As filed with the Securities and Exchange Commission on April 26, 2023
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 | ☒ |
AMENDMENT NO. 9
(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.
TRAYNE S. WHEELER, ESQ.
K&L GATES LLP
ONE LINCOLN STREET
BOSTON, MASSACHUSETTS 02111-2950
EXPLANATORY NOTES
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.
Dated: April 26, 2023
JOHN HANCOCK COLLATERAL TRUST
PART A
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.
ITEM 5. MANAGEMENT
(a) Investment Managers
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:
Pearl Natalie Andrada
• | Fixed income trader of Manulife IM (US) |
• | Associated with the Fund since 2022 |
• | Began business career in 2010 |
Bridget Bruce
▪ | Fixed income trader of Manulife IM (US) |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2007 |
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Christopher Coccoluto
▪ | Senior fixed income trader of Manulife IM (US) |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2008 |
Michael Lorizio
▪ | Senior fixed income trader of Manulife IM (US) |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 1999 |
James Madison
▪ | Fixed income trader of Manulife IM (US) |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2005 |
Connor Minnaar, CFA
▪ | Associate portfolio manager of Manulife IM (US) |
▪ | 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.
ITEM 7. TAX INFORMATION
The Fund intends to make distributions taxed as ordinary income or as capital gains.
ITEM 8. FINANCIAL INTERMEDIARY COMPENSATION
Statement omitted.
ITEM 9. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, RELATED RISKS, AND DISCLOSURE OF PORTFOLIO HOLDINGS
(a) Investment Objective
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; |
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▪ | 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 10% 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 30% 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 liquidity fees on redemptions and/or temporary redemption gates in the event the Fund’s weekly liquid assets were to fall below a designated threshold, if the Fund’s Board determines such liquidity fees or redemption gates are in the best interest of the Fund.
If the Fund’s weekly liquid assets fall below 30% of its total assets, the Fund may, but is not required to, impose liquidity fees of up to 2% of the value of the shares redeemed and/or temporarily suspend redemptions. If the Fund’s weekly liquid assets fall below 10% of its total assets at the end of any business day, the Fund is required to impose a liquidity fee of 1% on all redemptions beginning on the
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next business day, unless the Board determines that imposing such a fee would not be in the best interests of the Fund. Please see Item 11 herein for additional information.
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 the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(c) Risks
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 quality risk. The Fund invests exclusively in high-quality debt securities (those that are “eligible securities” under Rule 2a-7). Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates after the Fund has purchased the security, the market value
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of the security may decrease and lead to a decrease in the value of the Fund’s investments; however, the Fund will not be required to dispose of the security.
U.S. government securities are subject to varying degrees of credit risk depending upon whether the securities are supported by the full faith and credit of the United States; the ability to borrow from the U.S. Treasury; only by the credit of the issuing U.S. government agency, instrumentality, or corporation; or otherwise supported by the United States. For example, issuers of many types of U.S. government securities (e.g., the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Banks), although chartered or sponsored by Congress, are not funded by congressional appropriations, and their fixed-income securities, including asset-backed and mortgage-backed securities, are neither guaranteed nor insured by the U.S. government. An agency of the U.S. government has placed Fannie Mae and Freddie Mac into conservatorship, a statutory process with the objective of returning the entities to normal business operations. It is unclear what effect this conservatorship will have on the securities issued or guaranteed by Fannie Mae or Freddie Mac. As a result, these securities are subject to more credit risk than U.S. government securities that are supported by the full faith and credit of the United States (e.g., U.S. Treasury bonds).
Economic and Market Events Risk.
Events in certain sectors historically have resulted, and may in the future result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included, but are not limited to: bankruptcies, corporate restructurings, and other similar events; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and state budget deficits; social, political, and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in energy prices and currency exchange rates; and China’s economic slowdown. Interconnected global economies and financial markets increase the possibility that conditions in one country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected. 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.
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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,” and the UK ceased to be a member of the EU. Following a transition period during which the EU and the UK Government engaged in a series of negotiations regarding the terms of the UK’s future relationship with the EU, the EU and the UK Government signed an agreement regarding the economic relationship between the UK and the EU. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. This uncertainty may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. Despite the influence of the lockdowns, and the economic bounce back, Brexit has had a material impact on the UK’s economy. Additionally, trade between the UK and the EU did not benefit from the global rebound in trade in 2021, and remained at the very low levels experienced at the start of the coronavirus (COVID-19) pandemic in 2020, highlighting Brexit’s potential long-term effects on the UK economy.
In addition, Brexit may create additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the coronavirus (COVID-19) pandemic is likely to continue to stretch the resources and deficits of many countries in the EU and throughout the world, increasing the possibility that countries may be unable to make timely payments on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the performance of the fund.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which may lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may ultimately affect fund performance. For example, the coronavirus (COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
The United States responded to the coronavirus (COVID-19) pandemic and resulting economic distress with fiscal and monetary stimulus packages. In late March 2020, the government passed the Coronavirus Aid, Relief, and Economic Security Act, a stimulus package providing for over $2.2 trillion in resources to
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small businesses, state and local governments, and individuals adversely impacted by the coronavirus (COVID-19) pandemic. In late December 2020, the government also passed a spending bill that included $900 billion in stimulus relief for the coronavirus (COVID-19) pandemic. Further, in March 2021, the government passed the American Rescue Plan Act of 2021, a $1.9 trillion stimulus bill to accelerate the United States’ recovery from the economic and health effects of the coronavirus (COVID-19) pandemic. In addition, in mid-March 2020 the Fed cut interest rates to historically low levels and promised unlimited and open-ended quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial markets, including expanding its reverse repurchase agreement operations, adding $1.5 trillion of liquidity to the banking system, establishing swap lines with other major central banks to provide dollar funding, establishing a program to support money market funds, easing various bank capital buffers, providing funding backstops for businesses to provide bridging loans for up to four years, and providing funding to help credit flow in asset-backed securities markets. The Fed also extended credit to small- and medium-sized businesses.
Political and military events, including in Ukraine, North Korea, Russia, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of 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.
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Fees and gates risk. The Fund has adopted policies and procedures such that the Fund will be able to impose liquidity fees on redemptions and/or temporarily suspend redemptions for up to 10 business days in any 90-day period in the event that the Fund’s weekly liquid assets were to fall below a designated threshold, subject to a determination by the Fund’s Board that such a liquidity fee or redemption gate is in the Fund’s best interest. If the Fund’s weekly liquid assets fall below 30% of its total assets, the Fund may impose liquidity fees of up to 2% of the value of the shares redeemed and/or temporarily suspend redemptions, if the Board, including a majority of the independent Trustees, determines that imposing a liquidity fee or temporarily suspending redemptions is in the Fund’s best interest. In addition, if the Fund’s weekly liquid assets fall below 10% of its total assets at the end of any business day, the Fund must impose a 1% liquidity fee on shareholder redemptions unless the Board, including a majority of the independent Trustees, determines that imposing such fee is not in the best interests of the Fund.
Fixed-income securities risk. Fixed-income securities are affected by changes in interest rates and credit quality. A rise in interest rates typically causes bond prices to fall. The longer the average maturity or average duration of the bonds held by the Fund, the more sensitive the Fund is likely to be to interest-rate changes. There is the possibility that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments.
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.
Foreign securities risk.
Funds that invest in securities traded principally in securities markets outside the United States are subject to additional and more varied risks, as the value of foreign securities may change more rapidly and extremely than the value of U.S. securities. Less information may be publicly available regarding foreign issuers, 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.
If applicable, depositary receipts are subject to most of the risks associated with investing in foreign securities directly because the value of a depositary receipt is dependent upon the market price of the underlying foreign equity security. Depositary receipts are also subject to liquidity risk. Additionally, the Holding Foreign Companies Accountable Act (HFCAA) could cause securities of foreign companies, including American depositary receipts, to be delisted from U.S. stock exchanges if the companies do not allow the U.S. government to oversee the auditing of their financial information. Although the requirements of the HFCAA apply to securities of all foreign issuers, the SEC has thus far limited its enforcement efforts to securities of Chinese companies. If securities are delisted, a fund’s ability to transact in such securities will be impaired, and the liquidity and market price of the securities may decline. The fund may also need to seek other markets in which to transact in such securities, which could increase the fund’s costs.
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Interest-rate risk. Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of 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, 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.
The fixed-income securities market has been and may continue to be negatively affected by the coronavirus (COVID-19) pandemic. As with other serious economic disruptions, governmental authorities and regulators responded with significant fiscal and monetary policy changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including their reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
Issuer risk. The value of fixed income securities may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage, reduced demand for the issuer’s goods and services, historical and prospective earnings of the issuer and the value of the assets of the issuer. An issuer of securities held by the Fund could default or have its credit rating downgraded. These risks could adversely impact the value of the Fund’s portfolio and the Fund’s ability to achieve its investment objective.
Liquidity risk. 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
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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 (such as the coronavirus (COVID-19) pandemic), may adversely affect the fund’s ability to conduct business, in particular if the fund’s employees or the employees of its service providers are unable or unwilling to perform their responsibilities as a result of any such event. Even if the fund’s employees and the employees of its service providers are able to work remotely, those remote work arrangements could result in the fund’s business operations being less efficient than under normal circumstances, could lead to delays in its processing of transactions, and could increase the risk of cyber-events.
Prepayment risk. During periods of declining interest rates, borrowers may exercise their option to prepay principal earlier than scheduled. For fixed rate securities, such payments often occur during periods of declining interest rates, forcing the Fund to reinvest in lower yielding securities, resulting in a possible decline in the Fund’s income and distributions to shareholders. This is known as prepayment or “call” risk. Floating rate loans are also subject to prepayment risk. Securities subject to prepayment risk can offer less potential for gains when the credit quality of the issuer improves.
Redemption risk. Substantial redemptions of shares by the Fund’s investors within a short period of time could require the Fund to liquidate positions more rapidly than would otherwise be desirable, which could result in losses that would adversely affect the NAV of both the shares being redeemed and the remaining outstanding shares. Shares held by the Advisor, its affiliates or investment companies under their management are expected to represent a substantial portion of the Fund’s assets. The Advisor and its affiliates are not under any obligation to the Fund with respect to the amount or timing of these investments or redemption of their investments.
Reinvestment risk. 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.
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Repurchase agreements risk. The risk of a repurchase agreement transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument purchased may decline in value, interest payable on the instrument may be lost and there may be possible difficulties and delays in obtaining collateral and delays and expense in liquidating the instrument. If an issuer of a repurchase agreement fails to repurchase the underlying obligation, the loss, if any, would be the difference between the repurchase price and the underlying obligation’s market value. The fund might also incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings are commenced with respect to the seller, realization upon the underlying obligation might be delayed or limited.
U.S. Government Obligations. U.S. government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Treasury. These securities include treasury bills, notes and bonds.
GNMA Obligations. GNMA obligations are mortgage-backed securities guaranteed by the GNMA, which guarantee is supported by the full faith and credit of the U.S. government.
U.S. Agency Obligations. U.S. government agency obligations are debt securities issued or guaranteed as to principal or interest by an agency or instrumentality of the U.S. government pursuant to authority granted by Congress. U.S. government agency obligations include, but are not limited to:
• | SLMA; |
• | FHLBs; |
• | FICBs; and |
• | Fannie Mae. |
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.
(d) Portfolio Holdings
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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
(a)(1) Management
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, 2022, the Advisor had total assets under management of approximately $144.3 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
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Manulife Financial Corporation) and, as of December 31, 2022, had total assets under management of approximately $181.4 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.
Average Daily Net Assets of the Fund | Fee (Annual Rate) |
First $1.5 billion | 0.50% |
Over $1.5 billion | 0.48% |
A contractual management fee waiver of 0.45% is in effect until April 30, 2024. |
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.
Pearl Natalie Andrada
• | Fixed income trader of Manulife IM (US) |
• | Associated with the Subadvisor since 2022 |
• | Associated with the Fund since 2022 |
• | Began business career in 2010 |
Bridget Bruce
▪ | Fixed income trader of Manulife IM (US) |
▪ | Associated with the Subadvisor since 2009 |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2007 |
Christopher Coccoluto
▪ | Senior fixed income trader of Manulife IM (US) |
▪ | Associated with the Subadvisor since 2010 |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2008 |
Michael Lorizio
▪ | Senior fixed income trader of Manulife IM (US) |
▪ | Associated with the Subadvisor since 2000 |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 1999 |
James Madison
▪ | Fixed income trader at Manulife IM (US) |
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▪ | Associated with the Subadvisor since 2015 |
▪ | Associated with the Fund since 2015 |
▪ | Began business career in 2005 |
Connor Minnaar, CFA
▪ | Associate Portfolio Manager of Manulife IM (US) |
▪ | Associated with the Subadvisor since 2006 |
▪ | Associated with the Fund since 2022 |
▪ | Began business career in 2002 |
(a)(3) Legal Proceedings
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.
(b) Capital Stock
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
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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.
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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
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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 SEC has implemented a number of requirements, including liquidity fees and temporary redemption gates, for money market funds based on the amount of Fund assets that are “weekly liquid assets,” which generally includes cash, direct obligations of the U.S. government, certain other U.S. government or agency securities and securities that will mature or are subject to a demand feature that is exercisable and payable within five business days.
The Fund has adopted policies and procedures such that the Fund will be able to impose liquidity fees on redemptions and/or temporarily suspend redemptions for up to 10 business days in any 90-day period in the event that the Fund’s weekly liquid assets were to fall below a designated threshold, subject to a determination by the Fund’s Board that such a liquidity fee or redemption gate is in the Fund’s best interest. If the Fund’s weekly liquid assets fall below 30% of its total assets, the Fund may impose liquidity fees of up to 2% of the value of the shares redeemed and/or temporarily suspend redemptions, if the Board, including a majority of the independent Trustees, determines that imposing a liquidity fee or temporarily suspending redemptions is in the Fund’s best interest. If the Fund’s weekly liquid assets fall below 10% of its total assets at the end of any business day, the Fund will impose a liquidity fee of 1% on all redemptions beginning on the next business day, unless the Board, including a majority of the independent Trustees, determines that imposing such a fee would not be in the best interests of the Fund or determines that a lower or higher fee (not to exceed 2%) would be in the best interests of the Fund, which would remain in effect until weekly liquid assets return to 30% or the Board determines that the fee is no longer in the best interests of the Fund. In the event that a liquidity fee is imposed and/or redemptions are temporarily suspended, the Board 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. All liquidity fees payable by shareholders of the Fund would be payable to the Fund and could offset any losses realized by the Fund when seeking to honor redemption requests during times of market stress.
If liquidity fees are imposed or redemptions are temporarily suspended, 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 Fund’s percentage of total assets invested in weekly liquid assets, the time of implementation of the liquidity fee and/or redemption gate and details regarding the amount of the liquidity fee. The imposition and termination of a liquidity fee or redemption gate will also be reported by the Fund to the SEC on Form N-CR.
If redemptions are temporarily suspended, the Fund will not accept redemption orders until the Fund has notified shareholders that the redemption gate has been lifted. Shareholders wishing to redeem shares once the redemption gate has been lifted will need to submit a new redemption request to the Fund.
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All liquidity fees payable by shareholders to the Fund 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 will reduce the amount a shareholder will receive upon the redemption of its shares and will 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, 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.
Under certain circumstances, the Fund may honor redemption orders (or pay redemptions without adding a liquidity fee to the redemption amount) if the Fund can verify that the redemption order was received in good order by the Fund before the Fund imposed liquidity fees or temporarily suspended redemptions.
(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.
(f) Tax Consequences
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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
(a) Sales Loads.
Not applicable.
(b) Rule 12b-1 Fees
Not applicable.
(c) Multiple Class and Master-Feeder Funds
Not applicable.
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JOHN HANCOCK COLLATERAL TRUST
PART B
Dated: April 26, 2023
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 26, 2023. 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.
The Fund was organized as a Massachusetts business trust on December 4, 2014, under the laws of the Commonwealth of Massachusetts
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ITEM 16. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
(a) Classification
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.
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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
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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.
European Risk. Countries in Europe may be significantly affected by fiscal and monetary controls implemented by the European Union (“EU”) and European Economic and Monetary Union (“EMU”), which require member countries to comply with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls. Decreasing imports or exports, changes in governmental or other regulations on trade, changes in the exchange rate or dissolution of the Euro, the default or threat of default by one or more EU member countries on its sovereign debt, and/or an economic recession in one or more EU member countries may have a significant adverse effect on 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,” and the UK ceased to be a member of the EU. Following a transition period during which the EU and the UK Government engaged in a series of negotiations regarding the terms of the UK’s future relationship with the EU, the EU and the UK Government signed an agreement regarding the economic relationship between the UK and the EU. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political, regulatory, economic, and market outcomes are difficult to predict. The uncertainty resulting from the transition period may affect other countries in the EU and elsewhere, cause volatility within the EU, or trigger prolonged economic downturns in certain countries within the EU. It is also possible that various countries within the UK, such as Scotland or Northern Ireland, could seek to separate and remain a part of the EU. Other secessionist movements including countries seeking to abandon the Euro or withdraw from the EU may cause volatility and uncertainty in the EU.
The UK has one of the largest economies in Europe and is a major trading partner with the other 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. In addition, Brexit may create
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additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the coronavirus (COVID-19) pandemic is likely to continue to stretch the resources and deficits of many countries in the EU and throughout the world, increasing the possibility that countries may be unable to make payments on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the performance of the Fund.
Investing in the securities of Eastern European issuers is highly speculative and involves risks not usually associated with investing in the more developed markets of Western Europe. Securities markets of Eastern European countries typically are less efficient and have lower trading volume, lower liquidity, and higher volatility than more developed markets. Eastern European economies also may be particularly susceptible to disruption in the international credit market due to their reliance on bank related inflows of capital.
To the extent that a Fund invests in European securities, it may be exposed to these risks through its direct investments in such securities, including sovereign debt, or indirectly through investments in money market funds and financial institutions with significant investments in such securities. In addition, 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.
Custodial Receipts. 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.
Repurchase Agreements Risk. 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
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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.
Risks of Foreign Securities. 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.
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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 Fund. See “Sovereign Government and Supranational Debt Risk” and “European Risk”, above.
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, the 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 Securities Act of 1933, as amended (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
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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.
The SEC adopted Rule 18f-4 under the 1940 Act (the “Derivatives Rule”) on October 28, 2020, and in doing so announced it would rescind SEC releases, guidance and no-action letters related to funds’ coverage and asset segregation practices. Funds were required to comply with the Derivatives Rule requirement by August 19, 2022. When-issued or forward settling securities transactions physically settling within 35 days are deemed not to involve a senior security. When-issued or forward settling securities transactions that do not physically settle within 35 days are required to be treated as derivatives transactions in compliance with the Derivatives Rule.
Interfund Lending. Pursuant to an exemptive order issued by the SEC, the 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 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. The 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 the 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
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services related to carbon based energy sources, such as drilling services or equipment maintenance services.
Interest Rate Risk. Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of the fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline. Recent and potential future changes in government monetary policy may affect interest rates.
The longer a fixed-income 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.
The fixed-income securities market has been and may continue to be negatively affected by the coronavirus (COVID-19) pandemic. As with other serious economic disruptions, governmental authorities and regulators responded with significant fiscal and monetary policy changes, including considerably lowering interest rates, which, in some cases could result in negative interest rates. These actions, including their reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets and reduce market liquidity. To the extent the fund has a bank deposit or holds a debt instrument with a negative interest rate to maturity, the fund would generate a negative return on that investment. Similarly, negative rates on investments by money market funds and similar cash management products could lead to losses on investments, including on investments of the fund’s uninvested cash.
LIBOR Discontinuation Risk. Certain debt securities, derivatives and other financial instruments may utilize LIBOR as the reference or benchmark rate for interest rate calculations. However, following allegations of manipulation and concerns regarding liquidity, in July 2017 the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it would cease its active encouragement of banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing certain LIBOR maturities, including some U.S. LIBOR maturities, on December 31, 2021, and is expected to cease publishing the remaining and most liquid U.S. LIBOR maturities on June 30, 2023. It is expected that market participants have or will transition to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date. Additionally, although regulators have encouraged the development and adoption of alternative rates such as the Secured Overnight Financing Rate (“SOFR”), the future utilization of LIBOR or of any particular replacement rate remains uncertain.
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Although the transition process away from LIBOR has become increasingly well-defined in advance of the anticipated discontinuation dates, the impact on certain debt securities, derivatives and other financial instruments remains uncertain. It is expected that market participants will adopt alternative rates such as SOFR or otherwise amend financial instruments referencing LIBOR to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor the viability of such measures is known. Further, uncertainty and risk remain regarding the willingness and ability of issuers and lenders to include alternative rates and revised provisions in new and existing contracts or instruments. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. However, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple alternative reference rates in new or existing financial instruments and products has not been determined. Certain proposed replacement rates to LIBOR, such as SOFR, which is a broad measure of secured overnight U.S. Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an alternative reference rate is not completed in a timely manner.
As market participants transition away from LIBOR, LIBOR’s usefulness may deteriorate and these effects could be experienced until the permanent cessation of the majority of U.S. LIBOR rates in 2023. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR’s deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR as a benchmark interest rate, including securities and other financial instruments held by the fund. Further, the utilization of an alternative reference rate, or the transition process to an alternative reference rate, may adversely affect the 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. 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.
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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’s and the advisor’s relationships with accounts, shareholders, clients, customers, employees, products, and service providers. The funds have established risk management systems reasonably designed to seek to reduce the risks associated with cyber-events. There is no guarantee that the funds will be able to prevent or mitigate the impact of any or all cyber-events.
The funds are exposed to operational risk arising from a number of factors, including, but not limited to, human error, processing and communication errors, errors of the funds’ service providers, counterparties, or other third parties, failed or inadequate processes, and technology or system failures.
The Advisor, 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 funds invest.
In addition, other disruptive events, including (but not limited to) natural disasters and public health crises (such as the coronavirus (COVID-19) pandemic), may adversely affect the 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
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included, but are not limited to: bankruptcies, corporate restructurings, and other similar events; governmental efforts to limit short selling and high frequency trading; measures to address U.S. federal and state budget deficits; social, political, and economic instability in Europe; economic stimulus by the Japanese central bank; dramatic changes in energy prices and currency exchange rates; and China’s economic slowdown. Interconnected global economies and financial markets increase the possibility that conditions in one country or region might adversely impact issuers in a different country or region. Both domestic and foreign equity markets have experienced increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage, and credit markets particularly affected. 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,” and the UK ceased to be a member of the EU. Following a transition period during which the EU and the UK Government engaged in a series of negotiations regarding the terms of the UK’s future relationship with the EU, the EU and the UK Government signed an agreement on regarding the economic relationship between the UK and the EU. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. There remains significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible political,
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regulatory, economic, and market outcomes are difficult to predict. This uncertainty may affect other countries in the EU and elsewhere, and may cause volatility within the EU, triggering prolonged economic downturns in certain countries within the EU. Despite the influence of the lockdowns, and the economic bounce back, Brexit has had a material impact on the UK’s economy. Additionally, trade between the UK and the EU did not benefit from the global rebound in trade in 2021, and remained at the very low levels experienced at the start of the coronavirus (COVID-19) pandemic in 2020, highlighting Brexit’s potential long-term effects on the UK economy.
In addition, Brexit may create additional and substantial economic stresses for the UK, including a contraction of the UK economy and price volatility in UK stocks, decreased trade, capital outflows, devaluation of the British pound, wider corporate bond spreads due to uncertainty and declines in business and consumer spending as well as foreign direct investment. Brexit may also adversely affect UK-based financial firms that have counterparties in the EU or participate in market infrastructure (trading venues, clearing houses, settlement facilities) based in the EU. Additionally, the spread of the coronavirus (COVID-19) pandemic is likely to continue to stretch the resources and deficits of many countries in the EU and throughout the world, increasing the possibility that countries may be unable to make timely payments on their sovereign debt. These events and the resulting market volatility may have an adverse effect on the performance of the fund.
A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which may lead to less liquidity in certain instruments, industries, sectors or the markets generally, and may ultimately affect fund performance. For example, the coronavirus (COVID-19) pandemic has resulted and may continue to result in significant disruptions to global business activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other pre-existing political, social and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
The United States responded to the coronavirus (COVID-19) pandemic and resulting economic distress with fiscal and monetary stimulus packages. In late March 2020, the government passed the Coronavirus Aid, Relief, and Economic Security Act, a stimulus package providing for over $2.2 trillion in resources to small businesses, state and local governments, and individuals adversely impacted by the coronavirus (COVID-19) pandemic. In late December 2020, the government also passed a spending bill that included $900 billion in stimulus relief for the coronavirus (COVID-19) pandemic. Further, in March 2021, the government passed the American Rescue Plan Act of 2021, a $1.9 trillion stimulus bill to accelerate the United States’ recovery from the economic and health effects of the coronavirus (COVID-19) pandemic. In addition, in mid-March 2020 the Fed cut interest rates to historically low levels and promised unlimited and open-ended quantitative easing, including purchases of corporate and municipal government bonds. The Fed also enacted various programs to support liquidity operations and funding in the financial markets, including expanding its reverse repurchase agreement operations, adding $1.5 trillion of liquidity to the banking system, establishing swap lines with other major central banks to provide dollar funding, establishing a program to support money market funds, easing various bank capital buffers, providing funding backstops for businesses to provide bridging loans for up to four years, and providing funding to help credit flow in asset-backed securities markets. The Fed also extended credit to small- and medium-sized businesses.
Political and military events, including in Ukraine, North Korea, Russia, Venezuela, Iran, Syria, and other areas of the Middle East, and nationalist unrest in Europe and South America, also may cause market disruptions.
As a result of continued political tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and ultimate result of which are unknown at this time, the United States and the EU, along with the regulatory bodies of a number of countries, have imposed
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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.
ESG Integration Risk. 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
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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.
(c) Fund Policies.
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
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“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
The Fund will not:
(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 |
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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
Not applicable.
(e) Portfolio Turnover
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.
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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, 2022, the entities that may receive information described in the preceding paragraph, and the purpose for which such information is disclosed, are as presented in the table below. Portfolio holdings information is provided as frequently as daily with a one-day lag.
Vendor Name | Disclosure Purpose |
Bloomberg L.P. | Analytics, Compliance, Trade Order Management, Pricing, Research Reports, Reporting Agency |
BNP Paribas S.A. | Leverage Provider, Pledging |
Broadridge Financial Solutions | Proxy Voting, Software Vendor |
Brown Brothers Harriman | Back Office Functions, Service Provider, Reconciliation, Corporate Actions |
Capital Institutional Services (CAPIS) | Broker Dealer, Commission Recapture, Transition Services |
Citibank | Securities Lending |
Confluence Technologies | Consulting |
DataLend | Securities Lending Analytics |
DG3 | Financial Reporting, Type Setting |
Donnelley Financial Solutions | Financial Reporting, Printing |
DUCO | Reconciliation Services |
Electra Information Systems | Reconciliation |
Ernst & Young | Tax Reporting |
ETF Global | Holdings Analytics |
FactSet | Data Gathering, Analytics, Performance, Research Reports |
Foley Hoag | Foreign Currency Trade Review |
FX Transparency | Transactions |
Gainskeeper | Wash Sales, REIT Data |
Goldman Sachs (GSAL) | Securities Lending |
Institutional Shareholder Services (ISS) | Class Actions, Proxy Voting |
Interactive Data | Pricing |
KPMG | Tax Reporting |
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Vendor Name | Disclosure Purpose |
Law Firm of Davis and Harman | Development of Revenue Ruling |
Lipper | Ratings, Survey Service |
Markit | Service Provider-Electronic Data Management |
Milestone | Service Provider-Valuation Oversight |
Morningstar, Inc. | Ratings, Surveys |
MSCI Inc. | Liquidity Risk Management, Performance |
National Financial Services | Securities Lending |
PricewaterhouseCoopers LLP | Audit Services |
RSM US LLP | Consulting |
Russell Implementation Services | Transition Services |
Security Software & Consulting Inc. (SS&C) | Cash & Securities Reconciliation, Analytics, Data Gathering, Performance |
Star Compliance | Service Provider, Code of Ethics Monitoring, Personal Trading |
State Street Bank | Service Provider-IBOR, Back Office Functions, Custodian, Collateral Services, Securities Lending |
State Street Closed End Financing | SS Lending Funds |
SunGard | Securities Lending Analytics |
SWIFT | Accounting Messages, Custody Messages, Trade Messaging |
Wolters Kluwer | 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.
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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 table includes information concerning other directorships held by each Trustee in other registered investment companies or publicly traded companies. Information is listed separately for each Trustee who is an “interested person” (as defined in the 1940 Act) of the Trust (each a “Non-Independent Trustee”) and the Independent Trustees. As of December 31, 2022, the “John Hancock Fund Complex” consisted of 186 funds (including separate series of series mutual funds). Each Trustee has been elected to serve on the Board. Each of William H. Cunningham, Grace K. Fey, Deborah C. Jackson, Hassell H. McClellan, Steven R. Pruchansky, and Gregory A. Russo was most recently elected to serve on the Board at a shareholder meeting held on November 15, 2012. Each of Andrew G. Arnott, James R. Boyle, Noni L. Ellison, Dean C. Garfield, Marianne Harrison, Patricia Lizarraga, 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.
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Non-Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Andrew G. Arnott(2) (1971) |
Trustee (since 2017); President (since 2014) |
Global Head of Retail for Manulife (since 2022); Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Director and Executive Vice President, John Hancock Investment Management LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Variable Trust Advisers LLC (since 2006, including prior positions); President, John Hancock Investment Management Distributors LLC (since 2004, including prior positions); President of various trusts within the John Hancock Fund Complex (since 2007, including prior positions).
Trustee of various trusts within the John Hancock Fund Complex (since 2017). |
184 |
40 |
Non-Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years |
Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Marianne Harrison(2) (1963) |
Trustee (since 2018) |
President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013–2017); Member, Board of Directors, Boston Medical Center (since 2021); Member, Board of Directors, CAE Inc. (since 2019); Member, Board of Directors, MA Competitive Partnership Board (since 2018); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led innovation center that fosters technology companies in Canada (2017– 2019); Member, Board of Directors, Manulife Assurance Canada (2015–2017); Board Member, St. Mary’s General Hospital Foundation (2014–2017); Member, Board of Directors, Manulife Bank of Canada (2013–2017); Member, Standing Committee of the Canadian Life & Health Assurance Association (2013–2017); Member, Board of Directors, John Hancock USA, John Hancock Life & Health, John Hancock New York (2012–2013 and since 2017).
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183 |
Paul Lorentz(2) | Trustee (since 2022) |
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). |
183 |
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Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years | Number of Funds in John Hancock Fund Complex Overseen by Trustee |
James R. Boyle (1959) |
Trustee (since 2015) |
Board Member, United of Omaha Life Insurance Company (since 2022). Board Member, Mutual of Omaha Investor Services, Inc. (since 2022). Foresters Financial, Chief Executive Officer (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). |
183 |
William H. Cunningham (1944) |
Trustee (since 2015) |
Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000).
Trustee of various trusts within the John Hancock Fund Complex (since 1986). |
184 |
Noni L. Ellison (1971) |
Trustee (since 2022) |
Senior Vice President, General Counsel & Corporate Secretary, Tractor Supply Company (rural lifestyle retailer) (since 2021); General Counsel, Chief Compliance Officer & Corporate Secretary, Carestream Dental, L.L.C. (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–present).
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
183 |
42 |
Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years | Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Grace K. Fey (1946) |
Trustee (since 2015) |
Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009).
Trustee of various trusts within the John Hancock Fund Complex (since 2008). |
186 |
Dean C. Garfield (1968) |
Trustee (since 2022) |
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).
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
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Deborah C. Jackson (1952) |
Trustee (since 2015) |
President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, Amwell Corporation (since 2020); Board of Directors, Massachusetts Women’s Forum (2018–2020); Board of Directors, National Association of Corporate Directors/New England (2015–2020); 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). |
185
|
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Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years | Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Patricia Lizarraga (1966) |
Trustee (since 2022) |
Founder, Chief Executive Officer, Hypatia Capital Group (advisory and asset management company) (since 2007); Independent Director, Audit Committee Chair, and Risk Committee Member, Credicorp, Ltd. (since 2017); Independent Director, Audit Committee Chair, Banco De Credito Del Peru (since 2017); Trustee, Museum of Art of Lima (since 2009).
Trustee of various trusts within the John Hancock Fund Complex (since 2022). |
183 |
Hassell H. McClellan (1945) |
Trustee (since 2015) and Chairperson of the Board (since 2017) |
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. |
186 |
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. |
183 |
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Independent Trustees | |||
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) and Other Directorships During the Past 5 Years | Number of Funds in John Hancock Fund Complex Overseen by Trustee |
Frances G. Rathke (1960) |
Trustee (since 2020) |
Director, Audit Committee Chair, Oatly Group AB (plant-based drink company) (since 2021); Director, Audit Committee Chair and Compensation Committee Member, Green Mountain Power Corporation (since 2016); Director, Treasurer and Finance & Audit Committee Chair, Flynn Center for Performing Arts (since 2016); Director and Audit Committee Chair, Planet Fitness (since 2016); Chief Financial Officer and Treasurer, Keurig Green Mountain, Inc. (2003–retired 2015).
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183 |
Gregory A. Russo (1949) |
Trustee (since 2015) |
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). |
183 |
(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
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or employees of the Advisor or its affiliates. All of the officers also are officers of all of the other funds for which the Advisor serves as investment advisor.
Name (Birth Year) |
Current Position(s) with the Trust(1) | Principal Occupation(s) During the Past 5 Years |
Charles A. Rizzo (1957) | 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) | Treasurer (since 2015) |
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). |
Trevor Swanberg (1979) | Chief Compliance Officer (since 2020) | Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2019–2020); Assistant Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2016–2019); Vice President, State Street Global Advisors (2015–2016); Chief Compliance Officer of various trusts within the John Hancock Fund Complex (since 2016, including prior positions). |
(1) | Each officer holds office for an indefinite term until his or her successor is duly elected and qualified or until he 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 and expertise 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. 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 funds in a manner consistent with the best interests of the Funds’ shareholders. When
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considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Trustees.
Independent Trustees
James R. Boyle –Mr. Boyle has high-level executive, financial, operational, governance, regulatory and leadership experience in the financial services industry, including in the development and management of registered investment companies, variable annuities, retirement and insurance products. Mr. Boyle is the former President and CEO of a large international fraternal life insurance company and is the former President and CEO of multi-line life insurance and financial services companies. Mr. Boyle began his career as a Certified Public Accountant with Coopers & Lybrand.
William H. Cunningham –Mr. Cunningham has management and operational oversight experience as a former Chancellor and President of a major university. Mr. Cunningham regularly teaches a graduate course in corporate governance at the law school and at the Red McCombs School of Business at The University of Texas at Austin. He also has oversight and corporate governance experience as a current and former director of a number of operating companies, including an insurance company.
Noni L. Ellison – As a senior vice president, general counsel, and corporate secretary with over 25 years of executive leadership experience, Ms. Ellison has extensive management and business expertise in legal, regulatory, compliance, operational, quality assurance, international, finance and governance matters.
Grace K. Fey –Ms. Fey has significant governance, financial services, and asset management industry expertise based on her extensive non-profit board experience, as well as her experience as a consultant to non-profit and corporate boards, and as a former director and executive of an investment management firm.
Dean C. Garfield – As a former president and chief executive officer of a leading industry organization and current vice-president of a leading international company, Mr. Garfield has significant global executive operational, governance, regulatory, and leadership experience. He also has experience as a leader overseeing and implementing global public policy matters including strategic initiatives.
Deborah C. Jackson –Ms. Jackson has leadership, governance, management, and operational oversight experience as the lead director of a large bank, president of a college, and as the former chief executive officer of a major charitable organization. She also has expertise in financial services matters and oversight and corporate governance experience as a current and former director of various other corporate organizations, including, an insurance company, a regional stock exchange, a telemedicine company, and non-profit entities.
Patricia Lizarraga –Through her current positions as an independent board director, audit committee chair, and chief executive officer of an investment advisory firm, Ms. Lizarraga has expertise in financial services and investment matters, and operational and risk oversight. As former governance committee chair, Ms. Lizarraga has a strong understanding of corporate governance and the regulatory frameworks of the investment management industry.
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.
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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.
Non-Independent Trustees
Andrew G. Arnott – Through his positions as Executive Vice President of John Hancock Financial Services; Director and Executive Vice President of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC; President of John Hancock Investment Management Distributors LLC; and President of the John Hancock Fund Complex, Mr. Arnott has experience in the management of investments, registered investment companies, variable annuities and retirement products, enabling him to provide management input to the Board.
Marianne Harrison –Through her position as President and CEO, John Hancock, and previous experience as President and CEO, Manulife Canadian Division, President and General Manager for John Hancock Long-Term Care Insurance, and Executive Vice President and Controller for Manulife, Ms. Harrison has experience as a strategic business builder expanding product offerings and distribution, enabling her to provide management input to the Board.
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, 2022.
The Board has appointed an Independent Trustee as Chairperson. The Chairperson presides at meetings of the Trustees, and may call meetings of the Board and any Board committee whenever he deems it necessary. The Chairperson participates in the preparation of the agenda for meetings of the Board and the identification of information to be presented to the Board with respect to matters to be acted upon by the Board. The Chairperson also acts as a liaison with the funds’ management, officers, attorneys, and other Trustees generally between meetings. The Chairperson may perform such other functions as may be requested by the Board from time to time. The Board also has designated a Vice Chairperson to serve in the absence of the Chairperson. Except for any duties specified in this Part B 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.
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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 Ms. Harrison and Messrs. Arnott, Boyle and Lorentz, as current or former senior executives of the Advisor or MFC, the parent company of the Advisor, 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.
Board Committees
The Board has established an Audit Committee; Compliance Committee; Contracts, Legal & Risk Committee; Nominating and Governance Committee; and Investment Committee. The current membership of each committee is set forth below.
Audit Committee. The Board has a standing Audit Committee composed solely of Independent Trustees (Mr. Cunningham and Mses. Lizarraga and 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, 2022.
Compliance Committee. The Board also has a standing Compliance Committee (Ms. Fey, Mr. Garfield and Ms. Jackson). Ms. Fey serves as Chairperson of this Committee. This Committee reviews and makes recommendations to the full Board regarding certain compliance matters relating to the Trust. This Committee met four times during the fiscal year ended December 31, 2022.
Contracts, Legal & Risk Committee. The Board also has a standing Contracts, Legal & Risk Committee (Mr. Boyle, Ms. Ellison, and Messrs. Pruchansky, and Russo). Mr. Russo serves as Chairperson of this Committee. This Committee oversees the initiation, operation, and renewal of the various contracts between the Trust and other entities. These contracts include advisory and subadvisory agreements, custodial and transfer agency agreements and arrangements with other service providers. The Committee also reviews the significant legal affairs of the funds, as well as any significant regulatory and legislative actions or proposals affecting or relating to the funds or their service providers. The Committee also assists the Board in its oversight role with respect to the processes pursuant to which the Advisor and the subadvisor 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, 2022.
Nominating and Governance Committee. The Board also has a Nominating and Governance Committee composed of all of the Independent Trustees. This Committee will consider nominees recommended by Trust shareholders. Nominations should be forwarded to the attention of the Secretary of the Trust at 200 Berkeley Street, Boston, Massachusetts 02116. Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in order to be considered by this Committee. This Committee met five times during the fiscal year ended December 31, 2022.
Investment Committee. The Board also has an Investment Committee composed of all of the Trustees.
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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, 2022.
Annually, the Board evaluates its performance and that of its Committees, including the effectiveness of the Board’s Committee structure.
Risk Oversight
As registered investment companies, the funds are subject to a variety of risks, including investment risks (such as, among others, market risk, credit risk and interest rate risk), financial risks (such as, among others, settlement risk, liquidity risk and valuation risk), compliance risks, and operational risks. As a part of its overall activities, the Board oversees the funds’ risk management activities that are implemented by the Advisor, the funds’ Chief Compliance Officer (“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. The fund’s subadvisor, subject to oversight of the Advisor, is primarily responsible for managing investment and financial risks as a part of its day-to-day investment responsibilities, as well as operational and compliance risks at their firms. 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.
The Compliance Committee assists the Board in overseeing the activities of the Trust’s CCO with respect to the compliance programs of the funds, the Advisor, the subadvisor, and certain of the funds’ other service providers (e.g., any distributors and transfer agents). This Committee and the Board receive and
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consider periodic reports from the CCO throughout the year, including the CCO’s annual written report, which, among other things, summarizes material compliance issues that arose during the previous year and any remedial action taken to address these issues, as well as any material changes to the compliance programs.
The Contracts, Legal & Risk Committee assists the Board in its oversight role with respect to the processes pursuant to which the Advisor and the subadvisor identify, assess, manage and report the various risks that affect or could affect the 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 Trust’s CCO, who is directly accountable to the Board. As appropriate, the Chairperson of the Board, the Committee Chairs and the Trustees confer among themselves, with the Trust’s CCO, the Advisor, other service providers, external Fund counsel, and counsel to the Independent Trustees, to identify and review risk management issues that may be placed on the full Board’s agenda and/or that of an appropriate Committee for review and discussion.
In addition, in its annual review of the 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, 2022. For purposes of this table, beneficial ownership is defined to mean a direct or indirect pecuniary interest. Trustees may own shares beneficially through group annuity contracts. Exact dollar amounts of securities held are not listed in the table. Rather, dollar ranges are identified.
Trustees | John Hancock Collateral Trust | Total – John Hancock Fund Complex |
Independent Trustees | ||
James R. Boyle | $0 | $100,001 or more |
William H. Cunningham | $0 | $100,001 or more |
Noni L. Ellison | $0 | None |
Grace K. Fey | $0 | $100,001 or more |
Dean C. Garfield | $0 | None |
Deborah C. Jackson | $0 | $100,001 or more |
Patricia Lizarraga | $0 | None |
Hassell H. McClellan | $0 | $100,001 or more |
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Trustees | John Hancock Collateral Trust | Total – John Hancock Fund Complex |
Steven R. Pruchansky | $0 | $100,001 or more |
Frances G. Rathke | $0 | $100,001 or more |
Gregory A. Russo | $0 | $100,001 or more |
Non-Independent Trustees | ||
Andrew G. Arnott | $0 | $100,001 or more |
Marianne Harrison | $0 | $100,001 or more |
Paul Lorentz | $0 | None |
C. Compensation of Trustees
Trustees are reimbursed for travel and other out-of-pocket expenses. 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 $265,000, a fee of $22,000 for each regular meeting of the Trustees (in person or via videoconference or teleconference) and a fee of $5,000 for each special meeting of the Trustees (in person or via videoconference or teleconference). The Chairperson of the Board receives an additional retainer of $180,000. The Vice Chairperson of the Board receives an additional retainer of $20,000. The Chairperson of each of the Audit Committee, Compliance Committee and Contracts, Legal & Risk Committee receives an additional $40,000 retainer. The Chairperson of each Investment Sub-Committee receives an additional $20,000 retainer.
The following table provides information regarding the compensation paid by 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, 2022.
Compensation Table(1)
Name of Trustee | Total Compensation from Collateral Trust | Total Compensation from the Trust and the John Hancock Fund Complex(2) |
Independent Trustees | ||
James R. Boyle | $4,000 | $450,000 |
Peter S. Burgess(3) | $4,000 | $430,000 |
William H. Cunningham | $4,000 | $525,000 |
Noni L. Ellison(4) | $2,000 | $201,500 |
Grace K. Fey | $4,000 | $597,500 |
Dean C. Garfield(4) | $2,000 | $201,500 |
Deborah C. Jackson | $4,000 | $502,500 |
Patricia Lizarraga(4) | $2,000 | $201,500 |
Hassell H. McClellan | $4,000 | $745,500 |
Steven R. Pruchansky | $4,000 | $440,000 |
Frances G. Rathke | $4,000 | $450,000 |
Gregory A. Russo | $4,000 | $460,000 |
Non-Independent Trustees | ||
Andrew G. Arnott | $0 | $0 |
Marianne Harrison | $0 | $0 |
Paul Lorentz(4) | $0 | $0 |
(1) | The Trust does not have a pension or retirement plan for any of its Trustees or Officers. |
(2) | There were approximately 186 series in the John Hancock Fund complex as of December 31, 2022. |
(3) | Mr. Burgess retired as Trustee effective as of December 31, 2022. |
(4) | Elected to serve as Trustee effective as of September 9, 2022. |
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(d) Sales Loads
Not applicable.
(e) Code of Ethics
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.
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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
(a) Control Persons
As of April 1, 2023, there were no “control persons” of the Fund.
(b) Principal Holders
As of March 31, 2023, the following shareholders (principal holders) beneficially owned 5% or more of the outstanding shares of the Fund.
Name and Address | Percent |
STATE STREET FBO CASH SWEEP STATE STREET BANK AND TRUST 1776 HERITAGE DRIVE QUINCY, MA 02171-2119 |
60.99% |
JHF III INTERNATIONAL GROWTH FUND C/O JOHN HANCOCK INVESTMENT MANAGEMENT 200 BERKELEY STREET BOSTON, MA 02116-5022 |
6.46% |
(c) Management Ownership
As of March 31, 2023, 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
(a) Investment Advisor
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, 2022, the Advisor had total assets under management of approximately $144.3 billion.
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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
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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, 2022, December 31, 2021, and December 31, 2020, the Fund incurred and paid advisory fees to the Advisor that amounted to $11,149,436, $5,587,818 and $10,321,779, 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 St, Boston, MA 02116.
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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.
(d) Service Agreement
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, 2022 through December 31, 2022, the Fund incurred and paid the Advisor $391,086 for non-advisory fees pursuant to the Service Agreement.
(e) Other Investment Advice
Not applicable.
(f) Dealer Reallowances
Not applicable.
(g) Rule 12b-1 Plans
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Not applicable.
(h) Other Service Providers
TRANSFER AGENT SERVICES
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.
CUSTODY OF PORTFOLIO
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 Lincoln Street, Boston, Massachusetts 02111. 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.
(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, 2022. 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.
Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | ||||
Portfolio Manager | Number of Accounts | Total Assets (Mil) | Number of Accounts | Total Assets (Mil) | Number of Accounts | Total Assets (Mil) |
Pearl Natalie Andrada | 2 | $3,576 | 0 | $0 | 0 | $0 |
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Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | ||||
Portfolio Manager | Number of Accounts | Total Assets (Mil) | Number of Accounts | Total Assets (Mil) | Number of Accounts | Total Assets (Mil) |
Bridget Bruce | 2 | $3,576 | 0 | $0 | 0 | $0 |
Christopher Coccoluto | 2 | $3,576 | 0 | $0 | 0 | $0 |
Michael Lorizio | 2 | $3,576 | 0 | $0 | 0 | $0 |
James Madison | 2 | $3,576 | 0 | $0 | 0 | $0 |
Connor Minnaar | 16 | $35,875 | 29 | $5,561 | 19 | $10,578 |
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.
• | A portfolio manager could favor one account over another in allocating new investment opportunities that have limited supply, such as initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation on the initial public offering. The Subadvisor has policies that require a portfolio manager to allocate such investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives. |
• | A portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the policies of the Subadvisor generally require that such trades be “bunched,” which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the Subadvisor will place the order in a manner intended to result in as favorable a price as possible for such client. |
• | A portfolio manager could favor an account if the portfolio manager’s compensation is tied to the performance of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain |
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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. |
• | 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. |
(b) Compensation
The Subadvisor has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied systematically among investment professionals. At the Subadvisor, the structure of compensation of investment professionals is currently comprised of the following basic components: base salary, and 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.
• | 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. |
• | 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: |
• | 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 |
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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.
• | 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. |
• | 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. |
• | 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, 2022, 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
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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,
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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.
(b) Commissions
Not applicable.
(c) Brokerage Selection
See Part (a) of this Item 21 above.
(d) Directed Brokerage
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Not applicable.
(e) Regular Broker-Dealers
Not applicable.
ITEM 22. CAPITAL STOCK AND OTHER SECURITIES
(a) Capital Stock
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
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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.
(b) Other Securities
Not applicable.
ITEM 23. PURCHASE, REDEMPTION, AND PRICING OF SHARES
(a) Purchase of Shares
Described above in Item 6.
(b) Fund Reorganizations
Not applicable.
(c) Offering Price
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.
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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.
(d) Redemption in Kind
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
Not applicable.
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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.
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As of December 31, 2022, the Fund has a short-term capital loss carryforward of $92,550 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
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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.
(b) Compensation
Not applicable.
(c) Other Payments
Not applicable.
ITEM 26. CALCULATION OF PERFORMANCE DATA
Not applicable.
The financial statements of the Fund as of and for the year ended December 31, 2022 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 0001683863-23-001709), which are incorporated by reference into this Part B. The Fund’s annual report is available upon request.
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DESCRIPTION OF BOND RATINGS
DESCRIPTIONS OF CREDIT RATING SYMBOLS AND DEFINITIONS
The ratings of Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) 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.
I. | IN GENERAL |
A. 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.
B. 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.
C. 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
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“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
II. | LONG-TERM ISSUE RATINGS |
A. | 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,
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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
B. | 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.
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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+’).
C. | 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.
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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
III. | SHORT-TERM ISSUE RATINGS |
A. 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).
B. S&P’S SHORT-TERM ISSUE CREDIT RATINGS
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S&P’s 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+’).
C. 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.
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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.
IV. | TAX-EXEMPT NOTE RATINGS |
A. | 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.
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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.
B. | S&P GLOBAL RATINGS’ MUNICIPAL SHORT-TERM NOTE RATINGS MUNICIPAL SHORT-TERM NOTE RATINGS |
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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.
C. | FITCH PUBLIC FINANCE RATINGS |
See FITCH SHORT-TERM ISSUER OR OBLIGATIONS RATINGS above.
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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 fund’s website, at the fund’s option.
Advisers Act Under Advisers Act Rule 206(4)-6, investment advisers are required to adopt proxy voting policies and procedures, and investment companies typically rely on the policies of their advisers or sub-advisers. |
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 Fund’s respective Adviser or, if the Fund’s Adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the fund’s sub-adviser(s), subject to the Board’s continued oversight. The sub-adviser for each Fund shall vote all proxies relating to securities held by each Fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Advisers Act.
If an instance occurs where a conflict of interest arises between the shareholders and the designated sub-adviser, however, Advisers retain the right to influence and/or direct the conflicting proxy voting decisions in the best interest of shareholders. |
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Delegation of Proxy Voting Responsibilities It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held by a fund to the fund’s investment adviser (“adviser”) or, if the fund’s adviser has delegated portfolio management responsibilities to one or more investment sub-adviser(s), to the fund’s sub-adviser(s), subject to the Board’s continued oversight. The sub-adviser for each fund shall vote all proxies relating to securities held by each fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each sub-adviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Except as noted below under Material Conflicts of Interest, the Trust Proxy Policy with respect to a Fund shall incorporate that adopted by the Fund’s sub-adviser with respect to voting proxies held by its clients (the “Sub-adviser Proxy Policy”). Each Sub-adviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Proxy Policy. Each sub-adviser to a Fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the Fund’s adviser and by the Board. Each Adviser to a Fund retains the responsibility, and is directed, to oversee each sub-adviser’s compliance with these policies and procedures, and to adopt and implement such additional policies and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trust’s Chief Compliance Officer (“CCO”) shall conduct such monitoring and supervisory activities as the CCO or the Board deems necessary or appropriate in order to appropriately discharge the CCO’s role in overseeing the sub-advisers’ compliance with these policies and procedures.
The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time.
Voting Proxies of Underlying Funds of a Fund of Funds A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund With respect to voting proxies relating to the shares of an underlying fund (an “Underlying Fund”) held by a Fund of the Trust operating as a fund of funds (a “Fund of Funds”) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.
B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the Adviser to the Fund of Funds or the Trusts will vote proxies relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.
1. Where Both the Underlying Fund and the Fund of Funds are Voting on Substantially Identical Proposals
In the event that the Underlying Fund and the Fund of Funds are voting on substantially identical proposals (the “Substantially Identical Proposal”), then the Adviser or the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of the shareholders of the Fund of Funds on the Substantially Identical Proposal.
2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on by the Fund of Funds |
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(a) Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is no material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Adviser will vote proxies relating to the shares of the Underlying Fund pursuant to its Proxy Voting Procedures. (b) Where there is a Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is a material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Fund of Funds will seek voting instructions from the shareholders of the Fund of Funds on the proposal and will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders. A material conflict is generally defined as a proposal involving a matter in which the Adviser or one of its affiliates has a material economic interest.
Material Conflicts of Interest If (1) a sub-adviser to a Fund becomes aware that a vote presents a material conflict between the interests of (a) shareholders of the Fund; and (b) the Fund’s Adviser, sub-adviser, principal underwriter, or any of their affiliated persons, and (2) the sub-adviser does not propose to vote on the particular issue in the manner prescribed by its Sub-adviser Proxy Policy or the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy are otherwise triggered, then the sub-adviser will follow the material conflict of interest procedures set forth in its Sub-adviser Proxy Policy when voting such proxies.
If a Sub-adviser Proxy Policy provides that in the case of a material conflict of interest between Fund shareholders and another party, the sub-adviser will ask the Board to provide voting instructions, the sub-adviser shall vote the proxies, in its discretion, as recommended by an independent third party, in the manner prescribed by its Sub-adviser Proxy Policy or abstain from voting the proxies.
Proxy Voting Committee(s) The Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers’ CCO and may include legal counsel. The terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy in the name of a Fund must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Securities Lending Program Certain of the Funds participate in a securities lending program with the Trusts through an agent lender. When a Fund’s securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion. Where a sub-adviser determines, however, that a proxy vote (or other shareholder action) is materially important to the client’s account, the sub-adviser should request that the agent recall the security prior to the record date to allow the sub-adviser to vote the securities.
Disclosure of Proxy Voting Policies and Procedures in the Trust’s Statement of Additional Information (“SAI”) The Trust shall include in its SAI a summary of the Trust Proxy Policy and of the Sub-adviser Proxy Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Proxy Policy and Sub-adviser Proxy Policy in the SAI.) |
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Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports The Trusts shall disclose in annual and semi-annual shareholder reports that a description of the Trust Proxy Policy, including the Sub-adviser Proxy Policy, and the Trusts’ proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commission’s (“SEC”) website, and without charge, upon request, by calling a specified toll-free telephone number. The Trusts will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. The Fund Administration Department is responsible for preparing appropriate disclosure regarding proxy voting for inclusion in shareholder reports and distributing reports. The Legal Department supporting the Trusts is responsible for reviewing such disclosure once it is prepared by the Fund Administration Department.
Filing of Proxy Voting Record on Form N-PX The Trusts will annually file their complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year. The Fund Administration department, supported by the Legal Department supporting the Trusts, is responsible for the annual filing. |
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 CCO’s annual written compliance report to the Board will contain a summary of the material changes to each Sub-adviser Proxy Policy during the period covered by the report. 3. Providing the Adviser with a quarterly certification indicating that the sub-adviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Sub-adviser Proxy Policy. If the sub-adviser voted any proxies in a manner inconsistent with the Sub-adviser Proxy Policy, the sub-adviser will provide the Adviser with a report detailing the exceptions.
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Adviser Responsibilities The Trusts have retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trust’s reports on Form N-PX with the SEC.
The Advisers, in accordance with their general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service in accordance with the following procedures:
1. Receive a file with the proxy voting information directly from each sub-adviser on a quarterly basis. 2. Select a sample of proxy votes from the files submitted by the sub-advisers and compare them against the proxy voting service files for accuracy of the votes. 3. Deliver instructions to shareholders on how to access proxy voting information via the Trust’s semi-annual and annual shareholder reports. The Fund Administration Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
Proxy Voting Service Responsibilities Proxy voting services retained by the Trusts are required to undertake the following procedures:
• Aggregation of Votes: The proxy voting service’s proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple sub-advisers or third-party voting services.
• Reporting: The proxy voting service’s proxy disclosure system will provide the following reporting features:
1. multiple report export options; 2. report customization by fund-account, portfolio manager, security, etc.; and 3. account details available for vote auditing.
• Form N-PX Preparation and Filing: The Advisers will be responsible for oversight and completion of the filing of the Trusts’ reports on Form N-PX with the SEC. The proxy voting service will prepare the EDGAR version of Form N-PX and will submit it to the adviser for review and approval prior to filing with the SEC. The proxy voting service will file Form N-PX for each twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year. The Fund Administration Department, in conjunction with the Legal Department supporting the Trusts, is responsible for the foregoing procedures.
The Fund Administration Department in conjunction with the CCO oversees compliance with this policy.
The Fund Administration Department maintains operating procedures affecting the administration and disclosure of the Trusts’ proxy voting records.
The Trusts’ Chief Legal Counsel is responsible for including in the Trusts’ SAI information regarding the Advisers’ and each sub-advisers proxy voting policies as required by applicable rules and form requirements. |
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 |
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Document Retention Requirements |
The Fund Administration Department and The CCO’s Office is responsible for maintaining all documentation created in connection with this policy. Documents will be maintained for the period set forth in the Records Retention Schedule. See Compliance Policy: Books and Records. |
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JOHN HANCOCK VARIABLE TRUST ADVISERS LLC
JOHN HANCOCK INVESTMENT MANAGEMENT LLC
PROXY VOTING POLICIES AND PROCEDURES
Updated December 1, 2019
Overview |
The SEC adopted Rule 206(4)-6 under the Advisers Act, which requires investment advisers with voting authority to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser votes client securities in the best interest of clients. The procedures must include how the investment adviser addresses material conflicts that may arise between the interests of the investment adviser and those of its clients. The Advisers are registered investment advisers under the Advisers Act and serve as the investment advisers to the Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the Funds, including voting proxies with respect to a Fund’s portfolio securities. From time to time, however, the Advisers may elect to manage directly the assets of a Fund, including voting proxies with respect to such Fund’s portfolio securities, or a Fund’s Board may otherwise delegate to the Advisers authority to vote such proxies. Rule 206(4)-6 under the Advisers Act requires that a registered investment adviser adopt and implement written policies and procedures reasonably designed to ensure that it votes proxies with respect to a client’s securities in the best interest of the client.
Firms are required by Advisers Act Rule 204-2(c)(2) to maintain records of their voting policies and procedures, a copy of each proxy statement that the investment adviser receives regarding client securities, a record of each vote cast by the investment adviser on behalf of a client, a copy of any document created by the investment adviser that was material to making a decision how to vote proxies on behalf of a client, and a copy of each written client request for information on how the adviser voted proxies on behalf of the client, as well as a copy of any written response by the investment adviser to any written or oral client request for information on how the adviser voted that client’s proxies.
Investment companies must disclose information about the policies and procedures used to vote proxies on the investment company’s portfolio securities and must file the fund’s proxy voting record with the SEC annually on Form N-PX.
Pursuant thereto, the Advisers have adopted and implemented these proxy voting policies and procedures (the “Proxy Procedures”). |
Policy |
It is the Advisers’ policy to comply with Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act as described above. In general, the Advisers delegate proxy voting decisions to the sub-advisers managing the funds. If an instance occurs where a conflict of interest arises between the shareholders and a particular sub-adviser, however, the Adviser retains the right to influence and/or direct the conflicting proxy voting decisions. |
Regulatory Requirement |
Rule 206(4)-6 under the Advisers Act |
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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 CCO’s annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Fund’s proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions. |
Procedure |
Fiduciary Duty The Advisers have a fiduciary duty to vote proxies on behalf of a Fund in the best interest of the Fund and its shareholders.
Voting of Proxies - Advisers The Advisers will vote proxies with respect to a Fund’s portfolio securities when authorized to do so by the Fund and subject to the Fund’s proxy voting policies and procedures and any further direction or delegation of authority by the Fund’s Board. The decision on how to vote a proxy will be made by the person(s) to whom the Advisers have from time to time delegated such responsibility (the “Designated Person”). The Designated Person may include the Fund’s portfolio manager(s) or a Proxy Voting Committee, as described below.
When voting proxies with respect to a Fund’s portfolio securities, the following standards will apply:
• The Designated Person will vote based on what it believes is in the best interest of the Fund and its shareholders and in accordance with the Fund’s investment guidelines.
• Each voting decision will be made independently. To assist with the analysis of voting issues and/or to carry out the actual voting process the Designated Person may enlist the services of (1) reputable professionals (who may include persons employed by or otherwise associated with the Advisers or any of its affiliated persons) or (2) independent proxy evaluation services such as Institutional Shareholder Services. However, the ultimate decision as to how to vote a proxy will remain the responsibility of the Designated Person.
• The Advisers believe that a good management team of a company will generally act in the best interests of the company. Therefore, the Designated Person will take into consideration as a key factor in voting proxies with respect to securities of a company that are held by the Fund the quality of the company’s management. In general, the Designated Person will vote as recommended by company management except in situations where the Designated Person believes such recommended vote is not in the best interests of the Fund and its shareholders.
• As a general principle, voting with respect to the same portfolio securities held by more than one Fund should be consistent among those Funds having substantially the same investment mandates.
• The Advisers will provide the Fund, from time to time in accordance with the Fund’s proxy voting policies and procedures and any applicable laws and regulations, a record of the Advisers’ voting of proxies with respect to the Fund’s portfolio securities. |
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Material Conflicts of Interest In carrying out its proxy voting responsibilities, the Advisers will monitor and resolve potential material conflicts (“Material Conflicts”) between the interests of (a) a Fund and (b) the Advisers or any of its affiliated persons. Affiliates of the Advisers include Manulife Financial Corporation and its subsidiaries. Material Conflicts may arise, for example, if a proxy vote relates to matters involving any of these companies or other issuers in which the Advisers or any of their affiliates has a substantial equity or other interest.
If the Advisers or a Designated Person become aware that a proxy voting issue may present a potential Material Conflict, the issue will be referred to the Advisers’ Legal Department and/or the Office of the CCO. If the Legal Department and/or the Office of the CCO, as applicable determines that a potential Material Conflict does exist, a Proxy Voting Committee will be appointed to consider and resolve the issue. The Proxy Voting Committee may make any determination that it considers reasonable and may, if it chooses, request the advice of an independent, third-party proxy service on how to vote the proxy.
Voting Proxies of Underlying Funds of a Fund of Funds The Advisers or the Designated Person will vote proxies with respect to the shares of a Fund that are held by another Fund that operates as a Fund of Funds”) in the manner provided in the proxy voting policies and procedures of the Fund of Funds (including such policies and procedures relating to material conflicts of interest) or as otherwise directed by the board of trustees or directors of the Fund of Funds.
Proxy Voting Committee(s) The Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers’ CCO and may include legal counsel. The terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Voting of Proxies - SubAdvisers In the case of proxies voted by a sub-adviser to a Fund pursuant to the Fund’s proxy voting procedures, the Advisers will request the sub-adviser to certify to the Advisers that the sub-adviser has voted the Fund’s proxies as required by the Fund’s proxy voting policies and procedures and that such proxy votes were executed in a manner consistent with these Proxy Procedures and to provide the Advisers with a report detailing any instances where the sub-adviser voted any proxies in a manner inconsistent with the Fund’s proxy voting policies and procedures. The COO of the Advisers will then report to the Board on a quarterly basis regarding the sub-adviser certification and report to the Board any instance where the sub-adviser voted any proxies in a manner inconsistent with the Fund’s proxy voting policies and procedures.
The Fund Administration Department maintains procedures affecting all administration functions for the mutual funds. These procedures detail the disclosure and administration of the Trust’s proxy voting records.
The Trust’s Chief Legal Counsel is responsible for including, in the SAI of each Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting to Fund Boards The CCO of the Advisers will provide the Board with a copy of these Proxy Procedures, accompanied by a certification that represents that the Proxy Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, the Advisers will provide the Board |
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with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCO’s annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Fund’s proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions |
Key Contacts |
Investment Compliance |
Escalation/Reporting Violations |
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds. |
Related Policies and Procedures |
N/A |
Document Retention Requirements |
The Advisers will retain (or arrange for the retention by a third party of) such records relating to proxy voting pursuant to these Proxy Procedures as may be required from time to time by applicable law and regulations, including the following:
1. These Proxy Procedures and all amendments hereto;
2. All proxy statements received regarding Fund portfolio securities;
3. Records of all votes cast on behalf of a Fund;
4. Records of all Fund requests for proxy voting information;
5. Any documents prepared by the Designated Person or a Proxy Voting Committee that were material to or memorialized the basis for a voting decision;
6. All records relating to communications with the Funds regarding Conflicts; and
7. All minutes of meetings of Proxy Voting Committees.
The Office of the CCO, and/or the Legal Department are responsible for maintaining the documents set forth above as needed and deemed appropriate. Such documents will be maintained in the Office of the CCO, and/or the Legal Department for the period set forth in the Records Retention Schedule. |
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MANULIFE INVESTMENT MANAGEMENT
GLOBAL PROXY VOTING POLICY
AND PROCEDURES
April 2021
Executive Summary
Each investment team at Manulife Investment Management (Manulife IM)1 is responsible for investing in line with its investment philosophy and clients’ objectives. Manulife IM’s approach to proxy voting aligns with its organizational structure and encourages best practices in governance and management of environmental and social risks and opportunities. Manulife IM has adopted and implemented proxy voting policies and procedures to ensure that proxies are voted in the best interests of its clients for whom it has proxy voting authority.
This global proxy voting policy and procedures (policy) applies to each of the Manulife IM advisory affiliates listed in Appendix A. In seeking to adhere to local regulatory requirements of the jurisdiction in which an advisory affiliate operates, additional procedures specific to that affiliate may be implemented to ensure compliance, where applicable. The policy is not intended to cover every possible situation that may arise in the course of business, but rather to act as a decision-making guide. It is therefore subject to change and interpretation from time to time as facts and circumstances dictate.
Statement of policy
• | 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. |
• | 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. |
• | 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. |
• | Manulife IM will disclose information about its proxy voting policies and procedures to its clients. |
• | Manulife IM will maintain certain records relating to proxy voting. |
Philosophy on sustainable investing
Manulife IM’s commitment to sustainable investment2 is focused on protecting and enhancing the value of our clients’ investments and, as active owners in the companies in which we invest, we believe that voting at shareholder meetings can contribute to the long-term sustainability of our investee companies. Manulife IM will seek to exercise the rights and responsibilities associated with equity ownership, on behalf of its clients, with a focus on maximizing long-term shareholder returns, as well as enhancing and improving the operating strength of the companies to create sustainable value for shareholders.
Manulife IM invests in a wide range of securities across the globe, ranging from large multinationals to smaller early stage companies, and from well-developed markets to emerging and frontier markets. Expectations of those companies vary by market to reflect local standards, regulations and laws. Manulife IM believes, however, that successful companies across regions are generally better positioned over the long-term if they have:
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• | Robust oversight, including a strong and effective board with independent and objective leaders working on behalf of shareholders; |
• | Mechanisms to mitigate risk such as effective internal controls, board expertise covering a firm’s unique risk profile, and routine use of key performance indicators to measure and assess long-term risks; |
• | A management team aligned with shareholders through remuneration structures that incentivize long-term performance through the judicious and sustainable stewardship of company resources; |
• | Transparent and thorough reporting of the components of the business that are most significant to shareholders and stakeholders with focus on the firm’s long-term success; and |
• | Management focused on all forms of capital including environmental, social, and human capital. |
The Manulife Investment Management voting principles (voting principles) outlined in Appendix B provide guidance for our voting decisions. An active decision to invest in a firm reflects a positive conviction in the investee company and we generally expect to be supportive of management for that reason. Manulife IM may seek to challenge management’s recommendations, however, if they contravene these voting principles or Manulife IM otherwise determines that doing so is in the best interest of its clients.
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 client’s holdings, and the custodian bank will be notified if proxies have not been
forwarded to the proxy service provider when due.
Voting proxies
Manulife IM has adopted the voting principles contained in Appendix B of this policy.
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 IM’s 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
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created by the proxy voting service provider to ensure consistency with our voting principles, to the extent this is possible.
Manulife IM also has procedures in place to review additional materials submitted by issuers often in response to voting recommendations made by proxy voting service providers. Manulife IM will review additional materials related to proxy voting decisions in those situations where Manulife IM becomes aware of those additional materials, is considering voting contrary to management, and where Manulife IM owns 2% or more of the subject issuer as aggregated across the funds.
Portfolio managers actively review voting options and make voting decisions for their holdings. Where Manulife IM holds a significant ownership position in an issuer, the rationale for a portfolio manager’s voting decision is specifically recorded, including whether the vote cast aligns with the recommendations of the proxy voting services provider or has been voted differently. A significant ownership position in an investment is defined as those cases where Manulife IM holds at least 2% of a company’s issued share capital in aggregate across all Manulife IM client accounts.
The Manulife IM ESG research and integration team (ESG team) is an important resource for portfolio management teams on proxy matters. This team provides advice on specific proxy votes for individual issuers if needed. ESG team advice is supplemental to the research and recommendations provided by our proxy voting services provider. In particular, ESG analysts actively review voting resolutions for companies in which:
• | Manulife IM’s aggregated holdings across all client accounts represent 2% or greater of issued capital; |
• | A meeting agenda includes shareholder resolutions related to environmental and social risk management issues, or where the subject of a shareholder resolution is deemed to be material to our investment decision; or |
• | Manulife IM may also review voting resolutions for issuers where an investment team engaged with the firm within the previous two years to seek a change in behavior. |
After review, the ESG team may provide research and advice to investment staff in line with the voting principles.
Manulife IM also has an internal proxy voting working group (working group) comprising senior managers from across Manulife IM including the equity investment team, legal, compliance, and the ESG team. The working group operates under the auspices of the Manulife IM Public Markets Sustainable Investing Committee. The working group regularly meets to review and discuss voting decisions on shareholder proposals or instances where a portfolio manager recommends a vote different than the recommendation of the proxy voting services provider.
Manulife IM clients retain the authority, and may choose, to lend shareholdings. Manulife IM, however, generally retains the ability to restrict shares from being lent and to recall shares on loan in order to preserve proxy voting rights. Manulife IM is focused in particular on preserving voting rights for issuers where funds hold 2% or more of an issuer as aggregated across funds. Manulife IM has a process in place to systematically restrict and recall shares on a best efforts basis for those issuers where we own an aggregate of 2% or more.
Manulife IM may refrain from voting a proxy where we have agreed with a client in advance to limit the situations in which we will execute votes. Manulife IM may also refrain from voting due to logistical considerations that may have a detrimental effect on our ability to vote. These issues may include, but are not limited to:
• | Costs associated with voting the proxy exceed the expected benefits to clients; |
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• | Underlying securities have been lent out pursuant to a client’s securities lending program and have not been subject to recall; |
• | Short notice of a shareholder meeting; |
• | Requirements to vote proxies in person; |
• | Restrictions on a nonnational’s ability to exercise votes, determined by local market regulation; |
• | Restrictions on the sale of securities in proximity to the shareholder meeting (i.e. share blocking); |
• | Requirements to disclose commercially sensitive information that may be made public (i.e. reregistration); |
• | Requirements to provide local agents with power of attorney to facilitate the voting instructions (such proxies are voted on a best-efforts basis); or |
• | The inability of a client’s custodian to forward and process proxies electronically. |
If a Manulife IM portfolio manager believes it is in the best interest of a client to vote proxies in a manner inconsistent with the policy, the portfolio manager will submit new voting instructions to a member of the ESG team with rationale for the new instructions. The ESG team will then support the portfolio manager in developing voting decision rationale that aligns with this policy and the voting principles. The ESG team will then submit the vote change to the working group. The working group will review the change and ensure that the rationale is sound, and the decision will promote the long-term success of the issuer.
On occasion, there may be proxy votes that are not within the research and recommendation coverage universe of the proxy voting service provider. Portfolio managers responsible for the proxy votes will provide voting recommendations to the ESG team and those items may be escalated to the working group for review to ensure that the voting decision rationale is sound, and the decision will promote the long-term success of the issuer. the Manulife IM proxy operations team will be notified of the voting decisions and execute the votes accordingly.
Manulife IM does not engage in the practice of “empty voting” (a term embracing a variety of factual circumstances that result in a partial, or total, separation of the right to vote at a shareholders meeting from beneficial ownership of the shares on the meeting date). Manulife IM prohibits investment managers from creating large hedge positions solely to gain the vote while avoiding economic exposure to the market. Manulife IM will not knowingly vote borrowed shares (for example, shares borrowed for short sales and hedging transactions).
Engagement of the proxy voting service provider
Manulife IM has contracted with a third-party proxy service provider to assist with the proxy voting process. Except in instances where
a client retains voting authority, Manulife IM will instruct custodians of client accounts to forward all proxy statements and materials
received in respect of client accounts to the proxy service provider.
Manulife IM has engaged its proxy voting service provider to:
• | Research and make voting recommendations; |
• | Ensure proxies are voted and submitted in a timely manner; |
• | Provide alerts when issuers file additional materials related to proxy voting matters; |
• | Perform other administrative functions of proxy voting; |
• | Maintain records of proxy statements and provide copies of such proxy statements promptly upon request; |
• | Maintain records of votes cast; and |
• | 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
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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 IM’s
objective to provide the opportunity for companies to better understand our investment process, policies, and objectives.
We will not intentionally disclose to anyone else, including other investors, our voting intention prior to casting the vote.
Manulife IM keeps records of proxy voting available for inspection by clients, regulatory authorities, or government agencies.
Manulife IM quarterly discloses voting records aggregated across funds.4
Conflicts of interest
Manulife IM has an established infrastructure designed to identify conflicts of interest throughout all aspects of the business. Proxy voting proposals may raise conflicts between the interests of Manulife IM’s clients and the interests of Manulife IM, its affiliates, or employees. Apparent conflicts are reviewed by the working group to determine whether there is a conflict of interest and, if so, whether the conflict is material. Manulife IM shall consider any of the following circumstances a potential material conflict of interest:
• | Manulife IM has a business relationship or potential relationship with the issuer; |
• | Manulife IM has a business relationship with the proponent of the proxy proposal; or |
• | Manulife IM members, employees, or consultants have a personal or other business relationship with managers of the business such as top-level executives, corporate directors or director candidates. |
In addressing any such potential material conflict Manulife IM will seek to ensure proxy votes are cast in the advisory client’s best interests and are not affected by Manulife IM’s potential conflict. In the event a potential material conflict of interest exists, the 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
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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 IM’s proxy voting function. The working group is responsible for reviewing regular reports, potential conflicts of interest, vote changes and nonroutine proxy voting items. The working group also oversees the third-party proxy voting service provider. The working group will meet at least monthly and report to the Manulife IM public markets sustainable investing committee and, where requested, the Manulife IM operating committee.
Manulife IM’s proxy operations team is responsible for the daily administration of the proxy voting process for all Manulife IM operations that have contracted with a third-party proxy voting services provider. Significant proxy voting issues identified by Manulife IM’s proxy operations team are escalated to the chief compliance officer or its designee, and the working group.
The working group is responsible for the proper oversight of any service providers hired by Manulife IM to assist it in the proxy voting process. This oversight includes:
Annual due diligence: Manulife IM conducts an annual due diligence review of the proxy voting research service provider. This oversight includes an evaluation of the service provider’s industry reputation, points of risk, compliance with laws and regulations, and technology infrastructure. Manulife IM also reviews the provider’s capabilities to meet Manulife IM’s requirements, including reporting competencies; the adequacy and quality of the proxy advisory firm’s staffing and personnel; the quality and accuracy of sources of data and information; the strength of policies and procedures that enable it to make proxy voting recommendations based on current and accurate information; and the strength of policies and procedures to address conflicts of interest of the service provider related to its voting recommendations.
Regular Updates: Manulife also requests that the proxy voting research service provider deliver updates regarding any business changes that alter that firm’s ability to provide independent proxy voting advice and services aligned with our policies.
Additional oversight in process: Manulife IM has additional control mechanisms built into the proxy voting process to act as checks on the service provider and ensure that decisions are made in the best interest of our clients. These mechanisms include:
• | Sampling 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 vendor’s electronic voting platform before such votes are cast to ensure alignment with the voting principles. |
• | Decision scrutiny from the working group: Where our voting policies and procedures do not address how to vote on a particular matter, or where the matter is highly contested or controversial (e.g., major acquisitions involving takeovers or contested director elections where a shareholder has proposed its own slate of directors), review by the working group may be necessary or appropriate to ensure votes cast on behalf of its client are cast in the client’s best interest. |
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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 client’s proxies.
Manulife IM keeps records of proxy voting activities and those records include proxy voting policies and procedures, records of votes cast on behalf of clients, records of client requests for proxy voting information; and any documents generated in making a vote decision. These documents are available for inspection by clients, regulatory authorities, or government agencies.
Manulife IM 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.
1 Manulife Investment Management is the unified global
brand for Manulife’s global wealth and asset management business, which serves individual investors and institutional clients in
three businesses: retirement, retail and institutional asset management (Public markets and private markets).
2 Further information on Sustainable Investing at Manulife IM can be found at manulifeim.com/institutional.
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 client’s best interest; (ii) an agreement with the client to vote in favor of all proposals
made by particular shareholder proponents; or (iii) an agreement with the client to vote in accordance with the voting recommendations
of management of the issuer. All such arrangements could be subject to conditions depending on instruction from the client.
4 Manulife IM aggregated voting records are available through this site manulifeim.com/institutional/us/en/sustainability.
5 This includes general funds, affiliated segregated funds or separate accounts, and affiliated mutual / pooled funds.
6 This includes assets managed or advised for unaffiliated third parties, such as unaffiliated mutual/pooled funds and unaffiliated
institutional advisory portfolios.
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JOHN HANCOCK COLLATERAL TRUST
PART C
OTHER INFORMATION
Item 28. Exhibits.
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 a wholly owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife Financial Corporation, 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
Not applicable.
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
Not applicable.
ITEM 35. UNDERTAKINGS
Not applicable.
SIGNATURE
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 Commonwealth of Massachusetts, on the 26th day of April, 2023.
JOHN HANCOCK COLLATERAL TRUST | ||||
By: | /s/ Christopher Sechler | |||
Name: | Christopher Sechler | |||
Title: | Secretary and Chief Legal Officer |
Exhibit (d)(1)
JOHN HANCOCK COLLATERAL TRUST
AMENDED AND RESTATED ADVISORY AGREEMENT
Amended and Restated Advisory Agreement dated June 30, 2020, between John Hancock Collateral Trust, a Massachusetts business trust (the “Trust”), and John Hancock Investment Management LLC, a Delaware limited liability company (the “Adviser”). In consideration of the mutual covenants contained herein, the parties agree as follows:
1. | APPOINTMENT OF ADVISER |
The Trust hereby appoints the Adviser, subject to the supervision of the Trustees of the Trust and the terms of this Agreement, as the investment adviser for the Trust. The Adviser accepts such appointment and agrees to render the services and to assume the obligations set forth in this Agreement commencing on its effective date. The Adviser will be an independent contractor and will have no authority to act for or represent the Trust in any way or otherwise be deemed an agent unless expressly authorized in this Agreement or another writing by the Trust and the Adviser.
2. | DUTIES OF THE ADVISER |
a. | Subject to the general supervision of the Trustees of the Trust and the terms of this Agreement, the Adviser will at its own expense, except as noted below, select and contract with investment subadvisers (“Subadvisers”) to manage the investments and determine the composition of the assets of the Trust; provided, that any contract with a Subadviser (a “Subadvisory Agreement”) shall be in compliance with and approved as required by the Investment Company Act of 1940, as amended (the “1940 Act”), except for such exemptions therefrom as may be granted to the Trust or the Adviser. Subject always to the direction and control of the Trustees of the Trust, the Adviser will monitor compliance of each Subadviser with the investment objectives and related investment policies, as set forth in the Trust’s registration statement with the Securities and Exchange Commission, of the Trust under the management of such Subadviser, and review and report to the Trustees of the Trust on the performance of such Subadviser. |
b. | The Adviser shall furnish to the Trust the following: |
i. | Office and Other Facilities. - The Adviser shall furnish to the Trust office space in the offices of the Adviser or in such other place as may be agreed upon by the parties hereto from time to time, and all necessary office facilities and equipment; |
ii. | Trustees and Officers. - The Adviser agrees to permit individuals who are directors, officers or employees of the Adviser to serve (if duly elected or appointed) as Trustees or President of the Trust without remuneration from or other cost to the Trust. |
iii. | Other Personnel. The Adviser shall furnish to the Trust, at the Trust’s expense, any other personnel necessary for the operations of the Trust. The Adviser shall not, however, furnish to the Trust personnel for the performance of functions (a) related to and to be performed under the Trust contract for custodial, bookkeeping, transfer and dividend disbursing agency services by the bank or other financial institution selected to perform such services and (b) related to the investment subadvisory services to be provided by any Subadviser pursuant to a Subadvisory Agreement. |
iv. | Reports to Trust. The Adviser shall furnish to, or place at the disposal of, the Trust such information, reports, valuations, analyses and opinions as the Trust may, at any time or from time to time, reasonably request or as the Adviser may deem helpful to the Trust, provided that the expenses associated with any such materials furnished by the Adviser at the request of the Trust shall be borne by the Trust. |
c. | In addition to negotiating and contracting with Subadvisers as set forth in section (2) (a) of this Agreement and providing facilities, personnel and services as set forth in section (2) (b), the Adviser will pay the compensation of the President and Trustees of the Trust who are also directors, officers or employees of the Adviser or its affiliates. |
d. | With respect to the Trust, the Adviser may elect to manage the investments and determine the composition of the assets of the Trust, subject to the approval of the Trustees of the Trust. In the event of such election, the Adviser, subject always to the direction and control of the Trustees of the Trust, will manage the investments and determine the composition of the assets of the Trust in accordance with the Trust’s registration statement, as amended. In fulfilling its obligations to manage the investments and reinvestments of the assets of the Trust, the Adviser: |
i. | will obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in the Trust or are under consideration for inclusion in the Trust; |
ii. | will formulate and implement a continuous investment program for the Trust consistent with the investment objectives and related investment policies of the Trust as described in the Trust’s registration statement, as amended, |
iii. | will take whatever steps are necessary to implement these investment programs by the purchase and sale of securities including the placing of orders for such purchases and sales; |
iv. | will regularly report to the Trustees of the Trust with respect to the implementation of these investment programs; |
v. | will provide assistance to the Trust’s Custodian regarding the fair value of securities held by the Trust for which market quotations are not readily available; |
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vi. | will furnish, at its expense, (i) all necessary investment and management facilities, including salaries of personnel required for it to execute its duties faithfully, and (ii) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the investment affairs of the Trust (excluding determination of net asset value and shareholder accounting services); |
vii. | will select brokers and dealers to effect all transactions subject to the following conditions: the Adviser will place all necessary orders with brokers, dealers, or issuers, and will negotiate brokerage commissions if applicable; the Adviser is directed at all times to seek to execute brokerage transactions for the Trust in accordance with such policies or practices as may be established by the Trustees and described in the Trust’s registration statement as amended; the Adviser may pay a broker-dealer which provides research and brokerage services a higher spread or commission for a particular transaction than otherwise might have been charged by another broker-dealer, if the Adviser determines that the higher spread or commission is reasonable in relation to the value of the brokerage and research services that such broker-dealer provides, viewed in terms of either the particular transaction or the Adviser’s overall responsibilities with respect to accounts managed by the Adviser; and the Adviser may use for the benefit of its other clients, or make available to companies affiliated with the Adviser for the benefit of such companies or their clients, any such brokerage and research services that the Adviser obtains from brokers or dealers; |
viii. | to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, on occasions when the Adviser deems the purchase or sale of a security to be in the best interest of the Trust as well as other clients of the Adviser, aggregate the securities to be purchased or sold to attempt to obtain a more favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Adviser in the manner the Adviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to its other clients; |
ix. | will maintain all accounts, books and records with respect to the Trust as are required of an investment adviser of a registered investment company pursuant to the 1940 Act and the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and the rules thereunder; and |
x. | will vote all proxies received in connection with securities held by the Trust. |
3. | EXPENSES ASSUMED BY THE TRUST |
The Trust will pay all expenses of its organization, operations and business not specifically assumed or agreed to be paid by the Adviser, as provided in this Agreement, or by a Subadviser, as provided in a Subadvisory Agreement. Without limiting the generality of the foregoing, in addition to certain expenses described in section 2 above, the Trust shall pay or arrange for the payment of the following:
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a. | Edgarization. Printing and Mailing. Costs of edgarization, printing and mailing (i) all registration statements (including all amendments thereto) and prospectuses/statements of additional information (including all supplements thereto), all annual, semiannual and periodic reports to shareholders of the Trust, regulatory authorities or others, (ii) all notices and proxy solicitation materials furnished to shareholders of the Trust or regulatory authorities and (iii) all tax returns; |
b. | Compensation of Officers and Trustees. Compensation of the officers and Trustees of the Trust (other than persons serving as President or Trustee of the Trust who are also directors, officers or employees of the Adviser or its affiliates); |
c. | Registration and Filing Fees. Registration, filing, blue-sky and other fees in connection with requirements of regulatory authorities, including, without limitation, all fees and expenses of registering and maintaining the registration of the Trust under the 1940 Act, as amended; |
d. | Custodial Services. The charges and expenses of the custodian appointed by the Trust for custodial services; |
e. | Accounting Fees. The charges and expenses of the independent accountants retained by the Trust; |
f. | Transfer, Bookkeeping and Dividend Disbursing Agents. The charges and expenses of any transfer, bookkeeping and dividend disbursing agents appointed by the Trust; |
g. | Commissions. Broker’s commissions and issue and transfer taxes chargeable to the Trust in connection with securities transactions to which the Trust is a party; |
h. | Taxes. Taxes and corporate fees payable by the Trust to federal, state or other governmental agencies and the expenses incurred in the preparation of all tax returns; |
i. | Stock Certificates. The cost of stock certificates, if any, representing shares of the Trust; |
j. | Legal Services. Legal services and expenses in connection with the affairs of the Trust, including registering and qualifying its shares with regulatory authorities; |
k. | Membership Dues. Association membership dues; |
l. | Insurance Premiums. Insurance premiums for fidelity, errors and omissions, directors and officers and other coverage; |
m. | Shareholders and Trustees Meetings. Expenses of shareholders and Trustees meetings; |
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n. | Pricing. Pricing of the Trust and shares, including the cost of any equipment or services used for obtaining price quotations and valuing Trust portfolio investments; |
o. | Interest. Interest on borrowings; |
p. | Communication Equipment. All charges for equipment or services used for communication between the Adviser or the Trust and the custodian, transfer agent or any other agent selected by the Trust; and |
q. | Nonrecurring and Extraordinary Expense. Such nonrecurring expenses as may arise, including the costs of actions, suits, or proceedings to which the Trust is, or is threatened to be made, a party and the expenses the Trust may incur as a result of its legal obligation to provide indemnification to its Trustees, officers, agents and shareholders. |
4. | COMPENSATION OF ADVISER |
Subject to the provisions of section 2(d) of this Agreement, the Adviser shall be entitled to a fee, accrued and paid daily, at such annual percentage rates, as specified in Appendix A to this Agreement, of the average daily net asset value of the Trust.
The Trust will pay the Adviser the compensation specified in Appendix A to this Agreement.
5. | NON-EXCLUSIVITY |
The services of the Adviser to the Trust are not to be deemed to be exclusive, and the Adviser shall be free to render investment advisory or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that the directors, officers and employees of the Adviser are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors, trustees or employees of any other firm or corporation, including other investment companies.
6. | SUPPLEMENTAL ARRANGEMENTS |
The Adviser may enter into arrangements with other persons affiliated with the Adviser to better enable it to fulfill its obligations under this Agreement for the provision of certain personnel and facilities to the Adviser.
7. | CONFLICTS OF INTEREST |
It is understood that Trustees, officers, agents and shareholders of the Trust are or may be interested in the Adviser as directors, officers, stockholders, or otherwise; that directors, officers, agents and stockholders of the Adviser are or may be interested in the Trust as Trustees, officers, shareholders or otherwise; that the Adviser may be interested in the Trust; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided in the Agreement and Declaration of Trust of the Trust or the organizational documents of the Adviser or by specific provision of applicable law.
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8. | REGULATION |
The Adviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations.
9. | DURATION AND TERMINATION OF AGREEMENT |
This Agreement shall become effective on the later of; (i) its execution and (ii) the date of the meeting of the shareholders of the Trust, at which meeting this Agreement is approved by the vote of a “majority of the outstanding voting securities” (as defined in the 1940 Act) of the Trust. The Agreement will continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually either by the Trustees of the Trust or by the vote of a majority of the outstanding voting securities of the Trust provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the Trust who are not “interested persons” (as defined in the 1940 Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective with respect to the Trust if a majority of the outstanding voting securities of the Trust votes to approve the Agreement or its continuance.
If the shareholders of the Trust fail to approve the Agreement or any continuance of the Agreement, the Adviser will continue to act as investment adviser with respect to the Trust pending the required approval of the Agreement or its continuance or of a new contract with the Adviser or a different adviser or other definitive action; provided, that the compensation received by the Adviser in respect of the Trust during such period will be no more than its actual costs incurred in furnishing investment advisory and management services to the Trust or the amount it would have received under the Agreement, whichever is less.
This Agreement may be terminated at any time, without the payment of any penalty, by the Trustees of the Trust, by the vote of a majority of the outstanding voting securities of the Trust , on sixty days’ written notice to the Adviser, or by the Adviser on sixty days’ written notice to the Trust. This Agreement will automatically terminate, without payment of any penalty, in the event if its “assignment” (as defined in the 1940 Act).
10. | PROVISION OF CERTAIN INFORMATION BY ADVISER |
The Adviser will promptly notify the Trust in writing of the occurrence of any of the following events:
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a. | the Adviser fails to be registered as an investment adviser under the Advisers Act or under the laws of any jurisdiction in which the Adviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement; |
b. | the Adviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Trust; and |
c. | the chief executive officer or managing member of the Adviser or the portfolio manager of the Trust changes. |
11. | AMENDMENTS TO THE AGREEMENT |
This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of a majority of the outstanding voting securities of the Trust affected by the amendment and by the vote of a majority of the Trustees of the Trust who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval shall be effective with respect to the Trust if a majority of the outstanding voting securities of the Trust vote to approve the amendment.
12. | ENTIRE AGREEMENT |
This Agreement contains the entire understanding and agreement of the parties.
13. | HEADINGS |
The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof.
14. | NOTICES |
All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the Trust or Adviser in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this section.
15. | SEVERABILITY |
Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein.
16. | GOVERNING LAW |
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the 1940 Act.
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To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the 1940 Act, the latter shall control.
17. | NAME OF THE TRUST AND FUNDS |
The Trust may use the name “John Hancock” or any name or names derived from or similar to the names “John Hancock Investment Management LLC,” or “John Hancock Life Insurance Company(U.S.A.)”, a Michigan domiciled insurance company, only for so long as this Agreement remains in effect. At such time as this Agreement shall no longer be in effect, the Trust will (to the extent it lawfully can) cease to use such a name or any other name indicating that the Trust is advised by or otherwise connected with the Adviser. The Trust acknowledges that it has adopted the name John Hancock Collateral Trust through permission of John Hancock Life Insurance Company (U.S.A.), and agrees that John Hancock Life Insurance Company (U.S.A.) reserves to itself and any successor to its business the right to grant the non-exclusive right to use the name “John Hancock” or any similar name or names to any other corporation or entity, including but not limited to any investment company of which John Hancock Life Insurance Company (U.S.A.) or any subsidiary or affiliate thereof shall be the investment adviser.
18. | LIMITATION OF LIABILITY UNDER THE DECLARATION OF TRUST |
The Amended and Restated Declaration of Trust establishing the Trust, dated January 22, 2016, a copy of which, together with all amendments thereto (the “Declaration”), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that no Trustee, shareholder, officer, employee or agent of the Trust shall be subject to any personal liability in connection with Trust property or the affairs of the Trust and that all persons should shall look solely to the Trust property for satisfaction of claims of any nature arising in connection with the affairs of the Trust.
19. LIABILITY OF THE ADVISER
In the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Adviser in performance of its obligations and duties hereunder, (b) reckless disregard by the Adviser of its obligations and duties hereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not be subject to any liability whatsoever to the Trust, or to any shareholder for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of a Fund.
20. | EXECUTION |
This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above.
JOHN HANCOCK COLLATERAL TRUST | ||
By: | /s/ Andrew Arnott | |
Name: | Andrew A. Arnott | |
Title: | President |
JOHN HANCOCK INVESTMENT MANAGEMENT LLC |
||
By: | /s/ Jay Aronowitz | |
Name: | Jay Aronowitz | |
Title: | Chief Investment Officer |
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APPENDIX A
ADVISORY FEE SCHEDULE
Annual Percentage Rates of Average Daily Net Assets
First $1.5 Billion of Average Daily Net Assets |
Over $1.5 Billion of Average Daily Net Assets |
0.500% | 0.480% |
A-1 |
Exhibit (h)(2)
AMENDMENT 1
TO THE
TRANSFER AGENCY AND SERVICE AGREEMENT
FOR
JOHN HANCOCK COLLATERAL TRUST
This AMENDMENT is made as of the 1st day of April, 2015 to the Transfer Agency and Service Agreement (“Agreement”) dated the 29th day of January, 2015 by and between John Hancock Collateral Trust (the “Trust”) and John Hancock Signature Services, Inc. (“JHSS”).
WITNESSETH:
WHEREAS, the Trust and JHSS mutually desire to amend certain terms of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. Exhibit A - Transfer Agent Fee Schedule is hereby deleted in its entirety and replaced with the attached revised Exhibit A.
2. Except as otherwise specifically modified by the terms of this Amendment, the terms of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed in their names and on their behalf under their seals by and through their duly authorized officers, as of the day and year first above written.
JOHN HANCOCK COLLATERAL TRUST | ||
By: | /s/ Charles A. Rizzo | |
Name: | Charles A. Rizzo | |
Title: | Chief Financial Officer | |
JOHN HANCOCK SIGNATURE SERVICES, INC. | ||
By: | /s/ Cheryl Sobolewski | |
Name: | Cheryl Sobolewski | |
Title: | Assistant Vice President |
EXHIBIT A
TRANSFER AGENT FEE SCHEDULE
Revised As-of April 1, 2015
The transfer agent fees payable by John Hancock Collateral Trust (the “Trust”) under the Transfer Agency and Service Agreement (the “Agreement”) between the Trust and John Hancock Signature Services, Inc. (“JHSS”) shall be the following:
An annual flat fee of $60,000 paid monthly in arrears. JHSS shall be entitled to receive a pro rata portion of such monthly fee for any period in which JHSS provides the services under the Agreement for less than a full year.
Examples of out-of-pocket expenses of JHSS in providing services to the Trust include costs relating to communication lines, recordkeeping and archiving.
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Exhibit (h)(3)
CHIEF COMPLIANCE OFFICER
SERVICES AGREEMENT
THIS AGREEMENT (the “Agreement”) is made as of this 30th day of June, 2020 by and among the trusts listed in Appendix A (the “Trusts”), on behalf of themselves and each of their funds (the “Funds”), John Hancock Investment Management LLC (formerly, John Hancock Advisers, LLC) (“John Hancock”) and the Trust’s Chief Compliance Officer, Frank Knox (the “CCO”).
WHEREAS, Rule 38a-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), requires each Trust to: (i) establish a compliance program that is reasonably designed to prevent violations of the Federal Securities Laws (as defined in Rule 38a-1); and (ii) designate an individual to serve as the CCO, with overall responsibility for administering the Trust’s compliance program;
WHEREAS, each Trust desires to retain the CCO to provide the services set forth below to the Trust and each of its Funds and the CCO is willing to furnish such services in the manner and on the terms hereinafter set forth; and
WHEREAS, each Trust desires to retain John Hancock to provide administrative services to the CCO as described below and John Hancock is willing to furnish such services in the manner and on the terms hereinafter set forth.
NOW, THEREFORE, each Trust, the CCO and John Hancock hereby agree as follows:
1. CCO and CCO Services. Subject to the general supervision of the Boards of Trustees of the Trusts (the “Board”), the CCO will provide the Trusts and each of the Funds the CCO services set forth below as are reasonably necessary for the operation of the Trusts and each Fund (the “CCO Services”). The CCO Services include, but are not limited to:
(1) | coordinating the implementation of policies and procedures reasonably designed to prevent violation of federal securities laws by the Funds, including policies and procedures that provide for the oversight of compliance by each investment adviser, subadviser, principal underwriter, administrator, and transfer agent of the Funds; |
(2) | reviewing, at least annually, the adequacy of the policies and procedures of the Funds and each investment adviser, subadviser, principal underwriter, administrator and transfer agent of the Funds; and |
(3) | providing, at least annually, a written report to the Board that at minimum, addresses: |
(a) | the operation of the policies and procedures of the Funds and each investment adviser, subadviser, principal underwriter, administrator, and transfer agent of the Funds, any material changes made to those policies and procedures since the date of the last report, and any material changes to the policies and procedures recommended as a result of the annual review described in Section 1.2 above; and |
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(b) | each material compliance matter that occurred since the date of the last report. |
(4) | Monitoring of post-trade compliance of each Fund with applicable regulatory requirements. |
In connection with the provision of the CCO Services by the CCO, John Hancock will at the expense of the Trusts:
(1) | either provide such staff and personnel to the CCO as are reasonably necessary to perform the CCO Services or assist the CCO in hiring such staff and personnel; |
(2) | provide the Trusts with all office space, office equipment, utilities and other office support as the CCO may reasonably request to perform the CCO Services (“Office Support”); |
(3) | provide the CCO with computer hardware and software (and the development thereof) used to support CCO Services and IT support relating to such computer hardware and software; and |
(4) | provide the CCO with such other services as the CCO may reasonably request in order to perform his or her duties as the CCO of the Funds including, without limitation, services provided by third parties such as Charles River, Diligence Vault and Bloomberg that are related to John Hancock’s provision of CCO Services to the Funds; |
Expenses of providing the services set forth in (1) through (4) above to be paid by the Trust include overhead expenses (including Manulife Financial Corporation (“Manulife”) corporate overhead) related to Office Support and personnel who provide services to each Fund pursuant to this Agreement (the “Reimbursement”), provided that overhead expenses related to Office Support shall not exceed levels that are allocated ordinarily to other Manulife business units. John Hancock shall determine, subject to Board approval, the expenses to be reimbursed by each Fund pursuant to this Agreement (the “Reimbursement”); provided, however, that such expenses shall not exceed levels that are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Reimbursement shall be calculated and paid monthly in arrears.
The CCO Services do not include services performed and personnel provided pursuant to contracts with the Trust or the Funds by third-party custodians, transfer agents and other service providers.
2. Compensation. In consideration for the CCO Services provided by the CCO pursuant to this Agreement, each Fund will pay the CCO such compensation as may be approved by the Board in accordance with Rule 38a-1 from time to time. Any services provided to the CCO or the Funds relating to the CCO Services by a person or entity other than John Hancock and its affiliates, including, without limitation, services provided by attorneys not affiliated with John Hancock, are not covered under this Agreement and are an expense of the Funds.
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3. No Partnership or Joint Venture. Each Trust, on behalf of itself and each of its Funds, John Hancock and the CCO are not partners of or joint venturers with each other, and nothing herein shall be construed so as to make any of the Trusts, on behalf of itself or any of its Funds, John Hancock or the CCO partners or joint venturers or impose any liability as such on the Trust, any Fund, John Hancock or the CCO.
4. Limitation of Liability. Neither the CCO nor John Hancock shall be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with the matters to which this Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by the CCO or John Hancock in the performance of its duties or from reckless disregard by the CCO or John Hancock of its obligations under this Agreement. Any person, even though also employed by John Hancock, who may be or become an employee of and paid by any of the Trusts shall be deemed, when acting within the scope of his or her employment by the Trust, to be acting in such employment solely for the Trusts and not as John Hancock’s employee or agent.
5. Duration and Termination of Agreement. This Agreement shall remain in effect until the second anniversary of the date on which it was executed, and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Independent Trustees. The Agreement may be terminated: (a) at any time on written notice without the payment of any penalty by any of the Trusts on behalf of itself or any of its Funds (by vote of a majority of the Trustees of the Trust); or (b) on 30 days’ written notice to the Trusts by the CCO or John Hancock.
6. Amendment. No provision of this Agreement may be amended, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is sought.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to the choice of law provisions thereof.
8. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions of this Agreement or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A copy of the Declaration of Trust of each Trust which is organized as a Massachusetts business trust is on file with the Secretary of State of the Commonwealth of Massachusetts and provides that no Trustee, shareholder, officer, employee or agent of the Trust shall be subject to any personal liability in connection with Trust property or the affairs of the Trust, but that only the assets belonging to the Trust, or to the particular Fund with respect to which an obligation or claim arose, shall be liable.
9. Execution. This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by authorized officers as of the date first written above.
By: | /s/ Francis V. Knox | |
Name: | Frank Knox | |
Title: | CCO of the Trusts | |
JOHN HANCOCK INVESTMENT MANAGEMENT LLC (formerly, John Hancock Advisers, LLC) |
||
By: | /s/ Jay Aronowitz | |
Name: | Jay Aronowitz | |
Title: | Chief Investment Officer | |
BY ALL THE TRUSTS LISTED IN APPENDIX A | ||
By: | /s/ Andrew G. Arnott | |
Name: | Andrew G. Arnott | |
Title: | President and Chief Executive Officer |
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APPENDIX A
JOHN HANCOCK BOND TRUST
JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND
JOHN HANCOCK CAPITAL SERIES
JOHN HANCOCK COLLATERAL TRUST
JOHN HANCOCK CURRENT INTEREST
JOHN HANCOCK EXHANGE-TRADED FUND TRUST
JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND
JOHN HANCOCK FUNDS II
JOHN HANCOCK FUNDS III
JOHN HANCOCK HEDGED EQUITY & INCOME FUND
JOHN HANCOCK INCOME SECURITIES TRUST
JOHN HANCOCK INVESTMENT TRUST
JOHN HANCOCK INVESTMENT TRUST II
JOHN HANCOCK INVESTORS TRUST
JOHN HANCOCK MUNICIPAL SECURITIES TRUST
JOHN HANCOCK PREFERRED INCOME FUND
JOHN HANCOCK PREFERRED INCOME FUND II
JOHN HANCOCK PREFERRED INCOME FUND III
JOHN HANCOCK PREMIUM DIVIDEND FUND
JOHN HANCOCK SOVEREIGN BOND FUND
JOHN HANCOCK STRATEGIC SERIES
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND
JOHN HANCOCK TAX-ADVANTAGED GLOBAL SHAREHOLDER YIELD FUND
A-1 |
Exhibit (h)(4)
AMENDED AND RESTATED
SERVICE AGREEMENT
THIS AGREEMENT (the “Agreement”) is amended and restated as of this 24th day of June, 2021, by and between the trusts listed in Appendix A (the “Trusts”), on behalf of themselves and each of their funds (except as noted) (the “Funds”) and John Hancock Investment Management LLC (formerly, John Hancock Advisers, LLC) (“John Hancock”).
WHEREAS, each Trust desires to retain John Hancock to provide certain services to the Trust and the Funds as described below; and John Hancock is willing to provide such services in the manner and on the terms hereinafter set forth; and
WHERE AS, each Trust, except John Hancock Collateral Trust and the John Hancock Exchange-Traded Fund Trust (the “Existing Trusts”), has entered into a Service Agreement with John Hancock dated as of June 25, 2014, as amended, and each Existing Trust desires to amend and restate that Agreement and the John Hancock Collateral Trust and the John Hancock Exchange-Traded Fund Trust desire to become a party to the Service Agreement;
NOW, THEREFORE, each Trust and John Hancock hereby agree as follows:
1. Services. Subject to the general supervision of the Boards of Trustees of the Trusts (the “Boards of Trustees”), John Hancock will provide (a) to the Trusts and each of the Funds the services set forth below, and (b) to each of the Funds (if any) that is identified in Appendix B as a feeder fund (“Feeder Fund”) that invests substantially all of its assets in a corresponding master fund (“Master Fund”) having substantially similar investment objectives and policies, such additional services and functions set forth below, as are reasonably necessary for the operation of the Trusts and each Fund (“Services”). The Services, to the extent not required to be performed by John Hancock pursuant to an investment advisory agreement with respect to a Fund, include, but are not limited to:
A. | Legal services as follows: |
(1) | Maintenance of each Fund’s registration statement and federal and state registration; |
(2) | Preparation of certain notices and proxy materials furnished to shareholders of the Funds; |
(3) | Preparation of periodic reports of each Fund to regulatory authorities, including Form N-SAR and Rule 24f-2 legal opinions; |
(4) | Preparation of materials in connection with meetings of the Board of Trustees including minutes of the meeting and all Board Committee meetings; |
(5) | Administration of the meetings of the Board of Trustees; |
(6) | Preparation of written contracts, distributions plans, compliance procedures, corporate and trust documents and other legal documents; |
(7) | Research advice and consultation about certain legal, regulatory and compliance issues; |
(8) | Supervision, coordination and evaluation of certain services provided by outside counsel; |
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(9) | Responses to subpoenas and appropriate information requests for shareholder records; and |
(10) | Management of litigation regarding the Funds. |
B. | Tax Services as follows: |
(1) | Preparation (and in some cases reviewing EY’s preparation) of all required tax returns for the Funds; |
(2) | Preparation (and in some cases reviewing EY’s preparation) of all required tax returns for the Funds; |
(3) | Review of “complex” securities purchased by the Funds; |
(4) | Preparation of tax information that is included in a Fund’s Form 1099-DIV and distributed to third party intermediaries; |
(5) | Preparation of financial statement tax adjustments and disclosures for the Funds; |
(6) | Monitoring regulatory compliance with applicable IRS rules and regulations; |
(7) | Preparation of tax provisions for excise, fiscal year-end and calendar year end; |
(8) | Analysis and consultation regarding certain tax matters; |
(9) | Oversight of tax services provided by auditing firms such as Ernst & Young; and |
(10) | Preparation (and in some cases reviewing EY’s preparation) of all required tax returns for the Funds; |
(11) | Analysis of complex corporate actions for tax purposes; and |
(12) | Consultation with the Investment Product group on new products from a tax perspective; |
C. | Treasury & Portfolio Services as follows: |
(1) | Review of each Fund’s class-level net asset value computation (as calculated by the Custodian) using the Line Data system on a daily (next day) basis; |
(2) | Resolve daily fund accounting, custody, and other operational issues that arise given the dual-custodian model and number of sub-advisors on the platform; Corporate action oversight; daily yield review, etc. |
(3) | Provide guidance and support to the Investments team on complex Fund events, investment types, and other complexities surrounding operational issues that arise; |
(4) | Subject matter experts on accounting and trading operations related to the Funds and disposition of all incidents appropriately; |
(5) | Assessment and review of internal controls at the Custodian bank and perform Custodian and Fund Accounting agent oversight and due diligence visits as necessary; |
(6) | Support for and calculation of daily and periodic Fund dividend distributions including the Excise process; |
(7) | Review, analysis and disposition of NAV pricing errors including processing and determination of applicable support for reimbursement of losses and reprocessing of fund shares; |
(8) | Preparation of Board materials (relevant to TPS) for Fund Administration, including materials for the annual Fund Contracts review; |
(9) | Development of Accounting Policies; |
(10) | Coordinate and execute the duties of the Complex Securities Committee; |
(11) | Support the RIO (Risk in Investment Operations) process and facilitate meetings, reporting, and Board materials thereof; |
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(12) | Administer the daily Interfund Lending (IFL) program including adherence to the SEC Exemptive Order; |
(13) | Administer daily leveraged line of credit process for the Closed-End funds, including the monitoring and movement of collateral as required as well as coordination of the annual line of credit analysis; |
(14) | Daily overdraft monitoring including administration of the open-end line of credit; |
(15) | Review of cash and securities reconciliations and aged exception items; |
(16) | Review monthly custodian Operations Report and conduct periodic onsite risk reviews; |
(11) | Oversight of Blue-Sky filings as they pertain to Fund events; |
(11) | Coordinate and execute transactions relating to the Funds such as Fund mergers, sub adviser changes, Fund rebalancing and Fund asset transfers (collectively, “Fund Events”), including the assessment and selection of transition managers; |
(12) | Complete and disseminate certain surveys for the John Hancock funds, such as the ICI survey; |
(13) | Review matters relating to Fund mergers, Fund launches and Fund liquidations; |
(14) | Prepare N-14 pro-forma merger related information and financial statements for other Fund transactions; |
(15) | Administer the Fund Commission Recapture Program; |
(16) | Oversight and reporting of counterparty exposure across all funds by counterparty and derivative type; |
(17) | Coordinate operational activities associated with Fund of Funds rebalancing; |
(18) | Review of financing break even analysis for Closed End Funds; |
(19) | Review of contractual covenants and coordination of de-leveraging events; associated with closed-end Fund lines of credit; and |
(20) | Administration of other Closed-End fund-related activities such as the Equity shelf offering and share repurchase program. |
D. | Valuation as follows: |
(1) | Ensure that the Funds’ Board-approved Valuation Policies and Procedures are adhered to and updated, as appropriate; |
(2) | Daily review of Fund market risk, such as suspended securities, significant events, price discrepancies, vendor discrepancies, and stale prices, including development of reports to identify market risk; |
(3) | Develop and maintain controls relating to valuation of Fund securities; |
(4) | Prepare reports to the Funds Board relating to the valuation risks including fair valuation of securities and resolved securities as prescribed in Board-approved Valuation Policies and Procedures; |
(5) | Conduct Pricing Committee meetings as needed and assist in the determination of fair valuation of securities; |
(6) | Perform due diligence of pricing vendors, including onsite visits; |
(7) | Prepare materials for monthly Pricing Committee meetings; |
(8) | Monitor for significant events; |
(9) | Perform back-testing to determine whether fair valuations were appropriate; |
(10) | Periodically evaluate trigger levels; and |
(11) | Document fair value decisions. |
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E. | Financial Reporting as follows: |
(1) | Preparation of financial data or reports required by the Securities and Exchange Commission or other regulatory authorities including the preparation of semi-annual and annual reports for the Funds; |
(2) | Preparation and filing of Form N-CSR, Form N-PORT, Form N-CEN, Form N-MFP and CFTC reporting (as applicable) for the Funds; |
(3) | Coordination of independent external audits for the Funds; |
(4) | Coordination and administration of CEO/CFO certification materials; |
(5) | Coordination and administration of Accounting Policies Meeting; |
(6) | Coordination and administration of Disclosure Controls & Procedures (DC&P) meetings; |
(7) | Provide business analyst support for Fund Administration initiatives and activities; |
(8) | Maintain the Funds’ GAAP reporting policies; |
(9) | Assist the Funds’ Audit Committees in annual fee proposals and monitor auditor independence; |
(10) | Administer and review the pre-approval process for the Funds’ auditors regarding non-audit securities engagements; |
(11) | Review and on-going maintenance of Fund financial statement disclosures; |
(12) | Provide confirmation support for external audit; |
(13) | Coordinate Closed End Funds annual financial statements and Audit Committee approval |
(14) | Oversee ETF website reporting in accordance with SEC exemptive order requirements; and |
(15) | Administration and filing of Form N-PX. |
F. | Service Provider Oversight (Vendor Management) as follows: |
(1) | Assistance in the selection of service providers; |
(2) | Assistance in the negotiation of existing service provider agreements including appropriate amendments thereto; |
(3) | Monitoring the performance of and the quality of services provided by service providers under such agreements including the review of vendor reports, performance measurement reporting (“scorecards”) and periodic due diligence reviews; |
(4) | Perform SOC 1 report reviews for key vendors; Review and assess known compliance violations with service providers; |
(5) | Monitoring service providers’ compliance with applicable regulatory requirements; |
(6) | Facilitating the annual due diligence questionnaire process for key service providers and the issuance of risk assessment memos to the business summarizing the results; |
(7) | Support Information Risk Management in their review of highest risk vendors through the collection of risk artifacts and with assistance in the closing of any related risk findings; |
(8) | Reporting periodically to the Board of Trustees on the service providers and the services provided to the Trust and the Funds; |
(9) | Responding to requests from regulators regarding the service providers; |
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(10) | Establish a philosophy and framework for effective management and oversight of Fund service providers including conducting on-site due diligence visits as necessary; |
(11) | Development and review of Service Level Agreements as needed; |
(12) | Monitor news events regarding Funds’ vendor relationships; and |
(13) | Prepare materials and coordinate key vendor periodic executive meetings. |
G. | Fund Administration Solutions |
(1) | Conduct monthly Fund Administration project prioritization meetings with senior management; |
(2) | Develop the master project list, prioritization schedule and Project Management Office staffing model; |
(3) | Adhere to Manulife’s corporate Information Technology project prioritization procedures (i.e. Project Gating and Steering Committee participation); |
(4) | Facilitate project meetings and the development of business requirements, project plans and summary dashboard reporting documents; execute select projects; |
(5) | Coordinate activities with internal and external Information Technology representatives; |
(6) | Lead initiatives, including projects related to regulatory requirements, process improvements, digitization and process improvement, strategic priorities, and risk reduction needs; and |
(7) | Manage deployment, enablement and adoption, and ongoing support (including subject matter expertise) of user enabled technologies. |
H. | Additional Services to Feeder Funds: |
(1) | Assist in the development of information and reports to the Board of Trustees (i) to enable it to make all necessary decisions regarding whether to invest the assets of a Feeder Fund in shares of a particular Master Fund and (ii) as may be requested by the Board of Trustees from time to time; |
(2) | Coordination with the board of directors, officers and service providers of each Master Fund for purposes of obtaining all information, reports, certifications, signatures and other materials reasonably necessary for preparing and filing of its corresponding Feeder Fund’s registration statement, shareholder reports and other reports that may be filed pursuant to applicable securities laws and regulations; |
(3) | Effecting daily trades into or from each Master Fund, settling all such transactions and performing trading and settlement reconciliations; |
(4) | Facilitation of distributing Master Fund proxy solicitation materials to corresponding Feeder Fund shareholders and/or coordinating with officers and service providers of each Master Fund the incorporation of its proxy information into its corresponding Feeder Fund proxy solicitation materials; and |
(5) | Coordination with officers and service providers of each Master Fund for purposes of enabling its corresponding Feeder Fund to compile and maintain such books and records as may be legally required or reasonably necessary or prudent for such Feeder Fund to compile and maintain. |
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I. | Expense Services |
(1) | Preparation of expense budget for each Fund and update for contractual changes; |
(2) | Preparation of Form 24f-2 notices for each Fund; |
(3) | Calculation of expense information and disclosure included in Fund registration statements; |
(4) | Monitoring of Fund expense caps and waivers; |
(5) | Assist in completing proforma analysis for new funds and completing expense disclosure for proxy for potential fund mergers; |
(6) | Perform 18f-3 reviews; |
(7) | Complete board materials around overall expenses of funds and tracked to budget; |
(8) | Oversight of vendor and ensure compliance for state blue sky laws; |
(9) | Review of Fund expenses and authorization for disbursement including all affiliated fees (inclusive of advisor, 12b-1, administration and transfer agency); and |
(10) | Completion and review of 12b-1 expense cap calculations. |
J. | Liquidity Risk Management Program |
(1) | Provide oversight of the Liquidity Risk Management Program of the John Hancock Group of Funds to ensure that processes are operating effectively and appropriately to manage liquidity risk; |
(2) | Review and approve portfolio position liquidity classifications in accordance to SEC Rule 22e-4; |
(3) | Monitor fund events and news regarding potential liquidity events on a daily basis; |
(4) | Manage liquidity event escalation with internal stakeholders and JH Board members as situations require; and |
(5) | Provide materials and discuss with the Liquidity Risk Management Committee to meet the requirements of the Committee charter and Liquidity Risk Management Policy. |
K. | Data Management |
(1) | Administration and maintenance of the data management system and the Investment Data Hub (“IDH”); |
(2) | Review data feeds and analyze and resolve exceptions; and |
(3) | Maintain data governance controls and data quality requirements as outlined by the data governance committee and data users. |
L. | Performance Reporting |
(1) | Provide oversight on the daily & monthly calculation and review of the investment performance of the Funds, including performance attribution; |
(2) | Reconcile JH performance with key 3rd party vendors – Morningstar and Lipper; |
(3) | Support performance content and review of JH financial statements; |
(4) | Support performance content and review of JH annual prospectus filing; |
(5) | Support JH Investments website content (daily / monthly); |
(6) | Contributor to monthly DC&P meetings; and |
(7) | Contributor to board materials as necessary. |
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M. | Securities Lending and FX |
(1) | Oversight of securities lending agents and custodians; |
(2) | Ensure all FX trades are executed in a manner consistent with the best interests of Fund shareholders; |
(3) | Perform benchmarking Transaction Cost Analysis for both Negotiated and Non-Negotiated FX trades; |
(4) | Review of securities lending income received by the Funds, as well as income payments and past dues; |
(5) | Coordination and administration of the Cash Management and Security Lending Committee |
(6) | Ensure compliance with SEC regulations and John Hancock agreements and guidelines (lending limits, collateral coverage, approved collateral, borrowers, and markets); |
(7) | Monitor loan recalls, sell fails, and restrictions; |
(8) | Monitor Collateral Trust Fund activity from yield, liquidity, and compliance perspective; |
(9) | Monitor Collateral Trust Fund cash sweep |
(10) | Perform benchmark analysis to validate loan rates |
(11) | Perform due diligence on potential and existing securities lending agents; and |
(12) | Communicate and monitor lending approvals and transactions related to fund launches, mergers, and liquidations. |
In connection with its provision of the Services, John Hancock will
(1) | Provide such staff and personnel as are reasonably necessary to perform the Services for the Trusts and the Funds. Without limiting the generality of the foregoing, such staff and personnel shall be deemed to include officers of John Hancock and its affiliates, and persons employed or otherwise retained by John Hancock, to provide or assist in providing the Services to the Trusts and the Funds; and |
(2) | Provide the Trusts and the Funds with all office facilities to perform the Services. |
The Services do not include services performed and personnel provided pursuant to contracts with the Trust or the Funds by third-party custodians, transfer agents and other service providers.
In connection with its provision of the Services, John Hancock may delegate to one or more companies that John Hancock controls, is controlled by, or is under common control with, or to specified employees of any such companies, some of John Hancock’s duties under this Agreement, provided in each case that (i) John Hancock will supervise the activities of each such entity and employees thereof, (ii) such delegation will not relieve John Hancock of any of its duties or obligations under this Agreement, and (iii) any such arrangements are entered into in accordance with all applicable requirements of the Investment Company Act of 1940 and U.S. Securities and Exchange Commission guidance thereunder. Notwithstanding the foregoing, John Hancock will not delegate or designate the performance of fair value determinations relating to fund investments.
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2. Compensation. In consideration for the Services provided to the Trusts and the Funds by John Hancock and its affiliates pursuant to this Agreement, each Fund will pay John Hancock such fee or other compensation as may be approved by the Board of Trustees from time to time and set forth in Appendix C hereto as the same may be amended from time to time. Any Services provided by a person or entity other than John Hancock and its affiliates, including, without limitation, services provided by attorneys not affiliated with John Hancock, are not covered under this Agreement and are an expense of the Funds.
3. No Partnership or Joint Venture. Each Trust, on behalf of itself and each of its Funds, and John Hancock are not partners of or joint venturers with each other, and nothing herein shall be construed so as to make any of the Trusts, on behalf of itself or any of its Funds, and John Hancock partners or joint venturers or impose any liability as such on the Trust, any Fund or John Hancock.
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4. Limitation of Liability. John Hancock shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with the matters to which this Agreement relates, except losses resulting from willful misfeasance, bad faith or negligence by John Hancock in the performance of its duties or from reckless disregard by .John Hancock of its obligations under this Agreement. Any person, even though also employed by John Hancock, who may be or become an employee of and paid by any of the Trusts shall be deemed, when acting within the scope of his or her employment by the Trust, to be acting in such employment solely for the Trusts and not as John Hancock’s employee or agent.
5. Duration and Termination of Agreement. This Agreement shall remain in effect until the second anniversary of the date on which it was executed, and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by a majority of the Board of Trustees and a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of any of the Trusts or John Hancock. The Agreement may, on 60 days’ written notice, be terminated at any time without the payment of any penalty by any of the Trusts on behalf of itself or any of its Funds (by vote of a majority of the Trustees of the Trust) or by John Hancock.
6. Amendment. No provision of this Agreement may be amended, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is sought.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to the choice of law provisions thereof.
8. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or Limit any of the provisions of this Agreement or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A copy of the Declaration of Trust of each Trust whi.ch is organized as a Massachusetts business trust is on file with the Secretary of State of the Commonwealth of Massachusetts and provides that no Trustee, shareholder, officer, employee or agent of the Trust shall be subject to any personal liability in connection with Trust property or the affairs of the Trust, but that only the assets belonging to the Trust, or to the particular Fund with respect to which an obligation or claim arose, shall be liable.
9. Execution. This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures.
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF the undersigned have caused this Agreement to be executed by their duly authorized officers as of the date first written above.
JOHN HANCOCK INVESTMENT MANAGEMENT LLC | ||
(formerly, John Hancock Advisers, LLC) | ||
By: | /s/ Jay Aronowitz | |
Name: | Jay Aronowitz | |
Title: | Chief Investment Officer | |
BY ALL THE TRUSTS LISTED IN APPENDIX A | ||
By: | /s/ Andrew G. Arnott | |
Name: | Andrew G. Arnott | |
Title: | President and Chief Executive Officer |
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Appendix A
John Hancock Bond Trust
On behalf of each of its series
John Hancock Current Interest
On behalf of each of its series
John Hancock Funds II
On behalf of each of its series
John Hancock Funds III
On behalf of each of its series
John Hancock Hedged Equity & Income Fund
John Hancock Income Securities Trust
John Hancock Investment Trust
On behalf of each of its series (except John Hancock Fundamental Large Cap Core Fund)
John Hancock Investment Trust II
On behalf of each of its series
John Hancock Investors Trust
John Hancock Municipal Securities Trust
On behalf of each of its series
John Hancock Preferred Income Fund
John Hancock Preferred Income Fund II
John Hancock Preferred Income Fund III
John Hancock Sovereign Bond Fund
On behalf of each of its series
John Hancock Strategic Series
On behalf of each of its series
John Hancock Tax-Advantaged Dividend Income Fund
John Hancock Tax-Advantaged Global Shareholder Yield Fund
A-1 |
John Hancock Collateral Trust
John Hancock Exchange-Traded Fund Trust
On behalf of each of its series
A-2 |
Appendix B
The Feeder Funds are as follows:
None
B-1 |
Appendix C
Compensation
Each Fund listed in Appendix A shall reimburse John Hancock for its expenses associated with providing all such Services described in this Agreement, including (a) direct compensation and related personnel expenses, (b) direct expenses of office space, office equipment, utilities and miscellaneous office expenses (“Office Support”),(c) direct expenses of computer hardware and software(and the development thereof) used to support John Hancock in providing such Services and IT support relating to such computer hardware and software, (d) other reasonable direct expenses incurred by John Hancock in providing Services to the Funds including, without limitation, expenses related to services provided by third parties such as Charles River, GainsKeeper and Confluence, Bloomberg to John Hancock that are related to John Hancock’s provision of Services to the Funds and (e) overhead expenses (including Manulife Financial Corporation (“Manulife”) corporate overhead) related to Office Support and personnel who provide services to each Fund (the “Reimbursement”), provided that overhead expenses related to Office Support shall not exceed levels that are allocated ordinarily to other Manulife business units. John Hancock shall determine, subject to Board approval, the expenses to be reimbursed by each Fund; provided, however, that such expenses shall not exceed levels that are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality. The Reimbursement shall be calculated and paid monthly in arrears.
C-1 |
Exhibit (h)(5)
Dated as of June 30, 2020
John Hancock Investment Management Distributors LLC
200 Berkeley Street
Boston, MA 02116
Amended and Restated Placement Agent Agreement
Ladies and Gentlemen:
This letter sets forth the amended and restated agreement (the “Agreement”) between John Hancock Collateral Trust, a Massachusetts business trust (the “Trust”) registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and John Hancock Investment Management Distributors LLC, a Delaware limited liability company (the “Placement Agent”), relating to the offering and sale of shares of beneficial interests (“Shares”) of the Trust in accordance with the exemption from registration under the Securities Act of 1933, as amended (the “1933 Act”), set forth in Rule 506 of Regulation D under the 1933 Act.
1. | The Trust proposes to offer for sales Shares to institutional investors that are “accredited investors” as defined in Rule 501(a)(l), (2), (3) or (7) of Regulation D (institutional investors meeting such qualifications being referred to herein as “Eligible Investors”). The Trust has prepared and filed with the Securities and Exchange Commission a registration statement on Form N-1A pursuant to Section 8(b) of the 1940 Act relating to the Shares dated January 29, 2015 (the “Registration Statement”) and will deliver to the Placement Agent a reasonable number of copies of the Registration Statement. If the Registration Statement is supplemented or amended the term “Registration Statement” shall refer to the Registration Statement as supplemented or amended, and a reasonable number of copies such supplements or amendments shall be delivered to the Placement Agent. All capitalized terms not defined herein shall have the meanings set forth in the Registration Statement. |
2. | The Placement Agent is hereby appointed the agent of the Trust for the purpose of finding qualified subscribers in the United States; provided that Shares shall only be offered and sold to Eligible Investors in a manner complying with Rule 506 under Regulation D. The Placement Agent shall be the exclusive United States placement agent for the Trust. The Placement Agent accepts such agency and agrees to use its reasonable efforts to identify, contact, meet and negotiate with Eligible Investors. |
3. | The Trust represents, warrants and agrees that: |
a. | The Trust is a business trust organized under the laws of the Commonwealth of Massachusetts and registered as an investment company under the 1940 Act. |
b. | The Registration Statement, does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
c. | The Trust shall provide to the Placement Agent, upon its request, a memorandum prepared by K&L Gates, LLP with respect to compliance with state securities laws. |
4. | The Placement Agent represents, warrants and agrees that: |
a. | The Placement Agent, through one or more of its duly authorized registered representatives, will make offers to sell Shares to, or solicit offers to buy Shares from, only investors who the Placement Agent has reasonable grounds to believe are Eligible Investors. The Placement Agent will retain in its records for seven years and make available to the Trust information establishing that each purchaser of Shares is an Eligible Investor. |
b. | The Placement Agent, through one or more of its duly authorized registered representatives, will not offer the Shares for sale or solicit offers to buy any Shares on the basis of any communication or documents other than the Registration Statement. The Placement Agent will not pay or award any finder’s fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Shares. |
c. | The Placement Agent assumes no responsibility or obligation with respect to the qualification of the Shares under the laws of any jurisdiction. The Placement Agent will offer the Shares for sale or solicit offers to buy the Shares only in such manner and in such circumstance as comply with U.S. federal and state securities laws. |
d. | The Placement Agent will cause all investors to execute and deliver subscription documents including counterpart signature pages to the Trust’s Registration Statement in such form as may be provided by the Trust. |
e. | Each of the Placement Agent and its registered representatives is duly licensed to perform the agency described herein. |
f. | In conducting its activities pursuant to this Agreement, including the execution and delivery of documents and the retention of records, the Placement Agent will be relying on the Trust, in addition to its registered representatives. |
5. | The Trust reserves the right to accept or reject subscriptions or redemptions solicited by the Placement Agent and the Trust agrees to act reasonably in rejecting any subscriptions. In addition, the Trust shall have the sole right to make final determinations in any negotiations with potential investors concerning the provisions of the Trust’s Declaration of Trust and any other matters relating to the offering. |
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6. | The Trust shall cause John Hancock Investment Management LLC to pay to the Placement Agent a fee of $100 as compensation for the services to be rendered by the Placement Agent hereunder, plus any expenses of the Placement Agent related to the maintenance of the registered representative licenses. |
7. | (a) The Trust (the “Indemnitor”) agrees to indemnify and hold harmless the Placement Agent, as follows: |
I. | against any and all loss, liability, claim, damage and expense whatsoever arising out of any untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; |
II. | against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Trust; |
III. | against any and all expense whatsoever reasonably incurred in investigation, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, to the extent that any such expense is not paid under clause (i) or (ii) above; and |
IV. | against any and all loss, liability, claim, damage and expense whatsoever arising out of any actions of the Trust in administering, sponsoring and/or supporting the private placement of Shares as described in this Agreement. |
b. | The Placement Agent agrees to indemnify and hold harmless the Indemnitor against any and all loss, liability, claim, damage and expense whatsoever directly arising out of the exercise by any person of any right under the 1933 Act, the 1940 Act, or the Securities Exchange Act of 1934, or the securities or “blue sky” laws of any state on account of any violations by the Placement Agent of its representations and warranties set forth herein. |
c. | In no case shall any indemnifying party be liable under this Section 7 with respect to any claim made against an indemnified party unless such indemnifying party shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure so to notify such indemnifying party shall not relieve them from any liability which they many have otherwise than pursuant to this Section 7. An indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects within a reasonable time after receipt of such notice, to assume the defense, which defense shall be conducted by counsel chosen by it and satisfactory to the indemnified party, defendant or defendants in |
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any suit so brought, unless such indemnified party reasonably objects to such assumption on the ground that there may be legal defenses available to such indemnified party different from or in addition to those available to such indemnifying party. In the event that the indemnifying party elects to assume the defense of any such suit and retain such counsel, the indemnified party, defendant of defendants in the suit shall bear the fees and expenses of any additional counsel thereafter retained by such indemnified party. In the event that the parties to any such action (including impleaded parties) include any of the Indemnitor and the Placement Agent, and the Placement Agent has been advised by counsel chosen by it and reasonable satisfactory to the Placement Agent that there may be one or more legal defenses available to the Placement Agent which are different from or additional to those available to the Indemnitor, the Indemnitor shall not have the right to assume the defense of such action on the Placement Agent’s behalf and will reimburse the Placement Agent as aforesaid for the reasonable fees and expenses or any counsel retained by it, it being understood that the Indemnitors shall not, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstance, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Placement Agent, which firm shall be designated in writing by the Placement Agent. The Indemnitor agrees to notify the Placement Agent within a reasonable time of the assertion of any claim in connection with the sale of the Shares against it or any person who controls the Trust.
8. | All communications referred to herein shall be in writing and, if sent to the Placement Agent, shall be mailed, delivered or sent by facsimile and confirmed to John Hancock Investment Management Distributors LLC, 200 Berkeley Street, Boston, MA 02116, Attention John Danello or, if sent to the Trust, shall be delivered or and confirmed to them, c/o John Hancock Investment Management LLC, 200 Berkeley Street, Boston, MA 02116, Attention Christopher Sechler. |
9. | The Placement Agent shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which this 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 this Agreement. Any person, even though also employed by the Placement Agent, who may be or become an employee of and paid by the Trust shall be deemed, when acting within the scope of his or her employment by the Trust, to be acting in such employment solely for the Trust and not as the Placement Agent’s employee or agent. |
10. | This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. |
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11. | This Agreement and any amendments hereto and any notices or other communications hereunder that are required to be in writing may be in electronic form (including without limitation by facsimile and, in the case of notices and other communications, email) and may be executed by means of electronic signatures. |
(THE REMAINDER OF THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK)
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If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement among you and the Trust.
JOHN HANCOCK COLLATERAL TRUST | ||
By: | /s/ Charles A. Rizzo | |
Name: | Charles A. Rizzo | |
Title: | Chief Financial Officer |
JOHN HANCOCK INVESTMENT | ||
MANAGEMENT DISTRIBUTORS LLC | ||
By: | /s/ Jeffrey Long | |
Name: | Jeffrey Long | |
Title: | Chief Financial Officer |
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Exhibit (h)(6)
John Hancock Investment Management LLC Boston, MA 02116 |
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December 15, 2022
To the Trustees of
John Hancock Collateral Trust
200 Berkeley Street
Boston, MA 02116
Re: | Expense Limitation Letter Agreement |
With reference to the Advisory Agreement entered into by and between John Hancock Investment Management LLC (the “Adviser”) and John Hancock Collateral Trust (the “Trust”), on behalf of its series John Hancock Collateral Trust (the “Fund”), we hereby notify you as follows:
1. The Adviser agrees to contractually waive its advisory fee for the Fund as set forth in the appendix attached hereto.
2. We understand and intend that the Trust will rely on this undertaking in accruing the Fund’s expenses for purposes of calculating its net and gross asset value per share, and for other purposes permitted under the Investment Company Act of 1940, as amended, and we expressly permit the Trust so to rely.
Very truly yours, | ||
JOHN HANCOCK INVESTMENT MANAGEMENT LLC | ||
By: | /s/ Jeffrey H. Long | |
Jeffrey H. Long | ||
Chief Financial Officer |
Agreed and Accepted | ||
on behalf of John Hancock Collateral Trust | ||
By: | /s/ Charles A. Rizzo | |
Charles A. Rizzo | ||
Chief Financial Officer |
APPENDIX A
Fund Level Contractual Investment Management Waiver
For purposes of this Appendix:
The Adviser contractually agrees to waive its advisory fee by 0.45% of the Fund’s average daily net assets. This fee waiver expires April 30, 2024, unless renewed by mutual agreement of the Fund and the Adviser based upon a determination that this is appropriate under the circumstances at that time.*
*At the December 13-15, 2022 meeting of the Board of Trustees of the Trust, the Adviser notified the Board of, and the Board approved, the extension of the expiration date (to April 30, 2024) of the fee waiver arrangement, effective upon the current expiration date of April 30, 2023.
A-1 |
Exhibit (p)(2)
Every day we make individual choices which reflect on the collective reputation of the Manulife and John Hancock brands. Our global standards for business ethics and our well-regarded reputation for integrity differentiates our brands in the marketplace, and are critical factors to our past and future success. We are proud of Manulife’s culture of doing business the right way and underscore the need to continue to conduct our business in this manner.
To this end, Global Wealth and Asset Management and General Account Investments have adopted this code of ethics to promote compliance with applicable law, as well as to address certain potential and actual conflicts of interest which can arise between our personal interests and the interests of our Clients. This code of ethics has been designed to reflect our values as a global organization and demonstrate the importance of the trust our Clients have placed in Manulife and the duties we owe to our Clients.
Paul Lorentz | Scott Hartz |
President & CEO, | Chief Investment Officer |
Global Wealth and Asset Management | Manulife Financial Corporation |
Table of Contents
1. | Purpose | 7 |
2. | Code Applicability | 8 |
2.1 GWAM AND GA ASSOCIATE | 8 | |
2.2 GWAM AND GA ACCESS PERSON (“ACCESS PERSON”) | 8 | |
3. | Access Classification Levels and Applicable Rules | 9 |
3.1 ACCESS CLASSIFICATION LEVELS – SCHEMATIC | 9 | |
4. | General Principles of Business Conduct | 10 |
4.1 GENERAL PRINCIPLES OF BUSINESS CONDUCT | 10 | |
4.2 PERSONAL TRADING CONFLICTS OF INTEREST | 11 | |
4.3 CONFIDENTIAL INVESTMENT INFORMATION | 11 | |
4.4 MNPI RELATED TO MANULIFE SECURITIES AND MANULIFE AFFILIATED FUNDS | 11 | |
4.5 FALSE RUMOURS | 11 | |
4.6 SUPERVISORY OVERSIGHT | 11 | |
4.7 SPECIAL REQUIREMENTS FOR REAL ASSETS | 11 | |
4.8 SHARED BUSINESS ENTERTAINMENT AND GIFTS | 11 | |
4.9 PAY TO PLAY | 12 | |
4.10 OUTSIDE BUSINESS ACTIVITIES | 12 | |
4.11 REPORTING VIOLATIONS OF THE CODE | 12 | |
4.12 INITIAL CODE CERTIFICATION | 12 | |
4.13 QUARTERLY CODE CERTIFICATION | 12 | |
4.14 ANNUAL CODE CERTIFICATION | 12 |
Code of Ethics Rev. 4.12.2022 | 3 |
Table of Contents
5. | Personal Trading Rules | 13 |
5.1 NO LIABILITY FOR LOSSES | 13 | |
5.2 WHAT SECURITIES ARE SUBJECT TO THE PERSONAL TRADING RULES? | 13 | |
5.3 REQUIREMENT TO REPORT SECURITIES ACCOUNTS | 13 | |
5.3.1 MANAGED ACCOUNTS | 14 | |
5.3.2 MANAGED ACCOUNT QUALIFICATION PROCESS | 14 | |
5.4 DUPLICATE TRANSACTION CONFIRMATIONS AND STATEMENTS | 14 | |
5.5 U.S.-BASED PREFERRED BROKERAGE ACCOUNT REQUIREMENT | 14 | |
5.6 INITIAL HOLDINGS REPORT AND CERTIFICATION | 14 | |
5.7 QUARTERLY TRANSACTIONS REPORT AND CERTIFICATION | 15 | |
5.8 REPORTING OF SECURITIES AS GIFTS, DONATIONS AND INHERITANCES | 15 | |
5.9 ANNUAL HOLDINGS REPORT AND CERTIFICATION | 15 | |
5.10 ACCESS PERSON’S RESPONSIBILITY REGARDING TRANSACTIONS AND HOLDINGS DATA | 15 | |
5.11 PRE-CLEARANCE APPROVAL REQUIREMENT | 16 | |
5.12 TERMS OF PRE-CLEARANCE | 16 | |
5.12.1 SAME DAY APPROVAL WINDOW | 16 | |
5.12.2 RESTRICTION ON SECURITIES UNDER ACTIVE CONSIDERATION | 16 | |
5.12.3 LIMIT ORDERS AND SPECIAL ORDERS | 16 | |
5.12.4 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE | 16 | |
5.12.5 INITIAL PUBLIC OFFERINGS & INITIAL COIN OFFERINGS & PRIVATE PLACEMENTS | 16 | |
5.12.6 INITIAL PUBLIC OFFERINGS, INITIAL COIN OFFERINGS & PRIVATE PLACEMENT APPROVALS | 16 | |
5.13 INVESTMENT CLUBS | 16 | |
5.14 RESTRICTIONS ON MANULIFE SECURITIES | 16 | |
5.14.1 REQUIREMENT TO PRE-CLEAR SALES OF MFC SHARES IN THE GSOP PROGRAM | 17 | |
5.15 SHORT TERM PROFIT BAN (“60 DAY RULE”) | 17 | |
5.16 SAME DAY BLACKOUT PERIOD RULE | 18 | |
5.16.1 MARKET CAP SECURITIES EXCEPTION | 18 | |
5.17 EXCESSIVE TRADING IS DISCOURAGED | 18 | |
5.18 INFORMATION BARRIERS | 18 |
4 | Code of Ethics Rev. 4.12.2022 |
Table of Contents
6. | Additional Personal Trading Rules for Front-Office Access Persons | 19 |
6.1 15 DAY BLACKOUT PERIOD RULE | 19 | |
6.1.1 MARKET CAP SECURITIES EXCEPTION | 19 | |
6.1.2 DE MINIMIS TRADING EXCEPTION | 19 | |
6.2 INITIAL PUBLIC OFFERING BAN | 19 | |
6.3 INVESTMENT CLUB BAN | 19 | |
6.4 ADDITIONAL RESTRICTIONS - HONG KONG-BASED ACCESS PERSONS ONLY | 19 | |
7. | Additional Personal Trading Rules for MIM Public Markets Front-Office Access Persons | 20 |
7.1 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE | 20 | |
8. | Administration of the Code | 21 |
8.1 PENALTIES FOR CODE VIOLATIONS | 21 | |
8.2 EXEMPTIONS AND APPEALS | 21 | |
8.3 CODE AMENDMENTS | 21 | |
8.4 PRIVACY | 21 | |
8.5 CODE ADMINISTRATION | 22 | |
8.5.1 CONTACT | 22 | |
8.6 RECORDKEEPING | 22 |
Appendix A | 23 |
Definitions of Italicized Code of Ethics Terms | 23 |
Appendix B | 28 |
Legal Entity Adoption of the Code | 28 |
Appendix C | 29 |
Securities Reporting & Pre-Clearance Summary Chart | 29 |
Code of Ethics Rev. 4.12.2022 | 5 |
6 | Code of Ethics Rev. 01.20.2020 |
1. Purpose
Global Wealth and Asset Management (“GWAM”) and General Account Investments (“GA”) and certain regulated entities listed in Appendix B (together the “Firm”) have adopted this Code of Ethics (the “Code”) to promote compliance with applicable law.1
This Code is separate and distinct from the Manulife Code of Business Conduct and Ethics. It is a supplementary standard of business conduct for asset managers and their employees to prevent those abuses in the investment management business that can arise when certain conflicts of interest exist between an investment manager, including its personnel and affiliates, and accounts managed for its Clients.
By adopting and enforcing this Code, we strengthen the trust and confidence entrusted in us by demonstrating that at Manulife, Client interests come first.
1This Code has been designed to be applicable across GWAM and GA and certain regulated entities listed in Appendix B (together the “Firm”), however it is being implemented in a multi-phased, multi-year project. In the interim, Associates may be subject to another code of ethics. See Appendix B for the legal entities that have adopted this Code to date.
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2. Code Applicability
This Code is applicable to Associates of the Firm.
Adherence to the General Principles of Business Conduct, and other provisions of this Code as applicable, are a condition of employment.
2.1 GWAM AND GA ASSOCIATE
Associates are:
(i) | any partner, officer, director, or other person occupying a similar status or performing similar functions of the Firm |
(ii) | an employee of the Firm |
(iii) | any person who provides investment advice on behalf of the Firm and is subject to the supervision and control of the Firm |
(iv) | any person meeting the definition of Access Person |
(v) | an Advisory Person of a Fund |
(vi) | certain Manulife Affiliate persons who engage, directly or indirectly, in the Firm’s investment advisory activities and |
(vii) | any other person who the Code Administrator deems an Associate.2 |
2.2 GWAM AND GA ACCESS PERSON (“ACCESS PERSON”)
Additionally, Associates who have access to certain investment information and the investment decision-making process are further classified by the Code Administrator into one of three Access Person levels and therefore subject to the personal trading rules and obligations of their Access Person classification level.
2The Code Administrator may modify the requirements of this Code for those Associates whose covered status is expected not to exceed 90 days (for instance contractors, co-ops and interns) or in instances where a person is subject to another code of ethics or fiduciary duty and where the modification is not otherwise specifically prohibited by law. In reliance on an SEC no-action letter, the Code Administrator may include in the definition of “Associate” any person of a Manulife Affiliate who is engaged, directly or indirectly in the Firm’s investment advisory activities.
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3. Access Classification Levels and Applicable Rules
Associates are categorized into one of the following Access Classification Levels for purposes of applying the rules in this Code:
ACCESS CLASSIFICATION LEVELS | DEFINITION | APPLICABLE SECTION(S) OF RULES IN THIS CODE |
Non-Access Person | Associates (as defined in Section 2.1) who are not deemed to be an Access Person. | Section 4 |
Regular Access Person | Any Associate who, in connection with their regular functions or duties: (i) has or may have access to non-public information regarding the purchase or sale of securities or non-public information regarding the portfolio holdings of Client or Firm accounts (ii) has or may have access to material, non-public Securities information. Examples: Sales, Marketing, Product, Client Service, IT, Finance, Operations, Legal, Compliance, Risk, Audit and certain related support staff. |
Section 4 Section 5 |
General Account/ Manulife Investment Management Private Markets (“MIM Private Markets”) Front-Office Access Person | Any GA or MIM Private Markets Associate who, in connection with their regular functions or duties, makes or participates in/supports making recommendations regarding the purchase or sale of Securities for Client or Firm accounts, or provides direct administrative support to a General Account/MIM Private Markets Associate who makes or participates in/supports recommendations. Examples: Portfolio Management, Analysts, Traders, Credit, ALM, Real Estate, Commercial Mortgages and certain related support staff |
Section 4 Section 5 Section 6 |
Manulife Investment Management Public Markets (“MIM Public Markets”) Front-Office Access Person | Any MIM Public Markets Associate who, in connection with their regular functions or duties, makes or participates in/supports making recommendations regarding the purchase or sale of Securities for Client or Firm accounts, or provides direct administrative support to a MIM Public Markets Associate who makes or participates in/supports recommendations. Examples: Portfolio Managers, Analysts, Traders and certain related support staff |
Section 4 Section 5 Section 6 Section 7 |
3.1 ACCESS CLASSIFICATION LEVELS – SCHEMATIC
ACCESS CLASSIFICATION LEVELS | GENERAL PRINCIPLES OF BUSINESS CONDUCT (SECTION 4) |
PERSONAL TRADING RULES (SECTION 5) |
ADDITIONAL PERSONAL TRADING RULES (SECTION 6) |
ADDITIONAL PERSONAL TRADING RULES (SECTION 7) |
Non-Access Person | ![]() |
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Regular Access Person | ![]() |
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GA/MIM Private Markets Front-Office Access Person | ![]() |
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MIM Public Markets Front-Office Access Person | ![]() |
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4. General Principles of Business Conduct
Applicable to All Access Classification Levels
The rules in this Section are applicable to all Access Classification Levels:
• Non-Access Person
• Regular Access Person
• GA/MIM Private Markets Front-Office Access Person
• MIM Public Markets Front-Office Access Person.
4.1 GENERAL PRINCIPLES OF BUSINESS CONDUCT
Adherence to the General Principles of Business Conduct and other provisions of this Code is a condition of employment. Additionally, while the Code contains specific restrictions and limitations designed to prevent certain defined types of conflicts, the Firm recognizes that not every potential conflict of interest can be anticipated by the Code. Therefore, it is critical that the Code’s General Principles of Business Conduct be followed in the absence of a specific Code requirement or limitation.
Each Associate is expected to adhere to a high standard of professional and ethical conduct and should be sensitive to situations that may give rise to an actual conflict or the appearance of a conflict with the accounts we manage, or situations that have the potential to cause damage to Manulife or a Manulife Affiliates’ reputation. To this end, each Associate must act with integrity, honesty and in an ethical manner. The following General Principles of Business Conduct govern the activities of our business and every Associate:
• | We have a fiduciary duty to place the interests of our Clients first. Consistent with our fiduciary duty, we must also never (i) employ any device, scheme or artifice to defraud a Client (ii) make any untrue statement of a material fact to the Client or an account we manage or omit to state a material fact necessary in order to make the statements made to a Client, in light of the circumstances under which they are made, not misleading |
• | All personal Securities transactions must be conducted consistent with the applicable provisions of the Code, and in such a manner as to avoid any actual or potential conflict of interest and any other abuse of trust or responsibility. |
• | We should not take inappropriate advantage of our position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to the accounts we manage. |
• | We must treat as confidential any non-public or confidential information concerning the identity of Security holdings and financial circumstances of the Firm or our Clients. |
• | We must comply with all applicable laws including applicable domestic and foreign Securities Laws. |
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4.2 PERSONAL TRADING CONFLICTS OF INTEREST
The Code represents a balancing of important interests. On the one hand, we owe a duty of loyalty to our Clients, and we must avoid even the appearance of a conflict that might be perceived as abusing the trust Clients have placed in us. On the other hand, the Firm does not want to prevent conscientious professionals from investing for their own accounts where conflicts do not exist or are immaterial to investment decisions affecting our Clients or the accounts we manage.
When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Associates owe a fiduciary duty to our Clients, and the accounts we manage. In most cases, this means that the affected Associates will be required to forego conflicting Securities transactions. In some cases, personal investments will be permitted, but only in a manner, which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Client portfolios or taking unfair advantage of the account relationship.
4.3 CONFIDENTIAL INVESTMENT INFORMATION
Information acquired by Associates in connection with their duties for the Firm including information regarding actual or contemplated investment decisions, non-public portfolio composition, proprietary research, research recommendations, investment recommendations, or Firm or Client interests, is confidential and may not be used in any way that might be contrary to, or in conflict with the interests of the accounts we manage. Additionally, Associates are reminded that certain Clients have specifically required their relationship with us to be treated confidentially.
4.4 MNPI RELATED TO MANULIFE SECURITIES AND MANULIFE AFFILIATED FUNDS
Material, non-public information (“MNPI”) related to Manulife Securities, Manulife Affiliated Mutual Funds, or Affiliated Regulated Closed-End Funds acquired by Associates in connection with their duties for the Firm is confidential and may not be used for direct or indirect personal or family benefit including personal trading.
4.5 FALSE RUMOURS
The Securities Laws prohibit the deliberate or reckless use of manipulative devices or activities with an intention to affect the Securities markets, including the intentional creation or spreading of false or unfounded rumors or other information. Accordingly, Associates may not communicate information regarding companies, Securities, or markets that they know to be false.
4.6 SUPERVISORY OVERSIGHT
All Associates with managerial responsibility are responsible for the reasonable supervision of their staff to prevent and detect violations of this Code and applicable rules and regulations. Failure to perform adequate oversight can result in the manager being held personally liable by regulators for violations of the Securities Laws and the Code.
4.7 SPECIAL REQUIREMENTS FOR REAL ASSETS
Associates are prohibited from knowingly engaging in for (direct or indirect) personal or family benefit any of the following activities:
• | Employing, hiring, or contracting with vendors for the provision of goods or services to Manulife or Manulife-managed properties or businesses; |
• | Utilizing for personal purposes the paid or unpaid services of a Manulife or Manulife-managed property vendor (including the services of the vendor’s employees); |
• | Purchasing or selling property adjacent to existing or proposed Manulife or Manulife-managed properties or businesses; |
• | Purchasing, selling, or transferring mineral or other land-related rights impacting existing or proposed Manulife or Manulife-managed properties or businesses; |
• | Leasing a real estate interest to or from a Manulife or Manulife-managed property; or |
• | Exploiting Manulife or Manulife-managed properties or assets (including rental space and equipment or supplies) for personal use. |
4.8 SHARED BUSINESS ENTERTAINMENT AND GIFTS
The Firm has adopted the “GLOBAL ENTERTAINMENT & GIFT POLICY.” Although the Firm recognizes that the giving or receiving of shared business entertainment and modest gifts is a customary way to strengthen business relationships, and with some restrictions, is a lawful and proper business practice, they have adopted the policy to:
• | Protect Associates from being improperly influenced (or perceived to be improperly influenced) in the discharge of their responsibilities because of excessive or improper shared business entertainment or gifts from a business partner or Client; |
• | Ensure that the giving of shared business entertainment or gifts to business partners or Clients does not exclude the Firm from certain investment management and business opportunities; and |
• | Ensure that Associates do not engage in shared business entertainment or gift practices that constitute (or appear to constitute) a corrupt business practice, including bribery. |
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All Associates must abide by the specific standards and disclosure requirements of the “GLOBAL ENTERTAINMENT & GIFT POLICY.”
Additionally, Associates are required to report their shared business entertainment and gift activity in StarCompliance, the Code of Ethics administrative system, as well as certify to their adherence to the “GLOBAL ENTERTAINMENT & GIFT POLICY” on a quarterly basis.
4.9 PAY TO PLAY
The Firm has adopted the “PAY TO PLAY POLICY” to ensure that certain GWAM and GA legal entities (each a “U.S. Adviser”) comply with applicable pay to play laws and are not disqualified from pursuing new government Client opportunities (including public pension fund Clients), or from receiving advisory compensation from existing government Clients.
The Policy outlines its applicability to certain U.S. Advisers and Associates of those U.S. Advisers that must comply with the specific standards and requirements of the policy.
Additionally, Associates are required to pre-clear and report their political contributions and certify to their adherence to the “PAY TO PLAY POLICY” in StarCompliance on a quarterly and annual basis.
4.10 OUTSIDE BUSINESS ACTIVITIES
The Firm has established a reporting and pre-clearance process to identify and address certain actual or potential conflicts of interest related to an Associate’s outside business activities.
Associates are required to pre-clear and disclose in StarCompliance their outside employment positions, board or officer positions with a business or charitable organization, positions with portfolio companies or other portfolio advisory positions, positions on loan or creditor committees, positions with government or quasi-government bodies, and board or officer positions with industry or professional organizations. This includes activities on both a paid and unpaid basis.
Additionally, Associates are required to certify that they have disclosed all outside business activities in StarCompliance on a quarterly and annual basis.
4.11 REPORTING VIOLATIONS OF THE CODE
Associates who know or have reason to believe that the Code has been or may be violated must bring such actual or potential violations to the immediate attention of the Code Administrator and/or the relevant Chief Compliance Officer.
Associates are encouraged to communicate with the Code Administrator and/or the relevant Chief Compliance Officer, if they have a doubt about a provision of the Code pertinent to a specific situation, business practice or potential conflict of interest.
It is a violation of the Code for an Associate to deliberately fail to report a violation or deliberately withhold relevant or material information concerning a violation of the Code.
No person will be subject to penalty or reprisal for reporting in good faith suspected violations of the Code.
Additionally, unethical, unprofessional, illegal, fraudulent or other questionable behavior may also be anonymously reported by visiting the confidential Manulife Ethics Hotline at www.ManulifeEthics.com.
4.12 INITIAL CODE CERTIFICATION
Each Associate is required to certify in StarCompliance their initial receipt of the Code including that they have read and understood the Code and agree to comply with the applicable provisions of the Code.
4.13 QUARTERLY CODE CERTIFICATION
Each Associate is required to certify in StarCompliance on a quarterly basis that they are in compliance with the applicable provisions of the Code.
4.14 ANNUAL CODE CERTIFICATION
Each Associate, on an annual basis, is required to certify in StarCompliance that they have read and understood the Code, have complied with the applicable provisions of the Code (or have disclosed any failure to comply with the provisions of the Code to the Code Administrator) during the past year.
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5. Personal Trading Rules
Applicable to All Access Persons
The rules in this Section are applicable to the following Access Classification Levels:
• | Regular Access Person |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person |
5.1 NO LIABILITY FOR LOSSES
Manulife and/or Clients will not be liable for any losses incurred or profits avoided by any Access Person or Household Family Member resulting from the implementation or enforcement of the Code. The definition of a Household Family Member includes an Access Person’s spouse, significant other, minor children or other family members who also share the same household with the Access Person.
Access Persons must understand that their ability (as well as the ability of their Household Family Members) to buy and sell Securities may be limited by the Code and that trading activity by the Firm, Clients and/or other Manulife Affiliates may affect the timing of when an Access Person (as well as a Household Family Member) can buy or sell a particular Security.
5.2 WHAT SECURITIES ARE SUBJECT TO THE PERSONAL TRADING RULES?
Securities in which the Access Person has a Beneficial Interest are subject to the Code’s personal trading restrictions and requirements. An Access Person is deemed to have a Beneficial Interest in any Security where the Access Person controls or can directly or indirectly profit or share in the profit derived from a transaction in a Security. An Access Person is presumed to have a Beneficial Interest in the following Securities:
• | Securities owned by an Access Person in their name; |
• | Securities owned by Household Family Members; |
• | Securities owned by an Access Person indirectly through an account or investment vehicle for their benefit, such as an IRA/RRSP/ RESP/ISA/SIPP, family trust, or family partnership; |
• | Securities in which the Access Person has a joint ownership interest, such as Securities owned in a joint brokerage account; and |
• | Securities over which the Access Person has discretion or gives advice (other than for a Firm or Client account). This includes Securities owned by trusts, private foundations or other charitable accounts for which the Access Person has investment discretion. |
5.3 REQUIREMENT TO REPORT SECURITIES ACCOUNTS
Access Persons are required to report the name of the broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Securities are or can be held for the Access Person’s Beneficial Interest (including accounts of Household Family Members).
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Access Persons are required to report all Securities accounts within 10 calendar days of initially being designated an Access Person. After this initial report of Securities accounts, any Securities accounts opened in the future time must be reported no later than 10 calendar days following the opening of the account or prior to the first discretionary transaction in the account (whichever comes first).
The following is a non-exhaustive list of commonly reported Securities Accounts:
• | Brokerage Accounts |
• | Mutual Fund Only Accounts |
• | Custodial Securities Accounts |
• | Manulife GSOP Plan Accounts |
• | Certain 529 Plans (plans affiliated with or plans with investment options managed by Manulife or a Manulife-affiliated entity) |
• | IRA Accounts |
• | Stock Purchase Plans |
• | Transfer Agent Accounts |
• | Variable Life or Annuity Insurance Policies with underlying Affiliated Mutual Fund investment options |
• | Manulife Loan Program Mutual Fund Account |
• | John Hancock Unified 401k Plan/Manulife RPS |
• | Registered Savings Plan (RRSP/RESP/TFSA) |
• | Uncertified Book Entry Securities |
• | Physical possession of certified Securities |
• | Employee Stock Option Account |
• | U.K. Individual Savings Account (ISA) |
• | U.K. Self Invested Pension Plan (SIPP) |
As an Access Person, you are also required to inform any broker/dealer when you open a new account that you are employed by a financial institution and also whether you are registered with a broker/dealer.
5.3.1 MANAGED ACCOUNTS
As outlined in Section 5.3 above, the requirement to report accounts in which any Securities are or can be held for the Access Person’s Beneficial Interest includes Managed Accounts (accounts where a professional money manager is charged with sole discretionary authority over the account). However, Securities transactions in Managed Accounts may be exempt from Section 5.7:
Pre-Clearance Approval Requirement (below) provided the Code Administrator qualifies the account to be a Managed Account.
5.3.2 MANAGED ACCOUNT QUALIFICATION PROCESS
The Code Administrator may qualify an account to be a Managed Account provided the Access Person furnishes a copy of the client Advisory Agreement for the Managed Account. The Code Administrator will review the agreement to determine if the account qualifies to be a Managed Account.
Once the Code Administrator approves an account to be a Managed Account, any Securities transactions in the Managed Account are exempt from Section 5.7: Pre-Clearance Approval Requirement.
5.4 DUPLICATE TRANSACTION CONFIRMATIONS AND STATEMENTS
Access Persons must arrange for the Code Administrator to receive duplicate copies of trade confirmations of Reportable Securities transactions and periodic account statements for any Reportable Securities accounts in which the Access Person has a Beneficial Interest in, if the account holds, or has the ability to hold, Reportable Securities. This requirement also applies to the Securities confirmations and statements of Household Family Members.3
5.5 U.S.-BASED PREFERRED BROKERAGE ACCOUNT REQUIREMENT
U.S.-based Access Persons are required to maintain all Reportable Securities accounts (including the Reportable Securities accounts of Household Family Members) at one of the firm’s Preferred Brokers unless the account has been qualified by the Code Administrator as an Exempt Securities Account. A current list of the Firm’s Preferred Brokers can be found on StarCompliance or by contacting the Code Administrator.
Upon designation as an Access Person, a person has 45 calendar days to (i) transfer all assets to a Preferred Broker and close the non-compliant account or (ii) qualify any non-compliant Securities account as an Exempt Securities Account.
5.6 INITIAL HOLDINGS REPORT AND CERTIFICATION
After reporting all Reportable Securities accounts (as outlined in Section 5.3) Access Persons must file an Initial Holdings Report. This Initial Holdings Report is due within 10 calendar days after the person became an Access Person and the submitted information must be current as of a date no more than 45 calendar days prior to the date the person became an Access Person.
An Access Person is required to submit with their Initial Holdings Report a certification that they have disclosed or reported all required Reportable
3 The Code Administrator may rely on the operating groups of Manulife/John Hancock for administration of trading activity limitations and monitoring of market timing policies for Manulife Affiliated Mutual Funds. To the extent the Code Administrator has ready access to Securities transaction and holdings information, the Code Administrator is not required to obtain duplicate paper confirmations or statements for such accounts.
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Securities holdings and all Reportable Securities accounts in which they have a Beneficial Interest (including Household Family Member accounts).
The Initial Holdings Report must include: (i) the title and type of each Reportable Security in which the Access Person has any Beneficial Interest, (ii) the exchange ticker symbol or CUSIP number and the number of shares or principal amount of each Reportable Security (each as applicable), (iii) the name of any broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Reportable Securities are or can be held for the Access Person’s direct or indirect Beneficial Interest, and (iv) the date the report is submitted by the Access Person.
5.7 QUARTERLY TRANSACTIONS REPORT AND CERTIFICATION
Access Persons must file a Quarterly Transaction Report that discloses certain information about each Reportable Security transaction in which they have (or as a result of the transaction acquired) a Beneficial Interest (including transactions for Household Family Members) during the quarter covered by the Quarterly Transaction Report.
Each Access Person’s Quarterly Transaction Report is due within 30 calendar days after the end of each calendar quarter. Each Access Person’s Quarterly Transaction report must also include a certification that the submitted Quarterly Transaction Report includes all information required to be reported. In connection with the Quarterly Transaction Report Certification, Access Persons are required to certify to the accuracy of the listing of Securities accounts displayed in StarCompliance.
The Quarterly Transaction report must include: (i) the date of the transaction (“trade date”), (ii) the title of the Reportable Security, (iii) the exchange ticker symbol or CUSIP number, the interest rate and maturity date, the number of shares or principal amount of each Reportable Security, the type of transaction or acquisition, the price at which the transaction was effected (each as applicable), (iv) the name of any broker, dealer, bank, or other entity with or through which the transaction was effected, and (v) the date the report is submitted by the Access Person.
5.8 REPORTING OF SECURITIES AS GIFTS, DONATIONS AND INHERITANCES
An Access Person’s gift or donation of a Pre-Clearable Security is considered a “sale” event (this includes gifts or donations by Household Family Members) and therefore is subject to pre-clearance approval prior to making the gift or donation. Refer to Section 5.11: Pre-Clearance Approval Requirement. Additionally, any approved gift or donation event of a Reportable Security must be accurately reflected in the next Quarterly Transaction Report (Refer to Section 5.7).
The receipt of a gift or inheritance of Reportable Securities should be promptly reported to the Code Administrator to ensure the new holding is accurately accounted for. However, the receipt of a gift or inheritance is not subject to pre-clearance.
5.9 ANNUAL HOLDINGS REPORT AND CERTIFICATION
Access Persons must file an Annual Holdings Report.
The Annual Holdings Report is due within 45 calendar days of December 31st and must be current as of a date no more than 45 calendar days prior to the date this information is reported.
Each Access Person must submit each Annual Holdings Report with a certification that they have reported all required Reportable Securities holdings and Securities accounts for which the Access Person holds a Beneficial Interest (including the applicable holdings and accounts of Household Family Members).
The Annual Holdings Report must include: (i) the title and type of each Reportable Security in which the Access Person has any Beneficial Interest, (ii) the exchange ticker symbol or CUSIP number and the number of shares or principal amount of each Reportable Security (each as applicable), (iii) the name of any broker, dealer, bank, or other entity with which the Access Person maintains an account in which any Reportable Securities are or can be held for the Access Person’s direct or indirect Beneficial Interest, and (iv) the date the report is submitted by the Access Person.
5.10 ACCESS PERSON’S RESPONSIBILITY REGARDING TRANSACTIONS AND HOLDINGS DATA
As a convenience to Access Persons, the Code Administrator works with certain brokers to obtain Securities transactions and holdings data to pre-populate Quarterly Transaction and Annual Holdings Reports in StarCompliance (where available). However, the pre-populated data may contain omissions or inaccuracies. It is each Access Person’s responsibility to contact the Code Administrator to correct any inaccurate transactions or holdings data prior to submitting a report or certification.
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5.11 PRE-CLEARANCE APPROVAL REQUIREMENT
Access Persons may not purchase, sell or otherwise acquire or dispose of any Security in which they have (or because of such transaction will establish) a Beneficial Interest without obtaining advance pre-clearance approval for such transaction from StarCompliance (or the Code Administrator) unless the Security transaction is exempt from the Code’s pre-clearance requirement. Remember, Access Persons are required to obtain pre-clearance approval for all Securities transactions of persons who qualify as a Household Family Member of the Access Person unless the Security transaction is exempt from the Code’s pre-clearance requirement.
Refer to APPENDIX C for a list of Securities and Securities transactions exempt from the pre-clearance requirement.
5.12 TERMS OF PRE-CLEARANCE
During the pre-clearance process, Access Persons will be required to attest to the following terms of pre-clearance:
5.12.1 SAME DAY APPROVAL WINDOW
The pre-clearance approval is valid only for the same day it is granted.
5.12.2 RESTRICTION ON SECURITIES UNDER ACTIVE CONSIDERATION
Access Persons may not purchase, sell or otherwise dispose of any Security in which the Access Person has (or because of such transaction will establish) Beneficial Interest if the Access Person at the time of the transaction has actual knowledge that:
• | the Security (or a related Security) is under Active Consideration for Purchase or Sale by or on behalf of the Firm or any Client account; |
• | the Security is on an MNPI Restricted Trading List; and/or |
• | the Access Person is in possession of material non-public information regarding the Security. |
5.12.3 LIMIT ORDERS AND SPECIAL ORDERS
Due to the same-day approval window outlined in Section 5.12.1, multi-day special orders such as “good until cancelled orders” or “limit orders” are prohibited. “Day orders” (i.e., orders that automatically expire at the end of the trading day session) are allowed, however the onus is on the Access Person to check the status of day orders at the end of the trading day to ensure any orders that have not been executed are cancelled. If a trade order is left open beyond the same-day pre-clearance window, any resulting executed trade will constitute a Code violation.
5.12.4 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE
![]() | Please note this term of pre-clearance is only applicable to the following Classification Level: MIM Public Markets Front-Office Access Persons. | |
Refer to Section 7.1 – MIM Public Markets Investment Team Hold Until Sold Rule. |
As outlined in Section 7.1, MIM Public Markets Front-Office Access Persons associated with an Investment Team (including Household Family Members) are not permitted to sell a holding if the same holding is held in a Client account managed by the MIM Public Markets Front-Office Access Person’s Investment Team.
5.12.5 INITIAL PUBLIC OFFERINGS & INITIAL COIN OFFERINGS & PRIVATE PLACEMENTS
As outlined in Section 5.11, Access Persons must obtain advance pre-clearance approval for transactions of reportable Securities. This includes Initial Public Offerings, Initial Coin Offerings, and Private Placements.
![]() | Please note that the following Classification Levels may not participate in Initial Public Offerings (Refer to Section 6.2 – Initial Public Offering Ban): |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
5.12.6 INITIAL PUBLIC OFFERINGS, INITIAL COIN OFFERINGS & PRIVATE PLACEMENT APPROVALS
As part of the pre-clearance process, pre-clearance requests for Initial Public Offerings, Initial Coin Offerings and Private Placements will be subject to the approval of the relevant Chief Investment Officer or designee.
Pre-clearance approvals for Initial Public Offerings, Initial Coin Offerings and Private Placements are valid for the duration of the subscription period.
5.13 INVESTMENT CLUBS
Access Persons (including Household Family Members) are required to pre-clear and report all pre-clearable and Reportable Securities of their Investment Club in the same manner as their own personal trades.
![]() | Please note that the following Classification Levels may not participate in Investment Clubs (Refer to Section 6.3 – Investment Club Ban): |
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
5.14 RESTRICTIONS ON MANULIFE SECURITIES
The Corporate Law Department has a Policy entitled: Manulife Financial Corporation (“MFC”): Insider Trading & Reporting Policy. This Policy prohibits Manulife employees from speculating in MFC Securities. Speculation includes the purchase or sale of MFC Securities with the intention of reselling or buying back in a relatively short period of time in the expectation of a rise or fall in the market price of such Securities, buying or selling options, or short selling. The
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Policy also outlines requirements for Manulife employees that are deemed to be “Reporting Insiders” and/or “Designated Employees.” Questions related to this Policy and whether you have been deemed a “Reporting Insider” and/or “Designated Employees” should be directed to the Corporate Law Department or to the General Counsel.
Notwithstanding the above, Access Persons are subject to pre-clearance requirements for transactions in MFC Securities, just like any other Security (refer to Section 5.11: Pre-Clearance Approval Requirement).
5.14.1 REQUIREMENT TO PRE-CLEAR SALES OF MFC SHARES IN THE GSOP PROGRAM
Access Persons are required to pre-clear sales of MFC Shares in the MFC Global Share Ownership Program (GSOP).
Refer to Section 5.11: Pre-Clearance Approval Requirement.
Access Persons are not required to pre-clear purchases of MFC Shares in the MFC GSOP.
5.15 SHORT TERM PROFIT BAN (“60 DAY RULE”)
Access Persons (including Household Family Members) cannot directly or indirectly profit from a discretionary purchase and sale of the same Pre-Clearable Security within 60 calendar days. However, Pre-Clearable Securities whose issuer’s market capitalization is $5 Billion USD or more at the time of the transaction are exempt from the 60 Day Rule.
A voluntary transaction related to a derivative Security (including options) which results in a profit is permitted so long as the voluntary transaction occurs more than 60 calendar days after the initial related transaction event.
The following Securities activities are exempt from the 60-Day Rule:
• | All money market fund transactions |
• | Automatic Investment Plan transactions (including payroll deduction purchases) |
• | Dividend reinvestment purchase transactions |
• | Issuer Pro Rata Discretionary Transactions |
• | Involuntary issuer transactions (i.e. stock dividends, stock splits/ reverse splits or other similar reorganizations or distributions, call of a debt security, and spin-offs of shares to existing holders) |
• | Automatic purchases into a default investment option by a retirement plan |
• | Other involuntary purchase or sales activity not at the direction of the Access Person or the Access Person’s Household Family Member. |
Conversely, giving gifts and donations of Securities are considered “Sales” and are not exempt from the 60-Day Rule.
The Code Administrator in consultation with the relevant Chief Compliance Officer may approve waivers to the 60 Day Rule.
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5.16 SAME DAY BLACKOUT PERIOD RULE
Access Persons (and Household Family Members) may not purchase, sell or otherwise acquire or dispose of any Pre-Clearable Security in which they have (or as a result of such transaction will establish) a Beneficial Interest if that same or Related Pre-Clearable Security traded in a Client or Firm account on the same day the Access Person (or Household Family Member) transacts unless (1) the Access Person has no actual knowledge that the same or Related Pre-Clearable Security is under Active Consideration for Purchase or Sale by an account and (2) the transaction can satisfy the following exception:
5.16.1 MARKET CAP SECURITIES EXCEPTION
May permit the transaction if the Access Person’s pre-clearance request is in the Securities of an issuer whose market capitalization is at least $5B USD or more.
If a Client or Firm account trades in a Pre-Clearable Security during the pre-clearance window and an Access Person successfully obtained pre-clearance approval of a trade, the Access Person may still be required to demonstrate that they did not know that the same or Related Pre-Clearable Security was under Active Consideration for Purchase or Sale for an account at the time of the personal trade. Access Persons failing to demonstrate to the firm “no knowledge” when requested may be required to sell any Security purchased and/or disgorge any profits realized as a result of a transaction being found by the Firm to have violated the Same Day Blackout Period Rule.
![]() | Please note that the following Access Person Classification Levels are subject to a stricter Blackout period Rule. (Refer to Section 6.1 - 15 Day Blackout Period Rule.): |
• | General Account/MIM Private Markets Front-Office Access Person | |
• | MIM Public Markets Front-Office Access Person. |
5.17 EXCESSIVE TRADING IS DISCOURAGED
While active personal trading may not in and of itself raise issues under the Securities Laws, a high volume of personal trading by an Access Person can be time consuming and can increase the possibility of actual or apparent conflicts with portfolio transactions. Accordingly, high levels of discretionary personal trading activity by an Access Person is strongly discouraged and will be subjected to enhanced scrutiny including reporting to the Ethics Oversight Committee. Additionally, limitations may be imposed on the number of Pre-Clearable Securities pre-clearance requests permitted during a given period for Access Persons.
5.18 INFORMATION BARRIERS
The Firm has adopted the “INFORMATION BARRIER POLICY” to establish, maintain, and enforce information barriers reasonably designed to meet its business needs and satisfy its contractual and regulatory obligations. In addition, the policy establishes safeguards and controls to ensure the integrity of these information barriers and prevent the improper transfer or sharing of sensitive information between business units.
Access Persons must comply with the specific standards and requirements of the “INFORMATION BARRIER POLICY”.
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6. Additional Personal Trading Rules for Front-Office Access Persons
Applicable to all General Account/MIM Private Markets Front-Office Access Persons and all MIM Public Markets Front-Office Access Persons
The rules in this Section are applicable to the following Access Classification Levels:
• | General Account/MIM Private Markets Front-Office Access Person |
• | MIM Public Markets Front-Office Access Person. |
6.1 15 DAY BLACKOUT PERIOD RULE
Front-Office Access Persons (and Household Family Members) may not purchase, sell or otherwise acquire or dispose of any Pre-Clearable Security in which they have (or as a result of such transaction will establish) a Beneficial Interest if that same or Related Pre-Clearable Security traded in a Client or Firm account 7 calendar days before such a transaction (or will trade in a Client or Firm account 7 days following such a transaction) unless (1) the Front-Office Access Person has no actual knowledge that the same or Related Pre-Clearable Security is under Active Consideration for Purchase or Sale by an account and (2) the transaction can satisfy one of the following exceptions:
6.1.1 MARKET CAP SECURITIES EXCEPTION
May permit the transaction if the Front-Office Access Person’s pre-clearance request is in the Securities of an issuer whose market capitalization is at least $5B USD or more.
6.1.2 DE MINIMIS TRADING EXCEPTION
May permit the transaction if all of the Front-Office Access Person’s aggregate total same-day pre-clearance requests for the same or Related Pre-Clearable Security have a transaction market value of less than $25,000 USD and (in the case of equities) the same day transactions in the Pre-Clearable Security total no more than 500 equity shares.
If a Client or Firm account trades in a Pre-Clearable Security during the pre-clearance window and a Front-Office Access Person successfully obtained pre-clearance approval of a trade, the Front-Office Access Person may still be required to demonstrate that they did not know that the same or Related Pre-Clearable Security was under Active Consideration for Purchase or Sale for an account at the time of the personal trade. Front-Office Access Persons failing to demonstrate to the Firm “no knowledge” when requested may be required to sell any Security purchased and/or disgorge any profits realized as a result of a transaction being found by the Firm to have violated the 15 Day Blackout Period Rule.
6.2 INITIAL PUBLIC OFFERING BAN
Front-Office Access Persons may not directly or indirectly acquire a Beneficial Interest in a Security through an Initial Public Offering (IPO). Consequently Front-Office Access Persons (including Household Family Members) must wait to purchase newly-issued IPO Securities until the next business (trading) day following the offering date of the IPO.
6.3 INVESTMENT CLUB BAN
Front-Office Access Persons (including Household Family Members) are prohibited from participating or holding an interest in any Investment Club.
6.4 ADDITIONAL RESTRICTIONS – HONG KONG-BASED ACCESS PERSONS ONLY
Access Persons who are employees of SFC-licensed entities in Hong Kong must comply with the requirements in the “Staff Ethics” section of the Fund Manager Code of Conduct.
Hong Kong-based Front-office Access Persons (and their Household Family Members) are prohibited from the following: (i) short selling any Security, (ii) delay of personal transaction settlement beyond the normal settlement time for the relevant market and (iii) cross trades between Access Persons and Client accounts.
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7. Additional Personal Trading Rules for MIM Public Markets Front-Office Access Persons
Applicable to all MIM Public Markets Front-Office Access Persons
The rules in this Section are applicable to the following Access Classification Levels:
• | MIM Public Markets Front-Office Access Person. |
7.1 MIM PUBLIC MARKETS INVESTMENT TEAM HOLD UNTIL SOLD RULE
MIM Public Markets Front-Office Access Persons associated with an Investment Team (including Household Family Members) are not permitted to sell a Pre-Clearable Security holding in which they have a Beneficial Interest if (i) the same Security is held in a Client account managed by the MIM Public Markets Front-Office Access Person’s Investment Team and (ii) the MIM Public Markets Front-Office Access Person (or Household Family Member) purchased the Security after the date of the Code’s initial adoption or the date the person was named to the relevant Investment Team (whichever date is later).
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8. Administration of the Code
8.1 PENALTIES FOR CODE VIOLATIONS
Penalties for violating the Securities Laws can be severe, both for the individuals involved and their employers. A person can be subject to penalties even if they did not personally benefit from the violation. Penalties may include civil injunctions, payment of profits made or losses avoided (“disgorgement”), jail sentences, fines for the person committing the violation, and fines for the employer or other controlling person.
In addition, any violation of the Code is subject to the imposition of sanctions by the Firm as may be deemed appropriate under the circumstances by the Firm. These sanctions could include, without limitation, bans on personal trading (including Household Family Member trading), disgorgement of trading profits, and personnel action, including termination of employment, where appropriate.
8.2 EXEMPTIONS AND APPEALS
In cases of hardship, exemptions from Code provisions may be granted by the Code Administrator, in consultation with the relevant Chief Compliance Officer, where warranted by applicable facts and circumstances, if permitted by law, and if the Code Administrator and/or Ethics Oversight Committee determines an exemption would be in accordance with the spirit of the General Principles of the Code and the Securities Laws. Associates and Access Persons may direct their request for an exemption to the Code Administrator or the relevant Chief Compliance Officer. The Code Administrator and/or Ethics Oversight Committee is also authorized to modify the personal trading provisions of this Code where local law would prohibit the application of a specific provision.
If an Associate or Access Person believes that a Code-related request for exemption has been incorrectly denied by the Code Administrator and/or Ethics Oversight Committee, or that a Code-related action is not warranted, they may make a written appeal of the decision or action within 30-days of the decision or action to the Ethics Oversight Committee. The Code Administrator will arrange an appropriate forum or communication for the consideration of appeals.
8.3 CODE AMENDMENTS
The Code Administrator, in consultation with the relevant Chief Compliance Officer, is permitted to approve non-material amendments to the Code and the Ethics Oversight Committee (or relevant Board, if applicable) is responsible for approving any material amendments.
For certain Affiliated Mutual Fund and Affiliated Registered Closed-End Fund Clients, the respective Board of Trustees must approve any material changes to the Code within 6 months of the adoption of the material change in accordance with the requirements of SEC Rule 17j-1 under the Investment Company Act of 1940.
8.4 PRIVACY
All confidential information received by the Code Administrator or Code service providers is kept confidential and will only be disclosed to others as required to administer this Code, or to report violations to the Ethics Oversight Committee, management, regulators, or other legal authority.
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8.5 CODE ADMINISTRATION
The Firm’s relevant Chief Compliance Officers, together with the Code Administrator, maintain responsibility for establishing policies and procedures for the administration of the Code; monitoring and testing for Code compliance; ensuring Code training is provided to Associates and Access Persons; granting exemptions to any provision of the Code, on an individual or class basis; and considering and recommending material amendments to the Code to the Ethics Oversight Committee (or relevant Board, if applicable).
The Ethics Oversight Committee (or relevant Board, if applicable) retains the ultimate discretion as to the interpretation the Code’s provisions in any given situation, rendering material sanctions for violations of the Code, and rendering final judgments on any Associate’s or Access Person’s appeal of any decision or ordinary sanction imposed by the Code Administrator.
8.5.1 CONTACT
The Code Administrator can be contacted at The Code of Ethics, Global Center of Expertise - INVDIVCodeofEthics@manulife.com
8.6 RECORDKEEPING
The Code Administrator maintains or causes to be maintained, the following records: (1) a copy of the Code or any predecessor code of ethics which has been in effect during the most recent 7-year period; (2) a record of any violation of the Code, or any predecessor code of ethics, and of any action taken as a result of such violation in the 7-year period following the end of the fiscal year in which the violation took place; (3) a list of all persons currently or within the most recent 7-year period who were required to make reports pursuant to the Code (or any predecessor Code) and the person(s) who were responsible for reviewing these reports; (4) copies of all acknowledgements of each person’s receipt of the Code, Initial and Annual Holdings Reports, Quarterly Transaction Reports, and duplicate brokerage confirmations and Securities account statements (as applicable) filed during the most recent 7-year period; and (5) a record of the approval of, and rationale supporting, the acquisition of Securities by Access Persons in an Initial Public Offering or Limited Offering for at least 7 years after the end of the fiscal year in which the approval is granted.
Code records will be maintained for the first 2 years in an office of the Firm (in paper or accessible electronically) and in an easily accessible place for the time period as required by any applicable regulations thereafter.
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Appendix A
Definitions of Italicized Code of Ethics Terms
Access Person |
Access Persons are any Associate who, in connection with their regular functions or duties: (i) has regular access to non-public information regarding the purchase or sale of securities or non-public information regarding the portfolio holdings of Client or Firm accounts, (ii) has a job function that relates to the making (or participating in making) of recommendations regarding the purchase or sale of Securities for Firm or Client accounts, or (iii) regularly has or may have access to material, non-public securities information. See Section 3: Access Classification Levels and Applicable Rules. |
Active Consideration for Purchase or Sale |
A Security is under Active Consideration for Purchase or Sale once an analyst wishes to recommend or a portfolio manager forms a specific intent to purchase or sell a Security for a Client or Firm account. |
Advisory Person of a Fund |
An Advisory Person of a Fund is (i) any “Access Person” of the Fund (as defined by SEC Rule 17j-1), (i) any director, officer, general partner, or employee of a Fund or its investment adviser (or of any company in a control relationship to the Fund or its investment adviser who, in connection with their regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of “covered securities” (as defined by SEC Rule 17j-1) by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; or (iii) any natural person in a control relationship to the Fund or investment adviser who obtains information regarding recommendations made to the Fund with regard to the purchase or sale of covered securities. Note: Advisory Persons of a Fund that are also personnel of John Hancock Investment Management, LLC (“JHIM LLC”) are covered under a separate joint Fund and JHIM LLC code of ethics. Additionally, Advisory Persons of a Fund that are also independent trustees of a Fund are covered under a separate Fund independent trustee code of ethics. |
Affiliated Mutual Fund |
Any Mutual Fund for which Manulife serves as an investment adviser (or sub-adviser) or whose investment adviser (or sub-adviser) controls, is controlled by, or is under common control with Manulife. (e.g., Manulife or John Hancock Mutual Funds). |
Affiliated Registered Closed-End Fund |
Any U.S. registered Closed-End Investment Company or business development company for which Manulife serves as an investment adviser (or sub-adviser) (e.g., John Hancock GA Mortgage Trust, etc). |
Associate |
Associates are: (i) any partner, officer, director, or other person occupying a similar status or performing similar functions of the Firm (ii) an employee of the Firm (iii) any person who provides investment advice on behalf of the Firm and is subject to the supervision and control of the Firm (iv) any person meeting the definition of Access Person; (v) an Advisory Person of a Fund; (vi) certain Manulife Affiliate persons who engage, directly or indirectly, in the Firm’s investment advisory activities; and (vii) any other person who the Code Administrator deems an Associate. See Section 3.1. |
Automatic Investment Plan |
A program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. Examples include automatic dividend reinvestment plans and payroll deduction purchase plans. |
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Beneficial Interest |
An Access Person is deemed to have a Beneficial Interest in any transaction in which the Access Person controls or has the opportunity to directly or indirectly profit or share in the profit derived from the Securities transacted. An Access Person is presumed to have a Beneficial Interest in the following Securities and related transaction activities: (1) Securities owned by an Access Person in their name; (ii) Securities (and Securities accounts) owned by Household Family Members; (iii) Securities owned by an Access Person indirectly through an account or investment vehicle for their benefit, such as an IRA/RRSP/RESP/ISA/SIPP, family trust or family partnership; (iv) Securities owned in which the Access Person has a joint ownership interest, such as Securities owned in a joint brokerage account; and (v) Securities over which the Access Person has discretion or gives advice (other than Firm or Client accounts) and includes Securities owned by trusts, private foundations or other charitable accounts for which the Access Person has investment discretion. Beneficial Interest is interpreted in the same manner under the Code as it would be under Rule 16a-1(a)(2) under the U.S. Securities Exchange Act of 1934. |
Chief Compliance Officer |
The term Chief Compliance Officer refers to the Chief Compliance Officer of each applicable entity adopting this Code. |
Client |
For purposes of this Code, the term “Client” means the specific person or entity that has an investment advisory or investment sub-advisory services agreement (or supervised investment delegation affiliate arrangement) with a specific entity adopting this Code. The term “Client” also includes a Fund. |
Closed-End Investment Company |
A Closed-Fund Investment Company is a registered investment company that issues a fixed number of shares and is usually traded on a major stock exchange. In contrast, an open-end investment company (i.e., mutual fund) continuously offers new shares to the public and repurchases shares at net asset value. Note: Many REITs are Closed-End Investment Companies. |
Code Administrator |
Code Administrator refers to the person (or persons) primarily responsible for the day-to-day administration of the Code. The Code Administrator can be contacted at The Code of Ethics, Global Center of Expertise - INVDIVCodeofEthics@manulife.com. |
Cryptocurrencies |
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database. |
Direct Obligations of the Government of the U.S. or U.K. |
Any Security directly issued or guaranteed as to principal or interest by the United States. Examples of direct obligations include Cash Management Bills, Treasury Bills, Notes and Bonds, and STRIPS. It is important to note that Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) Securities are not Direct Obligations of the Government of the United States. Direct Obligations of the U.K. refers to the following list of Securities issued and guaranteed by the United Kingdom Treasury: Premium Savings Bonds, Index Linked Savings Certificates, Fixed Interest Savings Certificates, Guaranteed Equity Bonds, Capital Bonds, Children’s Bonus Bonds, Fixed Rate Savings Bonds, Income Bonds, and Pensioners Guaranteed Income Bonds. Refer to M&G Investment Management Ltd. SEC No-Action Letter (Sept. 10, 2002). |
Ethics Oversight Committee |
The Ethics Oversight Committee is an ad hoc or standing compliance committee composed of Code Administrator personnel, relevant Chief Compliance Officers and certain senior management. |
Exchange-Traded Fund (ETF) |
An Exchange-Traded Fund (ETF) is an investment fund traded on stock exchanges. An ETF holds assets such as stocks, commodities or bonds. Most ETF’s track an index, such as a stock index or bond index. ETF transactions require annual and quarterly reporting, but do not require advance pre-clearance approval. Refer to APPENDIX C for further information on reporting ETF transactions and holdings. |
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Exempt Securities Accounts |
With written approval from the Code Administrator, U.S.-based Access Persons (and Household Family Members) subject to the Preferred Broker Requirement of Section 5.5 are permitted to maintain a Securities account with an entity other than with a Preferred Broker, if the Securities account can meet one of the following exemptions: (i) it contains only Securities that can’t be transferred; (ii) it exists solely for products or services that one of the Preferred Brokers cannot provide; (iii) it exists solely because your spouse’s or significant other’s employer prohibits external covered accounts; (iv) it is managed by a third-party registered investment adviser; (v) it is restricted to trading interests in 529 College Savings Plans; (vi) it is associated with an ESOP (employee stock option plan) or an ESPP (employee stock purchase plan); (vii) employee sponsored phantom stock or option plan; (viii) it is required by a direct purchase plan, a dividend reinvestment plan, or an Automatic Investment Plan with a public company in which regularly scheduled investments are made or planned; (ix) it is a Mutual Fund only account; (x) it is required by a trust agreement; (xi) it is associated with an estate of which the Access Person is the executor, but not a beneficiary, and involvement with the account is temporary; (xii) transferring the account would be inconsistent with other applicable rules; or (xii) other exception approved by the Code Administrator. |
Firm |
Global Wealth and Asset Management (“GWAM”) and General Account Investments (“GA”) business groups and the entities listed in Appendix B of this Code. |
Fund(s) |
Fund (or collectively Funds) means the John Hancock GA Mortgage Trust, John Hancock Private Placement Trust, and John Hancock GA Senior Loan Trust. |
High Quality Short Term Debt Instrument |
Any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized rating organization (e.g., S&P, Moody’s, Fitch, A.M. Best). |
Household Family Member |
An Access Person’s spouse, “significant other,” minor children, or other family member who also shares the same household with the Access Person. An Access Person’s “significant other” is defined as a person who (i) shares the same household with the Access Person; (ii) shares living expenses with the Access Person; and (iii) is in a committed personal relationship with the Access Person and there is an intention to remain in the relationship indefinitely. The Code Administrator, after reviewing all the pertinent facts and circumstances, may determine, if not prohibited by applicable law, that an indirect Beneficial Interest over Securities held by members of the Access Person’s Household Family Members does not exist or is too remote for purposes of the Code’s requirements. |
Initial Coin Offering |
An Initial Coin Offering (ICO) is the cryptocurrency industry’s equivalent to an Initial Public Offering (IPO) (see IPO definition below). ICOs act as a way to raise funds, where a company looking to raise money to create a new coin, app, or service launches an ICO. Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project. |
Initial Public Offering |
An offering of Securities registered under the U.S. Securities Act of 1933 (or comparable non-U.S. registration statute or regime), the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the U.S. Securities Exchange Act of 1934 (or comparable non-U.S. compulsory reporting requirements). |
Investment Club |
A group of people who pool their assets in order to make joint decisions (typically a vote) on which Securities to buy, hold or sell. |
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Investment Team |
An individual Investment Team describes the grouping of analysts and portfolio managers who make or participate in making recommendations regarding the purchase or sale of securities for designated Client accounts. The Code Administrator or CCO may also assign certain traders to specific Investment Teams if the trader regularly participates in the Security recommendation process with the analysts or portfolio managers. |
Limited Offering |
A Securities offering that is exempt from registration under the U.S. Securities Act of 1933, pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act of 1933, or equivalent foreign statute or regulation. Also known as a private placement Security (e.g., private investment funds, “hedge funds,” limited partnerships, etc.) |
Manulife |
Manulife Financial Corporation. |
Manulife Affiliate |
All persons or entities controlled by Manulife. |
Mutual Fund |
(a) Any U.S. registered open-end investment management company (i.e., mutual fund); or (b) a Canadian or foreign regulated mutual fund (UCITs etc.) which meets the following 4 requirements: (i) redemption on demand at the net asset value of fund shares, (ii) forward pricing reflecting the net asset value of fund shares, (iii) daily calculation of the fund’s net asset value in a manner consistent with principles and rules adopted under the Investment Company Act of 1940, and (iv) absence of a secondary market. Refer to SEC No-Action Letter, Manufacturers Adviser Corp., Sept. 10, 2002. |
No Direct or Indirect Control Over Account |
Purchases, sales or dispositions of Securities over which a person has no direct or indirect influence or control (e.g., a “blind trust” or certain managed accounts which the Access Person has obtained from the Code Administrator a written exemption). |
Pre-Clearable Security |
All Securities except those Securities listed on APPENDIX C of the Code as exempt from the pre-clearance requirements of the Code. |
Preferred Brokers |
A current list of Preferred Brokers can be found on StarCompliance or by contacting the Code Administrator. Refer to Section 5.5 for further information regarding the U.S.-Based Preferred Brokerage Account requirements. |
Private Placement |
Private Placement (or non-public offering) is a funding round of Securities which are not sold through a public offering, but rather through a private offering, mostly to a small number of chosen investors. |
Pro Rata Discretionary Transactions |
Purchases or other acquisitions or dispositions of Securities resulting from the discretionary exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of the issuer. (e.g., discretionary participation in takeovers, rights & tender/ exchange offerings). |
Reportable Security |
All Securities except those Securities listed as exempt from the Initial and Annual Holdings Report and Quarterly Transaction Report requirements on APPENDIX C of the Code. |
Same (or Related) Pre-Clearable Security |
For an equity Security, the Same Pre-Clearable Security would include all other equity securities of the same issuer or, other instrument whose value is derived from the value of the issuer’s equity Securities. For a debt Security, the Same Pre-Clearable Security would include all other debt instruments of the same issuer as well as any instrument whose value is derived from the credit, value or reference to the issuer’s debt. |
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Security (Securities) |
A “security” as defined by Section 1(1) of the Ontario Securities Act, the Hong Kong Securities and Futures Ordinance, Section 3(a)(10) or the Investment Advisers Act of 1940. Examples include but are not limited to: any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, mutual funds, closed-end funds, unit investment trusts, REITS, ETFs, commodity funds, broker cds, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, security-based swap, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any “security” (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privileged entered into on a national securities exchange related to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. References to a Security also includes any warrant for, option in, or “security” or other instrument immediately convertible into or whose value is derived from that “security” and any instrument or right which is equivalent to that “security.” The definition of Security applies regardless of the registration status or domicile of registration of the Security (i.e., the term Security includes both private placements/limited partnership interests and publicly-traded securities as well as domestic and foreign Securities). For purposes of this Code, the definition of Securities also includes other instruments and interests labeled as reportable on APPENDIX C of this Code. |
Securities Laws |
The Securities Laws include various domestic and foreign securities-related laws, statutes and rules/regulations that govern the Firm’s investment management activities and includes: Ontario Securities Act, U.K. Financial Services Authority regulations, the Securities and Futures Ordinance of Hong Kong, Securities and Futures Act (Singapore), the Securities Act of 1933 (U.S.), the Securities Exchange Act of 1934 (U.S.), the Sarbanes-Oxley Act of 2002 (U.S.), the Investment Company Act of 1940 (U.S.), the Investment Advisers Act of 1940 (U.S.), Title V of the Gramm-Leach-Bliley Act (U.S.), and the Bank Secrecy Act (U.S.) (as it applies to funds and investment advisers). |
StarCompliance |
The web-based reporting and certification system used by the Firm to facilitate compliance with certain reporting and pre-clearance obligations imposed under the Code (a.k.a., Star). The Code Administrator may approve alternate reporting methods if deemed appropriate. |
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Appendix B
1Legal Entity Adoption of the Code
Legal Entity: |
Jurisdiction/Country |
Initial Adoption Date |
Hancock Natural Resource Group, Inc. | U.S. | April 6, 2020 |
John Hancock GA Mortgage Trust | U.S. | April 6, 2020 |
John Hancock GA Senior Loan Trust | U.S. | April 6, 2020 |
Manulife Asset Management and Trust Corporation | Philippines | April 6, 2020 |
Manulife Data Services Inc. | Barbados | April 6, 2020 |
Manulife General Account Investments (HK) Limited | Hong Kong | April 6, 2020 |
Manulife General Account Investments (Singapore) Pte. Ltd. | Singapore | April 6, 2020 |
Manulife IM (Switzerland) LLC | Switzerland | April 6, 2020 |
Manulife Investment (Shanghai) Limited Company | China | April 6, 2020 |
Manulife Investment Management (Europe) Limited | U.K. | April 6, 2020 |
Manulife Investment Management (Ireland) Limited | Ireland | April 6, 2020 |
Manulife Investment Management (North America) Limited | Canada | April 6, 2020 |
Manulife Investment Management (US) LLC | U.S. | April 6, 2020 |
Manulife Investment Management Distributors Inc. | Canada | April 6, 2020 |
Manulife Investment Management Limited | Canada | April 6, 2020 |
Manulife Investment Management Private Markets (Canada) Corp | Canada | April 6, 2020 |
Manulife Investment Management Private Markets (US) LLC | U.S. | April 6, 2020 |
Manulife Investment Management Private Markets Holdings (US) LLC | U.S. | April 6, 2020 |
Manulife Overseas Investment Fund Management (Shanghai) Limited Company | China | April 6, 2020 |
Manulife US Real Estate Management Pte, Ltd. (Definition of Associate only includes officers and employees of the entity). |
Singapore |
April 6, 2020 |
The General Account Investments and the Manulife Investment Management Private Markets Groups of John Hancock Life Insurance Company (U.S.A.) |
U.S. |
April 6, 2020 |
The General Account Investments and the Manulife Investment Management Private Markets Groups of The Manufacturers Life Insurance Company |
Canada |
April 6, 2020 |
John Hancock Personal Financial Services, LLC | U.S. | April 5, 2021 |
1This Code has been designed to be applicable across GWAM and GA and certain regulated entities listed in Appendix B (together the “Firm”), however it is being implemented in a multi-phased, multi-year project.
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Appendix C
Securities Reporting & Pre-Clearance Summary Chart
Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Government Securities | |||
Direct Obligations of the Government of the U.S. or U.K. | No | No | No |
State, Province or Municipal Bonds | Yes | Yes | Yes |
Direct Obligations of the Governments of Canada, Japan, Germany, France or Italy |
Yes |
Yes |
Yes |
Money Market Instruments/Commodities/Currency | |||
Bankers Acceptances | No | No | No |
Bank Certificates of Deposit | No | No | No |
Brokerage Certificates of Deposit | Yes | Yes | No |
Commercial Paper | No | No | No |
High Quality Short-Term Debt Instruments | No | No | No |
Repurchase Agreements | No | No | No |
Money Market Funds (including Money Market Affiliated Mutual Funds) | No | No | No |
Physical Commodities and Options and Futures on Commodities (not commodity ETFs or closed-end funds) |
No |
No |
No |
Foreign and Domestic Currency Holdings/Transactions. This includes currency options (unless they are traded on a national securities exchange) and futures. |
No |
No |
No |
Cryptocurrencies (only Initial Coin Offerings “ICO’s” are reportable and pre-clearable) |
No |
No |
No |
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
IPOs / ICOs, Private Placements / Limited Offerings | |||
IPOs & ICOs (Note: IPO’s are prohibited for the following Classification Levels: GA/MIM Private Markets Front-Office Access Persons & MIM Public Markets Front-Office Access Persons) |
Yes |
Yes |
Yes |
Private Placements/Private Funds/Limited Offerings | Yes | Yes | Yes |
Issuer Event Transactions / Automatic Investment Plans | |||
Involuntary Issuer Transactions and Holdings (stock dividends, stock splits/reverse splits, or other similar reorganizations or distributions, call of a debt security, and spin-offs of shares to existing holders) |
Yes |
Yes |
No |
Issuer Pro Rata Discretionary Transactions/Elections (purchases or other acquisitions or dispositions resulting from the discretionary exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of Securities of such issuer) (e.g., discretionary participation in takeovers, rights & tender/exchange offerings) |
Yes |
Yes |
Yes. Pre-clearance approval for discretionary elections should be sought by manually phoning or emailing the Code Administrator directly. It is important to contact the Code Administrator to avoid having your request improperly denied. |
Automatic Investment Plans (a program in which regular periodic purchases or withdrawals are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation) (for Mutual Funds AIPs Refer to below) |
Yes. You must add up all of the Plan transactions for the year and reflect the activity on the Annual Holdings Report |
No. You do not need to report automatic (non-discretionary) Plan transactions on the Quarterly Transaction Report |
No. However, transactions that override the automatic preset schedule (discretionary purchases/sales, discretionary changes in individual security selection) must be pre-cleared. Note: You do not need to pre-clear a change to your money contribution level into a Plan. |
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/MIM Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Issuer Event Transactions / Automatic Investment Plans | |||
Dividend Reinvestment Plan Automatic Transactions | Yes | No | No |
Issuer Direct Stock Plan Automatic Transactions | Yes | No | No |
Issuer Direct Stock Plan Non-Automatic Transactions (discretionary transactions) |
Yes |
Yes |
Yes. A pre-cleared transaction instruction is valid until executed by the Plan. |
Investment Company Securities | |||
Closed-End Investment Companies | Yes | Yes | Yes |
Exchange Traded Funds (ETFs) and Exchange Traded Notes | Yes | Yes | No |
Money Market Funds (including Money Market Affiliated Mutual Funds) | No | No | No |
Mutual Funds (non-affiliated) | No | No | No |
Affiliated Mutual Funds | Yes | Yes | No |
Affiliated Mutual Funds interests held by or through the Manulife Registered Pension Plan (RPS), Manulife Registered Retirement Savings Plan (RRSP), John Hancock Unified 401k Plan, other employer-sponsored retirement plan, 529/RESP plan, or any other account. |
Yes |
Yes, however do not report automatic transactions/rebalances (in accordance with a predetermined schedule/allocation) on the Quarterly Transaction Report |
No |
Affiliated Mutual Funds held through a variable (annuity or life) insurance product separate account/unit investment trust |
Yes (report Affiliated Mutual Fund unit values) |
Yes, however do not report automatic transactions/rebalances (in accordance with a predetermined schedule/allocation) on the Quarterly Transaction Report |
No |
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Employee Compensation Instruments | |||
Automated Purchases—No | |||
MFC Shares in the MFC Global Share Ownership Plan (GSOP) |
Yes |
Automated Purchases—No Sales—Yes |
Sales—Yes. A pre-cleared transaction instruction is valid until executed by the Plan. |
MFC Restricted Share Units (RSU), Deferred Share Units (DSU), or Performance Share Units (PSU) |
No |
No |
No |
Options Acquired from MFC or Other Public Company Employer as Part of Employee Compensation (MFC Solium Account options) |
Yes |
Yes |
No |
Employer Phantom Stock/Phantom Option Interest (granted as compensation to employee, only employer can redeem interest and interest is non-transferable) |
No |
No |
No |
Automatic Grants—No | |||
Employer (non-MFC) Stock Grant (unvested grant of employer stock, vesting event, sales of vested shares) |
Unvested and Vested Amounts—Yes |
Grants—No Vesting Events — No (however if upon vesting the shares are transferred to a brokerage account then yes) |
Automatic Vesting Event—No Sale of Vested Shares: Yes—if employee directs sale, No—if employer automatically sells vested without direction from employee) |
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Only applicable to Access Persons in the following Access Classification Levels: • Regular Access Person • General Account/Private Markets Front-Office Access Person • MIM Public Markets Front-Office Access Person. |
Reportable Security? Initial and Annual Holdings Reports |
Reportable Security? Quarterly Transaction Reports |
Pre-Clearable Security? |
Unless otherwise indicated on this chart, (i) all Securities positions must be reported initially and annually thereafter, (ii) all Securities transactions must receive advance pre-clearance approval, and (iii) all Securities transactions must be reported quarterly (italicized terms are defined in the Code). | Does the Access Person need to report the following types of Securities holdings? | Does the Access Person need to report transactions in the following types of Securities? | Does the Access Person need to obtain pre-clearance approval prior to transacting in the following types of Securities? |
Gifts / Blind Trusts / Managed Accounts | |||
Gifts, Inheritances, or Donations of Reportable Securities (received or given) |
Yes |
Yes |
Securities Gifts & Inheritances Received - No Securities Given or Donated - Yes |
No* | |||
No Direct or Indirect Control Over Account (Securities held in, purchased/sold for an account where a person does not have direct or indirect influence or investment/ proxy voting control, e.g., Blind Trusts, Certain Managed Accounts) |
No |
No |
*However, you must report initial and annual holdings in (as well as pre-clear and report quarterly transactions for) a Managed Account unless the Access Person has obtained a specific written pre-clearance or reporting exemption from the Code Administrator. |
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Exhibit (p)(3)
Code of Ethics for the Independent Trustees of the
John Hancock Funds
Effective December 6, 2005
Amended and Restated January 1, 2023
The Board of Trustees (the “Board”) of the John Hancock Funds1 has adopted this code of ethics (this “Code”), exclusively with respect to Trustees who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940 (the “1940 Act”), of the John Hancock Funds (the “Independent Trustees” or “you”). This Code is intended to comply with the requirements of Rule 17j-1 under the 1940 Act insofar as they apply to the Independent Trustees.
The Board recognizes that the John Hancock Funds’ officers and access persons (with the exception of the Independent Trustees) are covered by a separate code of ethics adopted by the Board, which is applicable to John Hancock Investment Management, LLC and John Hancock Variable Trust Advisers, LLC (each, a “John Hancock Adviser”), John Hancock Investment Management Distributors, LLC, John Hancock Distributors, LLC and each of the John Hancock Funds. The Board also recognizes that access persons who are employees of a sub-adviser to the John Hancock Funds are covered under a separate code of ethics approved by the Board. The Board, after considering the limited nature of access by the Independent Trustees to current information with respect to security transactions being effected or considered on behalf of the John Hancock Funds, has adopted this Code specifically and separately to cover the Independent Trustees.
Please note that the policies described below apply to all accounts over which you have a beneficial interest. Normally, you will be deemed to have a beneficial interest in your personal accounts, those of a spouse, “significant other,” minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice.
If you have any questions regarding your responsibilities under this Code of Ethics, please contact Trevor Swanberg at 617-572-7149 or tswanberg@jhancock.com
Set forth below are policies applicable to the Independent Trustees.
I. Statements of Policy
A. General Principles
It is unlawful for any Independent Trustee covered by this Code, directly or indirectly, in connection with his or her purchase or sale of a security held or to be acquired by a John Hancock Fund, to:
• employ any device, scheme or artifice to defraud a John Hancock Fund;
• make any untrue statement of a material fact to a John Hancock Fund or omit to state a material fact necessary in order to make the statements made to a John Hancock Fund, in light of the circumstances under which they are made, not misleading;
1 As used in this Code, the “John Hancock Funds,” or the “Funds,” refer to each open-end and closed-end fund that is listed, or that is a series of a trust listed, in Appendix A hereto, as may be updated from time to time by the Chief Compliance Officer of the John Hancock Funds.
INTERNAL |
• engage in any act, practice or course of business that operates or would operate as a fraud or deceit on a John Hancock Fund; or
• engage in any manipulative practice with respect to a John Hancock Fund.
The General Principles discussed above govern all conduct, whether or not the conduct is also covered by more specific standards and procedures in this Code. Failure to comply with this Code may result in disciplinary action as determined by the Board, including potentially removal from the Board in accordance with the terms of the John Hancock Fund charter documents.
B. Transactions in John Hancock Funds
The Independent Trustees are subject to the same policies against excessive trading of shares of the open-end John Hancock Funds that apply to all shareholders of the open-end John Hancock Funds, as applicable. These policies are described in the John Hancock Funds’ prospectuses and are subject to change. Additional restrictions on trading of closed-end and open-end John Hancock Funds are discussed in Section II.C.
C. Transactions in securities of Advisers, Subadvisers and Principal Underwriters
As an Independent Trustee, you are prohibited from purchasing any security issued by:
(1) the controlling parent of the John Hancock Advisers;
(2) any subadviser of a John Hancock Fund;
(3) the controlling parent of any subadviser;
(4) any principal underwriter of a John Hancock Fund, including prospective principal underwriters of John Hancock closed-end funds;
(5) the controlling parent of any principal underwriter.
A complete list of these issuers can be found in Appendix B.
D. Annual Certification
On an annual basis, you must provide a certification at a date designated by the Chief
Compliance Officer of the John Hancock Funds that:
(1) you have read and understand this Code;
(2) you acknowledge that you are subject to its requirements; and
(3) you have complied, to the best of your knowledge, with its requirements.
You are required to make this certification to demonstrate that you understand the importance of these policies and your responsibilities under the Code.
E. Quarterly Transaction Reports
You will not generally be required to submit quarterly transaction reports. You will, however, be required to submit a quarterly transaction report if you knew (or, in the ordinary course of fulfilling your official duties as an Independent Trustee, should have known) that during the 15 calendar days immediately before or after you trade a security described in Section II.A of this Code, either:
(i) the subadviser of a John Hancock Fund purchased or sold the same security on behalf of such Fund, or
(ii) the subadviser of a John Hancock Fund actively considered the purchase or sale of the same security on behalf of such Fund;
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provided that, monitoring of the publication of portfolio holdings of series of John Hancock Exchange-Traded Fund Trust (the “John Hancock ETFs”) is not construed to be within the ordinary course of fulfilling the duties of a trustee, therefore the publication or availability of such portfolio holdings shall not be construed to impart actual or constructive knowledge of the John Hancock ETFs’ portfolio transactions on a trustee.
If these circumstances occur, it is your responsibility to contact the Chief Compliance Officer of the John Hancock Funds and he will assist you with the requirements of the quarterly transaction report.
You must submit a quarterly transaction report within 30 calendar days after the end of a calendar quarter if required in the limited circumstances described above. This report must cover all transactions during the calendar quarter that are personal securities transactions, as described below in Section II of this Code.
If you are required to submit a quarterly transaction report, the report must include the following information about each transaction described above:
• the date of the transaction, the title, and as applicable, the exchange ticker symbol or CUSIP number, interest rate and maturity date (if applicable), number of shares, and principal amount of each reportable security involved;
• the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
• the price at which the transaction was effected;
• the name of the broker, dealer or bank with or through which the transaction was effected; and
• the date that you submit the report.
With respect to any account in which you have traded securities for which you must submit a quarterly transaction report, the quarterly transaction report must also include the following account information:
• the name of the broker, dealer or bank with whom you have established an account;
• the account number and account registration;
• the date the account was established; and
• the date that you submit the report.
II. Personal Securities Transactions
A Personal Securities Transaction is a transaction in a security in which an Independent Trustee subject to this Code has a beneficial interest. Normally, this includes securities transactions in your personal accounts, those of a spouse, “significant other,” minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice. Accounts over which you have no direct or indirect influence or control are exempt. For discretionary accounts, this is defined as:
1) | Not being able to suggest that the trustee or third-party discretionary manager make any particular purchases or sales of securities; |
2) | Not being able to direct the trustee or third-party discretionary manager to make any particular purchases or sales of securities; and |
3) | You did not consult with the trustee or third-party discretionary manager as to the particular allocation of investments to be made in your account. |
To prevent potential violations of this Code, you are strongly encouraged to request clarification for any transactions or accounts that are in question.
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A. Covered Personal Securities Transactions
Except as noted below, Personal Securities Transactions include transactions in all securities, including:
• Stocks or bonds;
• Government securities that are not direct obligations of the U.S. government, such as Fannie Mae or municipal securities;
• Shares of all closed-end funds;
• Shares of the John Hancock Funds, as well as any other open-end mutual funds, including John Hancock ETF’s, that are advised or sub-advised by a John Hancock Adviser or by John Hancock or Manulife entities (other than money market funds);
• Options on securities, on indexes, and on currencies;
• All kinds of limited partnerships;
Exchange Traded Funds formed as unit investment trusts;
• Foreign unit trusts and foreign mutual funds;
• Private investment funds and hedge funds; and
• Futures, investment contracts or any other instrument that is considered a “security” under the Investment Company Act of 1940.
B. Exempt Personal Securities Transactions
Personal Securities Transactions do not include transactions in the following securities:
• Direct obligations of the U.S. government (e.g., treasury securities);
• Bankers’ acceptances, bank certificates of deposit, commercial paper, and high quality short-term debt obligations, including repurchase agreements;
• Shares of any open-end mutual funds, including exchange-traded funds, that are not advised or sub-advised by a John Hancock Adviser or by John Hancock or Manulife entities;
• Shares issued by money market funds; and
• Securities in accounts over which you have no direct or indirect influence or control.
C. Restrictions on Trading in John Hancock Funds
1. General. You may not buy or sell shares of John Hancock Funds, or tip others who then trade in such Funds, on the basis of material non-public information (“Inside Information”). This concern is most pronounced with respect to closed-end John Hancock Funds (“Closed-End Funds”) and the John Hancock ETFs because their shares trade on a secondary market. However, it is also applicable to all John Hancock mutual funds.
a. Material Information. Information is considered “material” if a reasonable investor would consider it important in making a decision to buy, sell or hold shares of a Fund. Positive or negative information may be “material.”
b. Non-public Information. Information is considered “non-public” if it has not been broadly and publicly disseminated for a sufficient period to be reflected in the price of the Fund. Information remains “non-public” until it has been “publicly disclosed,” meaning that it has been broadly distributed to the public in a non-exclusionary manner, such as via a press release or inclusion of such information in a filing with the Securities and Exchange Commission. In the case of the John Hancock ETFs, holdings information posted to the Funds’ website is considered to have been “publicly disseminated.”
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c. Examples. Inside Information may include such things as news about acquisitions, Closed-End Fund tender offers, financial results, changes in dividends or distributions, Closed-End Fund share buy-backs, important management changes, anticipated litigation recoveries, or any other information that is likely to be considered material to a Fund.
d. Further Guidance. If you are uncertain as to whether information is Inside Information, you should presume that the information is both material and non-public, and that it is Inside Information. In such cases, you should refrain from trading until you consult legal counsel or the Chief Compliance Officer for further guidance on information that may be deemed Inside Information.
2. Closed-End, and John Hancock ETF’s Blackout Periods and Trading Guidelines. You may not trade in shares of Closed-End Funds during the following blackout periods (each, a “Blackout Period”):
a. Regular Meetings. The Independent Trustees may not engage in any transactions in shares of the Closed-End Funds at any time between (x) the earlier of (A) the date Board meeting information is received by the Trustee, or (B) the date the Independent Trustees are advised that Board meeting information is posted to the website where Board materials are made available, and (y) 10 calendar days after the dates of a regular meeting of the Board. To clarify, assuming a meeting begins on a Monday and concludes at mid-day on the next day, Independent Trustees may not transact in Closed-End Fund or John Hancock ETF shares before the second subsequent Monday.
b. Special Meetings. Upon receipt of the materials for a special meeting of the Board or a committee thereof, Independent Trustees may not engage in any transactions in Closed-End Fund or John Hancock ETF shares at any time from the date of receipt of such materials until after the tenth calendar day after the date of such meeting.
c. Financial Statements Review. The Independent Trustees may not engage in any transactions in shares of a Closed-End Fund or John Hancock ETF’s at any time between:
(i) the earlier of (A) the date on which a semiannual or an annual shareholder report that contains financial statements for a Closed-End Fund or John Hancock ETF is received by the Trustee, or (B) the date the Independent Trustees are advised that a semiannual or an annual shareholder report that contains financial statements for a Closed-End Fund or John Hancock ETF is posted to the website where Board materials are made available, and
(ii) two (2) business days after the date on which the semi-annual or annual shareholder report for the Closed-End Fund or John Hancock ETF is publicly available on John Hancock Funds website or through another method consistent with Regulation FD.
3. Other Restricted Periods. The Chief Compliance Officer of the John Hancock Funds may, from time to time, restrict the purchase of one or more John Hancock Funds, including open-end John Hancock Funds, if he or she believes after consulting with counsel to the John Hancock Funds that the Independent Trustees may have knowledge of Inside Information regarding such John Hancock Fund(s). The Chief Compliance Officer will provide the Independent Trustees prior notice of any such restrictions.
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III. Administration of the Code of Ethics
A. Review of Reports
The Chief Compliance Officer of the John Hancock Funds shall review any reports delivered by an Independent Trustee pursuant to this Code. Any such review shall give special attention to evidence, if any, of conflicts or potential conflicts with the securities transactions of the John Hancock Funds or violations or potential violations of the antifraud provisions of the federal securities law or this Code.
B. Investigations of Potential Violations
The Chief Compliance Officer shall investigate any potential violation of the provisions of this Code. After completion of any such investigation, the Chief Compliance Officer shall determine whether a violation has occurred and, if so, make a report to the Board or, if appropriate, the Compliance Committee of the Board. The Board shall determine what action should be taken in response to a violation of this Code.
C. Annual Reports
At least on an annual basis, the Chief Compliance Officer shall provide the Board with (i) a written report that describes issues that arose under this Code since the prior such report, including, but not limited to, information relating to material violations of this Code and any actions taken, and (ii) a certification that the John Hancock Funds have adopted procedures reasonably necessary to prevent the Independent Trustees from violating this Code.
D. Record Retention Requirements
The Chief Compliance Officer shall maintain the following records at the John Hancock Funds’ principal place of business, and shall make these records available to the Securities and Exchange Commission at any time and from time to time for reasonable periodic, special or other examination:
• A copy of this Code that is currently in effect, or at any time within the past five years was in effect;
• A record of any violation of this Code, and any action taken as a result of a violation, must be maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs;
• A copy of each quarterly transaction report made by an Independent Trustee under this Code;
• A copy of each annual report and certification described in Section III.C of this Code; and
• A record of all Independent Trustees, currently or within the past five years, who are subject to this Code, and of individual(s) who are responsible for reviewing reports made under this Code.
E. Amendments
Any amendments to this Code must be approved by a majority of the Independent Trustees.
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Appendix A
John Hancock Funds
John Hancock Variable Insurance Trust |
John Hancock Funds II |
John Hancock Funds III |
John Hancock Bond Trust |
John Hancock California Tax-Free Income Fund |
John Hancock Capital Series |
John Hancock Collateral Trust |
John Hancock Current Interest |
John Hancock Exchange-Traded Fund Trust |
John Hancock Investment Trust |
John Hancock Investment Trust II |
John Hancock Municipal Securities Trust |
John Hancock Sovereign Bond Fund |
John Hancock Strategic Series |
John Hancock Emerging Markets Income Fund |
John Hancock Floating Rate High Income Fund |
John Hancock Financial Opportunities Fund |
John Hancock Hedged Equity & Income Trust |
John Hancock Income Securities Trust |
John Hancock Investors Trust |
John Hancock Preferred Income Fund |
John Hancock Preferred Income Fund II |
John Hancock Preferred Income Fund III |
John Hancock Premium Dividend Fund |
John Hancock Tax-Advantaged Dividend Income Fund |
John Hancock Tax-Advantaged Global Shareholder Yield Fund |
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JOHN HANCOCK COLLATERAL TRUST
200 Berkeley Street
Boston, Massachusetts 02116
April 26, 2023
VIA EDGAR TRANSMISSION
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
RE: John Hancock Collateral Trust (the “Trust”)
File No. 811-23027
Ladies and Gentlemen:
Enclosed for filing on behalf of the Trust pursuant to the Investment Company Act of 1940, as amended (the “1940 Act”), is Amendment No. 9 to the Trust’s Registration Statement on Form N-1A under the 1940 Act (the “Amendment”).
The Amendment is being filed pursuant to Section 8(b) under the 1940 Act.
If you have any questions or comments, please call me at 617-572-0420.
Sincerely,
/s/ Harsha Pulluru | |
Harsha Pulluru | |
Assistant Secretary of the Trust |