for any services provided to Client by or on behalf of Mellon hereunder that are not set forth above will be based on Mellon’s standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
John Hancock Patriot Premium Dividend II
Fee Schedule - Page 8
EXHIBIT (2)(k)(3)(b)
AMENDMENT TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this “Amendment”), dated September 25, 2007, is entered into between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), and John Hancock Patriot Premium Dividend Fund II, John Hancock Patriot Select Dividend Trust, John Hancock Investors Trust, John Hancock Income Securities Trust, John Hancock Bank and Thrift Opportunity Fund, John Hancock Preferred Income Fund , John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Tax-Advantaged Dividend Income Fund (collectively, the “Existing Clients”) and John Hancock Tax-Advantaged Global Shareholder Yield Fund (together with the Existing Clients, the “Clients”), each a Massachusetts Business Trust and a Maryland corporation.
WHEREAS, Mellon and the Existing Clients entered into that certain Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the “Agreement”), pursuant to which Mellon is providing transfer agent and related services to the Existing Clients. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, Mellon and the Clients desire to amend the Agreement as provided in this Amendment to add John Hancock Tax-Advantaged Global Shareholder Yield Fund as a Client under the Agreement.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments. The Agreement is hereby amended to add John Hancock Tax-Advantaged Global Shareholder Yield Fund as a Client thereto under the same terms and conditions of the Agreement, including the Investor Plan Services Fee Schedule set forth in Exhibit D thereto, and the Fee Schedule attached as Exhibit D hereto and hereby made part of the Agreement. |
2. | Term of the Amendment. This Amendment shall become effective on the date hereof, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
1 |
IN WITNESS WHEREOF, Mellon and the Clients have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II
JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
JOHN HANCOCK PREFERRED INCOME FUND
JOHN HANCOCK PREFERRED INCOME FUND II
JOHN HANCOCK PREFERRED INCOME FUND III
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND
JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND
By: | /s/ Alfred P. Ouellette | |||
Name: | Alfred P. Ouellette | |||
Title: | Assistant Secretary |
2 |
EXHIBIT (2)(k)(3)(c)
AMENDMENT # 3 TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this “#3 Amendment”), dated October 10, 2007, is entered into between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”) and John Hancock Patriot Select Dividend Trust, John Hancock Patriot Premium Dividend Fund II, John Hancock Investors Trust, John Hancock Income Securities Trust, John Hancock Bank And Thrift Opportunity Fund, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Tax-Advantaged Dividend Income Fund, and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust, a Maryland corporation (each a “Client” and collectively the “Clients”).
WHEREAS, Mellon and Client entered into that certain Service Agreement for Transfer Agent Services dated June 1, 2002, as amended by an amendment dated July 1, 2007, and as further amendment by an amendment dated (collectively the “Agreement”), pursuant to which Mellon is providing transfer agent and related services to Clients. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, John Hancock Patriot Select Dividend Trust, (the “Terminated Fund”) has merged into John Hancock Patriot Premium Dividend Fund II, and Mellon and Clients desire to amend the Agreement as provided in this Amendment #3.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments. |
(a) | The Agreement, including the applicable Exhibits, is hereby terminated solely with respect to the Terminated Fund. |
(b) | Exhibit D of the Agreement is amended to replace the Fee Schedule to John Hancock Patriot Premium Dividend Fund II with the revised Exhibit D-1 attached hereto. |
2. | Term of the Amendment. This Amendment shall become effective on the date hereof, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
IN WITNESS WHEREOF, Mellon and Client have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
John Hancock Patriot Premium Dividend Fund II
John Hancock Investors Trust
John Hancock Income Securites Trust
John Hancock Bank And Thrift Opportunity Fund
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Tax-Advantaged Dividend Income Fund
john hancock tax-advantaged GLOBAL shareholder yield fund
By: | /s/ Alfred P. Ouellette | |||
Name: | Alfred P. Ouellette | |||
Title: | Assistant Secretary |
3 |
EXHIBIT (2)(k)(3)(d)
AMENDMENT TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this "Amendment") dated as of July 1, 2010, is entered into between Mellon Investor Services LLC, a New Jersey limited liability company ("Mellon") and John Hancock Patriot Premium Dividend Fund II, John Hancock Investors Trust, John Hancock Income Securities Trust, John Hancock Bank And Thrift Opportunity Fund, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, and John Hancock Tax-Advantaged Dividend Income Fund, and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust, (each a "Client" and collectively the "Clients").
WHEREAS, Mellon and the Clients entered into that certain Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the "Agreement"), pursuant to which Mellon is providing transfer agent and related services to Clients. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, Mellon and Clients desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments to Agreement |
(a) | Section 2(a) of the Agreement is hereby amended and restated in its entirety to read as follows: |
“(a) Effective July 1, 2010, this Agreement shall continue for a term of two (2) years ending on June 30, 2012, provided however, the Clients may terminate this Agreement at any time and without penalty on ninety (90) days written notice to Mellon.”
(b) | Exhibit D for each Client is hereby deleted in its entirety and replaced with the attached revised Exhibit D. |
(c) | Section 4(a) of the Agreement is hereby amended to add the following Section 4(a)(iv): |
“(iv) it shall adopt and maintain such policies, procedures and controls reasonably designed to ensure that the performance of its obligations as set forth in this Agreement is in compliance with all applicable rules and regulations, including, but not limited to those rules and regulations applicable to transfer agents performing such services as described in this Agreement and applicable to customer information.”
1 |
(d) | Section 6 of the Agreement is hereby amended to add the following Section (g): |
“(g) Subject to the following sentence, Mellon shall create and maintain in complete and accurate form all books and records required of it pursuant to its duties hereunder in accordance with all applicable laws, rules and regulations, including but not limited to records required by the Securities Exchange Act of 1934, as amended (the "1934 Act"). Mellon agrees that all such records prepared or maintained by Mellon are the property of the Client and will be preserved, maintained and made available in accordance with such applicable laws, rules and regulations and will be surrendered to the Client promptly on and in accordance with the Client's request, provided that Mellon retain copies of such records to the extent required by applicable law or Mellon's record retention policies.”
(e) | Section 8 of the Agreement is hereby amended to add the following Section (c): |
“(c) If the Fund is a Massachusetts business trust, Mellon agrees that it shall have recourse only to the assets of the Client for the payment of claims or obligations as between Mellon and the Client arising out of this Agreement, and Mellon shall not seek satisfaction of any such claim or obligation from the trustees or shareholders of the Client in their capacity as such. In any case, each Client shall be liable only for its own obligations to Mellon under this Agreement and shall not be jointly or severally liable for the obligations of any other Client hereunder.”
“(f) The Agreement is hereby amended to add the following new Section 17:
“17. Information Security. As part of the services provided by Mellon hereunder, Mellon agrees that it shall take the steps and security precautions outlined in its information security policies and procedures, a summary of which has been provided to each Client. Each Client acknowledges that such policies and procedures are subject to change at any time by Mellon, provided that the protections afforded thereby will not be intentionally diminished in comparison with those provided by Mellon to Client prior to such change. Mellon shall notify Client of any unauthorized use of, or unauthorized access to, Client nonpublic personal information (as defined by applicable law) promptly upon Mellon becoming aware of such unauthorized use or unauthorized access.”
2. | Term of the Amendment. This Amendment shall become effective upon due execution and delivery by both parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
2 |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
3 |
IN WITNESS WHEREOF, Mellon and Clients have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
JOHN HANCOCK PATRIOT PREMIUM DIVIDEND FUND II
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND
JOHN HANCOCK PREFERRED INCOME FUND
JOHN HANCOCK PREFERRED INCOME FUND II
JOHN HANCOCK PREFERRED INCOME FUND III
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND
JOHN HANCOCK TAX-ADVANTAGED SHAREHOLDER YIELD FUND
By: | /s/ Charles A. Rizzo | |||
Name: | Charles A. Rizzo | |||
Title: | Chief Financial Officer |
4 |
Exhibit D
STOCK TRANSFER FEE SCHEDULE
The following schedule is intended to be a comprehensive summary of the fees associated with this proposal. The pricing as listed below is valid for ninety days from the date of submission or until "date". Fees are not subject to increase during the initial term.
Initial Term of Agreement: | Two (2) Years1 |
Fees Not Subject to Increase | Two (2) Years |
Administration & Account Maintenance
Mellon will assign a Client Service Manager to consult with Client on all facets of stock transfer administration, including, but not limited to, securities regulations, transfer requirements, structuring of annual meetings, stock option exercises, cash and stock dividends, etc.
Monthly OFAC Reporting is included in the monthly administration and accounts maintenance fees listed below.
Fund Name |
Administration & Account Maintenance (per month) 2010-2011 |
Administration & Account Maintenance (per month) 2011-2012 |
John Hancock Bank & Thrift ("BTO") | $ | $ |
John Hancock Income Securities Trust ("Income Securities") | $ | $ |
John Hancock Investors Trust ("Investors Trust") | $ | $ |
John Hancock Patriot Premium Dividend II ("Patriot Prem Div II") | $ | $ |
John Hancock Preferred Income ("Preferred Income") | $ | $ |
John Hancock Preferred Income II ("Preferred Income II") | $ | $ |
John Hancock Preferred Income III ("Preferred Income HI") | $ | $ |
John Hancock Tax-Advantaged Global Shareholder Yield Fund ("Tax-Adv. Global S/H Yield") | $ | $ |
John Hancock Tax-Advantaged Dividend Income Fund ("Tax-Adv. Div Income") | $ | $ |
1 Subject to Section 2(a) of the Agreement
5 |
The Administration and Account Maintenance fees cover all of the services and are subject to the allowances listed below.
- All allowances are on a per fund basis | ||||||||||
Fee | BTO | Income Securities | Investors Trust | Patriot Prem Dlv Il (b) | Preferred Income | Preferred Income II | Preferred Income III | Tax-Adv. Global S/HYield | Tax-Adv. Div Income | |
No. of Active Accounts Maintained | $/Year | |||||||||
No. of Inactive Accounts | % of Active A/C Fee | |||||||||
No. of Dividend Reinvestment Accounts Maintained | $4.00 | |||||||||
No. of Legal Review Items Processed | $ | |||||||||
No. of Certificates Issued & Book Entry Credits | ||||||||||
No. of Certificates Cancelled & Book Entry Debits | ||||||||||
No. of Additional Mailings per Year (including one enclosure) | See Below | |||||||||
No. of Reports, Analyses, Lists, or Labels | See Below | |||||||||
No. of Inspectors of Election | ||||||||||
No. of Respondent Bank Omnibus Proxies | $ | |||||||||
No. of S/H Telephone Calls Handled by IVR System (d) | ||||||||||
No. of S/H Telephone Calls Transferred from IVR to CSR (d) | $ | |||||||||
No. of Correspondence Items Responding to S/H Inquiries | $ | |||||||||
No. of Investor ServiceDirect® Transactions (e) |
(a) IVR = Interactive Voice Response; CSR = Customer Service Representative
(b) | ISD transactions are defined as any shareholder transaction initiated through ISD, including, but not limited to, share sales or purchases, duplicate statement or tax form requests, address or pin changes, account changes or updates and certificate requests. |
Stock Transfer Fee
Schedule - Page 2
6 |
All allowances are on a per fund basis | ||||||||||
Fee | BTO | Income Securities | Investors Trust | Patriot Prem Div II | Preferred Income | Preferred Income II | Preferred Income III |
Tax-Adv. Global S/H Yield |
Tax-Adv. Div Income | |
No. of State Mandated Due Diligence Mailings for Lost Property | S per a/c S min. | |||||||||
No. of SEC Mandated Lost S/H Database Searches | $per a/c 0 min | |||||||||
MLink Administration Fee (Electronic delivery of material) | ||||||||||
Evote Administration Fee | ||||||||||
Telephone Votes | ||||||||||
Internet | ||||||||||
Investor / Broker Directed Movement of Shares | $ |
Stock Transfer Fee
Schedule - Page 3
7 |
Dividend Disbursement Fee
Number of dividends processed per year. The dividend disbursement fee includes all of the services listed below.
Fund Name | Included |
BTO | |
Income Securities | |
Investors Trust | |
Patriot Prem Div II | |
Preferred Income | |
Preferred Income II | |
Preferred Income III | |
Tax-Adv. Global S/H Yield | |
Tax-Adv. Div Income |
Preparing and mailing checks
Reconciling checks
Preparing payment register in list form
Withholding and filing taxes for non-resident aliens and others
Filing federal tax information returns
Processing "B" and "C" notices received from the IRS
Mailing required statements (Form 1099DIV or Form 1042) to registered holders
Maintaining stop payment files and issuing replacement checks
Maintaining separate dividend addresses
Receiving, verifying and posting funds to cover entire dividend distribution on mailing date of checks
Stock Transfer Fee
Schedule - Page 4
8 |
Escheatment Services
Annual Compliance Services | |
SEC Mandated Electronic Database & New Address Retrieval Mailing | $per account $ |
(subject to the following minimum) | $per account $ |
Each state mandated due diligence mailing | |
(subject to the following minimum) | |
In-Depth Search and Location Services | |
(Annual compliance services include all of the services listed below) |
• | Assist in establishing compliance with the unclaimed property requirements of all jurisdictions that may have a claim on escheatable property held by your organization |
• Processing records and property subject to reporting based upon current state statutes, rules, and regulations
• | Requesting penalty and interest release agreements and indemnification from future claim agreements (on property remitted) from the states that offer such agreements |
• Identifying property that has become escheatable since the last filing date
• Assist in reviewing state regulations to determine if there have been any changes in reporting procedures
• Reporting and remitting property to states
CLIENT SERVICE DIRECT® System Access
(the Client ServiceDirect fee includes all of the services listed below)
• | Providing client access to Mellon's mainframe inquiry and internet based system for management reporting and shareholder records |
• Providing daily data on registered shareholders
• Providing daily access to proxy tabulation file during proxy season
DIRECT REGISTRATION/PROFILE SYSTEM | |
Enrollment Fee | |
Annual Surety Fee | |
Stock Distribution Event - full, full and fractional shares | $ |
DRS Fee, per statement | $ |
Investor directed movement of shares, each | $ |
Broker directed movement of shares, each | $ |
DRS/Profile reject fee, each | $ |
DRS/Profile Broker Authorization Form, each | $ |
Stock Transfer Fee
Schedule - Page 5
9 |
ACH/DIRECT DEPOSIT SERVICES | |
Initial Setup Fee | |
Annual Maintenance Fee | |
ACH file transmission, each distribution, per item | |
Placement of Stop Payment Order | $ |
Returns/Reversals, per occurrence | $ |
(Annual Maintenance includes all of the services listed below) |
Processing returned authorization forms
Posting bank information to accounts
Creating pre-note transactions and sending to clearinghouse
Following up on rejects
Produce and mail checks for returned items
Stock Transfer Fee
Schedule - Page 6
10 |
ADDITIONAL SERVICES AVAILABLE UPON REQUEST
SHAREHOLDER LISTS AND ANALYSES | |
Minimum charge for each of the below services | $ |
Lists, per name listed | $ |
Labels, per label printed | $ |
Analysis, per name passed on database | $ |
Analysis, per name listed in report | $ |
Custom Lists or Analyses |
STANDARD MAILING SERVICES Minimum charge for each of the below services |
$ |
Addressing mailing medium, per name | $ |
Affixing labels, per label | $ |
Machine Inserting 1st Enclosure, per piece 2nd Enclosure, per piece Each Enclosure thereafter, per piece Manual Inserting |
$ |
OTHER SERVICES | |
Confidential Proxy Voting | |
Dividends - Special Cash Dividends | |
Electronic Distribution of Materials | |
Foreign Tax Re-claim | |
Householding of Annual Meeting and Other Materials | |
Interactive Online Meeting Services | |
Logistics Services (including document transportation, fulfillment, | |
printing and media placement) | |
Mailing Quarterly or Periodic Reports | |
Maintaining Mail Lists | |
Secondary Offerings or Closings | |
Stock Splits and Stock Dividends | |
Special Meetings | |
Survey Tabulation |
Stock Transfer Fee
Schedule - Page 7
11 |
ADDITIONAL SERVICES PROVIDED BY MELLON
In addition to transfer agent services, Mellon Investor Services also provides the following related services. | |
Contact your Sales Representative or Client Service Manager for additional information. | |
Bank/Broker Distributions | |
Corporate Stock Buy-Back Services | |
Custodial Services | |
Direct Purchase & Dividend Reinvestment Services | |
Employee Stock Option Plan Administration | |
Employee Stock Purchase Plan Administration | |
Escrow Services | |
Exchange or Tender Offer Processing | |
Financial Planning Services | |
Odd-Lot Program Administration | |
Proxy Solicitation | |
Stock Watch (beneficial owner identification) | |
Subscription Agent Services | |
Rights Agency | |
Warrant Agency |
Stock Transfer Fee
Schedule - Page 8
12 |
EXPENSES AND OTHER CHARGES
Fees and Out of Pocket Expenses: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, out of pocket costs, expenses and disbursements of Mellon are due and payable by Client upon receipt of an invoice from Mellon.
With respect to any shareholder mailing processed by Mellon, Client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, Client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
Share Sale Program: Client may appoint Mellon to administer, through Mellon's affiliate, Mellon Bank, N.A., a program allowing Client's shareholders to liquidate book-entry shares, held in the Direct Registration System ("DRS"), pursuant to the Client's stock purchase and/or dividend reinvestment plan. The charge for each such sale, and the process for selling such shares, shall be as described in the Client's plan. If Client does not have a separate stock purchase or dividend reinvestment plan, then Client hereby appoints and directs Mellon to implement and administer, through Mellon Bank, N.A., a share selling program allowing Client's shareholders to liquidate DRS shares. The transaction fee for each such sale shall be $ plus $ per share. Under the program, upon receipt of a sell request by a registered shareholder, Mellon Bank, N.A. will process the request through FutureShare Financial ("FSF"), a registered broker/dealer and member of NASD/SIPC and an affiliate of Mellon. Proceeds of the sale will be sent to the shareholder in the form of a check (less the transaction fee). Sale requests will typically be combined with other sale requests received from Client shareholders and shares will be submitted in bulk to FSF for sale. Shares will be sold usually within one business day of Mellon's receipt of the sale request, but in no event more than five business days (except where deferral is necessary under state or federal regulations). The price per share received by the selling shareholder will equal the market price Mellon receives for the shares (or if more than one bulk trade is executed on the day the shares are sold, then the price per share shall equal the weighted average market price received for all Client shares sold that day).
Offering Administration Fee: A minimum fee of $will be imposed for activities associated with initial public offerings (IPO's), secondary offerings and/or closings. The fee covers the coordination of efforts necessary between Mellon, the Client's underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and/or book-entry credits. Certificates and/or book-entry credits over this amount will be billed at $ each. This fee is in addition to any fees Mellon may charge for coordination of selling shareholders, custody services and/or escrow services.
Conversion: If an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 calendar days of such conversion, Client agrees to provide Mellon with funds or shares sufficient to resolve the out-of-proof condition promptly after the expiration of such 90 day period.
Deconversion: Upon expiration or termination of this Agreement, Client shall pay Mellon a fee for deconversion services (e.g., providing shareholder lists and files, producing and shipping records, answering successor agent inquiries). This fee shall be based on Mellon's then-current deconversion fee schedule. Mellon may withhold the Client's records, reports and unused certificate stock pending Client's payment in full of all fees and expenses owed to Mellon under this Agreement.
Legal Expenses, System Modifications: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Mellon's expenses (including the cost of external or internal counsel) in resolving such matters; provided that any legal expenses charged to the Client shall be reasonable.
In the event any federal, state or local laws, rules or regulations are enacted that require Mellon to (i) make any adjustments and/or modifications to its current system, or (ii) provide additional services to Client for which Mellon is not being compensated hereunder, then Client shall compensate Mellon (a) on a pro rata basis proportionate to the Client's registered shareholder base, for the costs associated with making such required adjustments and/or modifications, or (b) according to Mellon's standard fees established, in good faith, with respect to such additional services.
Stock Transfer
Fee Schedule - Page 9
13 |
Other Services: Fees for any services provided to Client by or on behalf of Mellon hereunder that are not set forth above will be based on Mellon's standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
Stock Transfer
Fee Schedule - Page 10
14 |
EXHIBIT (2)(k)(3)(e)
AMENDMENT TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this “Amendment”) dated October 18, 2010 to the Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the “Agreement”), is entered into between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), and John Hancock Premium Dividend Fund (previously known as John Hancock Patriot Premium Dividend Fund II), a Massachusetts Business Trust (“Client”).
WHEREAS, effective October 18, 2010 John Hancock Patriot Premium Dividend Fund II changed its name to John Hancock Premium Dividend Fund, and Mellon and the Client are entering into this Amendment for the purpose of reflecting this name change in the Agreement, pursuant to which Mellon will provide transfer agent and related services to Client. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, Mellon and Client desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments to Agreement |
(a) | the Agreement is being amended to reflect the name change of John Hancock Patriot Premium Dividend Fund II to John Hancock Premium Dividend Fund. |
(b) | Exhibit D is hereby amended to include the attached. |
2. | Term of the Amendment. This amendment shall become effective upon due execution and delivery by both parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
1 |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
2 |
IN WITNESS WHEREOF, Mellon and Client have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
JOHN HANCOCK PREMIUM DIVIDEND FUND | ||||
By: | /s/ Charles A. Rizzo | |||
Name: | Charles A. Rizzo | |||
Title: | Chief Financial Officer |
3 |
EXHIBIT (2)(k)(3)(f)
AMENDMENT TO
JOHN HANCOCK CLOSED END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (this “Amendment”) dated April 6,2011 to the Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the “Agreement”), is entered into between Mellon Investor Services LLC, a New Jersey limited liability company (“Mellon”), and John Hancock Hedged Equity & Income Fund, a Massachusetts Business Trust ( “Client”).
WHEREAS, Mellon and the Client are entering into this Amendment for the purpose of adding John Hancock Hedged Equity & Income Fund to the Agreement, pursuant to which Mellon will provide transfer agent and related services to Client. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings set forth in the Agreement.
WHEREAS, Mellon and Client desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendments to Agreement. |
(a) | the Agreement is hereby amended to add John Hancock Hedged Equity & Income Fund; |
(b) | Exhibit D is hereby amended to include the attached. |
2. | Term of the Amendment. This amendment shall become effective upon due execution and delivery by both parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
2 |
IN WITNESS WHEREOF, Mellon and Client have caused these presents to be duly executed as of the day and year first above written.
MELLON INVESTOR SERVICES LLC | ||||
By: | /s/ Lynore LeConche | |||
Name: | Lynore LeConche | |||
Title: | Relationship Manager |
JOHN HANCOCK HEDGED EQUITY & INCOME FUND | ||||
By: | /s/ Charles A. Rizzo | |||
Name: | Charles A. Rizzo | |||
Title: | Chief Financial Officer |
3 |
Exhibit D
STOCK TRANSFER FEE SCHEDULE
The following schedule is intended to be a comprehensive summary of the fees associated with this proposal. The pricing as listed below is valid for ninety days from the date of submission or until “date”. Fees are not subject to increase during the initial term.
Initial Term of Agreement: | Two (2) years1 |
Fees Not Subject to Increase | Two (2) Years |
Administration & Account Maintenance
Mellon will assign a Client Service Manager to consult with Client on all facets of stock transfer administration, including, but not limited to, securities regulations, transfer requirements, structuring of annual meetings, stock option exercises, cash and stock dividends, etc.
Monthly OFAC Reporting is included in the monthly administration and accounts maintenance fees listed below.
Fund Name |
Administration &
2010-2011 |
Administration &
2011-2012 |
John Hancock Hedged Equity & Income Fund |
The Administration and Account Maintenance fees cover all of the services and are subject to the allowances listed below.
1 Subject to Section 2(a) of the Agreement
Stock Transfer
Fee Schedule - Page 1
Fee |
JH
Hedged Equity & Income |
|
No. of Active Accounts Maintained | ||
No. of Inactive Accounts | ||
No. of Dividend Reinvestment Accounts Maintained | ||
No. of Dividend Processed per year | ||
No. of Legal Review Items Processed | ||
No. of Certificates Issued & Book Entry Credits | ||
No. of Certificates Cancelled & Book Entry Debits | ||
No. of Additional Mailings per Year (including one enclosure) | ||
No. of Reports, Analyses, Lists, or Labels | ||
No. of Inspectors of Election | ||
No. of Respondent Bank Omnibus Proxies | ||
No. of S/H Telephone Calls Handled by IVR System (d) |
(a) | IVR = Interactive Voice Response; CSR = Customer Service Representative |
(b) | ISD transactions are defined as any shareholder transaction initiated through ISD, including, but not limited to, share sales or purchases, duplicate statement or tax form requests, address or pin changes, account changes or updates and certificate requests. |
No. of SIH Telephone Calls Handled by IVR System (d) | ||
No. of SIH Telephone Calls Transferred from IVR to CSR (d) | ||
No. of Correspondence Items Responding to SIH Inquiries | ||
No. of Investor ServiceDirect® Transactions (d) |
Fee |
JH Hedged
Equity & Income |
|
No. of State Mandated Due Diligence Mailings for Lost Property | ||
No. of SEC Mandated Lost S/H Database Searches |
Stock Transfer
Fee Schedule - Page 2
EXHIBIT (2)(k)(3)(g)
AMENDMENT TO
JOHN HANCOCK CLOSED-END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
March 31, 2013
1 |
THIS AMENDMENT (this “Amendment”) dated March 31, 2013 to the Service Agreement for Transfer Agent Services dated June 1, 2002, as amended (the “Agreement”), is entered into among Computershare Shareowner Services LLC, a New Jersey limited liability company (“Agent”), and John Hancock Financial Opportunities Fund, John Hancock Hedged Equity & Income Fund, John Hancock Income Securities Trust, John Hancock Investors Trust, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Premium Dividend Fund, John Hancock Tax-Advantaged Dividend Income Fund and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust (collectively, the “Clients”).
WHEREAS, Agent and the Clients desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendment to Agreement |
(a) Effective March 31, 2013, this Agreement shall continue through June 30, 2014, provided however, the Clients may terminate this Agreement at any time and without penalty on sixty (60) days written notice to Agent.
(b) Exhibit D for each Client, as amended, is hereby deleted in its entirety and replaced with the attached revised Exhibit D.
2. | Term of the Amendment. This amendment shall become effective upon due execution and delivery by the parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
2 |
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as of the day and year first above written.
Computershare Shareowner Services LLC
By: | ||||
Name: | Jay McHale | |||
Title: | President |
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
By: | /s/ Salvatore Schiavone | |||
Name: | Salvatore Schiavone | |||
Title: | Treasurer of the Funds listed Above |
3 |
EXHIBIT (2)(k)(3)(h)
AMENDMENT TO
JOHN HANCOCK CLOSED-END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
June 30, 2014
1 |
THIS AMENDMENT (this “Amendment”) dated June 30, 2014 to the Service Agreement for Transfer Agent Services (the “ Agreement”) dated June 1, 2002, as amended by and between Computershare Inc., successor-in-interest to Computershare Shareowner Services LLC, a New Jersey limited liability company (“ Agent”), and John Hancock Financial Opportunities Fund, John Hancock Hedged Equity & Income Fund, John Hancock Income Securities Trust, John Hancock Investors Trust, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Premium Dividend Fund, John Hancock Tax- Advantaged Dividend Income Fund and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust (collectively, the “Clients”).
WHEREAS, Agent and the Clients desire to amend the Agreement as provided in this amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendment to Agreement |
(a) | Section 2 (a) of the Agreement is hereby amended and restated in its entirety to read as follows: |
(a) | Effective June 30, 2014, this Agreement shall continue through June 30. 2016, provided however, the Clients may terminate this Agreement at any time and without penalty on sixty (60) days written notice to Agent. |
(b) | Exhibit D for each Client, as amended, is hereby deleted in its entirety and replaced with the attached revised Exhibit D. |
2. | Term of the Amendment. This amendment shall become effective upon due execution and delivery by the parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
2 |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as of the day and year first above written.
Computershare Inc. | ||
By: | ||
Name: | Jay McHale | |
Title: | President |
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
By: | ||
Name: | Salvatore Schiavone | |
Title: | Treasurer of the Funds listed Above |
3 |
Exhibit D
STOCK TRANSFER FEE SCHEDULE
Effective June 30, 2014
Fees are not subject to increase during the term set forth in Section 2(a) of the Agreement.
Term Set Forth in Section 2(a) of the Agreement: | 2 Years1 |
Fee Not Subject to Increase | 2 Years |
Administration & Account Maintenance
Computershare will assign a Client Service Manager to consult with Client on all facets of stock transfer administration, including, but not limited to, securities regulations, transfer requirements, structuring of annual meetings, cash and stock dividends, etc.
Included in the Monthly fee below are: Monthly OFAC Reporting and all Annual Meeting Administrative costs, including:
• | Notice and Access |
• | Search and Distribution- the preparation and mailing of the notice and inquiry required by Rule 14a-13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the mailing or delivery of proxy solicitation materials |
• | Balancing and reconciling the OTC position. |
• | Provide tabulation reports |
• | Provide direct link to Broadridge to system for voting |
• | Vote monitoring to ensure that no phone calls are required to obtain vote |
Fund Name |
Administration &
Account Maintenance (per month) 2014-2016 |
John Hancock Bank & Thrift (“BTO”) | $2,382.00. |
John Hancock Hedged Equity & Income Fund | $1,579.00 |
John Hancock Income Securities Trust (“Income Securities”) | $5,380.00 |
John Hancock Investors Trust (“Investors Trust”) | $4,227.00 |
John Hancock Preferred Income Fund (“Preferred Income”) | $2,075.00 |
John Hancock Preferred Income Fund II (“Preferred Income II”) | $2,075.00 |
John Hancock Preferred Income Fund III (“Preferred Income III”) | $2,075.00 |
John Hancock Premium Dividend Fund (“Patriot Prem Div”) | $9,174.00 |
John Hancock Tax-Advantaged Dividend Income Fund (“Tax-Adv. Div Income”) | $1,921.00 |
John Hancock Tax-Advantaged Global Shareholder Yield Fund (“Tax-Adv. Global S/H Yield”) | $1,085.00 |
1 | Subject to Section 2(a) of the Agreement |
The Administration and Account Maintenance fees cover all of the services and are subject to the allowances listed below.
--------------- AII allowances are on a per fund basis ---------------
Allowances per Fund | |||||||||||
Fee | BTO (a) | Hedged Equity & Income Fund | Income Securities | Investors Trust | Premium Div Fund (b) | Preferred Income | Preferred Income II | Preferred Income III | Tax-Adv. Div Income | Tax-Adv. Global S/H Yield (c) | |
No. of Active Accounts Maintained | $2.50/ Year | 1,800 | 1,000 | 5,300 | 4,700 | 4,600 | 500 | 500 | 500 | 500 | 1,000 |
No. of Inactive Accounts |
40%
of Active
A/C Fee |
500 | 250 | 2,500 | 2,500 | 3,650 | 250 | 250 | 250 | 250 | 250 |
No. of Dividend Reinvestment Accounts Maintained | 44.00 | 1,400 | 100 | 1,500 | 1,050 | 2,300 | 100 | 100 | 100 | 100 | 100 |
No. of Legal Review Items Processed | $50.00 | 100 | 25 | 100 | 100 | 100 | 25 | 25 | 25 | 25 | 25 |
No. of Certificates Issued & Book Entry Credits | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Certificates Cancelled & Book Entry Debits | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Additional Mailings per Year (including one enclosure) | See Below | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
No. of Reports, Analyses, Lists, or Labels | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Inspectors of Election | $1,500.00 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
No. of Respondent Bank Omnibus Proxies | $150.00 | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited |
No. of S/H Telephone Call Handled by IVR System (d) | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of S/H Telephone Calls Transferred from IVR to CSR (d) | $5.25 | 500 | Unlimited | 2,075 | 1,700 | 2,600 | 310 | 310 | 310 | 310 | Unlimited |
(a) | IVR = Interactive Voice Response; CSR = Customer Service Representative |
(b) | ISD transactions are defined as any shareholder transaction initiated through ISD, including but not limited to share sales or purchases, duplicate statement or tax form requests, address or pin changes, account changes or updates and certificate requests. |
--------------- AII allowances are on a per fund basis ---------------
Stock Transfer
Fee Schedule - Page 2
Fee | BTO | Hedged Equity & Income Fund | Income Securities | Investors Trust | Premium Div Fund | Preferred Income | Preferred Income II | Preferred Income III | Tax-Adv. Div Income | Tax-Adv. Global S/H Yield | |
No. of State Mandated Due Diligence Mailings for Lost Property | $3 per a/c $250 min | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 |
No. of SEC Mandated Lost S/H Database Searches | $2.50 par a/c S250 min | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 |
MLink Administration Fee (Electronic delivery of materials) | As appraised | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Evote Administration Fee | As appraised | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Telephone Votes | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
Internet | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
Investor / Broker Directed Movement of Shares | $3.00 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 |
Stock Transfer
Fee Schedule - Page 3
Dividend Disbursement Fee
Number of dividends processed per year. The dividend disbursement fee includes all of the services listed below.
Fund Name | Included |
Financial Opportunities Fund | 4 |
Hedged Equity & Income Fund | 4 |
Income Securities | 4 |
Investors Trust | 4 |
Patriot Premium Dividend Fund | 12 |
Preferred Income | 12 |
Preferred Income II | 12 |
Preferred Income III | 12 |
Tax-Adv. Global S/H Yield | 12 |
Tax-Adv. Div Income | 12 |
• | Preparing and mailing checks |
• | Reconciling checks |
• | Preparing payment register in list form |
• | Withholding and filing taxes for non-resident aliens and others |
• | Filing federal tax information returns |
• | Processing “B” and “C” notices received from the IRS |
• | Mailing required statements (Form 1099DIV or Form 1042) 10 registered holders |
• | Maintaining stop payment files and issuing replacement checks |
• | Maintaining separate dividend addresses |
• | Receiving, verifying and posting funds to cover entire dividend distribution on mailing date of checks |
Stock Transfer
Fee Schedule - Page 4
INVESTOR PLAN SERVICES FEE SCHEDULE
Escheatment Services | |
Annual Compliance Services | Included |
SEC Mandated Electronic Database & New Address Retrieval Mailing | $3.00 per account |
(subject to the following minimum) | $250.00 |
Each state mandated due diligence mailing | $2.50 per account |
(subject to the following minimum) | $250.00 |
In-Depth Search and Location Services | No charge to company |
(Annual compliance services include all of the services listed below) |
• | Assist in establishing compliance with the unclaimed property requirements of all jurisdictions that may have a claim on escheatable property held by your organization |
• | Processing records and property subject to reporting based upon current state statutes rules, and regulations |
• | Requesting penalty and interest release agreements and indemnification from future claim agreements (on property remitted) from the states that offer such agreements |
• | Identifying properly that has become escheatable since the last filing date |
• | Review state regulations to determine if there have been any changes in reporting procedures |
• | Reporting and remitting property to states |
Stock Transfer
Fee Schedule - Page 5
ISSUER ONLINE System Access | Included |
• | Providing client access to Computershare’s mainframe inquiry and internet based system for management reporting and shareholder records |
• | Providing daily data on registered shareholders |
• | Providing daily access to proxy tabulation file during proxy season |
DIRECT REGISTRATION/PROFILE SYSTEM Enrollment Fee Annual Surety Fee Stock Distribution Event – full, full and fractional shares DRS Fee, per statement Investor directed movement of shares, each Broker directed movement of hares, each DRS/Profile reject fee, each DRS/Profile Broker Authorization Form. each |
Included Included $3.50 $0.25 $3.00 $3.00 $5.00 $1.50 |
ACH/DIRECT DEPOSIT SERVICES Initial Setup Fee Annual Maintenance Fee ACH file transmission, each distribution; per item Placement of Stop Payment Order Returns/Reversals, per occurrence (Annual Maintenance includes oil of the services listed below) |
Included Included Included $10.00 $10.00 |
• | Processing returned authorization forms |
• | Posting bank information to accounts |
• | Creating pre-note transactions and sending to clearinghouse |
• | Following up on rejects |
• | Produce and mail checks for returned items |
Stock Transfer
Fee Schedule - Page 6
ADDITIONAL SERIVICES AVAILABLE UPON REQUEST
STANDARD MAILING SERVICES Minimum charge for each of the below services Addressing mailing medium, per name Affixing labels, per label Machine inserting 1st Enclosure, per piece 2nd Enclosure, per piece Each Enclosure thereafter, per piece Manual inserting |
$500.00 $0.05 $0.04
$0.05 $0.04 $0.03 By Appraisal |
OTHER SERVICES Confidential Proxy Voting Dividends – Special Cash Dividends Electronic Distribution of Materials Foreign Tax Re-claim Householding of Annual Meeting and Other Materials Interactive Online Meeting Services
Logistics Services (including document transportation,
Mailing Quarterly or Periodic Reports Maintaining Mail Lists Secondary Offerings or Closings Stock Splits and Stock Dividends Special Meetings Survey Tabulation |
By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal By Appraisal |
Stock Transfer
Fee Schedule - Page 7
ADDITIONAL SERVICES PROVIDED BY COMPUTERSHARE
In addition to transfer agent services, Computershare Investor Services also provides the following related services. Contact your Sales Representative or Client Service Manager for additional information.
Bank/Broker Distributions Corporate Stock Buy-Back Services Custodial Services Employee Stock Option Plan Administration Employee Stock Purchase Plan Administration Escrow Services Exchange or Tender Offer Processing Financial Planning Services Odd-Lot Program Administration Proxy Solicitation StockWatch (beneficial owner identification) Subscription Agent Services Rights Agency Warrant Agency |
Stock Transfer
Fee Schedule - Page 8
EXPENSES AND OTHER CHARGES
Fees and Out of Pocket Expenses: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from OTC are billed in addition to the above fees. All charges and foes, out of pocket costs, expenses and disbursements of Computershare are due and payable by Client upon receipt of in invoice from Computershare.
With respect to any shareholder mailing processed by Computershare, Client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, Client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
Offering Administration Fee: A minimum fee of $5,000 will be imposed for activities associated with initial public offerings (IPO’s), secondary offerings and / or closings. The fee covers the coordination of efforts necessary between Computershare, the Client’s underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and / or book-entry credits. Certificates and /or book-entry credits over this amount will be billed at $2.00 each. This fee is in addition to any fees Computershare may charge for coordination of selling shareholders, custody services and/ or escrow services.
Conversion: If an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 calendar days of such conversion, Client agrees to provide Computershare with funds or shares sufficient to resolve the out-of-proof condition promptly after the expiration of such 90 day period.
Deconversion: Upon expiration or termination of this Agreement, Client shall pay Computershare a fee for deconversion services (e.g., providing shareholder lists and tiles, producing and shipping records, answering successor agent inquiries). This fee shall be based on Computershare’s then-current deconversion fee schedule. Computershare may withhold the Client’s records, reports and unused certificate stock pending Client’s payment in full of all fees and expenses owed to Computershare under this Agreement.
Legal Expenses, System Modifications: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Computershare’s expenses (including the cost of external or internal counsel) in resolving such matters; provide d that any legal expenses charged to the Client shall be reasonable.
In the event any federal, state or local laws, rules or regulations are enacted that require Computershare to (i) make any adjustments and/or modifications to its current system, or (ii) provide additional services to Client for which Computershare is not being compensated hereunder, then Client shall compensate Computershare (a) on a pro rata basis proportionate to the Client’s registered shareholder base, for the costs associated with making such required adjustments and/or modifications, or (b) according to Computershare’s standard fees established , in good faith, with respect to such additional services.
Other Services: Fees for any services provided to Client by or on behalf of Computershare hereunder that are not set forth above will be based on Computershare’s standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
Stock Transfer
Fee Schedule - Page 9
EXHIBIT (2)(k)(3)(i)
AMENDMENT TO
JOHN HANCOCK CLOSED-END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
1 |
THIS AMENDMENT (this "Amendment") dated June 30, 2016 to the Service Agreement for Transfer Agent Services, as amended (the "Agreement'1) dated June 1, 2002, as amended by and between Computershare Inc., successor-in-interest to Computershare Shareowner Services LLC, a New Jersey limited liability company (“Agent"), and John Hancock Financial Opportunities Fund, John Hancock Hedged Equity & Income Fund, John Hancock Income Securities Trust, John Hancock Investors Trust, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Premium Dividend Fund, John Hancock Tax- Advantaged Dividend Income Fund and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust (collectively, the "Clients'1).
WHEREAS, Agent and the Clients desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. | Amendment to Agreement. |
(a) | Section 2(a) of the Agreement is hereby amended and restated in its entirety to read as follows: |
"Effective June 30, 2016, this Agreement shall continue through June 30, 2018, provided however, the Clients may terminate this Agreement at any time and without penalty on ninety (90) days written notice to Agent."
(b) | Insert the following new section: |
"17. Company Audit. Agent shall, upon at least thirty (30) days written notice, no more frequently than once per year, and at mutually agreed dates and times, allow Clients, their auditors and/or their regulators, to inspect, examine, and audit (each, an "Audit") Agent's operations, procedures and business records that are relevant to the Services provided hereunder by Agent (collectively, "Records''), solely to determine Agent's compliance with this Agreement, and only to the extent that such Records were not included within the scope of the SSAE 16, AT 101, or equivalent audit conducted for Agent within the previous calendar year. Notwithstanding the foregoing, Agent may, in its sole discretion, prohibit Clients from entering certain areas of its facilities for security reasons, in which case Agent will provide Clients with alternative access to the Records, information or personnel in such restricted area, to the extent reasonably possible. Audits shall not include penetration testing. Further, Clients agree that any Audit includes the right of Clients to inspect Records on- site at Agent's office, but not the right to copy Records. Clients will provide Agent with a written Scope of Work including a mutually agreed level of detail, at least 10 business days in advance of commencement of an Audit. Agent shall cooperate reasonably and in good faith with Clients' internal or external auditors
2 |
to ensure a prompt and accurate Audit. In addition, Agent shall address within a reasonable time period and in the manner determined by Agent any practices found to be non-compliant with this Agreement after receipt of a Client Audit report. Clients acknowledge that Agent may require any such auditors and/or regulators of Clients to agree to written confidentiality provisions relating to Agent's proprietary and confidential information that such auditors and/or regulators may have access to during any such Audit. Clients agree to compensate Agent for all out of pocket expenses incurred in connection with any Audit, and also agrees to compensate Agent, in accordance with the Agent fee schedule in effect at the time such Audit, for the time of each Agent employee required to assist such Audit; provided, however, that in no event shall Clients be charged for the time incurred by Agent's Relationship Management employees required to assist such Audit."
(c) | Exhibit D for each Client, as amended, is hereby deleted in its entirety and replaced with the attached revised Exhibit D. |
2. | Term of the Amendment. This amendment shall become effective upon due execution and delivery by the parties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Partial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in two or more counterparts, each of which, when executed and delivered, shall be deemed an original for all purposes, but all of which together shall constitute one and the same instrument. |
3 |
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as of the day and year first above written.
Computershare Inc.
By: | ||||
Name: | Martin J. McHale, Jr. | |||
Title: | President, U.S. Equity Services |
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
By: | ||||
Name: | Salvatore Schiavone | |||
Title: | Treasurer of the Funds listed Above |
4 |
EXHIBIT 2(k)(3)(j)
AMENDMENT TO
JOHN HANCOCK CLOSED-END FUNDS
SERVICE AGREEMENT
FOR
TRANSFER AGENT SERVICES
THIS AMENDMENT (“Amendment”) dated July 1, 2018 to the Service Agreement for Transfer Agent Services (the “Agreement”) dated June 1, 2002, as amended by and between Computershare Inc., a Delaware corporation, successor-in-interest to Computershare Shareowner Services LLC (“Agent”), and John Hancock Financial Opportunities Fund, John Hancock Hedged Equity & Income Fund, John Hancock Income Securities Trust, John Hancock Investors Trust, John Hancock Preferred Income Fund, John Hancock Preferred Income Fund II, John Hancock Preferred Income Fund III, John Hancock Premium Dividend Fund, John Hancock Tax-Advantaged Dividend Income Fund and John Hancock Tax-Advantaged Global Shareholder Yield Fund, each a Massachusetts Business Trust (collectively, the “Clients”) .
WHEREAS, Agent and the Clients desire to amend the Agreement as provided in this Amendment;
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the patties hereto agree as follows;
1. | Amendments to Agreement. The Agreement is hereby amended as follows: |
(a) | All references in the Agreement to “Mellon” shall now be referred to as “Agent”. |
(b) | Section 2(a) of the Agreement is hereby amended and restated in its entirety as follows: |
“(a) Effective July 1, 2018, the Agreement shall continue through June 30, 2021; provided, however, the Clients may terminate this Agreement at any time and without penalty upon sixty (60) days written notice to Agent.”;
(c) | Exhibit D is hereby deleted in its entirety and replaced it with the new Exhibit D attached hereto; and |
(d) | Exhibit E attached hereto is hereby added to the Agreement. |
2. | Term of the Amendment. This Amendment shall become effective upon due execution and delivety by the patties hereto, and shall remain in effect for so long as the Agreement shall remain in effect. |
3. | Ratification. Except as expressly set forth herein, the Agreement is not modified hereby and shall remain in full force and effect in accordance with the respective provisions thereof and is in all respects ratified and affirmed. |
4. | Pattial Invalidity. If any provision of this Amendment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Amendment as a whole, but this Amendment shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the patties shall be construed and enforced only to such extent as shall be permitted by applicable law. |
5. | Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect, and enforceability as an original signature. |
2
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed as of the day and year first above written.
Computershare Inc.
By: | /s/ Steven RI. Rothbloom | |
Name: | Steven RI. Rothbloom | |
Title: | CEO, Computershare U.S . |
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
By: | ||
Name: | Salvatore Schiavone | |
Title: | Treasurer of the Funds listed Above |
3
Exhibit D
STOCK TRANSFER FEE SCHEDULE
Effective July 1, 2018
Fees are not subject to increase during the term set forth in Section 2(a) of the Agreement.
Term Set Forth in Section 2(a) of the Agreement: | 3 Years1 |
Fees Not Subject to Increase | 3 Years |
Administration & Account Maintenance
Agent will assign a Client Service Manager to consult with Client on all facets of stock transfer administration, including, but not limited to, securities regulations, transfer requirements, structuring of annual meetings, cash and stock dividends, etc.
Included in the Monthly fee below are: Monthly OFAC Reporting, New Account Mailings and all Annual Meeting Administrative costs, including:
• | Notice and Access | |
• | Search and Distribution- the preparation and mailing of the notice and inquiry required by Rule 14a-13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the mailing or delivery of proxy solicitation materials | |
• | Balancing and reconciling the DTC positions | |
• | Provide tabulation reports | |
• | Provide direct links to Broadridge to system for voting | |
• | Vote monitoring to ensure that no phone calls are required to obtain vote |
International Currency Exchange
• | Agent may, at its option, offer a currency conversion service (“ICE Service”) to certain shareholders whereby any such shareholder can elect to receive payments in a currency other than U.S. Dollars. The ICE Service is voluntary and will only be provided to a shareholder who selects such ICE Service and who agrees to the ICE Service terms and conditions. Agent shall charge a processing fee to the shareholder and may receive compensation from the currency conversion service provider. Clients will not incur fees resulting from the ICE Service. |
Shareholder Communications
• | Provide Clients-specific shareholder contact number | |
• | Provide Interactive Voice Response (IVR) 24/7 (subject to system maintenance) | |
• | Respond to shareholder inquiries (written, e-mail and web) | |
• | Record shareholder calls | |
• | Scan and image incoming correspondence from shareholders |
1 Subject to Section 2(a) of the Agreement
• | Solicit, collect and record consents and U.S mobile telephone numbers from shareholders for Agent to send text messages. Such consents and information may be collected via IVR, Investor Center, shareholder calls, or in writing. | |
• | For consented Accounts, provide text message notifications for: | |
• | various transactions (not to replace legally required notifications) | |
• | action to be taken on an Account (e.g., uncashed checks, uncertified TIN) | |
• | Receive and record requests to stop text messages | |
• | Administer text message campaigns (as agreed upon between Clients and Agent, and which may be subject to additional fees) |
Fund Name |
Administration & Account Maintenance
(per month) 2018/2019 |
Administration & Account Maintenance
(per month) 2019/2020 |
Administration & Account Maintenance
(per month) 2020/2021 |
John Hancock Bank & Thrift (“BTO”) | $2,069.00 | $1,994.00 | $1,994.00 |
John Hancock Hedged Equity & Income Fund | $1,371.00 | $1,322.00 | $1,322.00 |
John Hancock Income Securities Trust (“Income Securities”) | $4,672.00 | $4,503.00 | $4,503.00 |
John Hancock Investors Trust (“Investors Trust”) | $3,671.00 | $3,538.00 | $3,538.00 |
John Hancock Preferred Income Fund (“Preferred Income”) | $1,803.00 | $1,737.00 | $1,737.00 |
John Hancock Preferred Income Fund II (“Preferred Income II”) | $1,803.00 | $1,737.00 | $1,737.00 |
John Hancock Preferred Income Fund III (“Preferred Income III”) | $1,803.00 | $1,737.00 | $1,737.00 |
John Hancock Premium Dividend Fund (“Patriot Prem Div”) | $7,968.00 | $7,679.00 | $7,679.00 |
John Hancock Tax-Advantaged Dividend Income Fund Tax-Adv. Div Income”) | $1,668.00 | $1,608.00 | $1,608.00 |
John Hancock Tax-Advantaged Global Shareholder Yield Fund (“Tax-Adv. Global S/H Yield”) | $1,568.00 | $1,511.00 | $1,511.00 |
Stock Transfer
Fee Schedule – Page 5
The Administration and Account Maintenance fees cover all of the services and are subject to the allowances listed below.
-------------------- All allowances are on a per fund basis --------------------
Fee | BTO (a) | Hedged Equity & Income Fund | Income Securities | Investors Trust | Premium Div Fund (b) | Preferred Income | Preferred Income II | Preferred Income III | Tax-Adv. Div Income | Tax-Adv. Global S/H Yield (c) | |
No. of Active Accounts Maintained | $2.50 / Year | 1,800 | 1,000 | 5,300 | 4,700 | 4,600 | 500 | 500 | 500 | 500 | 1,000 |
No. of Inactive Accounts | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Dividend Reinvestment Accounts Maintained | $4.00 | 1,400 | 100 | 1,500 | 1,050 | 2,300 | 100 | 100 | 100 | 100 | 100 |
No. of Legal Review Items Processed | $50.00 | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited |
No. of Certificates Issued & Book Entry Credits | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Certificates Cancelled & Book Entry Debits | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Additional Mailings per Year (including one enclosure) | See Below | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
No. of Reports, Analyses, Lists, or Labels | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of Inspectors of Election | $1,500.00 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
No. of Respondent Bank Omnibus Proxies | $150.00 | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited |
No. of S/H Telephone Calls Handled by IVR System (d) | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
No. of S/H Telephone Calls Transferred from IVR to CSR (d) | $5.25 | 500 | Unlimited | 2,075 | 1,700 | 2,600 | 310 | 310 | 310 | 310 | Unlimited |
No. of Correspondence Items Responding to S/H Inquiries | $15.00 | 100 | Unlimited | 250 | 250 | 500 | 60 | 60 | 60 | 60 | Unlimited |
No. of on line Transactions (e) | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited |
(a) IVR = Interactive Voice Response; CSR = Customer Service Representative
(b) On Line Transactions are defined as any shareholder transaction initiated through the web, including, but not limited to, share sales or purchases, duplicate statement or tax form requests, address or pin changes, account changes or updates and certificate requests.
-------------------- All allowances are on a per fund basis --------------------
Stock Transfer
Fee Schedule – Page 6
No. of SEC Mandated Lost S/H Database Searches | $2.50 per a/c $250 min | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 |
E delivery Administration Fee (Electronic delivery of meeting materials) | As appraised | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Evote Administration Fee | As appraised | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Telephone Votes | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
Internet | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | Unlimited | |
Investor / Broker Directed Movement of Shares | $3.00 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 | 50 |
(a) JH Bank & Thrift charges $1.50 per S/H telephone calls transferred from IVR to a CSR.
(b) JH Patriot Premium Dividend II the Number of certificates issued / cancelled and book entry credits / debits in included for no additional fee.
Stock Transfer
Fee Schedule – Page 7
Dividend Disbursement Fee
Number of dividends processed per year. The dividend disbursement fee includes all of the services listed below.
Fund Name | Included |
Financial Opportunities Fund | 4 |
Hedged Equity & Income Fund | 4 |
Income Securities | 4 |
Investors Trust | 4 |
Patriot Premium Dividend Fund | 12 |
Preferred Income | 12 |
Preferred Income II | 12 |
Preferred Income III | 12 |
Tax-Adv. Global S/H Yield | 12 |
Tax-Adv. Div Income | 12 |
• | Preparing and mailing checks |
• | Reconciling checks |
• | Preparing payment register in list form |
• | Withholding and filing taxes for non-resident aliens and others |
• | Filing federal tax information returns |
• | Processing “B” and “C” notices received from the IRS |
• | Mailing required statements (Form 1099DIV or Form 1042) to registered holders |
• | Maintaining stop payment files and issuing replacement checks |
• | Maintaining separate dividend addresses |
• | Receiving, verifying and posting funds to cover entire dividend distribution on mailing date of checks |
Stock Transfer
Fee Schedule – Page 8
INVESTOR PLAN SERVICES FEE SCHEDULE
Item | Amount | Note | Paid By 1 |
Plan Set Up Fee | $2,500 | Per Fund | Clients |
Fulfillment Processing | $5.50 | Per request | Clients |
Reinvestment Trading Fee | $.05 | Per share | Participant |
Purchase of Additional Shares
By check By Electronic Transfer Trading Fee |
$5.00 $2.00 $.05 |
Per investment Per investment Per share |
Participant |
Sale of Shares 2
Trading Fee |
$5.00
$.05 |
Per share | Participant |
Safekeeping | No Charge | ||
Duplicate Statement – Prior Year | No Charge | ||
Insufficient Funds or Rejected Automatic Debit | $35.00 | Per check or debit | Participant |
Other services including (but not limited to):
Certificate Issuance Transfer of Shares |
Per Stock Transfer Agency Contract | Clients | |
Expenses including (but not limited to): Forms/Brochures, Postage, 800 Number, etc. | As incurred | Clients |
Note 1 |
Fees could be:
“P”, Participant Paid or “C”, Clients Paid |
Note 2 | Including sales of fractional shares upon termination from plan. |
Escheatment Services | |
Annual Compliance Services | Included |
SEC Mandated Electronic Database & New Address Retrieval Mailing
(subject to the following minimum) |
$3.00 per account
$250.00 |
Each state mandated due diligence mailing
(subject to the following minimum) |
$2.50 per account
$250.00 |
In-Depth Search and Location Services (Annual compliance services include all of the services listed below) |
No charge to Clients |
• | Assist in establishing compliance with the unclaimed property requirements of all jurisdictions that may have a claim on escheatable property held by your organization | |
• | Processing records and property subject to reporting based upon current state statutes, rules, and regulations | |
• | Identifying property that has become escheatable since the last filing date | |
• | Review state regulations to determine if there have been any changes in reporting procedures | |
• | Reporting and remitting property to states |
ISSUER ONLINE System Access | Included |
• | Providing client access to Agent’s mainframe inquiry and internet based system for management reporting and shareholder records | |
• | Providing daily data on registered shareholders | |
• | Providing daily access to proxy tabulation file during proxy season |
DIRECT REGISTRATION/PROFILE SYSTEM |
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Enrollment Fee | Included |
Annual Surety Fee | Included |
Stock Distribution Event – full, full and fractional shares | $3.50 |
DRS Fee, per statement | $0.25 |
Investor directed movement of shares, each | $3.00 |
Broker directed movement of shares, each | $3.00 |
DRS/Profile reject fee, each | $5.00 |
DRS/Profile Broker Authorization Form, each | $1.50 |
ACH/DIRECT DEPOSIT SERVICES | |
Initial Setup Fee | Included |
Annual Maintenance Fee | Included |
ACH file transmission, each distribution, per item | Included |
Placement of Stop Payment Order | $10.00 |
Returns/Reversals, per occurrence (Annual Maintenance includes all of the services listed below) |
$10.00 |
• | Processing returned authorization forms |
• | Posting bank information to accounts |
• | Creating pre-note transactions and sending to clearinghouse |
• | Following up on rejects |
• | Produce and mail checks for returned items |
ADDITIONAL SERVICES AVAILABLE UPON REQUEST
STANDARD MAILING SERVICES
Minimum charge for each of the below services |
$500.00 |
Addressing mailing medium, per name | $0.05 |
Affixing labels, per label | $0.04 |
Machine Inserting
1st Enclosure, per piece 2nd Enclosure, per piece Each Enclosure thereafter, per piece |
$0.05 $0.04 $0.03 |
Manual Inserting | By Appraisal |
OTHER SERVICES | |
Confidential Proxy Voting | By Appraisal |
Dividends – Special Cash Dividends | By Appraisal |
Electronic Distribution of Materials | By Appraisal |
Foreign Tax Re-claim | By Appraisal |
Householding of Annual Meeting and Other Materials | By Appraisal |
Interactive Online Meeting Services | By Appraisal |
Logistics Services (including document transportation, fulfillment, printing and media placement) | By Appraisal |
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Mailing Quarterly or Periodic Reports | By Appraisal |
Maintaining Mail Lists | By Appraisal |
Secondary Offerings or Closings | By Appraisal |
Stock Splits and Stock Dividends | By Appraisal |
Special Meetings | By Appraisal |
Survey Tabulation | By Appraisal |
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ADDITIONAL SERVICES PROVIDED BY AGENT
In addition to transfer agent services, Agent also provides the following related services. Contact your Sales Representative or Client Service Manager for additional information. Bank/Broker Distributions Corporate Stock Buy-Back Services Custodial Services Employee Stock Option Plan Administration Employee Stock Purchase Plan Administration Escrow Services Exchange or Tender Offer Processing Financial Planning Services Odd-Lot Program Administration Proxy Solicitation StockWatch (beneficial owner identification) Subscription Agent Services Rights Agency Warrant Agency |
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EXPENSES AND OTHER CHARGES
Fees and Expenses: The cost of stationery and supplies, including but not limited to transfer sheets, dividend checks, envelopes, and paper stock, together with any disbursement for telephone, postage, mail insurance, travel for annual meeting, link-up charges for ADP and tape charges from DTC are billed in addition to the above fees. All charges and fees, costs, expenses and disbursements of Agent are due and payable by Client upon receipt of an invoice from Agent.
With respect to any shareholder mailing processed by Agent, Client shall, at least one business day prior to mail date, provide immediately available funds sufficient to cover all postage due on such mailing. For any dividend mailing, Client shall, at least one business day prior to the mail date, also provide immediately available funds sufficient to pay the aggregate amount of dividends to be paid.
Offering Administration Fee: A minimum fee of $5,000 will be imposed for activities associated with initial public offerings (IPO’s), secondary offerings and / or closings. The fee covers the coordination of efforts necessary between Agent, the Client’s underwriters, the banknote company and DTC in order to effect the closing. This fee will cover the issuance of up to 200 certificates and / or book-entry credits. Certificates and /or book-entry credits over this amount will be billed at $2.00 each. This fee is in addition to any fees Agent may charge for coordination of selling shareholders, custody services and / or escrow services.
Conversion: If an out-of-proof condition exists at the time of conversion, and such condition is not resolved within 90 calendar days of such conversion, Client agrees to provide Agent with funds or shares sufficient to resolve the out-of-proof condition promptly after the expiration of such 90 day period.
Deconversion: Upon expiration or termination of this Agreement, Clients shall pay Agent a fee for deconversion services (e.g., providing shareholder lists and files, producing and shipping records, answering successor agent inquiries). This fee shall be based on Agent’s then-current deconversion fee schedule.
Legal Expenses, System Modifications: Certain expenses may be incurred in resolving legal matters that arise in the course of performing services hereunder. This may result in a separate charge to cover Agent’s expenses (including the cost of external or internal counsel) in resolving such matters; provided that any legal expenses charged to the Clients shall be reasonable.
In the event any federal, state or local laws, rules or regulations are enacted that require Agent to (i) make any adjustments and/or modifications to its current system, or (ii) provide additional services to Client for which Agent is not being compensated hereunder, then Clients shall compensate Agent (a) on a pro rata basis proportionate to the Clients’ registered shareholder base, for the costs associated with making such required adjustments and/or modifications, or (b) according to Agent’s standard fees established, in good faith, with respect to such additional services.
Other Services: Fees for any services provided to Clients by or on behalf of Agent hereunder that are not set forth above will be based on Agent’s standard fees at the time such services are provided or, if no standard fees have been established, an appraisal of the work to be performed.
Bank Accounts: All funds received by Agent under this Agreement that are to be distributed or applied by Agent in the performance of Services (the “Funds”) shall be held by Agent as agent for Clients and deposited in one or more bank accounts to be maintained by Agent in its name as agent for Clients. Until paid pursuant to this Agreement, Agent may hold or invest the Funds through such accounts in: (a) obligations of, or guaranteed by, the United States of America; (b) commercial paper obligations rated A-1 or P-1 or better by Standard & Poor’s Corporation (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), respectively; (c) AAA rated money market funds that comply with Rule 2a-7 of the Investment Company Act of 1940; or (d) demand deposit accounts, short term certificates of deposit, bank repurchase agreements or bankers’ acceptances, of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit or investment made by Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. Agent may from time to time receive interest, dividends or other earnings in connection with such deposits or investments. Agent shall not be obligated to pay such interest, dividends or earnings to Clients, any shareholder or any other party.
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Exhibit E
Privacy and Information Security Addendum
This Privacy and Information Security Addendum (“Security Addendum”) comprises additional obligations of Agent to Clients and are incorporated into and constitute a material part of the Agreement. All capitalized terms not otherwise defined in this Security Addendum shall have the meaning given to them in the Agreement. Agent and Clients agree as follows:
1. Personal Information. As between Agent and Clients, all non-public information about living individuals received from Clients. otherwise obtained by Agent in connection with the Agreement, or to which Agent has access in the course of performing the services (..Personal Information’·) is the sole and exclusive property of Clients. including without limitation names. signatures, addresses. email addresses. telephone numbers, account numbers and information. social security numbers and other personal identification numbers. financial data. date of birth. transaction in formation , user names, passwords. security codes, employee ID numbers, and identity photos .
2. Use of Personal Information. Agent may access. collect, use, disclose. and store Personal Information only as reasonably necessary to perform its obligations under the Agreement and for no other purpose. unless it obtains prior written (including in electronic format) consent from Clients or the individual. Without limiting its other obligations hereunder. Agent (a) will treat all Personal Information as Confidential Information of Clients: and
(b) except as otherwise set forth in the Agreement , may disclose Personal Information to its affiliates, agents and subcontractors as reasonably necessary to perform its obligations under the Agreement. Agent may not disclose Personal Information to any other third party without Clients ‘ prior written consent.
3. U.S. Privacy Regulations. The Agreement or the services may be governed by one or more U.S. privacy laws or regulations (collectively, the “U.S. Privacy Regulations”) including, without limitation. the Gramm-Leach-Bliley Act of 1999, CAL. CIV. CODE §1798.82. and MA 201 C.M.R. §1 7.00. If so governed, then (a) the term.. Personal Information .. shall further include all Nonpublic Personal Information. Personal Information. material nonpublic in format ion, and similar terms. as each of those terms is defined in or by application of each respective U.S. Privacy Regulation: and (b) Agent will comply with all requirements of the U.S. Privacy Regulations applicable to Personal Information actually received by Agent. If a U.S. Privacy Regulation applicable to Agent under the Agreement is amended. and/or if any other state or federal law or regulation is effected such that a more restrictive standard of confidentiality or obligation of privacy or security is imposed with respect to an applicable component of the Personal Information portions of the Confidential Information. then such more restrictive standard shall prevail over the provisions of the Agreement with respect to those portions.
4. Security Safeguards. Agent will establish and maintain administrative. physical and technical safeguards designed to protect against unauthorized access, use, disclosure, alteration or destruction of Personal Information. including . without limitation. a written information security program (“Information Security Program”) that complies with the Privacy Regulations. The Information Security Program shall include the maintenance of policies and procedures. and technical, physical, and administrative safeguards, designed to (a) ensure the security and confidentiality of the Confidential Information. (b) protect against any anticipated threats or hazards to the security or integrity of Confidential Information, (c) protect against unauthorized access to or use of such in format ion. and (d) ensure appropriate disposal of the Confidential Information. Without limiting the foregoing. Agent shall comply with the Information Security Controls attached to this Security Addendum as Attachment 1 . Agent certifies that its Information Security Program is and shall be in compliance with MA 201 C.M.R. § 1 7.00. In furtherance of the foregoing. the parties will exchange all electronic data in accordance with Agent’s then-current security protocols and policies. including without limitation, minimum encryption and password requirements.
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5. Security Breach. Agent will promptly (but in no event more than seventy-two (72) hours) notify Clients in writing following Agent’s confirmation that there has been an unauthorized acquisition, use. or disclosure of. or access to. Personal Information (“‘Security Breach”). After providing such notice, Agent will investigate the Security Breach. take commercially reasonable steps to eliminate or contain the exposures that led to such Security Breach, and keep Clients advised of the status of such Security Breach and all matters related thereto. Agent further agrees to provide reasonable assistance and cooperation requested by Clients, in the furtherance of any correction. remediation, or investigation of any such Security Breach and/or the mitigation of any damage. including. without limitation. any notification that Clients may determine appropriate to send to individuals impacted by the Security Breach, and/or the provision of any credit monitoring services that Clients deems appropriate to provide to such individuals. The costs of all such assistance. cooperation, correction, remediation or investigation shall be allocated between Clients and Agent as agreed in writing between the parties prior to the time such actions are to be implemented. Unless required by law. Agent shall not notify any individual or any third party other than law enforcement of any Security Breach involving Personal Information without first consulting with. and obtaining the permission of. Clients. In addition. within thirty (30) days of identifying a confirmed Security Breach. Agent shall develop and execute a plan, to the extent practical. that reduces the likelihood of a recurrence of such Security Breach .
6. Return or Destruction of Personal Information. Promptly upon expiration or termination of Agent’s obligations to provide services under the Agreement, or such earlier time as Clients reasonably requests with respect to Personal Information that is no longer necessary for Agent to provide the services. Agent shall return to Clients, or securely destroy (or render unreadable or undecipherable if return is not reasonably feasible or desirable by Clients), each and every original and copy in every media of all Personal Information in Agent‘s possession. custody or control. Notwithstanding the foregoing. if applicable law or Agent’s standard or customary record retention policies or procedures do not permit Agent to return or destroy the Personal In format i on, or if such return or destruction is commercially unreasonable under the circumstances. Agent will retain such Personal Information (but only so long as required by such policies or procedures. or for so long as such commercial unreasonability continues). and will continue to maintain the confidentiality of the Personal Information in accordance with the Agreement.
7. Business Continuity Plan. Agent shall maintain plans for business continuity. disaster recovery. and backup capabilities and facilities designed to ensure Agent’s continued performance of its obligations under this Agreement. including without limitation loss of production. loss of systems. loss of equipment. failure of carriers and the failure of Agent‘s or its suppliers’ equipment. computer systems or business systems (“Business Continuity Plan’“). Such Business Continuity Plan shall include, but not be limited to, testing, accountability. and corrective actions designed to be immediately implemented, if necessary. Agent will provide a summary of such Business Continuity Plan to Clients upon request. Agent shall test its Business Continuity Plan a minimum of once each calendar year.
8. Annual Operational Controls Audits. Agent will engage a certified public accounting firm to conduct an SSAE 18. ISAE 3402. AT-C Section 205 (Criteria set forth in TSP Section 100. 2017 Trust Services Criteria for Security. Availability. Processing Integrity. Confidentiality, and Privacy (SOC 2)J, or equivalent audit of Agent’s control environment as applicable to the services provided hereunder and prepare a report on an annual basis. Agent shall make available to Clients a copy of such report prepared in connection with such audit. within a reasonable amount of time after request by Clients. Clients will pay a fee for the report in accordance with Agent’s tee schedule in effect at such time.
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9. Transition Cooperation. Upon receipt of written notice of termination. the parties will use commercially reasonable efforts to effect an orderly termination of this Agreement. Without limiting the forego in g. Agent will deliver Clients’ records in industry standard format to Clients or the successor agent designated by Clients in accordance with Clients’ request.
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Attachment 1 to Privacy and Information Security Addendum
Information Security Controls
l. Scope. This Attachment I details the information security controls to be applied to Clients’ Confidential Information during the Term of the Agreement.
2. Definitions.
“Information Security Policy” means a high-level document containing a set of principles relating to information security that includes the Overall intention and direction as formally expressed and modified from time to time by management.
“Information Security Standard” defines the principles and minimum controls necessary for protecting Confidential Information and supporting the Information Security Policy.
“Technical Security Standards” means the technology platform specific security standards that detail the mandatory baseline and enhanced levels of security for Agent IT systems.
3. Information Security Controls. Agent has established and during the Term will maintain an Information Security Standard aligned with industry practice (such as the International Organization for Standardization’s standards: ISO/IEC 2700 I: 201 3). Information security responsibilities are defined in the Information Security Standard and the Information Security Policy is reviewed on a periodic basis and approved by senior management.
4. Information Security Questionnaire. Annually, upon request. Agent will complete and deliver to Clients a Standard Information Gathering (SIG) Questionnaire. If Clients have additional questions that are not covered in the SIG or by the scope of the most recent SSAE 18, ISAE 3402, AT-C Section 205 or equivalent audit report. Clients may contact its relationship or account manager , who will facilitate a conversation with Agent‘s Global Information Security & Risk Group.
5. Asset Management.
5.1. Agent will keep asset inventories up-to-date using manual and automated discovery processes and tools. where practical. and will protect asset inventories against unauthorized modification.
5.2. Information owners and information custodians will be assigned to all business applications with clear responsibilities defined in the Information Security Policy.
5.3. Information security risk assessments will be conducted against all applications on an annual basis. or in the event of material change.
5.4. All Agent employees are required to adhere to the information classification and labeling guidelines published in the Information Security Standard.
6. Human Resource Security.
6.1. All newly-hired employees will be subject to screening prior to employment. which may include drug screening and background checks in accordance with Schedule A (Hiring Criteria) attached hereto . The screening processes are conducted in accordance with relevant national laws and industry regulations and provide verification of identity. references and credentials.
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6.2. Temporary employees will be evaluated in substantially the same manner as permanent employees. Agent reviews the screening processes of the contract staffing agencies through its supplier management program.
6.3. All employees will be required to complete an annual information security awareness program.
6.4. Violations and breaches of the Information Security Policy will be investigated and disciplinary actions may be taken in accordance with internal Human Resource policies.
6.5. Upon termination. transfer, or reassignment. as applicable. Agent will disable inactive accounts of users in a timely manner, require return of assets, and remove access rights.
7. Physical and Environment Security.
7.1. Physical access to Agent’s on-site data centers will be strictly controlled by proximity card access groups that are limited to the operations staff who require access to perform their contracted roles.
7.2. Agent’s on-site data centers will have strict controls to protect against environmental threats such as over-heating, flooding, fire, dust and chemical pollutants.
7.3. Agent’s on-site data centers will have dual power feeds. monitored Uninterruptible Power Supply (UPS) systems. back-up generators with on-site fuel store. redundant air conditioning systems, and a dual-path telecommunications infrastructure for critical communications systems.
7.4. Confidential Information will be securely erased using industry-standard data deletion utilities. physically destroyed. or returned to Clients. subject to the terms and conditions of the Agreement.
8. Communications and Operations Management.
8.1. All technology teams will maintain internal libraries of standard operating procedures that cover the installation, configuration. maintenance, and administration of the Agent systems. networks , and business applications.
8.2. Changes to production systems (e .g., upgrades and modifications to business applications emergency fixes. changes to systems and networks. new code deployments) will be subject to appropriate change management processes.
8.3. Segregation of duties will be maintained to minimize risk of theft. fraud. error. and unauthorized changes to information. unless mitigating controls are implemented ( e.g.. monitoring. log tile reviews. spot checks. audit trails).
8.4. Development. UAT. and handover environments are segregated.
8.5. Capacity planning activities are included in the system planning process and also in response to changing business requirements.
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8.6. Documented operating procedures are maintained that include the scope, frequency. methods and technologies used in data back-up.
8.7. Network security controls are appropriately implemented and managed (e.g.. network gateways. switches. routers. firewalls. IDS. load balancers). The technical security controls for each core technology are documented in the relevant Agent Technical Security Standards and incorporate security architecture principles and security hardening guidelines.
8.8. Agent desktop and laptop computers are installed with data loss prevention software that is configured to prevent the copying of certain information types (e.g.. Shareholder Reference Numbers. Social Security numbers. National Insurance numbers. Confidential Information) to all removable media devices (e.g., CD. external hard-drive. USB flash drive).
8.9. Confidential Information stored on Agent IT systems is securely destroyed before the asset ts decommissioned, sold. or transferred to an external party.
8.10. All critical Agent IT systems, applications. and network devices are configured to generate and record security event logs and maintain the integrity of important security-related information.
8.11. The logs generated by Agent IT systems. applications. and network devices are stored. retained and protected from unauthorized access. destruction, and modification in accordance with business requirements.
8.12. Where applicable. encryption is used to protect Confidential Information in transit (excluding such Confidential Information transmitted within Agent’s internal network) and at rest. including when stored on portable media and on de, ices outside of the Agent environment.
8.13. An appropriate non-disclosure agreement will be in place prior to transmission of Confidential Information outside of the Agent IT environment to a third-party supplier.
8.14. Processes to assess third-party service deli very. including the assessment of the information security status of each supplier, will be established at a frequency that is commensurate with the criticality rating of the supplier.
9. Internal Access Control to Agent Systems.
9.1. Allocation and use of privileges within the Agent systems will be restricted and controlled using appropriate procedures for authorization and control.
9.2. Appropriate mechanisms for user authentication and authorization will be maintained in accordance with a “least privilege” policy based on need to know for the role.
9.3. Controls will be maintained to enforce rigorous access restrictions for remote users. contractors and service providers.
9.4. Timely and accurate administration of user accounts and authentication management will be implemented. including a periodic recertification process. based on the criticality of the system.
9.5. The following processes will be maintained: processes to ensure assignment of unique IDs to each person with system access; processes to ensure Agent-supplied defaults for passwords and security parameters are changed and appropriately managed; processes to disable access to inactive accounts or accounts of terminated/transferred users in a timely manner.
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10. Information Systems Development, Acquisition and Maintenance.
10.1. Due consideration of security issues is given during system and application development processes to provide assurance of the robustness and effectiveness of system security controls.
10.2. Correct processing is facilitated in applications by including controls around data input and output validation. message integrity, and controlled internal processing.
10.3. Confidential Information is exchanged in accordance with security protocols. including encryption.
10.4. Confidential Information stored on laptops is encrypted.
10.5. Change management procedures are in place for system changes within the operational environment. including the installation of software or patches.
10.6. Procedures for ensuring the security of system files will be maintained. including change management processes for operating software. mechanisms for protection of system test data. and access controls to program source code.
10.7. Robust controls will be maintained for the identification and management of technical vulnerabilities. including governance frameworks for the testing and deployment of system. software and security patches. and anti virus pattern and signature updates.
10.8. Agent will conduct monthly scans against Internet-facing operating systems and annual scans against internal endpoints with a current commercially available vulnerability assessment tool.
10.9. Agent. on its own or through its affiliate. conducts penetration tests against certain critical-rated applications identified by Agent on a periodic basis. Upon request, Agent will provide to its clients executive summary results of these scans. which will list the number and severity of issues found, as well as remediation timelines based on severity.
10.10. Agent. on its own or through its affiliate. conducts vulnerability assessments against its externally- facing network infrastructure on a periodic basis according to a schedule determined by Agent. Upon request. Agent will provide to its clients executive summary results of these scans. which will list the number and severity of issues found, as well as remediation timelines based on severity.
11. Information Security Incident Management.
11.1. All Agent employees are provided with training and guidance to identify and report information security events.
11.2. Robust procedures are maintained for governing the management of information security incidents.
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12. Business Continuity Management.
12.1. Agent has a formal global process and provides a centralized toolset to allow business units to collect the information to build their Business Impact Analysis (BIA).
12.2. The Business Continuity program includes a plan to help ensure staff are trained and adequately prepared.
12.3. The Business Continuity plans are regularly updated and tested.
13. Logical Separation. Agent will maintain all customer information logically distinct from other information of Agent and its other customers.
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Schedule A
Hiring Criteria
Background Check Requirements
Agent Background Check Criteria
Considering whether or not to hire an individual based on the individual’s prior conduct as evidenced by a conviction or other information provided to the employer, the recruiter must consider the following factors: (1) the nature and the gravity of the offense or offenses; (2) the time that has passed since the conviction and /or completion of the sentence ; and (3) the nature of the job sought.
Criminal Adjudication Criteria-Ten Year Check
Pass | Fail | |
No record found or clear | X | |
Court disposition of not guilty, nolle prosse, waived or dismissed | X | |
Any one misdemeanor conviction or misdemeanors pending court disposition for crimes involving financial matters or violent crimes against persons , weapons, burglary. theft. dishonesty and/or drugs within the last 3 years | X | |
Any one misdemeanor conviction or misdemeanors pending court disposition for crimes involving drugs within the last 3 years | X | |
Any three or more misdemeanor convictions within the last 3 years | X | |
Any felony conviction involving: financial matters. violent crimes against persons. weapons, burglary, dishonesty. theft and/or drugs | X | |
Any other felony conviction (will be individually evaluated ) | ||
Computer crimes: hacking, software infringement | X | |
Criminal conversion/fraud | X | |
Drunk driving or related charge (refer to MVR ) | X | |
Finger Printing , negative results | X | |
Drug Testing | ||
Drug testing, negative results (without prescription) | X | |
Education Adjudication Criteria- Highest Level Completed | ||
Degree matched | X | |
Dates matched, major differs slightly | X | |
Major differs dramatically | X | |
No degree awarded when representation was that of a degree | X | |
Institution found no record of applicant (will be individually evaluated) | ||
Employment Adjudication Criteria-Ten Year Check | ||
Dates off by 3 months combined time considering start and end dates, title slightly off | X | |
Title differs dramatically. confirmation has occurred | X | |
Dates off by more than 3 months, confirmation has occurred | X | |
Employer found no record of applicant, but applicant provided pay stub or W2 (will be individually evaluated) | ||
MVR Adjudication Criteria-Then Year Check (during positions only) | ||
Three or less moving violations | X | |
Drunk driving or related charge (one conviction only). Pending status of license. | X | |
Suspended license | X | |
Drunk driving, reckless driving | X | |
Hit and run violations | X | |
Vehicular homicide or manslaughter | X | |
Licensure | ||
This criterion applies primarily to positions with specific licensure requirements; however, any represented certifications will be verified -- verification of representations that do not match will be individually evaluated |
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EXHIBIT (2)(k)(4)
June 25, 2020
To the Trustees of the John Hancock Group of Funds
200 Berkeley Street
Boston, MA 02116
Re: Agreement to Waive Advisory Fees and Reimburse Expenses
John Hancock Variable Trust Advisers LLC (formerly John Hancock Investment Management Services, LLC) and John Hancock Investment Management LLC (formerly John Hancock Advisers, LLC) (collectively, the “Advisers”), each an investment adviser to the investment companies listed in Appendix A (collectively, the “John Hancock Funds”), hereby notify you as follows:
1. Each Adviser agrees to waive its management fee for a John Hancock Fund portfolio, as applicable, or otherwise reimburse the expenses of that portfolio as set forth below (the “Reimbursement”).
2. The Reimbursement shall apply to all John Hancock Fund portfolios in existence on the date of this Agreement, except those noted below, and to all future John Hancock Fund portfolios to which an Adviser agrees this Agreement should apply (the “Participating Portfolios”).
The Reimbursement shall not apply to the following John Hancock Variable Insurance Trust portfolios:
Each Managed Volatility Portfolio
Each Lifecycle Trust
Each Lifestyle Portfolio
The reimbursement shall not apply to the following John Hancock Funds II portfolios:
Each Multi-Index Preservation Portfolio
Each Multimanager Lifestyle Portfolio
Each Multi-Index Lifestyle Portfolio
Each Multimanager Lifetime Portfolio
Each Multi-Index Lifetime Portfolio
Alternative Asset Allocation Fund
Retirement Income 2040 Fund
The Reimbursement shall not apply to John Hancock Collateral Trust.
The Reimbursement shall not apply to the following John Hancock Strategic Series portfolios:
John Hancock Managed Account Shares Investment-Grade Corporate Bond Portfolio
John Hancock Managed Account Shares Securitized Debt Portfolio
John Hancock Managed Account Shares Non-Investment-Grade Corporate Bond Portfolio
3. The Reimbursement shall equal on an annualized basis:
0.01% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $75 billion but is less than or equal to $125 billion;
0.0125% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $125 billion but is less than or equal to $150 billion;
0.0150% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $150 billion but is less than or equal to $175 billion;
0.0175% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $175 billion but is less than or equal to $200 billion;
0.02% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $200 billion but is less than or equal to $225 billion; and
0.0225% of that portion of the aggregate net assets of all the Participating Portfolios that exceeds $225 billion.
The amount of the Reimbursement shall be calculated daily and allocated among all the Participating Portfolios in proportion to the daily net assets of each such portfolio.
4. The Reimbursement with respect to each Participating Portfolio expires on July 31, 2022 unless renewed by mutual agreement of the John Hancock Funds and the Advisers based upon a determination that this is appropriate under the circumstances at the time.
- 2 - |
5. This Agreement is effective as of June 25, 2020 and supersedes the prior Letter Agreement from the Adviser to the Trustees relating to the same subject matter.
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Very truly yours, | ||||
John Hancock Variable Trust Advisers LLC | ||||
By: | /s/ Jay Aronowitz | |||
Jay Aronowitz |
John Hancock Investment Management LLC | ||||
By: | /s/ Jay Aronowitz | |||
Jay Aronowitz |
ACCEPTED BY:
John Hancock Bond Trust | |
John Hancock California Tax-Free Income Fund |
John Hancock Investors Trust
|
John Hancock Capital Series | John Hancock Municipal Securities Trust |
John Hancock Current Interest | John Hancock Preferred Income Fund |
John Hancock Exchange-Traded Fund Trust | John Hancock Preferred Income Fund II |
John Hancock Financial Opportunities Fund |
John Hancock Preferred Income Fund III
|
John Hancock Funds II | John Hancock Premium Dividend Fund |
John Hancock Funds III |
John Hancock Sovereign Bond Fund |
John Hancock Hedged Equity & Income Fund | John Hancock Strategic Series |
John Hancock Income Securities Trust | John Hancock Tax-Advantaged Dividend Income Fund |
John Hancock Investment Trust
|
John Hancock Tax-Advantaged Global Shareholder Yield Fund |
John Hancock Investment Trust II | John Hancock Variable Insurance Trust |
On behalf of each of its series identified as a Participating Portfolio | ||||
By: | /s/ Andrew G. Arnott | |||
Andrew G. Arnott |
- 4 - |
Appendix A
John Hancock Bond Trust | |
John Hancock California Tax-Free Income Fund |
John Hancock Investors Trust |
John Hancock Capital Series |
John Hancock Municipal Securities Trust |
John Hancock Current Interest | John Hancock Preferred Income Fund |
John Hancock Exchange-Traded Fund Trust | John Hancock Preferred Income Fund II |
John Hancock Financial Opportunities Fund |
John Hancock Preferred Income Fund III |
John Hancock Funds II |
John Hancock Premium Dividend Fund |
John Hancock Funds III |
John Hancock Sovereign Bond Fund |
John Hancock Hedged Equity & Income Fund |
John Hancock Strategic Series |
John Hancock Income Securities Trust | John Hancock Tax-Advantaged Dividend Income Fund |
John Hancock Investment Trust |
John Hancock Tax-Advantaged Global Shareholder Yield Fund |
John Hancock Investment Trust II |
John Hancock Variable Insurance Trust |
- 5 - |
Exhibit (2)(l)
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
200 Berkeley Street
Boston, Massachusetts 02116
June 25, 2021
To whom it may concern:
John Hancock Financial Opportunities Fund (the “Trust”) is a business trust formed under the laws of the Commonwealth of Massachusetts (the “Trust”), with the powers and authority set forth under its Amended and Restated Declaration of Trust dated January 22, 2016 (the “Declaration of Trust”). The Trustees of the Trust have the powers set forth in the Declaration of Trust, subject to the terms, provisions and conditions therein provided.
This opinion is furnished in connection with the filing with the Securities and Exchange Commission (“SEC”) of the Trust’s Registration Statement on Form N-2 (File Nos. 333-__________ and 811-08568) (the “Registration Statement”), for the registration of up to 1,500,000 common shares of beneficial interest of the Trust, no par value (the “Shares”), under the Securities Act of 1933, as amended (the “1933 Act”).
I am a member of the Massachusetts bar and have acted as internal legal counsel to the Trust in connection with the preparation of the Registration Statement. I have examined originals, or copies, certified or otherwise identified to my satisfaction, of such certificates, records and other documents as I have deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and with respect to existing Massachusetts law (other than the Massachusetts Uniform Securities Act), only to the extent that Massachusetts law may be applicable and without reference to the laws of the other several states or of the United States of America, I am of the opinion that the Shares, when issued, sold and consideration therefore is paid in accordance with the Registration Statement, will be legally issued, fully paid and non-assessable by the Trust. In this regard, however, I note that the Trust is a Massachusetts business trust and, under certain circumstances, shareholders of a Massachusetts business trust could be held personally liable for the obligations of the Trust.
I consent to the filing of this opinion with the U.S. Securities and Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
/s/ Ariel Ayanna | |||
Ariel Ayanna | |||
Assistant Secretary |
EXHIBIT (2)(n)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form N-2 of John Hancock Financial Opportunities Fund of our report dated February 11, 2021 relating to the financial statements and financial highlights, which appears in John Hancock Financial Opportunities Fund’s Annual Report on Form N-CSR for the year ended December 31, 2020. We also consent to the references to us under the headings “Financial Highlights” and “Independent Registered Public Accounting Firm” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 25, 2021
Exhibit (2)(r)(1)
John Hancock Code of Ethics
January 1, 2008
(Revised September _17, 2020)
This is the Code of Ethics for the following:
John Hancock Investment Management, LLC and
John Hancock Variable Trust Advisers, LLC, LLC
(each, a “John Hancock Adviser”)
and
John Hancock Investment Management Distributors, LLC
John Hancock Distributors, LLC,
each open-end fund, closed-end fund, and exchange traded
fund advised by a John Hancock Adviser
(the “John Hancock Affiliated Funds”),
(together, called “John Hancock”)
Table of Contents
Introduction | 4 |
Standards of Business Conduct | 5 |
Applicability and Scope | 5 |
Access Levels | 6 |
Access Level 1 | 6 |
Access Level 2 | 6 |
Access Level 3 | 7 |
Overview of Rules for All Access Persons | 7 |
Brokerage Account Disclosure | 7 |
Brokerage Account Examples (non-exclusive list) | 7 |
Employee Compensation Instruments (non-exclusive list) | 8 |
College Savings Plans - 529s | 8 |
401(k) and John Hancock Variable Products: John Hancock Affiliated Funds Reporting | 9 |
Managed Accounts | 9 |
Preferred Brokerage Account Requirements | 9 |
Opening/Closing Accounts | 10 |
Statements and Duplicate Confirmations of Trades | 10 |
Personal Trading | 10 |
Personal Trading Restrictions for all Access Persons | 11 |
Reporting and Pre-clearance | 11 |
Level 1 Access Persons: Additional Personal Trading Restrictions and Disclosures | 12 |
Level 2 Access Persons: Additional Personal Trading Restrictions and Disclosures | 15 |
Level 3 Access Persons: Additional Personal Trading Restrictions and Disclosures | 17 |
Pre-clearance Process | 17 |
Reporting and Certification Requirements | 18 |
Reporting | 18 |
Reporting Upon Designation | 18 |
Quarterly Reporting | 18 |
Annual Reporting | 19 |
Ad Hoc Reporting | 19 |
2 |
Administration and Enforcement | 20 |
Administration of the Code | 20 |
Subadviser Compliance | 20 |
Adoption and Approval | 20 |
Subadviser Reporting & Recordkeeping Requirements | 21 |
Reporting to the Board | 21 |
Reporting Violations | 21 |
Exemptions & Appeals | 22 |
Exemptions: | 22 |
Appeals | 22 |
Interpretation and Enforcement | 22 |
Education of Employees | 23 |
Recordkeeping | 23 |
Other Important Policies | 24 |
MFC Code of Business Conduct & Ethics (All Covered Employees) | 24 |
John Hancock Conflicts of Interest Policy (All Covered Employees) | 25 |
John Hancock Gift & Entertainment Policy (All Covered Employees) | 25 |
John Hancock Insider Trading Policy (All Covered Employees) | 25 |
John Hancock Pay to Play Rule on Political Contributions (All Covered Associates) | 25 |
John Hancock Whistleblower Policy (All Covered Employees) | 26 |
Policy and Procedures Regarding Disclosure of Portfolio Holdings (All Covered Employees) | 26 |
Additional Policies Outside the Code (All Covered Employees) | 27 |
Appendix | 28 |
Definitions | 28 |
Preferred Brokers List | 32 |
Compliance Contacts | 33 |
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Introduction
John Hancock is required by law to adopt a Code of Ethics. The purpose of a Code of Ethics is to ensure that companies and their Covered Persons comply with all applicable laws and to prevent abuses in the investment advisory business that can arise when conflicts of interest exist between the employees of an investment advisor and its clients. By adopting and enforcing a Code of Ethics, we strengthen the trust and confidence entrusted in us by demonstrating that at John Hancock, client interests come first.
The Code of Ethics (the Code) that follows represents a balancing of important interests. On the one hand, as registered investment advisers, the John Hancock Advisers owe a duty of undivided loyalty to their clients and must avoid even the appearance of a conflict that might be perceived as abusing the trust they have placed in John Hancock. On the other hand, the John Hancock Advisers do not want to prevent conscientious professionals from investing for their own accounts where conflicts do not exist or that are immaterial to investment decisions affecting the John Hancock Advisers’ clients.
When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Covered Persons owe a fiduciary duty to John Hancock clients. In most cases, this means that the affected employee will be required to forego conflicting personal securities transactions. In some cases, personal investments will be permitted, but only in a manner, which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting John Hancock client portfolios or taking unfair advantage of the relationship John Hancock employees have to John Hancock clients.
The Code contains specific rules prohibiting defined types of conflicts. Since every potential conflict cannot be anticipated by the Code, it also contains general provisions prohibiting conflict situations. In view of these general provisions, it is critical that any Covered Person who is in doubt about the applicability of the Code in a given situation seek a determination from Chief Compliance Officer (CCO), designee, or the Code of Ethics Administration Group about the propriety of the conduct in advance.
It is critical that the Code be strictly observed. Not only will adherence to the Code ensure that John Hancock renders the best possible service to its clients, it will help to ensure that no individual is liable for violations of law.
It should be emphasized that adherence to this policy is a fundamental condition of employment at John Hancock. Every Covered Person is expected to adhere to the requirements of the Code despite any inconvenience that may be involved. Any Covered Person failing to do so may be subject to disciplinary action, including financial penalties and termination of employment as determined by the CCO, designee, or Ethics Oversight Committee.
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Standards of Business Conduct
Each Covered Person within the John Hancock organization is responsible for maintaining the very highest ethical standards when conducting our business.
This means that you must at all times:
• | Place the interests of clients first. You have a fiduciary duty at all times to place the interests of our clients and fund investors first. |
• | Conduct all personal trading in full compliance with this Code. All of your personal securities transactions must be conducted consistent with the provisions of the Code that apply to you and in such a manner as to avoid any actual or potential conflict of interest or other abuse of your position of trust and responsibility. |
• | Avoid taking inappropriate advantage of your position at John Hancock. You should not take inappropriate advantage of your position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to our clients’ accounts or fund investors. |
• | Maintain confidentiality of our clients and John Hancock. You must treat as confidential any information concerning the identity of security holdings and financial circumstances of clients or fund investors. |
• | Comply with applicable Federal Securities Laws. You must comply with all applicable federal Securities Laws. |
• | Report any violation of the Code. You must promptly report any violation of the Code that comes to your attention to the CCO (or designee) of your company. |
It is essential that you understand and comply with the general principles, noted above, in letter and in spirit as no set of rules can anticipate every possible problem or conflict situation. Failure to comply with the general principles and the provisions of the Code may result in disciplinary action, including termination of employment.
Applicability and Scope
Individuals subject to this policy will be notified by the CCO, designee, or the Code of Ethics Administration Group. Generally, if you meet the requirements listed below, you are deemed an Access Person1 and this Code applies to you2:
• | a director, officer or other Supervised Person of a John Hancock Adviser; |
• | an interested director, officer or Access Person of John Hancock Investment Management Distributors, LLC, John Hancock Distributors, LLC, or a John Hancock open-end or closed-end fund registered under the 1940 Act and are advised by a John Hancock Adviser;3 |
• | an employee of Manulife Financial Corporation (MFC) or its subsidiaries who |
1 See the Definitions section and contact a member of the Office of the CCO with any questions.
2 Access Persons of John Hancock GA Mortgage Trust that are personnel of John Hancock Investment Management, LLC are covered by this Code.
3 Disinterested Trustees of John Hancock open-end and closed-end funds registered under the 1940 Act and advised by a John Hancock Adviser are subject to a separate Code of Ethics adopted by the Board of Trustees.
5 |
participates in making recommendations for, or receives information about, portfolio trades or holdings of the John Hancock Affiliated Funds.4
Access Levels
The requirements of this policy will differ depending on your Access Level category. There are three categories for persons covered by the Code, taking into account position, duties and access to information regarding fund portfolio trades.5 You will receive notification as to your particular category, based on the Code of Ethics Administration Group’s understanding of your current role in coordination with the Office of the CCO. If you have a level of investment access beyond your assigned category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to notify the CCO, designee, or the Code of Ethics Administration Group.
Please note: If a specific Code provision (examples: personal investing restriction or limitations, pre-clearance obligation, or reporting obligation, etc.) applies to the Access Person, it also applies to all Securities and Brokerage Accounts over which the Access Person has Beneficial Ownership.
Access Level 1
A person who, in connection with his/her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Fund or account.
Examples (may include but are not limited to):
• | Portfolio Managers |
• | Analysts |
• | Traders |
Access Level 2
A person who, in connection with his/her regular functions or duties, has regular access to nonpublic information regarding any clients’ purchase or sale of securities, nonpublic information regarding the portfolio holdings of any John Hancock Affiliated Fund(s), is involved in making securities recommendations to clients, or has regular access to such recommendations that are nonpublic.
Examples (may include but are not limited to):
4 The preceding excludes John Hancock Asset Management (U.S.) and John Hancock Asset Management (N.A.) each of whom have adopted their own Code of Ethics in accordance with Rule 204A-1 under the Advisers Act.
5 The Code of Ethics Administration Group, CCO (or designee) may modify the requirements of this Code for those John Hancock Associates whose covered status is expected not to exceed 90 days (for instance contractors, co-ops and interns) or in instances where a person is subject to another Code of Ethics or fiduciary duty and where the modification is not otherwise specifically prohibited by law. In reliance on an SEC no-action letter, the Code of Ethics Administration Group or CCO (or designee) may include in the definition of “John Hancock Associate” any person of a John Hancock Affiliate who is engaged, directly or indirectly in John Hancock’s investment advisory activities.
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• | Office of the CCO |
• | Fund Administration |
• | Investment Management Services |
• | Technology Resources Personnel (as designated) |
• | Legal Staff |
• | Marketing (as designated) |
Access Level 3
A person who, in connection with his/her regular functions or duties, has periodic access to nonpublic information regarding any clients’ purchase or sale of securities or nonpublic information regarding the portfolio holdings of any John Hancock Affiliated Funds.
Examples (may include but are not limited to):
• | Marketing (as designated) |
• | Product Development |
• | E-Commerce |
• | Corporate Publishing |
• | Technology Resources Personnel (as designated) |
Overview of Rules for All Access Persons
This policy contains rules regarding your obligations to comply with federal Securities Laws and John Hancock’s standards of conduct. Access Persons are responsible for complying with the personal trading restrictions and obligations of their access designation level including: Brokerage Account disclosure, personal trading restrictions, pre-clearance requirements, disclosure requirements, and various reporting and certification requirements.
Brokerage Account Disclosure
You must use the automated compliance reporting system (“StarCompliance”), to disclose all Brokerage Accounts that have the capability to hold Reportable Securities including all Brokerage Accounts:
• | of your own; regardless of what is currently held in the account, |
• | of your spouse, Significant Other, minor children or family members sharing the same household (Household Family Member), |
• | over which you have discretion or give advice or information, and/or |
• | in which your Household Family Member have Beneficial Ownership, or the opportunity to directly or indirectly profit or share in any profit derived from a Reportable Securities transaction. |
Brokerage Account Examples (non-exclusive list)
You need to report:
7 |
• | Brokerage Accounts |
• | John Hancock 401(k) accounts |
• | MFC Global Share Ownership Plan (GSOP) |
• | Solium accounts (some if they hold reportable securities including options on MFC securities) |
• | Self-directed IRA accounts |
• | Custodial accounts |
• | Mutual fund accounts* |
• | College investment plans 529s* |
• | 401(k)/403(b) accounts* |
• | Dividend reinvestment program or dividend reinvestment plan (DRIP) |
• | Registered Retirement Savings Plan (RRSP/RESP/TFSA) |
• | Stock Purchase accounts |
*if they have the capability to hold John Hancock Affiliated Funds
Employee Compensation Instruments (non-exclusive list)
You need to report:
• | John Hancock 401(k) |
• | MFC Global Share Ownership Plan (GSOP) |
• | Options acquired from MFC (only MFC Solium account options that are granted) |
• | Public company employer as part of employee compensation |
• | Sole discretion accounts |
• | Accounts holding John Hancock Affiliated Funds |
• | Certain Manulife Pension Plans (RPS, RRSP) |
You are not responsible for reporting:
• | MFC Restricted Share Units (RSU) |
• | Deferred Share Units (DSU) |
• | Performance Share Units (PSU) |
• | US John Hancock Pension Plans |
• | Employer phantom stock/phantom option interest (granted as compensation to employee, only employer can redeem interest and interest is non-transferrable) |
To prevent any potential violations of the Code, you are strongly encouraged to request clarification for accounts that are in question from the Code of Ethics Administration Group INVDIVCodeofEthics@manulife.com.
College Savings Plans - 529s
You must report John Hancock affiliated 529 plans including both the Freedom 529 plan and any other 529 plans that can hold John Hancock Affiliated Funds. You are not required to report transactions or holdings in 529 Plans for which the Adviser or a control affiliate does
8 |
not manage, distribute, market or underwrite the 529 Plan or the investments and strategies underlying the 529 Plan. If you have any questions about this requirement, please contact the Code of Ethics Administration Group or a member of the Office of the CCO.
401(k) and John Hancock Variable Products: John Hancock Affiliated Funds Reporting
You must report your holdings and trades in a John Hancock Affiliated Funds. This includes voluntary trades in your John Hancock affiliated accounts such as your 401(k) and any external Brokerage Account.
To comply with this requirement, if you purchase a John Hancock variable product you must provide your contract or policy number to the Code of Ethics Administration Group and if you have a John Hancock 401(k), you must you must enter the Brokerage Account on StarCompliance.
Managed Accounts
Managed Accounts are considered fully managed if neither Access Person nor Household Family Member has no direct influence or control. Prior to the execution of Reportable Securities transactions in the Managed Account, you must obtain approval from the CCO (or designee). Once the Brokerage Account is approved as a Managed Account, in writing from the CCO (or designee) of the Adviser/Trust, the transactions do not need to be pre-cleared. Exemption requests which pose a conflict of interest for the CCO (or designee) will be escalated to the Ethics Oversight Committee for review and consideration.
You may request approval by disclosing the Brokerage Account in the automated compliance system, marking it as a Managed Account and by providing the appropriate evidence as described below. You are required to provide evidence that you or your Household Family Member has no direct or indirect influence or control including not being able to:
1) | Suggest that the trustee or third-party discretionary manager make any particular purchases or sales of Reportable Securities; |
2) | Direct the trustee or third-party discretionary manager to make any particular purchases or sales of Reportable Securities; and |
3) | Consult with the trustee or third-party discretionary manager as to the particular allocation of investments to be made in your account. |
You may also be asked to periodically attest to the status of the Managed Account(s) and provide electronic feeds or duplicate statements.
Preferred Brokerage Account Requirements
You must maintain your Brokerage Accounts at one of the preferred brokers approved by John Hancock. Upon designation as an Access Person, you have 45 calendar days to (i) qualify any non-compliant Brokerage Account as an exempt account or (ii) transfer all assets to a preferred broker and close the non- compliant account. Please note that you are not required to move 401(k) accounts. Exceptions may be granted with the approval from the CCO, its designee, or the Code of Ethics Administration Group. Requests for exceptions to this policy must be submitted in writing to the Code of Ethics Administration Group. A list of the Preferred Brokers can be found in the Appendix.
9 |
Opening/Closing Accounts
You are required to report each transaction in any Reportable Security to the Code of Ethics Administration Group. To comply with this requirement, you:
• | Are required to notify the Code of Ethics Administration team within 10 days of opening or closing a Brokerage Account. In the case of a new Brokerage Account in which you have a beneficial interest, you must notify the Code of Ethics Administration Group before any trades are placed. |
• | Are required by this Code and by the Insider Trading Policy to inform your broker-dealer that you are employed by a financial institution. Your broker- dealer is subject to certain rules designed to prevent favoritism toward your Brokerage Accounts. You may not accept negotiated commission rates that you believe may be more favorable than the broker grants to accounts with similar characteristics. |
• | Must notify the broker-dealer if you are registered with the Financial Industry Regulatory Authority or are employed by John Hancock Investment Management Distributors, LLC or John Hancock Distributors, LLC. |
Statements and Duplicate Confirmations of Trades
The Code of Ethics Administration Group may rely on information submitted by your broker as part of your reporting requirements under the Code. Upon notification of your Brokerage Account, the Code of Ethics Administration Group will notify the broker-dealer to have duplicate confirmations of any trade, as well as statements or other information concerning the Brokerage Account, sent to:
John Hancock Financial Services
Attention: General Funds Compliance
197 Clarendon Street, C-03-13
Boston, MA 02116
Personal Trading
Personal Trading is a privilege and must always come second to the fiduciary duty you owe to our clients. Below is a list of personal trading restrictions for all Access Persons.
All Access Persons must:
• | Disclose holdings in Reportable Securities (including John Hancock Affiliated Funds and John Hancock Variable Products) |
• | Disclose Brokerage Accounts |
• | Pre-clear applicable Reportable Securities transactions |
10 |
Personal Trading Restrictions for all Access Persons
All Access Persons are prohibited from:
• | Profiting from the purchase and sale of a John Hancock Affiliated Fund within 30 calendar days. |
• | Engaging in speculative transactions involving MFC securities including: options, hedging or short sales involving securities issues by Manulife. |
• | Transacting in securities that appear on the confidential John Hancock Restricted list (pre-clearance requests will be denied). |
• | Transacting in Initial Public Offerings (IPOs), Private Placements, and Limited Offerings without obtaining proper pre-clearance approval.6 |
• | Transacting in securities while in possession of material nonpublic information including but not limited to: fund events, due diligence visits etc. |
An Access Person who either directs 45 or more trades in a quarter or redeems shares of a John Hancock Affiliated Fund within 30 days of purchase, should expect additional scrutiny of his or her trades and he or she may be subject to limitations on the number of trades allowed during a given period.
Reporting and Pre-clearance
As an Access Person, you are required to report to the Code of Ethics Administration Group each transaction in any Reportable Security. You must ensure that all transactions (unless it is an Involuntary Issuer Transaction) and holdings in Reportable Securities are properly reflected in the requisite initial, quarterly and annual reporting certifications. To facilitate the reporting process, please ensure that you have properly disclosed your correct Brokerage Account information to the Code of Ethics Administration Group in the automated compliance system, including the disclosure of participation in the John Hancock 401(k) and Manulife GSOP.
The transaction and holding reporting requirement does not include John Hancock money market funds or any dividend reinvestment, payroll deduction, systematic investment/withdrawal and/or other program trades. Please note that different requirements apply to shares of John Hancock Affiliated Funds, including a 30-day holding period requirement.
As an Access Person, in addition to your reporting obligations, you have pre-clearance obligations for certain securities, depending on your Access Level group. Please see the appropriate access level below, for more detailed information.
6 Please note, Level 1 Access Persons and Registered Representatives are prohibited from purchasing IPOs.
11 |
Level 1 Access Persons: Additional Personal Trading Restrictions and Disclosures
Please note, there are additional restrictions that apply to all Access Persons listed in the section entitled, “Personal Trading Restrictions for All Access Persons”.
Level 1 Access Persons
• | Pre-clear MFC Securities: You must pre-clear all transactions in MFC securities including stock, company issued options, securities such as debt, and sell transactions in the MFC Global Share Ownership Plan. |
• | Pre-clear all of the following securities: You must pre-clear and receive approval prior to transactions in the following securities: |
• | Stocks; including sell transactions of MFC Shares held in your Global Share Ownership Plan |
• | Bonds; |
• | Government securities that are not direct obligations of the U.S. government, such as Fannie Mae, or municipal securities, in each case that mature in more than one year; |
• | John Hancock Affiliated Funds;7 |
• | Closed-end funds (including John Hancock affiliated closed-end funds) |
• | Options on securities, on indexes, and on currencies; |
• | Swaps on securities, on indexes, and on currencies; |
• | Limited partnerships; |
• | Exchange traded funds and notes; |
• | Domestic unit investment trusts; |
• | Non-US unit investment trusts and Non-US mutual funds; |
• | Private investment funds and hedge funds; and |
• | Futures, investment contracts or any other instrument that is considered a “security” under the Securities Act of 1933; |
• | Private Placements, limited offerings8. |
• | Ban on IPOs: You may not acquire securities in an IPO. You may not purchase any newly-issued Reportable Security until it is listed on a public exchange. |
• | Seven Day Blackout: You are prohibited from buying or selling a Reportable Security within 7 calendar days before or after that Reportable Security is traded for a fund that the Person manages or for a John Hancock Affiliated Fund unless no conflict of interest exists in relation to that Reportable Security as determined by the Code of Ethics Administration Group. |
• | Gifting Reportable Securities: If you gift or donate shares of a Reportable Security it is considered a sale and you must receive pre-clearance approval. |
• | Inheriting Reportable Securities: If you inherit shares of a Reportable Security you must notify the Code of Ethics Administration Group within 10 days. |
7 John Hancock Affiliated open ended mutual funds do not require pre-clearance, only reporting. However, there are certain holding period requirements. A list of John Hancock Affiliated Funds can be found on StarCompliance.
8 Level 1 Access Persons are banned from participation in IPOs.
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• | 30 Day Hold John Hancock Affiliated Funds: You cannot profit from the purchase and sale of a John Hancock Affiliated Funds within 30 calendar days. |
• | 60 Day Hold: You may not profit from the purchase and sale (or sale and purchase) of the same (or equivalent) Reportable Security (see note on John Hancock Affiliated Funds) within 60 calendar days, also known as a “Ban on Short Term Profits”. |
o | Exclusion: pre-clearance requests in a Reportable Security with a market capitalization of $5 billion or more would, in most cases, not be subject to the 60 day hold and would be approved if they are appropriately pre-cleared. |
Options requiring additional consideration are as follows: |
Call Options |
You can purchase a call option that is subject to pre-clearance only if the call option has an expiration of equal to or greater than 60 days from the date of purchase. You must either (i) hold the option for at least 60 days prior to sale or (ii) if exercised, must hold the option and the underlying Security of the option for a total of 60 days (i.e., the period during which the call option was held will count towards the 60 day holding period for the underlying Security). |
You can sell (i.e. write) a call option that is subject to pre-clearance only if the underlying Security (in the corresponding quantity) has been held for at least 60 days (i.e. covered call). You can not engage in a subsequent purchase of a call option unless the conditions specified above are met. |
Put Options |
You can purchase a put option that is subject to pre-clearance only if the put option has a period to expiration of at least 60 days from the date of purchase and you hold the put option for at least 60 days. If you purchases a put option on a Security already owned (i.e. put hedge), the time the underlying Security has been held will count towards the 60 day holding period for the put. |
You may not sell (i.e. write) a put option on a Security. |
You may not use derivatives including futures, options on futures, or options or warrants on a Security to circumvent the restrictions of the Code. (i.e. you may not use derivative transactions with respect to a Security if the Code otherwise prohibits them from taking the same position directly in the underlying Security.) |
• | Ownership Ban: Securities of Sub-advisers: you are prohibited from owning securities of any sub-adviser of a John Hancock Affiliated Fund.9 |
• | Must promptly disclose: |
o | Ownership of Securities Under Consideration for John Hancock Affiliated Fund: Any direct or indirect beneficial interest in a Reportable Security that is under consideration for purchase or sale in a John Hancock Affiliated Fund. |
9 MFC securities are excluded from Level 1 & Level 2 sub-adviser ownership prohibition. The list of securities of sub-advisers can be found on the automated compliance system or upon request from the CCO.
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o | Private Placement Conflicts: You must disclose holdings of any Reportable Securities purchased in a private placement when you participate in a decision to purchase or sell that same issuer’s securities for a John Hancock Affiliated Fund. |
• | Restriction on Securities Under Active Consideration: You are prohibited from buying or selling a Reportable Security if the Reportable Security is being actively traded by a John Hancock Affiliated Fund. |
o | Exceptions: |
▪ | De Minimis Trading: pre-clearance requests for 500 shares or less of a particular Reportable Security within a market value of $25K or less, aggregated daily, would, in most cases, not be subject to the 7-day blackout period restrictions and the restriction on actively traded securities. |
▪ | Market Cap Securities: pre-clearance requests in a Reportable Security with a market capitalization of $5B or more would not be subject to the blackout period restrictions and the restriction on actively traded securities. |
• | Pre-clearance of Exchange Traded Funds/Exchange Traded Notes (ETF/ETN) and Options on Reportable Securities: you are required to pre-clear ETFs, ETNs and Options on Reportable Securities. |
o | Exceptions to the pre-clearance requirement for ETF/ETN or options on Reportable Securities (provided it is not a John Hancock Affiliated Fund): |
o | has an average market capitalization of $5 billion or more; |
o | is based on a non-covered security; |
o | or is based on a Broad-Based Index. |
• | Prohibition on Investment Clubs, Good Until Canceled Orders, or Limit Orders: You may not participate in: |
o | investment clubs, |
o | “good until cancelled orders”, or |
o | “limit orders” unless the limit orders are day orders that automatically expire at the end of the trading day and cancel any orders that have not been executed. |
Investment Professionals Only
Level 1 Access Persons who are “Investment Professionals” (Analysts and Portfolio Managers) must disclose the following:
o | Ownership of 5% or Greater: 5% or greater interest in a company, John Hancock Affiliated Funds and its affiliates may not make any investment in that company; |
o | Ownership of 1% or greater 1% or greater interest in a company, you cannot participate in any decision by John Hancock Funds and its affiliates to buy or sell that company’s securities; |
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• | ANY other interest in a company, you cannot recommend or participate in a decision by John Hancock Affiliated Funds, and its affiliates to buy or sell that company’s securities unless your personal interest is fully disclosed at all stages of the investment decision. |
In such instances, you must initially disclose that beneficial interest orally to the primary portfolio manager (or other appropriate analyst) of the Affiliated Fund(s) or account or the appropriate Chief Investment Officer. Following the oral disclosure, you must send a written acknowledgement to the primary portfolio manager with a copy to the Code of Ethics Administration Group.
Level 2 Access Persons: Additional Personal Trading Restrictions and Disclosures
Please note, there are additional restrictions that apply to all Access Persons listed in the section entitled, “Personal Trading Restrictions for All Access Persons”.
Level 2 Access Persons:
• | Pre-clear MFC Securities: You must pre-clear all transactions in MFC securities including stock, company issued options, sell transactions in the MFC Global Share Ownership Plan, and any other securities such as debt. |
• | Pre-clear the following securities: You must pre-clear and receive approval prior to transactions in the following securities: |
• | Stocks; including sell transactions of MFC Shares held in your Global Share Ownership Plan |
• | Bonds; |
• | Government securities that are not direct obligations of the U.S. government, such as Fannie Mae, or municipal securities, in each case that mature in more than one year; |
• | John Hancock Affiliated Funds;10 |
• | Closed-end funds (including John Hancock affiliated closed-end funds) |
• | Options on securities, on indexes, and on currencies; |
• | Swaps on securities, on indexes, and on currencies; |
• | Limited partnerships; |
• | Exchange traded funds and notes; |
• | Domestic unit investment trusts; |
• | Non-US unit investment trusts and Non-US mutual funds; |
• | Private investment funds and hedge funds; and |
• | Futures, investment contracts or any other instrument that is considered a “security” under the Securities Act of 1933; |
• | IPOs11, Private Placements, limited offerings. |
10 John Hancock Affiliated open ended mutual funds do not require pre-clearance, only reporting. However, there are certain holding period requirements.
11 Level 1 Access Persons are banned from participation in IPOs.
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• | Three Day Blackout Period: You are prohibited from knowingly buying or selling a Reportable Security within three calendar days before and after that Reportable Security is traded for a John Hancock Affiliated Fund unless no conflict of interest exists in relation to that Reportable Security as determined by the Code of Ethics Administration Group. |
• | Gifting Reportable Securities: If you gift or donate shares of a Reportable Security the transaction is considered a sale and you must receive pre-clearance approval. |
• | Inheriting Reportable Securities: If you inherit shares of a Reportable Security you must notify the Code of Ethics Administration Group within 10 days. |
• | 30 Day Hold John Hancock Affiliated Funds: You cannot profit from the purchase and sale of a John Hancock Affiliated Funds within 30 calendar days. |
• | 60 Day Hold: You may not profit from the purchase and sale (or sale and purchase) of the same (or equivalent) Reportable Security within 60 calendar days, also known as a “Ban on Short Term Profits”. |
o | Exclusion: pre-clearance requests in a Reportable Security with a market capitalization of $5 billion or more would, in most cases, not be subject to the Ban on Short Term Profits, and would be approved if they are appropriately pre-cleared. |
• | Ownership Ban: Securities of Sub-advisers: you are prohibited from owning securities of any sub-adviser of a John Hancock Affiliated Fund.12 |
• | Restriction on Securities Under Active Consideration: You are prohibited from buying or selling a Reportable Security if the security is being actively traded by a John Hancock Affiliated Fund. |
o | Exceptions: |
▪ | De Minimis Trading: pre-clearance requests for 500 shares or less of a particular Reportable Security within a market value of $25K or less, aggregated daily, would, in most cases, not be subject to the 7-day blackout period restrictions and the restriction on actively traded securities. |
▪ | Market Cap Securities: pre-clearance requests in a Reportable Security with a market capitalization of $5B or more would not be subject to the blackout period restrictions and the restriction on actively traded securities. |
• | Pre-clearance of Exchange Traded Funds/Exchange Traded Notes (ETF/ETN) and Options on Reportable Securities: you are required to pre-clear ETFs, ETNs and Options on Reportable Securities. |
o | Exceptions to the pre-clearance requirement for ETF/ETN or options on Reportable Securities (provided it is not a John Hancock Affiliated Fund): |
▪ | has an average market capitalization of $5 billion or more; |
▪ | is based on a non-covered security; |
▪ | or is based on a Broad-Based Index. |
12 MFC securities are excluded from Level 1 &Level 2 sub-adviser ownership prohibition. The list of securities of sub-advisers can be found on the automated compliance system or upon request from the CCO.
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• | Prohibition on Investment Clubs, Good Until Canceled Orders, or Limit Orders: You may not participate in: |
o | investment clubs, |
o | “good until cancelled orders”, or |
o | “limit orders” unless the limit orders are day orders that automatically expire at the end of the trading day and cancel any orders that have not been executed. |
Level 3 Access Persons: Additional Personal Trading Restrictions and Disclosures
Please note, there are additional restrictions that apply to all Access Persons listed in the section entitled, “Personal Trading Restrictions for All Access Persons”.
Level 3 Access Persons:
• | Pre-clear transactions in: |
o | closed-end funds and exchange traded funds advised by a John Hancock Adviser |
o | transactions in IPOs |
o | private placements and limited offerings. |
• | Gift or Donation of Reportable Securities: You must obtain pre-clearance approval prior to gifting or donating any Reportable Securities transactions that would require pre-clearance. |
• | Inheritance of Reportable Securities: If you inherit shares of a Reportable Security you must notify the Code of Ethics Administration Group within 10 days. |
• | 30 Day Hold John Hancock Affiliated Funds: You cannot profit from the purchase and sale of a John Hancock Affiliated Funds within 30 calendar days. |
An Access level 3 Person is not required to pre-clear other trades. However, please keep in mind that an Access level 3 Person is required to report Reportable Securities transactions after every trade (even those that are not required to be pre-cleared) by requiring your broker to submit duplicate confirmation statements or electronic feeds to the Code of Ethics Administration Group. You must also ensure that all transactions in Reportable Securities are properly reported on your quarterly transaction/annual holdings certification.
Pre-clearance Process
You may request a trade pre-clearance through the automated compliance system, StarCompliance.
Please note that:
• | You may not trade until clearance approval is received. |
• | Clearance approval is valid only for the date granted (i.e. the pre-clearance requested date and the trade date should be the same). |
• | A separate procedure should be followed for requesting pre-clearance of an IPO, a private placement, or a limited offering in StarCompliance. |
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Certain transactions in securities that would normally require pre-clearance are exempt from the pre-clearance requirement in the following situations: (1) shares are being purchased as part of an Automatic Investment Plan; (2) shares are being purchased as part of a dividend reinvestment plan; or (3) transactions are being made in a Managed/discretionary account, an account over which you have designated a third party as having sole discretion to trade (you must have approval from the CCO (or designee) to establish a discretionary account).
Reporting and Certification Requirements
Reporting
All Access Persons, regardless of their level, must complete and submit reports and certifications to compliance using StarCompliance, the automated compliance system, in an accurate and timely manner as described below.
Reporting Upon Designation
Within 10 calendar days after designation as an Access Person, you must complete and submit to compliance using StarCompliance:
• | Initial Holdings Report: A report of all Brokerage Accounts (please see the definition section) that hold or have the ability to hold any Reportable Securities and all Reportable Securities holdings current as of the date you became an Access Person. |
• | Initial Certification of Compliance: Certify to your understanding of the Code of Ethics. |
• | Initial Training: Certify that you have attended a training on the Code of Ethics Policy. |
Quarterly Reporting
Within 30 calendar days after the end of each calendar quarter, you must complete and submit to compliance using StarCompliance:
• | Quarterly Certification: a report of all Brokerage Accounts and all transactions in Reportable Securities (including transactions in John Hancock Affiliated Funds, including sell transactions in your Global Share Ownership Plan (GSOP) and voluntary transactions, such as fund exchanges, in your John Hancock 401(k)). |
• | Managed Account Certification: A certification of related to your Managed Accounts (only if applicable). |
Additional transaction notes:
• | All transactions in John Hancock Affiliated Funds and Variable Products must be reported. |
• | Only sell transactions of MFC stock in your Global Share Ownership Plan (GSOP) need to be reported. |
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• | Only voluntary transactions, such as fund exchanges, need to be reported for transactions in your John Hancock 401(k) Savings account. |
For each Brokerage Account you must certify that the following information is captured accurately:
• | Account number |
• | Brokerage Firm |
For each transaction required to be reported you must certify the following information was captured accurately:
• | the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each Reportable Security involved; |
• | the nature of the transaction (i.e. purchase, sale or any other type of acquisition or disposition); |
• | the price at which the transaction was effected; |
• | the name of the broker, dealer or bank with or through which the transaction was effected. |
Annual Reporting
At a date designated by the Code of Ethics Administration Group, at least annually (or additionally when the Code has been materially changed), you must complete and submit to compliance:
• | Annual Holdings Report: disclosing all of your Brokerage Accounts that hold or can hold any Reportable Securities and all holdings in Reportable Securities, current as of a date not more than 45 days before the report is submitted. |
o | John Hancock Affiliated Funds & Variable Products holdings must be reported, regardless of where they are held. |
o | Global Share Ownership holdings of Manulife Financial Corporation, Inc. (MFC) stock must be reported. |
• | Annual (or additionally when the Code has been materially changed) Certification of Code of Ethics: acknowledging that you have received, read, and complied with the requirements of the Code of Ethics. |
Ad Hoc Reporting
Throughout the year you must complete and submit to compliance:
• | Brokerage Account Changes: You are required to promptly notify (within 10 days) Compliance of any applicable account changes. |
• | Changes to the Code of Ethics: You are required to complete an additional certification of compliance stating that you read, received and understood material changes to the Code of Ethics. |
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Administration and Enforcement
Administration of the Code
Sub-adviser Compliance
A sub-adviser to a John Hancock Affiliated Fund has a number of Code of Ethics responsibilities:
• | The sub-adviser must have adopted their own code of ethics in accordance with Rule 204A-1(b) under the Advisers Act which has been approved by the Board of Trustees; |
• | On a quarterly basis, each sub-adviser certifies compliance with their Code of Ethics or reports material violations if such have occurred; and |
• | Each sub-advisor must report quarterly to the CCO (or designee), any material changes to its Code of Ethics. |
Adoption and Approval
The Board of a John Hancock Affiliated Fund, including a majority of the Fund’s Independent Board Members, must approve the Code of Ethics of the Fund’s adviser, sub-adviser or principal underwriter (if an affiliate of the underwriter serves as a Board member or officer of the Fund or the adviser) before initially retaining its services.
Each material change to a Code of Ethics of a sub-adviser to a fund must be approved by the Board of the John Hancock Affiliated Fund, including a majority of the Fund’s Independent Board Members, no later than six months after adoption of the material change.
The Board may only approve the Code if they determine that the Code:
• | Contains provisions reasonably necessary to prevent the subadviser’s Access Persons (as defined in Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act) from engaging in any conduct prohibited by Rule 17j-1 and 204A-1; |
• | Requires the sub-adviser’s Access Persons to make reports to at least the extent required in Rule 17j-1(d) and Rule 204A-1(b); |
• | Requires the sub-adviser to institute appropriate procedures for review of these reports by management or compliance personnel (as contemplated by Rule 17j-1(d)(3) and Rule 204 A- 1(a)(3)); |
• | Provides for notification of the sub-adviser’s Access Persons in accordance with Rule 17j-1(d)(4) and Rule 204A-1(a)(5); |
• | Requires the sub-adviser’s Access Persons who are Investment Personnel to obtain the pre- clearances required by Rule 17j-1(e); and |
• | Requires the sub-adviser’s Access Persons to obtain the pre-clearances required by Rule 204A- 1(c). |
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The CCO of the John Hancock Affiliated Funds oversees each of the fund’s sub-adviser to ensure compliance with each of the provisions included in this section.
Sub-adviser Reporting & Recordkeeping Requirements
Each sub-adviser must complete an annual Code of Ethics questionnaire and certification as to their compliance under Rule 17j-1 and summary of any violation to the relevant John Hancock Adviser, whom present summaries to the Board of Trustees annually during their 2nd quarter meeting (which is typically held in June).
Reporting to the Board
No less frequently than annually, the Office of the CCO will furnish to the Board of Trustees a written report that:
• | describes issues that arose during the previous year under the Code of Ethics or the related procedures, including, but not limited to, information about material Code or procedure violations, as well as any sanctions imposed in response to the material violations, and |
• | certifies that each entity, including the sub-advisers have adopted procedures reasonably necessary to prevent its Access Persons from violating its Code of Ethics, |
• | Any material changes to the Code are presented to the Trustees within six months for their approval. |
The CCO of the John Hancock Affiliated Funds oversees each of the fund’s sub-adviser to ensure compliance with each of the
provisions included in this section.
Reporting Violations
If you know of any violation of the Code, you have a responsibility to promptly report it to the CCO of your company. You should also report any deviations from the controls and procedures that safeguard John Hancock and the assets of our clients.
Since we cannot anticipate every situation that will arise, it is important that we have a way to approach questions and concerns. Always ask first, act later. If you are unsure of what to do in any situation, seek guidance before you act.
Speak to your manager, a member of the Human Resources Department or Legal Department or your divisional compliance officer if you have:
• | a doubt about a particular situation; |
• | a question or concern about a business practice; or |
• | a question about potential conflicts of interest |
You may report suspected or potential illegal or unethical behavior without fear of retaliation. John Hancock does not permit retaliation of any kind for good faith reports of illegal or unethical behavior. Concerns about potential or suspected illegal or unethical
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behavior should be referred to a member of the Human Resources or Legal Department. John Hancock relies on the Manulife Code of Business Conduct which advises that unethical, unprofessional, illegal, fraudulent or other questionable behavior may also be reported by calling a confidential toll-free Ethics Hotline at 1-866-294-9534 or at www.ManulifeEthics.com.
Exemptions & Appeals
Exemptions: to the Code may be granted by the CCO (or designee) where supported by applicable facts and circumstances. If you believe that you have a situation that warrants an exemption to any of the rules and restrictions of this Code you need to submit a written request to the CCO (or designee). All requests will be reviewed on a case by case basis. The CCO (or designee) will provide a written response detailing its decision once the review has been completed.
Exemption requests which pose a conflict of interest for the CCO will be escalated to the Ethics Oversight Committee for review and consideration.
Appeals: If you believe that your request has been incorrectly denied or that an action is not warranted, you may appeal
the decision. To make an appeal, you need to give the CCO (or designee) of the Adviser/Trust a written explanation of your reasons
for appeal within 30 days of the date that you were informed of the decision. Be sure to include any extenuating circumstances
or other factors not previously considered. During the review process, you may, at your own expense, engage an attorney to represent
you. The Code of Ethics Administration Group may arrange for Ethics Oversight Committee or other parties to be part of the review
process.
Interpretation and Enforcement
The Code cannot anticipate every situation in which personal interests may be in conflict with the interests of our clients and fund investors. You should be responsive to the spirit and intent of the Code as well as its specific provisions.
When any doubt exists regarding any Code provision or whether a conflict of interest with clients or fund investors might exist, you should discuss the situation in advance with the CCO (or designee) of your company. The Code is designed to detect and prevent fraud against clients and fund investors, and to avoid the appearance of impropriety.
The CCO has general administrative responsibility for the Code as it applies to the covered employees; an appropriate member of the Code of Ethics Administration Group will administer procedures to review personal trading activity. The Code of Ethics Administration Group also regularly reviews the forms and reports it receives. If these reviews uncover information that is incomplete, questionable, or potentially in violation of the rules in this document, the Code of Ethics Administration Group will investigate the matter and may contact you.
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The Board of the John Hancock Affiliated Funds approve material amendments to the Code and authorize sanctions imposed on Access Persons of the Funds. Accordingly, the Code of Ethics Administration Group will refer violations to the CCO of the Trust/Adviser (or designee) for further review and action, including determination if the matter should be presented to the Ethics Oversight Committee and/or the Board of Trustees for recommended action.
The following factors will be considered when determining a fine or other disciplinary action:
• | the person’s position and function (senior personnel may be held to a higher standard); |
• | the amount of the trade; |
• | whether the John Hancock Affiliated Funds hold the security and were trading the same day; |
• | whether the violation was by a family member; |
• | whether the person has had a prior violation and which policy was involved; and |
• | whether the employee self-reported the violation. |
John Hancock takes all rule violations seriously and, at least once a year, provides the Board of the John Hancock Affiliated Funds with a summary of all material violations and sanctions, significant conflicts of interest and other related issues for their review. Sanctions for violations could include (but are not limited to) fines, disgorgement, limitations on personal trading activity, suspension or termination of the Covered Person’s position with John Hancock and/or a report to the appropriate regulatory authority.
You should be aware that other Securities Laws and regulations not addressed by the Code may also apply to you, depending on your role at John Hancock.
The CCO of the Adviser/Trust (or designee) and the Ethics Oversight Committee retain the discretion to interpret the Code’s provisions and to decide how they apply to any given situation.
Education of Employees
This Code constitutes the Code of Ethics required by Rule 17j-1 under the Investment Company Act of 1940 and by Rule 204A-1 under the Investment Advisers Act of 1940. The Code of Ethics Administration Group will provide a copy of the Code (and any amendments) to each person subject to the Code. The Code of Ethics Administration Group in coordination with the CCO or designee will also administer initial and annual training to employees on the principles and procedures of the Code and other related policies.
Recordkeeping
The Code of Ethics Administration Group will maintain a:
• | Copy of the current Code for John Hancock and a copy of each Code of Ethics in effect at any time within the past five years. |
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• | Record of any violation of the Code, and of any action taken as a result of the violation, for six years. |
• | Copy of each report made by an Access Person under the Code, for six years (the first two years in a readily accessible place). |
• | Record of all persons, currently or within the past five years, who are or were, required to make reports under the Code. This record will also indicate who was responsible for reviewing these reports. |
• | Record of any decision, and the reasons supporting the decision, to approve the acquisition by an Access Level I Persons of IPOs or private placement securities, for six years. |
• | Record of any decision, and the reasons supporting the decision, to approve the acquisition by an Access Person of the John Hancock Advisers IPOs or private placement securities, for six years. |
Other Important Policies
The John Hancock Affiliated Funds have additional policies or may rely on certain MFC policies. Summary excerpts of such policies are listed below please review each full policy for additional details.
MFC Code of Business Conduct & Ethics (All Covered Employees)
The MFC Code of Business Conduct and Ethics (the MFC Code) provides standards for ethical behavior when representing the Company and when dealing with employees, field representatives, customers, investors, external suppliers, competitors, government authorities and the public.
The MFC Code applies to directors, officers and employees of MFC, its subsidiaries and controlled affiliates. Sales representatives and third-party business associates are also expected to abide by all applicable provisions of the MFC Code and adhere to the principles and values set out in the MFC Code when representing Manulife to the public or performing services for, or on behalf of, Manulife.
Other important issues in the MFC Code include:
• | MFC values; |
• | Ethics in workplace; |
• | Ethics in business relationships; |
• | Conflicts of Interest; |
• | Handling information; |
• | Receiving or giving of gifts, entertainment or favors; |
• | Misuse or misrepresentation of your corporate position; |
• | Disclosure of confidential or proprietary information; |
• | Disclosure of outside business activities; |
• | Antitrust activities; and |
• | Political campaign contributions and expenditures relating to public officials. |
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John Hancock Conflicts of Interest Policy (All Covered Employees)
Conflicts of Interest are both inherent to the investment advisory business and also exist as a result of our unique organizational structure. The Conflicts of Interest Policy governs organizational/Adviser conflicts, rather than personal conflicts (such as outside business activities or gifts and entertainment). Our fiduciary obligation as an adviser to the Funds requires us to effectively disclose and/or manage these conflicts, which we do today through various documents and controls, and ultimately to act in the best interest of our clients and the Fund shareholders.
John Hancock Gift & Entertainment Policy (All Covered Employees)
You are subject to the Gift and Entertainment Policy for the John Hancock Advisers which is designed to prevent the appearance of an impropriety, potential conflict of interest or improper payment.
The Gift & Entertainment Policy covers many issues relating to giving and accepting of gifts and entertainment when dealing with business partners, such as:
• | Gift & Business Entertainment Limits |
• | Restrictions on Gifts & Entertainment |
• | Reporting of Gifts & Entertainment |
John Hancock Insider Trading Policy (All Covered Employees)
The antifraud provisions of the federal Securities Laws generally prohibit persons with material nonpublic information from trading on or communicating the information to others. Sanctions for violations can include civil injunctions, permanent bars from the securities industry, civil penalties up to three times the profits made or losses avoided, criminal fines and jail sentences. While Access Level I Persons are most likely to come in contact with material nonpublic information, the rules (and sanctions) in this area apply to all persons covered under this code and extend to activities both related and unrelated to your job duties.
The John Hancock Insider Trading Policy (the Insider Trading Policy) covers a number of important issues, such as:
• | Possession, misuse and access to material nonpublic information |
John Hancock Pay to Play Rule on Political Contributions (All Covered Associates)
The Pay to Play rule restricts Investment Advisers and certain employees who fall within the definition of Covered Associates from making contributions to elected officials (including incumbents, candidates, or successful candidates for an elective office of a government entity) who may be able to influence the selection of the investment adviser to manage the assets of government entities (any state or political subdivision of a state). The rule has three primary elements:
• | A two-year prohibition on an adviser’s providing compensated investment advisory services to a government entity after a contribution has been made by the adviser or one of its covered associates; |
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• | A prohibition on the use of third-party solicitors who are not themselves regulated persons subject to pay-to-play restrictions on political contributions; and |
• | A prohibition on bundling and other efforts by advisers to solicit political contributions to certain officials of a government entity to which the adviser is seeking to provide services. |
Sanctions for violating the rule include a prohibition from receiving compensation for providing advisory services to a fund in which such government entity’s participant-directed plan or program invests for two years thereafter, otherwise known as a “time-out” period.
John Hancock Whistleblower Policy (All Covered Employees)
The Committees of the mutual funds’ Board of Trustees investigate improprieties or suspected improprieties in the operations of the Funds and has established procedures for the confidential, anonymous submission by employees of John Hancock Investment Management, LLC and John Hancock Variable Trust Advisers, LLC. (collectively the “Advisers”) or any other provider of services to the Funds or Advisers of complaints regarding accounting, internal accounting controls, auditing matters or violations of the Securities Laws. The objective of this policy is to provide a mechanism by which complaints and concerns regarding accounting, internal accounting controls, auditing matters or violations of Securities Laws may be raised and addressed without the fear or threat of retaliation. The funds desire and expect that the employees and officers of the Advisers, or any other service provider to the funds will report any complaints or concerns they may have regarding accounting, internal accounting controls or auditing matters.
Persons may submit complaints or concerns to the attention of funds’ CCO (or designee) by sending a letter or other writing to the funds’ principal executive offices, by telephone call to or an email to the Ethics Hotline, Ethics Hotline can be reached at 1-866-294-9534, or through the Ethicspoint website at www.manulifeethics.com. The Ethics Hotline and Ethicspoint website are operated by an independent third party, which maintains the anonymity of all complaints.
Complaints and concerns may be made anonymously to the funds’ CCO (or designee) or the respective Committee’s Chairperson. Furthermore, nothing in this policy prohibits reporting possible violations of applicable law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation.
Policy and Procedures Regarding Disclosure of Portfolio Holdings (All Covered Employees)
It is our policy not to disclose nonpublic information regarding Fund portfolio holdings except in the limited circumstances noted in this Policy. You can only provide nonpublic information regarding portfolio holdings to any person, including affiliated persons, on a “need to know” basis (i.e., the person receiving the information must have a legitimate
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business purpose for obtaining the information prior to it being publicly available and you must have a legitimate business purpose for disclosing the information in this manner). We consider nonpublic information regarding Fund portfolio holdings to be confidential and the intent of the policy and procedures is to guard against selective disclosure of such information in a manner that would not be in the best interest of Fund shareholders.
Additional Policies Outside the Code (All Covered Employees)
• | Policy Regarding Dissemination of Mutual Fund Portfolio Information |
• | Manulife Financial Corporation Anti-Fraud Policy |
• | John Hancock Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) Program |
• | Conflict of Interest Rules for Directors and Officers |
• | John Hancock Non-Cash Compensation Policy |
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Appendix
Definitions
Access Person:
You are an “Access Person” if you are a “Supervised Person” who has access to nonpublic information regarding any client’s purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any John Hancock Affiliated Fund, or who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic.
Automatic Investment Plan:
Means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan.
Beneficial Ownership:
Means the opportunity, directly or indirectly, to profit or share in any profit (for loss) derived from a Reportable Securities transaction. This includes Reportable Securities held by an Access Person’s Household Family Member and Covered Securities held through certain family trusts, family custodial accounts, entities controlled by the Access Person, portfolios from which the Supervised Person may receive a performance fee, and other circumstances in which the Access Person may profit, directly or indirectly through any contract, arrangement, understanding, relationship, or otherwise, from transactions in the respective Reportable Securities, as defined further in Rule 16a-1 (a) (2) of the Securities Exchange Act of 1934.
Broad-Based Index:
For the purposed of this Code a Broad-Based Index will include the following:
• | the S&P 100, S&P Midcap 400, S&P 500, FTSE 100, and Nikkei 225; |
• | Direct obligations of the U.S. Government (e.g., treasury securities) |
• | Indirect obligations of the U.S. Government with a maturity of less than 1 year (GNMA) |
• | Commodities; |
• | Foreign currency |
Brokerage Account:
Any of your accounts:
• | Which have the capability to hold Reportable Securities; |
• | Accounts of your spouse, Significant Other, minor children or family members sharing your household (together, “Household Members”); |
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• | Accounts in which you or your Household Members have a Beneficial Ownership; |
• | Accounts over which you have discretion, give advice or information or have Power of Attorney (POA). |
Covered Person:
Includes all “Access Persons” as defined under Securities and Exchange Commission (SEC) Rule 17j-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), and “Supervised Persons” as defined under SEC Rule 204A-1 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Household Family Member:
An Access Person’s spouse, Significant Other, minor children, or other family member who also shares the same household as the Access Person.
Investment Professionals:
Means a Supervised Person who are either Portfolio Managers, Analysts, and Traders.
Involuntary Issuer Transaction:
Transaction where the account owner has not determined the timing as to when the purchase or sale transaction will occur or the amount of shares purchased or sold, i.e. making changes to existing positions or asset allocations within the John Hancock retirement plans, buying or selling shares of a Reportable Security, etc.
Involuntary Issuer Transactions include:
• | transactions which result from a corporate action applicable to all similar security holders (such as splits, tender offers, mergers, stock dividends, etc.); or |
• | automatic dividend reinvestment and stock purchase plan acquisitions. |
Please note: any transaction that overrides the pre-set schedule or allocations must be included in a quarterly transaction report.
John Hancock Affiliated Fund:
For the purposes of this Code, a John Hancock Affiliated Fund shall include both:
• | a “John Hancock Mutual Fund” (i.e., a 1940 Act mutual fund that is advised or sub-advised by a John Hancock Adviser or by another Manulife entity); or |
• | “John Hancock Variable Product” (i.e., contracts funded by insurance company separate accounts that use one or more portfolios of John Hancock Variable Insurance Trust). |
• | Any other financial product or security advised or sub-advised by a John Hancock Adviser or John Hancock Insurance or another Manulife entity. |
The definition for John Hancock Affiliated Fund does not include John Hancock money market funds. A list of John Hancock Affiliated Funds can be found on StarCompliance.
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John Hancock Variable Products:
Contracts funded by insurance company separate accounts that use one or more portfolios of John Hancock Variable Insurance Trust.
Managed Account:
Any account over which neither you nor a Household Family Member has direct or indirect influence or control and cannot a) suggest purchases or sales of investments to the trustee or third-party discretionary manager; b) direct purchases or sales of investments; or c) consult with the trustee or third-party discretionary manager as to the particular allocation of investments to be made in the account.
Private Placements:
Securities exempt from SEC registration under section 4(2), section 4(6) and/or rules 504 –506 under the Securities Act.
Reportable Securities:
Means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guaranty of, or warrant or right to subscribe to or purchase any of the foregoing, except it should not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;
(iii) Shares issued by money market funds;
(iv) Shares issued by open-end funds other than reportable funds; and
(v) Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds.
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Please note: Reportable Securities includes both John Hancock Affiliated Funds and John Hancock Variable Products.
Securities Laws:
Means the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the SEC under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted there under by the SEC or the Department of the Treasury.
Significant Others:
Two people who (1) share the same primary residence; (2) share living expenses; and (3) are in a committed relationship and intend to remain in the relationship indefinitely.
Supervised Person:
Is defined by the Advisers Act to mean a partner, officer, director (or other person occupying a similar status or performing similar functions) or employee, as well as any other person who provides advice on behalf of the adviser and is subject to the adviser’s supervision and control. However, in reliance on the Prudential no-action letter, John Hancock does not treat as a “Supervised Employee” any of its “non-advisory personnel”, as defined below.
In reliance on the Prudential no-action letter, John Hancock treats as an “Advisory Person” any “Supervised Employee” who is involved, directly, or indirectly, in John Hancock Financial Services investment advisory activities, as well as any “Supervised Employee” who is an Access Person. John Hancock treats as “non-advisory personnel”, and does not treat as a Supervised Person, those individuals who have no involvement, directly or indirectly, in John Hancock investment advisory activities, and who are not Access Persons.
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Preferred Brokers List
Preferred Brokers List While employed by John Hancock, you must maintain your Brokerage Accounts at one of the preferred brokers approved by John Hancock. The following are the preferred brokers:
Ameriprise | Sanders Morris Harris |
Bank of Oklahoma | Scottrade |
Bank of Texas | Stifel |
Barclays Wealth Management | TD Ameritrade |
Brave Warrior Advisors | T. Rowe Price |
Charles Schwab | Thompson Davis & Co. |
Chase Investment Services | UBS |
Citigroup | US Trust |
Constellation Wealth Management | Vanguard |
Credit Suisse | Robert W. Baird & Co. |
DB Alex Brown | |
Edward Jones | |
E*Trade | |
Fidelity | |
First Republic | |
Goldman Sachs Wealth Management | |
HSBC Private Bank | |
Interactive Brokers | |
JB Were | |
JP Morgan Private Bank | |
JP Morgan Securities | |
Lincoln Financial | |
Merrill Lynch & Bank of America | |
Morgan Stanley Private Wealth | |
Morgan Stanley Smith Barney | |
Northern Trust | |
Northern Trust Institutional | |
Oppenheimer & Co. | |
OptionsXpress | |
Pershing Advisor Solutions | |
Piper Jaffray | |
Raymond James | |
Revolution Capital |
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Compliance Contacts
Entity | Chief Compliance Officer |
John Hancock Investment Management, LLC | Trevor Swanberg – 617-572-4398 |
John Hancock Variable Trust Advisers, LLC | Trevor Swanberg |
Each open-end and closed-end fund advised by a John Hancock Adviser | Trevor Swanberg |
John Hancock Investment Management Distributors, LLC | Michael Mahoney - 617-663-3021 |
John Hancock Distributors, LLC | Michael Mahoney |
Code of Ethics Contacts | |
Code of Ethics Administration Group | INVDIVCodeofEthics@manulife.com |
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Exhibit (2)(r)(2)
Every day we make individual choices which reflect on the collective reputation of the Manulife and John Hancock brands. Our global standards for business ethics and our well-regarded reputation for integrity differentiates our brands in the marketplace, and are critical factors to our past and future success. We are proud of Manulife’s culture of doing business the right way and underscore the need to continue to conduct our business in this manner.
To this end, Global Wealth and Asset Management and General Account Investments have adopted this code of ethics to promote compliance with applicable law, as well as to address certain potential and actual conflicts of interest which can arise between our personal interests and the interests of our Clients. This code of ethics has been designed to reflect our values as a global organization and demonstrate the importance of the trust our Clients have placed in Manulife and the duties we owe to our Clients.
Paul Lorentz | Scott Hartz |
President & CEO, | Chief Investment Officer |
Global Wealth and Asset Management | Manulife Financial Corporation |
Table of Contents
1. | Purpose | 7 |
2. | Code Applicability | 8 |
2.1 GWAM AND GA ASSOCIATE | 8 | |
2.2 GWAM AND GA ACCESS PERSON (“ACCESS PERSON”) | 8 | |
3. | Access Classification Levels and Applicable Rules | 9 |
3.1 ACCESS CLASSIFICATION LEVELS – SCHEMATIC | 9 | |
4. | General Principles of Business Conduct | 10 |
4.1 GENERAL PRINCIPLES OF BUSINESS CONDUCT | 10 | |
4.2 PERSONAL TRADING CONFLICTS OF INTEREST | 11 | |
4.3 CONFIDENTIAL INVESTMENT INFORMATION | 11 | |
4.4 MNPI RELATED TO MANULIFE SECURITIES AND MANULIFE AFFILIATED FUNDS | 11 | |
4.5 FALSE RUMOURS | 11 | |
4.6 SUPERVISORY OVERSIGHT | 11 | |
4.7 SPECIAL REQUIREMENTS FOR REAL ASSETS | 11 | |
4.8 SHARED BUSINESS ENTERTAINMENT AND GIFTS | 11 | |
4.9 PAY TO PLAY | 12 | |
4.10 OUTSIDE BUSINESS ACTIVITIES | 12 | |
4.11 REPORTING VIOLATIONS OF THE CODE | 12 | |
4.12 INITIAL CODE CERTIFICATION | 12 | |
4.13 QUARTERLY CODE CERTIFICATION | 12 | |
4.14 ANNUAL CODE CERTIFICATION | 12 |
Code of Ethics Rev. 01.20.2020
3 |
Table of Contents
5. | Personal Trading Rules | 13 |
5.1 NO LIABILITY FOR LOSSES | 13 | |
5.2 WHAT SECURITIES ARE SUBJECT TO THE PERSONAL TRADING RULES? | 13 | |
5.3 REQUIREMENT TO REPORT SECURITIES ACCOUNTS | 13 | |
5.3.1 MANAGED ACCOUNTS | 14 | |
5.3.2 MANAGED ACCOUNT QUALIFICATION PROCESS | 14 | |
5.4 DUPLICATE TRANSACTION CONFIRMATIONS AND STATEMENTS | 14 | |
5.5 U.S.-BASED PREFERRED BROKERAGE ACCOUNT REQUIREMENT | 14 | |
5.6 INITIAL HOLDINGS REPORT AND CERTIFICATION | 14 | |
5.7 QUARTERLY TRANSACTIONS REPORT AND CERTIFICATION | 15 | |
5.8 REPORTING OF SECURITIES AS GIFTS, DONATIONS AND INHERITANCES | 15 | |
5.9 ANNUAL HOLDINGS REPORT AND CERTIFICATION | 15 | |
5.10 ACCESS PERSON’S RESPONSIBILITY REGARDING TRANSACTIONS AND HOLDINGS DATA | 15 | |
5.11 PRE-CLEARANCE APPROVAL REQUIREMENT | 16 | |
5.12 TERMS OF PRE-CLEARANCE | 16 | |
5.12.1 SAME DAY APPROVAL WINDOW | 16 | |
5.12.2 RESTRICTION ON SECURITIES UNDER ACTIVE CONSIDERATION | 16 | |
5.12.3 LIMIT ORDERS AND SPECIAL ORDERS | 16 | |
5.12.4 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE | 16 | |
5.12.5 INITIAL PUBLIC OFFERINGS & INITIAL COIN OFFERINGS & PRIVATE PLACEMENTS | 16 | |
5.12.6 INITIAL PUBLIC OFFERINGS, INITIAL COIN OFFERINGS & PRIVATE PLACEMENT APPROVALS | 16 | |
5.13 INVESTMENT CLUBS | 16 | |
5.14 RESTRICTIONS ON MANULIFE SECURITIES | 16 | |
5.14.1 REQUIREMENT TO PRE-CLEAR SALES OF MFC SHARES IN THE GSOP PROGRAM | 17 | |
5.15 SHORT TERM PROFIT BAN (“60 DAY RULE”) | 17 | |
5.16 SAME DAY BLACKOUT PERIOD RULE | 18 | |
5.16.1 MARKET CAP SECURITIES EXCEPTION | 18 | |
5.17 EXCESSIVE TRADING IS DISCOURAGED | 18 | |
5.18 INFORMATION BARRIERS | 18 |
Code of Ethics Rev. 01.20.2020
4 |
Table of Contents
6. | Additional Personal Trading Rules for Front-Office Access Persons | 19 |
6.1 15 DAY BLACKOUT PERIOD RULE | 19 | |
6.1.1 MARKET CAP SECURITIES EXCEPTION | 19 | |
6.1.2 DE MINIMIS TRADING EXCEPTION | 19 | |
6.2 INITIAL PUBLIC OFFERING BAN | 19 | |
6.3 INVESTMENT CLUB BAN | 19 | |
7. | Additional Personal Trading Rules for MIM Public Markets Front-Office Access Persons | 20 |
7.1 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE | 20 | |
8. | Administration of the Code | 21 |
8.1 PENALTIES FOR CODE VIOLATIONS | 21 | |
8.2 EXEMPTIONS AND APPEALS | 21 | |
8.3 CODE AMENDMENTS | 21 | |
8.4 PRIVACY | 21 | |
8.5 CODE ADMINISTRATION | 22 | |
8.5.1 CONTACT | 22 | |
8.6 RECORDKEEPING | 22 |
Appendix A | 23 |
Definitions of Italicized Code of Ethics Terms | 23 |
Appendix B | 28 |
Legal Entity Adoption of the Code | 28 |
Appendix C | 29 |
Securities Reporting & Pre-Clearance Summary Chart | 29 |
Code of Ethics Rev. 01.20.2020
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Code of Ethics Rev. 01.20.2020
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1. Purpose
Global Wealth and Asset Management (“GWAM”) and General Account Investments (“GA”) and certain regulated entities listed in Appendix B (together the “Firm”) have adopted this Code of Ethics (the “Code”) to promote compliance with applicable law.1
This Code is separate and distinct from the Manulife Code of Business Conduct and Ethics. It is a supplementary standard of business conduct for asset managers and their employees to prevent those abuses in the investment management business that can arise when certain conflicts of interest exist between an investment manager, including its personnel and affiliates, and accounts managed for its Clients.
By adopting and enforcing this Code, we strengthen the trust and confidence entrusted in us by demonstrating that at Manulife, Client interests come first.
1This Code has been designed to be applicable across GWAM and GA and certain regulated entities listed in Appendix B (together the “Firm”), however it is being implemented in a multi-phased, multi-year project. In the interim, Associates may be subject to another code of ethics. See Appendix B for the legal entities that have adopted this Code to date.
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2. Code Applicability
This Code is applicable to Associates of the Firm.
Adherence to the General Principles of Business Conduct, and other provisions of this Code as applicable, are a condition of employment.
2.1 GWAM AND GA ASSOCIATE
Associates are:
(i) | any partner, officer, director, or other person occupying a similar status or performing similar functions of the Firm |
(ii) | an employee of the Firm |
(iii) | any person who provides investment advice on behalf of the Firm and is subject to the supervision and control of the Firm |
(iv) | any person meeting the definition of Access Person |
(v) | an Advisory Person of a Fund |
(vi) | certain Manulife Affiliate persons who engage, directly or indirectly, in the Firm’s investment advisory activities and |
(vii) | any other person who the Code Administrator deems an Associate.2 |
2.2 GWAM AND GA ACCESS PERSON (“ACCESS PERSON”)
Additionally, Associates who have access to certain investment information and the investment decision-making process are further classified by the Code Administrator into one of three Access Person levels and therefore subject to the personal trading rules and obligations of their Access Person classification level.
2The Code Administrator may modify the requirements of this Code for those Associates whose covered status is expected not to exceed 90 days (for instance contractors, co-ops and interns) or in instances where a person is subject to another code of ethics or fiduciary duty and where the modification is not otherwise specifically prohibited by law. In reliance on an SEC no-action letter, the Code Administrator may include in the definition of “Associate” any person of a Manulife Affiliate who is engaged, directly or indirectly in the Firm’s investment advisory activities.
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3. Access Classification Levels and Applicable Rules
Associates are categorized into one of the following Access Classification Levels for purposes of applying the rules in this Code:
ACCESS CLASSIFICATION LEVELS | DEFINITION | APPLICABLE SECTION(S) OF RULES IN THIS CODE |
Non-Access Person | Associates (as defined in Section 2.1) who are not deemed to be an Access Person. | Section 4 |
Regular Access Person |
Any Associate who, in connection with their regular functions or duties: (i) has or may have access to non-public information regarding the purchase or sale of securities or non-public information regarding the portfolio holdings of Client or Firm accounts (ii) has or may have access to material, non-public Securities information.
Examples: Sales, Marketing, Product, Client Service, IT, Finance, Operations, Legal, Compliance, Risk, Audit and certain related support staff. |
Section 4
Section 5 |
General Account/ Manulife Investment Management Private Markets (“MIM Private Markets”) Front- Office Access Person |
Any GA or MIM Private Markets Associate who, in connection with their regular functions or duties, makes or participates in/supports making recommendations regarding the purchase or sale of Securities for Client or Firm accounts, or provides direct administrative support to a General Account/MIM Private Markets Associate who makes or participates in/supports recommendations.
Examples: Portfolio Management, Analysts, Traders, Credit, ALM, Real Estate, Commercial Mortgages and certain related support staff |
Section 4
Section 5 Section 6 |
Manulife Investment Management Public Markets (“MIM Public Markets”) Front-Office Access Person |
Any MIM Public Markets Associate who, in connection with their regular functions or duties, makes or participates in/supports making recommendations regarding the purchase or sale of Securities for Client or Firm accounts, or provides direct administrative support to a MIM Public Markets Associate who makes or participates in/supports recommendations.
Examples: Portfolio Managers, Analysts, Traders and certain related support staff |
Section 4
Section 5 Section 6 Section 7 |
3.1 ACCESS CLASSIFICATION LEVELS – SCHEMATIC
ACCESS CLASSIFICATION LEVELS |
GENERAL PRINCIPLES OF BUSINESS CONDUCT
(SECTION 4) |
PERSONAL TRADING RULES
(SECTION 5) |
ADDITIONAL PERSONAL TRADING RULES
(SECTION 6) |
ADDITIONAL PERSONAL TRADING RULES
(SECTION 7) |
Non-Access Person |
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Regular Access Person |
|
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||
GA/MIM Private Markets Front-Office Access Person |
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MIM Public Markets Front-
Office Access Person |
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4. General Principles of Business Conduct
Applicable to All Access Classification Levels
The rules in this Section are applicable to all Access Classification Levels:
• Non-Access Person
• Regular Access Person
• GA/MIM Private Markets Front-Office Access Person
• MIM Public Markets Front-Office Access Person.
4.1 GENERAL PRINCIPLES OF BUSINESS CONDUCT
Adherence to the General Principles of Business Conduct and other provisions of this Code is a condition of employment. Additionally, while the Code contains specific restrictions and limitations designed to prevent certain defined types of conflicts, the Firm recognizes that not every potential conflict of interest can be anticipated by the Code. Therefore, it is critical that the Code’s General Principles of Business Conduct be followed in the absence of a specific Code requirement or limitation.
Each Associate is expected to adhere to a high standard of professional and ethical conduct and should be sensitive to situations that may give rise to an actual conflict or the appearance of a conflict with the accounts we manage, or situations that have the potential to cause damage to Manulife or a Manulife Affiliates’ reputation. To this end, each Associate must act with integrity, honesty and in an ethical manner. The following General Principles of Business Conduct govern the activities of our business and every Associate:
• | We have a fiduciary duty to place the interests of our Clients first. Consistent with our fiduciary duty, we must also never (i) employ any device, scheme or artifice to defraud a Client (ii) make any untrue statement of a material fact to the Client or an account we manage or omit to state a material fact necessary in order to make the statements made to a Client, in light of the circumstances under which they are made, not misleading |
• | All personal Securities transactions must be conducted consistent with the applicable provisions of the Code, and in such a manner as to avoid any actual or potential conflict of interest and any other abuse of trust or responsibility. |
• | We should not take inappropriate advantage of our position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to the accounts we manage. |
• | We must treat as confidential any non-public or confidential information concerning the identity of Security holdings and financial circumstances of the Firm or our Clients. |
• | We must comply with all applicable laws including applicable domestic and foreign Securities Laws. |
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4.2 PERSONAL TRADING CONFLICTS OF INTEREST
The Code represents a balancing of important interests. On the one hand, we owe a duty of loyalty to our Clients, and we must avoid even the appearance of a conflict that might be perceived as abusing the trust Clients have placed in us. On the other hand, the Firm does not want to prevent conscientious professionals from investing for their own accounts where conflicts do not exist or are immaterial to investment decisions affecting our Clients or the accounts we manage.
When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Associates owe a fiduciary duty to our Clients, and the accounts we manage. In most cases, this means that the affected Associates will be required to forego conflicting Securities transactions. In some cases, personal investments will be permitted, but only in a manner, which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Client portfolios or taking unfair advantage of the account relationship.
4.3 CONFIDENTIAL INVESTMENT INFORMATION
Information acquired by Associates in connection with their duties for the Firm including information regarding actual or contemplated investment decisions, non-public portfolio composition, proprietary research, research recommendations, investment recommendations, or Firm or Client interests, is confidential and may not be used in any way that might be contrary to, or in conflict with the interests of the accounts we manage. Additionally, Associates are reminded that certain Clients have specifically required their relationship with us to be treated confidentially.
4.4 MNPI RELATED TO MANULIFE SECURITIES AND MANULIFE AFFILIATED FUNDS
Material, non-public information (“MNPI”) related to Manulife Securities, Manulife Affiliated Mutual Funds, or Affiliated Regulated Closed-End Funds acquired by Associates in connection with their duties for the Firm is confidential and may not be used for direct or indirect personal or family benefit including personal trading.
4.5 FALSE RUMOURS
The Securities Laws prohibit the deliberate or reckless use of manipulative devices or activities with an intention to affect the Securities markets, including the intentional creation or spreading of false or unfounded rumors or other information. Accordingly, Associates may not communicate information regarding companies, Securities, or markets that they know to be false.
4.6 SUPERVISORY OVERSIGHT
All Associates with managerial responsibility are responsible for the reasonable supervision of their staff to prevent and detect violations of this Code and applicable rules and regulations. Failure to perform adequate oversight can result in the manager being held personally liable by regulators for violations of the Securities Laws and the Code.
4.7 SPECIAL REQUIREMENTS FOR REAL ASSETS
Associates are prohibited from knowingly engaging in for (direct or indirect) personal or family benefit any of the following activities:
• | Employing, hiring, or contracting with vendors for the provision of goods or services to Manulife or Manulife-managed properties or businesses; |
• | Utilizing for personal purposes the paid or unpaid services of a Manulife or Manulife-managed property vendor (including the services of the vendor’s employees); |
• | Purchasing or selling property adjacent to existing or proposed Manulife or Manulife-managed properties or businesses; |
• | Purchasing, selling, or transferring mineral or other land-related rights impacting existing or proposed Manulife or Manulife-managed properties or businesses; |
• | Leasing a real estate interest to or from a Manulife or Manulife- managed property; or |
• | Exploiting Manulife or Manulife- managed properties or assets (including rental space and equipment or supplies) for personal use. |
4.8 SHARED BUSINESS ENTERTAINMENT AND GIFTS
The Firm has adopted the “GLOBAL ENTERTAINMENT & GIFT POLICY.” Although the Firm recognizes that the giving or receiving of shared business entertainment and modest gifts is a customary way to strengthen business relationships, and with some restrictions, is a lawful and proper business practice, they have adopted the policy to:
• | Protect Associates from being improperly influenced (or perceived to be improperly influenced) in the discharge of their responsibilities because of excessive or improper shared business entertainment or gifts from a business partner or Client; |
• | Ensure that the giving of shared business entertainment or gifts to business partners or Clients does not exclude the Firm from certain investment management and business opportunities; and |
• | Ensure that Associates do not engage in shared business entertainment or gift practices that constitute (or appear to constitute) a corrupt business practice, including bribery. |
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All Associates must abide by the specific standards and disclosure requirements of the “GLOBAL ENTERTAINMENT & GIFT POLICY.”
Additionally, Associates are required to report their shared business entertainment and gift activity in StarCompliance, the Code of Ethics administrative system, as well as certify to their adherence to the “GLOBAL ENTERTAINMENT & GIFT POLICY” on a quarterly basis.
4.9 PAY TO PLAY
The Firm has adopted the “PAY TO PLAY POLICY” to ensure that certain GWAM and GA legal entities (each a “U.S. Adviser”) comply with applicable pay to play laws and are not disqualified from pursuing new government Client opportunities (including public pension fund Clients), or from receiving advisory compensation from existing government Clients.
The Policy outlines its applicability to certain U.S. Advisers and Associates of those U.S. Advisers that must comply with the specific standards and requirements of the policy.
Additionally, Associates are required to pre-clear and report their political contributions and certify to their adherence to the “PAY TO PLAY POLICY” in StarCompliance on a quarterly and annual basis.
4.10 OUTSIDE BUSINESS ACTIVITIES
The Firm has established a reporting and pre-clearance process to identify and address certain actual or potential conflicts of interest related to an Associate’s outside business activities.
Associates are required to pre-clear and disclose in StarCompliance their outside employment positions, board or officer positions with a business or charitable organization, positions with portfolio companies or other portfolio advisory positions, positions on loan or creditor committees, positions with government or quasi-government bodies, and board or officer positions with industry or professional organizations. This includes activities on both a paid and unpaid basis.
Additionally, Associates are required to certify that they have disclosed all outside business activities in StarCompliance on a quarterly and annual basis.
4.11 REPORTING VIOLATIONS OF THE CODE
Associates who know or have reason to believe that the Code has been or may be violated must bring such actual or potential violations to the immediate attention of the Code Administrator and/or the relevant Chief Compliance Officer.
Associates are encouraged to communicate with the Code Administrator and/or the relevant Chief Compliance Officer, if they have a doubt about a provision of the Code pertinent to a specific situation, business practice or potential conflict of interest.
It is a violation of the Code for an Associate to deliberately fail to report a violation or deliberately withhold relevant or material information concerning a violation of the Code.
No person will be subject to penalty or reprisal for reporting in good faith suspected violations of the Code.
Additionally, unethical, unprofessional, illegal, fraudulent or other questionable behavior may also be anonymously reported by visiting the confidential Manulife Ethics Hotline at www.ManulifeEthics.com.
4.12 INITIAL CODE CERTIFICATION
Each Associate is required to certify in StarCompliance their initial receipt of the Code including that they have read and understood the Code and agree to comply with the applicable provisions of the Code.
4.13 QUARTERLY CODE CERTIFICATION
Each Associate is required to certify in StarCompliance on a quarterly basis that they are in compliance with the applicable provisions of the Code.
4.14 ANNUAL CODE CERTIFICATION
Each Associate, on an annual basis, is required to certify in StarCompliance that they have read and understood the Code, have complied with the applicable provisions of the Code (or have disclosed any failure to comply with the provisions of the Code to the Code Administrator) during the past year.
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5. Personal Trading Rules
Applicable to All Access Persons
The rules in this Section are applicable to the following Access Classification Levels:
• | Regular Access Person |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person |
5.1 NO LIABILITY FOR LOSSES
Manulife and/or Clients will not be liable for any losses incurred or profits avoided by any Access Person or Household Family Member resulting from the implementation or enforcement of the Code. The definition of a Household Family Member includes an Access Person’s spouse, significant other, minor children or other family members who also share the same household with the Access Person.
Access Persons must understand that their ability (as well as the ability of their Household Family Members) to buy and sell Securities may be limited by the Code and that trading activity by the Firm, Clients and/or other Manulife Affiliates may affect the timing of when an Access Person (as well as a Household Family Member) can buy or sell a particular Security.
5.2 WHAT SECURITIES ARE SUBJECT TO THE PERSONAL TRADING RULES?
Securities in which the Access Person has a Beneficial Interest are subject to the Code’s personal trading restrictions and requirements. An Access Person is deemed to have a Beneficial Interest in any Security where the Access Person controls or can directly or indirectly profit or share in the profit derived from a transaction in a Security. An Access Person is presumed to have a Beneficial Interest in the following Securities:
• | Securities owned by an Access Person in their name; |
• | Securities owned by Household Family Members; |
• | Securities owned by an Access Person indirectly through an account or investment vehicle for their benefit, such as an IRA/RRSP/ RESP/ISA/SIPP, family trust, or family partnership; |
• | Securities in which the Access Person has a joint ownership interest, such as Securities owned in a joint brokerage account; and |
• | Securities over which the Access Person has discretion or gives advice (other than for a Firm or Client account). This includes Securities owned by trusts, private foundations or other charitable accounts for which the Access Person has investment discretion. |
5.3 REQUIREMENT TO REPORT SECURITIES ACCOUNTS
Access Persons are required to report the name of the broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Securities are or can be held for the Access Person’s Beneficial Interest (including accounts of Household Family Members).
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Access Persons are required to report all Securities accounts within 10 calendar days of initially being designated an Access Person. After this initial report of Securities accounts, any Securities accounts opened in the future time must be reported no later than 10 calendar days following the opening of the account or prior to the first discretionary transaction in the account.
The following is a non-exhaustive list of commonly reported Securities Accounts:
• | Brokerage Accounts |
• | Mutual Fund Only Accounts |
• | Custodial Securities Accounts |
• | Manulife GSOP Plan Accounts |
• | Certain 529 Plans (plans affiliated with or plans with investment options managed by Manulife or a Manulife-affiliated entity) |
• | IRA Accounts |
• | Stock Purchase Plans |
• | Transfer Agent Accounts |
• | Variable Life or Annuity Insurance Policies with underlying Affiliated Mutual Fund investment options |
• | Manulife Loan Program Mutual Fund Account |
• | John Hancock Unified 401k Plan/Manulife RPS |
• | Registered Savings Plan (RRSP/ RESP/TFSA) |
• | Uncertified Book Entry Securities |
• | Physical possession of certified Securities |
• | Employee Stock Option Account |
• | U.K. Individual Savings Account (ISA) |
• | U.K. Self Invested Pension Plan (SIPP) |
As an Access Person, you are also required to inform any broker/dealer when you open a new account that you are employed by a financial institution and also whether you are registered with a broker/dealer.
5.3.1 MANAGED ACCOUNTS
As outlined in Section 5.3 above, the requirement to report accounts in which any Securities are or can be held for the Access Person’s Beneficial Interest includes Managed Accounts (accounts where a professional money manager is charged with sole discretionary authority over the account). However, Securities transactions in Managed Accounts may be exempt from Section 5.7:
Pre-Clearance Approval Requirement (below) provided the Code Administrator qualifies the account to be a Managed Account.
5.3.2 MANAGED ACCOUNT QUALIFICATION PROCESS
The Code Administrator may qualify an account to be a Managed Account provided the Access Person furnishes a copy of the client Advisory Agreement for the Managed Account. The Code Administrator will review the agreement to determine if the account qualifies to be a Managed Account.
Once the Code Administrator approves an account to be a Managed Account, any Securities transactions in the Managed Account are exempt from Section 5.7: Pre-Clearance Approval Requirement.
5.4 DUPLICATE TRANSACTION CONFIRMATIONS AND STATEMENTS
Access Persons must arrange for the Code Administrator to receive duplicate copies of trade confirmations of Reportable Securities transactions and periodic account statements for any Reportable Securities accounts in which the Access Person has a Beneficial Interest in, if the account holds, or has the ability to hold, Reportable Securities. This requirement also applies to the Securities confirmations and statements of Household Family Members.3
5.5 U.S.-BASED PREFERRED BROKERAGE ACCOUNT REQUIREMENT
U.S.-based Access Persons are required to maintain all Reportable Securities accounts (including the Reportable Securities accounts of Household Family Members) at one of the firm’s Preferred Brokers unless the account has been qualified by the Code Administrator as an Exempt Securities Account. A current list of the Firm’s Preferred Brokers can be found on StarCompliance or by contacting the Code Administrator.
Upon designation as an Access Person, a person has 45 calendar days to (i) transfer all assets to a Preferred Broker and close the non-compliant account or (ii) qualify any non- compliant Securities account as an Exempt Securities Account.
5.6 INITIAL HOLDINGS REPORT AND CERTIFICATION
After reporting all Reportable Securities accounts (as outlined in Section 5.3) Access Persons must file an Initial Holdings Report. This Initial Holdings Report is due within 10 calendar days after the person became an Access Person and the submitted information must be current as of a date no more than 45 calendar days prior to the date the person became an Access Person.
An Access Person is required to submit with their Initial Holdings Report a certification that they have disclosed or reported all required Reportable
3 The Code Administrator may rely on the operating groups of Manulife/John Hancock for administration of trading activity limitations and monitoring of market timing policies for Manulife Affiliated Mutual Funds. To the extent the Code Administrator has ready access to Securities transaction and holdings information, the Code Administrator is not required to obtain duplicate paper confirmations or statements for such accounts.
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Securities holdings and all Reportable Securities accounts in which they have a Beneficial Interest (including Household Family Member accounts).
The Initial Holdings Report must include: (i) the title and type of each Reportable Security in which the Access Person has any Beneficial Interest, (ii) the exchange ticker symbol or CUSIP number and the number of shares or principal amount of each Reportable Security (each as applicable), (iii) the name of any broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Reportable Securities are or can be held for the Access Person’s direct or indirect Beneficial Interest, and (iv) the date the report is submitted by the Access Person.
5.7 QUARTERLY TRANSACTIONS REPORT AND CERTIFICATION
Access Persons must file a Quarterly Transaction Report that discloses certain information about each Reportable Security transaction in which they have (or as a result of the transaction acquired) a Beneficial Interest (including transactions for Household Family Members) during the quarter covered by the Quarterly Transaction Report.
Each Access Person’s Quarterly Transaction Report is due within 30 calendar days after the end of each calendar quarter. Each Access Person’s Quarterly Transaction report must also include a certification that the submitted Quarterly Transaction Report includes all information required to be reported. In connection with the Quarterly Transaction Report Certification, Access Persons are required to certify to the accuracy of the listing of Securities accounts displayed in StarCompliance.
The Quarterly Transaction report must include: (i) the date of the transaction (“trade date”), (ii) the title of the Reportable Security, (iii) the exchange ticker symbol or CUSIP number, the interest rate and maturity date, the number of shares or principal amount of each Reportable Security, the type of transaction or acquisition, the price at which the transaction was effected (each as applicable), (iv) the name of any broker, dealer, bank, or other entity with or through which the transaction was effected, and (v) the date the report is submitted by the Access Person.
5.8 REPORTING OF SECURITIES AS GIFTS, DONATIONS AND INHERITANCES
An Access Person’s gift or donation of a Pre-Clearable Security is considered a “sale” event (this includes gifts or donations by Household Family Members) and therefore is subject to pre-clearance approval prior to making the gift or donation. Refer to Section 5.11: Pre-Clearance Approval Requirement. Additionally, any approved gift or donation event of a Reportable Security must be accurately reflected in the next Quarterly Transaction Report (Refer to Section 5.7).
The receipt of a gift or inheritance of Reportable Securities should be promptly reported to the Code Administrator to ensure the new holding is accurately accounted for. However, the receipt of a gift or inheritance is not subject to pre- clearance.
5.9 ANNUAL HOLDINGS REPORT AND CERTIFICATION
Access Persons must file an Annual Holdings Report.
The Annual Holdings Report is due within 45 calendar days of December 31st and must be current as of a date no more than 45 calendar days prior to the date this information is reported.
Each Access Person must submit each Annual Holdings Report with a certification that they have reported all required Reportable Securities holdings and Securities accounts for which the Access Person holds a Beneficial Interest (including the applicable holdings and accounts of Household Family Members).
The Annual Holdings Report must include: (i) the title and type of each Reportable Security in which the Access Person has any Beneficial Interest, (ii) the exchange ticker symbol or CUSIP number and the number of shares or principal amount of each Reportable Security (each as applicable), (iii) the name of any broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Reportable Securities are or can be held for the Access Person’s direct or indirect Beneficial Interest, and (iv) the date the report is submitted by the Access Person.
5.10 ACCESS PERSON’S RESPONSIBILITY REGARDING TRANSACTIONS AND HOLDINGS DATA
As a convenience to Access Persons, the Code Administrator works with certain brokers to obtain Securities transactions and holdings data to pre-populate Quarterly Transaction and Annual Holdings Reports in StarCompliance (where available). However, the pre-populated data may contain omissions or inaccuracies. It is each Access Person’s responsibility to contact the Code Administrator to correct any inaccurate transactions or holdings data prior to submitting a report or certification.
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5.11 PRE-CLEARANCE APPROVAL REQUIREMENT
Access Persons may not purchase, sell or otherwise acquire or dispose of any Security in which they have (or because of such transaction will establish) a Beneficial Interest without obtaining advance pre-clearance approval for such transaction from StarCompliance (or the Code Administrator) unless the Security transaction is exempt from the Code’s pre-clearance requirement. Remember, Access Persons are required to obtain pre-clearance approval for all Securities transactions of persons who qualify as a Household Family Member of the Access Person unless the Security transaction is exempt from the Code’s pre-clearance requirement.
Refer to APPENDIX C for a list of Securities and Securities transactions exempt from the pre-clearance requirement.
5.12 TERMS OF PRE-CLEARANCE
During the pre-clearance process, Access Persons will be required to attest to the following terms of pre-clearance:
5.12.1 SAME DAY APPROVAL WINDOW
The pre-clearance approval is valid only for the same day it is granted.
5.12.2 RESTRICTION ON SECURITIES UNDER ACTIVE CONSIDERATION
Access Persons may not purchase, sell or otherwise dispose of any Security in which the Access Person has (or because of such transaction will establish) Beneficial Interest if the Access Person at the time of the transaction has actual knowledge that:
• | the Security (or a related Security) is under Active Consideration for Purchase or Sale by or on behalf of the Firm or any Client account; |
• | the Security is on an MNPI Restricted Trading List; and/or |
• | the Access Person is in possession of material non-public information regarding the Security. |
5.12.3 LIMIT ORDERS AND SPECIAL ORDERS
Due to the same-day approval window outlined in Section 5.12.1, multi-day special orders such as “good until cancelled orders” or “limit orders” are prohibited. “Day orders” (i.e., orders that automatically expire at the end of the trading day session) are allowed, however the onus is on the Access Person to check the status of day orders at the end of the trading day to ensure any orders that have not been executed are cancelled. If a trade order is left open beyond the same-day pre-clearance window, any resulting executed trade will constitute a Code violation.
5.12.4 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE
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Please note this term of pre- clearance is only applicable to the following Classification Level: MIM Public Markets Front-Office Access Persons. | |
Refer to Section 7.1 – MIM Public Markets Investment Team Hold Until Sold Rule. |
As outlined in Section 7.1, MIM Public Markets Front-Office Access Persons associated with an Investment Team (including Household Family Members) are not permitted to sell a holding if the same holding is held in a Client account managed by the MIM Public Markets Front-Office Access Person’s Investment Team.
5.12.5 INITIAL PUBLIC OFFERINGS & INITIAL COIN OFFERINGS & PRIVATE PLACEMENTS
As outlined in Section 5.11, Access Persons must obtain advance pre- clearance approval for transactions of reportable Securities. This includes Initial Public Offerings, Initial Coin Offerings, and Private Placements.
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Please note that the following Classification Levels may not participate in Initial Public Offerings (Refer to Section 6.2 – Initial Public Offering Ban): |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
5.12.6 INITIAL PUBLIC OFFERINGS, INITIAL COIN OFFERINGS & PRIVATE PLACEMENT APPROVALS
As part of the pre-clearance process, pre-clearance requests for Initial Public Offerings, Initial Coin Offerings and Private Placements will be subject to the approval of the relevant Chief Investment Officer or designee.
5.13 INVESTMENT CLUBS
Access Persons (including Household Family Members) are required to pre-clear and report all pre-clearable and Reportable Securities of their Investment Club in the same manner as their own personal trades.
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Please note that the following Classification Levels may not participate in Investment Clubs (Refer to Section 6.3 – Investment Club Ban): |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
5.14 RESTRICTIONS ON MANULIFE SECURITIES
The Corporate Law Department has a Policy entitled: Manulife Financial Corporation (“MFC”): Insider Trading & Reporting Policy. This Policy prohibits Manulife employees from speculating in MFC Securities. Speculation includes the purchase or sale of MFC Securities with the intention of reselling or buying back in a relatively short period of time in the expectation of a rise or fall in the market price of such Securities, buying or selling options, or short selling. The
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Policy also outlines requirements for Manulife employees that are deemed to be “Reporting Insiders”. Questions related to this Policy and whether you have been deemed a “Reporting Insider” should be directed to the Corporate Law Department or to the General Counsel.
Notwithstanding the above, Access Persons are subject to pre-clearance requirements for transactions in MFC Securities, just like any other Security (refer to Section 5.11: Pre-Clearance Approval Requirement).
5.14.1 REQUIREMENT TO PRE-CLEAR SALES OF MFC SHARES IN THE GSOP PROGRAM
Access Persons are required to pre-clear sales of MFC Shares in the MFC Global Share Ownership Program (GSOP).
Refer to Section 5.11: Pre-Clearance
Approval Requirement.
Access Persons are not required to pre- clear purchases of MFC Shares in the MFC GSOP.
5.15 SHORT TERM PROFIT BAN (“60 DAY RULE”)
Access Persons (including Household Family Members) cannot directly or indirectly profit from a discretionary purchase and sale of the same Pre- Clearable Security within 60 calendar days. However, Pre-Clearable Securities whose issuer’s market capitalization is $5 Billion USD or more at the time of the transaction are exempt from the 60 Day Rule.
A voluntary transaction related to a derivative Security (including options) which results in a profit is permitted so long as the voluntary transaction occurs more than 60 calendar days after the initial related transaction event.
The following Securities activities are exempt from the 60-Day Rule:
• | All money market fund transactions |
• | Automatic Investment Plan transactions (including payroll deduction purchases) |
• | Dividend reinvestment purchase transactions |
• | Issuer Pro Rata Discretionary Transactions |
• | Involuntary issuer transactions (i.e. stock dividends, stock splits/ reverse splits or other similar |
• | reorganizations or distributions, call of a debt security, and spin-offs of shares to existing holders) |
• | Automatic purchases into a default investment option by a retirement plan |
• | Other involuntary purchase or sales activity not at the direction of the Access Person or the Access Person’s Household Family Member. |
Conversely, giving gifts and donations of Securities are considered “Sales” and are not exempt from the 60-Day Rule.
The Code Administrator in consultation with the relevant Chief Compliance Officer may approve waivers to the 60 Day Rule.
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5.16 SAME DAY BLACKOUT PERIOD RULE
Access Persons (and Household Family Members) may not purchase, sell or otherwise acquire or dispose of any Pre-Clearable Security in which they have (or as a result of such transaction will establish) a Beneficial Interest if that same or Related Pre-Clearable Security traded in a Client or Firm account on the same day the Access Person (or Household Family Member) transacts unless (1) the Access Person has no actual knowledge that the same or Related Pre-Clearable Security is under Active Consideration for Purchase or Sale by an account and (2) the transaction can satisfy the following exception:
5.16.1 MARKET CAP SECURITIES EXCEPTION
May permit the transaction if the Access Person’s pre-clearance request is in the Securities of an issuer whose market capitalization is at least $5B USD or more.
If a Client or Firm account trades in a Pre-Clearable Security during the pre-clearance window and an Access Person successfully obtained pre- clearance approval of a trade, the Access Person may still be required to demonstrate that they did not know that the same or Related Pre-Clearable Security was under Active Consideration for Purchase or Sale for an account at the time of the personal trade. Access Persons failing to demonstrate to the firm “no knowledge” when requested may be required to sell any Security purchased and/or disgorge any profits realized as a result of a transaction being found by the Firm to have violated the Same Day Blackout Period Rule.
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Please note that the following Access Person Classification Levels are subject to a stricter Blackout period Rule. (Refer to Section 6.1 - 15 Day Blackout Period Rule.): |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
5.17 EXCESSIVE TRADING IS DISCOURAGED
While active personal trading may not in and of itself raise issues under the Securities Laws, a high volume of personal trading by an Access Person can be time consuming and can increase the possibility of actual or apparent conflicts with portfolio transactions. Accordingly, high levels of discretionary personal trading activity by an Access Person is strongly discouraged and will be subjected to enhanced scrutiny including reporting to the Ethics Oversight Committee. Additionally, limitations may be imposed on the number of Pre-Clearable Securities pre-clearance requests permitted during a given period for Access Persons.
5.18 INFORMATION BARRIERS
The Firm has adopted the “INFORMATION BARRIER POLICY” to establish, maintain, and enforce information barriers reasonably designed to meet its business needs and satisfy its contractual and regulatory obligations. In addition, the policy establishes safeguards and controls to ensure the integrity of these information barriers and prevent the improper transfer or sharing of sensitive information between business units.
Access Persons must comply with the specific standards and requirements of the “INFORMATION BARRIER POLICY”.
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6. Additional Personal Trading Rules for Front-Office Access
Applicable to all General Account/MIM Private Markets Front-Office Access Persons and all MIM Public Markets Front-Office Access
The rules in this Section are applicable to the following Access Classification Levels:
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
6.1 15 DAY BLACKOUT PERIOD RULE
Front-Office Access Persons (and Household Family Members) may not purchase, sell or otherwise acquire or dispose of any Pre-Clearable Security in which they have (or as a result of such transaction will establish) a Beneficial Interest if that same or Related Pre-Clearable Security traded in a Client or Firm account 7 calendar days before such a transaction (or will trade in a Client or Firm account 7 days following such a transaction) unless (1) the Front-Office Access Person has no actual knowledge that the same or Related Pre-Clearable Security is under Active Consideration for Purchase or Sale by an account and (2) the transaction can satisfy one of the following exceptions:
6.1.1 MARKET CAP SECURITIES EXCEPTION
May permit the transaction if the Front-Office Access Person’s pre-clearance request is in the Securities of an issuer whose market capitalization is at least $5B USD or more.
6.1.2 DE MINIMIS TRADING EXCEPTION
May permit the transaction if all of the Front-Office Access Person’s aggregate total same-day pre-clearance requests for the same or Related Pre-Clearable Security have a transaction market value of less than $25,000 USD and (in the case of equities) the same day transactions in the Pre-Clearable Security total no more than 500 equity shares.
If a Client or Firm account trades in a Pre-Clearable Security during the pre- clearance window and a Front-Office Access Person successfully obtained pre-clearance approval of a trade, the Front-Office Access Person may still be required to demonstrate that they did not know that the same or Related Pre- Clearable Security was under Active Consideration for Purchase or Sale for an account at the time of the personal trade. Front-Office Access Persons failing to demonstrate to the Firm “no knowledge” when requested may be required to sell any Security purchased and/or disgorge any profits realized as a result of a transaction being found by the Firm to have violated the 15 Day Blackout Period Rule.
6.2 INITIAL PUBLIC OFFERING BAN
Front-Office Access Persons may not directly or indirectly acquire a Beneficial Interest in a Security through an Initial Public Offering (IPO). Consequently Front-Office Access Persons (including Household Family Members) must wait to purchase newly- issued IPO Securities until the next business (trading) day following the offering date of the IPO.
6.3 INVESTMENT CLUB BAN
Front-Office Access Persons (including Household Family Members) are prohibited from participating or holding an interest in any Investment Club.
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7. Additional Personal Trading Rules for MIM Public Markets Front-Office Access Persons
Applicable to all MIM Public Markets Front-Office Access Persons
The rules in this Section are applicable to the following Access Classification Levels:
• | MIM Public Markets Front-Office Access Person. |
7.1 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE
MIM Public Markets Front-Office Access Persons associated with an Investment Team (including Household Family Members) are not permitted to sell a Pre- Clearable Security holding in which they have a Beneficial Interest if (i) the same Security is held in a Client account managed by the MIM Public Markets Front-Office Access Person’s Investment Team and (ii) the MIM Public Markets Front-Office Access Person (or Household Family Member) purchased the Security after the date of the Code’s initial adoption or the date the person was named to the relevant Investment Team (whichever date is later).
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8 Administration of the Code
8.1 PENALTIES FOR CODE VIOLATIONS
Penalties for violating the Securities Laws can be severe, both for the individuals involved and their employers. A person can be subject to penalties even if they did not personally benefit from the violation. Penalties may include civil injunctions, payment of profits made or losses avoided (“disgorgement”), jail sentences, fines for the person committing the violation, and fines for the employer or other controlling person.
In addition, any violation of the Code is subject to the imposition of sanctions by the Firm as may be deemed appropriate under the circumstances by the Firm. These sanctions could include, without limitation, bans on personal trading (including Household Family Member trading), disgorgement of trading profits, and personnel action, including termination of employment, where appropriate.
8.2 EXEMPTIONS AND APPEALS
In cases of hardship, exemptions from Code provisions may be granted by the Code Administrator, in consultation with the relevant Chief Compliance Officer, where warranted by applicable facts and circumstances, if permitted by law, and if the Code Administrator and/or Ethics Oversight Committee determines an exemption would be in accordance with the spirit of the General Principles of the Code and the Securities Laws. Associates and Access Persons may direct their request for an exemption to the Code Administrator or the relevant Chief Compliance Officer. The Code Administrator and/ or Ethics Oversight Committee is also authorized to modify the personal trading provisions of this Code where local law would prohibit the application of a specific provision.
If an Associate or Access Person believes that a Code-related request for exemption has been incorrectly denied by the Code Administrator and/or Ethics Oversight Committee, or that a Code-related action is not warranted, they may make a written appeal of the decision or action within 30-days of the decision or action to the Ethics Oversight Committee. The Code Administrator will arrange an appropriate forum or communication for the consideration of appeals.
8.3 CODE AMENDMENTS
The Code Administrator, in consultation with the relevant Chief Compliance Officer, is permitted to approve non-material amendments to the Code and the Ethics Oversight Committee (or relevant Board, if applicable) is responsible for approving any material amendments.
For certain Affiliated Mutual Fund and Affiliated Registered Closed-End Fund Clients, the respective Board of Trustees must approve any material changes to the Code within 6 months of the adoption of the material change in accordance with the requirements of SEC Rule 17j-1 under the Investment Company Act of 1940.
8.4 PRIVACY
All confidential information received by the Code Administrator or Code service providers is kept confidential and will only be disclosed to others as required to administer this Code, or to report violations to the Ethics Oversight Committee, management, regulators, or other legal authority.
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8.5 CODE ADMINISTRATION
The Firm’s relevant Chief Compliance Officers, together with the Code Administrator, maintain responsibility for establishing policies and procedures for the administration of the Code; monitoring and testing for Code compliance; ensuring Code training is provided to Associates and Access Persons; granting exemptions to any provision of the Code, on an individual or class basis; and considering and recommending material amendments to the Code to the Ethics Oversight Committee (or relevant Board, if applicable).
The Ethics Oversight Committee (or relevant Board, if applicable) retains the ultimate discretion as to the interpretation the Code’s provisions in any given situation, rendering material sanctions for violations of the Code, and rendering final judgments on any Associate’s or Access Person’s appeal of any decision or ordinary sanction imposed by the Code Administrator.
8.5.1 CONTACT
The Code Administrator can be contacted at The Code of Ethics, Global Center of Expertise - INVDIVCodeofEthics@manulife.com
8.6 RECORDKEEPING
The Code Administrator maintains or causes to be maintained, the following records: (1) a copy of the Code or any predecessor code of ethics which has been in effect during the most recent 7-year period; (2) a record of any violation of the Code, or any predecessor code of ethics, and of any action taken as a result of such violation in the 7-year period following the end of the fiscal year in which the violation took place; (3) a list of all persons currently or within the most recent 7-year period who were required to make reports pursuant to the Code (or any predecessor Code) and the person(s) who were responsible for reviewing these reports; (4) copies of all acknowledgements of each person’s receipt of the Code, Initial and Annual Holdings Reports, Quarterly Transaction Reports, and duplicate brokerage confirmations and Securities account statements (as applicable) filed during the most recent 7-year period; and (5) a record of the approval of, and rationale supporting, the acquisition of Securities by Access Persons in an Initial Public Offering or Limited Offering for at least 7 years after the end of the fiscal year in which the approval is granted.
Code records will be maintained for the first 2 years in an office of the Firm (in paper or accessible electronically) and in an easily accessible place for the time period as required by any applicable regulations thereafter.
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Appendix A
Definitions of Italicized Code of Ethics Terms
Access Person |
Access Persons are any Associate who, in connection with their regular functions or duties: (i) has regular access to non-public information regarding the purchase or sale of securities or non-public information regarding the portfolio holdings of Client or Firm accounts, (ii) has a job function that relates to the making (or participating in making) of recommendations regarding the purchase or sale of Securities for Firm or Client accounts, or (iii) regularly has or may have access to material, non-public securities information. See Section 3: Access Classification Levels and Applicable Rules. |
Active Consideration for Purchase or Sale |
A Security is under Active Consideration for Purchase or Sale once an analyst wishes to recommend or a portfolio manager forms a specific intent to purchase or sell a Security for a Client or Firm account. |
Advisory Person of a Fund |
An Advisory Person of a Fund is (i) any “Access Person” of the Fund (as defined by SEC Rule 17j- 1), (i) any director, officer, general partner, or employee of a Fund or its investment adviser (or of any company in a control relationship to the Fund or its investment adviser who, in connection with their regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of “covered securities” (as defined by SEC Rule 17j-1) by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; or (iii) any natural person in a control relationship to the Fund or investment adviser who obtains information regarding recommendations made to the Fund with regard to the purchase or sale of covered securities. Note: Advisory Persons of a Fund that are also personnel of John Hancock Investment Management, LLC (“JHIM LLC”) are covered under a separate joint Fund and JHIM LLC code of ethics. Additionally, Advisory Persons of a Fund that are also independent trustees of a Fund are covered under a separate Fund independent trustee code of ethics. |
Affiliated Mutual Fund |
Any Mutual Fund for which Manulife serves as an investment adviser (or sub-adviser) or whose investment adviser (or sub-adviser) controls, is controlled by, or is under common control with Manulife. (e.g., Manulife or John Hancock Mutual Funds). |
Affiliated Registered Closed-End Fund |
Any U.S. registered Closed-End Investment Company or business development company for which Manulife serves as an investment adviser (or sub-adviser) (e.g., John Hancock GA Mortgage Trust, etc). |
Associate |
Associates are: (i) any partner, officer, director, or other person occupying a similar status or performing similar functions of the Firm (ii) an employee of the Firm (iii) any person who provides investment advice on behalf of the Firm and is subject to the supervision and control of the Firm (iv) any person meeting the definition of Access Person; (v) an Advisory Person of a Fund; (vi) certain Manulife Affiliate persons who engage, directly or indirectly, in the Firm’s investment advisory activities; and (vii) any other person who the Code Administrator deems an Associate. See Section 3.1. |
Automatic Investment Plan |
A program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. Examples include automatic dividend reinvestment plans and payroll deduction purchase plans. |
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Beneficial Interest |
An Access Person is deemed to have a Beneficial Interest in any transaction in which the Access Person controls or has the opportunity to directly or indirectly profit or share in the profit derived from the Securities transacted. An Access Person is presumed to have a Beneficial Interest in the following Securities and related transaction activities: (1) Securities owned by an Access Person in their name; (ii) Securities (and Securities accounts) owned by Household Family Members; (iii) Securities owned by an Access Person indirectly through an account or investment vehicle for their benefit, such as an IRA/RRSP/RESP/ISA/SIPP, family trust or family partnership; (iv) Securities owned in which the Access Person has a joint ownership interest, such as Securities owned in a joint brokerage account; and (v) Securities over which the Access Person has discretion or gives advice (other than Firm or Client accounts) and includes Securities owned by trusts, private foundations or other charitable accounts for which the Access Person has investment discretion. Beneficial Interest is interpreted in the same manner under the Code as it would be under Rule 16a-1(a)(2) under the U.S. Securities Exchange Act of 1934. |
Chief Compliance Officer |
The term Chief Compliance Officer refers to the Chief Compliance Officer of each applicable entity adopting this Code. |
Client |
For purposes of this Code, the term “Client” means the specific person or entity that has an investment advisory or investment sub-advisory services agreement (or supervised investment delegation affiliate arrangement) with a specific entity adopting this Code. The term “Client” also includes a Fund. |
Closed-End Investment Company |
A Closed-Fund Investment Company is a registered investment company that issues a fixed number of shares and is usually traded on a major stock exchange. In contrast, an open- end investment company (i.e., mutual fund) continuously offers new shares to the public and repurchases shares at net asset value. Note: Many REITs are Closed-End Investment Companies. |
Code Administrator |
Code Administrator refers to the person (or persons) primarily responsible for the day-to-day administration of the Code. The Code Administrator can be contacted at The Code of Ethics, Global Center of Expertise - INVDIVCodeofEthics@manulife.com. |
Cryptocurrencies |
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database. |
Direct Obligations of the Government of the U.S. or U.K. |
Any Security directly issued or guaranteed as to principal or interest by the United States. Examples of direct obligations include Cash Management Bills, Treasury Bills, Notes and Bonds, and STRIPS. It is important to note that Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) Securities are not Direct Obligations of the Government of the United States. Direct Obligations of the U.K. refers to the following list of Securities issued and guaranteed by the United Kingdom Treasury: Premium Savings Bonds, Index Linked Savings Certificates, Fixed Interest Savings Certificates, Guaranteed Equity Bonds, Capital Bonds, Children’s Bonus Bonds, Fixed Rate Savings Bonds, Income Bonds, and Pensioners Guaranteed Income Bonds. Refer to M&G Investment Management Ltd. SEC No-Action Letter (Sept. 10, 2002). |
Ethics Oversight Committee |
The Ethics Oversight Committee is an ad hoc or standing compliance committee composed of Code Administrator personnel, relevant Chief Compliance Officers and certain senior management. |
Exchange-Traded Fund (ETF) |
An Exchange-Traded Fund (ETF) is an investment fund traded on stock exchanges. An ETF holds assets such as stocks, commodities or bonds. Most ETF’s track an index, such as a stock index or bond index. ETF transactions require annual and quarterly reporting, but do not require advance pre-clearance approval. Refer to APPENDIX C for further information on reporting ETF transactions and holdings. |
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Exempt Securities Accounts |
With written approval from the Code Administrator, U.S.-based Access Persons (and Household Family Members) subject to the Preferred Broker Requirement of Section 5.5 are permitted to maintain a Securities account with an entity other than with a Preferred Broker, if the Securities account can meet one of the following exemptions: (i) it contains only Securities that can’t be transferred; (ii) it exists solely for products or services that one of the Preferred Brokers cannot provide; (iii) it exists solely because your spouse’s or significant other’s employer prohibits external covered accounts; (iv) it is managed by a third-party registered investment adviser; (v) it is restricted to trading interests in 529 College Savings Plans; (vi) it is associated with an ESOP (employee stock option plan) or an ESPP (employee stock purchase plan); (vii) employee sponsored phantom stock or option plan; (viii) it is required by a direct purchase plan, a dividend reinvestment plan, or an Automatic Investment Plan with a public company in which regularly scheduled investments are made or planned; (ix) it is a Mutual Fund only account; (x) it is required by a trust agreement; (xi) it is associated with an estate of which the Access Person is the executor, but not a beneficiary, and involvement with the account is temporary; (xii) transferring the account would be inconsistent with other applicable rules; or (xii) other exception approved by the Code Administrator. |
Firm |
Global Wealth and Asset Management (“GWAM”) and General Account Investments (“GA”) business groups and the entities listed in Appendix B of this Code. |
Fund(s) |
Fund (or collectively Funds) means the John Hancock GA Mortgage Trust, John Hancock Private Placement Trust, and John Hancock GA Senior Loan Trust. |
High Quality Short Term Debt Instrument |
Any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized rating organization (e.g., S&P, Moody’s, Fitch, A.M. Best). |
Household Family Member |
An Access Person’s spouse, “significant other,” minor children, or other family member who also shares the same household with the Access Person. An Access Person’s “significant other” is defined as a person who (i) shares the same household with the Access Person; (ii) shares living expenses with the Access Person; and (iii) is in a committed personal relationship with the Access Person and there is an intention to remain in the relationship indefinitely. The Code Administrator, after reviewing all the pertinent facts and circumstances, may determine, if not prohibited by applicable law, that an indirect Beneficial Interest over Securities held by members of the Access Person’s Household Family Members does not exist or is too remote for purposes of the Code’s requirements. |
Initial Coin Offering |
An Initial Coin Offering (ICO) is the cryptocurrency industry’s equivalent to an Initial Public Offering (IPO) (see IPO definition below). ICOs act as a way to raise funds, where a company looking to raise money to create a new coin, app, or service launches an ICO. Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project. |
Initial Public Offering |
An offering of Securities registered under the U.S. Securities Act of 1933 (or comparable non-U.S. registration statute or regime), the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the U.S. Securities Exchange Act of 1934 (or comparable non-U.S. compulsory reporting requirements). |
Investment Club |
A group of people who pool their assets in order to make joint decisions (typically a vote) on which Securities to buy, hold or sell. |
25
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Security (Securities) |
A “security” as defined by Section 1(1) of the Ontario Securities Act, the Hong Kong Securities and Futures Ordinance, Section 3(a)(10) or the Investment Advisers Act of 1940. Examples include but are not limited to: any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, mutual funds, closed-end funds, unit investment trusts, REITS, ETFs, commodity funds, broker cds, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, security-based swap, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any “security” (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privileged entered into on a national securities exchange related to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. References to a Security also includes any warrant for, option in, or “security” or other instrument immediately convertible into or whose value is derived from that “security” and any instrument or right which is equivalent to that “security.” The definition of Security applies regardless of the registration status or domicile of registration of the Security (i.e., the term Security includes both private placements/ limited partnership interests and publicly-traded securities as well as domestic and foreign Securities). For purposes of this Code, the definition of Securities also includes other instruments and interests labeled as reportable on APPENDIX C of this Code. |
Securities Laws |
The Securities Laws include various domestic and foreign securities-related laws, statutes and rules/regulations that govern the Firm’s investment management activities and includes: Ontario Securities Act, U.K. Financial Services Authority regulations, the Securities and Futures Ordinance of Hong Kong, Securities and Futures Act (Singapore), the Securities Act of 1933 (U.S.), the Securities Exchange Act of 1934 (U.S.), the Sarbanes-Oxley Act of 2002 (U.S.), the Investment Company Act of 1940 (U.S.), the Investment Advisers Act of 1940 (U.S.), Title V of the Gramm- Leach-Bliley Act (U.S.), and the Bank Secrecy Act (U.S.) (as it applies to funds and investment advisers). |
StarCompliance |
The web-based reporting and certification system used by the Firm to facilitate compliance with certain reporting and pre-clearance obligations imposed under the Code (a.k.a., Star). The Code Administrator may approve alternate reporting methods if deemed appropriate. |
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Appendix B
1Legal Entity Adoption of the Code
Legal Entity: |
Jurisdiction/ Country |
Initial Adoption Date |
Hancock Natural Resource Group, Inc. | U.S. | April 6, 2020 |
John Hancock GA Mortgage Trust | U.S. | April 6, 2020 |
John Hancock GA Senior Loan Trust | U.S. | April 6, 2020 |
Manulife Asset Management and Trust Corporation | Philippines | April 6, 2020 |
Manulife Data Services Inc. | Barbados | April 6, 2020 |
Manulife General Account Investments (HK) Limited | Hong Kong | April 6, 2020 |
Manulife General Account Investments (Singapore) Pte. Ltd. | Singapore | April 6, 2020 |
Manulife IM (Switzerland) LLC | Switzerland | April 6, 2020 |
Manulife Investment (Shanghai) Limited Company | China | April 6, 2020 |
Manulife Investment Management (Europe) Limited | U.K. | April 6, 2020 |
Manulife Investment Management (Ireland) Limited | Ireland | April 6, 2020 |
Manulife Investment Management (North America) Limited | Canada | April 6, 2020 |
Manulife Investment Management (US) LLC | U.S. | April 6, 2020 |
Manulife Investment Management Distributors Inc. | Canada | April 6, 2020 |
Manulife Investment Management Limited | Canada | April 6, 2020 |
Manulife Investment Management Private Markets (Canada) Corp | Canada | April 6, 2020 |
Manulife Investment Management Private Markets (US) LLC | U.S. | April 6, 2020 |
Manulife Investment Management Private Markets Holdings (US) LLC | U.S. | April 6, 2020 |
Manulife Overseas Investment Fund Management (Shanghai) Limited Company | China | April 6, 2020 |
Manulife US Real Estate Management Pte, Ltd. (Definition of Associate only includes officers and employees of the entity). |
Singapore |
April 6, 2020 |
The General Account Investments and the Manulife Investment Management Private Markets Groups of John Hancock Life Insurance Company (U.S.A.) |
U.S. |
April 6, 2020 |
The General Account Investments and the Manulife Investment Management Private Markets Groups of The Manufacturers Life Insurance Company |
Canada |
April 6, 2020 |
1This Code has been designed to be applicable across GWAM and GA and certain regulated entities listed in Appendix B (together the “Firm”), however it is being implemented in a multi-phased, multi-year project.
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Appendix C
Securities Reporting & Pre-Clearance Summary Chart
Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre- clearance approval prior to transacting in the following types of Securities? |
Government Securities |
|||
Direct Obligations of the Government of the U.S. or U.K. | No | No | No |
State, Province or Municipal Bonds | Yes | Yes | Yes |
Direct Obligations of the Governments of Canada, Japan, Germany, France or Italy |
Yes |
Yes |
Yes |
Money Market Instruments/Commodities/Currency |
|||
Bankers Acceptances | No | No | No |
Bank Certificates of Deposit | No | No | No |
Brokerage Certificates of Deposit | Yes | Yes | No |
Commercial Paper | No | No | No |
High Quality Short-Term Debt Instruments | No | No | No |
Repurchase Agreements | No | No | No |
Money Market Funds (including Money Market Affiliated Mutual Funds) | No | No | No |
Physical Commodities and Options and Futures on Commodities (not commodity ETFs or closed-end funds) |
No |
No |
No |
Foreign and Domestic Currency Holdings/ Transactions (including currency options and futures) |
No |
No |
No |
Cryptocurrencies (only Initial Coin Offerings “ICO’s” are reportable and pre-clearable) |
No |
No |
No |
29
Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre- clearance approval prior to transacting in the following types of Securities? |
IPOs / ICOs, Private Placements / Limited Offerings |
|||
IPOs & ICOs (Note: IPO’s are prohibited for the following Classification Levels: GA/ MIM Private Markets Front-Office Access Persons & MIM Public Markets Front-Office Access Persons) |
Yes |
Yes |
Yes |
Private Placements/Private Funds/Limited Offerings | Yes | Yes | Yes |
Issuer Event Transactions / Automatic Investment Plans |
|||
Involuntary Issuer Transactions and Holdings (stock dividends, stock splits/reverse splits, or other similar reorganizations or distributions, call of a debt security, and spin-offs of shares to existing holders) |
Yes |
Yes |
No |
Issuer Pro Rata Discretionary Transactions/Elections (purchases or other acquisitions or dispositions resulting from the discretionary exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer) (e.g., discretionary participation in takeovers, rights & tender/exchange offerings) |
Yes |
Yes |
Yes. Pre-clearance approval for discretionary elections should be sought by manually phoning or emailing the Code Administrator directly. It is important to contact the Code Administrator to avoid having your request improperly denied. |
Automatic Investment Plans (a program in which regular periodic purchases or withdrawals are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation) (for Mutual Funds AIPs Refer to below) |
Yes. You must add up all of the Plan transactions for the year and reflect the activity on the Annual Holdings Report |
No. You do not need to report automatic (non-discretionary) Plan transactions on the Quarterly Transaction Report |
No. However, transactions that override the automatic preset schedule (discretionary purchases /sales, discretionary changes in individual security selection) must be pre-cleared. Note: You do not need to pre-clear a change to your money contribution level into a Plan. |
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Issuer Event Transactions / Automatic Investment Plans |
|||
Dividend Reinvestment Plan Automatic Transactions | Yes | No | No |
Issuer Direct Stock Plan Automatic Transactions | Yes | No | No |
Issuer Direct Stock Plan Non-Automatic Transactions (discretionary transactions) |
Yes |
Yes |
Yes. A pre-cleared transaction instruction is valid until executed by the Plan. |
Investment Company Securities |
|||
Closed-End Investment Companies | Yes | Yes | Yes |
Exchange Traded Funds (ETFs) and Exchange Traded Notes | Yes | Yes | No |
Money Market Funds (including Money Market Affiliated Mutual Funds) | No | No | No |
Mutual Funds (non-affiliated) | No | No | No |
Affiliated Mutual Funds | Yes | Yes | No |
Affiliated Mutual Funds interests held by or through the Manulife Registered Pension Plan (RPS), Manulife Registered Retirement Savings Plan (RRSP), John Hancock Unified 401k Plan, other employer- sponsored retirement plan, 529/RESP plan, or any other account. |
Yes |
Yes, however do not report automatic transactions/ rebalances (in accordance with a predetermined schedule/ allocation) on the Quarterly Transaction Report |
No |
Affiliated Mutual Funds held through a variable (annuity or life) insurance product separate account/unit investment trust |
Yes (report Affiliated Mutual Fund unit values) |
Yes, however do not report automatic transactions/ rebalances (in accordance with a predetermined schedule/ allocation) on the Quarterly Transaction Report |
No |
31
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Gifts / Blind Trusts / Managed Accounts |
|||
Gifts, Inheritances, or Donations of Reportable Securities (received or given) |
Yes |
Yes |
Securities Gifts & Inheritances Received - No Securities Given or Donated - Yes |
No* | |||
No Direct or Indirect Control Over Account (Securities held in, purchased/sold for an account where a person does not have direct or indirect influence or investment/ proxy voting control, e.g., Blind Trusts, Certain Managed Accounts) |
No |
No |
*However, you must report initial and annual holdings in (as well as pre-clear and report quarterly transactions for) a Managed Account unless the Access Person has obtained a specific written pre-clearance or reporting exemption from the Code Administrator. |
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EXHIBIT (2)(r)(3)
Code of Ethics for the Independent Trustees of the
John Hancock Funds
Effective December 6, 2005
Amended and Restated January 1, 2021
The Board of Trustees (the “Board”) of the John Hancock Funds1 has adopted this code of ethics (this “Code”), exclusively with respect to Trustees who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940 (the “1940 Act”), of the John Hancock Funds (the “Independent Trustees” or “you”). This Code is intended to comply with the requirements of Rule 17j-1 under the 1940 Act insofar as they apply to the Independent Trustees.
The Board recognizes that the John Hancock Funds’ officers and access persons (with the exception of the Independent Trustees) are covered by a separate code of ethics adopted by the Board, which is applicable to John Hancock Investment Management, LLC and John Hancock Variable Trust Advisers, LLC (each, a “John Hancock Adviser”), John Hancock Investment Management Distributors, LLC, John Hancock Distributors, LLC and each of the John Hancock Funds. The Board also recognizes that access persons who are employees of a sub-adviser to the John Hancock Funds are covered under a separate code of ethics approved by the Board. The Board, after considering the limited nature of access by the Independent Trustees to current information with respect to security transactions being effected or considered on behalf of the John Hancock Funds, has adopted this Code specifically and separately to cover the Independent Trustees.
Please note that the policies described below apply to all accounts over which you have a beneficial interest. Normally, you will be deemed to have a beneficial interest in your personal accounts, those of a spouse, “significant other,” minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice.
If you have any questions regarding your responsibilities under this Code of Ethics, please contact Trevor Swanberg at (617) 572-4398 or tswanberg@jhancock.com
Set forth below are policies applicable to the Independent Trustees.
I. Statements of Policy
A. General Principles
It is unlawful for any Independent Trustee covered by this Code, directly or indirectly, in connection with his or her purchase or sale of a security held or to be acquired by a John Hancock Fund, to:
• employ any device, scheme or artifice to defraud a John Hancock Fund;
• make any untrue statement of a material fact to a John Hancock Fund or omit to state a material fact necessary in order to make the statements made to a John Hancock Fund, in light of the circumstances under which they are made, not misleading;
1 As used in this Code, the “John Hancock Funds,” or the “Funds,” refer to each open-end and closed-end fund that is listed, or that is a series of a trust listed, in Appendix A hereto, as may be updated from time to time by the Chief Compliance Officer of the John Hancock Funds.
• engage in any act, practice or course of business that operates or would operate as a fraud or deceit on a John Hancock Fund; or
• engage in any manipulative practice with respect to a John Hancock Fund.
The General Principles discussed above govern all conduct, whether or not the conduct is also covered by more specific standards and procedures in this Code. Failure to comply with this Code may result in disciplinary action as determined by the Board, including potentially removal from the Board in accordance with the terms of the John Hancock Fund charter documents.
B. Transactions in John Hancock Funds
The Independent Trustees are subject to the same policies against excessive trading of shares of the open-end John Hancock Funds that apply to all shareholders of the open-end John Hancock Funds, as applicable. These policies are described in the John Hancock Funds’ prospectuses and are subject to change. Additional restrictions on trading of closed-end and open-end John Hancock Funds are discussed in Section II.C.
C. Transactions in securities of Advisers, Subadvisers and Principal Underwriters
As an Independent Trustee, you are prohibited from purchasing any security issued by:
(1) the controlling parent of the John Hancock Advisers;
(2) any subadviser of a John Hancock Fund;
(3) the controlling parent of any subadviser;
(4) any principal underwriter of a John Hancock Fund, including prospective principal underwriters of John Hancock closed-end funds;
(5) the controlling parent of any principal underwriter.
A complete list of these issuers can be found in Appendix B.
D. Annual Certification
On an annual basis, you must provide a certification at a date designated by the Chief Compliance Officer of the John Hancock Funds that:
(1) you have read and understand this Code;
(2) you acknowledge that you are subject to its requirements; and
(3) you have complied, to the best of your knowledge, with its requirements.
You are required to make this certification to demonstrate that you understand the importance of these policies and your responsibilities under the Code.
E. Quarterly Transaction Reports
You will not generally be required to submit quarterly transaction reports. You will, however, be required to submit a quarterly transaction report if you knew (or, in the ordinary course of fulfilling your official duties as an Independent Trustee, should have known) that during the 15 calendar days immediately before or after you trade a security described in Section II.A of this Code, either:
(i) the subadviser of a John Hancock Fund purchased or sold the same security on behalf of such Fund, or
(ii) the subadviser of a John Hancock Fund actively considered the purchase or sale of the same security on behalf of such Fund;
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provided that, monitoring of the publication of portfolio holdings of series of John Hancock Exchange-Traded Fund Trust (the “John Hancock ETFs”) is not construed to be within the ordinary course of fulfilling the duties of a trustee, therefore the publication or availability of such portfolio holdings shall not be construed to impart actual or constructive knowledge of the John Hancock ETFs’ portfolio transactions on a trustee.
If these circumstances occur, it is your responsibility to contact the Chief Compliance Officer of the John Hancock Funds and he will assist you with the requirements of the quarterly transaction report.
You must submit a quarterly transaction report within 30 calendar days after the end of a calendar quarter if required in the limited circumstances described above. This report must cover all transactions during the calendar quarter that are personal securities transactions, as described below in Section II of this Code.
If you are required to submit a quarterly transaction report, the report must include the following information about each transaction described above:
• the date of the transaction, the title, and as applicable, the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), number of shares, and principal amount of each reportable security involved;
• the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
• the price at which the transaction was effected;
• the name of the broker, dealer or bank with or through which the transaction was effected; and
• the date that you submit the report.
With respect to any account in which you have traded securities for which you must submit a quarterly transaction report, the quarterly transaction report must also include the following account information:
• the name of the broker, dealer or bank with whom you have established an account;
• the account number and account registration;
• the date the account was established; and
• the date that you submit the report.
II. Personal Securities Transactions
A Personal Securities Transaction is a transaction in a security in which an Independent Trustee subject to this Code has a beneficial interest. Normally, this includes securities transactions in your personal accounts, those of a spouse, “significant other,” minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice. Accounts over which you have no direct or indirect influence or control are exempt. For discretionary accounts, this is defined as:
1) | Not being able to suggest that the trustee or third-party discretionary manager make any particular purchases or sales of securities; |
2) | Not being able to direct the trustee or third-party discretionary manager to make any particular purchases or sales of securities; and |
3) | You did not consult with the trustee or third-party discretionary manager as to the particular allocation of investments to be made in your account. |
To prevent potential violations of this Code, you are strongly encouraged to request clarification for any transactions or accounts that are in question.
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A. Covered Personal Securities Transactions
Except as noted below, Personal Securities Transactions include transactions in all securities, including:
• Stocks or bonds;
• Government securities that are not direct obligations of the U.S. government, such as Fannie Mae or municipal securities;
• Shares of all closed-end funds;
• Shares of the John Hancock Funds, as well as any other open-end mutual funds, including John Hancock ETF’s, that are advised or sub-advised by a John Hancock Adviser or by John Hancock or Manulife entities (other than money market funds);
• Options on securities, on indexes, and on currencies;
• All kinds of limited partnerships;
Exchange Traded Funds formed as unit investment trusts;
• Foreign unit trusts and foreign mutual funds;
• Private investment funds and hedge funds; and
• Futures, investment contracts or any other instrument that is considered a “security” under the Investment Company Act of 1940.
B. Exempt Personal Securities Transactions
Personal Securities Transactions do not include transactions in the following securities:
• Direct obligations of the U.S. government (e.g., treasury securities);
• Bankers’ acceptances, bank certificates of deposit, commercial paper, and high quality short-term debt obligations, including repurchase agreements;
• Shares of any open-end mutual funds, including exchange-traded funds, that are not advised or sub-advised by a John Hancock Adviser or by John Hancock or Manulife entities;
• Shares issued by money market funds; and
• Securities in accounts over which you have no direct or indirect influence or control.
C. Restrictions on Trading in John Hancock Funds
1. General. You may not buy or sell shares of John Hancock Funds, or tip others who then trade in such Funds, on the basis of material non-public information (“Inside Information”). This concern is most pronounced with respect to closed-end John Hancock Funds (“Closed-End Funds”) and the John Hancock ETFs because their shares trade on a secondary market. However, it is also applicable to all John Hancock mutual funds.
a. Material Information. Information is considered “material” if a reasonable investor would consider it important in making a decision to buy, sell or hold shares of a Fund. Positive or negative information may be “material.”
b. Non-public Information. Information is considered “non-public” if it has not been broadly and publicly disseminated for a sufficient period to be reflected in the price of the Fund. Information remains “non-public” until it has been “publicly disclosed,” meaning that it has been broadly distributed to the public in a non-
4 |
exclusionary manner, such as via a press release or inclusion of such information in a filing with the Securities and Exchange Commission. In the case of the John Hancock ETFs, holdings information posted to the Funds’ website is considered to have been “publicly disseminated.”
c. Examples. Inside Information may include such things as news about acquisitions, Closed-End Fund tender offers, financial results, changes in dividends or distributions, Closed-End Fund share buy-backs, important management changes, anticipated litigation recoveries, or any other information that is likely to be considered material to a Fund.
d. Further Guidance. If you are uncertain as to whether information is Inside Information, you should presume that the information is both material and non-public, and that it is Inside Information. In such cases, you should refrain from trading until you consult legal counsel or the Chief Compliance Officer for further guidance on information that may be deemed Inside Information.
2. Closed-End, and John Hancock ETF’s Blackout Periods and Trading Guidelines. You may not trade in shares of Closed-End Funds during the following blackout periods (each, a “Blackout Period”):
a. Regular Meetings. The Independent Trustees may not engage in any transactions in shares of the Closed-End Funds at any time between (x) the earlier of (A) the date Board meeting information is received by the Trustee, or (B) the date the Independent Trustees are advised that Board meeting information is posted to the website where Board materials are made available, and (y) 10 calendar days after the dates of a regular meeting of the Board. To clarify, assuming a meeting begins on a Monday and concludes at mid-day on the next day, Independent Trustees may not transact in Closed-End Fund or John Hancock ETF shares before the second subsequent Monday.
b. Special Meetings. Upon receipt of the materials for a special meeting of the Board or a committee thereof, Independent Trustees may not engage in any transactions in Closed-End Fund or John Hancock ETF shares at any time from the date of receipt of such materials until after the tenth calendar day after the date of such meeting.
c. Financial Statements Review. The Independent Trustees may not engage in any transactions in shares of a Closed-End Fund or John Hancock ETF’s at any time between:
(i) the earlier of (A) the date on which a semiannual or an annual shareholder report that contains financial statements for a Closed-End Fund or John Hancock ETF is received by the Trustee, or (B) the date the Independent Trustees are advised that a semiannual or an annual shareholder report that contains financial statements for a Closed-End Fund or John Hancock ETF is posted to the website where Board materials are made available, and
(ii) two (2) business days after the date on which the semi-annual or annual shareholder report for the Closed-End Fund or John Hancock ETF is publicly available on John Hancock Funds website or through another method consistent with Regulation FD.
3. Other Restricted Periods. The Chief Compliance Officer of the John Hancock Funds may, from time to time, restrict the purchase of one or more John Hancock Funds, including
5 |
open-end John Hancock Funds, if he or she believes after consulting with counsel to the John Hancock Funds that the Independent Trustees may have knowledge of Inside Information regarding such John Hancock Fund(s). The Chief Compliance Officer will provide the Independent Trustees prior notice of any such restrictions.
III. Administration of the Code of Ethics
A. Review of Reports
The Chief Compliance Officer of the John Hancock Funds shall review any reports delivered by an Independent Trustee pursuant to this Code. Any such review shall give special attention to evidence, if any, of conflicts or potential conflicts with the securities transactions of the John Hancock Funds or violations or potential violations of the antifraud provisions of the federal securities law or this Code.
B. Investigations of Potential Violations
The Chief Compliance Officer shall investigate any potential violation of the provisions of this Code. After completion of any such investigation, the Chief Compliance Officer shall determine whether a violation has occurred and, if so, make a report to the Board or, if appropriate, the Compliance Committee of the Board. The Board shall determine what action should be taken in response to a violation of this Code.
C. Annual Reports
At least on an annual basis, the Chief Compliance Officer shall provide the Board with (i) a written report that describes issues that arose under this Code since the prior such report, including, but not limited to, information relating to material violations of this Code and any actions taken, and (ii) a certification that the John Hancock Funds have adopted procedures reasonably necessary to prevent the Independent Trustees from violating this Code.
D. Record Retention Requirements
The Chief Compliance Officer shall maintain the following records at the John Hancock Funds’ principal place of business, and shall make these records available to the Securities and Exchange Commission at any time and from time to time for reasonable periodic, special or other examination:
• A copy of this Code that is currently in effect, or at any time within the past five years was in effect;
• A record of any violation of this Code, and any action taken as a result of a violation, must be maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs;
• A copy of each quarterly transaction report made by an Independent Trustee under this Code;
• A copy of each annual report and certification described in Section III.C of this Code; and
• A record of all Independent Trustees, currently or within the past five years, who are subject to this Code, and of individual(s) who are responsible for reviewing reports made under this Code.
E. Amendments
Any amendments to this Code must be approved by a majority of the Independent Trustees.
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Appendix A
John Hancock Funds
John Hancock Variable Insurance Trust |
John Hancock Funds II |
John Hancock Funds III |
John Hancock Bond Trust |
John Hancock California Tax-Free Income Fund |
John Hancock Capital Series |
John Hancock Collateral Trust |
John Hancock Current Interest |
John Hancock Exchange-Traded Fund Trust |
John Hancock Investment Trust |
John Hancock Investment Trust II |
John Hancock Municipal Securities Trust |
John Hancock Sovereign Bond Fund |
John Hancock Strategic Series |
John Hancock Emerging Markets Income Fund |
John Hancock Floating Rate High Income Fund |
John Hancock Financial Opportunities Fund |
John Hancock Hedged Equity & Income Trust |
John Hancock Income Securities Trust |
John Hancock Investors Trust |
John Hancock Preferred Income Fund |
John Hancock Preferred Income Fund II |
John Hancock Preferred Income Fund III |
John Hancock Premium Dividend Fund |
John Hancock Tax-Advantaged Dividend Income Fund |
John Hancock Tax-Advantaged Global Shareholder Yield Fund |
EXHIBIT (2)(s)
John Hancock Financial Opportunities Fund
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Premium Dividend Fund
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
(each a “Trust” and collectively the “Trusts”)
POWER OF ATTORNEY
The undersigned Trustee or Officer of each Trust, each a Massachusetts business trust, does hereby appoint Ariel Ayanna, Sarah M. Coutu, John J. Danello, Thomas Dee, Kinga Kapuscinski, Nicholas J. Kolokithas, Suzanne M. Lambert, Edward Macdonald, Mara Moldwin, Harsha Pulluru, Christopher L. Sechler, Betsy Anne Seel and Steven Sunnerberg, to be my true, sufficient and lawful attorneys-in-fact, with full power to each of them, and each acting singly, to sign for me, in my name and in the capacity indicated below, any registration statements on Form N-2 to be filed by the Trust under the Investment Company Act of 1940, as amended (the “1940 Act”), and under the Securities Act of 1933, as amended (the “1933 Act”), and any and all exhibits and other documents relating thereto, and any and all amendments to said registration statements, and to do generally all such things in my name and on my behalf in the capacity indicated below to enable the Trust to comply with the 1940 Act, the 1933 Act, and all requirements of the Securities and Exchange Commission thereunder.
This Power of Attorney shall be revocable with respect to an undersigned at any time by a writing signed by such undersigned and shall terminate automatically if the undersigned ceases to be a Trustee or Officer of the Trust.
Dated: December _10_, 2020.
Name | Signature | Title |
Andrew G. Arnott | /s/ Andrew G. Arnott | President and Trustee |
Charles A. Rizzo | /s/ Charles A. Rizzo |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Charles L. Bardelis | /s/ Charles L. Bardelis | Trustee |
James R. Boyle | /s/ James R. Boyle | Trustee |
Peter S. Burgess | /s/ Peter S. Burgess | Trustee |
William H. Cunningham | /s/ William H. Cunningham | Trustee |
Grace K. Fey | /s/ Grace K. Fey | Trustee |
Marianne Harrison | /s/ Marianne Harrison | Trustee |
Deborah C. Jackson | /s/ Deborah C. Jackson | Trustee |
Hassell H. McClellan | /s/ Hassell H. McClellan | Trustee |
James M. Oates | /s/ James M. Oates | Trustee |
Steven R. Pruchansky | /s/ Steven R. Pruchansky | Trustee |
Frances G. Rathke | /s/ Frances G. Rathke | Trustee |
Gregory A. Russo | /s/ Gregory A. Russo | Trustee |