As filed with the Securities and Exchange
Commission on April 25, 2024
1940 Act File No. 811-23027
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10
(CHECK APPROPRIATE BOX OR BOXES)
JOHN HANCOCK COLLATERAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN
CHARTER)
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(800) 225-5291
CHRISTOPHER SECHLER, ESQ
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
MARK P. GOSHKO, ESQ.
ABIGAIL P. HEMNES, ESQ.
K&L GATES LLP
1 CONGRESS STREET, SUITE 2900
BOSTON, MASSACHUSETTS 02114
This Registration Statement on Form N-1A has been filed by John Hancock Collateral Trust (the “fund”), a series of John Hancock Collateral Trust (the “Trust”) pursuant to Section 8(b) of the
Investment Company Act of 1940, as amended (the “1940 Act”). However, beneficial interests of the fund are not being registered under the Securities Act of 1933, as amended (the “1933 Act”), because
such interests will be issued solely by way of a “private placement” exempt from the registration requirements of the 1933 Act, applicable state securities laws
pursuant to Rule 506 of Regulation D under the 1933 Act and comparable state law exemptions and/or through private placement transactions that do not involve any
“public offering” within the meaning of Section 4(a)(2) of the 1933 Act. With the exception of John Hancock Investment Management LLC and John Hancock Signature
Services, Inc., only certain investment companies advised by the investment advisor to the
fund, or by one of its affiliates, that are “accredited investors” within the meaning of Regulation D under the 1933 Act, may invest in the fund. This Registration Statement does not constitute an offer to sell, or the solicitation of an offer to buy, any
interests in the fund.
This Registration Statement has been prepared as a single document consisting of Parts A, B and C, none of which is to be used or distributed as a stand-alone document. The
fund’s Part A is incorporated by reference into the fund’s Part B, and Part B is incorporated by reference into the fund’s Part A.
Manulife, Manulife Investment Management, Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers
Life Insurance Company and are used by its affiliates under license.
John Hancock
Collateral Trust
THIS PART A DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY BENEFICIAL INTERESTS IN JOHN HANCOCK COLLATERAL TRUST.
Responses to Items 1, 2, 3, 4 and 13 have not been included pursuant to paragraph
2(b) of Instruction B of the General Instructions to Form N-1A.
The name of the investment advisor of the fund is John Hancock Investment Management LLC (the “Advisor”). The name of the investment subadvisor of
the fund is Manulife
Investment Management (US) LLC (“Manulife IM (US)” or the “Subadvisor”).
(b) The portfolio managers, their titles and length of association
with the fund are as follows:
•
Associated with the Subadvisor since
2022
•
Associated with the fund since 2022
•
Began business career in 2010
•
Associated with the Subadvisor since 2009
•
Associated with the fund since 2015
•
Began business career in 2007
•
Head of Investment Grade Bond Trading
•
Associated with the Subadvisor since 2010
•
Associated with the fund since 2015
•
Began business career in 2008
•
Associated with the Subadvisor since 2000
•
Associated with the fund since 2015
•
Began business career in 1999
•
Associated with the Subadvisor since
2015
•
Associated with the fund since 2015
•
Began business career in 2005
•
Associated with the Subadvisor since 2006
•
Associated with the fund since 2022
•
Began business career in 2002
Item 6. Purchase and Sale of Fund Shares
(a) Purchase of Fund Shares. There is no minimum initial or subsequent investment requirement for the fund.
(b) The fund’s shares are redeemable daily by contacting the fund’s transfer agent on any business day by written request or wire transfer.
The
fund intends to make distributions taxed as ordinary income or as capital gains.
Item 8. Financial Intermediary Compensation
Item 9. Investment Objectives, Principal Investment Strategies, Related Risks, and Disclosure of Portfolio Holdings
The
fund’s investment objective is to seek current income, while maintaining adequate liquidity,
safeguarding the return of principal and minimizing risk of default. The fund’s investment objective is not a fundamental policy and may be changed without shareholder approval. There is no assurance that the fund will achieve its investment objective.
(b) Implementation of Investment Objective
The fund invests only in U.S. dollar-denominated securities that, at the time of investment, are “eligible
securities” as defined by Rule 2a-7 under the Investment Company Act of 1940 (“Rule 2a-7”). These securities may be issued by:
•
U.S. and foreign companies;
•
U.S. and foreign banks;
•
U.S. and foreign governments;
•
U.S. agencies, states and municipalities; and
•
International organizations such as the World Bank and the International Monetary
Fund.
The fund may also invest in repurchase agreements based on these securities.
The
fund maintains a dollar-weighted average maturity of 60 days or less and a dollar-weighted average
life of 120 days or less. Unlike the fund’s dollar-weighted average maturity, the fund’s dollar-weighted average life is calculated without reference to the reset dates of variable rate debt
obligations held by the fund.
As stated above, the fund will invest in “eligible securities” as defined under Rule 2a-7, which include securities issued by another money market fund, government securities or securities that have a remaining maturity of no more than 397 calendar days and are determined by the fund’s Board or its delegate to
present minimal credit risk based on an assessment of the issuer’s credit quality, including the capacity of the issuer or guarantor to meet its financial obligations.
The fund’s Board has adopted procedures by which the Adviser will conduct this initial and
ongoing assessment, as required.
The fund will not acquire any
security if, after doing so, more than 5% of its total assets would be invested in illiquid investments. An “illiquid investment” is an investment 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, at the time of investment,
will have at least 25% of its assets in cash, direct obligations of the U.S. government or
securities readily convertible to cash within one business day. The fund, at the time of investment, will have at least 50% of its assets in cash, direct obligations of the U.S. government, including certain government agency
securities issued at a discount with remaining maturities of 60 days or less, and securities readily convertible to cash within five business days.
In managing the fund, the Subadvisor
searches aggressively for the best values on securities that meet the fund’s credit and
maturity requirements. The Subadvisor tends to favor corporate securities and looks for relative yield advantages between, for example, a company’s secured and
unsecured short-term debt obligations.
In pursuing its investment objective and implementing its investment strategies,
the fund will comply with Rule 2a-7.
Pursuant to Rule 2a-7, the fund is designated as an “institutional” money market fund and is required to utilize current
market-based prices to value its portfolio securities and transact at a floating net asset value (NAV) that uses four-decimal-place precision ($10.0000). Because the share
price of the fund will fluctuate, when a shareholder sells its shares, they may be worth more or
less than what the shareholder originally paid for them. Accordingly, a shareholder may recognize capital gain or loss for federal income tax purposes upon the redemption of fund shares.
In addition, the fund has adopted policies and procedures to impose discretionary liquidity fees on redemptions if the fund’s Board determines
such liquidity fees are in the best interests of the fund. If the fund's Board, including a majority of the independent Trustees, or its delegate, determines that
imposing a liquidity fee is in the fund's best interests, the fund may impose discretionary liquidity fees of up to 2% of the value of the shares
redeemed.
You could lose money by
investing in the fund. Because the share price of the fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The fund may impose a fee upon sale of
your shares. The fund generally must impose a fee when net sales of fund shares exceed certain levels. An investment in the fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. The fund’s sponsor is not required to reimburse the fund for losses, and you should not expect that the sponsor will provide financial support to the Fund at any time, including during periods of market stress.
The manager considers environmental, social, and/or governance (ESG) factors, alongside other relevant factors, as part of its investment process. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies. The ESG characteristics utilized in the fund's investment process may change over time and one or more characteristics may not be relevant with respect to all issuers that are eligible fund investments.
An investment in the fund is not a
bank deposit and is not insured or guaranteed by the FDIC or any other government agency. The fund
is managed pursuant to the investment policies and limitations described in this Registration Statement. The value of the fund’s shares could go down in price, meaning that a shareholder could lose money by investing in the fund. Many factors influence the
fund’s performance, and they are described in more detail below. The fund’s
investment strategy may not produce the intended results.
Instability in the financial markets has led many governments, including the U.S. government, to take a number of unprecedented actions designed to
support certain financial institutions and segments of the financial markets that have experienced extreme volatility and, in some cases, a lack of liquidity. Federal, state, and other governments, and their regulatory agencies or self-regulatory organizations, may take actions that affect the regulation of the instruments in which the fund invests, or the issuers of such instruments, in ways that are unforeseeable. Legislation or regulation may also
change the way in which the fund itself is regulated. Such legislation or regulation could limit or
preclude the fund’s ability to achieve its investment objective. In addition, political events within the United States and abroad could negatively impact financial markets and the fund’s performance. Further,
certain municipalities of the United States and its territories are financially strained and may face the possibility of default on their debt obligations, which could
directly or indirectly detract from the fund’s performance.
Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or negative effects on the liquidity, valuation, and performance of the fund’s portfolio holdings. Furthermore, volatile financial markets can expose the fund to greater market and liquidity risk, increased transaction costs, and potential difficulty in valuing
portfolio instruments held by the fund.
The fund’s main risk factors
are listed below in alphabetical order, not in order of importance. For further details about fund
risks, including additional risk factors that are not discussed in this Part A because they are not considered primary risk factors, see Part B.
Changing distribution levels risk
The distribution amounts paid by the fund generally depend on the amount of income and/or dividends paid by the fund’s investments. As a result of market, interest rate and other circumstances, the amount of cash available for distribution by the fund and the fund’s distribution
rate may vary or decline. The risk of such variability is accentuated in currently prevailing market and interest rate circumstances.
Credit and counterparty risk
The fund invests exclusively in high-quality debt securities (those that are
“eligible securities” under Rule 2a-7). This is the risk that an issuer of a U.S.
government security, the issuer or guarantor of a fixed-income security or a borrower of a
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; supported by the ability to borrow
from the U.S. Treasury; supported 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.
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; bank failures; 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. Financial institutions could suffer losses as interest rates rise or economic conditions deteriorate.
In addition, relatively high market volatility and reduced liquidity
in credit and fixed-income markets may adversely affect many issuers worldwide. Actions taken by the U.S. Federal Reserve (Fed) or foreign central banks to stimulate or
stabilize economic growth, such as interventions in currency markets, could cause high volatility in the equity and fixed-income markets. Reduced liquidity may result in less
money being available to purchase raw materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also
result in emerging-market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
Beginning in March 2022, the Fed began increasing interest rates and has signaled the potential for further increases. As a result, risks associated with rising interest rates are currently heightened. It is difficult to accurately predict the pace at which the Fed will increase interest rates any further, or the timing, frequency or magnitude of any such increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the future. Any such increases generally will cause market interest rates to rise and could cause the value of a fund’s investments, and the fund’s net asset value (NAV), to decline, potentially suddenly and significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could increase the costs that the fund incurs and may negatively impact the fund’s performance.
In addition, as the Fed increases the target Fed funds rate, any such rate increases, among other factors, could cause markets to experience continuing high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. These events and the possible resulting market volatility may have an adverse effect on 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 U.S. 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 U.S. or other securities markets. In recent years, the U.S. renegotiated many of its global trade relationships and imposed or threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
Uncertainties surrounding the sovereign debt of a number of European Union (EU) countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or the EU dissolves, the global securities markets likely will be significantly disrupted. On January 31, 2020, the United Kingdom (UK) left the EU, commonly referred to as “Brexit,” the UK ceased to be a member of the
EU, and the UK and EU
entered into a Trade and Cooperation Agreement. While the full impact of Brexit is unknown, Brexit
has already resulted in volatility in European and global markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict.
A widespread health crisis such as a global pandemic could cause substantial market
volatility, exchange trading suspensions and closures, which may lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may
ultimately affect fund performance. For example, the coronavirus (COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business
activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain
disruption, among others. While many countries have lifted some or all restrictions related to the
coronavirus (COVID-19) and the United States ended the public health emergency and national
emergency declarations relating to the coronavirus (COVID-19) pandemic on May 11, 2023, the continued impact of coronavirus (COVID-19) and related variants is uncertain. 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.
Political and military events, including in Ukraine,
North Korea, Russia, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of Russia’s economy, which may result in, among
other things, the continued
devaluation of Russian currency, a downgrade in the country’s credit rating, and/or a decline in the value and liquidity of Russian securities, property or interests.
These sanctions could also result in the immediate freeze of Russian securities and/or funds invested in prohibited assets, impairing the ability of a fund to buy, sell,
receive or deliver those securities and/or assets. These sanctions or the threat of additional sanctions could also result in Russia taking counter measures or retaliatory
actions, which may further impair the value and liquidity of Russian securities. The United States and other nations or international organizations may also impose additional
economic sanctions or take other actions that may adversely affect Russia-exposed issuers and companies in various sectors of the Russian economy. Any or all of these
potential results could lead Russia’s economy into a recession. Economic sanctions and other actions against Russian institutions, companies, and individuals resulting from the ongoing conflict may also have a substantial negative impact on other economies and securities markets both regionally and globally, as well as on companies with operations in the conflict region, the extent to which is unknown at this time. The United States and the EU have also imposed similar sanctions on Belarus for its support of Russia’s invasion of Ukraine. Additional sanctions may be imposed on Belarus and other countries that support Russia. Any such sanctions could present substantially similar risks as those resulting from the sanctions imposed on Russia, including substantial negative impacts on the regional and global economies and securities markets.
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. Further, there is a
risk that the present value of assets or income from investments will be less in the future, known as inflation. Inflation rates may change frequently and drastically as a
result of various factors, including unexpected shifts in the domestic or global economy, and a fund’s investments may be affected, which may reduce a fund’s performance. Further,
inflation may lead to the rise in interest rates, which may negatively affect the value of debt instruments held by the fund, resulting in a negative impact on a fund’s performance. Generally, securities issued in emerging markets are subject to a greater risk of
inflationary or deflationary forces, and more developed markets are better able to use monetary policy to normalize markets.
The manager considers ESG factors that it deems relevant or additive, along with other material factors and analysis, when managing the fund. The manager may consider these ESG factors on all or a meaningful portion of the fund's investments. In certain situations, the extent to which these ESG factors may be applied according to the manager’s integrated investment process may not include U.S. Treasuries, government securities, or other asset classes. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG characteristics, as determined by the manager, carries the risk that the fund may perform differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG criteria. Integration of ESG factors into the fund’s investment process may result in a manager making different investments for the fund than for a fund with a similar investment universe and/or investment style that does not incorporate such considerations in its investment strategy or processes, and the fund’s investment performance may be affected. Because ESG factors are one of many considerations for the fund, the manager may nonetheless include companies with low ESG characteristics or exclude companies with high ESG characteristics in the fund’s investments.
The ESG characteristics utilized in
the fund’s
investment process may change over time, and different ESG characteristics may be relevant to different investments. Although the manager has established its own structure to oversee ESG integration in
accordance with the fund’s investment objective and strategies,
successful integration of ESG factors will depend on the manager’s skill in
researching, identifying, and applying these factors, as well as on the
availability of relevant data. The method of evaluating ESG factors and subsequent impact on portfolio composition,
performance, proxy
voting decisions and other factors, is subject to the interpretation of the manager in accordance with the fund’s investment objective and strategies.
ESG factors may be evaluated differently by different managers, and may not carry the same meaning
to all investors and managers. The manager may employ active shareowner engagement to raise ESG issues with the management of select portfolio
companies. The regulatory landscape with respect to ESG investing in
the United States is evolving and any future rules or regulations may require the
fund to change its investment process with respect to ESG integration.
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.
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. Duration is a
measure of the price sensitivity of a debt security, or a fund that invests in a portfolio of debt securities, to changes in interest rates, whereas the maturity of a security measures the time until final payment is due. Duration measures sensitivity
more accurately than maturity because it takes into account the time value of cash flows generated over the life of a debt security. Recent and potential future changes in government monetary policy may affect interest rates.
Beginning in March 2022, the Federal Reserve Board (Fed) began
increasing interest rates and has signaled the potential for further increases. It is difficult to accurately predict the pace at which the Fed will increase interest rates
any further, or the timing, frequency or magnitude of any such increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the
future. Any such increases generally will cause market interest rates to rise and could cause the value of a fund’s investments, and the fund’s net asset value
(NAV), to decline, potentially
suddenly and
significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could increase the costs that the fund incurs and
may negatively impact the fund’s performance.
In response to certain economic disruptions, governmental authorities and regulators typically respond with significant fiscal and monetary policy
changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including their reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
Credit quality risk.
Fixed-income securities are subject to the risk that the issuer of the
security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates
after a fund has purchased the security, the market value of the security may decrease and lead to a decrease in the value of the 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.
Prepayment of principal risk. Many types of debt securities, including floating-rate loans, are subject to prepayment risk. Prepayment risk is the risk that, when interest rates fall, certain types of obligations will be paid off by the borrower more quickly than originally anticipated and the fund may have to invest the proceeds in securities with lower yields. Securities subject to prepayment risk can offer less potential for gains when the credit quality of the issuer improves.
Floating net asset value money market risk
The fund will not maintain a constant
NAV per share. The value of the fund’s shares will be calculated to four decimal places and
will fluctuate reflecting the value of the portfolio of investments held by the fund. It is possible to lose money by investing in the fund.
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, including foreign government 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 a 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. Some of the foreign securities risks are also applicable to funds that invest a material portion of their assets in securities of foreign issuers traded in the United States.
The fund has adopted policies and procedures such that the fund will be able to impose discretionary liquidity
fees on redemptions if the fund’s Board determines that such a liquidity fee is in the
fund’s best interests. If the fund’s Board, including a majority of the
independent Trustees, or its delegate, determines that imposing a liquidity fee is in the fund’s best interests, the fund may impose discretionary
liquidity fees of up to 2% of the value of the shares redeemed.
The extent (if at all) to which a security may be sold without negatively impacting
its market value may be impaired by reduced market activity or participation, legal restrictions, or other economic and market impediments. Funds with principal investment
strategies that involve investments in securities of companies with smaller market capitalizations, foreign securities, 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 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.
Operational and
cybersecurity risk
With the increased use of technologies, such as
mobile devices and “cloud”-based service offerings and the dependence on the internet and computer systems to perform necessary business functions, the
fund’s service providers are susceptible to operational and information or cybersecurity
risks that could result in losses to the fund and its shareholders. Intentional cybersecurity breaches include unauthorized access to systems, networks, or devices (such as through “hacking” activity or “phishing”); infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cyber-attacks can also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on the service providers’ systems or websites rendering
them unavailable to intended users or via “ransomware” that renders the systems inoperable until appropriate actions are taken. In addition, unintentional incidents can occur, such as the inadvertent release of confidential information (possibly resulting in the violation of applicable privacy laws).
A cybersecurity breach could result in the loss or theft of customer data or funds,
loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system repairs. Such incidents could
cause a fund, the advisor, a manager, or other service providers to incur regulatory penalties, reputational damage, additional compliance costs, litigation costs or
financial loss. In addition, such incidents could affect issuers in which a fund invests, and thereby cause 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.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises
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.
The fund may experience periods of heavy redemptions that could cause it to liquidate its assets at inopportune
times or at a loss or depressed value, particularly during periods of declining or illiquid
markets, and that could affect the fund’s ability to maintain a $1.00 share
price. Redemption risk is
greater to the extent that the fund has investors with large shareholdings, short investment horizons or unpredictable cash flow needs. The redemption by one or more large shareholders of their holdings in the fund could cause the remaining
shareholders in the fund to lose money. In addition, the fund may liquidate the fund when permitted by applicable regulations.
Reinvestment risk is the risk that income from the fund's portfolio will decline if the
fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the fund's portfolio's current earnings rate.
Repurchase agreements risk
Repurchase agreements are arrangements involving the purchase of an obligation and the simultaneous agreement to resell the same obligation on demand or at a specified future date and at an agreed-upon price. A repurchase agreement can be viewed as a loan made by the 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.
The 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.
The Advisor and the subadvisor 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.
U.S. Government agency obligations 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.
U.S. Government Obligations. U.S. government
obligations are debt securities issued or guaranteed as to principal or interest by the U.S.
Treasury. These securities include treasury bills, notes and bonds.
GNMA Obligations. GNMA obligations are mortgage-backed securities guaranteed by the GNMA, which guarantee is supported by the full faith and credit of the U.S. government.
U.S. Instrumentality Obligations. U.S. instrumentality obligations include, but are not limited to, those issued by the
Export-Import Bank and Farmers Home Administration.
Some obligations issued or guaranteed by U.S. government agencies or
instrumentalities are supported by the right of the issuer to borrow from the U.S. Treasury or the Federal Reserve Banks, such as those issued by FICBs. Others, such as those
issued by Fannie Mae, FHLBs and Freddie Mac, are supported by discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality.
In addition, other obligations, such as those issued by the SLMA, are supported only by the credit of the agency or instrumentality. There also are separately traded interest components of securities issued or guaranteed by the U.S. Treasury.
No assurance can be given that the U.S. government will provide financial
support for the obligations of such U.S. government-sponsored agencies or instrumentalities in the future, since it is not obligated to do so by law. In this Part A,
“U.S. government securities” refers not only to securities issued or guaranteed as to principal or interest by the U.S. Treasury but also to securities that are
backed only by their own credit and not the full faith and credit of the U.S. government.
It is possible that the availability and the marketability (liquidity) of the securities discussed in this section could be adversely affected by actions of the U.S. government to tighten the availability of its credit. In 2008, FHFA, an agency of the U.S. government, placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. The FHFA will act as the conservator to operate Fannie Mae and Freddie Mac until they are stabilized. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio securities is available in the fund's Part B.
Item 10. Management, Organization and Capital Structure
John Hancock Investment Management LLC serves as the fund’s investment advisor. The Advisor’s address is 200 Berkeley Street, Boston, MA
02116.
Founded in 1968, the Advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife Financial Corporation.
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 leading institutional money managers, taking a disciplined team approach to
portfolio management and research, leveraging the expertise of seasoned investment professionals. As of December 31, 2023, the Advisor had total assets under management of approximately $153.7 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’s portfolio assets through
proactive oversight and monitoring of the Subadvisor and 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 the Subadvisor and recommend 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 objectives 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 fund relies on an order from the
Securities and Exchange Commission (“SEC”) permitting the Advisor, subject to approval by the Board of Trustees, to appoint a subadvisor or change the terms of a
subadvisory agreement without obtaining shareholder approval. The fund, therefore, is able to
change subadvisors or the fees paid to a subadvisor from time to time without the expense and delays associated with obtaining shareholder approval of the change. This order does not, however, permit the Advisor to appoint a subadvisor that is an affiliate of the Advisor or the fund (other than by reason of serving
as a subadvisor to the fund), or to increase the subadvisory fee of an affiliated subadvisor,
without the approval of the shareholders.
Manulife IM (US) serves as the fund’s subadvisor. The Subadvisor’s address is 197 Clarendon Street, Boston, MA 02116.
The Subadvisor provides investment advisory services to
individual and institutional investors. Manulife IM (US) is a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial
Corporation) and, as of December 31, 2023, had total assets under management of approximately $200.03
billion.
The fund pays the Advisor a
management fee for its services to the fund. The Advisor in turn pays the fees of the Subadvisor.
The management fee is stated as an annual percentage of the aggregate net assets of the Fund determined in accordance with the following schedule, and that rate is applied
to the average daily net assets of the fund.
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A contractual management fee waiver of 0.45% is in effect until April 30, 2025.
During its most recent fiscal period, the fund paid the Advisor a management fee equal to 0.04% of average daily net assets (including any waivers and/or
reimbursements).
The basis for the Board of Trustees’ approval of the advisory fees, and of the investment advisory agreement, including the subadvisory agreement, is discussed in the fund’s most
recent semi-annual shareholder report for the period ended June 30.
(a)(2) Portfolio Management
Following are brief biographical profiles of the leaders of the fund’s investment management team, in alphabetical order. These managers are jointly and primarily responsible
for the day-to-day management of the fund’s portfolio. These managers are employed by
Manulife IM (US). 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 Part
B.
•
Associated with the Subadvisor since 2022
•
Associated with the fund since 2022
•
Began business career in 2010
•
Associated with the Subadvisor since 2009
•
Associated with the fund since 2015
•
Began business career in 2007
•
Head of Investment Grade Bond Trading
•
Associated with the Subadvisor since 2010
•
Associated with the fund since 2015
•
Began business career in 2008
•
Associated with the Subadvisor since 2000
•
Associated with the fund since 2015
•
Began business career in 1999
•
Associated with the Subadvisor since 2015
•
Associated with the fund since 2015
•
Began business career in 2005
•
Associated with the Subadvisor since 2006
•
Associated with the fund since 2022
•
Began business career in 2002
There are no legal proceedings to which the Trust or the Advisor 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.
Fund shares may not be transferred, but an investor may redeem all or any portion of its shares in the
fund at NAV on any day on which the New York Stock Exchange (“NYSE”) is open, subject to certain exceptions. For more information about the ability of an investor to redeem all or any portion of its investment in the fund, please see
Item 11 herein. The fund reserves the right to issue additional shares. Investors in the fund have no preemptive or conversion
rights, and shares when issued will be fully paid and non-assessable, except as set forth below.
The
fund has no current intention to hold annual meetings of investors, except to the extent required
by the 1940 Act, but will hold special meetings of investors when, in the judgment of the Trustees, it is necessary or desirable to submit matters for an investor vote. Each
investor in the fund will
participate equally in accordance with its pro rata interests in the assets of the fund. Upon liquidation of the fund,
investors would be entitled to share, in proportion to their investment in the fund, in the assets of the fund available
for distribution to investors.
The fund is organized as a
Massachusetts business trust. Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for acts
or obligations of the trust. However, the Trust’s Declaration of Trust contains an express disclaimer of shareholder liability for acts, obligations and affairs of the
fund. The Trust’s Declaration of Trust also provides for indemnification out of the fund's assets for all losses and expenses of any shareholder held personally liable by reason of being or having
been a shareholder. Furthermore, the Fund shall not be liable for the liabilities of any other John Hancock fund. Liability is therefore limited to circumstances in which the
fund itself would be
unable to meet its obligations.
The
fund has entered into contractual arrangements with various parties that provide services to the
fund, which may include, among others, the Advisor and Subadvisor, as described above and in Part B. 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 Part A provides information concerning the fund that an investor should consider in determining whether to purchase shares of the fund. Each of this Part A, Part B, 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 expressly by federal or state securities laws.
Item 11. Shareholder Information
(a) Pricing of Fund Shares
The offering price that applies to a purchase order is the next NAV calculated after
the purchase order is received and accepted by the fund or its agent. The fund normally calculates the NAV
of its shares at 4:00 p.m. Eastern Time on each day that the NYSE is open. 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 SEC and applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated, and the fund does not transact
purchase or redemption requests. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and U.S. business holidays on which the
fund’s NAV is not calculated. Consequently, the fund’s
portfolio securities may trade, and the NAV of the fund’s shares may be significantly affected on days when a shareholder will not be able to purchase or redeem shares of the fund.
Generally, trading in non-U.S. securities, U.S. government securities and money market instruments is substantially completed each day at various
times prior to the close of trading on the NYSE. The values of such securities used in computing the NAV of the fund's shares are determined as of such
times and are generally transmitted to the fund prior to 4:00 p.m. Eastern Time. These prices are intended to represent the market value of the relevant
security and are based on the last market price quotation in the market in which they are traded. 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.
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.
The Board has designated the fund's Advisor as the valuation designee to perform fair value functions for the fund in accordance with the
Advisor's valuation policies and procedures. As valuation designee, the Advisor will determine the fair value, in good faith, of securities and other assets held by the fund for which market quotations
are not readily available and, among other things, will assess and manage material risks associated with fair value determinations, select, apply and test fair value
methodologies, and oversee and evaluate pricing services and other valuation agents used in valuing the fund's investments. The Advisor is subject to Board oversight and reports to the Board information regarding the
fair valuation process and related material matters. The Advisor carries out its responsibilities as valuation designee through its Pricing Committee.
If market quotations or official closing prices are not readily available or are otherwise deemed unreliable because of market- or issuer-specific events, a security will be valued at its fair value as determined in good faith by the Board’s valuation designee, the Advisor. In certain instances, therefore, the Pricing Committee may determine that a reported valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair value of the assets, which may differ from the reported valuation.
Fair value pricing of securities is intended to help ensure that 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. However, a security’s
valuation may differ depending on the method used for determining value, and no assurance can be given that fair value pricing of securities will successfully eliminate all
potential opportunities for such trading gains.
The use of fair value pricing has the effect of valuing a security based upon the price 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. With respect to any portion of the fund's assets that is invested in
another open-end investment company, that portion of the fund's NAV is calculated based on the NAV
of that investment company. The prospectus for the other investment company explains the circumstances and effects of fair value pricing for that other investment
company.
(b) Purchase of Fund Shares
Shares of the fund are issued after the acceptance of purchase orders by the fund or its agent solely in private placement transactions that do not involve any “public offering” within the meaning of Regulation D under the 1933 Act. Investments in the fund may only be made by certain “accredited investors” within the meaning of Section 4(a)(2) of the 1933 Act, including other investment companies. This Part A does not constitute an offer to sell, or the solicitation of an offer to buy, any “security” within the meaning of the 1933 Act.
All investments are made at the NAV
next determined after a purchase order and payment for the investment is received by the fund or
its agent by the designated cutoff time for each accredited investor. There is no minimum initial or subsequent investment in the fund. The fund reserves the right to stop accepting investments in the fund at any time or to reject any investment order.
(c) Redemption of Fund Shares
An investor in the fund may sell (redeem) some or all of its investment by submitting a redemption request to the fund or its agent on any business day
the NYSE is open for trading. Shares will be redeemed at the current NAV calculated after the order is received by the fund or its agent. Shares redeemed
will not receive distributions declared on the effective date of the redemption. The proceeds of a redemption will be paid either by Fedwire, other immediately available
funds or fund property, normally on the business day on which the shares are redeemed. Payment may
be delayed for not more than seven (7) days after the receipt and acceptance of the redemption order if reasonably necessary to prevent such redemption from having a material adverse impact on the fund
or the remaining shareholders, except as otherwise permitted by the 1940 Act or as provided by the SEC. The fund reserves the right to pay redemptions in kind. Shares of the fund may not be transferred.
The right of any investor to receive payment with respect to any redemption may be suspended or the payment of the redemption proceeds postponed during any period in which the NYSE is closed (other than weekends or holidays) or trading on such exchange is restricted, or, to the extent otherwise permitted by the 1940 Act or the SEC, if an emergency exists. In no event will the fund or any Trustee be liable to a beneficial owner for interest on the proceeds of any redemption.
The fund typically expects to mail or
wire redemption proceeds between 1 and 3 business days following the receipt of the shareholder's redemption request. Processing time is not dependent on the chosen delivery
method. In unusual circumstances, the fund may temporarily suspend the processing of sell requests or may postpone payment of proceeds for up to three business days or longer, as allowed by federal securities laws.
Under normal market conditions, the
fund typically expects to meet redemption requests through holdings of cash or cash equivalents or
through sales of portfolio securities, and may access other available liquidity facilities. In unusual or stressed market conditions, such as, for example, during a period
of time in which a foreign securities exchange is closed, in addition to the methods used in normal market conditions, the fund may meet redemption requests
through the use of its line of credit, interfund lending facility, redemptions in kind, or such other liquidity means or facilities as the fund may have in place from time to time.
Certain Special Limitations Affecting
Redemptions. The fund
may impose discretionary liquidity fees on redemptions if the fund’s
Board or its delegate
determines that such a
liquidity fee is in the fund’s best interests. If the
Board, including a majority of the independent Trustees, or its delegate, determines that imposing a liquidity fee is in the fund’s
best interests, the fund may impose liquidity fees of up to 2% of the value of the shares redeemed, which would remain in effect until the Board or its delegate determines that the fee is no longer in the best interests of the fund. In the event that a liquidity
fee is imposed, the Board or its delegate may take certain other actions based on the particular facts and circumstances, including but not limited to
modifying the timing and frequency of its NAV determinations.
If liquidity fees are imposed, the fund will notify shareholders on the
fund’s website or by press release. In addition to identifying the fund, such notifications will include
the time of implementation of the liquidity fee and details regarding the amount of the liquidity
fee. The imposition of a liquidity fee will also be reported by the fund to
the SEC on Form N-CR until June 10, 2024 and, effective June 11, 2024, on Form N-MFP.
All liquidity fees payable by shareholders of the fund would be payable to the fund and can be used to offset any losses realized by the fund when seeking to honor redemption
requests during times of market stress. The fund expects to treat such liquidity fees as not
constituting income to the fund.
A liquidity fee imposed by the fund
may reduce the amount a shareholder will receive upon the redemption of its shares and may decrease the amount of any capital gain or increase the amount of any capital loss a shareholder will recognize
from such redemption. Although there is some degree of uncertainty with respect to the tax treatment of liquidity fees received by money market funds, it is anticipated at
this time that a liquidity fee will have no tax effect for the fund. As the tax treatment will likely be the subject of future guidance issued by the Internal Revenue Service (IRS), the fund will re-visit the applicable tax
treatment of liquidity fees when they are received.
In addition, the right of any investor to receive payment with respect to any redemption may be suspended or the payment of the redemption proceeds
postponed during any period in which the NYSE is closed (other than weekends or holidays) or trading on the NYSE is restricted or, to the extent otherwise permitted by the 1940 Act or the SEC, if an emergency exists as a result of which disposal by the fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the fund fairly to determine the value of its net assets. In addition, the SEC may by order permit suspension of redemptions for the protection of shareholders of the fund.
If the fund’s weekly liquid assets fall below 10% of its assets on a business day, the fund may cease honoring redemptions and liquidate at the discretion of the Board, including a majority of the
independent Trustees. Prior to suspending redemptions, the fund would be required to notify the SEC
of its decision to liquidate and suspend redemptions. If the fund ceases honoring redemptions and determines to liquidate, the fund expects that it would notify shareholders on the fund’s website or by press release. Distributions to shareholders of liquidation proceeds may occur in one
or more disbursements.
(d) Dividends and
Distributions
The fund generally declares dividends
daily and pays them monthly. Capital gains, if any, are typically distributed at least annually. Most of the fund's dividends are income dividends. Dividends begin accruing the day the fund receives payment and continue up until the day your shares are actually redeemed. Dividends generally will be paid in cash, unless a shareholder elects to have dividends automatically reinvested in additional shares of the fund.
(e) Frequent Purchases and Redemption of Fund
Shares
The fund does not knowingly accept
shareholders who engage in “market timing” or other types of excessive short-term trading. Short-term trading into and out of the fund can disrupt portfolio investment strategies and may increase fund expenses for all shareholders, including long-term shareholders who do not generate these costs. However, because this fund is intended to serve as a vehicle for cash management purposes, investors in the fund value the ability to add and withdraw their funds quickly and without restrictions. In
addition, the fund does not offer shares of the fund for sale to the general public.
For these reasons, the Board has not adopted policies and procedures with respect to frequent purchases and redemptions of the fund's shares, and the fund does not impose redemption fees or minimum holding periods on its investors.
For investors who are not exempt from federal income taxes, dividends received from the fund are generally considered taxable, whether received in cash or reinvested in additional shares of the fund. Dividends from the fund's short-term capital gains are taxable as ordinary income. Dividends from the fund's long-term capital gains (if any) are taxable to individuals at a lower rate. The fund generally does not expect to make any distributions from long-term capital gains. Whether gains are short-term or long-term depends on the fund's holding period. Some dividends paid in January may be taxable as if they had been paid the previous
December.
Any time an investor sells shares, it may be considered a taxable event for the investor if the investor is not exempt from federal income taxes. Depending on the purchase price and the sale price of the shares sold, an investor may have a gain or a loss on the transaction. Each investor is responsible for any tax liabilities generated by its transactions.
(g) Website Posting Portfolio Holdings and Other Fund
Information
Information concerning the
fund’s portfolio holdings is available via the link to the fund at
https://www.jhinvestments.com/collateral-trust. Such information is posted on the website no later than five business days after month end then remains posted on the website for six months thereafter. The fund’s Weighted Average Maturity and Weighted Average Life, Daily and Weekly Liquid Assets and Daily Flows
are posted every business day and remain posted on the website for six months thereafter.
The fund files with the SEC a
complete schedule of its portfolio holdings as of the close of each month on “Form N-MFP.” Form N-MFP is available on the SEC’s website at sec.gov.
Shareholders may access Form N-MFP via the link to the fund at https://www.jhinvestments.com/collateral-trust.
Item 12. Distribution Arrangements
(c) Multiple Class and Master-Feeder Funds
John Hancock
Collateral Trust
This Part B provides information about John Hancock Collateral Trust (the “fund”), a series of John Hancock Collateral Trust (the “Trust”), in addition to the information that is contained in the fund's Part A. This Part B is not a prospectus. It should be read in conjunction with the prospectus in Part A,
dated April 25, 2024. Unless otherwise stated, capitalized terms in this Part B have the same meaning as in Part A. Eligible
Investors may obtain a copy of Part A free of charge by contacting John Hancock Signature Services, Inc. at P.O. Box 219909, Kansas City, MO 64121-9909.
NEITHER PART A NOR THIS PART B CONSTITUTES AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY INTERESTS IN THE FUND.
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Description of the Fund and Its Investments and Risks |
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Control Persons and Principal Holders of Securities |
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Investment Advisory and Other Services |
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Brokerage Allocations and Other Practices |
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Capital Stock and Other Securities |
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Purchase, Redemption, and Pricing of Shares |
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Calculation of Performance Data |
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Appendix A – Description of Bond Ratings |
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Appendix B – Proxy Voting Policies |
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The
fund was organized as a Massachusetts business trust on December 4, 2014, under the laws of the
Commonwealth of Massachusetts.
Item 16. Description of the Fund and Its Investments and Risks
The fund is a diversified, open-end,
management investment company.
(b) Investment Strategies and Risks
The following information supplements the discussion of the fund's investment objective and policies discussed in the Part A.
The
fund's investment objective is to seek current income, while maintaining adequate liquidity,
safeguarding the return of principal and minimizing risk of default. The fund invests in high quality money market instruments. The fund's investments will be subject to the market fluctuation and risks inherent in all securities. There is no
assurance that the fund will achieve its investment objective.
The fund seeks to achieve its
objective by investing in money market instruments including, but not limited to, U.S. government, municipal and foreign governmental securities; obligations of international
organizations (e.g., the World Bank and the International Monetary Fund); obligations of U.S. and foreign banks and other lending institutions; corporate obligations;
repurchase agreements and reverse repurchase agreements. All of the fund's investments will be denominated in U.S. dollars.
Under Rule 2a-7, the fund may generally invest in “eligible securities” which include securities issued by another money
market fund, government securities or securities that have a remaining maturity of no more than 397 calendar days and are determined by the fund’s board or its delegate to
present minimal credit risk based on an assessment of the issuer’s credit quality, including the capacity of the issuer or guarantor to meet its financial obligations. The fund’s Board
has adopted procedures by which the Adviser will conduct this initial and ongoing assessment, as required.
At the time the fund acquires its investments, such “eligible securities” will be rated (or issued by an issuer that
is rated with respect to a comparable class of short-term debt obligations) in one of the two highest rating categories for short-term debt obligations assigned by at least
two of the following
nationally recognized statistical rating
organizations (“NRSROs”) (or one NRSRO if the obligation was rated by only that NRSRO): S&P Global Ratings (“S&P”), Moody‘s Investors
Service, Inc. (“Moody‘s”), and Fitch Ratings (“Fitch”).
These high-quality securities are divided into “first tier” and
“second tier” securities. First tier securities have received the highest short-term rating from at least two designated NRSROs (or one, if only one has rated the
security). Second tier securities have received short-term ratings within the two highest categories from at least two designated NRSROs (or one, if only one has rated the
security), but do not qualify as first tier securities. The fund also may purchase obligations that are not rated, but are determined by the Subadvisor, based on procedures adopted by the Trustees, to be of comparable quality to rated first or second tier securities. The fund may not purchase any second-tier security if, as a result of its purchase, more than 3% of its total assets
would be invested in second tier securities or more than 0.50% of its total assets would be invested in the second tier securities of a single issuer.
The fund will generally limit its
investments in the securities of any one issuer of a first-tier security (other than with respect to government securities and securities subject to a guarantee issued by a
non-controlled person) to no more than 5% of fund assets at the time of investment. However, the
fund
may invest up to 25% of its total assets in the first-tier securities of a single issuer for a period of up to 3 business days after the acquisition thereof. Additionally, securities subject to a demand feature or a guarantee will be limited to no more than 10% of
fund assets at the time of investment from any one provider.
Ratings as Investment Criteria. In general, the ratings of Moody's, S&P, and Fitch represent the opinions of these
agencies as to the quality of the securities which they rate. It should be emphasized, however, that such ratings are relative and subjective and are not absolute standards
of quality. These ratings will be used by the fund as initial criteria for the selection of portfolio 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, S&P, and Fitch and their significance.
Subsequent to its purchase by the fund, an issuer 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, but the Subadvisor
will consider the event in its determination of whether the fund should continue to hold the securities. All of the fund’s first-tier investments will mature in 397 days or less and all of the fund’s second tier investments will mature in 45 days or less. The fund will maintain a dollar-weighted average portfolio maturity of 60 days or less and will maintain a dollar-weighted average life of 120 days or less. Unlike the fund’s dollar-weighted average maturity, the fund’s dollar-weighted average life is calculated without reference to the re-set dates of variable rate debt
obligations held by the fund.
Sovereign Government and Supranational Debt Risk
U.S. government securities include securities issued or guaranteed by
the U.S. government or its authorities, agencies, or instrumentalities. 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 U.S. government securities and
foreign government securities have different kinds of government support. For example, some U.S. government securities (e.g., U.S. Treasury bonds) are supported by the full
faith and credit of the United States. Other U.S. government securities are issued or guaranteed by federal agencies or government-chartered or –sponsored enterprises
but are neither guaranteed nor insured by the U.S. government (e.g., debt securities issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), and Federal Home Loan Banks (“FHLBs”)). Similarly, some foreign government securities are supported by the full faith and credit of a foreign national government or political subdivision and some are not.
Supra-national agencies are agencies whose member nations make capital contributions to support the agencies' activities and include the International Bank for Reconstruction and Development (the “World Bank”), the Asian Development Bank, the European Coal and Steel Community, and the Inter-American Development Bank.
Like other fixed income securities, U.S. government securities and foreign government
securities are subject to market risk and their market values typically will change as interest rates fluctuate. For example, the value of an investment in a fund that holds U.S. government securities or foreign government securities may fall during times of rising interest rates. Yields on U.S. government securities and foreign government securities tend to be lower than those of corporate securities of comparable maturities. Beginning in March 2022, the Federal Reserve Board (Fed) began increasing interest rates and has signaled the potential for further increases. As a result, risks associated with rising interest rates are currently heightened.
In addition to investing directly in U.S. government securities and foreign government securities, a fund may purchase certificates of accrual or similar instruments evidencing undivided ownership interests in
interest payments and/or principal payments of U.S. government securities and foreign government securities. Certificates of accrual and similar instruments may be more
volatile than other government securities.
Investments in sovereign debt involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of
the debt may be unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entity's willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuer's balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates and the extent of its foreign reserves. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, as many external debt obligations bear interest at rates which are adjusted based upon international interest rates. Also, there can be no assurance that the holders of commercial bank loans to the same
sovereign entity may not contest
payments to the holders of sovereign debt in the event of default under commercial bank loan agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted and the fund may be unable to collect all or any
part of its investment in a particular issue. Foreign investment in certain sovereign debt is restricted or controlled to varying degrees, including requiring governmental approval for the repatriation of income, capital or proceeds of sales by foreign investors. These restrictions or controls may at times limit or preclude foreign investment in certain sovereign debt and increase the costs and expenses of the
fund.
Countries in Europe may be significantly affected by fiscal and monetary controls implemented by the European Union (“EU”) and 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 other European economies and major trading partners outside Europe.
In recent years, the European financial markets have experienced volatility and adverse trends due to concerns about economic downturns, rising government debt levels and the possible default of government debt in several European countries. The European Central Bank and IMF have previously bailed-out several European countries. There is no guarantee that these institutions will continue to provide financial support, and markets may react adversely to any reduction in financial support. A default or debt restructuring by any European country can adversely impact holders of that 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 surrounding the sovereign debt of a number of EU
countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States and around the world. If one or more countries leave the EU or
the EU dissolves, the global securities markets likely will be significantly disrupted. On January 31, 2020, the UK left the EU, commonly referred to as “Brexit,”
the UK ceased to be a member of the EU, and the UK and EU entered into a Trade and Cooperation Agreement. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global
markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory,
economic, and market outcomes are difficult to predict. It is also possible that various countries within the UK, such as Scotland or Northern Ireland, could seek to separate and remain a part of the EU. Other secessionist movements including countries seeking to abandon the Euro or withdraw from the EU may cause volatility and uncertainty in the EU.
The UK has one of the largest economies in Europe and is a major trading partner with
the EU countries and the United States. Brexit might negatively affect The City of 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.
Investing in the securities of Eastern European issuers is highly speculative and involves risks not usually associated with investing in the more developed markets of Western Europe. Securities markets of Eastern European countries typically are less efficient and have lower trading volume, lower liquidity, and higher volatility than more developed markets. Eastern European economies also may be particularly susceptible to disruption in the international credit market due to their reliance on bank related inflows of capital.
To the extent that a fund invests in European securities, it may be exposed to these risks through its direct investments in such
securities, including sovereign debt, or indirectly through investments in money market funds and financial institutions with significant investments in such securities. In
addition, Russia’s increasing international assertiveness could negatively impact EU and Eastern European economic activity. Please see “Market Events” for additional information regarding risks related to sanctions imposed on Russia.
The fund may acquire custodial
receipts in respect of U.S. Government securities. Such custodial receipts evidence ownership of future interest payments, principal payments or both on certain notes or
bonds. These custodial receipts are known by various names, including Treasury Receipts, Treasury Investors Growth Receipts (“TIGRs), and Certificates of Accrual on Treasury Securities (“CATS”). For certain securities law purposes, custodial receipts are not considered U.S. Government securities.
Bank and Corporate Obligations
The fund may invest in commercial
paper. Commercial paper represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations and finance companies. The
commercial paper purchased by the fund consists of direct U.S. dollar denominated obligations of domestic or foreign issuers. Bank 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 on 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 that 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 FDIC
or any other insurer. Deposit notes are insured by the FDIC only to the extent of $250,000 per depositor per bank.
The
fund may invest in repurchase agreements. Repurchase agreements typically involve the acquisition
by the fund of fixed income securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement typically provides that the fund will sell the securities back to
the institution at a fixed time in the future for a fixed price plus accrued interest. The fund
will enter into repurchase agreements only with member banks of the Federal Reserve System and with “primary dealers” in U.S. Government securities. The Advisor
will continuously monitor the creditworthiness of the parties with whom it enters into repurchase agreements. The fund has established a procedure providing that the securities serving as collateral for each repurchase agreement must be delivered to the fund's custodian either physically or in book-entry form and that the collateral must be marked to market daily to
ensure that each repurchase agreement is fully collateralized at all times. The fund does not bear
the risk of a decline in the value of the underlying securities unless the seller defaults under its repurchase obligation. In the event of bankruptcy or other default
by a seller of a repurchase agreement, the fund could experience delays in or be prevented from liquidating the underlying securities and could experience
losses, including the possible decline in the value of the underlying securities during the period while the fund seeks to enforce its rights thereto, possible subnormal levels of income and decline in value of the underlying
securities or lack of access to income during this period as well as the expense of enforcing its rights. The fund will not invest in a repurchase agreement maturing in more than seven days, if such investment, together
with other illiquid securities held by the fund (including restricted securities) would exceed 5% of the fund's net assets.
The fund may invest in U.S.
dollar-denominated foreign securities and certificates of deposit, bankers' acceptances and fixed time deposits and other obligations issued by foreign banks and their U.S.
and foreign branches and foreign branches of U.S. banks.
Investing in obligations of foreign issuers may entail greater risks than investing in similar securities of U.S. issuers. These risks include (i)
social, political and economic instability; (ii) the small current size of the markets for many such securities and the currently low or nonexistent volume of trading, which may result in a lack of liquidity and in greater price volatility; (iii) certain national policies that may restrict the fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive to national interests; (iv) foreign taxation; and (v) the absence of developed structures
governing private or foreign investment or allowing for judicial redress for injury to private property.
Investments in foreign securities may involve a greater degree of risk than those in
domestic securities. There is generally less publicly available information about foreign companies in the form of reports and ratings similar to those that are published
about issuers in the United States. Also, foreign issuers are generally not subject to uniform accounting, auditing and financial reporting requirements comparable to those
applicable to United States issuers.
Foreign securities will be purchased in the best available market, whether through
over-the-counter markets or exchanges located in the countries where principal offices of the issuers are located. Foreign securities markets are generally 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 foreign issuers are
less liquid and more volatile than securities of comparable United States issuers. Fixed commissions on foreign exchanges are generally higher than negotiated commissions on United States exchanges, although 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 foreign 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 that could affect United States investments in those countries. Moreover, individual foreign 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 and interest payable on certain of the fund’s foreign portfolio securities and, in some cases, capital gains, may be subject to foreign withholding or other foreign taxes, thus reducing the net amount of income or gains available for distribution to the fund's shareholders.
Sovereign Debt Obligations
Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loan or loan participations. Typically, sovereign debt of developing countries may involve a high degree of risk and may be in default or present the risk of default, however, sovereign debt of developed countries also may involve a high degree of risk and may be in default or present the risk of default. Governments rely on taxes and other revenue sources to pay interest and principal on their debt obligations, and governmental entities responsible for repayment of the debt may be unable or unwilling to repay principal and pay interest when due and may require renegotiation or rescheduling of debt payments. The payment of principal and interest on these obligations may be adversely affected by a variety of factors, including economic results, changes in interest and exchange rates, changes in debt ratings, a limited tax base or limited revenue sources, natural disasters, or other economic or credit problems. In addition, prospects for repayment and payment of interest may depend on political as well as economic factors. Defaults in sovereign debt obligations, or the perceived risk of default, also may impair the market for other securities and debt instruments, including securities issued by banks and other entities holding such sovereign debt, and negatively impact the funds.
Illiquid
Securities
The fund may not invest more than 5% of its net assets in securities that cannot be sold or disposed of in seven
calendar days or less without the sale or disposition significantly changing the market value of the investment (“illiquid securities”). Investment in illiquid
securities involves the risk that, because of the lack of consistent market demand for such securities, a fund may be forced to sell them at a discount from the last offer price. To the extent that an investment is deemed to be an illiquid investment or a less liquid investment, the fund can expect to be exposed to greater liquidity risk.
Illiquid securities may include, but are not limited to: (a) securities (except for
Section 4(a)(2) Commercial Paper, discussed below) that are not eligible for resale pursuant to Rule 144A under the 1933 Act; (b) repurchase agreements maturing in more than seven days (except for those that can be terminated after a
notice period of seven days or less); (c) the interest only or “IO” class and the principal only or “PO” class of non-governmental issuers (except for
those that can be terminated after a notice period of seven days or less); (d) time deposits maturing in more than seven days; (e) federal fund loans maturing in more than
seven days; (f) bank loan participation interests; (g) foreign government loan participations; (h) municipal leases and participations therein; and (i) any other securities
or other investments for which a liquid secondary market does not exist.
Commercial paper issued in reliance on Section 4(a)(2) of the 1933 Act
(“Section 4(a)(2) Commercial Paper”) is restricted as to its disposition under federal securities law, and generally is sold to institutional investors, such as
the fund, who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be made in an exempt transaction. Section 4(a)(2) Commercial Paper normally is resold to other institutional investors, like the fund, through or with the assistance of the issuer or investment dealers who make a market in Section 4(a)(2)
Commercial Paper, thus providing liquidity.
If the Advisor determines that specific Section 4(a)(2) Commercial Paper or securities that are restricted as to resale but for which a ready market is
available pursuant to an exemption provided by Rule 144A under the 1933 Act or other exemptions from the registration requirements of the 1933 Act are liquid, they will not be subject to the fund’s limitation on investments in illiquid securities. Investing in Section 4(a)(2) Commercial Paper
could have the effect of increasing the level of illiquidity in the fund if qualified institutional buyers become for a time uninterested in purchasing these restricted
securities.
Forward Commitment and When-Issued Securities
The fund may purchase securities on a
when-issued or forward commitment basis. “When-issued” refers to securities whose terms are available and for which a market exists, but that have not been
issued. The fund will engage in when-issued transactions with respect to securities purchased for
its portfolio in order to obtain what is considered to be an advantageous price and yield at the time of the transaction. For when-issued transactions, no payment is made until delivery is due, often a month or more after the purchase. In a forward commitment transaction, the fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time.
When the fund engages in forward commitment and when-issued transactions, it relies on the seller to consummate the transaction. The failure of the issuer or seller to consummate the transaction may result in the fund losing the opportunity to obtain a price and yield considered to be advantageous. The purchase of securities on
a when-issued and forward commitment basis also involves a risk of loss if the value of the security to be purchased declines prior to the settlement date.
When-issued or forward settling securities transactions physically settling within 35 days are deemed not to involve a senior security. When-issued or forward settling securities transactions that do not physically settle within 35 days are required to be treated as derivatives transactions in compliance with Rule 18f-4 under the 1940 Act
(the “Derivatives Rule”).
Pursuant to an exemptive order issued by the SEC, a fund may lend money to, and borrow money from, other funds advised by the Advisor or any other investment advisor under common control with the Advisor, subject to the fundamental restrictions on borrowing and lending applicable to the fund.
The fund will borrow through the
program only when the costs are equal to or lower than the cost of bank loans, and a fund will lend
through the program only when the returns are higher than those available from an investment in overnight repurchase agreements. Interfund loans and borrowings normally
extend overnight, but can have a maximum duration of seven days. Loans may be called on one
day’s notice. A
fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund or from a borrowing fund could result in a lost investment opportunity or additional borrowing costs.
Natural Disasters, Adverse Weather Conditions, and Climate
Change
Certain areas of the world may be exposed to
adverse weather conditions, such as major natural disasters and other extreme weather events, including hurricanes, earthquakes, typhoons, floods, tidal waves, tsunamis,
volcanic eruptions, wildfires, droughts, windstorms, coastal storm surges, heat waves, and rising sea levels, among others. Some countries and regions may not have the
infrastructure or resources to respond to natural disasters, making them more economically sensitive to environmental events. Such disasters, and the resulting damage, could
have a severe and negative impact on 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.
Climate change, which is the result of a change in global
or regional climate patterns, may increase the frequency and intensity of such adverse weather conditions, resulting in increased economic impact, and may pose long-term
risks to a fund’s investments. The future impact of climate change is
difficult to predict but may include
changes in demand for certain goods and services, supply chain disruption, changes in production costs, increased legislation, regulation, international accords and compliance-related costs, changes in property and security values, availability of
natural resources and displacement of peoples.
Legal, technological, political and scientific developments regarding climate change
may create new opportunities or risks for issuers in which the fund invests. These developments may create demand for new products or services, including, but not limited to,
increased demand for goods that result in lower emissions, increased demand for generation and transmission of energy from alternative energy sources and increased
competition to develop innovative new products and technologies. These developments may also decrease demand for existing products or services, including, but not limited
to, decreased demand for goods that produce significant greenhouse gas emissions and decreased demand for services related to carbon based energy sources, such as drilling services or equipment maintenance services.
Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of the fixed-income securities
generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline. Recent and potential future changes in government monetary policy may affect interest rates.
The longer a fixed-income security’s duration, the more
sensitive it will be to changes in interest rates. Similarly, a fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund
with a shorter average portfolio duration. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates that incorporates
a security’s yield, coupon, final maturity, and call features, among other characteristics. All other things remaining equal, for each one percentage point increase in
interest rates, the value of a portfolio of fixed-income investments would generally be expected to decline by one percent for every year of the portfolio’s average
duration above zero. For example, the price of a bond fund with an average duration of eight years would be expected to fall approximately 8% if interest rates rose by one
percentage point. The maturity of a security, another commonly used measure of price sensitivity, measures only the time until final payment is due, whereas duration takes into account the pattern of all payments of interest and principal on a security over time, including how these payments are affected by prepayments and by changes in interest rates, as well as the time until an interest rate is reset (in the case of variable-rate securities).
Beginning in March 2022, the Federal Reserve Board (the Fed) began increasing interest rates and has signaled the potential for further increases. It is difficult to accurately predict the pace at which the Fed will increase interest rates any further, or the timing, frequency or magnitude of any such increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the future. Any such increases generally will cause market interest rates to rise and could cause the value of a fund's investments, and the fund's net asset value (NAV), to decline, potentially suddenly and significantly. As a result, the fund may experience high redemptions and, as a result, increased portfolio turnover, which could increase the costs that the fund incurs and may negatively impact the fund's performance.
In response to certain serious
economic disruptions, governmental authorities and regulators typically respond with significant
fiscal and monetary policy changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including
their reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
LIBOR Discontinuation Risk
Certain debt securities, derivatives and other financial instruments have
traditionally utilized LIBOR as the reference or benchmark rate for interest rate calculations.
However, following allegations of manipulation and concerns regarding liquidity, the U.K. Financial Conduct Authority (“UK
FCA”) announced that LIBOR would be discontinued on June 30, 2023. The UK FCA elected to require the ICE Benchmark Administration Limited, the administrator of LIBOR, to continue publishing a subset of LIBOR settings on a “synthetic” basis. The synthetic
publication of the one-, three- and six-month U.S. dollar LIBOR will continue
until September 30,
2024.
Although the transition process away from LIBOR has become
increasingly well-defined in advance of the discontinuation dates, the impact on certain debt
securities, derivatives and other financial instruments remains uncertain. Market participants have adopted alternative rates such as Secured
Overnight Financing Rate (“SOFR”) or otherwise amended financial instruments referencing LIBOR to include fallback provisions and other measures that contemplated 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 U.S. Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial
instruments transitioning away from LIBOR will need to be made to accommodate the differences.
The utilization of an alternative reference rate, or the transition process to an alternative reference rate,
may adversely affect the fund’s performance.
Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace LIBOR or another interbank offered
rate (“IBOR”) with a new reference rate could result in a taxable exchange and the realization of income and
gain/loss for U.S. federal income tax purposes.
The IRS has issued final regulations
regarding the tax consequences of the transition from IBOR to a new reference rate in debt instruments and non-debt contracts. Under the final regulations, alteration or
modification of the terms of a debt instrument to replace an operative rate that uses a discontinued IBOR with a qualified rate (as defined in the final regulations)
including true up payments equalizing the fair market value of contracts before and after such IBOR transition, to add a qualified rate as a fallback rate to a contract whose
operative rate uses a discontinued IBOR or to replace a fallback rate that uses a discontinued IBOR with a qualified rate would not be taxable. The IRS may provide additional
guidance, with potential retroactive effect.
Liquidity risk may result from the lack of an active market, the reduced number of traditional market participants, or the reduced capacity of traditional market participants to make a market in fixed-income securities. The capacity of traditional dealers to engage in fixed-income trading has not kept pace with the bond 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, liquidity risk may be magnified in a rising interest rate environment in which investor redemptions from fixed-income funds may be higher than normal; the selling of fixed-income securities to satisfy fund shareholder redemptions may result in an increased supply of such securities during periods of reduced investor demand due to a lack of buyers, thereby impairing the fund’s ability to sell such
securities. The secondary market for certain tax-exempt securities tends to be less well-developed or liquid than many other securities markets, which may adversely affect
the fund's ability to sell such securities at attractive prices.
Operational and Cybersecurity Risk
With the increased use of technologies, such as mobile devices and
“cloud”-based service offerings and the dependence on the internet and computer systems to perform necessary business functions, the fund's service providers are
susceptible to operational and information or cybersecurity risks that could result in losses to the fund and its shareholders. Cybersecurity breaches are either intentional
or unintentional events that allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause the fund or fund service provider
to suffer data corruption or lose operational functionality. Intentional cybersecurity incidents include: unauthorized access to systems, networks, or devices (such as
through “hacking” activity or “phishing”); infection from computer viruses or other malicious software code; and attacks that shut down, disable,
slow, or otherwise disrupt operations, business processes, or website access or functionality. Cyberattacks can also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on the service providers' systems or websites rendering them unavailable to intended users or via “ransomware” that renders the systems inoperable until appropriate actions are taken. In addition, unintentional incidents can occur, such as the inadvertent release of confidential information.
A cybersecurity breach could result in the loss or theft of customer
data or funds, loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system repairs, any of
which could have a substantial impact on the fund. For example, in a denial of service, fund shareholders could lose access to their electronic accounts indefinitely, and
employees of the Advisor, the 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 fulfillment of fund share purchases and redemptions. Cybersecurity incidents could cause the fund, the Advisor, the subadvisor, or other service provider to incur regulatory penalties, reputational damage, compliance costs associated with corrective measures, litigation costs, or financial loss. They may also result in violations of applicable privacy and other laws. In addition, such incidents could affect issuers in which the fund invests, thereby causing 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 funds 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, the subadvisor, and their affiliates have established risk management
systems that seek to reduce cybersecurity and operational risks, and business continuity plans in the event of a cybersecurity breach or operational failure. However, there
are inherent limitations in such plans, including that certain risks have not been identified, and there is no guarantee that such efforts will succeed, especially since none
of the Advisor, the subadvisor, or their affiliates controls the cybersecurity or operations 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,
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 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; bank failures; 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. Financial institutions could suffer losses as interest rates rise or economic conditions deteriorate.
In addition, relatively high market volatility and reduced liquidity in credit and
fixed-income markets may adversely affect many issuers worldwide. Actions taken by the Fed or foreign central banks to stimulate or stabilize economic growth, such as interventions in currency markets, could cause high volatility in the equity and fixed-income markets. Reduced liquidity may result in less money being available to purchase raw materials, goods, and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging-market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their securities prices.
Beginning in March 2022, the Fed began increasing interest rates and has signaled the potential for further increases. As a result, risks associated with rising interest rates are currently heightened. It is difficult to accurately predict the pace at which the Fed will increase interest rates any further, or the timing, frequency or magnitude of any such increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the future. Any such increases generally will cause market interest rates to rise and could cause the value of a
fund’s investments, and the fund’s NAV, to decline, potentially suddenly and significantly. As a result, the fund may experience high redemptions and,
as a result, increased portfolio turnover, which could increase the costs that the fund incurs and may negatively impact the fund’s
performance.
In addition, as the Fed increases the target Fed funds rate, any such rate increases, among other factors, could cause markets to experience continuing high volatility. A significant increase in interest rates may cause a decline in the market for equity securities. These events and the possible resulting market volatility may have an adverse effect on 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 U.S. 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 U.S. or other securities markets. In recent years, the U.S. renegotiated many of its global trade relationships and imposed or threatened to impose significant import tariffs. These actions could lead to price volatility and overall declines in U.S. and global investment markets.
Uncertainties surrounding the sovereign debt of a number of EU countries and the viability of the EU have disrupted and may in the future disrupt markets in the United States
and around the world. If one or more countries leave the EU or the EU dissolves, the global securities markets likely will be significantly disrupted. On January 31, 2020,
the UK left the EU, commonly referred to as “Brexit,” the UK ceased to be a member of the EU,
and the UK and EU entered into a Trade and Cooperation Agreement. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global
markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory,
economic, and market outcomes are difficult to predict.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which may lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may ultimately affect fund performance. For example, the coronavirus (COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. While many countries have lifted some or all restrictions related to the coronavirus (COVID-19) and the
United States ended the public health emergency and national emergency declarations relating to the
coronavirus (COVID-19) pandemic on May 11, 2023, the continued impact of coronavirus (COVID-19) and
related variants is uncertain. 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.
Political and military events, including in Ukraine, North Korea, Russia,
Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of Russia’s economy, which may result in, among other things, the continued devaluation of Russian currency, a downgrade in the country’s credit rating, and/or a decline in the value and liquidity of Russian securities, property or interests. These sanctions could also result in the immediate freeze of Russian securities and/or funds invested in prohibited assets, impairing the ability of a fund to buy, sell, receive or deliver those securities and/or assets. These sanctions or the threat of additional sanctions could also result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian
securities. The United States and other
nations or international organizations may also impose additional economic sanctions or take other actions that may adversely affect Russia-exposed issuers and companies in
various sectors of the Russian economy. Any or all of these potential results could lead Russia's economy into a recession. Economic sanctions and other actions against
Russian institutions, companies, and individuals resulting from the ongoing conflict may also have a substantial negative impact on other economies and securities markets
both regionally and globally, as well as on companies with operations in the conflict region, the extent to which is unknown at this time. The United States and the EU have
also imposed similar sanctions on Belarus for its support of Russia’s invasion of Ukraine. Additional sanctions may be imposed on Belarus and other countries that
support Russia. Any such sanctions could present substantially similar risks as those resulting from the sanctions imposed on Russia, including substantial negative impacts on the regional and global economies and securities markets.
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. Further, there is a
risk that the present value of assets or income from investments will be less in the future, known as inflation. Inflation rates may change frequently and drastically as a
result of various factors, including unexpected shifts in the domestic or global economy, and a fund’s investments may be affected, which may reduce a fund's performance. Further, inflation may lead to the rise in interest rates, which may negatively affect the value of debt instruments held by the fund, resulting in a negative impact on a fund's performance. Generally, securities issued in emerging markets are subject to a greater risk of inflationary or deflationary forces, and more developed markets are better able to use monetary policy to normalize markets.
Certain subadvisors may integrate research on environmental, social and governance
(“ESG”) factors into a fund’s investment process. Such subadvisors may consider ESG factors that it deems relevant or additive, along with other material
factors and analysis, when managing a fund. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and
human rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG characteristics, as determined by a subadvisor, carries the risk that a
fund may perform differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG criteria. Integration of ESG factors into a fund’s investment process may result in a subadvisor making different investment decisions for a fund than for a fund with a similar investment universe and/or investment style that does not incorporate such considerations in its investment strategy or processes, and a fund's investment performance may be affected. Integration of ESG factors into a fund’s investment process does not preclude a fund from including companies with low ESG characteristics or excluding companies with high ESG characteristics in the fund's investments.
The ESG characteristics utilized in a fund’s investment process may change over time, and different ESG characteristics may be relevant to different investments. Successful integration of ESG factors will depend on a subadvisor’s skill in researching, identifying, and applying these factors, as well as on the availability of relevant data. The method of evaluating ESG factors and subsequent impact on portfolio composition, performance, proxy voting decisions and other factors, is subject to the interpretation of a subadvisor in accordance with the fund’s investment objective and strategies. ESG factors may be evaluated differently by different subadvisors, and may not carry the same meaning to all investors and subadvisors. The regulatory landscape with respect to ESG investing in the United States is evolving and any future rules or regulations may require a fund to change its investment process with respect to ESG integration.
Fundamental Investment Restrictions
The fund’s investment
restrictions are subject to, and may be impacted and limited by, the federal securities laws, rules and regulations, including the Investment Company Act of 1940 and Rule
18f-4 thereunder. The following investment restrictions will not be changed without the approval of a majority of the fund's outstanding voting securities which, as used in the Part A and this Part B, means the approval by the
lesser of (1) the holders of 67% or more of the fund's shares represented at a meeting if more than 50% of the fund's outstanding shares are present in person or by proxy at the meeting or (2) more than 50% of the fund's outstanding shares.
(1)
Concentration. The fund will not concentrate its
investments in a particular industry, as that term is used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time
to time. For the elimination of doubt, this limitation does not apply to investments in obligations of the U.S. Government or any of its agencies, instrumentalities or
authorities.
(2)
Borrowing. The fund may not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(3)
Underwriting. The fund may not engage in the
business of underwriting securities issued by others, except to the extent that the fund may be
deemed to be an underwriter in connection with the disposition of portfolio securities.
(4)
Real Estate. The fund may not purchase or sell
real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except
that the fund reserves freedom of action to hold and to sell real estate acquired as a result of the
fund’s ownership of securities.
(5)
Commodities. The fund may not purchase or sell
commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.
(6)
Loans. The
fund may not make loans except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
(7)
Senior Securities. The
fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as
interpreted or modified by regulatory authority having jurisdiction, from time to time.
For purposes of Fundamental Restriction No. 7, purchasing securities on a when-issued, forward commitment or delayed delivery basis and engaging in
hedging and other strategic transactions will not be deemed to constitute the issuance of a senior security.
The following discussion provides additional information about the Fundamental Restrictions set forth above.
Concentration. While the 1940 Act does not define what constitutes “concentration”
in an industry, the staff of the SEC takes the position that any fund that invests more than 25% of its total assets in a particular industry (excluding the U.S. government,
its agencies or instrumentalities) is deemed to be “concentrated” in that industry. With respect to the fund's investment in loan participations, if any, the fund treats both the borrower and the financial intermediary under a loan participation as issuers for purposes of determining whether the fund has concentrated in a particular industry.
Borrowing. The 1940 Act permits a fund to borrow money in amounts of up to one-third of its total assets, at the time of borrowing, from banks for any purpose (the Fund’s total assets include the amounts being borrowed). To limit the risks attendant to borrowing, the 1940 Act requires a fund to maintain at all times an “asset coverage” of at least 300% of the amount of its borrowings, not including borrowings for temporary purposes in an amount not exceeding 5% of the value of its total assets. “Asset coverage” means the ratio that the value of a fund’s total assets (including amounts borrowed), minus liabilities other than borrowings, bears to the aggregate amount of all borrowings.
Commodities. Under the federal securities and commodities laws, certain financial instruments
such as futures contracts and options thereon, including currency futures, stock index futures or interest rate futures, and certain swaps, including currency swaps, interest
rate swaps, swaps on broad-based securities indices and certain credit default swaps, may, under certain circumstances, also be considered to be commodities. Nevertheless, the 1940 Act does not prohibit investments in physical commodities or contracts related to physical commodities. Funds typically invest in futures contracts and related options on these and other types of commodity contracts for hedging purposes, to implement tax or cash management strategies, or to enhance returns.
Loans. Although the 1940 Act does not prohibit a fund from making loans, SEC staff interpretations currently prohibit funds from lending more than one-third of their total assets, except through the purchase of debt obligations or the use of repurchase agreements. A repurchase agreement is an agreement to purchase a security, coupled with an agreement to sell that security back to the original seller on an agreed-upon date at a price that reflects current interest rates. The SEC frequently treats repurchase agreements as loans.
Senior Securities. “Senior securities” are defined as fund obligations that have a priority over the fund’s shares with respect to the payment of dividends or the distribution of fund assets. The 1940 Act
prohibits a fund from issuing any class of senior securities or selling any senior securities of which it is the issuer, except that the fund is permitted to borrow from a bank so long as, immediately after such borrowings, there is an asset
coverage of at least 300% for all borrowings of the fund (not including borrowings for temporary purposes in an amount not exceeding 5% of the value of the fund’s total assets). In the event that such asset coverage falls below this percentage, a fund must reduce
the amount of its borrowings within three days (not including Sundays and holidays) so that the asset coverage is restored to at least 300%. The fundamental investment
restriction regarding senior securities will be interpreted so as to permit collateral arrangements with respect to swaps, options, forward or futures contracts or other
derivatives, or the posting of initial or variation margin.
Non-Fundamental Investment Restrictions
(8)
Knowingly invest more than 5% of the value of its net assets in securities or other
investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, which are not readily marketable.
(9)
Make short sales of securities or maintain a short position, if, when added together,
more than 25% of the value of the fund’s net assets would be (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales “against-the-box” are not subject to this limitation.
(10)
Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the fund, except in an amount of not more
than 5% of the value of the fund’s total assets and then only to secure borrowings permitted
by restrictions (2) and (9). For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve
a pledge of assets. For purposes of restriction (10), “other strategic transactions” can include short sales and derivative transactions intended for non-hedging purposes.
Except with respect to the fundamental investment restriction on borrowing, if a
percentage restriction is adhered to at the time of an investment, a later increase or decrease in the investment’s percentage of the value of the fund’s total assets resulting from a change in such values or assets will not constitute a violation of the percentage restriction. Any subsequent change in a rating assigned by any rating service to a security (or, if unrated, any change in the Subadvisor’s assessment of the security), or change in the percentage of fund assets invested in certain securities or other instruments,
or change in the average duration of
the fund’s investment portfolio, resulting from market fluctuations or other changes in the
fund’s total assets will not require the fund to dispose of an
investment until the Subadvisor determines that it is practicable to sell or close out the investment without undue market or tax consequences to the Fund. In the event that
rating services assign different ratings to the same security, the Subadvisor will determine which rating it believes best reflects the security’s quality and risk at
that time, which may be the highest of the several assigned ratings.
(d) Temporary Defensive Position
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 in different segments of the market for debt obligations. Short-term trading may have the effect of increasing portfolio turnover rate. A high rate of portfolio turnover (100% or greater) involves correspondingly greater transactions costs. Portfolio turnover rate can change from year to year due to various factors, including among others, portfolio adjustments made in response to market conditions.
(f) Disclosure of Portfolio Holdings
The Board has adopted a Policy Regarding Disclosure of Portfolio
Holdings to protect the interests of the shareholders of the fund and to address potential conflicts of interest that could arise between the interests of shareholders and the interests of the Advisor, or the interest of the Subadvisor, principal underwriter or affiliated persons of the Advisor, Subadvisor or principal underwriter. The Trust’s general policy with respect to the release of the fund’s portfolio holdings to unaffiliated persons is to do so only in limited circumstances and only to
provide nonpublic information regarding portfolio holdings to any person, including affiliated persons, on a “need to know” basis and, when released, to release
such information only as consistent with applicable legal requirements and the fiduciary duties owed to shareholders. The Trust applies its policy uniformly to all potential
recipients of this information, including individual and institutional investors, intermediaries, affiliated persons of the fund, and to all third-party service providers and rating agencies.
Firms that provide administrative, custody, financial, accounting, legal or other
services to the fund may receive nonpublic information about the fund’s portfolio holdings for
purposes relating to their services. Additionally, portfolio holdings information for the fund that
is not publicly available will be released only pursuant to the exceptions described in the Policy Regarding Disclosure of Portfolio Holdings. The fund’s material nonpublic holdings information may be provided to unaffiliated persons as part of the investment activities of the fund to: entities that, by explicit agreement, are required to maintain the confidentiality of the information
disclosed; rating organizations, such as Moody’s, S&P, Fitch, Morningstar and Lipper, Vestek (Thomson Financial) or other entities for the purpose of compiling
reports and preparing data; proxy voting services for the purpose of voting proxies; entities providing computer software; courts (including bankruptcy courts) or regulators
with jurisdiction over the Trust and its affiliates; and institutional traders to assist in research and trade execution. Exceptions to the portfolio holdings release policy
can only be approved by the Trust’s Chief Compliance Officer (“CCO”) or the CCO’s duly authorized delegate after considering: (a) the purpose of
providing such information; (b) the procedures that will be used to ensure that such information remains confidential and is not traded upon; and (c) whether such disclosure
is in the best interest of the shareholders.
As of December 31, 2023, the entities that may receive information described in the preceding paragraph, and the purpose for which
such information is disclosed, are as presented in the table below. Portfolio holdings information is provided as frequently as daily with a one-day lag.
Entity Receiving Portfolio Information |
|
|
Analytics, Compliance, Trade Order Management, Pricing, Research Reports, Reporting
Agency |
Broadridge Financial Solutions |
Proxy Voting, Software Vendor |
|
Back Office Functions, Service Provider, Reconciliation, Corporate Actions
|
Capital Institutional Services (CAPIS) |
Broker Dealer, Commission Recapture, Transition Services |
|
|
|
Securities Lending Analytics |
|
Financial Reporting, Type Setting |
Donnelley Financial Solutions |
Financial Reporting, Printing |
|
|
Electra Information Systems |
|
|
|
|
Data Gathering, Analytics, Performance, Research Reports |
|
Foreign Currency Trade Review |
Entity Receiving Portfolio Information |
|
|
|
|
|
|
|
Institutional Shareholder Services (ISS) |
Class Actions, Proxy Voting |
|
|
|
|
Law Firm of Davis and Harman |
Development of Revenue Ruling |
|
|
|
Service Provider-Electronic Data Management |
|
Service Provider-Valuation Oversight |
|
|
|
Liquidity Risk Management, Performance |
National Financial Services |
|
PricewaterhouseCoopers LLP |
|
|
|
Russell Implementation Services |
|
Security Software & Consulting Inc. (SS&C) |
Cash & Securities Reconciliation, Analytics, Data Gathering, Performance
|
|
Service Provider, Code of Ethics Monitoring, Personal Trading |
|
Service Provider-IBOR, Back Office Functions, Custodian, Collateral Services, Securities
lending |
State Street Closed End Financing |
|
|
Securities Lending Analytics |
|
Accounting Messages, Custody Messages, Trade Messaging |
|
Audit Services, Tax Reporting |
The CCO is required to pre-approve the disclosure of nonpublic information regarding the fund’s portfolio holdings to any affiliated persons of the Trust. The CCO will use the following three considerations before approving disclosure of the fund’s nonpublic information to affiliated persons: (a) the purpose of providing such information; (b) the
procedures that will be used to ensure that such information remains confidential and is not traded upon; and (c) whether such disclosure is in the best interest of the
shareholders.
The CCO shall report to the Board whenever additional disclosures of the fund’s portfolio holdings are approved. The CCO’s report shall be presented at the Board meeting
following such approval.
When the CCO believes that the disclosure of the fund’s nonpublic information to an unaffiliated person presents a potential conflict of interest between the
interest of the shareholders and the interest of affiliated persons of the Trust, the CCO shall refer the conflict to the Board. The Board shall then permit such disclosure
of the fund’s nonpublic information only if in its reasonable business judgment it concludes
that such disclosure will be in the best interests of the Trust’s
shareholders.
The receipt of compensation by the
fund, the Advisor, the Subadvisor or an affiliate as consideration for disclosing the fund’s nonpublic portfolio
holdings information is not deemed a legitimate business purpose and is strictly forbidden.
Registered investment companies and separate accounts that are advised or subadvised by the Subadvisor may have investment objectives and strategies and, therefore, portfolio holdings, that potentially are similar to those of the fund. Neither such registered investment companies and separate accounts nor the Subadvisor are subject to the
Trust’s Policy Regarding Disclosure of Portfolio Holdings, and may be subject to different portfolio holdings disclosure policies. The Subadvisor may not, and the
Trust’s Board cannot, exercise control over policies applicable to separate subadvised funds and accounts.
In addition, the Advisor or the Subadvisor may receive compensation for furnishing to separate account clients (including sponsors of wrap accounts) model portfolios, the composition of which may be similar to those of the fund. Such clients have access to their portfolio holdings and are not subject to the Trust’s Policy Regarding
Disclosure of Portfolio Holdings. In general, the provision of portfolio management services and/or model portfolio information to wrap program sponsors is subject to
contractual confidentiality provisions that the sponsor will only use such information in connection with the program, although there can be no assurance that this would be
the case in an agreement between any particular Subadvisor that is not affiliated with the Advisor and a wrap account sponsor. Finally, the Advisor or the Subadvisor may
distribute to investment advisory clients analytical information concerning a model portfolio, which information may correspond substantially to the characteristics of a
particular Fund’s portfolio, provided that the applicable fund is not identified in any manner as being the model portfolio.
The potential provision of information in the various ways discussed in the preceding
paragraph is not subject to the Trust’s Policy Regarding Disclosure of Portfolio Holdings, as discussed above, and is not deemed to be the disclosure of the fund’s nonpublic portfolio holdings information.
As a result of the fund’s inability to control the disclosure of information as noted above, there can be no guarantee that
this information would not be used in a way that adversely impacts the fund. Nonetheless, the fund has oversight
processes in place to attempt to minimize this risk.
Item 17. Management of the Fund
(a) Management Information
The business of the fund is managed by its Trustees, a majority of whom are not “interested persons” of the fund (as defined in Section 2(a)(19) of the 1940 Act) (the “Independent Trustees”), who 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 Trust also are officers or directors of the Advisor. Each Trustee oversees the Trust and other funds in the John Hancock Fund Complex (collectively, “funds”) (as defined below).
The tables below present certain information regarding the Trustees and officers of the Trust, including their principal occupations which, unless specific dates are shown, are of at least five years’ duration. In addition, the tables include information concerning other directorships held by each Trustee in other registered investment companies or
publicly traded companies. Information is listed separately for each Trustee who is an “interested person” (as defined in the 1940 Act) of the Trust (each a
“Non-Independent Trustee”) and the Independent Trustees. As of December 31, 2023, the
“John Hancock Fund Complex” consisted of 183 funds (including separate series of series mutual funds). Each Trustee has been elected to serve on the Board.
Each of William H. Cunningham, Grace K. Fey, Deborah C. Jackson, Hassell H. McClellan, Steven R. Pruchansky, and Gregory A. Russo was most recently elected to serve on the
Board at a shareholder meeting held on November 15, 2012. Each of Andrew G. Arnott, James R. Boyle, Noni L. Ellison, Dean C. Garfield, Paul Lorentz, and Frances G. Rathke was most recently elected to serve on the Board at a shareholder meeting held on September 9, 2022. The address of each Trustee and officer of the Trust is 200 Berkeley Street, Boston, Massachusetts 02116.
|
Current Position(s)
with the Trust1 |
Principal Occupation(s) and Other
Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
|
|
|
|
|
Global Head of Retail for Manulife (since 2022); Head of Wealth and
Asset Management, United States and Europe, for John Hancock and
Manulife (2018-2023); Director and Chairman, John Hancock
Investment Management LLC (2005-2023, including prior positions);
Director and Chairman, John Hancock Variable Trust Advisers LLC
(2006-2023, including prior positions); Director and Chairman, John
Hancock Investment Management Distributors LLC (2004-2023,
including prior positions); President of various trusts within the John
Hancock Fund Complex (2007-2023, including prior
positions). Trustee of various trusts within the John Hancock Fund
Complex (since 2017). |
|
|
|
Global Head, Manulife Wealth and Asset Management (since 2017); General Manager, Manulife, Individual Wealth Management and Insurance (2013–2017); President, Manulife Investments (2010–2016). Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
|
|
Current Position(s)
with the Trust1 |
Principal Occupation(s) and Other
Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
|
|
|
|
|
Board Member, United of Omaha Life Insurance Company (since 2022). Board Member, Mutual of Omaha Investor Services, Inc. (since 2022). Foresters Financial, Chief Executive Officer (2018–2022) and board member (2017–2022). Manulife Financial and John Hancock, more than 20 years, retiring in 2012 as Chief Executive Officer, John Hancock and Senior Executive Vice President, Manulife Financial. Trustee of various trusts within the John Hancock Fund Complex (2005–2014 and since 2015). |
|
|
Current Position(s)
with the Trust1 |
Principal Occupation(s) and Other
Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
|
|
|
William H. Cunningham (1944) |
|
Professor, University of Texas, Austin, Texas (since 1971); former
Chancellor, University of Texas System and former President of
the University of Texas, Austin, Texas; Director (since 2006),
Lincoln National Corporation (insurance); Director, Southwest
Airlines (since 2000).
Trustee of various trusts within the John Hancock Fund Complex
(since 1986). |
|
|
|
Senior Vice President, General Counsel & Corporate Secretary,
Tractor Supply Company (rural lifestyle retailer) (since 2021);
General Counsel, Chief Compliance Officer & Corporate
Secretary, Carestream Dental, L.L.C. (2017–2021); Associate
General Counsel & Assistant Corporate Secretary, W.W. Grainger,
Inc. (global industrial supplier) (2015–2017); Board Member,
Goodwill of North Georgia, 2018 (FY2019)–2020 (FY2021);
Board Member, Howard University School of Law Board of Visitors
(since 2021); Board Member, University of Chicago Law School
Board of Visitors (since 2016); Board member, Children’s
Healthcare of Atlanta Foundation Board (2021–2023); Board
Member, Congressional Black Caucus Foundation (since 2024).
Trustee of various trusts within the John Hancock Fund Complex
(since 2022). |
|
|
|
Chief Executive Officer, Grace Fey Advisors (since 2007); Director
and Executive Vice President, Frontier Capital Management
Company (1988–2007); Director, Fiduciary Trust (since 2009).
Trustee of various trusts within the John Hancock Fund Complex
(since 2008). |
|
|
|
Vice President, Netflix, Inc. (since 2019); President & Chief
Executive Officer, Information Technology Industry Council
(2009–2019); NYU School of Law Board of Trustees (since
2021); Member, U.S. Department of Transportation, Advisory
Committee on Automation (since 2021); President of the
United States Trade Advisory Council (2010–2018); Board
Member, College for Every Student (2017–2021); Board
Member, The Seed School of Washington, D.C. (2012–2017);
Advisory Board Member of the Block Center for Technology and
Society (since 2019).
Trustee of various trusts within the John Hancock Fund Complex
(since 2022). |
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Deborah C. Jackson (1952) |
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President, Cambridge College, Cambridge, Massachusetts (2011–2023); 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); 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 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). |
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Current Position(s)
with the Trust1 |
Principal Occupation(s) and Other
Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
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Hassell H. McClellan (1945) |
Trustee (since 2015)
and Chairperson of
the Board (since
2017) |
Trustee of Berklee College of Music (since 2022);
Director/Trustee, Virtus Funds (2008–2020); Director, The
Barnes Group (2010–2021); Associate Professor, The Wallace E.
Carroll School of Management, Boston College (retired 2013).
Trustee (since 2005) and Chairperson of the Board (since 2017)
of various trusts within the John Hancock Fund Complex. |
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Steven R. Pruchansky (1944) |
Trustee and Vice
Chairperson of the
Board (since 2015) |
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).
Trustee (since 1992), Chairperson of the Board (2011–2012),
and Vice Chairperson of the Board (since 2012) of various trusts
within the John Hancock Fund Complex. |
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Director, Audit Committee Chair, Oatly Group AB (plant-based
drink company) (since 2021); Director, Audit Committee Chair
and Compensation Committee Member, Green Mountain Power
Corporation (since 2016); Director, Treasurer and Finance &
Audit Committee Chair, Flynn Center for Performing Arts (since
2016); Director and Audit Committee Chair, Planet Fitness (since
2016); Chief Financial Officer and Treasurer, Keurig Green
Mountain, Inc. (2003–retired 2015).
Trustee of various trusts within the John Hancock Fund Complex
(since 2020). |
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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 (2012–2018), and Finance Committee Chairman (2014–2018), The Moorings, Inc. (nonprofit continuing care community); Global Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial Markets, KPMG (1998–2002). Trustee of various trusts within the John Hancock Fund Complex (since 2008). |
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1
Because the Trust is not required to and does not hold regular annual shareholder
meetings, each Trustee holds office for an indefinite term until his or her successor is duly elected and qualified or until he or she dies, retires, resigns, is removed or
becomes disqualified. Trustees may be removed from the Trust (provided the aggregate number of Trustees after such removal shall not be less than one) with cause or without
cause, by the action of two-thirds of the remaining Trustees or by action of two-thirds of the outstanding shares of the Trust.
2
The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain of its affiliates.
Principal Officers who are not
Trustees
The following table presents information regarding the
current principal officers of the Trust 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.
|
Current Position(s)
with the Trust1 |
Principal Occupation(s) During the Past 5 Years |
Kristie M. Feinberg (1975) |
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Head of Wealth & Asset Management, U.S. and Europe, for John Hancock and Manulife (since 2023); Director and Chairman, John Hancock Investment Management LLC (since 2023); Director and Chairman, John Hancock Variable Trust Advisers LLC (since 2023); Director and Chairman, John Hancock Investment Management Distributors LLC (since 2023); CFO and Global Head of Strategy, Manulife Investment Management (2021–2023, including prior positions); CFO Americas & Global Head of Treasury, Invesco, Ltd., Invesco
US (2019–2020, including prior positions); Senior Vice President, Corporate Treasurer and
Business Controller, OppenheimerFunds (2001–2019, including prior positions);
President of various trusts within the John Hancock Fund Complex (since
2023). |
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Chief Financial Officer
(since 2015) |
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) |
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Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2007); Treasurer of various trusts within the John Hancock Fund Complex (since 2007, including prior positions). |
Christopher (Kit) Sechler (1973) |
Secretary and Chief Legal
Officer (since 2018) |
Vice President and Deputy Chief Counsel, John Hancock Investment Management (since 2015); Assistant Vice President and Senior Counsel (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). |
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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 or she dies, retires, resigns, is removed or becomes disqualified.
(b) Leadership Structure and the Board of Trustees
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 Trust. The information in this section should not be understood to
mean that any of the Trustees is an “expert” within the meaning of the federal securities laws.
The Board believes that the different perspectives, viewpoints, professional
experience, education, and individual qualities of each Trustee represent a diversity of experiences and a variety of complementary skills and expertise. Each Trustee has experience as a Trustee of the Trust 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 and the other funds in the John Hancock Fund Complex in a manner consistent with the best interests of the funds' shareholders. When considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Trustees.
James R. Boyle – Mr. Boyle has high-level executive, financial, operational, governance, regulatory and
leadership experience in the financial services industry, including in the development and management of registered investment companies, variable annuities, retirement and
insurance products. Mr. Boyle is the former President and CEO of a large international fraternal life insurance company and is the former President and CEO of multi-line life
insurance and financial services companies. Mr. Boyle began his career as a Certified Public Accountant with Coopers & Lybrand.
William H. Cunningham – Mr. Cunningham has management and operational oversight experience as a former Chancellor and President of a major
university. Mr. Cunningham regularly teaches a graduate course in corporate governance at the law school and at the Red McCombs School of Business at The University of Texas at Austin. He also has oversight and corporate governance experience as a current and former director of a number of operating companies, including an insurance company.
Noni L. Ellison
– As a senior vice president, general counsel, and corporate secretary with over 25 years of executive leadership experience, Ms. Ellison has extensive management and business expertise in legal, regulatory, compliance, operational, quality assurance, international, finance and governance matters.
Grace K. Fey – Ms. Fey has significant governance, financial services, and asset management industry
expertise based on her extensive non-profit board experience, as well as her experience as a consultant to non-profit and corporate boards, and as a former director and
executive of an investment management firm.
Dean C. Garfield – As a former president and chief executive officer of a leading industry organization and
current vice-president of a leading international company, Mr. Garfield has significant global executive operational, governance, regulatory, and leadership experience. He
also has experience as a leader overseeing and implementing global public policy matters including strategic initiatives.
Deborah C. Jackson – Ms. Jackson has leadership, governance, management, and operational oversight experience as the lead director of a large bank, former president of a college,
and as the former chief executive officer of a major charitable organization. She also has expertise in financial services matters and oversight and corporate governance
experience as a current and former director of various other corporate organizations, including an
insurance company, a regional stock exchange, a telemedicine company, and non-profit entities.
Hassell H. McClellan – As a former professor of finance and policy in the graduate management department of a
major university, a director of a public company, and as a former director of several privately held companies, Mr. McClellan has experience in corporate and financial
matters. He also has experience as a director of other investment companies not affiliated with the 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. As a result of Mr. Russo’s diverse global responsibilities, he possesses accounting, finance and executive operating experience.
Andrew G. Arnott –
As former President of various trusts within the John Hancock Fund
Complex,
and through his positions as Global Head of Retail for Manulife, and Trustee of the John Hancock Fund
Complex, Mr. Arnott has experience in the management of investments, registered investment companies, variable annuities and retirement products, enabling him to provide
management input to the Board.
Paul
Lorentz – Through his position as the Global Head of Manulife Wealth and Asset Management, Mr. Lorentz has experience with retirement, retail and asset management solutions offered by Manulife worldwide, enabling him to provide management input to the Board.
Duties of Trustees; Committee Structure
The Trust is organized as a Massachusetts business trust. Under the Declaration of
Trust, the Trustees are responsible for managing the affairs of the Trust, including the appointment of advisors and subadvisors. Each Trustee has the experience, skills,
attributes or qualifications described above (see “Principal Occupation(s) and Other Directorships” and “Additional Information about the Trustees”
above). The Board appoints officers who assist in managing the day-to-day affairs of the Trust. The Board met five times during the fiscal year ended December 31, 2023.
The Board has appointed an Independent Trustee as Chairperson. The Chairperson
presides at meetings of the Trustees and may call meetings of the Board and any Board committee
whenever he deems it necessary. The Chairperson participates in the preparation of the agenda for meetings of the Board and the identification of information to be presented
to the Board with respect to matters to be acted upon by the Board. The Chairperson also acts as a liaison with the funds' management, officers, attorneys, and other Trustees generally between meetings. The Chairperson may perform
such other functions as may be requested by the Board from time to time. The Board also has designated a Vice Chairperson to serve in the absence of the Chairperson. Except for any duties specified herein or pursuant to the Trust’s Declaration of Trust or By-laws, or as assigned by the Board, the designation
of a Trustee as Chairperson or Vice Chairperson does not impose on that Trustee any duties, obligations or liability that are greater than the duties, obligations or
liability imposed on any other Trustee, generally. The Board has designated a number of standing committees as further described below, each of which has a Chairperson. The
Board also may designate working groups or ad hoc committees as it deems appropriate.
The Board believes that this leadership structure is appropriate because it allows
the Board to exercise informed and independent judgment over matters under its purview, and it allocates areas of responsibility among committees or working groups of
Trustees and the full Board in a manner that enhances effective oversight. The Board considers leadership by an Independent Trustee as Chairperson to be integral to promoting
effective independent oversight of the funds' operations and meaningful representation of the shareholders’ interests, given the specific
characteristics and circumstances of the funds. The Board also believes that having a super-majority of Independent Trustees is appropriate and in the best interest of the
funds' shareholders.
Nevertheless, the Board also believes that having interested persons serve on the Board brings corporate and financial viewpoints
that are, in the Board’s view,
helpful elements in its decision-making process. In addition, the Board believes that Messrs. Arnott, Boyle, and Lorentz as current or former senior executives of the Advisor (or of its parent company, Manulife Financial Corporation), and of other affiliates of the Advisor, provide the Board with the perspective of the Advisor in managing and sponsoring all of the Trust’s series. The leadership structure of the Board may be changed, at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of the Trust.
The Board has established an Audit Committee; Compliance Committee; Contracts, Legal
& Risk Committee; Nominating and Governance Committee; and Investment Committee. The current membership of each committee is set forth below.
Audit Committee. The Board has a standing Audit Committee composed solely of Independent Trustees (Messrs. Cunningham and McClellan and Ms. Rathke). Ms. Rathke serves as Chairperson of this Committee. This Committee reviews the
internal and external accounting and auditing procedures of the Trust and, among other things, considers the selection of an independent registered public accounting firm for
the Trust, approves all significant services proposed to be performed by its independent registered public accounting firm and considers the possible effect of such services
on its independence. Ms. Rathke has been designated by the Board as an “audit committee financial expert,” as defined in SEC rules. This Committee met four
times during the fiscal year ended December 31, 2023.
Compliance Committee. The Board also has a standing Compliance Committee (Ms. Fey, Mr. Garfield and Ms.
Jackson). Ms. Fey serves as Chairperson of this Committee. This Committee reviews and makes recommendations to the full Board regarding certain compliance matters relating to
the Trust. This Committee met four times during the fiscal year ended December 31, 2023.
Contracts, Legal & Risk Committee. The Board also has a standing Contracts, Legal & Risk Committee (Mr. Boyle, Ms.
Ellison, and Messrs. Pruchansky and Russo). Mr. Russo serves as Chairperson of this Committee. This
Committee oversees the initiation, operation, and renewal of the various contracts between the Trust and other entities. These contracts include advisory and subadvisory
agreements, custodial and transfer agency agreements and arrangements with other service providers. The Committee also reviews the significant legal affairs of the funds, as
well as any significant regulatory and legislative actions or proposals affecting or relating to the funds or their service providers. The Committee also assists the Board in its oversight role with respect to the processes pursuant to which the Advisor and the
subadvisors identify, manage and report the various risks that affect or could affect the funds. This Committee met four times during the fiscal year ended December 31,
2023.
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 five times during the fiscal year ended December 31,
2023.
Investment Committee.
The Board also has an Investment Committee composed of all of the Trustees.
The Investment Committee has four subcommittees with the Trustees divided among the four subcommittees (each an “Investment Sub-Committee”). Ms. Jackson and
Messrs. Boyle,
Cunningham, and
Pruchansky serve as Chairpersons of the Investment Sub-Committees. Each Investment Sub-Committee reviews investment matters relating to a particular group of funds in the
John Hancock Fund Complex and coordinates with the full Board regarding investment matters. The Investment Committee met five times during the fiscal year ended December 31,
2023.
Annually, the Board evaluates its performance and that of its Committees, including
the effectiveness of the Board’s Committee structure.
As registered investment companies, the funds are subject to a variety of risks, including investment risks (such as, among others, market risk, credit risk and interest rate risk), financial risks (such as, among others, settlement risk, liquidity risk and valuation risk), compliance risks, and operational risks. As a part of its overall activities, the Board oversees the funds' risk management activities that are implemented by the Advisor, the funds'
CCO and
other service providers to the funds. The Advisor has primary responsibility for the funds' risk
management on a day-to-day basis as a part of its overall responsibilities. Each 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 funds and regulatory requirements and monitor the
implementation of the various compliance policies and procedures approved by the Board as a part of its oversight responsibilities.
The Advisor identifies to the Board the risks that it believes may affect the funds and develops processes and controls regarding such risks. However, risk management is a complex and dynamic undertaking and it is not always possible to comprehensively identify and/or mitigate all such risks at all times since risks are at times impacted by external events. In discharging its oversight responsibilities, the Board considers risk management issues throughout the year with the assistance of its various Committees as described below. Each Committee meets at least quarterly and presents reports to the Board, which may prompt further discussion of issues concerning the oversight of the funds' risk management. The Board as a whole also reviews written reports or presentations on a variety of risk issues
as needed and may discuss particular risks that are not addressed in the Committee process.
The Board has established an Investment Committee, which consists of four Investment
Sub-Committees. Each Investment Sub-Committee assists the Board in overseeing the significant investment policies of the relevant funds and the performance of their
subadvisors. The Advisor monitors these policies and subadvisor activities and may recommend changes in connection with the funds to each relevant Investment Sub-Committee in
response to
subadvisor requests or other
circumstances. On at least a quarterly basis, each Investment Sub-Committee reviews reports from the Advisor regarding the relevant funds' investment performance, which include information about investment and financial risks and how they are
managed, and from the CCO or his/her designee regarding subadvisor compliance matters. In addition, each Investment Sub-Committee meets periodically with the portfolio
managers of the funds'
subadvisors to receive reports regarding management of the funds, including with respect to risk management processes.
The Audit Committee assists the Board in reviewing with the independent auditors, at
various times throughout the year, matters relating to the funds' financial reporting. In addition, this Committee oversees the process of each fund’s valuation of its portfolio securities, assisted by the Advisor's Pricing Committee (composed of officers of the Advisor), which calculates fair value determinations pursuant
to procedures established by the Advisor and adopted by the Board.
With respect to valuation, the Advisor provides periodic reports to the Board
and Investment Committee that enables the Board to oversee the Advisor, as each fund's valuation designee, in assessing, managing and reviewing material risks associated with
fair valuation determinations, including material conflicts of interest. In addition, the Board reviews the Advisor's performance of an annual valuation risk assessment under
which the Advisor seeks to identify and enumerate material valuation risks which are or may be impactful to the funds including, but not limited to (1) the types of
investments held (or intended to be held) by the funds, giving consideration to those investments' characteristics; (2) potential market or sector shocks or dislocations
which may affect the ongoing valuation operations; (3) the extent to which each fair value methodology uses unobservable inputs; (4) the proportion of each fund's investments that are fair valued as determined in good faith, as well as their contributions to a fund's returns; (5) the use of fair value methodologies that rely on inputs from third-party service providers; and (6) the appropriateness and application of the methods for determining and calculating fair value. The Advisor reports any material changes to the risk assessment, along with appropriate actions designed to manage such risks, to the Board.
The Compliance Committee assists the Board in overseeing the activities of the
Trusts' CCO with respect
to the compliance programs of the funds, the Advisor, the subadvisors, and certain of the funds' other
service providers (any distributors 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 subadvisors identify, assess, manage and report the various risks that affect or could affect the funds. This
Committee reviews reports from the funds' Advisor on a periodic basis regarding the risks facing the funds, and makes recommendations to the Board concerning risks and risk oversight matters as the Committee deems appropriate. This Committee also coordinates with the other Board Committees regarding risks relevant to the other Committees, as appropriate.
In addressing issues regarding the funds' risk management between meetings, appropriate representatives of the Advisor communicate with the Chairperson of the Board, the relevant Committee Chair, or the Trusts' CCO, who is directly accountable to the Board. As appropriate, the Chairperson of the Board, the Committee Chairs and the Trustees confer among themselves, with the Trusts' CCO, the Advisor, other service providers, external fund counsel, and
counsel to the Independent Trustees, to identify and review risk management issues that may be placed on the full Board’s agenda and/or that of an appropriate Committee
for review and discussion.
In addition, in its annual review of the funds' advisory and subadvisory agreements, the Board reviews information provided by the Advisor, the subadvisor and
the Placement Agent relating to their operational capabilities, financial condition, risk management processes and resources.
The Board may, at any time and in its discretion, change the manner in which it conducts its risk oversight role.
The Advisor also has its own, independent interest in risk management. In this regard, the Advisor has appointed a Risk and Investment Operations Committee, consisting of senior personnel from each of the 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.
Trustee Ownership of Shares of the Fund
The table below sets forth the dollar range of the value of the shares of the fund, and the dollar range of the aggregate value of the shares of all funds in the John Hancock Fund Complex
overseen by a Trustee, owned beneficially by the Trustees as of December 31, 2023. For purposes of
this table, beneficial ownership is defined to mean a direct or indirect pecuniary interest. Trustees may own shares beneficially through group annuity contracts. Exact dollar amounts of securities held are not listed in the table. Rather, dollar ranges are identified.
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Total – John
Hancock Fund
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Total – John
Hancock Fund
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1
Dean C. Garfield placed orders to purchase shares of certain John Hancock closed-end
funds on December 29, 2023 and such orders settled on January 2, 2024.
(c) Compensation of Trustees
Trustees are reimbursed for travel and other out-of-pocket expenses. Effective January 1, 2024, each
Independent Trustee receives in the aggregate from the Trust and the other open-end funds in the
John Hancock Fund Complex an annual retainer of $298,000, a fee of $22,880 for each regular meeting of
the Trustees (in person or via videoconference or teleconference) and a fee of $5,000 for each special meeting of the Trustees (in person or via videoconference or
teleconference). The Chairperson of the Board receives an additional retainer of $213,200. The Vice
Chairperson of the Board receives an additional retainer of $20,000. The Chairperson of each of the Audit Committee, Compliance Committee, and Contracts, Legal & Risk
Committee receives an additional $40,000 retainer. The Chairperson of each Investment Sub-Committee receives an additional $20,000 retainer.
The following table provides information regarding the compensation paid by the Trust and the other investment companies in the John Hancock Fund Complex to the Independent Trustees for their services during the fiscal year ended December 31, 2023.
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Total Compensation
from John Hancock Collateral Trust ($) |
Total Compensation
from the Trust and the John
Hancock Fund
Complex ($)2 |
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1
The Trust does not have a pension or retirement plan for any of its Trustees or officers.
2
There were approximately 183 series
in the John Hancock Fund Complex as of December 31, 2023.
3
Effective September 21, 2023, Ms.
Lizarraga is no longer a Trustee.
4
Ms. Harrison retired
as Trustee as of May 1, 2023.
(d) Sales Loads
The Trust, the Advisor, the Placement Agent and subadvisor to the fund have
adopted Codes of Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code of Ethics permits personnel subject to the Code of Ethics to invest in securities, including
securities that may be purchased or held by the fund.
(f) Proxy Voting Policies
Based on the terms of the current Subadvisory Agreement, the fund’s proxy voting policies and procedures (the “Proxy Voting 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 or not vote such proxies in the best interests of the fund and its shareholders, and to avoid the influence of conflicts of interest. In the event that the Advisor
assumes day-to-day management responsibilities for the fund, the Proxy Voting Procedures delegate proxy voting responsibilities to the Advisor. Complete descriptions of the Proxy Voting Procedures and the proxy voting procedures of the Advisor and the Subadvisor are set forth in Appendix B.
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 could also arise when the fund, the Advisor 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 Proxy Voting Procedures generally require the Subadvisor to follow any conflicts procedures that may be included in the Subadvisor’s proxy voting procedures. Although conflicts procedures will vary among Subadvisors, they generally include one or more of the following:
(a) voting pursuant to the recommendation of a third party voting
service;
(b) voting pursuant to pre-determined voting guidelines; or
(c) referring voting to a special compliance or oversight
committee.
The specific conflicts procedures of the Subadvisor are set forth in its proxy voting procedures included in Appendix B. While these conflicts procedures may reduce the influence of conflicts of interest on proxy voting, such influence will not necessarily be eliminated.
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
(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. In addition, consistent with its duty to vote proxies in
the best interests of the fund’s shareholders, the Subadvisor may refrain from voting one or more of the
fund’s proxies if the Subadvisor believes that the costs of voting such proxies may outweigh
the potential benefits. For example, the Subadvisor may choose not to recall securities where the Subadvisor believes the costs of voting may outweigh the potential benefit
of voting. The Subadvisor also may choose not to recall securities that have been loaned in order to vote proxies for shares of the security, since the fund would lose
security lending income if the securities were recalled.
Information regarding how the fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th, when
available, can be obtained: (1) without charge, by calling (800-225-5291); and (2) on the SEC’s website at sec.gov.
Personnel of the Advisor and its affiliates may trade securities for their personal accounts. The fund also may hold, or may be buying or selling, the same securities. To prevent the fund from being disadvantaged, the Advisor, the Subadvisor and fund have adopted a Code of Ethics that restricts the trading activity of those personnel.
Item 18. Control Persons and Principal Holders of Securities
As of April 1, 2024, there were no
“control persons” of the fund.
As of
April
1, 2024, the following shareholders (principal holders) beneficially owned 5% or more of the outstanding shares of the
fund.
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STATE STREET FBO CASH SWEEP STATE STREET BANK AND TRUST 1776 HERITAGE DRIVE QUINCY, MA 02171-2119 |
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JHF III INTERNATIONAL GROWTH FUND C/O JOHN HANCOCK INVESTMENT MANAGEMENT 200 BERKELEY STREET BOSTON, MA 02116-5022 |
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As of
April
1, 2024, the officers and Trustees of the
fund as a group beneficially owned less than 1% of the outstanding shares of the fund.
Item 19. Investment Advisory and Other Services
John Hancock Investment Management LLC serves as the fund’s investment advisor. The Advisor’s address is 200 Berkeley Street, Boston, MA 02116. Founded in
1968, the Advisor is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife Financial
Corporation.
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 leading institutional money managers, taking a disciplined team approach to portfolio management and research, leveraging the expertise of seasoned investment professionals. As of December 31, 2023, the Advisor had total assets under management of approximately $153.7 billion.
The fund entered into an investment management contract (the “Advisory Agreement”) with the Advisor,
which was approved by the fund's sole initial shareholder on January 29, 2015.
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 provides the fund with
all necessary office facilities and equipment and any personnel necessary for the oversight and/or conduct of the investment operations of the fund. The Advisor also coordinates and oversees the services provided to the fund under other agreements, including
custodial, administrative and transfer agency services. Additionally, the Advisor provides certain administrative and other non-advisory services to the fund pursuant to a separate Service Agreement, as discussed below.
The Advisor is responsible for overseeing and implementing the fund’s investment program and provides a variety of advisory oversight and investment research services,
including: (i) monitoring fund portfolio compositions and risk profiles; and (ii) evaluating
fund investment characteristics, such as investment strategies, and recommending to the Board of Trustees potential enhancements to such characteristics. The Advisor provides management and transition services associated with certain fund events (e.g., strategy, portfolio manager or subadvisor changes).
The Advisor has the responsibility to oversee the subadvisor and recommend to the
Board of Trustees: (i) the hiring, termination, and replacement of a subadvisor; and (ii) the allocation and reallocation of the fund’s assets among multiple subadvisors, when appropriate. In this capacity, the Advisor negotiates with potential subadvisors and, once retained, among other things: (i) monitors the compliance of the subadvisor with the investment objectives and related policies of the fund; (ii) reviews the performance of the subadvisor; and (iii) reports periodically on such performance to the
Board. The Advisor utilizes the expertise of a team of investment professionals in manager research and oversight who provide these research and monitoring services.
Pursuant to the Advisory Agreement, the Advisor 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 Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Advisor in the performance of its duties or from its reckless disregard of its obligations and duties under the Agreement.
The continuation of the Advisory Agreement (discussed below) was approved by all Trustees. The Advisory Agreement will continue in effect from year to year, provided that the Agreement’s continuance is approved annually both: (i) by the holders of a majority of the outstanding voting securities of the Trust or by the Trustees, and; (ii) by a majority of the Trustees who are not parties to the Agreement, or “interested persons” of any such parties. This Agreement may be terminated on 60 days’ written notice by any party or by a vote of a majority of the outstanding voting securities of the fund and will terminate automatically
if assigned.
Personnel of the Advisor and its
affiliates may trade securities for their personal accounts. The fund also may hold, or may be
buying or selling, the same securities. To prevent the fund from being disadvantaged, the Advisor, the Subadvisor, and the Trust have adopted codes of ethics that restrict the trading activity of those personnel.
The
fund bears all costs of its organization and operation, including but not limited to expenses of
preparing, printing and mailing all shareholders' reports, notices, prospectuses, proxy statements and reports to regulatory agencies; expenses relating to the issuance,
registration and qualification of shares; government fees; interest charges; expenses of furnishing to shareholders their account statements; taxes; expenses of redeeming
shares; brokerage and other expenses connected with the execution of portfolio securities transactions; fees and expenses of custodians including those for keeping books and accounts, maintaining a committed line of credit and calculating the NAV of shares; fees and expenses of transfer agents and dividend disbursing agents; legal, accounting, financial, management, tax and auditing fees and expenses of the
fund; the compensation and expenses of Trustees who are not otherwise affiliated with the fund, the Advisor or any of their affiliates; expenses of Trustees' and shareholders' meetings; trade association
memberships; insurance premiums; and any extraordinary expenses.
The Advisory Agreement requires the Advisor, at its own expense, to provide the
fund with adequate office space, facilities and equipment. In addition, the Advisor is responsible for paying for the cost of all of its employees that provide services to the
fund and any other expenses incurred in connection with the performance of the Advisor's duties under the Advisory Agreement.
As compensation for its services under the Advisory Agreement, the fund pays the Advisor a fee based on a stated percentage of the average daily net assets of the fund. The amount of the
advisory fee is determined by applying the daily equivalent of an annual fee rate to the net assets of the fund. The management fees the Fund currently is obligated to pay the Advisor are as set forth in Part A.
For the fiscal periods ended December 31, 2023, December 31, 2022, and December 31,
2021, the fund incurred and paid advisory fees to the Advisor that amounted to $13,943,260, $11,149,436 and $5,587,818, respectively.
The Subadvisory Agreement
Manulife Investment Management (US) LLC serves as the fund’s subadvisor. The Subadvisor’s address is 197 Clarendon Street, Boston, MA 02116. The Subadvisor provides investment advisory services to individual and institutional investors. The Subadvisor is a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial Corporation).
Duties of the Subadvisor. Under the terms of the current subadvisory agreement (the “Subadvisory Agreement”), the Subadvisor manages the investment and reinvestment of the assets of the fund, subject to the supervision of the Board and the Advisor. The Subadvisor formulates a continuous investment
program for the Fund consistent with its investment objectives and policies The Subadvisor implements such program by purchases and sales of securities and regularly reports
to the Advisor and the Board with respect to the implementation of such program. The Subadvisor, at its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well as administrative facilities, including bookkeeping, clerical personnel, and equipment
necessary for the conduct of the investment affairs of the Fund. The Subadvisory Agreement will automatically terminate in the event of its assignment or upon termination of
the Advisory Agreement.
The Advisor has delegated 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 or not vote such proxies in the best interests of the fund and its shareholders and to
avoid the influence of conflicts of interest.
Subadvisory Fees. As compensation
for its services, the Subadvisor receives fees from the Advisor.
(b) Principal Underwriter
The
fund has no principal underwriter. The fund has entered into a Placement Agent Agreement with John Hancock Investment Management Distributors LLC, (the “Placement Agent”) an affiliate of the Advisor that serves as a principal underwriter for shares of certain other funds in the John Hancock fund complex. John Hancock Investment Management Distributors LLC is located at 200 Berkeley
Street, Boston, MA 02116.
Pursuant to the Placement Agent Agreement, the Placement Agent, through one or more of its duly authorized representatives, acts to offer to sell shares of the fund, and to buy shares
of the fund, from institutional investors that are “accredited investors” as defined in
Rule 506 of Regulation D of the Securities Act of 1933 (“Eligible Investors”). The Placement Agent accepts orders for the purchase of the shares of the fund that are continually offered at
the NAV next determined.
The Placement Agent 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 Placement Agency Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by the Placement Agent in the performance of its duties or from reckless disregard by the Placement Agent of its obligations under the Placement Agency Agreement.
For its services under the Placement Agency Agreement, the Placement Agent is paid an annual fee of $100 and reimbursed for certain expenses by the fund.
(c) Services Provided by
Each Investment Advisor and Fund Expenses Paid by Third Parties
See Parts (a) and (b) of this Item 19.
The
fund has entered into a Service Agreement with the Advisor under which the Advisor provides
accounting, valuation, financial reporting and certain other services.
Pursuant to the Service Agreement, the Advisor is
responsible for providing certain financial, accounting and administrative services such as legal services, tax, accounting, valuation, financial reporting and performance,
compliance and service provider oversight.
The Advisor 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 Service Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by the Advisor in the performance of its duties or from reckless disregard by the Advisor of its obligations under the Agreement.
The Service Agreement had an initial term of two years, and continues
thereafter so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Independent Trustees. The Trust, on behalf
of the fund, or the Advisor may terminate the Agreement at any time without penalty on 60 days’ written notice to the other party. The Agreement may be amended by mutual written agreement of the parties, without obtaining shareholder approval.
For the fiscal period from January 1, 2023 through December 31, 2023, the fund incurred and paid the
Advisor $584,111 for non-advisory fees pursuant to the Service Agreement.
(e) Other Investment Advice
(h) Other Service Providers
John Hancock Signature Services, Inc. (“Signature Services”), P.O. Box
219909, Kansas City, MO 64121-9909, an affiliate of the Advisor and a wholly owned indirect subsidiary of Manulife Financial Corporation, is the transfer and dividend paying
agent for the fund.
The fund pays Signature Services
monthly a fee that is based on an annual rate of $60,000. The fund also pays certain out-of-pocket
expenses.
Portfolio securities of the fund are held pursuant to a custodian agreement between the fund and State Street Bank and Trust Company, State Street Financial Center, One Congress
Street, Suite 1, Boston, Massachusetts 02114. Under the custodian agreement, State Street performs custody, foreign custody manager and fund accounting services.
Independent Registered Public Accounting Firm
The independent registered public accounting firm of the fund is PricewaterhouseCoopers LLP (“PwC”), 101 Seaport Boulevard, Suite 500, Boston, Massachusetts
02110. PricewaterhouseCoopers LLP audits and renders an opinion on the fund's annual financial
statements and reviews the fund's annual federal income tax return.
Legal and Regulatory Matters
There are no legal proceedings to which the Trust, the Advisor, or the Placement Agent is a party that are likely to have a material adverse effect on the fund or the ability of either the Advisor or the Placement Agent to perform its contract with the
fund.
Item 20. Portfolio Managers
(a) Other Accounts Managed
The following table provides information regarding other accounts for which each
portfolio manager of the fund has day-to-day management responsibilities as of December 31,
2023. Accounts are grouped into three categories: (i) other investment companies (and series
thereof); (ii) other pooled investment vehicles; and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance
(“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. dollars using the exchange rates as of the applicable
date.
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Other Registered Investment
Companies |
Other Pooled Investment
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The Subadvisor does not receive a fee based upon the investment performance of any of the accounts included under “Other Accounts Managed by the Portfolio Managers” in the table above.
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 Subadvisor has adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally, the risks of
such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The Subadvisor has structured
its compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See “Compensation” below.
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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.
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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.
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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 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. The Subadvisor does not receive 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.
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If
the different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest may arise. 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.
The Subadvisor has adopted a system of compensation for portfolio managers and others
involved in the investment process that is applied systematically among investment professionals. At the Subadvisor, the structure of compensation of investment professionals
is currently comprised of the following basic components: base salary, and an annual investment bonus plan, as well as customary benefits that are offered generally to all
full-time employees of the Subadvisor. A limited number of senior investment professionals, who serve as officers of both the Subadvisor and its parent company, may also receive options or restricted stock grants of common shares of Manulife Financial. The following describes each component of the compensation package for the individuals identified as a portfolio manager for the fund.
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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.
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Investment Bonus Plan. Only investment professionals are eligible to participate in the
Investment Bonus Plan. Under the plan, investment professionals are eligible for an annual bonus. 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:
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Investment Performance: The investment performance of all accounts (except
the fund) managed by the investment professional over one-, three- and five- year periods are considered. The pre-tax performance of each account is measured relative to an appropriate peer group benchmark (for example a Morningstar large cap growth peer group if the fund invests primarily in large cap stocks with a growth strategy). With respect to fixed income accounts, relative yields are also used to measure performance.
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The Profitability of the Subadvisor: The profitability of the Subadvisor and its parent company are also considered in determining bonus awards,
with greater emphasis placed upon the profitability of the Subadvisor.
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Non-Investment Performance: The more intangible contributions of an investment professional to the Subadvisor's business, including the
investment professional's support of sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are evaluated in determining the amount of any bonus award.
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Options and Stock Grants. 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.
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. No component of the compensation arrangements for the investment
professionals involves mandatory deferral arrangements. While the profitability of the Subadvisor and the investment performance of the accounts that the investment
professionals maintain are factors in determining an investment professional's overall compensation, the investment professional's compensation is not linked directly to the
NAV of any fund.
(c) Ownership of Securities
As of December 31, 2023, none of the portfolio managers owned shares of the fund.
Item 21. Brokerage Allocations and Other Practices
(a) Brokerage Transactions
Decisions concerning the purchase and sale of portfolio securities are made by the Subadvisor’s investment and/or trading personnel. Orders for purchases and sales of securities are placed in a manner, which, in the opinion of such personnel, will offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market maker reflect a “spread.” Investments in debt securities are generally traded on a
“net” basis through dealers acting for their own account as principals and not as brokers; no brokerage commissions are payable on these transactions. In the U.S.
Government securities market, securities are generally traded on a net basis with dealers acting as principal for their own account without a stated commission, although the
price of the security usually includes a profit to the dealer. On occasion, certain money market instruments and agency securities may be purchased directly from the issuer,
in which case no commissions or premiums are
paid. Investments in equity securities are generally traded on exchanges or on over-the-counter markets at fixed commission rates or on a net basis. In other countries, both
debt and equity securities are traded on exchanges at fixed commission rates. Commissions on foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and regulation of foreign stock exchanges and broker-dealers than in the U.S.
The fund’s primary policy is to
execute all purchases and sales of portfolio instruments at the most favorable prices consistent with best execution, considering all of the costs of the transaction
including brokerage commissions and/or dealer spreads. The policy governs the selection of brokers and dealers and the market in which a transaction is executed. Consistent
with best execution, the fund's trades may be executed by dealers that also sell shares of John Hancock funds. However, the Subadvisor does not consider sales of shares of the fund as a factor in the selection of broker-dealers to execute the fund's portfolio transactions. To the extent consistent with the foregoing, the fund will be governed in the selection of brokers and dealers, and the negotiation of brokerage commission rates and dealer spreads, by the reliability and quality of the services and may include, to a lesser extent, the availability and value of research information and statistical assistance furnished to the Subadvisor of the
fund. The Subadvisor has implemented policies and procedures (approved by the Board) reasonably designed to ensure that the fund's selection of the broker-dealer is not influenced by considerations about the sales of the fund's shares.
Where research is available for cash payments, the Subadvisor
pays for such research from its own resources, and not with brokerage commissions. In other cases, as permitted by Section 28(e) of the Exchange Act, the fund may pay to a broker that provides brokerage and research services to the fund an amount of
disclosed commission in excess of the commission which another broker would have charged for effecting that transaction. This practice is subject to a good faith
determination by the Trustees that such price is reasonable in light of the services provided and to such policies as the Trustees may adopt from time to time.
“Commissions,” as interpreted by the SEC, include fees paid to brokers for trades conducted on an agency basis, and certain mark-ups, mark-downs, commission
equivalents and other fees received by dealers in riskless principal transactions placed in the over-the-counter market.
The term “brokerage and research services” includes research services received from broker-dealers which supplement the Subadvisor's own research (and the research of its affiliates), and may include the following types of information: statistical and background information on the U.S. and foreign economies, industry groups and individual companies; forecasts and interpretations with respect to the U.S. and foreign economies, securities, markets, specific industry groups and individual companies; information on federal, state, local and foreign political developments; portfolio management strategies; performance information on securities, indexes and investment accounts; and information concerning prices and ratings of securities. Broker-dealers may communicate such information electronically, orally, in written form or on computer software. Research services may also include the providing of electronic communication of trade information and, the providing of specialized consultations with the Subadvisor's personnel with respect to computerized systems and data furnished as a component of other research services, the arranging of meetings with management of companies, and the providing of access to consultants who supply research information.
The outside research assistance is useful to the Subadvisor since the broker-dealers used by the Subadvisor tend to follow a broader universe of securities and other matters than the Subadvisor's staff can follow. In addition, the research provides the Subadvisor with a diverse perspective on financial markets. Research services provided to the Subadvisor by broker-dealers are available for the benefit of all accounts managed or advised by the Subadvisor or by its affiliates. Some broker-dealers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by the Subadvisor’s clients, including the
fund. However, the
fund is not under any
obligation to deal with any broker-dealer in the execution of transactions in portfolio securities.
The Subadvisor believes that the research services are beneficial in supplementing the Subadvisor's research and analysis and that they improve the quality of the Subadvisor's investment advice. It is not possible to place a dollar value on information and services to be received from brokers and dealers, since it is only supplementary to the research efforts of the Subadvisor. The advisory fee paid by the
fund is not reduced because the Subadvisor receives such services. The receipt of research information is not expected to reduce significantly the expenses of the Subadvisor. However, to the extent that the Subadvisor would have purchased research services had they not been provided by broker-dealers, or would have developed comparable information through its own staff, the expenses to the Subadvisor could be considered to have been reduced accordingly. The research information and statistical assistance furnished by brokers and dealers may benefit other advisory clients of the Subadvisor, and conversely, brokerage commissions and spreads paid by other advisory clients of the Subadvisor may result in research information and statistical assistance beneficial to the fund. The fund will make no commitment to allocate portfolio transactions upon any prescribed basis.
Broker-dealers may be willing to furnish statistical, research
and other factual information or service to the Subadvisor for no consideration other than brokerage or underwriting commissions. Securities may be bought or sold from time
to time through such broker-dealers on behalf of the fund or the Subadvisor's other clients.
In effecting portfolio transactions on behalf of the fund and the Subadvisor's other clients, the Subadvisor may, from time to time, instruct the broker-dealer that executes the transaction to allocate, or “step-out,” a portion of the transaction to another broker-dealer. The broker-dealer to which the Subadvisor “stepped-out” would then settle and complete the designated portion of the transaction. Each broker-dealer would receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes.
While the Subadvisor will be primarily responsible for the
allocation of the fund's brokerage business, the policies and practices of the Subadvisor in this
regard must be consistent with the foregoing and at all times be subject to review by the Trustees.
Other investment advisory clients
advised by the Subadvisor may also invest in the same securities as the fund. When these clients
buy or sell the same securities at substantially the same time, the Subadvisor may average the transactions as to price and allocate the amount of available investments in a
manner which the Subadvisor believes to be equitable to each client, including the fund. Because of this, client accounts in a particular style may sometimes not sell or acquire securities as quickly
or at the same prices as they might if each were managed and traded individually.
For fixed income accounts, generally securities will be allocated when appropriate
among accounts based on account size, except if the accounts have different objectives or if an account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account pro rata based on the order size. However, if a partial allocation is too small to be
meaningful, it may be reallocated based on such factors as account objectives, strategies, duration benchmarks and credit and sector exposure. In some instances, this
investment procedure may adversely affect the price paid or received by the fund or the size of the position obtainable for it. On the other hand, to the extent permitted by law, the
Subadvisor may aggregate securities to be sold or purchased for the fund with those to be sold or
purchased for other clients managed by it in order to obtain best execution.
See Part (a) of this Item 21 above.
(e) Regular Broker-Dealers
Item 22. Capital Stock and Other Securities
The Board is responsible for the management and supervision of the fund. The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of the fund, without par value. The Trustees have authorized the issuance of a single class of shares.
The shares of the fund represent an equal proportionate interest in the aggregate net assets attributable to the fund. The fund will not issue share certificates. Shares are electronically recorded. Shareholders will be entitled to receive
their pro rata share of dividends, if any, declared by the fund. No interest will be paid on uncashed dividend or redemption checks.
In the event of liquidation, shareholders are entitled to share pro rata in the net
assets of the fund available for distribution to these shareholders. Shares entitle their holders to one vote per share and have no preemptive, subscription or conversion rights. When issued, shares are fully paid and non-assessable, except as set forth below. Fund shares may not be transferred, but an investor may redeem all or any portion of its shares in the fund at NAV on any day on which the
New York Stock Exchange (“NYSE”) is open, subject to certain exceptions. For more information about the ability of an investor to redeem all or any portion of its
investment in the fund, please see Item 11 in Part A.
Unless otherwise required by the 1940 Act or the Declaration of Trust, the fund has no intention of holding annual meetings of shareholders, but will hold special meetings of investors when,
in the judgment of the Trustees, it is necessary or desirable to submit matters for an investor vote. Fund shareholders may remove a Trustee by the affirmative vote of at
least two-thirds of the fund's outstanding shares and the Trustees shall promptly call a meeting for such purpose when requested to do so in writing by the record holders of not less than 10% of the outstanding shares of the fund. Shareholders may, under certain circumstances, communicate with other shareholders in connection with a request for a special meeting of shareholders. However, at any time that less than a majority of the Trustees holding office were elected by the shareholders, the Trustees will call a special meeting of shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could, under
certain circumstances, be held personally liable for acts or obligations of the trust. However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts, obligations and affairs of the fund. The Declaration of Trust also provides for
indemnification out of the fund's assets for all losses and expenses of any shareholder held
personally liable by reason of being or having been a shareholder. Furthermore, the fund shall not be liable for the liabilities of any other John Hancock fund. Liability is therefore limited to
circumstances in which the fund itself would be unable to meet its obligations.
The fund reserves the right to reject
any application which conflicts with the fund's internal policies or the policies of any regulatory
authority. A shareholder's account is governed by the laws of The Commonwealth of Massachusetts.
The Trust’s amended and
restated Declaration of Trust: (i) sets forth certain duties, responsibilities, and powers of the Trustees; (ii) clarifies that, other than as provided under federal
securities laws, the shareholders may only bring actions involving the fund derivatively; (iii)
provides 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; and (iv)
clarifies that shareholders are not intended to be third-party beneficiaries of fund contracts. The foregoing description of the Declaration of Trust is qualified in its entirety by the full text
of the Declaration of Trust, effective as of January 22, 2016, which is available by writing to the Secretary of the fund at 200 Berkeley Street, Boston, MA 02116, and also on the SEC’s and Secretary of the Commonwealth of Massachusetts’ websites.
Item 23. Purchase, Redemption, and Pricing of Shares
Described above in Item 6.
The offering price that applies to a purchase order is the next NAV calculated after
the purchase order is received and accepted by the fund or its agent. The fund normally calculates the NAV
of its shares at 4:00 p.m. Eastern Time on each day that the NYSE is open. 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 Advisor’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 SEC and
applicable regulations. On holidays or other days when the NYSE is closed, the NAV is not calculated and the fund does not transact purchase or redemption requests. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and U.S. business holidays on which the Fund’s NAV is not calculated. Consequently, the fund’s
portfolio securities may trade and the NAV of the fund’s shares may be significantly affected
on days when a shareholder will not be able to purchase or redeem shares of the fund.
Generally, trading in non-U.S. securities, U.S. government securities and money market instruments is substantially completed each day at various
times prior to the close of trading on the NYSE. The values of such securities used in computing the NAV of the fund's shares are determined as of such
times and are generally transmitted to the Fund prior to 4:00 p.m. Eastern Time. These prices are intended to represent the market value of the relevant security and are based on the last market price quotation in the market in which they are traded. 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.
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 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.
The Board has designated the fund's Advisor as the valuation designee to perform fair value functions for the fund in accordance with the
Advisor's valuation policies and procedures. As valuation designee, the Advisor will determine the fair value, in good faith, of securities and other assets held by the fund for which market quotations are not readily available and, among other things, will assess and manage material risks associated with fair value determinations, select, apply and test fair value methodologies, and oversee and evaluate pricing services and other valuation agents used in valuing the fund's investments. The Advisor is subject to Board oversight and reports to the Board information regarding the fair valuation process and related material matters. The Advisor carries out its responsibilities as valuation designee through its Pricing Committee.
If market quotations or official closing prices are not readily available or are otherwise deemed unreliable because of market- or issuer-specific events, a security will be valued at its fair value as determined in good faith by the Board’s valuation designee, the Advisor. In certain instances, therefore, the
Pricing Committee may determine that a
reported valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair value of the
assets, which may differ from the reported valuation.
Fair value pricing of securities is intended to help ensure that 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. However, a security’s valuation may differ depending on the method used for determining value, and no assurance can be given that fair value pricing of securities will successfully eliminate all potential opportunities for such trading gains.
The use of fair value pricing has the effect of valuing a security based upon the price 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. With respect to any portion of the fund's assets that is invested in
another open-end investment company, that portion of the fund's NAV is calculated based on the NAV
of that investment company. The prospectus for the other investment company explains the circumstances and effects of fair value pricing for that other investment
company.
Although it would not normally do so, the fund has the right to pay the redemption price of shares of the Fund in whole or in part in portfolio securities
as prescribed by the Trustees. When the shareholder sells portfolio securities received in this fashion, the shareholder will incur a brokerage charge. Any such securities would be valued for the purposes of making such payment at the same value as used in determining NAV.
(e) Arrangements Permitting Frequent Purchases and Redemptions of Fund Shares
Item 24. Taxation of the Fund
The
fund is treated as a separate entity for accounting and tax purposes and has elected to be treated
and intends to qualify in each taxable year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the
“Code”). As such and by complying with the applicable provisions of the Code regarding the sources of its income, the timing of its distributions and the
diversification of its assets, the fund will not be subject to federal income tax on its taxable income (including net realized capital gains) to the extent it is distributed to shareholders in accordance with the timing requirements of the Code. The fund will be subject to a 4% nondeductible federal excise tax on certain amounts not distributed (and not treated as
having been distributed) on a timely basis in accordance with annual minimum distribution requirements. The fund intends under normal circumstances to seek to avoid or minimize liability for such tax by
satisfying such distribution requirements.
Distributions from the fund's current or accumulated earnings and profits (“E&P”) will be taxable under the Code for investors who are subject to tax. If these distributions are paid from the fund's “investment company taxable income,” they will be taxable as ordinary income; and if they are paid from the fund's “net capital gain,” they will be taxable as long-term capital gain. (Net capital gain is the
excess (if any) of net long-term capital gain over net short-term capital loss, and investment company taxable income is generally all taxable income and capital gains, other
than those gains and losses included in computing net capital gain, after reduction by deductible expenses.) It is not expected that the fund will earn or distribute any net capital gain. Some distributions that are paid in January will be taxable to shareholders as if they had been received on December 31 of the previous year. The tax treatment described above will apply without regard to whether distributions are received in cash or reinvested in additional shares of the fund.
Distributions, if any, in excess of E&P will constitute a return of
capital under the Code, which will first reduce an investor's tax basis in fund shares and then, to the extent such basis is exceeded, will generally give rise to capital gains. Shareholders who have chosen automatic reinvestment of their distributions will have a tax basis in each share received pursuant to such a reinvestment equal to the amount of cash they would have received had they elected to receive the distribution in cash, divided by the number of shares received in the reinvestment.
Upon a redemption or other disposition of shares of the fund (including by exercise of any exchange privilege) in a transaction that is treated as a “sale” for
federal income tax purposes, a shareholder may realize a taxable gain or loss depending on the amount of the proceeds and the investor's basis in his shares. Any gain or loss
will be treated as capital gain or loss if the shares are capital assets in the shareholder's hands and will be long-term or short-term, depending upon the shareholder's tax
holding period for the shares and subject to the special rules described below. Also, any loss realized on a redemption or exchange may be disallowed to the extent the shares
disposed of are replaced with other shares of the same fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to automatic dividend reinvestments. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss realized upon the redemption of shares with a tax holding period of six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain with respect to such shares. Shareholders should consult their own tax advisers regarding their particular circumstances to determine whether a disposition of fund shares is properly treated as
a sale for tax purposes, as is assumed in the foregoing discussion.
For federal income tax purposes, the fund is permitted to carry forward a net capital loss in any year to offset net capital gains, if any, during subsequent years until such loss carryforwards have been fully used, and such capital losses carried forward will retain their character as either short-term or long-term capital losses. To the extent subsequent net capital gains (if any) 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. As of December 31, 2023, the fund has a short-term capital loss carryforward of $96,307 available to offset future net realized capital gains. This carryforward does not expire.
Because the
fund's dividends and capital gain distributions are derived from interest paying securities rather
than dividends paid from stocks they are not expected to qualify for the corporate dividends-received deduction or for the reduced federal income tax rate applicable to
qualified dividend income.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain prohibited transactions, is accorded to accounts maintained as qualified retirement plans.
Shareholders should consult their tax advisers for more information.
A state income (and possibly local income and/or intangible property)
tax exemption is generally available to the extent (if any) the fund's distributions are derived from interest on (or, in the case of intangible property taxes, the value of its assets is attributable to) certain U.S. Government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. The fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing jurisdictions, although the fund may in its sole discretion provide relevant information to shareholders.
The fund will be required to report
to the Internal Revenue Service (the “IRS”) all taxable distributions to shareholders, except in the case of certain exempt recipients, i.e., corporations and
certain other investors distributions to which are exempt from the information reporting provisions of the Code. Under the backup withholding provisions of Code Section 3406
and applicable Treasury regulations, all such reportable distributions may be subject to backup withholding of federal income tax in the case of non-exempt shareholders who
fail to furnish the fund with their correct taxpayer identification number and certain certifications required by the IRS or if the IRS or a broker notifies the
fund that the number furnished by the shareholder is incorrect or that the shareholder is subject to backup withholding as a result of failure to report interest or dividend income. The fund may refuse to
accept an application that does not contain any required taxpayer identification number or certification that the number provided is correct. If the backup withholding
provisions are applicable, any such distributions, whether taken in cash or reinvested in shares, will be reduced by the amounts required to be withheld. Backup withholding
is not an additional tax. Any amounts withheld may be credited against a shareholder's U.S. federal income tax liability. Investors should consult their tax advisers about
the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. federal income tax law as applicable to U.S. persons (as defined in the Code) subject to tax under such
law. The discussion does not address special tax rules applicable to certain types of investors, including, for example, tax-exempt entities, insurance companies, and financial institutions. Dividends, capital gain distributions (if any), and ownership of or gains realized (if any) on the redemption (including an exchange) of fund
shares may also be subject to state and local taxes. Shareholders should consult their own tax advisers as to the federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the fund in their particular circumstances.
The fund is not subject to
Massachusetts corporate excise or franchise taxes. The fund anticipates that, provided the fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any Massachusetts income tax.
(a) Distribution of Securities
The
fund does not have underwriters. John Hancock Investment Management Distributors LLC, an affiliate
of the Advisor, serves as the fund's Placement Agent. Under the Placement Agent Agreement, John Hancock Investment Management Distributors LLC
accepts orders for the purchase of the shares of the fund that are continually offered at the NAV next determined. John Hancock Funds does not receive any compensation from the fund or its shareholders for its
services under the Placement Agent Agreement, except for an annual payment of $100. John Hancock Funds also distributes shares of other funds in the John Hancock fund
complex.
Item 26. Calculation of Performance Data
Item 27. Financial Statements
The financial statements of the fund
as of and for the year ended December 31, 2023 have been audited by PwC, independent registered
public accounting firm. The report of PwC is included, along with the fund's financial statements, in the
fund's annual report, (file number 811-23027, accession number
0001683863-24-001053
), which are incorporated by reference into this Part B. The fund’s annual report is available upon request.
Appendix A – Description of Bond Ratings
Descriptions of Credit Rating Symbols and Definitions
The ratings of Moody’s Investors Service, Inc. (“Moody’s”), 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.
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 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/products/rating-definitions.
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.
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.
Note: Addition of a Plus (+) or minus (-) sign: The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Dual Ratings – Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, ‘AAA/A-1+’ or ‘A-1+/A-1’). With U. S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, ‘SP-1+/A-1+’).
Fitch Corporate
Finance Obligations – Long-Term Rating Scales
Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In
addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment. This notably
applies to covered bond ratings, which incorporate both an indication of the probability of default and of the recovery given a default of this debt instrument.
AAA: Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality. ‘AA’ ratings denote expectations of very low
credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. ‘A’ ratings denote expectations of low credit risk. The
capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the
case for higher ratings.
BBB: Good credit quality. ‘BBB’ ratings indicate that expectations of credit risk
are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this
capacity.
BB: Speculative. ‘BB’ ratings indicate an elevated vulnerability to credit risk,
particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial
commitments to be met.
B: Highly speculative. ‘B’ ratings indicate that material credit risk is
present.
CCC: Substantial credit risk. “CCC” ratings indicate that substantial credit risk
is present.
CC: Very high levels of credit risk. “CC” ratings indicate very high levels of
credit risk.
C: Exceptionally high levels of credit risk. “C” indicates exceptionally high
levels of credit risk.
Corporate finance defaulted obligations typically are not assigned ‘RD’ or ‘D’ ratings but are instead rated in the ‘CCC’ to ‘C’ rating
categories, depending on their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but
varying vulnerability to default and loss.
Note: Addition of a Plus (+) or minus (-) sign: Within rating categories, Fitch may use modifiers.
The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. For example, the rating category
‘AA’ has three notch-specific rating levels (‘AA+’; ‘AA’; ‘AA-’; each a rating level). Such suffixes are not added to
‘AAA’ ratings and ratings below the ‘CCC’ category. For the short-term rating category of ‘F1’, a ‘+’ may be appended. For
Viability Ratings, the modifiers ‘+’ or ‘-’ may be appended to a rating to denote relative status within categories from ‘aa’ to ‘ccc’.
Corporate And Tax-Exempt Commercial Paper Ratings
Short-Term Issue
Ratings
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 table indicates the long-term ratings consistent with different short-term ratings when such long-term ratings exist. (Note: Structured finance short-term ratings are usually based either on the short-term rating of a support provider or on an assessment of cash flows available to retire the financial obligation).
S&P Global Ratings' Short-Term Issue Credit Ratings
S&P Global Ratings’ short-term ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. Medium term notes are assigned long-term ratings. Ratings are graded into several categories, ranging from ‘A’ for the highest-quality obligations to ‘D’ for the lowest. These categories are as follows:
A-1: A short-term obligation rated ‘A-1’ is rated in the highest category by S&P Global Ratings. The 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.
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.
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).
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.
US Municipal Short-Term Versus Long-Term Ratings |
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DEMAND OBLIGATIONS WITH CONDITIONAL LIQUIDITY SUPPORT |
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Ba1, Ba2, Ba3 B1, B2,
B3 Caa1, Caa2, Caa3 Ca, C |
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For SBPA-backed VRDBs, the rating transitions are higher to allow for distance to downgrade to below investment grade due to the presence of automatic termination events in the SBPAs.
S&P
Global Ratings’ Municipal Short-Term Note Ratings
Municipal
Short-Term Note Ratings
An S&P Global Ratings municipal note rating reflects S&P Global Ratings’ opinion about the liquidity factors and market access risks
unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a
long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings’ analysis will review the following considerations:
•
Amortization schedule – the larger the final maturity relative to other
maturities, the more likely it will be treated as a note; and
•
Source of payment – the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very
strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
D: 'D' is assigned upon failure to pay the note when due, completion of a distressed
exchange offer, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic
stay provisions.
Fitch Public Finance Ratings
See FITCH SHORT-TERM ISSUER OR OBLIGATIONS RATINGS above.
Appendix B – Proxy Voting Policies and Procedures
The Trust Procedures and the proxy voting procedures of the Advisor and the subadvisors are set forth in Appendix B.
JOHN HANCOCK FUNDS
PROXY VOTING POLICIES AND PROCEDURES
(Updated December
10, 2019)
Overview
Each fund of the Trust or any
other registered investment company (or series thereof) (each, a fund) is required to disclose its proxy voting policies and procedures in its registration statement and, pursuant to Rule 30b1-4
under the 1940 Act, file annually with the Securities and Exchange Commission and make available to shareholders its actual proxy voting record.
Investment Company Act
An investment company is required
to disclose in its SAI either (a) a summary of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities or (b) a copy of its proxy voting policies.
A fund is also required by Rule 30b1-4 of the Investment Company Act of 1940 to file Form N-PX annually with the SEC, which contains a record of how the fund voted proxies relating to portfolio securities. For each matter relating to a portfolio security considered at any shareholder meeting, Form N-PX is required to include, among other information, the name of the issuer of the security, a brief identification of the matter voted on, whether and how the fund cast its vote, and whether such vote was for or
against management. In addition, a fund is required to disclose in its SAI and its annual and semi-annual reports to shareholders that such voting record may be obtained by shareholders, either by calling a toll-free number or through the
funds website, at the funds option.
Advisers Act
Under Advisers Act Rule 206(4)-6, investment advisers are required to adopt proxy voting policies and procedures, and
investment companies typically rely on the policies of their advisers or sub-advisers.
Policy
The Majority of the Independent Board of Trustees (the Board) of each registered investment company of the Trusts, has adopted these proxy voting
policies and procedures (the Trust Proxy Policy).
It is the Advisers policy to comply with Rule
206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act as described above. In general, Advisers defer proxy voting decisions to the
sub-advisers managing the Funds. It is the policy of the Trusts to delegate the responsibility for voting proxies relating to portfolio securities held by a Fund to the Funds respective Adviser or, if
the Funds Adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the funds sub-adviser(s), subject to the
Boards continued oversight. The sub-adviser for each Fund shall vote all proxies relating to securities held by each Fund and in that connection, and subject to any further policies and procedures
contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Advisers Act.
If an instance occurs where a conflict of interest arises between the shareholders and the designated sub-adviser,
however, Advisers retain the right to influence and/or direct the conflicting proxy voting decisions in the best interest of shareholders.
Delegation
of Proxy Voting Responsibilities
It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held
by a fund to the funds investment adviser (adviser) or, if the funds adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the
funds sub-adviser(s), subject to the Boards continued oversight. The sub-adviser for each fund shall vote all proxies relating to securities held by each
fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the Advisers Act).
Except as noted below
under Material Conflicts of Interest, the Trust Proxy Policy with respect to a Fund shall incorporate that adopted by the Funds sub-adviser with respect to voting proxies held by its clients (the Sub-adviser Proxy Policy). Each Sub-adviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Proxy Policy. Each
sub-adviser to a Fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the Funds adviser and by the
Board. Each Adviser to a Fund retains the responsibility, and is directed, to oversee each sub- advisers compliance with these policies and procedures, and to adopt and implement such additional policies
and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trusts Chief Compliance Officer (CCO) shall conduct such monitoring and supervisory activities as the CCO or the Board
deems necessary or appropriate in order to appropriately discharge the CCOs role in overseeing the sub-advisers compliance with these policies and procedures.
The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the
Board, in whole or in part, at any time.
Voting Proxies of Underlying Funds of a Fund of Funds
A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund
With respect to voting proxies relating to the shares of an underlying fund (an Underlying Fund) held by a Fund of the Trust operating as a fund of
funds (a Fund of Funds) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to
shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.
B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund
In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the Adviser to the Fund of Funds or the Trusts will vote proxies
relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to
shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.
1. Where Both the Underlying Fund and
the Fund of Funds are Voting on Substantially Identical Proposals
In the event that the Underlying Fund and the Fund of Funds are voting on
substantially identical proposals (the Substantially Identical Proposal), then the Adviser or the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of the shareholders of the
Fund of Funds on the Substantially Identical Proposal.
2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on by the Fund of
Funds
(a) Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser
Relating to the Proposal
In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also
voting on a substantially identical proposal and there is no material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Adviser will vote proxies relating to the
shares of the Underlying Fund pursuant to its Proxy Voting Procedures.
(b) Where there is a Material Conflict of Interest Between the Interests of the
Shareholders of the Underlying Fund and the Adviser Relating to the Proposal
In the event that the Fund of Funds is voting on a proposal of the
Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is a material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal,
then the Fund of Funds will seek voting instructions from the shareholders of the Fund of Funds on the proposal and will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such
shareholders. A material conflict is generally defined as a proposal involving a matter in which the Adviser or one of its affiliates has a material economic interest.
Material Conflicts of Interest
If (1) a sub-adviser to a Fund becomes aware that a vote presents a material conflict between the interests of (a) shareholders of the Fund; and (b) the Funds Adviser,
sub-adviser, principal underwriter, or any of their affiliated persons, and (2) the sub-adviser does not propose to vote on the particular issue in the manner
prescribed by its Sub-adviser Proxy Policy or the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy are otherwise triggered, then the sub-adviser will follow the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy when voting such proxies.
If a Sub-adviser Proxy Policy provides that in the case of a material conflict of interest between Fund shareholders
and another party, the sub-adviser will ask the Board to provide voting instructions, the sub-adviser shall vote the proxies, in its discretion, as recommended by an
independent third party, in the manner prescribed by its Sub-adviser Proxy Policy or abstain from voting the proxies.
Proxy Voting Committee(s)
The Advisers will from time to
time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers CCO and may include legal counsel. The terms of reference and the
procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in
accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy in the name of a Fund must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Securities Lending Program
Certain of the Funds
participate in a securities lending program with the Trusts through an agent lender. When a Funds securities are out on loan, they are transferred into the borrowers name and are voted by the borrower, in its discretion. Where a sub-adviser determines, however, that a proxy vote (or other shareholder action) is materially important to the clients account, the sub-adviser should request that the
agent recall the security prior to the record date to allow the sub-adviser to vote the securities.
Disclosure
of Proxy Voting Policies and Procedures in the Trusts Statement of Additional Information (SAI)
The Trust shall include in its SAI a
summary of the Trust Proxy Policy and of the Sub-adviser Proxy Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Proxy Policy and Sub-adviser Proxy Policy in the SAI.)
Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports
The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy, including the Sub- adviser Proxy Policy, and the Trusts proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commissions (SEC) website, and without
charge, upon request, by calling a specified toll-free telephone number. The Trusts will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. The Fund
Administration Department is responsible for preparing appropriate disclosure regarding proxy voting for inclusion in shareholder reports and distributing reports. The Legal Department supporting the Trusts is responsible for reviewing such
disclosure once it is prepared by the Fund Administration Department.
Filing of Proxy Voting Record on Form N-PX
The Trusts will annually file their complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year. The Fund Administration department, supported by the Legal Department supporting the Trusts, is responsible for
the annual filing.
Regulatory Requirement
Rule 206(4)-6 of the Advisers Act and Rule 30b1-4 of the 1940 Act
Reporting
Disclosures in SAI: The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy,
including the Sub-adviser Proxy Policy, and the Trusts proxy voting record for the most recent 12 months ended June 30.
Form N-PX: The proxy voting service will file Form N-PX for each
twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year.
Procedure
Review of Sub-advisers Proxy Voting The Trusts have delegated proxy voting authority with respect to Fund
portfolio securities in accordance with the Trust Policy, as set forth above.
Consistent with this delegation, each
sub-adviser is responsible for the following:
1. Implementing written policies and procedures, in compliance with
Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the sub-adviser votes portfolio securities in the best interest of shareholders of the Trusts.
2. Providing the Advisers with a copy and description of the Sub-adviser Proxy Policy prior to being approved by
the Board as a sub-adviser, accompanied by a certification that represents that the Sub-adviser Proxy Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the Advisers with notice of any amendment or revision to that Sub-adviser Proxy Policy or with a description thereof.
The Advisers are required to report all material changes to a Sub-adviser Proxy Policy quarterly to the Board. The CCOs annual written compliance report to the Board will contain a summary of the
material changes to each Sub-adviser Proxy Policy during the period covered by the report.
3. Providing the
Adviser with a quarterly certification indicating that the sub-adviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the
Sub-adviser Proxy Policy. If the sub-adviser voted any proxies in a manner inconsistent with the Sub-adviser Proxy Policy, the sub-adviser will provide the Adviser with a report detailing the exceptions.
Adviser Responsibilities The Trusts
have retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trusts reports on Form N-PX with the SEC.
The Advisers, in accordance with their general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service
in accordance with the following procedures:
1. Receive a file with the proxy voting information directly from each
sub-adviser on a quarterly basis.
2. Select a sample of proxy votes from the files submitted by the sub-advisers and compare them against the proxy voting service files for accuracy of the votes.
3. Deliver instructions
to shareholders on how to access proxy voting information via the Trusts semi-annual and annual shareholder reports.
The Fund Administration
Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
Proxy Voting Service
Responsibilities Proxy voting services retained by the Trusts are required to undertake the following procedures:
The proxy voting services proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple sub- advisers or third-party voting services.
The proxy voting services proxy disclosure system will provide the following reporting features:
1. multiple report export options;
2. report customization by
fund-account, portfolio manager, security, etc.; and
3. account details available for vote auditing.
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Form N-PX Preparation and Filing: |
The Advisers will be responsible for oversight and completion of the filing of the Trusts reports on Form N-PX
with the SEC. The proxy voting service will prepare the EDGAR version of Form N-PX and will submit it to the adviser for review and approval prior to filing with the SEC. The proxy voting service will file
Form N-PX for each twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year. The Fund Administration Department, in conjunction with the Legal
Department supporting the Trusts, is responsible for the foregoing procedures.
The Fund Administration Department in conjunction with the CCO oversees
compliance with this policy.
The Fund Administration Department maintains operating procedures affecting the administration and disclosure of the
Trusts proxy voting records.
The Trusts Chief Legal Counsel is responsible for including in the Trusts SAI information regarding the
Advisers and each sub-advisers proxy voting policies as required by applicable rules and form requirements.
Key Contacts
Investment Compliance
Escalation/Reporting Violations
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds.
Related Policies and Procedures
7B Registration
Statements and Prospectuses
Document Retention Requirements
The Fund Administration Department and The CCOs Office is responsible for maintaining all documentation created in connection with this policy. Documents
will be maintained for the period set forth in the Records Retention Schedule. See Compliance Policy: Books and Records.
5E: Proxy Voting Policies and Procedures for the Adviser
General Compliance Policies for Trust & Adviser
Section 5: Fiduciary Standards & Affiliated Persons Issues
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Applies to |
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Adviser |
Risk Theme |
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Proxy Voting |
Policy Owner |
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Jim Interrante |
Effective Date |
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12-1-2019 |
5E. Advisers Proxy Voting Policy
Overview
The SEC adopted Rule 206(4)-6 under the Advisers Act, which requires investment advisers with voting authority to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser
votes client securities in the best interest of clients. The procedures must include how the investment adviser addresses material conflicts that may arise between the interests of the investment adviser and those of its clients. The Advisers are
registered investment advisers under the Advisers Act and serve as the investment advisers to the Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the Funds, including
voting proxies with respect to a Funds portfolio securities. From time to time, however, the Advisers may elect to manage directly the assets of a Fund, including voting proxies with respect to such Funds portfolio securities, or a
Funds Board may otherwise delegate to the Advisers authority to vote such proxies. Rule 206(4)-6 under the Advisers Act requires that a registered investment adviser adopt and implement written policies
and procedures reasonably designed to ensure that it votes proxies with respect to a clients securities in the best interest of the client.
Firms
are required by Advisers Act Rule 204-2(c)(2) to maintain records of their voting policies and procedures, a copy of each proxy statement that the investment adviser receives regarding client securities, a
record of each vote cast by the investment adviser on behalf of a client, a copy of any document created by the investment adviser that was material to making a decision how to vote proxies on behalf of a client, and a copy of each written client
request for information on how the adviser voted proxies on behalf of the client, as well as a copy of any written response by the investment adviser to any written or oral client request for information on how the adviser voted that clients
proxies.
Investment companies must disclose information about the policies and procedures used to vote proxies on the investment companys portfolio
securities and must file the funds proxy voting record with the SEC annually on Form N-PX.
Pursuant
thereto, the Advisers have adopted and implemented these proxy voting policies and procedures (the Proxy Procedures).
Policy
It is the Advisers policy to comply with Rule 206(4)-6 and Rule
204-2(c)(2) under the Advisers Act as described above. In general, the Advisers delegate proxy voting decisions to the sub-advisers managing the funds. If an instance
occurs where a conflict of interest arises between the shareholders and a particular sub-adviser, however, the Adviser retains the right to influence and/or direct the conflicting proxy voting decisions.
Regulatory Requirement
Rule 206(4)-6 under the Advisers Act
Reporting
Form N-PX
Advisers will
provide the Board with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCOs annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by
the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy
Procedures or a Funds proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions.
Procedure
Fiduciary Duty
The Advisers have a fiduciary
duty to vote proxies on behalf of a Fund in the best interest of the Fund and its shareholders.
Voting of ProxiesAdvisers
The Advisers will vote proxies with respect to a Funds portfolio securities when authorized to do so by the Fund and subject to the Funds proxy
voting policies and procedures and any further direction or delegation of authority by the Funds Board. The decision on how to vote a proxy will be made by the person(s) to whom the Advisers have from time to time delegated such responsibility
(the Designated Person). The Designated Person may include the Funds portfolio manager(s) or a Proxy Voting Committee, as described below.
When voting proxies with respect to a Funds portfolio securities, the following standards will apply:
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The Designated Person will vote based on what it believes is in the best interest of the Fund and its
shareholders and in accordance with the Funds investment guidelines. |
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Each voting decision will be made independently. To assist with the analysis of voting issues and/or to carry out
the actual voting process the Designated Person may enlist the services of (1) reputable professionals (who may include persons employed by or otherwise associated with the Advisers or any of its affiliated persons) or (2) independent
proxy evaluation services such as Institutional Shareholder Services. However, the ultimate decision as to how to vote a proxy will remain the responsibility of the Designated Person. |
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The Advisers believe that a good management team of a company will generally act in the best interests of the
company. Therefore, the Designated Person will take into consideration as a key factor in voting proxies with respect to securities of a company that are held by the Fund the quality of the companys management. In general, the Designated
Person will vote as recommended by company management except in situations where the Designated Person believes such recommended vote is not in the best interests of the Fund and its shareholders. |
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As a general principle, voting with respect to the same portfolio securities held by more than one Fund should be
consistent among those Funds having substantially the same investment mandates. |
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The Advisers will provide the Fund, from time to time in accordance with the Funds proxy voting policies
and procedures and any applicable laws and regulations, a record of the Advisers voting of proxies with respect to the Funds portfolio securities. |
Material Conflicts of Interest
In carrying out its proxy
voting responsibilities, the Advisers will monitor and resolve potential material conflicts (Material Conflicts) between the interests of (a) a Fund and (b) the Advisers or any of its affiliated persons. Affiliates of the
Advisers include Manulife Financial Corporation and its subsidiaries. Material Conflicts may arise, for example, if a proxy vote relates to matters involving any of these companies or other issuers in which the Advisers or any of their affiliates
has a substantial equity or other interest.
5E. Advisers Proxy Voting Policy
If the Advisers or a Designated Person become aware that a proxy voting issue may present a potential Material Conflict, the issue will be referred to the
Advisers Legal Department and/or the Office of the CCO. If the Legal Department and/or the Office of the CCO, as applicable determines that a potential Material Conflict does exist, a Proxy Voting Committee will be appointed to consider and
resolve the issue. The Proxy Voting Committee may make any determination that it considers reasonable and may, if it chooses, request the advice of an independent, third-party proxy service on how to vote the proxy.
Voting Proxies of Underlying Funds of a Fund of Funds
The Advisers or the Designated Person will vote proxies with respect to the shares of a Fund that are held by another Fund that operates as a Fund of
Funds) in the manner provided in the proxy voting policies and procedures of the Fund of Funds (including such policies and procedures relating to material conflicts of interest) or as otherwise directed by the board of trustees or directors
of the Fund of Funds.
Proxy Voting Committee(s)
The
Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers CCO and may include legal counsel. The
terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting
Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy must be submitted for consideration pursuant to the Shareholder Advocacy Policy and
Procedures.
Voting of Proxies - SubAdvisers
In the
case of proxies voted by a sub-adviser to a Fund pursuant to the Funds proxy voting procedures, the Advisers will request the sub-adviser to certify to the
Advisers that the sub-adviser has voted the Funds proxies as required by the Funds proxy voting policies and procedures and that such proxy votes were executed in a manner consistent with these
Proxy Procedures and to provide the Advisers with a report detailing any instances where the sub-adviser voted any proxies in a manner inconsistent with the Funds proxy voting policies and procedures.
The COO of the Advisers will then report to the Board on a quarterly basis regarding the sub-adviser certification and report to the Board any instance where the
sub-adviser voted any proxies in a manner inconsistent with the Funds proxy voting policies and procedures.
The Fund Administration Department maintains procedures affecting all administration functions for the mutual funds. These procedures detail the disclosure
and administration of the Trusts proxy voting records.
The Trusts Chief Legal Counsel is responsible for including, in the SAI of
each Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting to Fund Boards
The CCO of the Advisers will provide the Board with a copy of these Proxy Procedures, accompanied by a certification that represents that the Proxy
Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, the Advisers will provide the Board with notice and a copy of any amendments or revisions to
the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCOs annual written compliance report to
the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated
Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Funds proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions
Key Contacts
Investment Compliance
Escalation/Reporting Violations
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds.
Related Policies and Procedures
N/A
Document Retention Requirements
The Advisers will retain
(or arrange for the retention by a third party of) such records relating to proxy voting pursuant to these Proxy Procedures as may be required from time to time by applicable law and regulations, including the following:
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These Proxy Procedures and all amendments hereto; |
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All proxy statements received regarding Fund portfolio securities; |
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Records of all votes cast on behalf of a Fund; |
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Records of all Fund requests for proxy voting information; |
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Any documents prepared by the Designated Person or a Proxy Voting Committee that were material to or
memorialized the basis for a voting decision; |
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All records relating to communications with the Funds regarding Conflicts; and |
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All minutes of meetings of Proxy Voting Committees. |
The Office of the CCO, and/or the Legal Department are responsible for maintaining the documents set forth above as needed and deemed appropriate. Such
documents will be maintained in the Office of the CCO, and/or the Legal Department for the period set forth in the Records Retention Schedule.
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Version History |
Date |
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Effective Date |
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Approving Party |
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01-01-2012 |
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02-01-2015 |
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Sept. 2015 |
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05-01-2017 |
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12-01-2019 |
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Manulife Investment Management global proxy voting policy and procedures |
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Global Proxy Voting Policy and Procedures
Applicable Business Unit: Manulife Investment Management Public Markets
Applicable Legal Entity(ies): Refer to Appendix A
Committee Approval: Manulife IM Public Markets Operating Committee
Business Owner: Manulife IM Public Markets
Policy
Sponsor: Chief Compliance Officer, Manulife IM Public Markets
Policy Last Updated/Reviewed: April 2021
Policy Next Review Date: April 2024
Policy Original
Issue Date: February 2011
Review Cycle: Three (3) years
Company policy documents are for internal use only and may not be shared outside the Company, in whole or part, without prior approval from the Global Chief
Compliance Officer (or local Chief Compliance Officer if policy is only entity-applicable) who will consult, as appropriate with, the Policy Sponsor and legal counsel when deciding whether to approve and the conditions attached to any approval.
Manulife Investment Management global proxy voting policy and procedures
Executive summary
Each investment team at Manulife Investment Management (Manulife IM)1 is responsible for investing in line with its investment philosophy and clients
objectives. Manulife IMs approach to proxy voting aligns with its organizational structure and encourages best practices in governance and management of environmental and social risks and opportunities. Manulife IM has adopted and implemented
proxy voting policies and procedures to ensure that proxies are voted in the best interests of its clients for whom it has proxy voting authority.
This
global proxy voting policy and procedures (policy) applies to each of the Manulife IM advisory affiliates listed in Appendix A. In seeking to adhere to local regulatory requirements of the jurisdiction in which an advisory affiliate operates,
additional procedures specific to that affiliate may be implemented to ensure compliance, where applicable. The policy is not intended to cover every possible situation that may arise in the course of business, but rather to act as a decision-making
guide. It is therefore subject to change and interpretation from time to time as facts and circumstances dictate.
Statement of policy
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The right to vote is a basic component of share ownership and is an important control mechanism to ensure that a
company is managed in the best interests of its shareholders. Where clients delegate proxy voting authority to Manulife IM, Manulife IM has a fiduciary duty to exercise voting rights responsibly. |
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Where Manulife IM is granted and accepts responsibility for voting proxies for client accounts, it will seek to
ensure proxies are received and voted in the best interests of the client with a view to maximize the economic value of their equity securities unless it determines that it is in the best interests of the client to refrain from voting a given proxy.
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If there is any potential material proxy-related conflict of interest between Manulife IM and its clients,
identification and resolution processes are in place to provide for determination in the best interests of the client. |
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Manulife IM will disclose information about its proxy voting policies and procedures to its clients.
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Manulife IM will maintain certain records relating to proxy voting. |
1 |
Manulife Investment Management is the unified global brand for Manulifes global wealth and asset
management business, which serves individual investors and institutional clients in three businesses: retirement, retail, and institutional asset management (Public markets and private markets). |
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April 2021 2 |
Manulife Investment Management global proxy voting policy and procedures
Philosophy on sustainable investing
Manulife IMs commitment to sustainable investment 2 is focused on protecting and enhancing the value
of our clients investments and, as active owners in the companies in which we invest, we believe that voting at shareholder meetings can contribute to the long-term sustainability of our investee companies. Manulife IM will seek to exercise
the rights and responsibilities associated with equity ownership, on behalf of its clients, with a focus on maximizing long-term shareholder returns, as well as enhancing and improving the operating strength of the companies to create sustainable
value for shareholders.
Manulife IM invests in a wide range of securities across the globe, ranging from large multinationals to smaller early-stage
companies, and from well-developed markets to emerging and frontier markets. Expectations of those companies vary by market to reflect local standards, regulations, and laws. Manulife IM believes, however, that successful companies across regions
are generally better positioned over the long term if they have:
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Robust oversight, including a strong and effective board with independent and objective leaders working on behalf
of shareholders; |
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Mechanisms to mitigate risk such as effective internal controls, board expertise covering a firms unique
risk profile, and routine use of key performance indicators to measure and assess long-term risks; |
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A management team aligned with shareholders through remuneration structures that incentivize long- term
performance through the judicious and sustainable stewardship of company resources; |
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Transparent and thorough reporting of the components of the business that are most significant to shareholders
and stakeholders with focus on the firms long-term success; and |
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Management focused on all forms of capital, including environmental, social, and human capital.
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The Manulife Investment Management voting principles (voting principles) outlined in Appendix B provide guidance for our voting
decisions. An active decision to invest in a firm reflects a positive conviction in the investee company and we generally expect to be supportive of management for that reason. Manulife IM may seek to challenge managements recommendations,
however, if they contravene these voting principles or Manulife IM otherwise determines that doing so is in the best interest of its clients.
2 |
Further information on Sustainable Investing at Manulife IM can be found at manulifeim.com/institutional.
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April 2021 3 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IM also regularly engages with boards and management on environmental, social, or corporate
governance issues consistent with the principles stipulated in our sustainable investing statement and our ESG engagement policy. Manulife IM may, through these engagements, request certain changes of the portfolio company to mitigate risks or
maximize opportunities. In the context of preparing for a shareholder meeting, Manulife IM will review progress on requested changes for those companies engaged. In an instance where Manulife IM determines that the issuer has not made sufficient
improvements on an issue, then we may take voting action to demonstrate our concerns.
In rare circumstances, Manulife IM may consider filing, or co-filing, a shareholder resolution at an investee company. This may occur where our team has engaged with management regarding a material sustainability risk or opportunity, and where we determine that the company
has not made satisfactory progress on the matter within a reasonable time period. Any such decision will be in the sole discretion of Manulife IM and acted on where we believe filing, or co-filing, a proposal
is in the best interests of our clients.
Manulife IM may also divest of holdings in a company where portfolio managers are dissatisfied with company
financial performance, strategic direction, and/or management of material sustainability risks or opportunities.
Procedures
Receipt of ballots and proxy materials
Proxies received
are reconciled against the clients holdings, and the custodian bank will be notified if proxies have not been forwarded to the proxy service provider when due.
Voting proxies
Manulife IM has adopted the voting
principles contained in Appendix B of this policy.
Manulife IM has deployed the services of a proxy voting services provider to ensure the timely casting
of votes, and to provide relevant and timely proxy voting research to inform our voting decisions. Through this process, the proxy voting services provider populates initial recommended voting decisions that are aligned with the Manulife IM voting
principles outlined in Appendix B. These voting recommendations are then submitted, processed, and ultimately tabulated. Manulife IM retains the authority and operational functionality to submit different voting instructions after these initial
recommendations from the proxy voting services provider have been submitted, based on Manulife IMs assessment of each situation. As Manulife IM reviews voting recommendations and decisions, as articulated below, Manulife IM will often change
voting instructions based on those reviews. Manulife IM periodically reviews the detailed policies created by the proxy voting service provider to ensure consistency with our voting principles, to the extent this is possible.
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April 2021 4 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IM also has procedures in place to review additional materials submitted by issuers often in
response to voting recommendations made by proxy voting service providers. Manulife IM will review additional materials related to proxy voting decisions in those situations where Manulife IM becomes aware of those additional materials, is
considering voting contrary to management, and where Manulife IM owns 2% or more of the subject issuer as aggregated across the funds.
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April 2021 5 |
Manulife Investment Management global proxy voting policy and procedures
Portfolio managers actively review voting options and make voting decisions for their holdings. Where
Manulife IM holds a significant ownership position in an issuer, the rationale for a portfolio managers voting decision is specifically recorded, including whether the vote cast aligns with the recommendations of the proxy voting services
provider or has been voted differently. A significant ownership position in an investment is defined as those cases where Manulife IM holds at least 2% of a companys issued share capital in aggregate across all Manulife IM client accounts.
The Manulife IM ESG research and integration team (ESG team) is an important resource for portfolio management teams on proxy matters. This team provides
advice on specific proxy votes for individual issuers if needed. ESG team advice is supplemental to the research and recommendations provided by our proxy voting services provider. In particular, ESG analysts actively review voting resolutions for
companies in which:
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Manulife IMs aggregated holdings across all client accounts represent 2% or greater of issued capital;
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A meeting agenda includes shareholder resolutions related to environmental and social risk management issues, or
where the subject of a shareholder resolution is deemed to be material to our investment decision; or |
Manulife IM may also review
voting resolutions for issuers where an investment team engaged with the firm within the previous two years to seek a change in behavior.
After review,
the ESG team may provide research and advice to investment staff in line with the voting principles.
Manulife IM also has an internal proxy voting
working group (working group) comprising senior managers from across Manulife IM including the equity investment team, legal, compliance, and the ESG team. The working Group operates under the auspices of the Manulife IM Public Markets Sustainable
Investing Committee. The Working group regularly meets to review and discuss voting decisions on shareholder proposals or instances where a portfolio manager recommends a vote different than the recommendation of the proxy voting services provider.
Manulife IM clients retain the authority and may choose to lend shareholdings. Manulife IM, however, generally retains the ability to restrict shares
from being lent and to recall shares on loan in order to preserve proxy voting rights. Manulife IM is focused in particular on preserving voting rights for issuers where funds hold 2% or more of an issuer as aggregated across funds. Manulife IM has
a process in place to systematically restrict and recall shares on a best efforts basis for those issuers where we own an aggregate of 2% or more.
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April 2021 6 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IM may refrain from voting a proxy where we have agreed with a client in advance to limit the
situations in which we will execute votes. Manulife IM may also refrain from voting due to logistical considerations that may have a detrimental effect on our ability to vote. These issues may include, but are not limited to:
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Costs associated with voting the proxy exceed the expected benefits to clients; |
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April 2021 7 |
Manulife Investment Management global proxy voting policy and procedures
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Underlying securities have been lent out pursuant to a clients securities lending program and have not been
subject to recall; |
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Short notice of a shareholder meeting; |
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Requirements to vote proxies in person; |
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Restrictions on a nonnationals ability to exercise votes, determined by local market regulation;
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Restrictions on the sale of securities in proximity to the shareholder meeting (i.e., share blocking);
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Requirements to disclose commercially sensitive information that may be made public (i.e., reregistration);
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Requirements to provide local agents with power of attorney to facilitate the voting instructions (such proxies
are voted on a best-efforts basis); or |
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The inability of a clients custodian to forward and process proxies electronically. |
If a Manulife IM portfolio manager believes it is in the best interest of a client to vote proxies in a manner inconsistent with the policy, the portfolio
manager will submit new voting instructions to a member of the ESG team with rationale for the new instructions. The ESG team will then support the portfolio manager in developing voting decision rationale that aligns with this policy and the voting
principles. The ESG team will then submit the vote change to the working group. The working group will review the change and ensure that the rationale is sound, and the decision will promote the long-term success of the issuer.
On occasion, there may be proxy votes that are not within the research and recommendation coverage universe of the proxy voting service provider. Portfolio
managers responsible for the proxy votes will provide voting recommendations to the ESG team, and those items may be escalated to the working group for review to ensure that the voting decision rationale is sound, and the decision will promote the
long-term success of the issuer. the Manulife IM proxy operations team will be notified of the voting decisions and execute the votes accordingly.
Manulife IM does not engage in the practice of empty voting (a term embracing a variety of factual circumstances that result in a partial, or
total, separation of the right to vote at a shareholders meeting from beneficial ownership of the shares on the meeting date). Manulife IM prohibits investment managers from creating large hedge positions solely to gain the vote while avoiding
economic exposure to the market. Manulife IM will not knowingly vote borrowed shares (for example, shares borrowed for short sales and hedging transactions).
Engagement of the proxy voting service provider
Manulife
IM has contracted with a third-party proxy service provider to assist with the proxy voting process. Except in instances where a client retains voting authority, Manulife IM will instruct custodians of client accounts to forward all proxy statements
and materials received in respect of client accounts to the proxy service provider.
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April 2021 8 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IM has engaged its proxy voting service provider to:
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Research and make voting recommendations; |
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Ensure proxies are voted and submitted in a timely manner; |
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Provide alerts when issuers file additional materials related to proxy voting matters; |
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April 2021 9 |
Manulife Investment Management global proxy voting policy and procedures
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Perform other administrative functions of proxy voting; |
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Maintain records of proxy statements and provide copies of such proxy statements promptly upon request;
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Maintain records of votes cast; and |
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Provide recommendations with respect to proxy voting matters in general. |
Scope of proxy voting authority
Manulife IM and our
clients shape the proxy voting relationship by agreement provided there is full and fair disclosure and informed consent. Manulife IM may agree with clients to other proxy voting arrangements in which Manulife IM does not assume proxy voting
responsibility or will only vote in limited circumstances.3
While the application of our fiduciary
duty in the context of proxy voting will vary with the scope of the voting authority we assume, we acknowledge the relationship in all cases remains that of a fiduciary to the client. Beyond the general discretion retained by Manulife IM to withhold
from voting as outlined above, Manulife IM may enter a specific agreement with a client not to exercise voting authority on certain matters where the cost of voting would be high or the benefit to the client would be low.
Disclosure of proxy votes
Manulife IM may inform company
management of our voting intentions ahead of casting the vote. This is in line with Manulife IMs objective to provide the opportunity for companies to better understand our investment process, policies, and objectives.
We will not intentionally disclose to anyone else, including other investors, our voting intention prior to casting the vote.
Manulife IM keeps records of proxy voting available for inspection by clients, regulatory authorities, or government agencies.
3 |
We acknowledge SEC guidance on this issue from August 2019, which lists several nonexhaustive examples of
possible voting arrangements between the client and investment advisor, including (i) an agreement with the client to exercise voting authority pursuant to specific parameters designed to serve the clients best interest; (ii) an
agreement with the client to vote in favor of all proposals made by particular shareholder proponents; or (iii) an agreement with the client to vote in accordance with the voting recommendations of management of the issuer. All such
arrangements could be subject to conditions depending on instruction from the client. |
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April 2021 10 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IM quarterly discloses voting records aggregated across funds. 4
Conflicts of interest
Manulife IM has an established infrastructure designed to identify conflicts of interest throughout all aspects of the business. Proxy voting proposals may
raise conflicts between the interests of Manulife IMs clients and the interests of Manulife IM, its affiliates, or employees. Apparent conflicts are reviewed by the working group to determine whether there is a conflict of interest and, if so,
whether the conflict is material. Manulife IM shall consider any of the following circumstances a potential material conflict of interest:
4 |
Manulife IM aggregated voting records are available through this site
manulifeim.com/institutional/us/en/sustainability |
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April 2021 11 |
Manulife Investment Management global proxy voting policy and procedures
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Manulife IM has a business relationship or potential relationship with the issuer; |
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Manulife IM has a business relationship with the proponent of the proxy proposal; or |
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Manulife IM members, employees, or consultants have a personal or other business relationship with managers of
the business such as top-level executives, corporate directors, or director candidates. |
In
addressing any such potential material conflict, Manulife IM will seek to ensure proxy votes are cast in the advisory clients best interests and are not affected by Manulife IMs potential conflict. In the event a potential material
conflict of interest exists, the working group or its designee will either (i) review the proxy voting decisions to ensure robust rationale, that the voting decision will protect or enhance shareholder value over the long term, and is in line
with the best interest of the client; (ii) vote such proxy according to the specific recommendation of the proxy voting services provider; (iii) abstain; or (iv) request the client vote such proxy. The basis for the voting decision,
including the process for the determination of the decision that is in the best interests of the client, is recorded.
Voting shares of Manulife
Financial Corporation
Manulife Financial Corporation (MFC) is the publicly listed parent company of Manulife IM. Generally, legislation restricts the
ability of a public company (and its subsidiaries) to hold shares in itself within its own accounts. Accordingly, the MFC share investment policy outlines the limited circumstances in which MFC or its subsidiaries may, or may not, invest or hold
shares in MFC on behalf of MFC or its subsidiaries. 5
The MFC share investment policy does not apply
to investments made on behalf of unaffiliated third parties, which remain assets of the client. 6 Such investing may be restricted, however, by specific client guidelines, other Manulife policies,
or other applicable laws.
Where Manulife IM is charged with voting MFC shares, we will execute votes in proportion with all other shareholders (i.e.,
proportional or echo vote). This is intended to neutralize the effect of our vote on the meeting outcome.
Policy responsibility and oversight
The working group oversees and monitors the policy and Manulife IMs proxy voting function. The working group is responsible for reviewing regular
reports, potential conflicts of interest, vote changes, and nonroutine proxy voting items. The working group also oversees the third-party proxy voting service provider. The working group will meet at least monthly and report to the Manulife IM
public markets sustainable investing committee and, where requested, the Manulife IM operating committee.
5 |
This includes general funds, affiliated segregated funds or separate accounts, and affiliated mutual / pooled
funds. |
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This includes assets managed or advised for unaffiliated third parties, such as unaffiliated mutual/pooled
funds and unaffiliated institutional advisory portfolios. |
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April 2021 12 |
Manulife Investment Management global proxy voting policy and procedures
Manulife IMs proxy operations team is responsible for the daily administration of the proxy voting
process for all Manulife IM operations that have contracted with a third-party proxy voting services provider. Significant proxy voting issues identified by Manulife IMs proxy operations team are escalated to the chief compliance officer or
its designee, and the working group.
The working group is responsible for the proper oversight of any service providers hired by Manulife IM to assist it
in the proxy voting process. This oversight includes:
Annual due diligence: Manulife IM conducts an annual due diligence review of the proxy
voting research service provider. This oversight includes an evaluation of the service providers industry reputation, points of risk, compliance with laws and regulations, and technology infrastructure. Manulife IM also reviews the
providers capabilities to meet Manulife IMs requirements, including reporting competencies; the adequacy and quality of the proxy advisory firms staffing and personnel; the quality and accuracy of sources of data and information;
the strength of policies and procedures that enable it to make proxy voting recommendations based on current and accurate information; and the strength of policies and procedures to address conflicts of interest of the service provider related to
its voting recommendations.
Regular Updates: Manulife also requests that the proxy voting research service provider deliver updates regarding any
business changes that alter that firms ability to provide independent proxy voting advice and services aligned with our policies.
Additional
oversight in process: Manulife IM has additional control mechanisms built into the proxy voting process to act as checks on the service provider and ensure that decisions are made in the best interest of our clients. These mechanisms include:
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Sampling prepopulated votes: Where we use a third-party research provider for either voting
recommendations or voting execution (or both), we may assess prepopulated votes shown on the vendors electronic voting platform before such votes are cast to ensure alignment with the voting principles. |
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Decision scrutiny from the working group: Where our voting policies and procedures do not address how to
vote on a particular matter, or where the matter is highly contested or controversial (e.g., major acquisitions involving takeovers or contested director elections where a shareholder has proposed its own slate of directors), review by the working
group may be necessary or appropriate to ensure votes cast on behalf of its client are cast in the clients best interest. |
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April 2021 13 |
Manulife Investment Management global proxy voting policy and procedures
Recordkeeping and reporting
Manulife IM provides clients with a copy of the voting policy on request and it is also available on our website at manulifeim.com/institutional. Manulife IM
describes its proxy voting procedures to its clients in the relevant or required disclosure document and discloses to its clients the process to obtain information on how Manulife IM voted that clients proxies.
Manulife IM keeps records of proxy voting activities and those records include proxy voting policies and procedures, records of votes cast on behalf of
clients, records of client requests for proxy voting information; and any documents generated in making a vote decision. These documents are available for inspection by clients, regulatory authorities, or government agencies.
Manulife IM discloses voting records on its website and those records are updated on a quarterly basis. The voting records generally reflect the voting
decisions made for retail, institutional and other client funds in the aggregate.
Policy amendments and exceptions
This policy is subject to periodic review by the proxy voting working group. The working group may suggest amendments to this policy and any such amendments
must be approved by the Manulife IM public markets sustainable investing committee and the Manulife IM operating committee.
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.
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April 2021 14 |
Manulife Investment Management global proxy voting policy and procedures
Appendix A. Manulife IM advisory affiliates in scope of policy and investment management business only.
Manulife Investment Management Limited
Manulife Investment
Management (North America) Limited
Manulife Investment Management (Hong Kong) Limited
PT Manulife Aset Manajemen Indonesia*
Manulife Investment
Management (Japan) Limited Manulife
Investment Management (Malaysia) Bhd. Manulife Investment
Management and Trust Corporation
Manulife Investment
Management (Singapore) Pte. Ltd.
Manulife IM (Switzerland) LLC
Manulife Investment Management (Taiwan) Co., Ltd.*
Manulife
Investment Management (Europe) Limited
Manulife Investment Management (US) LLC
Manulife Investment Fund Management (Vietnam) Company Limited*
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April 2021 15 |
Manulife Investment Management global proxy voting policy and procedures
* |
By reason of certain local regulations and laws with respect to voting, for example, manual/physical voting
processes or the absence of a third-party proxy voting service provider for those jurisdictions, Manulife Investment Fund Management (Vietnam) Company Limited, and PT Manulife Aset Manajemen Indonesia do not engage a third-party service provider to
assist in their proxy voting processes. Manulife Investment Management (Taiwan) Co., Ltd. Uses the third-party proxy voting service provider to execute votes for non-Taiwanese entities only.
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April 2021 16 |
Manulife Investment Management global proxy voting policy and procedures
Appendix B. Manulife IM voting principles
Manulife IM believes that strong management of all forms of corporate capital, whether financial, social, or environmental will mitigate risks, create
opportunities, and drive value over the long term. Manulife IM reviews and considers environmental, social, and corporate governance risks and opportunities in our investment decisions. Once invested, Manulife IM continues our oversight through
active ownership, which includes portfolio company engagement and proxy voting of underlying shares. We believe proxy voting is a vital component of this continued oversight as it provides a voice for minority shareholders regarding management
actions.
Manulife IM has developed some key principles that generally drive our proxy voting decisions and engagements. We believe these principles
preserve value and generally lead to outcomes that drive positive firm performance. These principles dictate our voting on issues ranging from director elections and executive compensation to the preservation of shareholder rights and stewardship of
environmental and social capital. Manulife IM also adopts positions on certain sustainability topics and these voting principles should be read in conjunction with those position statements. Currently, we have a climate change statement and an
executive compensation statement that also help guide proxy voting decisions on those matters. The facts and circumstances of each issuer are unique, and Manulife IM may deviate from these principles where we believe doing so will preserve or create
value over the long term. These principles also do not address the specific content of all proposals voted around the globe, but provide a general lens of value preservation, value creation, risk management, and protection of shareholder rights
through which Manulife IM analyzes all voting matters.
I. |
Boards and directors: Manulife IM generally use 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. |
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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 nonexecutive, 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.
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Committee independence: Manulife IM also prefers that key board committees are composed of independent
directors. Specifically, the audit, nomination, and compensation committees should generally be entirely or majority composed of independent directors. |
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April 2021 17 |
Manulife Investment Management global proxy voting policy and procedures
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Attendance: A core part of a directors duties is to remain an engaged and productive participant
at board and committee meetings. Directors should, therefore, attend at least 75% of board and committee meetings in the aggregate over the course of a calendar year. |
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Diversity: In line with the principles expressed in relation to board of independence above, Manulife IM
believes boards with strong gender representation are better equipped to manage risks and oversee business resilience over the long term compared to firms with low gender balance. Manulife IM generally expects boards to have at least one woman on
the board and encourages companies to aspire to a higher balance of gender representation. Manulife IM also may hold boards in certain markets to a higher standard as market requirements and expectations change. In Canada, Europe, the United
Kingdom, and Ireland, for example, we encourage boards to achieve at least one-third female representation. We generally encourage boards to achieve racial and ethnic diversity among their members. We may, in
the future, hold nomination committee chairs accountable where the board does not appear to have racial or ethnically diverse members. |
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Classified/staggered boards: Manulife IM prefers that directors be subject to election and reelection 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 generally supports proposals to eliminate these structures.
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f. |
Overboarding: Manulife IM believes directors should limit their outside board seats in order to ensure
that they have the time and attention to provide their director role at a firm in question. Generally, this means directors should not sit on more than five public company boards. The role of CEO requires an individuals significant time and
attention. Directors holding the role of CEO at any public firm, therefore, generally should not sit on more than three public company boards inclusive of the firm at which they hold the CEO role. |
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g. |
Independent chair/CEO: Governance failures can occur where a manager has firm control over a board
through the combination of the chair/CEO roles. Manulife IM generally supports the separation of the chair/CEO roles as a means to prevent board capture by management. We may evaluate proposals to separate the chair/CEO roles on a case-by-case basis, for example, however, considering such factors as the establishment of a strong lead independent director role or the temporary need for the combination of
the CEO/chair roles to help the firm through a leadership transition. |
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April 2021 18 |
Manulife Investment Management global proxy voting policy and procedures
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h. |
Vote standard: Manulife IM generally supports a vote standard that allows resolutions to pass, or fail,
based on a majority voting standard. Manulife IM generally expects companies to adopt a majority vote standard for director elections and supports the elimination of a plurality vote standard except in the case of contested elections.
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Manulife Investment Management global proxy voting policy and procedures
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i. |
Contested elections: Where there is a proxy contest or a directors election is otherwise
contested, Manulife IM evaluates the proposals on a case-by-case basis. Consideration is given to firm performance, whether there have been significant failures of
oversight and whether the proponent for change makes a compelling case that board turnover will drive firm value. |
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j. |
Significant and problematic actions or omissions: Manulife IM believes boards should be held accountable
to shareholders in instances where there is a significant failure of oversight that has led to a loss of firm value, transparency failure or otherwise curtailed shareholder rights. Manulife IM generally considers withholding from, or voting against,
certain directors in these situations. Some examples of actions that might warrant a vote against directors include, but are not limited to, the following: |
Failure of oversight: Manulife IM may take action against directors where there has been a significant negative event leading to a loss
of shareholder value and stakeholder confidence. A failure may manifest itself in multiple ways, including adverse auditor opinions, material misstatements, failures of leadership and governance, failure to manage ESG risks, environmental or human
rights violations, and poor sustainability reporting.
Adoption of anti-takeover mechanism: Boards should generally review takeover
offers independently and objectively in consideration of the potential value created or lost for shareholders. Manulife IM generally holds boards accountable when they create or prolong certain mechanisms, bylaws or article amendments that act to
frustrate genuine offers that may lead to value creation for shareholders. These can include poison pills; classes of shares with differential voting rights; classified, or staggered, board structures; and unilateral bylaw amendments and
supermajority voting provisions.
Problematic executive compensation practices: Manulife IM encourages companies to adopt best
practices for executive compensation in the markets in which they operate. Generally, this means that pay should be aligned with performance. Manulife IM may hold directors accountable where this alignment is not robust. We may also hold boards
accountable where they have not adequately responded to shareholder votes against a previous proposal on remuneration or have adopted problematic agreements or practices (e.g., golden parachutes, repricing of options).
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April 2021 20 |
Manulife Investment Management global proxy voting policy and procedures
Bylaw/article adoption and amendments: Shareholders should have the ability to vote on
any change to company articles or bylaws that will materially change their rights as shareholders. Any amendments should require only a majority of votes to pass. Manulife IM will generally hold directors accountable where a board has amended or
adopted bylaw and/or article provisions that significantly curtail shareholder rights.
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April 2021 21 |
Manulife Investment Management global proxy voting policy and procedures
Engagement responsiveness: Manulife IM regularly engages with issuers to discuss ESG
risks and opportunities and may request changes from firms during these discussions. Manulife IM may vote against certain directors where we have engaged with an issuer and requested certain changes, but the firm has not made sufficient progress on
those matters.
II. |
Environmental and social proposals: Manulife IM expects its portfolio companies to manage material
environmental and social issues affecting their businesses, whether risks or opportunities, with a view towards long-term value preservation and creation.7 Manulife IM expects firms to identify
material environmental and social risks and opportunities specific to their businesses, to develop strategies to manage those matters, and to provide meaningful, substantive reporting while demonstrating progress year over year against their
management plans. Proposals touching on management of risks and opportunities related to environmental and social issues are often put forth as shareholder proposals but can be proposed by management as well. Manulife IM generally supports
shareholder proposals that request greater transparency or adherence to internationally recognized standards and principles regarding material environmental and social risks and opportunities. |
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a. |
The magnitude of the risk/opportunity: Manulife IM evaluates the level of materiality of a certain
environmental or social issue identified in a proposal as it pertains to the firms ability to generate value over the long term. This review includes deliberation of the effect an issue will have on the financial statements and/or the cost of
capital. |
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b. |
The firms current management of the risk/opportunity: Manulife IM analyzes a firms current
approach to an issue to determine whether the firm has robust plans, infrastructure, and reporting to mitigate the risk or embrace the opportunity. Recent controversies, litigation, or penalties related to a given risk are also considered.
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c. |
The firms current disclosure framework: Manulife IM expects firms to disclose enough information
for shareholders to assess the companys management of environmental and social risks and opportunities material to the business. Manulife IM may support proposals calling for enhanced firm disclosure regarding environmental and social issues
where additional information would help our evaluation of a companys exposure, and response, to those factors. |
7 |
For more information on issues generally of interest to our firm, please see the Manulife Investment Management
engagement policy, the Manulife Investment Management sustainable investing and sustainability risk statement, and the Manulife Investment Management climate change statement. |
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April 2021 22 |
Manulife Investment Management global proxy voting policy and procedures
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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. |
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Manulife Investment Management global proxy voting policy and procedures
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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. |
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a. |
Shareholder rights plans (poison pills): Manulife IM generally opposes mechanisms intended to frustrate
genuine takeover offers. Manulife IM may, however, support shareholder rights plans where the plan has a trigger of 20% ownership or more and will expire in three years or less. In conjunction with these requirements, Manulife IM evaluates the
companys strategic rationale for adopting the poison pill. |
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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 generally opposes the creation, or continuation, of any bylaw, charter, or article provisions that require approval of more than a majority of shareholders for amendment of those documents. Manulife IM may consider
supporting such a standard where the supermajority requirement is intended to protect minority shareholders. |
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c. |
Proxy access: Manulife IM believes that shareholders have a right to appoint representatives to the
board that best protect their interests. The power to propose nominees without holding a proxy contest is a way to protect that right and is potentially less costly to management and shareholders. Accordingly, Manulife IM generally supports creation
of a proxy access right (or similar power at non-U.S. firms) provided there are reasonable thresholds of ownership and a reasonable number of shareholders can aggregate ownership to meet those thresholds.
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d. |
Written consent: Written consent provides shareholders the power to formally demand board action outside
of the context of an annual general meeting. Shareholders can use written consent as a nimble method of holding boards accountable. Manulife IM generally supports the right of written consent so long as that right is reasonably tailored to reflect
the will of a majority of shareholders. Manulife IM may not support such a right, however, where there is a holder with a significant, or controlling, stake. Manulife IM evaluates the substance of any written actual consent proposal in line with
these principles. |
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April 2021 24 |
Manulife Investment Management global proxy voting policy and procedures
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e. |
Right to call a special meeting: Manulife IM is generally supportive of the shareholder right to call a
special meeting. This right allows shareholders to quickly respond to events that can significantly affect firm value. Manulife IM believes that a 10% ownership threshold to call a special meeting reasonably protects this shareholder right while
reducing the possibility of undue distraction for management. |
IV. |
Executive compensation: Manulife IM encourages companies to align executive incentives with shareholder
interests when designing executive compensation plans. Companies should provide shareholders with transparent, comprehensive, and substantive disclosure regarding executive compensation that aids shareholder assessment of the alignment between
executive pay and firm performance. Companies should also have the flexibility to design remuneration programs that fit a firms business model, business sector and industry, and overall corporate strategy. No one template of executive
remuneration can fit all companies. |
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a. |
Advisory votes on executive compensation: While acknowledging that there is no singular model for
executive compensation, Manulife IM closely scrutinizes companies that have certain concerning practices which may include: |
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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. |
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ii. |
One-time grants: A firms
one-time grant to an executive, outside of the normal salary, bonus, and long-term award structure, may be indicative of an overall failure of the board to design an effective remuneration plan. A company
should have a robust justification for making grants outside of the normal remuneration framework. |
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iii. |
Significant quantity of nonperformance-based pay: Executive pay should generally be weighted more
heavily toward performance-based remuneration to create the alignment between pay and performance. Companies should provide a robust explanation for any significant awards made that vest solely based on time or are not otherwise tied to performance.
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iv. |
Lack of rigor in performance targets: Performance targets should challenge managers to improve corporate
performance and outperform peers. Targets should, where applicable, generally align with, or even outpace, guidance; incentivize outperformance against a peer group; and otherwise remain challenging. |
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Manulife Investment Management global proxy voting policy and procedures
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v. |
Lack of disclosure: Transparency is essential to shareholder analysis and understanding of executive
remuneration at a company. Manulife IM expects firms to clearly disclose all major components of remuneration. This includes disclosure of amounts, performance metrics and targets, vesting terms, and pay outcomes. |
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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 generally oppose an advisory vote on
executive compensation where a company has repriced outstanding options for executives without that shareholder approval. |
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vii. |
Adoption of problematic severance agreements (golden parachutes): Manulife IM believes managers should
be incentivized to pursue and complete transactions that may benefit shareholders. Severance agreements, if structured appropriately, can provide such inducements. At the same time, however, the significant payment associated with severance
agreements could potentially drive managers to pursue transactions at the expense of shareholder value. Manulife IM may generally oppose an executive remuneration proposal where a firm has adopted, or amended, an agreement with an executive that
contains an excise tax gross-up provision, permits accelerated vesting of equity upon a change-in-control, allows an executive to
unilaterally trigger the severance payment, or pays out in an amount greater than 300% of salary and bonus combined. |
V. |
Capital structure: Manulife IM believes firms should balance the need to raise capital and encourage
investment with the rights and interests of the existing shareholder body. Evaluation of proposals to issue shares, repurchase shares, conduct stock splits, or otherwise restructure capital, is conducted on a case-
by-case basis with some specific requests covered here: |
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a. |
Common stock authorization: Requests to increase the pool of shares authorized for issuance are
evaluated on a case-by-case basis with consideration given to the size of the current pool, recent use of authorized shares by management, and the company rationale for
the proposed increase. Manulife IM also generally supports these increases where the company intends to execute a split of shares or pay a stock dividend. |
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April 2021 26 |
Manulife Investment Management global proxy voting policy and procedures
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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. |
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April 2021 27 |
Manulife Investment Management global proxy voting policy and procedures
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c. |
Dual class voting structure: Voting power should align with economic interest at a given firm. Manulife
IM generally opposes the creation of new classes of stock with differential voting rights and supports the elimination of these structures. |
VI. |
Corporate transactions and restructurings: Manulife IM reviews mergers, acquisitions, restructurings,
and reincorporations on a case-by-case basis through the lens of whether the transaction will create shareholder value. Considerations include fairness of the terms,
valuation of the event, changes to management and leadership, realization of synergies and efficiencies, and whether the rationale for a strategic shift is compelling. |
VII. |
Cross shareholding: Cross shareholding is a practice where firms purchase equity shares of business
partners, customers, or suppliers in support of those relationships. Manulife IM generally discourages this practice as it locks up firm capital that could be allotted to income-generating investments or otherwise returned to shareholders. Manulife
IM will review cross shareholding practices at issuers and we encourage issuers to keep cross shareholdings below 20% of net assets. |
VIII. |
Audit-related issues: Manulife IM believes that an effective auditor will remain independent and
objective in its review of company reporting. Firms should be transparent regarding auditor fees and other services provided by an auditor that may create a conflict of interest. Manulife IM uses the below principles to guide voting decisions
related to auditors. |
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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. |
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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.
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April 2021 28 |
Part C
Other Information
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Amendment dated December 13, 2018 to the Amended and Restated Declaration of
Trust dated January 22, 2016. –
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Instruments Defining Rights of Security Holders. Not Applicable.
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Investment Advisory Contracts. Amended and Restated Advisory Agreement dated
June 30, 2020 between the Trust and John |
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Underwriting Contracts. Not Applicable. |
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Bonus or Profit Sharing Contracts. Not Applicable. |
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Other Material Contracts. Transfer Agency and Service Agreement dated January
29, 2015 between the Trust and John |
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Amendment dated April 1, 2015 to the Transfer Agency and Service Agreement
between the Trust and John Hancock |
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Service Agreement dated June 30, 2020 among the Trust, the Adviser, and the
Trust’s Chief Compliance Officer – Previously
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Amended and Restated Placement Agent Agreement dated June 30, 2020, between
the Trust and John Hancock Investment |
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Expense Limitation Letter Agreement dated December 14, 2023 between the
Registrant and John Hancock Investment |
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Advisory Fee Waiver Letter Agreement dated December 14, 2023, between the
Registrant and John Hancock Investment |
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Subadvisory Fee Waiver Letter Agreement dated December 14, 2023, between the
Registrant and John Hancock Investment |
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Legal Opinion. Not Applicable. |
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Consent of Independent Registered Public Accounting Firm. Not
Applicable. |
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Omitted Financial Statements. Not Applicable. |
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Initial Capital Agreements. Not Applicable. |
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Rule 12b-1 Plan. Not Applicable. |
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Rule 18f-3 Plan. Not Applicable. |
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Code of Ethics. Code of Ethics, dated January 1, 2008 (as revised April 1,
2024) of John Hancock Investment Management LLC, John Hancock
Variable Trust Advisers LLC, John Hancock Investment Management Distributors LLC, John Hancock Distributors, LLC, and each open-end and closed-end fund advised by a John Hancock advisor. – FILED
HEREWITH. |
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Code of Ethics for Global Wealth and Asset Management and General Account
Investments (Manulife Investment Management (US) LLC (formerly
known as John Hancock Asset Management a division of Manulife Asset Management (US) LLC) and Manulife Investment Management (North America) Limited (formerly known as John Hancock Asset Management a division of
Manulife Asset Management (North America) Limited)) dated April 1, 2024
– FILED HEREWITH. |
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Code of Ethics for the Independent Trustees of the John Hancock Funds effective December 6, 2005, Amended and Restated
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Item 29. Persons Controlled by or Under Common Control with the Fund
John Hancock Investment Management LLC is the Advisor to the Registrant. The Advisor
is an indirect principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife Financial Corporation
(“MFC”), a publicly traded company based in Toronto, Canada. A corporate organization list is set forth below.
Item 30.
Indemnification
Indemnification provisions relating to the fund’s
Trustees, officers, employees and agents are set forth in Article IV of the Fund’s Declaration of Trust included as Exhibit (a) herein.
Article V of the Limited Liability Company Agreement of John Hancock Investment
Management LLC provide as follows:
Section
5.06. Indemnification 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 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.
(g)
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.
Registrant’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.
Section 5.06 of the Limited Liability Company Agreement of Manulife Asset Management
(US) provides as follows:
5.06 Indemnification
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 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 as provided in (f) below 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 (i) 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, (ii) 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,
(iii) independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Company), or (iv) a court of competent jurisdiction.
(g)
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.
Under Section 12 of the Placement Agent Agreement, John Hancock Investment Management Distributors LLC (“John Hancock Funds”) has agreed to indemnify the fund and its Trustees, officers and controlling persons against claims arising out of certain acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Life Insurance Company (“the Insurance Company”) provides, in effect, that the Insurance Company will, subject to limitations of law, indemnify each present and former director, officer and employee of the Insurance Company who serves as a Trustee or officer of the Registrant at the direction or request of the Insurance Company against litigation expenses and liabilities incurred while acting as such, except that such indemnification does not cover any expense or liability incurred or imposed in connection with any matter as to which such person shall be finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Insurance Company. In addition, no such person will be indemnified by the Insurance Company in respect of any final adjudication unless such settlement shall have been approved as in the best interests of the Insurance Company either by vote of the Board of Directors at a meeting composed of directors who have no interest in the outcome of such vote, or by vote of the policyholders. The Insurance Company may pay expenses incurred in defending an action or claim in advance of its final disposition, but only upon receipt of an undertaking by the person indemnified to repay such payment if he should be determined not to be entitled to indemnification.
Item 31. Business and Other Connections of Investment Adviser
See Item 19, “Investment Advisory and Other Services,” in the Part B for information regarding the business of the Advisor. For information as to the business, profession, vocation or employment of a substantial nature of each director, officer or partner of the Advisor, reference is made to the Advisor’s Form ADV, as amended, filed under the Investment Advisers Act of 1940 (file number 801-8124), which is incorporated herein by reference.
Item 32. Principal Underwriters
Item 33. Location of Accounts and Records
The fund maintains the records required to be maintained by it under Rules 31a-1(a), 31a-a(b), and 31a-2(a) under the Investment Company Act of 1940, as amended, at its principal executive offices at 200 Berkeley Street, Boston, MA 02116 and by John Hancock Investment Management LLC, at its principal executive offices at 197 Clarendon Street, Boston, MA 02116. Certain records, including records relating to a fund’s shareholders and the physical possession of its securities, are maintained pursuant to Rule 31a-3 under the 1940 Act at the main office of a fund’s administrator, transfer agent, and custodian.
Item 34. Management Services
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as amended, the Registrant has duly caused this Amendment to its Registration Statement on Form N-1A to be signed on its behalf by the undersigned, duly authorized, in the City of Boston and The Commonwealth of Massachusetts, on the 25th day of April, 2024.
JOHN HANCOCK COLLATERAL TRUST |
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Name: Christopher Sechler Title: Secretary and Chief Legal Officer |