As
filed with the Securities and Exchange Commission on
Registration Nos. 33-22884
811-05577
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | ☒ | |
Pre-Effective Amendment No. | ☐ | |
Post-Effective Amendment No. 117 | ☒ | |
and | ||
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | ☒ | |
Amendment No. 119 |
(Exact Name of Registrant as Specified in Charter)
1650 Market Street, Suite 1200
Philadelphia, PA 19103
(Address of Principal Executive Offices)
Registrant’s Telephone Number:
1-800-442-8299
Michael P. Malloy, Esq.
Secretary
Drinker Biddle & Reath LLP
One Logan Square
Suite 2000
Philadelphia, PA 19103-6996
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
☐ | immediately upon filing pursuant to paragraph (b) |
☒ | on |
☐ | 60 days after filing pursuant to paragraph (a)(i) |
☐ | on__________________ pursuant to paragraph (a)(i) |
☐ | 75 days after filing pursuant to paragraph (a)(ii) |
☐ | on ____________ pursuant to paragraph (a)(ii) of rule 485. |
If appropriate, check the following box:
☐ | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
Advisor
Shares | |||
Annual
Portfolio Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
|||||||||
|
3 |
|
|
4 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Russell
1000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Blend Average2 |
1 |
2 |
|
5 |
|
|
6 |
|
Advisor
Shares | |||
|
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
7 |
|
|
8 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
1000® Index1 (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Russell
1000® Growth Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Growth Average2 |
1 |
2 |
The
Morningstar Large Growth Average is provided so that investors may compare the performance of the Portfolio with the performance of a
peer group of funds that Morningstar, Inc. considers similar to the Portfolio. |
|
9 |
|
|
10 |
|
|
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
|||
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
11 |
|
|
12 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
1000® Index1 (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Russell
1000® Value Index (reflects no deduction for fees, expenses
or
taxes) |
|||||||||||
Morningstar
Large Value Average2 |
1 |
2 |
The
Morningstar Large Value Average is provided so that investors may compare the performance of the Portfolio with the performance of a peer
group of funds that Morningstar, Inc. considers similar to the Portfolio. |
|
13 |
|
|
14 |
|
|
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
|||
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
|||||||||
|
15 |
|
|
16 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
2000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Small Blend Average1 |
1 |
|
17 |
|
|
18 |
|
|
|||
Management
Fees |
|||
Other
Expenses
(includes
0.25% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
19 |
|
|
20 |
|
Past
1
Year |
Past
5
Years |
Past 10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
MSCI
World ex-USA Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Foreign Large Value Average1 |
1 |
|
21 |
|
|
22 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
|||
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
23 |
|
|
24 |
|
|
25 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
1000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Blend Average1 |
1 |
|
26 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
27 |
|
|
28 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
1000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Value Average1 |
1 |
|
|
29 |
|
|
30 |
|
Advisor
Shares | |||
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Short
Sale Expenses |
|||
Total
Other Expenses |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
|||||||||
|
31 |
|
|
32 |
|
|
33 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Russell
3000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Bloomberg
U.S. Treasury Bellwether 3-Month Index (reflects no deduction for
fees,
expenses or taxes)2 |
|||||||||||
Blended
Index (reflects no deduction for fees, expenses or taxes)3 |
|||||||||||
Morningstar
Long/Short Average4 |
1 |
2 |
|
3 |
|
4 |
|
|
34 |
|
|
35 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Short
Sale Expenses |
|||
Total
Other Expenses |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
36 |
|
|
37 |
|
|
38 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
3000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Mid-Cap Value Average1 |
1 |
|
|
39 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
40 |
|
|
41 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Dow
Jones Industrial Average Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Blend Average1 |
1 |
|
42 |
|
|
43 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust)1 |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
|||||||||
|
44 |
|
|
45 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Russell
1000® Value Index1 |
|||||||||||
Morningstar
Large Value Average2 |
1 |
2 |
|
|
46 |
|
|
47 |
|
Advisor
Shares | |||
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.25% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
|||||||||
|
48 |
|
|
49 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
Russell
2000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Russell
2000® Value Index (reflects no deduction for fees, expenses or taxes)1 |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes)2 |
|||||||||||
Morningstar
Small Blend Average3 |
1 |
|
2 |
The
S&P 500® Index is provided so that
investors may compare the performance of the Portfolio with the performance of a well-known index of leading U.S. companies. |
3 |
The
Morningstar Small Blend Average is provided so that investors may compare the performance of the Portfolio with the performance of a peer
group of funds that Morningstar, Inc. considers similar to the Portfolio. |
|
50 |
|
|
51 |
|
Advisor
Shares | |||
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
52 |
|
|
53 |
|
|
54 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes)1 |
|||||||||||
CBOE
S&P 500® PutWrite Index (reflects no deduction for fees, expenses or taxes) |
1 |
|
|
55 |
|
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.20% shareholder servicing fees payable to Glenmede Trust) |
|||
Acquired
Fund Fees and Expenses |
|||
Total
Annual Portfolio Operating Expenses1 |
|||
Fee
Waivers and Expense Reimbursements2 |
|||
Net
Expenses |
|||
1 |
|
2 |
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
|
56 |
|
|
57 |
|
|
58 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
MSCI
ACWI Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Blended
PutWrite Index (reflects no deduction for fees, expenses or taxes)2 |
1 |
2 |
|
59 |
|
|
60 |
|
|
61 |
|
|
62 |
|
|
63 |
|
• |
attempts to distribute relatively
low levels of taxable investment income by investing in stocks with low dividend yields; |
• |
attempts to hold taxes on
realized capital gains to a minimum by investing primarily in the securities of companies with above average earnings predictability and
stability which the Portfolio expects to hold for several years; |
• |
attempts to avoid realizing
short-term capital gains; and |
• |
sells depreciated securities
to offset realized capital gains, when consistent with its overall investment approach, thus reducing capital gains distributions. |
|
64 |
|
|
65 |
|
|
66 |
|
|
67 |
|
|
68 |
|
|
69 |
|
|
70 |
|
|
71 |
|
|
72 |
|
|
73 |
|
|
74 |
|
|
75 |
|
|
76 |
|
|
77 |
|
|
78 |
|
Portfolio |
Percentage
of Average Daily Net Assets * | ||
Quantitative
U.S. Large Cap Core Equity Portfolio – Advisor
Shares |
0.55% | ||
Quantitative
U.S. Large Cap Growth Equity Portfolio – Advisor
Shares
|
0.55% | ||
Quantitative
U.S. Large Cap Value Equity Portfolio |
0.55%* | ||
Quantitative
U.S. Small Cap Equity Portfolio |
0.55%* | ||
Quantitative
International Equity Portfolio |
0.75%** | ||
Responsible
ESG U.S. Equity Portfolio |
0.55%* | ||
Women
in Leadership U.S. Equity Portfolio |
0.55%* | ||
Quantitative
U.S. Long/Short Equity Portfolio – Advisor Shares |
1.20%*** | ||
Quantitative
U.S. Total Market Equity Portfolio |
1.20%*** | ||
Strategic
Equity Portfolio |
0.55% | ||
Equity
Income Portfolio |
0.55%* | ||
Small
Cap Equity Portfolio – Advisor Shares |
0.55% | ||
Secured
Options Portfolio – Advisor Shares |
0.55% | ||
Global
Secured Options Portfolio |
0.55%** | ||
* |
The Advisor has
contractually agreed to waive its fees and/or reimburse expenses to the extent that the Quantitative U.S. Large Cap Value Equity
Portfolio’s, Quantitative U.S. Small Cap Equity Portfolio’s, Responsible ESG U.S. Equity Portfolio’s, Women
in Leadership U.S. Equity Portfolio’s and Equity Income Portfolio’s annual total operating expenses exceed 0.85%
of such Portfolio’s average daily net assets (excluding Acquired Fund fees and expenses, brokerage commissions, extraordinary
items, interest and taxes). The Advisor has contractually agreed to these waivers and/or reimbursements until at least February 28,
2025. Shareholders will be notified if these waivers and/or reimbursements are discontinued after that date. |
** |
The Advisor has
contractually agreed to waive its fees and/or reimburse expenses to the extent that the Quantitative International Equity Portfolio’s
and Global Secured Options Portfolio’s annual total operating expenses exceed 1.00% of such Portfolio’s average daily
net assets (excluding Acquired Fund fees and expenses, brokerage commissions, extraordinary items, interest and taxes). The Advisor
has contractually agreed to these waivers and/or reimbursements until at least February 28, 2025. Shareholders
will be notified if these waivers and/or reimbursements are discontinued after that date. |
*** |
The Advisor has
contractually agreed to waive a portion of its 1.20% management fees so that after giving effect to such contractual waiver,
the management fees for the Quantitative U.S. Long/Short Equity and Quantitative U.S. Total Market Equity Portfolios are each
0.85% of such Portfolio’s average daily net assets. The Advisor has also contractually agreed to waive an additional portion
of its management fees and/or reimburse these Portfolios to the extent that total annual operating expenses of the Quantitative
U.S. Long/Short Equity Portfolio’s Advisor Shares and the Quantitative U.S. Total Market Equity Portfolio, exceed 1.25%
of the average daily net assets of the Quantitative U.S. Long/Short Equity Portfolio’s Advisor Shares and the Quantitative
U.S. Total Market Equity Portfolio (excluding Acquired Fund fees and expenses, short-sale dividends, prime broker interest, brokerage
commissions, taxes, interest, and extraordinary expenses). The Advisor has contractually agreed to these waivers and/or reimbursements
until at least February 28, 2025. Shareholders will be notified if these waivers and/or reimbursements are
discontinued after that date. |
|
79 |
|
|
80 |
|
|
81 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 25.15 | $ | 32.97 | $ | 24.99 | $ | 26.89 | $ | 27.88 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.23 | 0.26 | 0.23 | 0.29 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.78 | (4.01 | ) | 10.15 | (0.73 | ) | 1.18 | |||||||||||||
Total from investment operations | 1.01 | (3.75 | ) | 10.38 | (0.44 | ) | 1.53 | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.26 | ) | (0.27 | ) | (0.24 | ) | (0.29 | ) | (0.35 | ) | ||||||||||
Net realized capital gains | (4.61 | ) | (3.80 | ) | (2.16 | ) | (1.17 | ) | (2.17 | ) | ||||||||||
Total distributions | (4.87 | ) | (4.07 | ) | (2.40 | ) | (1.46 | ) | (2.52 | ) | ||||||||||
Net asset value, end of year | $ | 21.29 | $ | 25.15 | $ | 32.97 | $ | 24.99 | $ | 26.89 | ||||||||||
Total return | 4.42 | % | (12.89 | )% | 43.77 | % | (1.90 | )% | 6.42 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 712,481 | $ | 924,570 | $ | 1,255,795 | $ | 1,066,153 | $ | 1,674,687 | ||||||||||
Ratio of operating expenses to average net assets | 0.86 | %2 | 0.84 | %2 | 0.85 | %2 | 0.87 | % | 0.86 | % | ||||||||||
Ratio of net investment income to average net assets | 1.04 | % | 0.96 | % | 0.75 | % | 1.15 | % | 1.32 | % | ||||||||||
Portfolio turnover rate3 | 78 | % | 66 | % | 41 | % | 66 | % | 80 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
ratio of operating expenses excluding interest expense was 0.86%, 0.84% and 0.85% for the years ended October 31,
2023, 2022 and 2021, respectively. |
3 |
Portfolio
turnover is calculated at the fund level. |
|
82 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 27.95 | $ | 40.64 | $ | 32.02 | $ | 33.08 | $ | 32.52 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.08 | 0.09 | 0.05 | 0.12 | 0.16 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.71 | (5.65 | ) | 13.33 | 3.19 | 4.86 | ||||||||||||||
Total from investment operations | 1.79 | (5.56 | ) | 13.38 | 3.31 | 5.02 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.08 | ) | (0.09 | ) | (0.05 | ) | (0.14 | ) | (0.15 | ) | ||||||||||
Net realized capital gains | (1.93 | ) | (7.04 | ) | (4.71 | ) | (4.23 | ) | (4.31 | ) | ||||||||||
Total distributions | (2.01 | ) | (7.13 | ) | (4.76 | ) | (4.37 | ) | (4.46 | ) | ||||||||||
Net asset value, end of year | $ | 27.73 | $ | 27.95 | $ | 40.64 | $ | 32.02 | $ | 33.08 | ||||||||||
Total return | 6.84 | % | (16.67 | )% | 46.17 | % | 10.68 | % | 18.50 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 1,080,175 | $ | 1,211,342 | $ | 1,751,370 | $ | 1,659,543 | $ | 2,237,727 | ||||||||||
Ratio of operating expenses to average net assets | 0.86 | %2 | 0.84 | %2 | 0.85 | %2 | 0.88 | % | 0.86 | % | ||||||||||
Ratio of net investment income to average net assets | 0.27 | % | 0.28 | % | 0.15 | % | 0.40 | % | 0.53 | % | ||||||||||
Portfolio turnover rate3 | 78 | % | 85 | % | 49 | % | 69 | % | 80 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
ratio of operating expenses excluding interest expense was 0.86%, 0.84% and 0.85% for the years ended October 31,
2023, 2022 and 2021, respectively. |
3 |
Portfolio
turnover is calculated at the fund level. |
|
83 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 12.37 | $ | 13.05 | $ | 9.03 | $ | 10.29 | $ | 9.82 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.23 | 0.21 | 0.18 | 0.20 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.39 | ) | (0.67 | ) | 4.02 | (1.26 | ) | 0.49 | ||||||||||||
Total from investment operations | (0.16 | ) | (0.46 | ) | 4.20 | (1.06 | ) | 0.70 | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.22 | ) | (0.22 | ) | (0.18 | ) | (0.20 | ) | (0.23 | ) | ||||||||||
Net realized capital gains | (0.49 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.71 | ) | (0.22 | ) | (0.18 | ) | (0.20 | ) | (0.23 | ) | ||||||||||
Net asset value, end of year | $ | 11.50 | $ | 12.37 | $ | 13.05 | $ | 9.03 | $ | 10.29 | ||||||||||
Total return2 | (1.46 | )% | (3.49 | )% | 46.66 | % | (10.19 | )% | 7.33 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 1,640 | $ | 1,665 | $ | 2,487 | $ | 1,588 | $ | 2,040 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 2.85 | % | 2.27 | % | 2.45 | % | 2.66 | % | 3.20 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 0.85 | % | 0.85 | %3 | 0.85 | % | 0.85 | % | 0.89 | % | ||||||||||
Ratio of net investment income to average net assets | 1.87 | % | 1.66 | % | 1.48 | % | 2.15 | % | 2.08 | % | ||||||||||
Portfolio turnover rate | 81 | % | 76 | % | 68 | % | 95 | % | 77 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
The
ratio of operating expenses excluding interest expense was 0.85% for the year ended October 31, 2022. |
|
84 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 13.13 | $ | 15.05 | $ | 9.55 | $ | 10.39 | $ | 10.25 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.11 | 0.14 | 0.07 | 0.06 | 0.05 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.67 | ) | (0.57 | ) | 5.50 | (0.82 | ) | 0.17 | ||||||||||||
Total from investment operations | (0.56 | ) | (0.43 | ) | 5.57 | (0.76 | ) | 0.22 | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.11 | ) | (0.15 | ) | (0.07 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Net realized capital gains | (1.00 | ) | (1.34 | ) | — | — | — | |||||||||||||
Total distributions | (1.11 | ) | (1.49 | ) | (0.07 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Net asset value, end of year | $ | 11.46 | $ | 13.13 | $ | 15.05 | $ | 9.55 | $ | 10.39 | ||||||||||
Total return2 | (4.52 | )% | (2.97 | )% | 58.45 | % | (7.37 | )% | 2.19 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 1,450 | $ | 1,521 | $ | 1,556 | $ | 982 | $ | 1,061 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 3.06 | % | 3.49 | % | 3.45 | % | 4.63 | % | 4.12 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.90 | % | ||||||||||
Ratio of net investment income to average net assets | 0.91 | % | 1.03 | % | 0.53 | % | 0.65 | % | 0.53 | % | ||||||||||
Portfolio turnover rate | 85 | % | 94 | % | 84 | % | 101 | % | 133 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
|
85 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 12.27 | $ | 15.54 | $ | 12.05 | $ | 13.97 | $ | 13.26 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.32 | 0.42 | 0.36 | 0.26 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.54 | (3.15 | ) | 3.48 | (1.79 | ) | 0.73 | |||||||||||||
Total from investment operations | 1.86 | (2.73 | ) | 3.84 | (1.53 | ) | 1.12 | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.54 | ) | (0.35 | ) | (0.37 | ) | (0.41 | ) | ||||||||||
Net return of capital | — | — | — | (0.02 | ) | — | ||||||||||||||
Total distributions | (0.29 | ) | (0.54 | ) | (0.35 | ) | (0.39 | ) | (0.41 | ) | ||||||||||
Net asset value, end of year | $ | 13.84 | $ | 12.27 | $ | 15.54 | $ | 12.05 | $ | 13.97 | ||||||||||
Total return2 | 15.09 | % | (17.89 | )% | 31.96 | % | (11.10 | )% | 8.60 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 22,601 | $ | 22,939 | $ | 41,069 | $ | 53,302 | $ | 205,629 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 1.32 | % | 1.27 | % | 1.19 | % | 1.15 | % | 1.10 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 1.00 | %3 | 1.00 | %3 | 1.00 | %3 | 1.00 | % | 1.00 | % | ||||||||||
Ratio of net investment income to average net assets | 2.22 | % | 2.93 | % | 2.40 | % | 1.99 | % | 2.90 | % | ||||||||||
Portfolio turnover rate | 84 | % | 91 | % | 79 | % | 76 | % | 93 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense was 1.00%, 1.00% and 1.00% for the years ended
October 31, 2023, 2022 and 2021, respectively. |
|
86 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 16.10 | $ | 20.71 | $ | 14.26 | $ | 14.34 | $ | 14.12 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.16 | 0.18 | 0.14 | 0.15 | 0.16 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.21 | (2.86 | ) | 6.45 | (0.02 | ) | 0.74 | |||||||||||||
Total from investment operations | 0.37 | (2.68 | ) | 6.59 | 0.13 | 0.90 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.15 | ) | (0.17 | ) | (0.14 | ) | (0.15 | ) | (0.17 | ) | ||||||||||
Net realized capital gains | (1.06 | ) | (1.76 | ) | — | (0.06 | ) | (0.51 | ) | |||||||||||
Total distributions | (1.21 | ) | (1.93 | ) | (0.14 | ) | (0.21 | ) | (0.68 | ) | ||||||||||
Net asset value, end of year | $ | 15.26 | $ | 16.10 | $ | 20.71 | $ | 14.26 | $ | 14.34 | ||||||||||
Total return2 | 2.35 | % | (14.02 | )% | 46.31 | % | 0.87 | % | 6.78 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 21,753 | $ | 23,923 | $ | 32,861 | $ | 22,342 | $ | 23,231 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 1.05 | % | 1.02 | % | 1.05 | % | 1.05 | % | 1.07 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 0.85 | %3 | 0.85 | %3 | 0.85 | % | 0.85 | % | 0.90 | % | ||||||||||
Ratio of net investment income to average net assets | 0.98 | % | 1.02 | % | 0.74 | % | 1.02 | % | 1.17 | % | ||||||||||
Portfolio turnover rate | 87 | % | 101 | % | 74 | % | 88 | % | 102 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
The
ratio of operating expenses excluding interest expense was 0.85% and 0.85% for the years ended October 31, 2023 and 2022,
respectively. |
|
87 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 13.70 | $ | 19.27 | $ | 13.52 | $ | 13.98 | $ | 13.34 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.15 | 0.19 | 0.18 | 0.16 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.41 | (2.33 | ) | 5.75 | (0.47 | ) | 1.08 | |||||||||||||
Total from investment operations | 0.56 | (2.14 | ) | 5.93 | (0.31 | ) | 1.23 | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.16 | ) | (0.19 | ) | (0.18 | ) | (0.15 | ) | (0.15 | ) | ||||||||||
Net realized capital gains | (0.28 | ) | (3.24 | ) | — | — | (0.44 | ) | ||||||||||||
Total distributions | (0.44 | ) | (3.43 | ) | (0.18 | ) | (0.15 | ) | (0.59 | ) | ||||||||||
Net asset value, end of year | $ | 13.82 | $ | 13.70 | $ | 19.27 | $ | 13.52 | $ | 13.98 | ||||||||||
Total return2 | 4.14 | % | (13.15 | )% | 43.94 | % | (2.15 | )% | 9.75 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 19,515 | $ | 22,172 | $ | 27,887 | $ | 21,678 | $ | 21,047 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 1.06 | % | 1.05 | % | 1.04 | % | 1.08 | % | 1.11 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 0.85 | % | 0.85 | %3 | 0.85 | %3 | 0.85 | % | 0.90 | % | ||||||||||
Ratio of net investment income to average net assets | 1.04 | % | 1.27 | % | 1.01 | % | 1.19 | % | 1.14 | % | ||||||||||
Portfolio turnover rate | 83 | % | 105 | % | 81 | % | 105 | % | 89 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense was 0.85% and 0.85% for the years ended October 31,
2022 and 2021, respectively. |
|
88 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 14.06 | $ | 12.93 | $ | 11.05 | $ | 11.90 | $ | 12.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.34 | (0.03 | ) | (0.10 | ) | (0.07 | ) | 0.11 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.42 | 1.16 | 1.98 | (0.77 | ) | (0.65 | ) | |||||||||||||
Total from investment operations | 0.76 | 1.13 | 1.88 | (0.84 | ) | (0.54 | ) | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.30 | ) | — | — | — | (0.11 | ) | |||||||||||||
Net return of capital | — | — | — | (0.01 | ) | — | ||||||||||||||
Total distributions | (0.30 | ) | — | — | (0.01 | ) | (0.11 | ) | ||||||||||||
Net asset value, end of year | $ | 14.52 | $ | 14.06 | $ | 12.93 | $ | 11.05 | $ | 11.90 | ||||||||||
Total return2 | 5.46 | %3 | 8.74 | %3 | 17.01 | % | (7.07 | )% | (4.33 | )% | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 41,895 | $ | 48,370 | $ | 56,002 | $ | 96,702 | $ | 247,209 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 2.93 | % | 2.76 | % | 2.88 | % | 2.99 | % | 2.78 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets4 | 2.49 | % | 2.36 | % | 2.51 | % | 2.63 | % | 2.43 | % | ||||||||||
Ratio of net investment income (loss) to average net assets | 2.38 | % | (0.25 | )% | (0.78 | )% | (0.59 | )% | 0.91 | % | ||||||||||
Portfolio turnover rate5,6 | 99 | % | 118 | % | 115 | % | 133 | % | 108 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
Includes
adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for
shareholder transactions as shown in the management discussion and analysis and as otherwise reported to shareholders. |
4 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense, dividends on securities sold short and flex
fees was 1.25%, 1.25%, 1.25%, 1.25% and 1.21% for the years ended October 31, 2023, 2022, 2021, 2020
and 2019, respectively. |
5 |
Portfolio
turnover is calculated at the fund level. |
6 |
The
calculation of the portfolio turnover rate reflects the absolute value of the long and short positions. |
|
89 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 17.81 | $ | 22.90 | $ | 15.34 | $ | 17.88 | $ | 18.85 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.09 | 0.07 | 0.03 | 0.07 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.71 | ) | (1.57 | ) | 9.45 | (1.52 | ) | 0.49 | ||||||||||||
Total from investment operations | (0.62 | ) | (1.50 | ) | 9.48 | (1.45 | ) | 0.60 | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.09 | ) | (0.08 | ) | (0.03 | ) | (0.11 | ) | (0.11 | ) | ||||||||||
Net realized capital gains | — | (3.51 | ) | (1.89 | ) | (0.98 | ) | (1.46 | ) | |||||||||||
Total distributions | (0.09 | ) | (3.59 | ) | (1.92 | ) | (1.09 | ) | (1.57 | ) | ||||||||||
Net asset value, end of year | $ | 17.10 | $ | 17.81 | $ | 22.90 | $ | 15.34 | $ | 17.88 | ||||||||||
Total return2 | (3.50 | )% | (7.76 | )% | 66.37 | % | (8.82 | )% | 4.11 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 35,860 | $ | 43,836 | $ | 35,961 | $ | 28,447 | $ | 67,923 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 2.42 | % | 2.36 | % | 2.23 | % | 2.56 | % | 2.48 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets3 | 2.01 | % | 1.99 | % | 1.83 | % | 2.06 | % | 2.07 | % | ||||||||||
Ratio of net investment income to average net assets | 0.49 | % | 0.39 | % | 0.15 | % | 0.45 | % | 0.60 | % | ||||||||||
Portfolio turnover rate4 | 84 | % | 95 | % | 71 | % | 98 | % | 92 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense, dividends on securities sold short
and flex fees was 1.25%, 1.25%, 1.25%, 1.25% and 1.25% for the years ended October 31, 2023, 2022, 2021, 2020 and
2019, respectively. |
4 |
The
calculation of the portfolio turnover rate reflects the absolute value of the long and short positions. |
|
90 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 27.45 | $ | 35.56 | $ | 26.43 | $ | 27.22 | $ | 24.30 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.14 | 0.12 | 0.12 | 0.21 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.45 | (4.56 | ) | 10.73 | (0.25 | ) | 3.22 | |||||||||||||
Total from investment operations | 2.59 | (4.44 | ) | 10.85 | (0.04 | ) | 3.45 | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.15 | ) | (0.12 | ) | (0.13 | ) | (0.22 | ) | (0.23 | ) | ||||||||||
Net realized capital gains | (2.04 | ) | (3.55 | ) | (1.59 | ) | (0.53 | ) | (0.30 | ) | ||||||||||
Total distributions | (2.19 | ) | (3.67 | ) | (1.72 | ) | (0.75 | ) | (0.53 | ) | ||||||||||
Net asset value, end of year | $ | 27.85 | $ | 27.45 | $ | 35.56 | $ | 26.43 | $ | 27.22 | ||||||||||
Total return | 9.98 | % | (13.95 | )% | 42.57 | % | (0.18 | )% | 14.51 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 165,886 | $ | 191,646 | $ | 268,648 | $ | 219,447 | $ | 269,033 | ||||||||||
Ratio of operating expenses to average net assets | 0.86 | %2 | 0.85 | %2 | 0.85 | % | 0.86 | % | 0.84 | % | ||||||||||
Ratio of net investment income to average net assets | 0.50 | % | 0.39 | % | 0.38 | % | 0.79 | % | 0.89 | % | ||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 14 | % | 19 | % | 19 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
ratio of operating expenses excluding interest expense was 0.86% and 0.85% for the years ended October 31, 2023
and 2022, respectively. |
|
91 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 14.58 | $ | 15.92 | $ | 11.88 | $ | 12.22 | $ | 11.15 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.25 | 0.23 | 0.22 | 0.26 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.31 | ) | (0.63 | ) | 4.05 | (0.32 | ) | 1.33 | ||||||||||||
Total from investment operations | (0.06 | ) | (0.40 | ) | 4.27 | (0.06 | ) | 1.58 | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.25 | ) | (0.23 | ) | (0.23 | ) | (0.28 | ) | (0.25 | ) | ||||||||||
Net realized capital gains | (0.42 | ) | (0.71 | ) | — | — | (0.26 | ) | ||||||||||||
Total distributions | (0.67 | ) | (0.94 | ) | (0.23 | ) | (0.28 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 13.85 | $ | 14.58 | $ | 15.92 | $ | 11.88 | $ | 12.22 | ||||||||||
Total return2 | (0.60 | )% | (2.70 | )% | 36.12 | % | (0.38 | )% | 14.69 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 18,499 | $ | 21,902 | $ | 22,296 | $ | 18,560 | $ | 23,900 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 1.00 | % | 0.97 | % | 1.10 | % | 1.04 | %3 | 1.01 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to averagenet assets | 0.85 | %4 | 0.85 | % | 0.85 | % | 0.85 | %3 | 0.85 | % | ||||||||||
Ratio of net investment income to average net assets | 1.74 | % | 1.57 | % | 1.53 | % | 2.21 | %3 | 2.19 | % | ||||||||||
Portfolio turnover rate | 21 | % | 15 | % | 27 | % | 63 | % | 39 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
This
ratio does not include the expenses for any exchange-traded funds held in the Portfolio. |
4 |
The
ratio of operating expenses excluding interest expense was 0.85% for the year ended October 31, 2023. |
|
92 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 33.04 | $ | 37.06 | $ | 23.23 | $ | 23.66 | $ | 28.82 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.16 | 0.12 | — | 0.02 | 0.05 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.07 | ) | (2.47 | ) | 13.87 | (0.41 | ) | (1.04 | ) | |||||||||||
Total from investment operations | (0.91 | ) | (2.35 | ) | 13.87 | (0.39 | ) | (0.99 | ) | |||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.18 | ) | (0.11 | ) | (0.04 | ) | (0.04 | ) | (0.07 | ) | ||||||||||
Net realized capital gains | (3.55 | ) | (1.56 | ) | — | — | (4.09 | ) | ||||||||||||
Net return of capital | — | — | — | (0.00 | )2 | (0.01 | ) | |||||||||||||
Total distributions | (3.73 | ) | (1.67 | ) | (0.04 | ) | (0.04 | ) | (4.17 | ) | ||||||||||
Net asset value, end of year | $ | 28.40 | $ | 33.04 | $ | 37.06 | $ | 23.23 | $ | 23.66 | ||||||||||
Total return | (3.04 | )% | (6.59 | )% | 59.75 | % | (1.63 | )% | (2.61 | )% | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 412,521 | $ | 468,157 | $ | 530,401 | $ | 403,309 | $ | 761,813 | ||||||||||
Ratio of operating expenses to average net assets | 0.95 | %3 | 0.93 | %3 | 0.92 | %3 | 0.94 | % | 0.93 | % | ||||||||||
Ratio of net investment income to average net assets | 0.51 | % | 0.35 | % | 0.01 | % | 0.11 | % | 0.21 | % | ||||||||||
Portfolio turnover rate4 | 20 | % | 28 | % | 41 | % | 36 | % | 54 | % |
1 |
Per
net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
Amount
rounds to less than $0.01 per share. |
3 |
The
ratio of operating expenses excluding interest expense was 0.95%, 0.93% and 0.92% for the years ended October 31,
2023, 2022 and 2021, respectively. |
4 |
Portfolio
turnover is calculated at the fund level. |
|
93 |
|
For The Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 11.58 | $ | 14.83 | $ | 11.67 | $ | 13.01 | $ | 12.30 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | (0.07 | ) | (0.11 | ) | (0.07 | ) | (0.04 | ) | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.29 | (1.40 | ) | 3.27 | (0.34 | ) | 1.04 | |||||||||||||
Total from investment operations | 1.30 | (1.47 | ) | 3.16 | (0.41 | ) | 1.00 | |||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net realized capital gains | — | (1.78 | ) | — | (0.93 | ) | (0.29 | ) | ||||||||||||
Total distributions | — | (1.78 | ) | — | (0.93 | ) | (0.29 | ) | ||||||||||||
Net asset value, end of year | $ | 12.88 | $ | 11.58 | $ | 14.83 | $ | 11.67 | $ | 13.01 | ||||||||||
Total return | 11.23 | %2 | (11.29 | )% | 27.08 | % | (3.50 | )% | 8.43 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 56,074 | $ | 70,447 | $ | 90,143 | $ | 95,701 | $ | 268,478 | ||||||||||
Ratio of operating expenses to average net assets3 | 0.86 | %4 | 0.85 | % | 0.86 | % | 0.88 | % | 0.87 | %4 | ||||||||||
Ratio of net investment income (loss) to average net assets3 | 0.08 | % | (0.55 | )% | (0.77 | )% | (0.59 | )% | (0.34 | )% | ||||||||||
Portfolio turnover rate5,6 | —% | —% | —% | —% | —% |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
Includes
adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net
asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset
value and returns for shareholder transactions as shown in the management discussion and analysis and as otherwise reported to
shareholders. |
3 |
This
ratio does not include the expenses for any exchange-traded funds held in the Portfolio. |
4 |
The
ratio of operating expenses excluding interest expense was 0.86% and 0.86% for the years ended October 31, 2023
and 2019, respectively. |
5 |
Portfolio
turnover is calculated at the fund level. |
6 |
All
trading activity in the Portfolio during the year was short term and is excluded for portfolio turnover calculations resulting in zero
portfolio turnover percentage. |
|
94 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201,2 | 20191,2 | ||||||||||||||||
Net asset value, beginning of year | $ | 4.25 | $ | 5.64 | $ | 4.84 | $ | 4.90 | $ | 104.10 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.02 | (0.02 | ) | (0.05 | ) | (0.04 | ) | 0.02 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.52 | (0.64 | ) | 1.07 | (0.02 | ) | (5.71 | ) | ||||||||||||
Total from investment operations | 0.54 | (0.66 | ) | 1.02 | (0.06 | ) | (5.69 | ) | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.00 | )3 | — | — | (0.00 | )3 | (0.01 | ) | ||||||||||||
Net realized capital gains | — | (0.73 | ) | (0.22 | ) | — | (93.50 | ) | ||||||||||||
Total distributions | (0.00 | )3 | (0.73 | ) | (0.22 | ) | (0.00 | )3 | (93.51 | ) | ||||||||||
Net asset value, end of year | $ | 4.79 | $ | 4.25 | $ | 5.64 | $ | 4.84 | $ | 4.90 | ||||||||||
Total return4 | 12.74 | % | (13.35 | )% | 21.59 | % | (1.07 | )% | 8.56 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 22,470 | $ | 20,062 | $ | 17,152 | $ | 9,648 | $ | 1,220 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets5 | 1.15 | % | 1.22 | % | 1.30 | % | 2.13 | % | 9.76 | % | ||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets5 | 1.00 | %6 | 1.00 | %6 | 1.00 | % | 1.00 | % | 1.63 | %6 | ||||||||||
Ratio of net investment income to average net assets5 | 0.34 | % | (0.46 | )% | (0.96 | )% | (0.83 | )% | 0.32 | % | ||||||||||
Portfolio turnover rate | 117 | % | 152 | % | — | %7 | 995 | % | 685 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Board authorized a 1-for-10 reverse share split for the Global Secured Options Portfolio effective after the close of trading on March 16,
2020. The impact of the reverse share split was to decrease the number of shares outstanding by a factor of ten, while increasing the
NAV of shares outstanding by a factor of ten, resulting in no effect to the net assets of the Portfolio. The financial statements for
the Portfolio have been adjusted to reflect the reverse share split. |
3 |
Amount
rounds to less than $0.01 per share. |
4 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
5 |
This
ratio does not include the expenses for any exchange-traded funds held in the Portfolio. |
6 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense was 1.00% and 1.00% for the years
ended October 31, 2023 and 2022, respectively and the ratio of operating expenses after waiver/reimbursement
excluding dividends on securities sold short and interest expense was 1.62% for the year ended October 31, 2019. |
7 |
All
trading activity in the Portfolio during the year was short term and is excluded for portfolio turnover calculations resulting in zero
portfolio turnover percentage. |
|
95 |
|
|
96 |
|
Institutional
Shares | |||
|
|||
Management
Fees |
|||
Other
Expenses |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
|
3 |
|
|
4 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Russell
1000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Blend Average2 |
1 |
|
2 |
|
5 |
|
|
6 |
|
Institutional
Shares | |||
|
|||
Management
Fees |
|||
Other
Expenses |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
|
7 |
|
|
8 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Russell
1000® Index (reflects no deduction for fees, expenses or taxes)2 |
|||||||||||
Russell
1000® Growth Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Morningstar
Large Growth Average3 |
1 |
2 |
3 |
|
9 |
|
|
10 |
|
Institutional
Shares | |||
|
|||
Management
Fees |
|||
Other
Expenses |
|||
Short
Sale Expenses |
|||
Total
Other Expenses |
|||
Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
Glenmede
Investment Management LP (the “Advisor”) has contractually agreed to waive a portion of its Management Fee so that
the Management Fee is 0.85% of the Portfolio’s average daily net assets and to waive an additional portion of its Management
Fee and/or reimburse the Portfolio to the extent that total annual operating expenses of the Portfolio’s Institutional
Shares exceed 1.05% of the average daily net assets of the Portfolio’s Institutional Shares (excluding Acquired Fund fees
and expenses, short sale dividends, prime broker interest, brokerage commissions, taxes, interest, and extraordinary expenses).
The Advisor has contractually agreed to these waivers and/or reimbursements until at least February 28, 2025
and may discontinue this arrangement at any time thereafter. This contractual fee waiver agreement may not be terminated before
|
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
|
11 |
|
|
12 |
|
|
13 |
|
Past
1
Year |
Since
Inception
( ) |
|||||||
Return
Before Taxes |
||||||||
Return
After Taxes on Distributions |
||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
||||||||
Russell
3000® Index (reflects no deduction for fees, expenses or taxes) |
||||||||
Bloomberg
U.S. Treasury Bellwether 3-Month Index (reflects no deduction for fees, expenses or taxes)1 |
||||||||
Blended
Index (reflects no deduction for fees, expenses or taxes)2 |
||||||||
Morningstar
Long/Short Average3 |
1 |
2 |
The
Blended Index is comprised of two benchmarks, weighted 70% Bloomberg U.S. Treasury Bellwether 3-Month Index and 30% Russell 3000®
Index. It is provided so that investors may compare the performance of the Portfolio with the performance of a combination of indices
that the Advisor considers similar to the Portfolio. |
3 |
The
Morningstar Long/Short Average is provided so that investors may compare the performance of the Portfolio with the performance of a peer
group of funds that Morningstar, Inc. considers similar to the Portfolio. |
|
14 |
|
|
15 |
|
Institutional
Shares | |||
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses
(includes
0.05% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
|
16 |
|
|
17 |
|
Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Russell
2000® Index (reflects no deduction for fees, expenses or taxes) |
|||||||||||
Russell
2000® Value Index (reflects no deduction for fees, expenses or taxes)2 |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes)3 |
|||||||||||
Morningstar
Small Blend Average4 |
1 |
2 |
3 |
The
S&P 500® Index is provided so that
investors may compare the performance of the Portfolio with the performance of a well- known index of leading U.S. companies. |
4 |
The
Morningstar Small Blend Average is provided so that investors may compare the performance of the Portfolio with the performance of a peer
group of funds that Morningstar, Inc. considers similar to the Portfolio. |
|
18 |
|
|
19 |
|
Institutional
Shares | |||
Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
|||
Management
Fees |
|||
Other
Expenses |
|||
Total
Annual Portfolio Operating Expenses |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
|
20 |
|
|
21 |
|
|
22 |
|
Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares |
|||||||||||
S&P
500® Index (reflects no deduction for fees, expenses or taxes)1 |
|||||||||||
CBOE
S&P 500® PutWrite Index (reflects no deduction for fees, expenses or taxes) |
1 |
|
23 |
|
|
24 |
|
|
25 |
|
|
26 |
|
|
27 |
|
|
28 |
|
|
29 |
|
|
30 |
|
|
31 |
|
|
32 |
|
|
33 |
|
|
34 |
|
|
35 |
|
|
36 |
|
|
37 |
|
|
38 |
|
Portfolio |
Percentage
of Average Daily Net Assets* | ||
Quantitative
U.S. Large Cap Core Equity Portfolio — Institutional Shares |
0.55% | ||
Quantitative
U.S. Large Cap Growth Equity Portfolio — Institutional Shares |
0.55% | ||
Quantitative
U.S. Long/Short Equity Portfolio — Institutional Shares |
1.20%* | ||
Small
Cap Equity Portfolio — Institutional Shares |
0.55% | ||
Secured
Options Portfolio — Institutional Shares |
0.55% | ||
* |
The Advisor has
contractually agreed to waive a portion of its 1.20% management fee so that after giving effect to such contractual waiver, the
management fee for the Quantitative U.S. Long/Short Equity Portfolio is 0.85% of the Portfolio’s average daily net assets.
The Advisor has also contractually agreed to waive an additional portion of its management fee and/or reimburse the Portfolio
to the extent that total annual operating expenses of the Quantitative U.S. Long/Short Equity Portfolio’s Institutional
Shares, exceed 1.05% of the average daily net assets of the Portfolio’s Institutional Shares (excluding Acquired Fund fees
and expenses, short-sale dividends, prime broker interest, brokerage commissions, taxes, interest, and extraordinary expenses).
The Advisor has contractually agreed to these waivers and/or reimbursements until at least February 28, 2025. Shareholders
will be notified if these waivers and/or reimbursements are discontinued after that date. |
|
39 |
|
|
40 |
|
For
The Year Ended October 31, |
||||||||||||||||
20231 |
20221 |
20211 |
20201 |
20191 |
||||||||||||
Net
asset value, beginning of year |
$25.15 |
$32.98 |
$24.99 |
$26.91 |
$27.89
|
|||||||||||
Income
from investment operations:
Net
investment income |
0.30 |
0.32 |
0.29 |
0.34 |
0.40
|
|||||||||||
Net
realized and unrealized gain (loss) on investments |
0.75 |
(4.02) |
10.16 |
(0.75) |
1.20
|
|||||||||||
Total
from investment operations |
1.05 |
(3.70) |
10.45 |
(0.41) |
1.60
|
|||||||||||
Distributions
to shareholders from:
Net
investment income |
(0.30) |
(0.33) |
(0.30) |
(0.34) |
(0.41)
|
|||||||||||
Net
realized capital gains |
(4.61) |
(3.80) |
(2.16) |
(1.17) |
(2.17) |
|||||||||||
Total
distributions |
(4.91) |
(4.13) |
(2.46) |
(1.51) |
(2.58)
|
|||||||||||
Net
asset value, end of year |
$21.29 |
$25.15 |
$32.98 |
$24.99 |
$26.91
|
|||||||||||
Total
return |
4.65% |
(12.73)% |
44.10% |
(1.75)% |
6.68% |
|||||||||||
Ratios
to average net assets/Supplemental data: |
||||||||||||||||
Net
assets, at end of year (in 000s) |
$45,052 |
$66,600 |
$165,106 |
$173,029 |
$673,825 |
|||||||||||
Ratio
of operating expenses to average net assets |
0.66%2 |
0.64%2 |
0.65%2 |
0.67% |
0.66%
|
|||||||||||
Ratio
of net investment income to average net assets |
1.31% |
1.14% |
0.96% |
1.32% |
1.52%
|
|||||||||||
Portfolio
turnover rate3 |
78% |
66% |
41% |
66% |
80% |
|||||||||||
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
ratio of operating expenses excluding interest expense was 0.66%, 0.64% and 0.65% for the years ended October 31,
2023, 2022 and 2021, respectively. |
3 |
Portfolio
turnover is calculated at the fund level. |
|
41 |
|
For
The Year Ended October 31, |
||||||||||||||||
20231 |
20221 |
20211 |
20201 |
20191 |
||||||||||||
Net
asset value, beginning of year |
$27.95 |
$40.64 |
$32.02 |
$33.09 |
$32.53
|
|||||||||||
Income
from investment operations:
Net
investment income |
0.13 |
0.15 |
0.12 |
0.19 |
0.21
|
|||||||||||
Net
realized and unrealized gain (loss) on investments |
1.72 |
(5.65) |
13.34 |
3.18 |
4.88
|
|||||||||||
Total
from investment operations |
1.85 |
(5.50) |
13.46 |
3.37 |
5.09
|
|||||||||||
Distributions
to shareholders from:
Net
investment income |
(0.14) |
(0.15) |
(0.13) |
(0.21) |
(0.22)
|
|||||||||||
Net
realized capital gains |
(1.93) |
(7.04) |
(4.71) |
(4.23) |
(4.31) |
|||||||||||
Total
distributions |
(2.07) |
(7.19) |
(4.84) |
(4.44) |
(4.53) |
|||||||||||
Net
asset value, end of year |
$27.73 |
$27.95 |
$40.64 |
$32.02 |
$33.09
|
|||||||||||
Total
return |
7.05% |
(16.49)% |
46.47% |
10.89% |
18.74% |
|||||||||||
Ratios
to average net assets/Supplemental data: |
||||||||||||||||
Net
assets, at end of year (in 000s) |
$847,561 |
$955,360 |
$581,255 |
$543,675 |
$1,250,995 |
|||||||||||
Ratio
of operating expenses to average net assets |
0.66%2 |
0.64%2 |
0.65%2 |
0.68% |
0.66%
|
|||||||||||
Ratio
of net investment income to average net assets |
0.48% |
0.49% |
0.34% |
0.62% |
0.69%
|
|||||||||||
Portfolio
turnover rate3 |
78% |
85% |
49% |
69% |
80% |
|||||||||||
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
ratio of operating expenses excluding interest expense was 0.66%, 0.64% and 0.65% for the years ended October 31,
2023, 2022 and 2021, respectively. |
3 |
Portfolio
turnover is calculated at the fund level. |
|
42 |
|
For
The Year Ended October 31, |
For
the
Period
September 13,
20191
through
October 31,
20192 |
|||||||||||||||
20232 |
20222 |
20212 |
20202 |
|||||||||||||
Net
asset value, beginning of year |
$14.13 |
$12.97 |
$11.07 |
$11.89 |
$12.00 |
|||||||||||
Income
from investment operations: |
||||||||||||||||
Net
investment income (loss) |
0.37 |
— |
(0.03) |
(0.10) |
0.01
|
|||||||||||
Net
realized and unrealized gain (loss) on investments |
0.43 |
1.16 |
1.93 |
(0.71) |
(0.08) |
|||||||||||
Total
from investment operations |
0.80 |
1.16 |
1.90 |
(0.81) |
(0.07) |
|||||||||||
Distributions
to shareholders from: |
||||||||||||||||
Net
investment income |
(0.32) |
— |
— |
— |
(0.04) |
|||||||||||
Net
return of capital |
— |
— |
— |
(0.01) |
—
|
|||||||||||
Total
distributions |
(0.32) |
— |
— |
(0.01) |
(0.04) |
|||||||||||
Net
asset value, end of year |
$14.61 |
$14.13 |
$12.97 |
$11.07 |
$11.89 |
|||||||||||
Total
return3 |
5.73% |
8.94%4 |
17.16%4 |
(6.78)% |
(0.62)%5 |
|||||||||||
Ratios
to average net assets/Supplemental data: |
||||||||||||||||
Net
assets, at end of year (in 000s) |
$8,464 |
$8,571 |
$7,255 |
$311 |
$16
|
|||||||||||
Ratio
of operating expenses before waiver/reimbursement to average net assets |
2.73% |
2.57% |
3.88% |
2.59% |
2.36%6 |
|||||||||||
Ratio
of operating expenses after waiver/reimbursement to averagenet assets7 |
2.29% |
2.17% |
3.52% |
2.23% |
2.01%6 |
|||||||||||
Ratio
of net investment income (loss) to average net assets |
2.59% |
(0.01)% |
(0.27)% |
(0.89)% |
0.36%6 |
|||||||||||
Portfolio
turnover rate8,9 |
99% |
118% |
115% |
133% |
108% |
|||||||||||
1 |
Shareholder
activity commenced on September 13, 2019. |
2 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
3 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
4 |
Includes
adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for
shareholder transactions as shown in the management discussion and analysis and as otherwise reported to shareholders. |
5 |
Not
annualized. |
6 |
Annualized.
|
7 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense, dividends on securities sold short and flex
fees was 1.05%, 1.05%, 1.05% and 1.05% for the years ended October 31, 2023, 2022, 2021 and 2020, respectively,
and 1.01% for the period ended October 31, 2019. |
8 |
Portfolio
turnover is calculated at the fund level. |
9 |
The
calculation of the portfolio turnover rate reflects the absolute value of the long and short positions. |
|
43 |
|
For
The Year Ended October 31, |
||||||||||||||||
20231 |
20221 |
20211 |
20201 |
20191 |
||||||||||||
Net
asset value, beginning of year |
$35.13 |
$39.29 |
$24.61 |
$25.07 |
$30.25 |
|||||||||||
Income
from investment operations:
Net
investment income |
0.24 |
0.20 |
0.08 |
0.07 |
0.10
|
|||||||||||
Net
realized and unrealized gain (loss) on investments |
(1.15) |
(2.62) |
14.68 |
(0.44) |
(1.06) |
|||||||||||
Total
from investment operations |
(0.91) |
(2.42) |
14.76 |
(0.37) |
(0.96) |
|||||||||||
Distributions
to shareholders from:
Net
investment income |
(0.25) |
(0.18) |
(0.08) |
(0.09) |
(0.12)
|
|||||||||||
Net
realized capital gains |
(3.55) |
(1.56) |
— |
— |
(4.09) |
|||||||||||
Net
return of capital |
— |
— |
— |
(0.00)2 |
(0.01) |
|||||||||||
Total
distributions |
(3.80) |
(1.74) |
(0.08) |
(0.09) |
(4.22) |
|||||||||||
Net
asset value, end of year |
$30.42 |
$35.13 |
$39.29 |
$24.61 |
$25.07
|
|||||||||||
Total
return |
(2.87)% |
(6.39)% |
60.04% |
(1.44)% |
(2.38)% |
|||||||||||
Ratios
to average net assets/Supplemental data: |
||||||||||||||||
Net
assets, at end of year (in 000s) |
$540,040 |
$642,649 |
$944,442 |
$836,015 |
$1,279,693 |
|||||||||||
Ratio
of operating expenses to average net assets |
0.75%3 |
0.73%3 |
0.72%3 |
0.74% |
0.73%
|
|||||||||||
Ratio
of net investment income to average net assets |
0.72% |
0.54% |
0.22% |
0.29% |
0.39%
|
|||||||||||
Portfolio
turnover rate4 |
20% |
28% |
41% |
36% |
54% |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
Amount
rounds to less than $0.01 per share. |
3 |
The
ratio of operating expenses excluding interest expense was 0.75%, 0.73% and 0.72% for the years ended October 31,
2023, 2022 and 2021, respectively. |
4 |
Portfolio
turnover is calculated at the fund level. |
|
44 |
|
For
The Year Ended October 31, |
||||||||||||||||
20231 |
20221 |
20211 |
20201 |
20191 |
||||||||||||
Net
asset value, beginning of year |
$11.74 |
$14.99 |
$11.77 |
$13.09 |
$12.34 |
|||||||||||
Income
from investment operations:
Net
investment income (loss) |
0.04 |
(0.04) |
(0.08) |
(0.05) |
(0.02)
|
|||||||||||
Net
realized and unrealized gain (loss) on investments |
1.30 |
(1.43) |
3.30 |
(0.34) |
1.06 |
|||||||||||
Total
from investment operations |
1.34 |
(1.47) |
3.22 |
(0.39) |
1.04 |
|||||||||||
Distributions
to shareholders from:
Net
realized capital gains |
— |
(1.78) |
— |
(0.93) |
(0.29)
|
|||||||||||
Total
distributions |
— |
(1.78) |
— |
(0.93) |
(0.29) |
|||||||||||
Net
asset value, end of year |
$13.08 |
$11.74 |
$14.99 |
$11.77 |
$13.09 |
|||||||||||
Total
return |
11.41%2 |
(11.16)% |
27.36% |
(3.31)% |
8.73% |
|||||||||||
Ratios
to average net assets/Supplemental data: |
||||||||||||||||
Net
assets, at end of year (in 000s) |
$456,293 |
$431,137 |
$341,245 |
$354,674 |
$409,829 |
|||||||||||
Ratio
of operating expenses to average
net
assets3 |
0.66%4 |
0.65% |
0.66% |
0.68% |
0.67%4 |
|||||||||||
Ratio
of net investment income (loss) to average net assets3 |
0.29% |
(0.32)% |
(0.57)% |
(0.44)% |
(0.14)%
|
|||||||||||
Portfolio
turnover rate5,6 |
—% |
—% |
—% |
—% |
—% |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
This
ratio does not include the expenses for the exchange-traded funds held in the Portfolio. |
3 |
The
ratio of operating expenses excluding interest expense was 0.66% and 0.66% for the year ended October 31, 2023
and 2019. |
4 |
Portfolio
turnover is calculated at the fund level. |
5 |
All
trading activity in the Portfolio during the year was short term and is excluded for portfolio turnover calculations resulting in zero
portfolio turnover percentage. |
|
45 |
|
|
48 |
|
THE GLENMEDE FUND, INC.
Municipal Allocation Portfolio (GFMAX)
Prospectus
February 28, 2024
Investment Advisor
Glenmede Investment Management LP
The Securities and Exchange Commission has not approved or disapproved the Portfolio’s securities or determined if this Prospectus is accurate or complete. It is a criminal offense to state otherwise.
TABLE OF CONTENTS
SUMMARY SECTION
(expenses that you pay each year as a percentage of the value of your investment) |
|
Management Fees | |
Other Expenses1 | |
Total Annual Portfolio Operating Expenses | |
Expense Reimbursements2 | |
Net Expenses |
1 |
2 |
1 Year |
3 Years |
|
3 |
The Portfolio will invest in securities that are rated investment grade at the time of purchase. A security is investment grade if it is rated within the top four rating categories by a nationally recognized statistical rating organization (a “NRSRO”) or unrated, but in the opinion of the Advisor, of comparable quality at the time of purchase. If a portfolio security’s rating is reduced to below investment grade, the Advisor will dispose of the security in an orderly fashion as soon as practicable.
The Portfolio may be appropriate for you if you seek a regular stream of income with higher potential returns than money market funds and if you are also willing to accept more risk.
Interest Rate Risk: The value of fixed income securities tends to fluctuate with changes in interest rates. Generally, their value will decrease when interest rates rise and increase when interest rates fall. Therefore, you could lose money by investing in the Portfolio. Fixed income securities with longer maturities are more susceptible to interest rate fluctuations than those with shorter maturities. Therefore, the risk of interest rate fluctuation is greater to the extent that the Portfolio invests in long-term securities. Recently, there have been signs of inflationary price movements and interest rates have been rising. As such, fixed income and related markets may experience heightened levels of interest rate volatility and liquidity risk. Changes in market conditions and government action may have adverse effects on investments, volatility, and liquidity in debt markets, potentially negatively impacting the Portfolio’s performance and disrupting portfolio management by increased shareholder redemptions. A sharp rise in interest rates could cause the value of the Portfolio’s investments to decline.
Credit Risk: Fixed income securities are also subject to the risk that an issuer will be unable or unwilling to make principal and interest payments when due which could adversely impact the Portfolio’s return and NAV. Changes in the credit rating of a debt security held by the Portfolio could have a similar effect.
Municipal Obligation Risk: Municipal security prices, payment of interest on, repayment of principal for, and the market for municipal securities can be significantly affected by economic and political changes as well as uncertainties in the municipal market related to taxation, legislative changes or the rights of municipal security holders. Because many municipal securities are issued to finance similar projects, especially those relating to education, healthcare, transportation and utilities, conditions in those market sectors can affect municipal bond prices. In addition, a portion or all of the interest received from certain tax-exempt municipal securities could become taxable as a result of political and legislative changes, noncompliant conduct of a municipal issuer or determinations by the Internal Revenue Service (the “IRS”). A credit rating downgrade, bond default, or bankruptcy involving an issuer within a particular state or territory could affect the market values and marketability of some or all of the municipal obligations of that state or territory.
Government Agency Risk: Direct obligations of the U.S. Government such as Treasury bills, notes and bonds are supported by its full faith and credit. Indirect obligations issued by federal agencies and government-sponsored entities generally are not backed by the full faith and credit of the U.S. Treasury. Accordingly, while U.S. Government agencies and instrumentalities may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the U.S. Treasury. Some of these indirect obligations may be supported by the right of the issuer to borrow from the Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; still others are supported only by the credit of the instrumentality.
Call Risk: The Portfolio is subject to call risk. Call risk is the risk that changes in interest rates may cause certain municipal securities to be paid off much sooner or later than expected, which could adversely affect a Portfolio’s value.
Market Risk: The market values of securities owned by the Portfolio may decline, at times sharply and unpredictably. Market risks, including political, regulatory, market, economic and social developments, and developments that impact specific economic sectors, industries or segments of the market, interest rates, inflation rates or credit ratings, can affect the value of the Portfolio’s investments. Natural disasters, public health emergencies (including pandemics and epidemics such as COVID-19), war, military conflict, terrorism and other global unforeseeable events may lead to instability in world economies and markets, may lead to increased volatility, and may have adverse long-term effects. The Portfolio cannot predict the effects of such unforeseeable events in the future on the economy, the markets or the Portfolio’s investments.
New Portfolio Risk: The Portfolio is a recently organized portfolio of the Glenmede Fund with a limited operating history. There can be no assurance that the Portfolio will grow to, or maintain, an economically viable size, in which case the Board may determine to liquidate the Portfolio.
4 |
Investment Adviser: Glenmede Investment Management LP serves as investment advisor to the Portfolio.
Portfolio Managers: Robert M. Daly has been employed by the Advisor as Director of Fixed Income since September 2018. J. Douglas Wilson, Portfolio Manager of the Advisor, has been employed by the Advisor since September 2011. David M. Joyce, Portfolio Manager of the Advisor, has been employed by the Advisor since June 2014. Each of Messrs. Daly, Wilson and Joyce will manage the Portfolio upon commencement of operations.
Tax Information: The Portfolio anticipates that substantially all of its income distributions will be “exempt-interest dividends,” which are exempt from federal income taxes. However, some distributions may be taxable, such as distributions that are derived from accretion of market discounts, occasional taxable investments and distributions of short and long-term capital gains, or may be subject to the federal alternative minimum tax.
Purchase and Sale of Portfolio Shares:
NOT AVAILABLE TO THE GENERAL PUBLIC
Shares of the Portfolio may be purchased only by or on behalf of separately managed account clients where the Portfolio’s Advisor or an affiliate of the Advisor (each a “Managed Account Adviser”) has an agreement with the managed account program sponsor (the “Program Sponsor”), or directly with the client, to provide management or advisory services to the managed account or to the Program Sponsor for its use in managing such account. The Portfolio is intended to be used as a part of a broader investment program by certain separately managed account clients.
There are no minimum initial or subsequent investment requirements for the Portfolio. You may redeem shares at any time by contacting the Glenmede Trust Company, N.A. (“Glenmede Trust”) by telephone or facsimile or contacting the institution through which you purchased your shares.
Financial Intermediary Compensation: If you purchase shares of a Portfolio through a broker-dealer or other financial intermediary (such as a bank), the Portfolio and its related companies may pay the intermediary for the sale of Portfolio shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
5 |
ADDITIONAL INFORMATION ABOUT INVESTMENTS
Objective, Principal Strategies and Risks
To help you decide if the Municipal Allocation Portfolio (referred to sometimes herein as the “Portfolio”) is appropriate for you, this section looks more closely at the Portfolio’s investment objective, policies and risks. You should carefully consider your own investment goals, time horizon and risk tolerance before investing in the Portfolio.
The investment objective and strategies of the Municipal Allocation Portfolio may be changed by the Board without shareholder approval.
Municipal Allocation Portfolio
The Portfolio’s investment objective is to obtain a high level of current income exempt from regular federal income tax and consistent with what the Advisor considers to be an appropriate level of risk. The Portfolio attempts to achieve its objective by investing, under normal market circumstances, at least 80% of the value of its net assets (including borrowings for investment purposes) in municipal obligations that pay interest that is exempt from regular federal income tax, but may be subject to federal alternative minimum tax for non-corporate investors in the Portfolio.
Under normal market circumstances, the Portfolio will invest at least 80% of the value of its net assets (including borrowings for investment purposes) in investment grade municipal bonds issued by the states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities. This is a non-fundamental investment policy that can be changed by the Portfolio upon 60 days’ prior notice to shareholders. The investment objective and strategies of the Municipal Allocation Portfolio may be changed by the Board without shareholder approval.
The Portfolio may, from time to time, take temporary defensive positions that are inconsistent with its principal investment strategies in response to adverse market, economic, political or other conditions. Such investments may include, for example, cash, tax exempt money market funds and short-term instruments which meet the Portfolio’s credit criteria. To the extent the Portfolio employs a temporary defensive investment strategy, it may not achieve its investment objective. A defensive position, taken at the wrong time, would have an adverse impact on the Portfolio’s performance.
Investment Duration and Quality
The Portfolio will invest in securities that are rated investment grade at the time of purchase. A security is investment grade if it is rated within the top four rating categories by a NRSRO or unrated, but in the opinion of the Advisor, of comparable quality at the time of purchase. If a portfolio security’s rating is reduced to below the above levels, the Advisor will dispose of the security in an orderly fashion as soon as practicable.
Duration is a measure of the price sensitivity of a debt security or a portfolio of debt securities to a change in interest rates. The Portfolio does not have a specific duration target, and may invest in securities of any duration. The longer the duration of the Portfolio’s debt securities, the more sensitive they will be to interest rate changes (as a general rule, a 1% rise in interest rates means a 1% fall in value for every year of duration).
Interest Rate Risks
Generally, a fixed income security will increase in value when interest rates fall and decrease in value when interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they usually offer higher yields to compensate investors for the greater risks. Although governmental financial regulators, including the Federal Reserve, maintained historically low interest rates beginning in early 2020, interest rates have risen and are expected to continue to increase in the near future. A rising interest rate environment may cause investors to move out of fixed income securities and markets on a large scale, which could adversely affect the price and liquidity of such securities and also result in increased redemptions from the Portfolio. Recently, there have been signs of inflationary price movements. As such, fixed income and related markets may experience heightened levels of interest rate volatility and liquidity risk. Changes in market conditions and government action may have adverse effects on investments, volatility, and liquidity in debt markets, and any negative impact on fixed income securities could be swift and significant, potentially negatively impacting a Portfolio’s performance and disrupting portfolio management by increased shareholder redemptions. Substantial redemptions from bond and other income funds may worsen that impact. Dividend paying and other types of equity securities also may be adversely affected from an increase in interest rates.
Dollar weighted average maturity is a measure of how the Portfolio will react to interest rate changes. The stated maturity of a bond is the date the issuer must repay the bond’s entire principal value to an investor. A bond’s term to maturity is the number of years remaining to maturity. The Portfolio does not have a stated maturity, but does have a dollar-weighted average maturity. This is calculated by averaging the terms to maturity of bonds held by a Portfolio, with each maturity “weighted” according to the percentage of net assets it represents. The Portfolio expects to maintain a dollar-weighted average maturity of 3 to 10 years.
6 |
Credit Risks
The risk that the credit strength of an issuer will weaken and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will default is known as “credit risk.” Although U.S. Government Securities are generally considered to be among the safest type of investment in terms of credit risk, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. Government agencies, authorities, instrumentalities or sponsored enterprises, such as the Government National Mortgage Association (“GNMA”), are backed by the full faith and credit of the U.S. Treasury, while obligations by others, such as Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks (“FHLBs”), are backed solely by the ability of the entity to borrow from the U.S. Treasury or by the entity’s own resources. No assurance can be given that the U.S. Government would provide financial support to U.S. Government agencies, authorities, instrumentalities or sponsored enterprises if it is not obliged to do so by law.
On September 7, 2008, Fannie Mae and Freddie Mac (collectively the “GSEs”) were placed under the conservatorship of the Federal Housing Finance Agency to provide stability in the financial markets, mortgage availability and taxpayer protection by preserving the GSEs’ assets and property and putting them in a sound and solvent condition. Under the conservatorship, the management of the GSEs was replaced. The long-term effect that this conservatorship will have on the securities issued or guaranteed by the GSEs is unclear. More information about the conservatorship is in Appendix A to the Statement of Additional Information (“SAI”).
Municipal obligations generally rank between U.S. Government Securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, may present the highest credit risk.
Lower quality debt securities generally have higher rates of interest to compensate investors for the greater risk and may be subject to greater price fluctuations than higher quality debt securities. Credit risk is gauged in part, by the credit ratings of the debt securities in which the Portfolio invests. Although ratings published by rating agencies are widely accepted measures of credit risk, credit ratings are only the opinions of the rating agencies issuing the ratings and are not guarantees as to credit quality or an evaluation of market risk. The Advisor relies on its own credit analysts to research issuers and issues in seeking to mitigate various credit and default risks.
Liquidity Risk
Certain portfolio securities may be less liquid than others, which may make them difficult or impossible to sell at the time and the price that the Portfolio would like, adversely affecting the value of the Portfolio’s investments and its returns.
Municipal Securities
Municipal securities are debt obligations generally issued by a state, territory or possession of the United States (including the District of Columbia) or a political subdivision, agency, instrumentality or authority thereof to obtain funds for various public purposes, including the construction of public facilities. Opinions relating to the validity of municipal bonds, exclusion of municipal bond interest from an investor’s gross income for federal income tax purposes and, where applicable, state and local income tax, are rendered by bond counsel to the issuing authorities at the time of issuance.
The two principal classifications of municipal securities are general obligation bonds and limited obligation or revenue bonds. General obligation bonds are secured by the issuer’s pledge of its full faith and credit including, if available, its taxing power for the payment of principal and interest. Issuers of general obligation bonds include states, counties, cities, towns and various regional or special districts. The proceeds of these obligations are used to fund a wide range of public facilities, such as the construction or improvement of schools, highways and roads, water and sewer systems and facilities for a variety of other public purposes. Lease revenue bonds or certificates of participation in leases are payable from annual lease rental payments from a state or locality. Annual rental payments are payable to the extent such rental payments are appropriated annually.
The value of, payment of interest on, repayment of principal for, and the ability to sell a municipal security may be affected by constitutional amendments, legislation, executive orders, administrative regulations, voter initiatives and the economics of the regions in which the issuers are located. A credit rating downgrade, bond default, or bankruptcy involving an issuer within a particular state or territory could affect the market values and marketability of some or all of the municipal obligations of that state or territory. For example, significant economic and financial difficulties in Puerto Rico have led certain credit rating agencies to downgrade Puerto Rican general obligation debt and certain issuers below investment grade and to continue to have a negative outlook on certain Puerto Rican issuers. Such downgrades and continued financial difficulties could lead to lower prices and increased likelihood of restructurings or default of Puerto Rican bonds which could negatively impact the market values and marketability of some or all of the municipal obligations of Puerto Rico. In addition, since many municipal securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal securities market and a Portfolio’s investments in municipal securities. There is some risk that a portion or all of the interest received from certain tax-exempt municipal securities could become taxable as a result of determinations by the IRS.
7 |
The Portfolio may also invest in private activity municipal bonds that may subject non-corporate shareholders to federal alternative minimum tax. Private activity bonds are a type of revenue bond that includes, for example, pollution control, health care and housing bonds, which, although nominally issued by municipal authorities, are generally not secured by the taxing power of the municipality but by the revenues of the authority derived from payments by the private entity which owns or operates the facility financed with the proceeds of the bonds. Obligations of housing finance authorities have a wide range of security features, including reserve funds and insured or subsidized mortgages, as well as the net revenues from housing or other public projects. Many of these bonds do not generally constitute the pledge of the credit of the issuer of such bonds. The credit quality of such revenue bonds is usually directly related to the credit standing of the user of the facility being financed or of an institution which provides a guarantee, letter of credit or other credit enhancement for the bond issue.
The Portfolio may also invest in “moral obligation” bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable or unwilling to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Alternative Minimum Tax
The Portfolio has no limit as to the amount that can be invested in municipal securities that pay interest that may subject you to federal alternative minimum tax. Therefore, all or a portion of the Portfolio’s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax.
Debt Obligations
Debt obligations of domestic and foreign companies may include a broad range of fixed and variable rate bonds, debentures and notes. The market value of securities held by the Portfolio is expected to vary according to factors such as changes in interest rates and changes in the average weighted maturity of the Portfolio.
Municipal Revenue Obligations
The Municipal Allocation Portfolio may invest 25% or more of its net assets in municipal obligations, which pay interest and principal from revenues of similar projects. The Municipal Allocation Portfolio may also invest up to 20% of its total assets in taxable investments including private activity bonds. Such investments involve risks presented by the laws and economic conditions relating to such projects and bonds. These securities do not carry the general obligation of the issuer and are not backed by taxing power.
In many cases, the IRS has not ruled on whether the interest received on a municipal obligation is tax-exempt. The Portfolio and the Advisor rely on the opinion of bond counsel to issuers at the time of issuance and will not review the bases for them.
Repurchase Agreements
Under normal circumstances, the Portfolio may subject no more than 20% of its total assets to repurchase agreements with qualified brokers, dealers, banks and other financial institutions deemed creditworthy by the Advisor.
In a repurchase agreement, the Portfolio purchases a security and simultaneously commits to resell that security at a future date to the seller (a qualified bank or securities dealer) at an agreed upon price plus an agreed upon market rate of interest (itself unrelated to the coupon rate or date of maturity of the purchased security). The seller under a repurchase agreement will be required to maintain the value of the securities which are subject to the agreement and held by a Portfolio at not less than the agreed upon repurchase price. If the seller defaults on its repurchase obligation, the Portfolio holding such obligation suffers a loss to the extent that the proceeds from a sale of the underlying securities (including accrued interest) is less than the repurchase price (including accrued interest) under the agreement. In the event that such a defaulting seller files for bankruptcy or becomes insolvent, disposition of such securities by the Portfolio might be delayed pending court action.
Selection of Investments
The Advisor evaluates the rewards and risks presented by all securities purchased by the Portfolio it manages and how it may advance such Portfolio’s investment objective. It is possible, however, that these evaluations will prove to be inaccurate.
Other Types of Investments and Risks
In addition to the Portfolio’s principal investment strategies and risks, and the particular types of securities which the Portfolio may select for investment described above, the Portfolio may make other types of investments and pursue other investment strategies in support of its overall investment goal. Information about some of these investments and strategies and other risks is provided below. More information about these and other supplemental investment strategies and the risks involved are described in the SAI.
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Investments in Other Investment Companies: To the extent permitted by the Investment Company Act of 1940, as amended (the “1940 Act”), the Portfolio may invest in shares of other registered investment companies, including closed-end funds and ETFs. If the Portfolio invests in shares of another registered investment company, shareholders would bear not only their proportionate share of the Portfolio’s expenses, but also management fees and other expenses paid by the other fund. Any investment in a closed-end fund or an ETF generally presents the same primary risks as an investment in a conventional open-end fund that has the same investment objectives, strategies and policies. Additionally, the risks of owning a closed-end fund or an ETF generally reflect the risks of owning the underlying securities that such fund invests in or is designed to track, although the lack of liquidity of an ETF could result in it being more volatile. In addition, ETFs and closed-end funds do not necessarily trade at the NAV of their underlying securities, which means that these funds could potentially trade above or below the value of their underlying portfolios and may result in a loss. Finally, because ETFs and closed-end funds trade like stocks on exchanges, they are subject to trading and commission costs.
The Securities and Exchange Commission (“SEC”) has adopted revisions to the rules permitting funds to invest in other investment companies to streamline and enhance the regulatory framework applicable to fund of funds arrangements. While the rule permits more types of fund of fund arrangements without reliance on an exemptive order or no-action letters, it imposes new conditions, including limits on control and voting of acquired funds’ shares, evaluations and findings by investment advisers, fund investment agreements, and limits on most three-tier fund structures. Rule 12d1-4 of the 1940 Act went into effect on January 19, 2021. The rescission of the applicable exemptive orders and the withdrawal of the applicable no-action letters was effective on January 19, 2022.
Derivatives: The Portfolio may, but is not required to, use derivatives for hedging or risk management purposes. Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The Portfolio may use derivatives to hedge or adjust the risk profile of its investments, to replace more traditional direct investments and to obtain exposure to otherwise inaccessible markets. Derivatives include listed and cleared transactions where a Portfolio’s derivative trade counterparty is an exchange or clearinghouse, and non-cleared, bilateral “over-the-counter” transactions that are privately negotiated and where a Portfolio’s derivative trade counterparty is a financial institution. Exchange-traded or cleared derivatives transactions tend to be subject to less counterparty credit risk than those that are bilateral and privately negotiated.
The use of derivatives may involve risks that are different from, or possibly greater than, the risks associated with investing directly in securities or other more traditional instruments. These risks include the risk that the value of a derivative instrument may not correlate perfectly, or at all, with the value of the assets, reference rates, or indices that it is designed to track. Other risks include the possible absence of a liquid secondary market for a particular instrument and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close out an unfavorable position and the risk that the counterparty will not perform its obligations. Certain derivatives may have a leverage component and involve leverage risk. Adverse changes in the value or level of the underlying asset, note or index can result in a loss substantially greater than the Portfolio’s investment (in some cases, the potential loss is unlimited).
Rule 18f-4 under the 1940 Act, which was adopted on October 28, 2020 and had a final compliance deadline of August 19, 2022, permits a Portfolio to enter into derivatives transactions (as defined below) and certain other transactions notwithstanding the restrictions on the issuance of senior securities contained in section 18 of the 1940 Act, provided that the Portfolio complies with the conditions of the Rule. Section 18 of the 1940 Act, among other things, prohibits open-end funds, including the Portfolio, from issuing or selling any “senior security,” other than borrowing from a bank (subject to a requirement to maintain 300% “asset coverage”).
Under Rule 18f-4, “Derivatives Transactions” include the following: (1) any swap, security-based swap (including a contract for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing, or any similar instrument, under which a Portfolio is or may be required to make any payment or delivery of cash or other assets during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; (2) any short sale borrowing; (3) reverse repurchase agreements and similar financing transactions (e.g., recourse and non-recourse tender option bonds, and borrowed bonds), if a Portfolio elects to treat these transactions as Derivatives Transactions under Rule 18f-4; and (4) when-issued or forward-settling securities (e.g., firm and standby commitments, including to-be-announced (“TBA”) commitments, and dollar rolls) and non-standard settlement cycle securities, unless the Portfolio intends to physically settle the transaction and the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”).
Rule 18f-4 under the 1940 Act provides for the regulation of the use of derivatives and certain related instruments by registered investment companies. Rule 18f-4 prescribes specific value-at-risk leverage limits for certain derivatives users. In addition, Rule 18f-4 requires certain derivatives users to adopt and implement a derivatives risk management program (including the appointment of a derivatives risk manager and the implementation of certain testing requirements), and prescribes reporting requirements with respect to derivatives. Subject to certain conditions, if a fund qualifies as a “limited derivatives user,” as defined in Rule 18f-4, it is not subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC rescinded certain of its prior guidance regarding asset segregation and coverage requirements in respect of derivatives transactions and related instruments. With respect to reverse repurchase agreements or other similar financing transactions in particular, Rule 18f-4 permits a fund to enter into such
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transactions if the fund either (i) complies with the asset coverage requirements of Section 18 of the 1940 Act, and combines the aggregate amount of indebtedness associated with all reverse repurchase agreements or similar financing with the aggregate amount of any other senior securities representing indebtedness when calculating the relevant asset coverage ratio, or (ii) treats all reverse repurchase agreements or similar financing transactions as derivatives transactions for all purposes under Rule 18f-4. Rule 18f-4 could restrict a Portfolio’s ability to engage in certain derivatives transactions and/or increase the costs of such derivatives transactions, which could adversely affect the value or performance of the Portfolio.
Swaps: The Portfolio may enter into swaps, including interest rate swaps, consumer price index swaps (“CPI swaps”) and swaps on a credit default index (sometimes referred to as a credit default swap index) (collectively, “swaps”), for hedging purposes. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals (payment dates) based upon or calculated by reference to changes in specified prices or rates (e.g., interest rates in the case of interest rate swaps) for a specified amount of an underlying asset (the “notional” principal amount). Generally, the notional principal amount is used solely to calculate the payment stream, but is not exchanged. Most swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments). Certain standardized swaps, including certain interest rate swaps and credit default swaps, are subject to mandatory central clearing and are required to be executed through a regulated swap execution facility. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Portfolios post initial and variation margin to support their obligations under cleared swaps by making payments to their clearing member FCMs. Central clearing is intended to reduce counterparty credit risks and increase liquidity, but central clearing does not make swaps risk free. The SEC may adopt similar clearing and execution requirements in respect of certain security-based swaps under its jurisdiction. Privately negotiated swap agreements are two-party contracts entered into primarily by institutional investors and are not cleared through a third party, nor are these required to be executed on a regulated swap execution facility. Payments received by the Portfolio from swap agreements will result in taxable income, either as ordinary income or capital gains, rather than tax-exempt income, which will increase the amount of taxable distributions received by shareholders. The Portfolio’s investments in swap transactions may include the following:
• | Interest Rate Swaps, Swaptions, Caps and Floors. Interest rate swaps involve the exchange by the Portfolio with another party of payments calculated by reference to specified interest rates (e.g., an exchange of floating-rate payments for fixed-rate payments). Unless there is a counterparty default, the risk of loss to the Portfolio from interest rate swap transactions is limited to the net amount of interest payments that the Portfolio is contractually obligated to make. If the counterparty to an interest rate swap transaction defaults, the Portfolio’s risk of loss consists of the net amount of interest payments that the Portfolio contractually is entitled to receive. |
An option on a swap agreement, also called a “swaption”, is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. | |
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually-based principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on an agreed principal amount from the party selling the interest rate floor. It may be more difficult for the Portfolio to trade or close out interest rate caps and floors in comparison to other types of swaps. | |
The value of interest rate transactions will fluctuate based on changes in interest rates. | |
Interest rate swap, swaption, cap or floor transactions may be used in an effort to preserve a return or spread on a particular investment or portion of the Portfolio’s portfolio or to protect against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps may also be used to leverage the Portfolio’s investments by creating positions that are functionally similar to purchasing a municipal or other fixed-income security but may only require payments to a swap counterparty under certain circumstances and allow the Portfolio to efficiently increase (or decrease) its duration and income. | |
• | Inflation (CPI) Swaps. Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swap agreements may be used to protect the |
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NAV of the Portfolio against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements may be expected to increase if inflation increases. The Portfolio will enter into inflation swaps on a net basis. The values of inflation swap agreements are expected to change in response to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation. If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, leading to a decrease in value of an inflation swap agreement. | |
• | Credit Default Swap Agreements. The “buyer” in a credit default swap contract is obligated to pay the “seller” a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or restructuring. A Portfolio may be either the buyer or seller in the transaction. As a seller, a Portfolio receives a fixed rate of income throughout the term of the contract, which typically is between one month and ten years, provided that no credit event occurs. If a credit event occurs, a Portfolio, as seller, typically must pay the contingent payment to the buyer, which will be either (i) the “par value” (face amount) of the reference obligation in which case the Portfolio will receive the reference obligation in return or (ii) an amount equal to the difference between the face amount and the current market value of the reference obligation. As a buyer, if a credit event occurs, the Portfolio would be the receiver of such contingent payments, either delivering the reference obligation in exchange for the full notional (face) value of a reference obligation that may have little or no value, or receiving a payment equal to the difference between the face amount and the current market value of the obligation. The current market value of the reference obligation is typically determined via an auction process sponsored by the International Swaps and Derivatives Association, Inc. The periodic payments previously received by the Portfolio, coupled with the value of any reference obligation received, may be less than the full amount it pays to the buyer, resulting in a loss to the Portfolio. If the reference obligation is a defaulted security, physical delivery of the security will cause a Portfolio to hold a defaulted security. If a Portfolio is a buyer and no credit event occurs, the Portfolio will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. |
Credit default swaps may involve greater risks than if a Portfolio had invested in the reference obligation directly. Credit default swaps are subject to general market risk and credit risk, and may be illiquid. |
Rule 18f-4 under the 1940 Act provides for the regulation of the use of derivatives and certain related instruments by registered investment companies. Rule 18f-4 prescribes specific value-at-risk leverage limits for certain derivatives users. In addition, Rule 18f-4 requires certain derivatives users to adopt and implement a derivatives risk management program (including the appointment of a derivatives risk manager and the implementation of certain testing requirements), and prescribes reporting requirements with respect to derivatives. Subject to certain conditions, if a fund qualifies as a “limited derivatives user,” as defined in Rule 18f-4, it is not subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC rescinded certain of its prior guidance regarding asset segregation and coverage requirements in respect of derivatives transactions and related instruments. With respect to reverse repurchase agreements or other similar financing transactions in particular, Rule 18f-4 permits a fund to enter into such transactions if the fund either (i) complies with the asset coverage requirements of Section 18 of the 1940 Act, and combines the aggregate amount of indebtedness associated with all tender option bonds or similar financing with the aggregate amount of any other senior securities representing indebtedness when calculating the relevant asset coverage ratio, or (ii) treats all tender option bonds or similar financing transactions as derivatives transactions for all purposes under Rule 18f-4. Rule 18f-4 could restrict a Portfolio’s ability to engage in certain derivatives transactions and/or increase the costs of such derivatives transactions, which could adversely affect the value or performance of the Portfolio.
Cyber Security Risk: The Portfolio and its service providers may be prone to operational and information security risks resulting from breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a Portfolio to lose proprietary information, suffer data corruption, or lose operational capacity. Breaches in cyber security include, among other behaviors, stealing or corrupting data maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information or various other forms of cyber-attacks. Cyber security breaches affecting the Portfolio or its advisers, custodian, transfer agent, intermediaries and other third-party service providers may adversely impact the Portfolio. For instance, cyber security breaches may interfere with the processing of shareholder transactions, impact the Portfolio’s ability to calculate its NAV, cause the release of private shareholder information or confidential business information, impede trading, subject a Portfolio to regulatory fines or financial losses and/or cause reputational damage. The Portfolio may also incur additional costs for cyber security risk management purposes. Similar types of cyber security risks are also present for issuer of securities in which the Portfolio may invest, which could result in material adverse consequences for such issuers and may cause the Portfolio’s investment in such companies to lose value.
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COVID-19 Risk: The continuing spread of an infectious respiratory illness caused by the coronavirus (known as COVID-19) has caused volatility, severe market dislocations and liquidity constraints in many markets and may adversely affect the Portfolio’s investments and operations. The outbreak was first detected in December 2019 and has subsequently spread globally. The transmission of COVID-19 and efforts to contain its spread have resulted in international and domestic travel restrictions and disruptions, closed international borders, resulted in enhanced health screenings at ports of entry and elsewhere, disruptions of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff reductions), supply chains and consumer activity, as well as general concern and uncertainty that has negatively affected the economic environment. The impact of COVID-19 has negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. On May 5, 2023, the World Health Organization declared the end of the global emergency status for COVID-19, and the United States subsequently ended the federal COVID-19 public health emergency declaration effective May 11, 2023. Although vaccines for COVID-19 are widely available, the full impact of COVID-19 and any current or future variants is currently unknown, and it may exacerbate other risks that apply to the Portfolio, including political, social and economic risks. Any such impact could adversely affect the Portfolio’s performance and the performance of the securities in which the Portfolio invests. The impact of these events and other epidemics or pandemics in the future could adversely affect the Portfolio’s performance.
LIBOR Risk: Many financial instruments may be tied to the London Interbank Offered Rate, or “LIBOR,” to determine payment obligations, financing terms, hedging strategies, or investment value. LIBOR is the offered rate for short-term Eurodollar deposits between major international banks. As of June 30, 2023, almost all settings of LIBOR have ceased to be published, except that certain widely used U.S. dollar LIBORs will continue to be published on a temporary, synthetic and non-representative basis through at least September 30, 2024. In some instan. ces, regulators have restricted new use of LIBORs prior to the date when synthetic LIBORs will cease to be published. The Secured Overnight Financing Rate (“SOFR”), which has been used increasingly on a voluntary basis in new instruments and transactions, is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities in the repurchase agreement market. On December 16, 2022, the Federal Reserve Board adopted regulations implementing the Adjustable Interest Rate Act, which provides a statutory fallback mechanism to replace LIBOR, by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. These regulations apply only to contracts governed by U.S. law, among other limitations. The regulations include provisions that (i) provide a safe harbor for selection or use of a replacement benchmark rate selected by the Federal Reserve Board; (ii) clarify who may choose the replacement benchmark rate selected by the Federal Reserve Board; and (iii) ensure that contracts adopting a replacement benchmark rate selected by the Federal Reserve Board will not be interrupted or terminated following the replacement of LIBOR. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition, poses risks for the Portfolio. The transition away from LIBOR could have a significant impact on the financial markets in general and may also present heightened risk to market participants, including public companies, investment advisers, investment companies, and broker-dealers. The risks associated with this discontinuation and transition will be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. For example, current information technology systems may be unable to accommodate new instruments and rates with features that differ from LIBOR. Accordingly, it is difficult to predict the full impact of the transition away from LIBOR on the Portfolio until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices become settled.
Large Shareholder Risk: From time to time, shareholders of a Portfolio (which may include institutional investors or financial intermediaries acting on behalf of their clients) may make relatively large redemptions or purchases of the Portfolio’s shares. These transactions may, among other things, cause the Portfolio to sell securities or invest additional cash, as the case may be, at disadvantageous prices. While the Glenmede Fund and The Glenmede Portfolios (collectively, the “Funds”) maintain credit facilities with State Street Bank and Trust Company that can be used to help limit the disruption from redemptions, there could be adverse effects on the Portfolio’s performance to the extent that the Portfolio may be required to sell securities or invest cash at times it would not otherwise do so. Selling portfolio securities to meet a large redemption request also may increase transaction costs or have adverse tax consequences for Portfolio shareholders. In addition, a large redemption could result in the Portfolio’s current expenses being allocated over a smaller asset base, leading to an increase in the Portfolio’s expense ratio.
Portfolio Holdings
The Advisor may publicly disclose information concerning the securities held by the Portfolio in accordance with regulatory requirements, such as periodic portfolio disclosure in filings with the SEC. In addition, the Advisor may post the Portfolio’s month-end, top-ten portfolio holdings no earlier than ten calendar days after the end of each month, and/or the complete quarter-end portfolio holdings no earlier than ten calendar days after the end of each calendar quarter, on its website, www.glenmedeim.com. This information will generally remain available on the website at least until the Funds file with the SEC their annual/semi-annual shareholder report that includes such period or its report on Form N-PORT for the last month of the Funds’ first or third fiscal quarters. The Funds may terminate or modify this policy at any time without further notice to shareholders.
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A further description of the Funds’ policies and procedures with respect to the disclosure of portfolio holdings is available in the SAI.
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PRICE OF PORTFOLIO SHARES
The price of shares issued by the Portfolio is based on its NAV. The Portfolio’s NAV per share is determined as of the close of regular trading hours of the New York Stock Exchange (the “NYSE”), currently 4:00 p.m. (Eastern Time), on each day that the NYSE is open for business. The time at which shares are priced may be changed in case of an emergency or if regular trading on the NYSE is stopped at a time other than 4:00 p.m. (Eastern Time). In addition, the Board has approved that the Portfolio may determine to price its shares on weekdays that the NYSE is temporarily closed due to emergency circumstances.
Marketable fixed income securities generally are priced at market value and debt securities with maturities of 60 days or less at the time of purchase generally are valued at “amortized cost” which approximates market value. When market quotations are not readily available or when events occur that make established valuation methods unreliable, the Portfolio’s investments are valued at fair value as determined in good faith using methods determined by the Board. The Board has designated the Advisor to serve as the valuation designee (the “Valuation Designee”) with respect to the Portfolio’s securities for which valuations are not readily available. The Valuation Designee works with State Street Bank and Trust Company, the Funds’ custodian, to regularly test the accuracy of the fair value prices by comparing them with values that are available from other sources. At each regularly scheduled Board meeting, a report by the Valuation Designee is submitted describing any security that has been fair valued and the basis for the fair value determination.
The following are examples of situations that may constitute significant events that could render a market quotation for a specific security “not readily available” and require fair valuation of such security: (i) the security’s trading has been halted or suspended; (ii) the security has been de-listed from a national exchange; (iii) the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; (iv) the security has not been traded for an extended period of time; (v) the security’s authorized pricing sources are not able or willing to provide a price; (vi) an independent price quote from two or more broker-dealers is not available; (vii) trading of the security is subject to local government-imposed restrictions; (viii) foreign security has reached a pre-determined range of trading set by a foreign exchange (“limit up” or “limit down” price), and no trading has taken place at the limit up price or limit down price; (ix) natural disasters, armed conflicts, and significant government actions; (x) significant events that relate to a single issuer or to an entire market sector, such as significant fluctuations in domestic or foreign markets or between the current and previous days’ closing levels of one or more benchmark indices approved by the Board; (xi) the security’s sales have been infrequent or a “thin” market in the security exists; and/or (xii) with regard to over-the-counter securities, the validity of quotations from broker-dealers appears questionable or the number of quotations indicates that there is a “thin” market in the security.
The frequency with which a Portfolio’s investments are valued using fair value pricing is primarily a function of the types of securities and other assets in which the Portfolio invests pursuant to its investment objective, strategies and limitations. Investments in other registered mutual funds, if any, are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).
Valuing a Portfolio’s investments using fair value pricing will result in using prices for those investments that may differ from current market prices. Accordingly, fair value pricing could result in a difference between the prices used to calculate a Portfolio’s NAV and the prices used by other investment companies, investors and the Portfolio’s benchmark index to price the same investments.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF SHARES
The Portfolio may appoint one or more intermediaries as its agent to receive purchase and redemption orders of shares of the Portfolio and cause these orders to be transmitted, on an aggregated basis, to the Portfolio’s transfer agent. Orders placed through these intermediaries will be deemed to have been received and accepted by the Portfolio when the intermediary accepts the order. Therefore, the purchase or redemption order will reflect the NAV per share next determined after receipt of the order by the intermediary, if the intermediary successfully transmits the order to the Portfolio’s transfer agent by the next business morning.
Purchase of Shares
Shares of the Portfolio may be purchased only by or on behalf of separately managed account clients where the Portfolio’s Advisor or an affiliate of the Advisor (each a “Managed Account Adviser”) has an agreement with the managed account program sponsor (typically, a registered investment adviser or broker/dealer), or directly with the client, to provide management or advisory services for the managed account. Shares of the Portfolio are sold without a sales commission on a continuous basis at the NAV per share next determined after receipt, in proper order, of the purchase order by the Funds’ transfer agent. We consider orders to be in “proper order” when all required documents are properly completed, signed and received. Beneficial ownership of shares will be reflected on books maintained by Glenmede Trust.
The Portfolio reserves the right, in its sole discretion, to reject any purchase order, when in the judgment of management, such rejection is in the best interests of the Portfolio and its shareholders.
Your institution may charge you for purchasing or selling shares of the Portfolio. There is no transaction charge for shares purchased directly from the Portfolio through Glenmede Trust.
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Purchases of the Portfolio’s shares will be made in full and fractional shares of the Portfolio calculated to three decimal places. In the interest of economy and convenience, certificates for shares will not be issued except upon your written request. Certificates for fractional shares, however, will not be issued.
The Funds reserve the right, in their sole discretion, to suspend the offering of shares of the Portfolio or to reject purchase orders when, in the judgment of the Advisor, such suspension or rejection is in the best interests of the Portfolio. Subject to the Board’s discretion, the Advisor will monitor the Portfolio’s total assets and may decide to close the Portfolio at any time to new investments or to new accounts due to concerns that a significant increase in the size of the Portfolio may adversely affect the implementation of the Portfolio’s investment strategy. Subject to the Board’s discretion, once closed, the Advisor may also choose to reopen the Portfolio to new investments at any time, and may subsequently close such Portfolio again should concerns regarding the Portfolio’s size recur. If a Portfolio closes to new investments, generally that Portfolio would be offered only to certain existing shareholders of the Portfolio and certain other persons, who may be generally subject to cumulative, maximum purchase amounts. The Funds, however, reserve the right to reopen a closed Portfolio to new investments from time to time at their discretion.
Redemption of Shares
You may redeem shares of the Portfolio at any time, without cost, at the NAV per share next determined after the Funds’ transfer agent receives your redemption order. Generally, a properly signed written order is all that is required. If you wish to redeem your shares, you should contact Glenmede Trust by telephone or facsimile or contact your Institution.
You will typically be paid your redemption proceeds within one business day after the Funds’ transfer agent receives your redemption order in proper form; however, payment of redemption proceeds may take up to seven days. The Funds may suspend the right of redemption or postpone the date of payment under any emergency circumstances as determined by the SEC.
Redemption proceeds are typically paid in cash from the proceeds of the sale of portfolio securities. The Funds also maintain credit facilities that serve as additional sources of liquidity for meeting redemption requests. The Funds also have the right to limit each shareholder to cash redemptions of $250,000 or 1% of the Portfolio’s NAV, whichever is less, within a 90-day period or, subject to the approval of the Board, in other circumstances identified by the Advisor. Any additional redemption proceeds would be made in readily marketable securities (“in-kind redemptions”). In-kind Redemptions may be in the form of pro-rata slices of a Portfolio’s portfolio, individual securities or a representative basket of securities in conformity with applicable rules of the SEC and the Funds’ Policy and Procedures Related to the Processing of In-Kind Redemptions. A shareholder will be exposed to market risk until the readily marketable securities are converted to cash, generally will incur brokerage charges on the sale of portfolio securities so received in the payment of redemptions and may incur other transaction expenses in converting these securities to cash. These redemption methods are used regularly and may also be used in stressed market conditions.
Frequent Purchases and Redemptions of Portfolio Shares
Mutual fund market timing involves the frequent purchase and redemption of shares of mutual funds within short periods of time with the intention of capturing short-term profits resulting from market volatility. Market timing may disrupt portfolio management strategies; harm the performance of the Portfolio; dilute the value of Portfolio shares held by long-term shareholders; increase brokerage and administrative costs; and for a Portfolio that invests to a significant extent in foreign securities, foster time-zone arbitrage.
The Funds do not knowingly accommodate frequent purchases and redemptions of Portfolio shares by shareholders. Pursuant to a policy adopted by the Board to discourage market timing of the Portfolio’s shares, the Funds have established the following procedures designed to discourage market timing of the Portfolio. Each Fund will enforce its policies and procedures to discourage market timing of the Portfolio’s shares equitably on all shareholders. There is no guarantee that the Funds will be able to identify individual shareholders who may be market timing the Portfolio or curtail their trading activity in every instance, particularly if they are investing through financial intermediaries.
Shares of the Portfolio may be sold through omnibus account arrangements with financial intermediaries. Omnibus account information generally does not identify the underlying investors’ trading activity on an individual basis. In an effort to identify and deter market timing in omnibus accounts, Glenmede Trust and the Advisor periodically review trading activity at the omnibus level and will seek to obtain underlying account trading activity information from the financial intermediaries when, in their judgment, the trading activity suggests possible market timing. Requested information relating to trading activity will be reviewed to identify accounts that may be engaged in excessive trading based on criteria established by Glenmede Trust or the Advisor, as applicable. If this information shows that an investor’s trading activity suggests market timing, Glenmede Trust or the Advisor, as applicable, will contact the financial intermediary and follow its procedures, including but not limited to, warnings, restricting the account from further trading and/or closing the account. Financial intermediaries may also monitor their customers’ trading activities in the Portfolio using criteria that may differ from the criteria established by Glenmede Trust and the Advisor and there is no assurance that the procedures used by the financial intermediaries will be able to curtail excessive trading. If a third-party financial intermediary does not provide underlying account trading activity information upon request, Glenmede Trust or the Advisor, as applicable, will determine what action to take, including terminating the relationship with the financial intermediary.
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DIVIDENDS AND DISTRIBUTIONS
The Portfolio normally distributes substantially all of its net investment income to shareholders monthly.
The Portfolio normally distributes any realized net capital gains at least once a year.
Dividends and capital gains distributions are paid in cash or reinvested in additional shares at the option of the shareholder.
ADDITIONAL INFORMATION ABOUT TAXES
The following is a summary of certain United States income tax considerations relevant under current law, which may be subject to change in the future. Because the federal income tax consequences of investing in the Portfolio may vary from shareholder to shareholder depending on each shareholder’s unique federal income tax circumstances, this summary does not attempt to discuss all of the federal income tax consequences of such an investment. Except where otherwise indicated, the discussion relates to investors who are individual United States citizens or residents. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation. Additional information about taxes relating to the Portfolio is contained in the SAI.
Distributions
The Portfolio contemplates distributing as dividends each year all or substantially all of its taxable income, including its net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any. Except as discussed below, you will be subject to federal, state and local income tax on Portfolio distributions regardless of whether they are paid in cash or reinvested in additional shares. Portfolio distributions attributable to short-term capital gains and net investment income will generally be taxable to you as ordinary income.
Distributions attributable to the net capital gain, if any, of the Portfolio will be taxable to you as long-term capital gain, no matter how long you have owned your Portfolio shares. The maximum long-term capital gain rate applicable to individuals, estates, and trusts is currently 23.8% (which includes a 3.8% Medicare tax). You will be notified annually of the tax status of distributions to you.
Distributions from the Portfolio will generally be taxable to you in the taxable year in which they are paid, with one exception. Distributions declared by the Portfolio in October, November or December and paid in January of the following year, are taxed as though they were paid on December 31.
The Portfolio anticipates that substantially all of its income distributions will be “exempt-interest dividends,” which are exempt from federal income taxes. However, some distributions may be taxable, such as distributions that are derived from accretion of market discounts, occasional taxable investments and distributions of short and long-term capital gains.
Interest on indebtedness you incur to purchase or carry shares of the Portfolio generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Portfolio may constitute a tax-preference item for purposes of determining federal alternative minimum tax liability for non-corporate investors in the Portfolio. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any social security or railroad retirement payments received by you are subject to federal income taxes.
Other Information. If you purchase shares of the Portfolio just before a distribution of long-term or short-term capital gains, the purchase price will reflect the amount of the upcoming distribution, but you will be taxed on the entire amount of the distribution received, even though, as an economic matter, the distribution simply constitutes a return of capital. This adverse tax result is known as “buying into a dividend.”
Sales and Redemptions
You will generally recognize taxable gain or loss for federal income tax purposes on a sale or redemption of your shares, based on the difference between your tax basis in the shares and the amount you receive for them. Generally, you will recognize long-term capital gain or loss if you have held your Portfolio shares for over 12 months at the time you dispose of them.
Certain special tax rules may apply to losses realized in some cases. Any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. If you receive an exempt-interest dividend with respect to any share of the Municipal Allocation Portfolio and the share is held by you for six months or less, any loss on the sale of the share will be disallowed to the extent of that dividend amount. Additionally, any loss realized on a
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disposition of shares of the Portfolio may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of the same Portfolio within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of the Portfolio. If disallowed, the loss will be reflected in an upward adjustment to the basis of the shares acquired.
The Portfolio (or relevant broker or financial advisor) is required to compute and report to the IRS and furnish to Portfolio shareholders cost basis and other relevant information when such shares are sold. The Portfolio will use the average cost method, unless you instruct the Portfolio to use a different IRS-accepted cost basis method or you choose to specifically identify your shares at the time of each sale. If your account is held by your broker or other financial advisor, they may select a different cost basis method. In that case, please contact your broker or other financial advisor to obtain information with respect to the available methods and elections for your account. You should carefully review the cost basis information provided by the Portfolio and make any additional basis, holding period or other adjustments that are required when reporting these amounts on your federal and state income tax returns. Portfolio shareholders should consult with their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how the cost basis reporting requirements apply to them.
IRAs and Other Tax-Qualified Plans
The one major exception to the preceding tax principles is that distributions on, and sales and redemptions of, shares held in investment retirement accounts (or other tax-qualified plan) will not be currently taxable unless it borrowed to acquire the shares.
Backup Withholding
The Portfolio may be required in certain cases to withhold and remit to the IRS a percentage of taxable dividends or gross proceeds realized upon sale or redemption payable to shareholders who have failed to provide a correct tax identification number in the manner required, who are subject to withholding by the IRS for failure to properly include on their return payments of taxable interest or dividends, or who have failed to certify to the Portfolio that they are not subject to backup withholding when required to do so or that they are “exempt recipients.” The current backup withholding rate is 24%. The amount of any backup withholding from a payment to a shareholder will be allowed as a credit against the shareholder’s U.S. federal income tax liability and may entitle such a shareholder to a refund, provided that the required information is timely furnished to the IRS.
U.S. Tax Treatment of Foreign Shareholders
Generally, nonresident aliens, foreign corporations and other foreign investors are subject to 30% withholding tax on dividends paid by a U.S. corporation, although the rate may be reduced for an investor that is a qualified resident of a foreign country with an applicable tax treaty with the United States. In the case of regulated investment companies such as the Portfolio, however, certain categories of dividends are exempt from the 30% withholding tax. These generally include dividends attributable to the Portfolio’s net capital gains (the excess of net long-term capital gains over net short-term capital losses), dividends attributable to the Portfolio’s interest income from U.S. obligors and dividends attributable to net short-term capital gains of the Portfolio.
Foreign shareholders will generally not be subject to U.S. tax on gains realized on the sale or redemption of shares in the Portfolio, except that a nonresident alien individual who is present in the United States for 183 days or more in a calendar year will be taxable on such gains on the dispositions of shares and capital gain dividends (if any) from the Portfolio.
In contrast, if a foreign investor conducts a trade or business in the United States and the investment in the Portfolio is effectively connected with that trade or business, the foreign investor’s income from the Portfolio will generally be subject to U.S. federal income tax at graduated rates in a manner similar to the income of a U.S. citizen or resident.
The Portfolio will also generally be required to withhold 30% tax on certain payments to foreign entities that do not provide a Form W-8BEN-E that evidences their compliance with, or exemption from, specified information reporting requirements under the Foreign Account Tax Compliance Act.
All foreign investors should consult their own tax advisors regarding the tax consequences in their country of residence of an investment in the Portfolio.
State and Local Taxes
You may also be subject to state and local taxes on distributions, sales and redemptions. State income taxes may not apply, however, to the portions of the Portfolio’s distributions, if any, that are attributable to interest on U.S. Government securities or interest on securities of the particular state or localities within the state in which you live. You should consult your tax adviser regarding the tax status of distributions in your state and locality.
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ADDITIONAL INFORMATION ABOUT MANAGEMENT OF THE PORTFOLIO
Investment Advisor
Glenmede Investment Management LP, with principal offices at One Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103, serves as investment advisor to the Portfolio. The Advisor, a limited partnership, is wholly-owned by Glenmede Trust. As of December 31, 2023, the Advisor oversaw approximately $12 billion in assets.
Under Investment Advisory Agreements with the Funds, the Advisor, subject to the control and supervision of the Board and in conformance with the stated investment objective and policies of the Portfolio, manages the investment and reinvestment of the assets of the Portfolio.
The Portfolio does not pay a management fee to the Advisor for its investment advisory services. The Advisor has agreed to reimburse expenses to the extent that the Portfolio’s annual total operating expenses exceed 0.10% of the Portfolio’s average daily net assets (excluding Acquired Fund fees and expenses, brokerage commissions, extraordinary items, interest and taxes). The Advisor has contractually agreed to these reimbursements until at least February 28, 2025 and may discontinue this arrangement at any time thereafter. This contractual expense reimbursement agreement may not be terminated before February 28, 2025 without the approval of the Board.
A discussion regarding the Board’s basis for approving the Investment Advisory Agreement will be available in the Fund’s April 30, 2024 semi-annual shareholder report (or the first shareholder report following the commencement of operations of the Portfolio).
The Advisor and/or Glenmede Trust may pay additional compensation from time to time, out of their assets, and not as an additional charge to the Portfolio, to selected Institutions that provide services to the Institution’s customers who are beneficial owners of the Portfolio and other persons in connection with servicing and/or sales of Portfolio shares and other accounts managed by the Advisor or Glenmede Trust.
Robert M. Daly, Director of Fixed Income of the Advisor, J. Douglas Wilson, Portfolio Manager of the Advisor, and David M. Joyce, Portfolio Manager of the Advisor, will manage the Portfolio and will be responsible for management of the Portfolio upon its commencement of operations.
Mr. Daly has been employed by the Advisor and Glenmede Trust as the Director of Fixed Income since September 2018. Prior to that time, Mr. Daly served as a senior portfolio manager for U.S. and global fixed income strategies at BlackRock Financial Management, Inc. Mr. Wilson has been employed by the Advisor since September 2011. Prior to that time, Mr. Wilson served as a bond trader for AllianceBernstein Holding L.P. Mr. Joyce has been employed by the Advisor since June 2014. Prior to that time, Mr. Joyce served as a bond trader at WNJ Capital.
The SAI provides additional information about the portfolio managers’ compensation and other accounts they manage.
GENERAL INFORMATION
If you have any questions regarding the Portfolio, contact the Funds at the address or telephone number stated on the back cover page.
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FINANCIAL HIGHLIGHTS
Financial highlights for the Portfolio are not presented as the Portfolio had not commenced operations as of the date of this Prospectus.
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Where to find more information
More Portfolio information is available to you upon request and without charge:
Annual and Semi-Annual Report
The Annual and Semi-Annual Reports will provide additional information about the Portfolio’s investments. The Annual Report will also contain a discussion of the market conditions and investment strategies that significantly affected the Portfolio’s performance during the last fiscal year.
Statement of Additional Information (“SAI”)
The SAI includes additional information about the Portfolio’s investment policies, organization and management. It is legally part of this Prospectus (it is incorporated by reference).
You can get free copies of the Portfolio’s Annual Report, Semi-Annual Report or SAI by calling or writing to the address shown below. These documents are also available on Glenmede Investment Management LP’s website at www.glenmedeim.com. You may also request other information about the Portfolio, and make inquiries as follows:
Write to:
The Glenmede Fund/Portfolios
1650 Market Street
Suite 1200
Philadelphia, PA 19103
By phone:
1-800-442-8299
Reports and other information about the Portfolio will be available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.
The Glenmede Fund, Inc.’s Investment Company Act File No. is 811-05577
The Glenmede Portfolios’ Investment Company Act File No. is 811-06578
The third party marks appearing above are the marks of their respective owners.
THE GLENMEDE FUND, INC.
MUNICIPAL ALLOCATION PORTFOLIO (GFMAX)
(800) 442-8299
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2024
This Statement of Additional Information (“SAI”) is not a prospectus but should be read in conjunction with The Glenmede Fund, Inc.’s (“Glenmede Fund” or the “Fund”) Prospectus dated February 28, 2024, as amended or supplemented from time to time (the “Prospectus”). This SAI is for the Municipal Allocation Portfolio (GFMAX) (referred to sometimes herein as the “Portfolio”). No investment in shares of the Portfolio should be made without first reading the Prospectus of the Portfolio. This SAI is incorporated by reference in its entirety into the Prospectus. A copy of the Portfolio’s Prospectus and Annual Report will be available without charge, upon request, by calling the Fund at the above telephone number.
Capitalized terms used in this SAI and not otherwise defined have the same meanings given to them in the Fund’s Prospectus.
TABLE OF CONTENTS
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THE FUND
The Glenmede Fund was organized as a Maryland corporation on June 30, 1988. The Glenmede Fund’s Articles of Incorporation, as amended, authorize its Board of Directors (the “Board”) to issue 6,000,000,000 shares of common stock, with a $.001 par value. The Board has the power to subdivide these shares into one or more investment portfolios from time to time. The Board also has the power to designate separate classes of shares within the same Portfolio. As of the date hereof, the Glenmede Fund is offering shares of eighteen Portfolios. This SAI relates to the Municipal Allocation Portfolio.
The Glenmede Fund is an open-end, management investment company. The Portfolio is a diversified Portfolio of the Glenmede Fund. The Portfolio will offer a single class of shares after it commences operations.
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INVESTMENT STRATEGIES
The following investment strategies supplement those set forth in the Portfolio’s Prospectus. Unless specified below and except as described under “Investment Limitations,” the following investment strategies are not fundamental and the Board may change such strategies without shareholder approval.
Municipal Allocation Portfolio
Under normal market circumstances, the Portfolio will invest at least 80% of the value of its net assets (including borrowings for investment purposes) in investment grade municipal bonds issued by the states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities that pay interest that is exempt from regular federal income tax, but, in certain instances, may be subject to federal alternative minimum tax. The Portfolio will invest in securities that are rated investment grade at the time of purchase. A security is investment grade if it is rated within the top four rating categories by a nationally recognized statistical rating organization (a “NRSRO”) or unrated, but in the opinion of Glenmede Investment Management LP (“GIM” or the “Advisor”), of comparable quality at the time of purchase. If a portfolio security’s rating is reduced to below investment grade, the Advisor will dispose of the security in an orderly fashion as soon as practicable.
The two principal classifications of municipal obligations are “general obligation” securities and “limited obligation” or “revenue” securities. General obligation securities are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special or specific excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.
Municipal obligations may also include “moral obligation” bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable or unwilling to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
During temporary defensive periods, the Portfolio may invest without limitation in obligations which are not municipal obligations and may hold without limitation uninvested cash reserves. Such securities may include, without limitation, bonds, notes, variable rate demand notes and commercial paper, provided such securities are rated within the relevant categories applicable to municipal obligations as set forth above and in the Portfolio’s Prospectus under the heading “Objective, Principal Strategies and Risks,” or if unrated, are of comparable quality in the opinion of the Portfolio’s Advisor. The Portfolio may also invest in higher quality fixed income securities. Additionally, the Portfolio may invest, without limitation, in other non-municipal debt obligations, such as bank obligations which are also of comparable quality in the opinion of the Portfolio’s Advisor. Furthermore, the Portfolio may acquire “stand-by commitments” with respect to municipal obligations held by it. Under a stand-by commitment, a dealer agrees to purchase, at the Portfolio’s option, specified municipal obligations at a specified price. The Portfolio will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes.
COMMON INVESTMENT POLICIES AND RISKS
Asset Backed Securities
The Portfolio may invest in asset-backed securities consisting of undivided fractional interests in pools of consumer loans or receivables held in a trust. Examples include certificates for automobile receivables and credit card receivables. Payments of principal and interest on the loans or receivables are passed through to certificate holders. Asset-backed securities are not issued or guaranteed by the U.S. government (the “U.S. Government”) or its agencies or instrumentalities, however, they may be guaranteed up to a certain amount by a private issuer through a letter of credit. Payment on asset-backed securities of private issuers is typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guaranty, or subordination. The extent of credit enhancement varies, but usually amounts to only a fraction of the asset-backed security’s par value until exhausted. Ultimately, asset-backed securities are dependent upon payment of the consumer loans or receivables by individuals, and the certificate holder frequently has no recourse to the entity that originated the loans or receivables.
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An asset-backed security’s underlying assets may be prepaid with the result of shortening the certificate’s weighted average life. Prepayment rates vary widely and may be affected by changes in market interest rates. It is not possible to accurately predict the average life of a particular pool of loans or receivables. The proceeds of prepayments received by a Portfolio must be reinvested in securities whose yields reflect interest rates prevailing at the time. Thus, a Portfolio’s ability to maintain a portfolio which includes high-yielding asset-backed securities will be adversely affected to the extent reinvestments are in lower yielding securities. The actual maturity and realized yield will therefore vary based upon the prepayment experience of the underlying asset pool and prevailing interest rates at the time of prepayment. Asset-backed securities may be subject to greater risk of default during periods of economic downturn than other instruments. Also, while the secondary market for asset-backed securities is ordinarily quite liquid, in times of financial stress the secondary market may not be as liquid as the market for other types of securities, which could result in a Portfolio’s experiencing difficulty in valuing or liquidating such securities.
Borrowing
As a temporary measure for extraordinary or emergency purposes, the Portfolio may borrow money from banks in amounts not exceeding one-third of total assets. However, the Portfolio will not borrow money for speculative purposes. If the market value of the Portfolio’s securities should decline, the Portfolio may experience difficulty in repaying the borrowing.
As required by the 1940 Act, a Portfolio must maintain continuous asset coverage (total assets, including assets acquired with borrowed funds, less liabilities exclusive of borrowings) of 300% of all amounts borrowed. If, at any time, the value of a Portfolio’s assets should fail to meet this 300% coverage test, a Portfolio, within three days (not including Sundays and holidays), will reduce the amount of its borrowings to the extent necessary to meet this 300% coverage. Maintenance of this percentage limitation may result in the sale of portfolio securities at a time when investment considerations otherwise indicate that it would be disadvantageous to do so. Borrowing of securities in connection with short sales and derivative transactions such as options, futures and swaps are not subject to this limitation. The Portfolio is authorized to pledge portfolio securities to the lender as collateral in connection with any borrowings. Reverse repurchase agreements constitute borrowings, and leverage is a related risk.
Borrowing for investment is known as leveraging. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk, but also increases investment opportunity. Since substantially all of the Portfolio’s assets will fluctuate in value, whereas the interest obligations on borrowings may be fixed, the net asset value per share (“NAV”) of the Portfolio will increase more when the Portfolio’s assets increase in value and decrease more when the Portfolio’s assets decrease in value than would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the returns on the borrowed funds. Unless profits on assets acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish the investment performance of the Portfolio. Under adverse conditions, the Portfolio may have to sell portfolio securities to meet interest or principal payments at a time investment considerations would not favor such sales. The Portfolio may lose money as a result of its borrowing activities. Lastly, the interests of persons with whom the Portfolio enters into leverage arrangements will not necessarily be aligned with the interests of such Portfolio’s shareholders and such persons will have claims on the Portfolio’s assets that are senior to those of the Portfolio’s shareholders.
Credit Risks
Because the Portfolio may invest in fixed income securities, they are subject to “credit risk” — the risk that an issuer will be unable or unwilling to make principal and interest payments when due. U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. Government securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, may present the highest credit risk.
Ratings published by NRSROs are widely accepted measures of credit risk. The lower a bond issue is rated by an agency, the more credit risk it is considered to represent. Lower-rated bonds generally pay higher yields to compensate investors for the greater risk.
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Derivative Instruments
In the course of pursuing its investment strategies, the Portfolio may invest in certain types of derivative instruments. Derivatives are financial contracts whose values depend on the values of other investments, exchange rates or indices, in connection with its investment strategies to hedge and manage risk. Derivatives may be used in a variety of ways to meet the objectives of the Advisor. The Portfolio may invest in interest rate swaps, consumer price index swaps (“CPI swaps”) and swaps on a credit default index (sometimes referred to as a credit default swap index). Futures, options and swaps are commonly used for traditional hedging and cash management purposes as a low-cost method of gaining exposure to a particular securities market without investing directly in those securities.
Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus a Portfolio’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified. The price of derivatives can be very volatile and result in disproportionately heavy losses to a Portfolio relative to the amount invested if the Advisor is incorrect in its expectation of fluctuations in securities prices, interest rates or credit events. A Portfolio’s use of derivatives involves risks that may be different from the risk associated with investing directly in the underlying assets, including the risk that changes in the value of the derivative may not correlate perfectly with the underlying assets, interest rate or index. The return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument to which it relates.
Derivatives are also subject to the risk that the counterparty will default on its obligations. If such a default occurs, a Portfolio will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. The use of derivatives is also subject to operational and legal risks. Operational risks generally refer to risks related to potential operational issues, including documentation issues, settlement issues, system failures, inadequate controls, and human error. Legal risks generally refer to risks of loss resulting from insufficient documentation or legality or enforceability of a contract.
The use of certain derivative instruments is subject to applicable regulations of the Securities and Exchange Commission (the “SEC”), the several options and futures exchanges upon which they may be traded, and the Commodity Futures Trading Commission (the “CFTC”). An exclusion has been claimed for the Glenmede Fund’s Portfolios from the definition of the term “commodity pool operator” under the Commodity Exchange Act, as amended, and therefore, the Portfolio is not subject to registration or regulation as a commodity pool operator under that Act as of the date thereof.
Rule 18f-4 under the 1940 Act permits a Portfolio to enter into derivatives transactions (as defined below) and certain other transactions notwithstanding the restrictions on the issuance of senior securities contained in section 18 of the 1940 Act, provided that the Portfolio complies with the conditions of the Rule. Section 18 of the 1940 Act, among other things, prohibits open-end funds, including the Portfolio, from issuing or selling any “senior security,” other than borrowing from a bank (subject to the 300% “asset coverage” requirement described above).
Under Rule 18f-4, “Derivatives Transactions” include the following: (1) any swap, security-based swap (including a contract for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing, or any similar instrument, under which a Portfolio is or may be required to make any payment or delivery of cash or other assets during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; (2) any short sale borrowing; (3) reverse repurchase agreements and similar financing transactions (e.g., recourse and non-recourse tender option bonds, and borrowed bonds), if a Portfolio elects to treat these transactions as Derivatives Transactions under Rule 18f-4; and (4) when-issued or forward-settling securities (e.g., firm and standby commitments, including to-be-announced (“TBA”) commitments, and dollar rolls) and non-standard settlement cycle securities, unless the Portfolio intends to physically settle the transaction and the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”).
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Exchange-Traded Funds
The Portfolio may invest in shares of registered open-end or closed-end investment companies, including ETFs. Some ETFs seek to track the performance of a particular market index, and are a type of index fund bought and sold on a securities exchange. These indices include not only broad-market indices but more narrowly-based indices as well, including those relating to particular sectors, markets, regions or industries. ETF and listed closed-end fund shares are traded like traditional equity securities on a national securities exchange or NASDAQ National Market System. The Portfolio may purchase ETF shares as a way of gaining exposure to the segments of the equity or fixed income markets represented by the ETF’s portfolio instead of buying those portfolio securities directly. ETF shares enjoy several advantages over futures. Depending on the market, the holding period, and other factors, ETF shares can be less costly than futures. In addition, ETF shares can be purchased for smaller sums and offer exposure to market sectors and styles for which there is no suitable or liquid futures contract. Because most ETFs are investment companies, the Portfolio’s purchase of ETF shares generally are subject to the percentage limitations and risks described below under “Investment Company Securities.”
An investment in an ETF or a closed-end fund generally presents the same primary risks as an investment in a conventional open-end fund (i.e., one that is not exchange traded) that has the same investment objectives, strategies, and policies. The price of an ETF or a closed-end fund can fluctuate within a wide range, and the Portfolio could lose money investing in such a fund if the prices of the stocks owned by it go down. In addition, ETFs and listed closed-end funds are subject to the following risks that do not apply to conventional open-end funds: (i) the market price of their shares may trade at a discount to their NAV; (ii) an active trading market for their shares may not develop or be maintained; or (iii) trading of their shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
Fixed Income Securities
The Portfolio may invest in fixed income securities, which are used by issuers to borrow money. Bonds, notes, debentures, asset-backed securities (including those backed by mortgages), and loan participations and assignments are common types of debt securities. Generally, issuers pay investors periodic interest and repay the amount borrowed either periodically during the life of the security and/or at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values and their values accrete over time to face value at maturity. Some debt securities bear interest at rates that are not fixed, but that vary with changes in specified market rates or indices. The market prices of debt securities fluctuate depending on such factors as interest rates, credit quality and maturity. In general, market prices of debt securities decline when interest rates rise and increase when interest rates fall. These fluctuations will generally be greater for longer-term debt securities than for shorter-term debt securities.
Debt securities may be sensitive to economic changes, political and corporate developments, and interest rate changes. In addition, during an economic downturn or a period of rising interest rates, issuers that are highly leveraged may experience increased financial stress that could adversely affect their ability to meet projected business goals, to obtain additional financing and to service their principal and interest payment obligations. Periods of economic change and uncertainty also can be expected to result in increased volatility of market prices and yields of certain debt securities and derivative instruments. For example, during the financial crisis of 2007-2009, the Federal Reserve implemented a number of economic policies that impacted interest rates and the market. These policies, as well as potential actions by governmental entities both in and outside of the U.S., may expose fixed income markets to heightened volatility and may reduce liquidity for certain investments, which could cause the value of the Portfolio to decline. Prices of debt securities can also be affected by financial contracts held by the issuer or third parties (such as derivatives) relating to the security or other assets or indices.
Debt securities may contain redemption or call provisions. If an issuer exercises these provisions in a lower interest rate market, a Portfolio would have to replace the security with a lower yielding security, resulting in decreased income to investors. If the issuer of a debt security defaults on its obligations to pay interest or principal or is the subject of bankruptcy proceedings, the Portfolio may incur losses or expenses in seeking recovery of amounts owed to it.
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There may be little trading in the secondary market for particular debt securities, which may affect adversely the Portfolio’s ability to value accurately or dispose of such debt securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and/or liquidity of debt securities.
Fixed income securities are subject to “credit risk” — the risk that an issuer will be unable or unwilling to make principal and interest payments when due. U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. Government securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, may present the highest credit risk. The Advisor will attempt to reduce the risks described above through diversification of Portfolio investments and by credit analysis of each issuer, as well as by monitoring broad economic trends and corporate and legislative developments, but there can be no assurance that it will be successful in doing so.
Credit ratings for debt securities provided by rating agencies reflect an evaluation of the safety of principal and interest payments, not market value risk. The rating of an issuer is a rating agency’s view of past and future potential developments related to the issuer and may not necessarily reflect actual outcomes. There can be a lag between the time of developments relating to an issuer and the time a rating is assigned and updated. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of a Portfolio investment in that issuer.
Bond rating agencies may assign modifiers (such as +/–) to ratings categories to signify the relative position of a credit within the rating category. Investment policies that are based on ratings categories should be read to include any security within that category, without giving consideration to the modifier except where otherwise provided. See Appendix A to this SAI for more information about credit ratings.
Illiquid Investments
The Portfolio will not invest more than 15% of its net assets in investments that are illiquid. These investments are subject to the risk that should the Portfolio need to dispose of such investments, there may not be a ready market or the Portfolio may have to sell such investments at an undesirable price. Illiquid investments are any investment that the Portfolio 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 (including repurchase agreements in excess of seven days).
Pursuant to Rule 22e-4 under the 1940 Act, the Glenmede Fund has established a liquidity risk management program with respect to the Portfolio. If the limitation on illiquid securities is exceeded, other than by a change in market values, the condition will be reported to the Fund’s Board and, when required, to the SEC.
Indexed Securities
An indexed security is an instrument whose price is indexed to the price of another security, security index, currency, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic.
The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed, and may also be influenced by interest rate changes in the United States and abroad. Indexed securities may be more volatile than the underlying instruments. Indexed securities are also subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer’s creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. Government agencies.
Interest Rate Risks
The Portfolio may invest in fixed income securities. Generally, a fixed income security will increase in value when interest rates fall and decrease in value when interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they usually offer higher yields to compensate investors for the greater risks. The risks associated with
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increasing interest rates are heightened under current market conditions given that the U.S. Federal Reserve began to raise interest rates in March 2022 from historically low levels as part of its efforts to address rising inflation. If interest rates are raised again in the future, the Portfolio’s yield may not increase proportionately, and the maturities of fixed-income securities that have the ability to be prepaid or called by the issuer may be extended Changes in market conditions and government action may have adverse effects on investments, volatility, and liquidity in debt markets and any negative impact on fixed income securities could be swift and significant, potentially negatively impacting the Portfolio’s performance. A general rise in interest rates may cause investors to move out of fixed-income securities on a large scale, which could adversely affect the price and liquidity of fixed-income securities. Substantial redemptions from bond and other income funds may worsen that impact. Dividend paying and other types of equity securities also may be adversely affected from an increase in interest rates.
Investment Company Securities
The Portfolio may invest in securities issued by other open-end or closed-end investment companies, including ETFs. The Portfolio may invest in securities issued by such other investment companies to the extent permitted by the 1940 Act. Under the 1940 Act, the Portfolio’s investment in such securities currently is limited to, subject to certain exceptions: (i) 3% of the total voting stock of any one investment company; (ii) 5% of the Portfolio’s total assets with respect to any one investment company; and (iii) 10% of the Portfolio’s total assets with respect to investment companies in the aggregate. Investments in the securities of other investment companies will involve duplication of advisory fees and certain other expenses. Rule 12d1-1 under the 1940 Act permits a Portfolio to invest an unlimited amount of its uninvested cash in a money market fund so long as, among other things, said investment is consistent with the Portfolio’s investment objective. As a shareholder of another mutual fund, a Portfolio would bear its pro rata portion of the other investment company’s advisory fees and other expenses, in addition to the expenses the Portfolio bears directly in connection with its own operations. Furthermore, the investment company securities in which the Portfolio invests may decline in value. The SEC adopted certain regulatory changes and took other actions related to the ability of an investment company to invest in the securities of another investment company. These changes include, among other things, the rescission of certain SEC exemptive orders permitting investments in excess of the statutory limits and the withdrawal of certain related SEC staff no-action letters, and the adoption of Rule 12d1-4 under the 1940 Act which permits the Portfolio to invest in other investment companies beyond the statutory limits, subject to certain conditions. Pursuant to Rule 12d1-4 and procedures approved by the Board, the Portfolio may invest in certain ETFs in excess of the limits described above, provided that the Glenmede Fund complies with Rule 12d1-4 and any other applicable investment limitations.
The Portfolio’s shares may be purchased by other investment companies, including other Portfolios of the Fund. An investment company’s shares purchased by a Portfolio would be limited to 10% of the outstanding voting securities of the acquired investment company. For so long as the Portfolio invests in or accepts investments by other affiliated investment companies, it will not purchase securities of other investment companies, except to the extent permitted by the 1940 Act.
Preferred Stocks
The Portfolio may invest in preferred stocks. Preferred stock includes convertible and non-convertible preferred and preference stocks that are senior to common stock. Preferred stock has a preference over common stock in liquidation (and generally dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Repurchase Agreements
The Portfolio may enter into repurchase agreements with qualified brokers, dealers, banks and other financial institutions deemed creditworthy by the Advisor. Under normal circumstances, however, the Portfolio will not enter into repurchase agreements if entering into such agreements would cause, at the time of entering into such agreements, more than 20% of the value of the total assets of the Portfolio to be subject to repurchase agreements.
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In effect, by entering into a repurchase agreement, the Portfolio is lending its funds to the seller at the agreed upon interest rate, and receiving a security as collateral for the loan. Such agreements can be entered into for periods of one day (overnight repo) or for a fixed term (term repo). Repurchase agreements are a common way to earn interest income on short-term funds.
In a repurchase agreement, a Portfolio purchases a security and simultaneously commits to resell that security at a future date to the seller (a qualified bank or securities dealer) at an agreed upon price plus an agreed upon market rate of interest (itself unrelated to the coupon rate or date of maturity of the purchased security). The seller under a repurchase agreement will be required to maintain the value of the securities which are subject to the agreement and held by a Portfolio at not less than the agreed upon repurchase price.
If the seller defaults on its repurchase obligation, the Portfolio holding such obligation will suffer a loss to the extent that the proceeds from a sale of the underlying securities (including accrued interest) were less than the repurchase price (including accrued interest) under the agreement. In the event that such a defaulting seller files for bankruptcy or becomes insolvent, disposition of such securities by the Portfolio might be delayed pending court action.
Repurchase agreements that do not provide for payment to the Portfolio within seven days after notice without taking a reduced price are considered illiquid investments.
Swaps
The Portfolio may enter into swaps, including CPI swaps and credit default swap indices (collectively, “swaps”), for hedging purposes or to seek to increase total return. In a standard swap transaction, two parties agree to pay or exchange the returns (or differentials in rates of return) earned or realized on particular assets, which may be adjusted for transaction costs, interest payments, dividends paid on the referenced assets or other factors. The gross returns to be paid or “swapped” between the parties are generally calculated with respect to a ‘‘notional amount,’’ for example, the increase or decrease in value of a particular dollar amount invested in the assets. The agreement can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. For example, index swaps involve the exchange by a party with another party of the respective amounts payable with respect to the notional principal amount at interest rates equal to specified indices; interest rate swaps involve the exchange by a party with another party of their respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments; and equity swaps are generally contracts that obligate one party to pay the positive return and the other party to pay the negative return on a specific security or basket of securities.
Under a swap, payments may be made at the conclusion of the swap or periodically during its term. Normally, however, the Advisor may terminate a swap contract prior to its term, subject to any potential termination fee that is in addition to the Portfolio’s accrued obligation under the swap.
The Portfolio will generally enter into swaps on a net basis, which means that the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of a swap contract or periodically during its term. Since swaps normally do not involve the delivery of securities or other underlying assets, the risk of loss with respect to swaps is normally limited to the net amount of payments that the Portfolio is contractually obligated to make. If the other party to a swap defaults, the Portfolio’s risk of loss consists of the net amount of payments that the Portfolio is contractually entitled to receive, if any.
Stand-by Commitments
The Portfolio may acquire stand-by commitments which may increase the cost, and thereby reduce the yield, of the municipal obligation to which such commitment relates.
U.S. Government Obligations
The Portfolio may invest in obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities. Direct obligations of the U.S. Government such as Treasury bills, notes and bonds are supported by its full faith and credit. Indirect obligations issued by federal agencies and government-sponsored entities generally are not backed by the full faith and credit of the U.S. Treasury. Some of these indirect obligations may be supported by the right of the issuer to borrow from the
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Treasury; others are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; still others are supported only by the credit of the instrumentality. Please refer to Appendix A for further information about U.S. Government obligations.
“When Issued,” “Delayed Settlement” and “Forward Delivery” Securities
The Portfolio may purchase and sell securities on a “when issued,” “delayed settlement” or “forward delivery” basis. “When issued” or “forward delivery” refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled after a period longer than the regular settlement time of trade date plus two business days. “Delayed settlement” is a term used to describe settlement of a securities transaction in the secondary market which will occur sometime in the future. No payment or delivery is made by the Portfolio in a “when issued,” “delayed settlement” or “forward delivery” transaction until the Portfolio receives payment or delivery from the other party to the transaction. The Portfolio will segregate cash, U.S. Government securities or other high grade debt obligations at least equal to the value of purchase commitments until payment is made. Such segregated securities will either mature or, if necessary, be sold on or before the settlement date. Although the Portfolio receives no income from the above described securities prior to delivery, the market value of such securities is still subject to change.
The Portfolio will engage in “when issued” transactions to obtain what is considered to be an advantageous price and yield at the time of the transaction. When the Portfolio engages in “when issued,” “delayed settlement” or “forward delivery” transactions, it will do so for the purpose of acquiring securities consistent with its investment objective and policies and not for the purpose of speculation. The Portfolio’s “when issued,” “delayed settlement” and “forward delivery” commitments are not expected to exceed 30% of its total assets absent unusual market circumstances. The Portfolio will only sell securities on a when issued, delayed settlement or forward delivery basis to offset securities purchased on a when-issued, delayed settlement or forward delivery basis.
Securities purchased or sold on a “when issued,” “delayed settlement” or “forward delivery” basis are subject to changes in value based upon changes in the general level of interest rates. In when-issued and delayed settlement transactions, the Portfolio relies on the seller to complete the transaction; the seller’s failure to do so may cause the Portfolio to miss an advantageous price or yield.
PRICE OF PORTFOLIO SHARES
The NAV per share of each class of shares of the Portfolio is determined by dividing the total market value of its investments and other assets, less liabilities allocated to that share class, by the total number of its shares outstanding of that class.
Equity securities and options listed on a U.S. securities exchange, including ETFs, for which quotations are readily available are valued at the last quoted sale price as of the close of the exchange’s regular trading hours on the day the valuation is made. Price information on listed securities is taken from the exchange where the security is primarily traded. Unlisted U.S. equity securities and listed securities not traded on the valuation date for which market quotations are readily available are valued not in excess of the asked prices or less than the bid prices. If no sales are reported, listed options are valued at the mean of the bid and ask price. Investments in open-ended investment companies are valued at their respective NAVs as reported by such companies.
Marketable fixed income securities are valued according to the broadest and most representative market, which will ordinarily be the over-the-counter market, at the most recent quoted bid price, or when stock exchange valuations are used, at the latest quoted sale price on the day of valuation. If there is not such a reported sale, the latest quoted bid price will be used. NAV includes interest on fixed income securities which is accrued daily. In addition, bond and other fixed income securities may be valued on the basis of prices provided by a pricing service or by using a matrix or formula, when the Portfolio’s advisor believes such prices reflect the fair market value of such securities. The prices provided by a pricing service are determined without regard to bid or last sale prices, but take into account institutional size trading in similar groups of securities and any developments related to specific securities. The matrix pricing method values securities by reference to prices of comparable securities obtained from sources the Portfolio’s advisor deems accurate and reliable. Debt securities with maturities of 60 days or less at the time of purchase are valued at amortized cost, which does not take into account unrealized gains or losses. The amortized cost method involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value
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of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Portfolio would receive if it sold the instrument.
Securities listed on a foreign exchange and unlisted foreign securities are valued at the latest quoted sales price available when assets are valued. Foreign securities for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board. Foreign securities may trade on days when shares of the Portfolio are not priced; as a result, the NAV of shares of the Portfolio may change on days when shareholders will not be able to purchase or redeem the Portfolio’s shares. Foreign currency amounts are translated into U.S. dollars at the bid prices of such currencies against U.S. dollars last quoted by a major bank.
The Portfolio’s municipal obligations for which quotations are readily available are valued at the most recent quoted bid price provided by investment dealers, provided that municipal obligations may be valued on the basis of prices provided by a pricing service when such prices are determined by the Advisor to reflect the fair market value of such municipal obligations. Municipal obligations for which market quotations are not readily available are valued at fair market value as determined in good faith by the Valuation Designee (defined below) under the oversight of the Board. Debt obligations with maturities of 60 days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value.
When market quotations are not readily available (as such term is defined in the 1940 Act), or when events occur that make established valuation methods unreliable, the Portfolio’s investments will be valued at fair value as determined in good faith using methods determined by the Board. The Board has delegated certain of the Portfolio’s valuation functions to the Advisor (in such capacity, the “Valuation Designee”), pursuant to procedures approved by the Board. The Valuation Designee works with State Street Bank and Trust Company, the Portfolio’s custodian, to regularly test the accuracy of the fair value prices by comparing them with values that are available from other sources. At each regularly scheduled Board meeting, a report by the Valuation Designee is submitted describing any security that has been fair valued and the basis for the fair value determination.
PURCHASE OF SHARES
The purchase price of shares of each class of the Portfolio is the NAV next determined after receipt of the purchase order by the Fund. It is the responsibility of The Glenmede Trust Company, N.A., the parent company of the Advisor (“Glenmede Trust”), the Advisor or certain approved brokers, employee benefit plans or other institutions to transmit orders for share purchases to State Street, the Fund’s transfer agent, and to deliver, or provide instructions to investors for the delivery of, required funds to State Street, the Fund’s custodian, on a timely basis.
The Portfolio reserves the right in its sole discretion (i) to suspend the offering of its shares, (ii) to reject purchase orders when in the judgment of management such rejection is in the best interest of the Portfolio, (iii) to reduce or waive the minimum for initial and subsequent investments, from time to time and (iv) to close at any time to new investments or to new accounts.
At the discretion of the Fund, investors may be permitted to purchase Portfolio shares by transferring securities to the Portfolio that meets the Portfolio’s investment objective and policies.
REDEMPTION OF SHARES
Redemption proceeds are normally paid in cash, although the Fund has elected to be governed by Rule 18f-1 under the 1940 Act which permits it to limit each shareholder to cash redemptions of $250,000 or 1% of the Portfolio’s NAV, whichever is less, within a 90-day period or, subject to the approval of the Board, in other circumstances identified by the Advisor. Any additional redemption proceeds would be made in readily marketable securities.
PORTFOLIO TURNOVER
The Portfolio will not normally engage in short-term trading, but reserves the right to do so. It is anticipated that the portfolio turnover may vary greatly from year to year as well as within a particular year, and may be affected by changes in the holdings of
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specific issuers, changes in country and currency weightings, cash requirements for redemption of shares and by requirements which enable the Portfolio to receive favorable tax treatment. The Portfolio is not restricted by policy with regard to portfolio turnover and will make changes in their investment portfolio from time to time as business and economic conditions as well as market prices may dictate.
A high portfolio turnover rate can result in corresponding increases in brokerage commissions; however, the Portfolio’s Advisor will not consider turnover rate a limiting factor in making investment decisions consistent with the Portfolio’s investment objective and policies.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Board has adopted a policy on selective disclosure of portfolio holdings (including, but not limited to, portfolio securities holdings, asset allocations, sector allocations, and other portfolio holdings statistics, collectively referred to herein as “portfolio holdings”). The policy provides that neither a Fund, nor its Advisor, sub-advisor, administrator, transfer agent nor distributor (each, a “Fund Service Provider”) will disclose the Fund’s portfolio holdings to any person other than in accordance with the policy. Under the policy, neither a Fund, any Fund Service Provider, nor any of their affiliated persons may receive any compensation in any form, whether in cash or otherwise, in connection with the disclosure of portfolio holdings. A Fund Service Provider may provide portfolio holdings to third parties if such information has been included in the Fund’s public filings as required by the SEC or other filings, reports or disclosure documents as the SEC or other applicable regulatory authorities may require. The Advisor may post the following portfolio holdings on its website or any website maintained for the Fund or otherwise in a manner available to all shareholders: (1) no earlier than ten calendar days after the end of each month, the month-end top-ten portfolio holdings; and/or (2) no earlier than ten calendar days after the end of each calendar quarter, the complete quarter-end portfolio holdings. This information may then be separately provided to any person commencing the day after it is first published on the website. Such information shall remain available on the website at least until the Fund files with the SEC its annual/semi-annual shareholder report that includes such period or its report on Form N-PORT for the last month of the Fund’s first or third fiscal quarters.
Portfolio holdings information that is not filed with the SEC or not otherwise required to be disclosed by the SEC or other applicable regulatory authorities, may be provided to third parties only if a Fund has a legitimate business purpose for doing so, the third-party recipients are required to keep all portfolio holdings information confidential and are prohibited from trading on the information they receive. In order to ensure that the disclosure of a Fund’s non-public portfolio holdings is in the best interests of the Fund’s shareholders and to avoid any potential or actual conflicts of interest with the Fund Service Providers or other affiliated persons, disclosure to such third parties must be authorized by the Fund’s President and approved in advance by the Fund’s Board. Under the policy, the Board is to receive information, on a quarterly basis, regarding any disclosures of non-public portfolio holdings information that were permitted during the preceding quarter. Such authorization, pre-approval and reporting is not required for disclosure by the Fund’s administrator to providers of auditing, custody, proxy voting and other services to the Fund, as well as rating and ranking organizations. In general, each recipient of non-public portfolio holdings information must sign a confidentiality and non-trading agreement, although this requirement will not apply when the recipient is otherwise subject to a duty of confidentiality.
Under the policy, the Fund’s President has authorized the release of information regarding the Fund’s portfolio holdings on a daily basis to providers of auditing, custody, proxy voting, legal and other services to the Fund, currently including:
(i) | State Street, in connection with the provision of services as the Fund’s custodian, administrator, transfer agent, securities lending agent and short sales lending agent; |
(ii) | Third-party providers of proxy voting services, such as Institutional Shareholder Services Inc. (“ISS”) and mailing services such as Broadridge Financial Solutions, Inc. (“Broadridge”); |
(iii) | Cohen & Company, Ltd, the Fund’s independent registered public accountant, in connection with the provision of services related to the audit of the Fund’s financial statements and certain non-audit services; |
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(iv) | Third-party providers of pricing/analytical/reconciliation services, such as FT Interactive Data Corporation, FactSet, Bloomberg Valuation Service (BVAL) and Electra Information Systems; |
(v) | Ratings and ranking organizations, such as Morningstar, Inc. and Lipper/Thomson Reuters; | |
(vi) | Faegre Drinker Biddle & Reath LLP, in connection with the provision of services as legal counsel to the Fund; |
(vii) | Foreside Financial Group, LLC in connection with the provision of services related to the Fund’s compliance program; and |
(viii) | Third-party financial printers, such as Broadridge Financial Solutions. |
INVESTMENT LIMITATIONS
The Portfolio is subject to the following restrictions. The numbered restrictions are fundamental policies and may not be changed without the approval of the lesser of: (1) 67% of the voting securities of the Portfolio present at a meeting if the holders of more than 50% of the outstanding voting securities of the Portfolio are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Portfolio.
If the Portfolio’s borrowings are in excess of 5% (excluding overdrafts) of its total net assets, additional portfolio purchases will not be made until the amount of such borrowing is reduced to 5% or less.
The Municipal Allocation Portfolio will not:
(1) | invest in commodities or commodity contracts, except that the Portfolio may invest in futures contracts and options; |
(2) | purchase or sell real estate, although it may purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests in real estate; |
(3) | make loans, except (i) by purchasing bonds, debentures or similar obligations (including repurchase agreements, subject to the limitation described in investment limitation (9) below, and money market instruments, including bankers’ acceptances and commercial paper, and selling securities on a when issued, delayed settlement or forward delivery basis) which are publicly or privately distributed, and (ii) by lending its portfolio securities to banks, brokers, dealers and other financial institutions so long as such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder; |
(4) | purchase on margin or sell short, except as specified above in investment limitation (1); | |
(5) | purchase more than 10% of any class of the outstanding voting securities of any issuer; | |
(6) | issue senior securities, except that the Portfolio may borrow money in accordance with investment limitation (7) below, purchase securities on a when issued, delayed settlement or forward delivery basis and enter into reverse repurchase agreements; |
(7) | borrow money, except as a temporary measure for extraordinary or emergency purposes, and then not in excess of 10% of its total assets at the time of the borrowing (entering into reverse repurchase agreements and purchasing securities on a when issued, delayed settlement or forward delivery basis are not subject to this investment limitation); |
(8) | pledge, mortgage, or hypothecate any of its assets to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectus and this SAI and in connection with entering into futures contracts, but the deposit of assets in a segregated account in connection with the writing of covered put and call options and the purchase of securities on a when issued, delayed settlement or forward delivery basis and collateral arrangements with respect to initial or variation margin for futures contracts will not be deemed to be pledges of the Portfolio’s assets or the purchase of any securities on margin for purposes of this investment limitation; |
(9) | underwrite the securities of other issuers or invest more than an aggregate of 15% of the total assets of the Portfolio, at the time of purchase, in securities for which there are no readily available markets, including repurchase agreements which have maturities of more than seven days or, in the case of the Portfolio, securities subject to legal or contractual restrictions on resale; |
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(10) | invest for the purpose of exercising control over management of any company; |
(11) | invest its assets in securities of any investment company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940 Act; |
(12) | acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s net assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies, enterprises or instrumentalities; and |
(13) | write or acquire options or interests in oil, gas or other mineral exploration or development programs. |
The Portfolio also will not:
(14) | with respect to 75% of its total assets, invest more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed by the U.S. Government, its agencies, enterprises or instrumentalities). |
If the Portfolio’s borrowings are in excess of 5% (excluding overdrafts) of its total net assets, additional portfolio purchases will not be made until the amount of such borrowing is reduced to 5% or less.
Borrowings including reverse repurchase agreements and securities purchased on a when issued, delayed settlement or forward delivery basis may not exceed 33 1/3% of the Portfolio’s total net assets.
In addition, with respect to investment limitation (12), (a) there is no limitation with respect to (i) instruments issued or guaranteed by the United States, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions, and (ii) repurchase agreements secured by the instruments described in clause (i); (b) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents; and (c) utilities will be divided according to their services; for example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry.
With regard to limitation (13), the purchase of securities of a corporation, a subsidiary of which has an interest in oil, gas or other mineral exploration or development programs shall not be deemed to be prohibited by the limitation.
Under normal market circumstances, the Municipal Allocation Portfolio will invest at least 80% of the value of its net assets (including borrowings for investment purposes) in municipal obligations that pay interest that is exempt from regular federal income tax, but may be subject to federal alternative minimum tax for non-corporate investors in the Municipal Allocation Portfolio. This is a non-fundamental investment policy that may be changed by the Municipal Allocation Portfolio upon 60 days’ prior notice to shareholders.
If a percentage restriction is adhered to at the time an investment is made, a later increase in percentage resulting from a change in value or assets will not constitute a violation of such restriction except as to limitations on borrowings.
MANAGEMENT OF THE FUND
The Fund’s officers, under the supervision of the particular Board, manage the day-to-day operations of the Fund. The Board members set broad policies for the Fund and choose its officers. The Fund’s Board members each hold office until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such member and until the election and qualification of his/her successor, if any, elected at such meeting, or (ii) the date he or she dies, resigns or retires, or is removed by the Board or shareholders. The Fund’s officers are elected by the Board and hold office for the term of one year and until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed, or becomes disqualified.
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Board Members and Officers
The following is a list of the Board members and officers of the Fund, their ages, their principal occupations during the past five years, the number of currently-offered portfolios that they oversee in the Fund complex (excluding the Portfolio, which has not commenced operations as of the date of this SAI), and other directorships they hold (as of the date of this SAI, shares of the Municipal Allocation Portfolio were not offered for sale.) The portfolios of the Glenmede Fund and The Glenmede Portfolios are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Unless otherwise indicated below, the address of each Board member and officer is c/o Glenmede Investment Management, LP, 1650 Market Street, Suite 1200, Philadelphia, PA 19103.
Name and Age | Positions with the Fund and Time Served |
Principal Occupations(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen |
Other Director- ships Held During | ||||
Interested Directors/Trustees (1) | ||||||||
Susan W. Catherwood (2) Year of Birth: 1943 |
Director of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) | Director (since 1988) and Member of the Investment Review/Relationship Oversight Committee (since 2001), Compensation Committee (since 1993) and Nominating Committee (since 2018), Glenmede Trust; Director, The Glenmede Corporation (since 1988); Board Member, The Pew Charitable Trusts; Charter Trustee, The University of Pennsylvania; Chairman Emeritus, The University Museum of The University of Pennsylvania; Chairman of the Board of Managers, The Christopher Ludwick Foundation; Director: Thomas Skelton Harrison Foundation and The Catherwood Foundation; Fellow and formerly served on Finance and Investment Committees, and former Board member, College of Physicians of Philadelphia; Former Member and Chair, The Women’s Committee and Penn Museum Board of Overseers of the University of Pennsylvania; Former Board Chair, University of Pennsylvania Health System (1991-1999). | 18 | None | ||||
Mary Ann B. Wirts (2) Year of Birth: 1951 |
Director of Glenmede Fund (since June 2020) and Trustee of Glenmede Portfolios (since June 2020) | Managing Director and Chief Administrative Officer of Glenmede Trust (until 2020); Managing Director and Chief Administrative Officer of Glenmede Investment Management LP (2006-2020); First Vice President and Managing Director of Fixed Income of Glenmede Advisers (2000-2006). | 18 | None |
(1) | Interested Directors/Trustees are those Directors/Trustees who are “interested persons” of the Fund and The Glenmede Portfolios as defined in the 1940 Act. |
(2) | Susan W. Catherwood and Mary Ann B. Wirts are considered to be “interested persons” of the Fund and The Glenmede Portfolios because of their current or prior affiliations with Glenmede Trust, the parent company of the Fund’s investment advisor, GIM, and/or their stock ownership in The Glenmede Corporation, of which GIM is an affiliate. |
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Name and Age | Positions with the Fund and Time Served |
Principal Occupations(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen |
Other Director- ships Held During | ||||
Independent Directors/Trustees (3) | ||||||||
H. Franklin Allen, Ph.D. Year of Birth: 1956 |
Director of Glenmede Fund (since March 1991) and Trustee of Glenmede Portfolios (since May 1992) | Vice Dean Research and Faculty of the Imperial College Business School (since 2019), Professor of Finance and Economics and Director of the Brevan Howard Centre for Financial Analysis at the Imperial College London (since 2014); Professor Emeritus of Finance, The Wharton School of The University of Pennsylvania since June 2016; Professor of Finance and Economics (1990-1994); Vice Dean and Director of Wharton Doctoral Programs (1990-1993); Employed by The University of Pennsylvania (from 1980-2016). | 18 | None | ||||
William L. Cobb, Jr. Year of Birth: 1947 |
Director of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) Chairman of the Fund (since December 2021) | Former Executive Vice President and Former Chief Investment Officer, The Church Pension Fund (defined benefit plan for retired clergy of the Episcopal Church) (1999-2014); Chair and Member, Investment Committee, The Minister and Missionaries Benefit Board of the American Baptist Church (until 2013); Vice Chairman, J.P. Morgan Investment Management (1994-1999). | 18 | Director, TCW Direct Lending LLC | ||||
Rebecca E. Duseau Year of Birth: 1963 |
Director of Glenmede Fund and Trustee of Glenmede Portfolios (Since December 2023) | Cofounder and Chief Compliance Officer (since 2000), Adamas Partners, LLC (investment firm); Chair of Investment Advisory Board (since 2020) for Boston Family Advisors (multi-family office); Member of Investment Committees of Mass General Brigham (hospital) (since 2019) and Berklee School of Music (since 2019); Chair of the Investment Committee and Member of the Finance Committee, Museum of Science (since 2023). | 18 | None | ||||
Andrew Phillips Year of Birth: 1962 |
Director of Glenmede Fund and Trustee of Glenmede Portfolios (since September 2022) | Adjunct Professor – College of Management (since 2021), Long Island University; Senior Performance Officer (2013-2015), Global Head of Institutional and Alternatives Product Strategy (2012-2013), Global Chief Performance Officer (2010-2012), Global Chief Operating Officer (2007-2010) and Managing Director – Americas Fixed Income Executive Team, BlackRock, Inc. | 18 | None | ||||
Harry Wong Year of Birth: 1948 |
Director of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) | Former Managing Director, Knight Capital Americas, L.P., an operating subsidiary of Knight Capital Group Inc. (investment banking) (2009- 2011); Managing Director, Long Point Advisors, LLC (business consulting) (2003-2012); Senior Managing Director, ABN AMRO (investment banking) (1990-2002); Adjunct Faculty Member, Sacred Heart University (2003-2007). | 18 | None |
(3) | Independent Directors/Trustees are those Directors/Trustees who are not “interested persons” of the Fund as defined in the 1940 Act. |
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Officers
Name,
Address, |
Positions Held with the Fund |
Term of Office and Length of Time Served |
Principal Occupation(s) During Past 5 Years | |||
Kent E. Weaver, Jr. 1650 Market Street, Suite 1200 Philadelphia, PA 19103 Year of Birth: 1967 |
President of the Fund. | President of the Fund since November 2019. | President of Glenmede Investment Management LP (since 2021); Director of Sales and Client Service of Glenmede Investment Management LP (July 2015-2021). | |||
Kimberly C. Osborne 1650 Market Street, Suite 1200 Philadelphia, PA 19103 Year of Birth: 1966 |
Executive Vice President and Assistant Treasurer of the Fund. | Executive Vice President of the Fund since December 1997; Assistant Treasurer of the Fund since December 2020. | Client Service Manager of Glenmede Investment Management LP (since 2006). Vice President of Glenmede Trust and Glenmede Advisers (until 2008); Employed by Glenmede Trust (1993-2008) and Glenmede Advisers (2000-2008). | |||
Christopher E. McGuire 1650 Market Street, Suite 1200 Philadelphia, PA 19103 Year of Birth: 1973 |
Treasurer of the Fund. | Treasurer of the Fund since December 2019. | Director of Administration of Glenmede Investment Management LP (since October 2019); Managing Director, State Street Bank and Trust Company (2007-2019). | |||
Michael P. Malloy One Logan Square Suite 2000 Philadelphia, PA 19103-6996 Year of Birth: 1959 |
Secretary of the Fund. | Secretary of the Fund since January 1995. | Partner in the law firm of Faegre Drinker Biddle & Reath LLP. | |||
Eimile J. Moore 3 Canal Plaza, Suite 100, Portland, ME 04101 Year of Birth: 1969 |
Chief Compliance Officer of the Fund. | Chief Compliance Officer of the Fund since December 2017. | Senior Principal Consultant (since 2011). | |||
Daniel P. Bulger One Congress Street, Suite 1 Boston, MA 02114 Year of Birth: 1966 |
Assistant Secretary of the Fund. | Assistant Secretary of the Fund since December 2022. | Vice President and Counsel, State Street Bank and Trust Company (2016-present). | |||
Rebecca Tran Savage One Congress Street, Suite 1 Boston, MA 02114 Year of Birth: 1981 |
Assistant Secretary of the Fund. | Assistant Secretary of the Fund since December 2022. | Assistant Vice President and Associate Counsel, State Street Bank and Trust Company (May 2022-present). |
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The Board believes that each Director’s experience, qualifications, attributes and skills on an individual basis and in combination with those of the other Directors lead to the conclusion that each Director should serve in such capacity. Among the attributes common to all Directors is the ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the other Directors, the Advisor, other service providers, legal counsel and the independent registered public accounting firm, and to exercise effective business judgment in the performance of their duties as Directors. A Director’s ability to perform his or her duties effectively may have been attained through such person’s business, consulting and/or academic positions; experience as a board member of the Fund, other investment funds, or non-profit entities or other organizations; education or professional training; and/or other life experiences. In addition to these shared characteristics, set forth below is a brief discussion of the specific experience, qualifications, attributes or skills of each Director:
H. Franklin Allen, Ph.D.: | Dr. Allen has substantial experience in the areas of finance and economics through his educational background and position for many years as a professor of finance and economics at The Wharton School of The University of Pennsylvania and most recently as Vice Dean of Research and Faculty of the Imperial College London Business School and Professor of Finance and Economics and Director of the Brevan Howard Centre for Financial Analysis at the Imperial College London. |
Susan W. Catherwood: | Ms. Catherwood has substantial business, finance and investment management experience through her board and committee positions with the parent companies of the Advisor and her board and/or executive positions with academic entities, charitable foundations and companies. |
William L. Cobb, Jr.: | Mr. Cobb has substantial investment management and business experience through his senior executive, chief investment officer and/or investment committee positions with private and non-profit entities, as a senior executive officer of a global investment management firm and most recently as a board member of a business development company. |
Rebecca E. Duseau | Ms. Duseau has substantial investment management, compliance, risk management and business experience as a co-founder and executive of an investment management firm. |
Andrew Phillips: | Mr. Phillips has substantial investment management and business experience through his executive positions with a major investment management firm. |
Mary Ann B. Wirts: | Ms. Wirts has substantial business, financial services and investment management experience through her senior executive positions with the Advisor and its parent companies. |
Harry Wong: | Mr. Wong has substantial finance, investment banking and capital markets experience through his positions as an executive in investment banking businesses. |
Specific details regarding each Director’s term of office as a Director with the Fund and principal occupations during at least the past five years are included in the table above.
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Leadership Structure and Oversight Responsibilities
Overall responsibility for oversight of the Fund rests with the Board. The Fund has engaged an investment adviser to manage the Portfolio on a day-to-day basis. The Board is responsible for overseeing the Advisor and other service providers in the operations of the Fund in accordance with the provisions of the 1940 Act, applicable provisions of state and other laws and the Fund’s Charters and By-laws. The Board is currently composed of six members, four of whom are Independent Directors. The Board meets in-person at regularly scheduled meetings four times each year. In addition, the Board may hold special in-person or telephonic meetings or informal conference calls to discuss specific matters that may arise or require action between regular meetings. The Board may also meet via videoconference. The Board and the Independent Directors have access to the Fund’s Chief Compliance Officer (“CCO”), the Fund’s independent registered public accounting firm and independent legal counsel for consultation to assist them in performing their oversight responsibilities. As described below, the Board has established an Audit Committee, Valuation Committee, and Nominating Committee and may establish ad hoc committees or working groups from time to time to assist the Board in fulfilling its oversight responsibilities.
The Board has appointed William L. Cobb, Jr., an Independent Director, to serve in the role of Chairman of the Board. The Chairman’s role is to preside at all meetings of the Board and to act as liaison with the Advisor, other service providers, counsel and other Directors generally between meetings. The Chairman may also perform such other functions as may be delegated by the Board from time to time. The Board reviews its leadership structure during periodic self-assessments and based on that review, has determined that the Board’s leadership structures are appropriate because they allow the Board to exercise informed judgment over matters under their purview and they allocate areas of responsibility among committees of the Board and the full Board in a manner that enhances effective oversight.
The Fund is subject to a number of risks, including investment, compliance, operational and valuation risks, among others. Risk oversight forms part of the Board’s general oversight of the Fund and is addressed as part of the Board’s and its committees’ various activities. Day-to-day risk management functions are included within the responsibilities of the Advisor and other service providers (depending on the nature of the risk), which carry out the Fund’s investment management and business affairs. The Advisor and other service providers employ a variety of processes, procedures and controls to identify various events or circumstances that give rise to risks, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. Each of the Advisor and other service providers have their own independent interests in risk management, and their policies and methods of risk management will depend on their functions and business models. The Board recognizes that it is not possible to identify all of the risks that may affect the Fund or to develop processes and controls to eliminate or mitigate their occurrence or effects. The Board requires senior officers of the Fund, including the President, Chief Financial Officer and CCO and the Advisor, to report to the full Board on a variety of matters at each regular meeting of the Board, including matters relating to risk management. The Board also receives reports from certain of the Fund’s other primary service providers on regular basis, including State Street as the Fund’s custodian, administrator, transfer agent and securities lending agent. The Fund’s CCO meets in executive session with the Board at each regularly scheduled meeting and meets separately with the Independent Directors at least annually to discuss relevant risk issues affecting the Fund. In addition, the CCO reports to the Chairman of the Audit Committee between meetings to discuss compliance related matters. The Audit Committee also receives regular reports from the Fund’s independent registered public accounting firm on internal control and financial reporting matters. The Board and Independent Directors meet with the Fund’s independent legal counsel each quarterly meeting and have access to legal counsel for consultation concerning any issues that may occur between regularly scheduled meetings. The Board may, at any time and in its discretion, change the manner in which they conduct risk oversight.
Standing Board Committees
Dr. Allen and Messrs. Cobb, Phillips and Wong (Chairman) and Ms. Duseau serve on the Audit Committee of the Board. The Audit Committee operates under a written charter approved by the Board. The purposes of the Audit Committee include overseeing the accounting and financial reporting processes of the Fund and the audits of the Fund’s financial statements. Accordingly, the Committee assists the Board in its oversight of (i) the integrity of the Fund’s financial statements; (ii) the independent accountants’ qualifications and independence; and (iii) the performance of the Fund’s internal audit function and independent accountants. The Audit Committee met one times during the fiscal year ended October 31, 2023.
Dr. Allen (Chairman) and Messrs. Cobb, Phillips, Wong, Weaver and McGuire and Mmes. Catherwood and Wirts serve on the Valuation Committee of the Board. The Fund’s Valuation Committee, or under certain circumstances the Valuation Committee’s
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Chairman or his designee, determine, in consultation with the Fund’s administrator and Advisor, the fair value of certain securities pursuant to procedures adopted by the Board. The Glenmede Fund’s Valuation Committee did not meet during the fiscal year ended October 31, 2023 but was apprised of fair value events that occurred over the course of the year at each of the quarterly Board meetings by the Advisor.
Dr. Allen (Chairman) and Messrs. Cobb, Wong and Phillips and Ms. Duseau serve on the Nominating Committee of the Board. The Fund’s Nominating Committee, among other things, nominates persons to fill vacancies on the Board and Board Committees. The Nominating Committee will consider nominees recommended by shareholders. Recommendations should be submitted to the Nominating Committee in care of the Fund’s Secretary. The Nominating Committee met two times during the fiscal year ended October 31, 2023.
Director/Trustee Ownership of Fund Shares
The following table shows the Directors’ ownership of the Portfolio and in all Portfolios of the Fund and The Glenmede Portfolios overseen by the Directors, as of December 31, 2023.
Name of Director/Trustee | Dollar
Range of Equity Securities in the Portfolio* |
Aggregate Dollar Range of Equity Securities in All Portfolios in the Fund Complex | ||
Interested Directors/Trustees | ||||
Susan W. Catherwood | None | None | ||
Mary Ann B. Wirts | None | Over $100,000 | ||
Independent Directors/Trustees | ||||
H. Franklin Allen, Ph.D. | None | None | ||
William L. Cobb, Jr. | None | None | ||
Rebecca E. Duseau | None | None | ||
Andrew Phillips | None | None | ||
Harry Wong | None | None |
* As of the date of this SAI, the Portfolio did not have any shares outstanding.
Remuneration of Board Members
As of January 1, 2024, the annual fee for each Board member, other than officers of the Advisor, is $104,000. In addition to the annual fee, the Glenmede Fund pays each Board member, other than officers of the Advisor, $5,000 for each Board meeting attended and out-of-pocket expenses incurred in attending Board meetings, the Audit Committee Chairman receives an annual fee of $10,000 for his services as Chairman of the Audit Committee and the Chairman of the Board receives an annual fee of $15,000 for this services as Chairman of the Board. The Glenmede Portfolios pay each Board member, other than officers of the Advisor, an annual fee of $6,000 per year and out-of-pocket expenses incurred in attending Board meetings. Board members receive no compensation as members of the Audit, Valuation or Nominating Committees. The officers of the Fund receive no compensation as officers from the Fund.
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Set forth in the table below is the compensation received by Board members for the fiscal year ended October 31, 2023.
Name of Person, Position* | Aggregate Compensation* from the Glenmede Fund |
Aggregate Compensation* from The Glenmede Portfolios | Pension or Retirement Benefits Accrued as Part of Fund’s Expenses |
Estimated Annual Benefits Upon Retirement | Total Compensation* from the Fund Complex** | |||||
Interested Directors/Trustees |
||||||||||
Susan W.
Catherwood, Director/Trustee |
$124,000 | $6,000 | None | None | $130,000 | |||||
Mary Ann B. Wirts Director/Trustee |
$124,705 | $6,000 | None | None | $130,705 | |||||
Independent Directors/Trustees | ||||||||||
H. Franklin
Allen, Ph.D., Director/Trustee |
$131,461 | $6,000 | None | None | $137,461 | |||||
William L.
Cobb, Jr., Director/Trustee |
$139,752 | $6,000 | None | None | $145,752 | |||||
Rebecca E.
Duseau, Director/Trustee** |
$0 | $0 | None | None | $0 | |||||
Andrew Phillips,
Director/Trustee |
$124,390 | $6,000 | None | None | $130,390 | |||||
Harry Wong, |
$136,321 | $6,000 | None | None | $142,321 |
* | Compensation includes reimbursement of out-of-pocket expenses incurred in attending Board meetings, where applicable. |
** | Ms. Duseau became a Director/Trustee of the Funds in December 2023, was not a member of the Boards during the fiscal year ended October 31, 2023, and did not receive any compensation from the Funds. |
Code of Ethics
The Fund and the Advisor have each adopted codes of ethics that permit personnel subject to the codes to invest in securities including securities that may be purchased or held by the Fund.
Proxy Voting Procedures
The Fund has delegated proxy voting responsibilities to the Advisor, subject to the Board’s general oversight. In delegating proxy responsibilities, the Board has directed that proxies be voted consistent with the Fund’s and its shareholders best interests and in compliance with all applicable proxy voting rules and regulations. The Advisor has adopted its own proxy voting policies and guidelines for this purpose (collectively, the “Proxy Voting Procedures”). The Proxy Voting Procedures address, among other things,
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material conflicts of interest that may arise between the interests of the Fund and the interests of the Advisor and its affiliates. The Proxy Voting Procedures are provided in Appendix B of this SAI.
Information regarding how the Fund voted proxies, if any, relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, upon request, by calling 1-800-442-8299, and on the SEC’s website at http://www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisor
GIM, with principal offices at One Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103, currently serves as the investment advisor to the Portfolio. GIM, a limited partnership, is wholly-owned by Glenmede Trust. As of December 31, 2023, GIM and its affiliated companies had over $44.2 billion in assets in the accounts for which they serve in various capacities, including as executor, trustee or investment advisor.
The Investment Advisory Agreement has an initial term of two years and thereafter will continue in effect from year to year provided its continuance is approved annually (i) by the holders of a majority of the Portfolio’s outstanding voting securities or by the Board and (ii) by a majority of the Directors who are not parties to the Investment Advisory Agreement or interested persons of any such party. The Investment Advisory Agreement may be terminated on 60 days’ written notice by any such party and will terminate automatically if assigned.
The names and position with GIM of the principal executive officers and each director of GIM are as follows. The address for each is c/o GIM, One Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, PA 19103.
Name | Position with GIM | |
Peter Zuleba | Managing Director and Chief Executive Officer | |
Raj Tewari | Managing Director and Chief Operating Officer | |
Kent E. Weaver | Managing Director and President | |
John F. McCabe | Managing Director and General Counsel |
GIM is wholly-owned by Glenmede Trust as both its only limited partner and as the sole owner of GIM’s only general partner, Gatepost Partners, LLC. Glenmede Trust, a nationally-chartered trust company, provides fiduciary and investment services to endowment funds, foundations, employee benefit plans and other institutions and individuals. Glenmede Trust is a wholly-owned subsidiary of The Glenmede Corporation. Glenmede Trust, Gatepost Partners, LLC and The Glenmede Corporation are located at One Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
The Municipal Allocation Portfolio does not pay a management fee to the Advisor for its investment advisory services.
Portfolio Managers
Set forth below is information regarding the individuals identified in the Portfolio’s Prospectus as primarily responsible for the day-to-day management of the Portfolio (“Portfolio Managers”).
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As of October 31, 2023, the Portfolio Managers were also primarily responsible for the day-to-day management of certain types of other portfolios and/or accounts, as indicated in the table below:
Glenmede Investment Management LP | Type of Accounts | Number of Accounts Managed |
Total Assets Managed |
Number of Accounts Managed with Performance- Based Advisory Fees |
Total Assets Managed with Performance- Based Advisory Fees | |||||
Robert M. Daly | Registered Investment Companies Other Pooled Investment Vehicles Other Accounts |
None None 1,572 |
$0 $0 $3,032,547,998 |
None None None |
$0 $0 $0 | |||||
J. Douglas Wilson | Registered Investment Companies Other Pooled Investment Vehicles Other Accounts |
None None 1,416 |
$0 $0 $2,312,115,225 |
None None None |
$0 $0 $0 | |||||
David M. Joyce | Registered Investment Companies Other Pooled Investment Vehicles Other Accounts |
None None 1,416 |
$0 $0 $2,312,115,225 |
None None None |
$0 $0 $0 |
As of the date of this SAI, the Portfolio had not yet commenced operations, so none of the Portfolio managers owned shares of the Portfolio.
The compensation package for the GIM Portfolio Managers is comprised of a base salary, annual bonus and participation in a long-term equity plan of The Glenmede Corporation. The base salary is based on a combination of factors including the Portfolio Manager’s experience, expertise, and competitive market rates. The annual bonus payment is based on a combination of the annual pre-tax financial performance of The Glenmede Corporation, revenue generated from investment management fees and achievement of non-financial strategic goals. The Glenmede Corporation’s equity plan provides an opportunity for senior management to build equity in the parent company through options and restricted stock. Participation is based on position, experience and expertise.
The Portfolio Managers may manage other accounts with investment strategies similar to those of the Portfolio, which may suggest the potential for conflicts of interests relating to cross trading, allocation of investment opportunities, and aggregation and allocation of trades. In addition, GIM may charge varying fees to different accounts managed by their respective Portfolio Managers. Shareholders should be aware that, as with any group of portfolios and accounts managed by an investment advisor pursuant to varying fee arrangements, including performance or other incentive-based fee arrangements, there is the potential for conflicts of interest that may result in the Portfolio Managers’ favoring those portfolios or accounts with higher or incentive-based arrangements. However, the Fund does not anticipate that management by the Portfolio’s Portfolio Manager of other accounts with a similar investment strategy or different fee arrangement would conflict with management of the Portfolio because conflicts of interest of this type are minimized by GIM’s investment management decision-making process and trade allocation policy. In addition, the Fund has adopted policies limiting the circumstances under which cross-trades may be effected between the Portfolio and another client account.
Transfer Agent, Dividend Paying Agent, Custodian and Administrator
State Street, with its primary place of business located at One Congress Street, Suite 1 Boston, MA 02114, serves as the Fund’s transfer agent, dividend paying agent, custodian and administrator. Because the Portfolio is new, it did not pay any fees to State Street during previous fiscal years.
For its services, State Street is entitled to receive fees from the Fund based on a percentage of the daily net assets of the Portfolio of the Fund, plus transaction charges for certain transactions and out-of-pocket expenses.
State Street is also compensated for its services as the Fund’s securities lending agent and short sales lending agent and until December 2010, was also paid an annual fee plus out-of-pocket expenses for the provision of personnel and services related to the Fund’s compliance program.
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Distributor
Shares of the Fund are distributed continuously and are offered without a sales load by Quasar Distributors, LLC (“Quasar Distributors”), 3 Canal Plaza, Suite 100, Portland, ME 04101, pursuant to Distribution Agreements between the Fund and Quasar Distributors. Quasar Distributors receives no fee from the Fund for its distribution services. Currently, the Advisor pays Quasar Distributors’ fees and out-of-pocket expenses for the distribution services Quasar Distributors provides to the Portfolio.
Independent Registered Public Accounting Firm
Cohen & Company, Ltd. serves as the Fund’s independent registered public accounting firm and will audit its financial statements annually.
Counsel
Faegre Drinker Biddle & Reath LLP, One Logan Square, Suite 2000, Philadelphia, Pennsylvania 19103-6996, serves as counsel to the Fund.
Reports
Shareholders will receive unaudited semi-annual financial statements and audited annual financial statements.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Advisor to select the brokers or dealers that will execute the purchases and sales of investment securities for the Portfolio and directs the Advisor to use its best efforts to obtain the best available price and most favorable execution with respect to all transactions for the Portfolio. The Advisor may, however, consistent with the interests of the Portfolio, select brokers on the basis of the research, statistical and pricing services they provide to the Portfolio. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Advisor under the Investment Advisory Agreement. A commission paid to such brokers may be higher than that which another qualified broker would have charged for effecting the same transaction, provided that such commissions are paid in compliance with the Securities Exchange Act of 1934, as amended, and that the Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Advisor to the Portfolio and the Advisor’s other clients. The distribution of orders among brokers and the commission rates paid by the Portfolio are reviewed periodically by the Board.
The Fund is required to identify any securities of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents that the Portfolio has acquired during the Fund’s most recent fiscal year. As of the date of this SAI, the Portfolio had not commenced operations and thus had not acquired any such securities.
The Municipal Allocation Portfolio does not currently expect to incur any brokerage commission expense on transactions in its portfolio securities because debt instruments are generally traded on a “net” basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer.
To the extent that the Portfolio effects brokerage transactions with a broker/dealer affiliated directly or indirectly with the Fund, the Advisor or Quasar Distributors, such transactions will be effected in compliance with applicable law.
Some securities considered for investment by the Portfolio may also be appropriate for other clients served by the Advisor. If the purchase or sale of securities is consistent with the investment policies of the Portfolio and one or more of these other clients served by the Advisor and is considered at or about the same time, transactions in such securities will be allocated among the Portfolio and clients in a manner deemed fair and reasonable by the Advisor. While in some cases this practice could have a detrimental effect on the price, value or quantity of the security as far as the Portfolio is concerned, in other cases it is believed to be beneficial to the Portfolio.
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ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally affecting the Portfolio and its shareholders that are not described in the Prospectus. Except where otherwise specifically referenced, the discussion relates solely to the Portfolio and investors who are United States citizens, residents or domestic corporations and domestic trusts. No attempt is made to present a detailed explanation of the tax treatment of the Portfolio or their shareholders, and the discussions here and in the Prospectus are not intended as a substitute for careful tax planning. Potential investors should consult their tax advisers with specific reference to their own tax situations.
The discussions of the federal tax consequences in the Prospectus and this SAI are based on the Internal Revenue Code (the “Code”), and the regulations issued under it, and court decisions and administrative interpretations published by the IRS as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly alter the statements included herein, and any such changes or decisions may be retroactive.
General
The Portfolio intends to qualify as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code. As a regulated investment company, the Portfolio generally will be exempt from federal income tax on its net investment income and realized capital gains that it distributes to shareholders. To qualify for treatment as a regulated investment company, the Portfolio must meet three important tests each year.
First, the Portfolio must derive with respect to each taxable year at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, other income derived with respect to its business of investing in such stock, securities, or currencies or net income derived from interests in qualified publicly traded partnerships.
Second, generally, at the close of each quarter of its taxable year, at least 50% of the value of the Portfolio’s assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies and securities of other issuers as to which the Portfolio has not invested more than 5% of the value of its total assets in securities of such issuer and as to which the Portfolio does not hold more than 10% of the outstanding voting securities of the issuer, and no more than 25% of the value of the Portfolio’s total assets may be invested in the securities of (1) any one issuer (other than U.S. Government securities and securities of other regulated investment companies), (2) two or more issuers that the Portfolio controls and which are engaged in the same or similar trades or businesses, or (3) one or more qualified publicly traded partnerships.
Third, the Portfolio must distribute an amount equal to at least the sum of 90% of its investment company taxable income (net investment income and the excess of net short-term capital gain over net long-term capital loss) before taking into account any deduction for dividends paid, and 90% of its net tax-exempt income, if any, for the year.
The Portfolio intends to comply with these requirements. If the Portfolio were to fail to make sufficient distributions, it could be liable for corporate income tax and for excise tax in respect of the shortfall or, if the shortfall is large enough, the Portfolio could be disqualified as a regulated investment company. If for any taxable year the Portfolio were not to qualify as a regulated investment company, all its taxable income would be subject to income tax at regular corporate rates without any deduction for distributions to shareholders. In that event, taxable shareholders would recognize dividend income on distributions to the extent of the Portfolio’s current and accumulated earnings and profits and corporate shareholders could be eligible for the dividends-received deduction.
The Code imposes a nondeductible 4% excise tax on regulated investment companies that fail to distribute each calendar year an amount equal to specified percentages of their ordinary taxable income and capital gain net income (excess of capital gains over capital losses). The Portfolio intends to make sufficient distributions or deemed distributions each year to avoid liability for this excise tax.
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Taxation of Certain Investments
The tax principles applicable to transactions in certain financial instruments, such as futures contracts and options, that may be engaged in by the Portfolio are complex and, in some cases, uncertain. Such transactions and investments may cause the Portfolio to recognize taxable income prior to the receipt of cash, thereby requiring the Portfolio to liquidate other positions, or to borrow money, so as to make sufficient distributions to shareholders to avoid corporate-level tax. Moreover, some or all of the taxable income recognized may be ordinary income or short-term capital gain, so that the distributions may be taxable to shareholders as ordinary income.
Municipal Allocation Portfolio
As described in the Prospectus, the Municipal Allocation Portfolio is designed to provide investors with current tax-exempt interest income. Shares of the Portfolio may not be suitable for tax-exempt institutions and may not be suitable for retirement plans qualified under Section 401 of the Code, H.R. 10 plans (“Keogh Plans”) and individual retirement accounts since such plans and accounts are generally tax-exempt and, therefore, shareholders would fail to gain any additional benefit from the Portfolio’s dividends being tax-exempt. Additionally, dividends would be ultimately taxable to the beneficiaries of retirement plans, Keogh Plans and individual retirement accounts when distributed to them. In addition, the Portfolio may not be an appropriate investment for entities which are “substantial users” of facilities financed by private activity bonds or “related persons” thereof. “Substantial user” is defined under U.S. Treasury Regulations to include a non-exempt person who regularly uses a part of such facilities in his trade or business and whose gross revenues derived with respect to the facilities financed by the issuance of bonds are more than 5% of the total revenues derived by all users of such facilities, who occupies more than 5% of the usable area of such facilities or for whom such facilities or a part thereof were specifically constructed, reconstructed or acquired. “Related persons” include certain related natural persons, affiliated corporations, a partnership and its partners and an S corporation and its shareholders.
For the Municipal Allocation Portfolio to pay tax-exempt dividends for any taxable year, at least 50% of the aggregate value of the Portfolio’s total assets at the close of each quarter of the Portfolio’s taxable year must consist of exempt-interest obligations.
State and Local Taxes
Although the Portfolio intends to qualify as a regulated investment company and to be relieved of all or substantially all federal income taxes, depending upon the extent of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located, or in which it is otherwise deemed to be conducting business, the Portfolio may be subject to the tax laws of such states or localities.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISOR REGARDING ANY UNITED STATES FEDERAL TAX CONSEQUENCES OF HOLDING SHARES IN THE PORTFOLIO IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES AS WELL AS ANY FOREIGN, STATE AND LOCAL OR OTHER TAX CONSEQUENCES THAT MAY ARISE AS A RESULT OF HOLDING SHARES IN THE PORTFOLIO.
GENERAL INFORMATION
Description of Shares and Voting Rights
The shares of the Portfolio have no preference as to conversion, exchange, dividends, retirement or other rights, and, when issued and paid for as provided in the Prospectus, will be fully paid and non-assessable. The shares of the Portfolio have no pre-emptive rights and do not have cumulative voting rights, which means that the holders of more than 50% of the shares of a Fund voting for the election of its Board members can elect 100% of the Board of that Fund if they choose to do so. A shareholder is entitled to one vote for each full share held (and a fractional vote for each fractional share held), then standing in his or her name on the books of the particular Fund. The Fund will not hold annual meetings of shareholders, except as required by the 1940 Act, the next sentence and other applicable law. The Fund has undertaken that its Board will call a meeting of shareholders for the purpose of voting upon the question of removal of a Board member or members if such a meeting is requested in writing by the holders of not less than 10% of the outstanding shares of the particular Fund. To the extent required by the undertaking, the Fund will assist shareholder
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communication in such matters. The staff of the SEC has expressed the view that the use of a combined Prospectus for the Portfolios of the Glenmede Fund and The Glenmede Portfolios may subject the Fund to liability for misstatements, inaccuracies or incomplete disclosure about another Portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted to the holders of the outstanding voting securities of an investment company shall not be deemed to have been effectively acted upon unless approved by a majority of the outstanding shares of the Portfolio or class affected by the matter. The Portfolio or class is affected by a matter unless it is clear that the interests of the Portfolio or class in the matter are substantially identical or that the matter does not affect any interest of the Portfolio or class. Under Rule 18f-2, the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to the Portfolio only if approved by a majority of the outstanding shares of the Portfolio. However, Rule 18f-2 also provides that the ratification of independent public accountants and the election of directors or trustees may be effectively acted upon by shareholders of the Fund voting without regard to the Portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote of the Glenmede Fund’s common stock (or of the shares of the Portfolio or class voting separately as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above) or by the Glenmede Fund’s Articles of Amendment and Restatement, the Glenmede Fund may take or authorize such action upon the favorable vote of the holders of more than 50% of the outstanding common stock of the Glenmede Fund entitled to vote thereon. Under Maryland law, the Board may liquidate a Glenmede Fund Portfolio or class without shareholder approval.
Certain Record Holders
Any shareholder that owns more than 25% of the outstanding shares of a Portfolio or class may be presumed to “control” (as that term is defined in the 1940 Act) the Portfolio or class. Shareholders controlling a Portfolio or class could have the ability to vote a majority of the shares of the Portfolio or class on any matter requiring approval of shareholders of the Portfolio or class.
As of May 31, 2023, the Directors and officers of the Fund collectively owned less than 1% of the outstanding shares of the Portfolio.
Dividends and Distributions
The Portfolio’s policy is to distribute substantially all of its net investment income, if any, together with any net realized capital gains in the amount and at the times that will avoid both income (including capital gains) taxes on it and the imposition of the federal excise tax on undistributed income and gains. The amounts of any income dividends or capital gains distributions for the Portfolio cannot be predicted.
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FINANCIAL STATEMENTS
No Financial Statements are supplied for the Portfolio because as of the date of the Prospectus and this SAI, the Portfolio had no operating history.
OTHER INFORMATION
The Fund’s Prospectus and this SAI do not contain all the information included in the Registration Statement filed with the SEC under the Securities Act of 1933, as amended, with respect to the securities offered by the Prospectus. Certain portions of the Registration Statement have been omitted from the Prospectus and this SAI pursuant to the rules and regulations of the SEC. The Registration Statement, including the exhibits filed therewith, may be examined at the office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this SAI as to the contents of any contract or other documents referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which the Prospectus and this SAI form a part, each such statement being qualified in all respects by such reference.
The third party marks appearing above are the marks of their respective owners.
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APPENDIX A – DESCRIPTION OF SECURITIES RATINGS
Short-Term Credit Ratings
An S&P Global Ratings short-term issue credit rating is generally assigned to those obligations considered short-term in the relevant market. The following summarizes the rating categories used by S&P Global Ratings for short-term issues:
“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 commitments 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 commitment 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. A rating on an obligation is lowered to “D” if it is subject to a distressed debt restructuring.
Local Currency and Foreign Currency Ratings – S&P Global Ratings’ issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. A foreign currency rating on an issuer can differ from the local currency rating on it when the obligor has a different capacity to meet its obligations denominated in its local currency, versus obligations denominated in a foreign currency.
“NR” – This indicates that a rating has not been assigned or is no longer assigned.
Moody’s Investors Service (“Moody’s”) short-term ratings are forward-looking opinions of the relative credit risks of financial obligations with an original maturity of thirteen months or less 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.
Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
“P-1” – Issuers (or supporting institutions) rated Prime-1 reflect a superior ability to repay short-term obligations.
“P-2” – Issuers (or supporting institutions) rated Prime-2 reflect a strong ability to repay short-term obligations.
“P-3” – Issuers (or supporting institutions) rated Prime-3 reflect 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.
“NR” – Is assigned to an unrated issuer, obligation and/or program.
A-1 |
Fitch, Inc. / Fitch Ratings Ltd. (“Fitch”) 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 ratings are assigned to obligations whose initial maturity is viewed as “short-term” based on market convention.1 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. The following summarizes the rating categories used by Fitch for short-term obligations:
“F1” – Securities possess the highest short-term credit quality. This designation indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
“F2” – Securities possess good short-term credit quality. This designation indicates good intrinsic capacity for timely payment of financial commitments.
“F3” – Securities possess fair short-term credit quality. This designation indicates that the intrinsic capacity for timely payment of financial commitments is adequate.
“B” – Securities possess speculative short-term credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
“C” – Securities possess 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.
“NR” – Is assigned to an issue of a rated issuer that are not and have not been rated.
The DBRS Morningstar® Ratings Limited (“DBRS Morningstar”) short-term obligation ratings provide DBRS Morningstar’s opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner. The obligations rated in this category typically have a term of shorter than one year. The R-1 and R-2 rating categories are further denoted by the subcategories “(high)”, “(middle)”, and “(low)”.
The following summarizes the ratings used by DBRS Morningstar for commercial paper and short-term debt:
“R-1 (high)” – Short-term debt rated “R-1 (high)” is of the highest credit quality. The capacity for the payment of short-term financial obligations as they fall due is exceptionally high. Unlikely to be adversely affected by future events.
“R-1 (middle)” – Short-term debt rated “R-1 (middle)” is of superior credit quality. The capacity for the payment of short-term financial obligations as they fall due is very high. Differs from “R-1 (high)” by a relatively modest degree. Unlikely to be significantly vulnerable to future events.
“R-1 (low)” – Short-term debt rated “R-1 (low)” is of good credit quality. The capacity for the payment of short-term financial obligations as they fall due is substantial. Overall strength is not as favorable as higher rating categories. May be vulnerable to future events, but qualifying negative factors are considered manageable.
“R-2 (high)” – Short-term debt rated “R-2 (high)” is considered to be at the upper end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events.
1 A long-term rating can also be used to rate an issue with short maturity.
A-2 |
“R-2 (middle)” – Short-term debt rated “R-2 (middle)” is considered to be of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events or may be exposed to other factors that could reduce credit quality.
“R-2 (low)” – Short-term debt rated “R-2 (low)” is considered to be at the lower end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events. A number of challenges are present that could affect the issuer’s ability to meet such obligations.
“R-3” – Short-term debt rated “R-3” is considered to be at the lowest end of adequate credit quality. There is a capacity for the payment of short-term financial obligations as they fall due. May be vulnerable to future events and the certainty of meeting such obligations could be impacted by a variety of developments.
“R-4” – Short-term debt rated “R-4” is considered to be of speculative credit quality. The capacity for the payment of short-term financial obligations as they fall due is uncertain.
“R-5” – Short-term debt rated “R-5” is considered to be of highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet short-term financial obligations as they fall due.
“D” – Short-term debt rated “D” is assigned when the issuer has filed under any applicable bankruptcy, insolvency or winding-up statute or there is a failure to satisfy an obligation after the exhaustion of grace periods. DBRS Morningstar may also use “SD” (Selective Default) in cases where only some securities are impacted, such as the case of a “distressed exchange”.
Long-Term Issue Credit Ratings
The following summarizes the ratings used by S&P Global Ratings for long-term issues:
“AAA” – An obligation rated “AAA” has the highest rating assigned by S&P Global Ratings. The obligor’s capacity to meet its financial commitments 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 commitments 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 commitments 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 exposure 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 commitments 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.
A-3 |
“CC” – An obligation rated “CC” is currently highly vulnerable to nonpayment. The “CC” rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
“C” – An obligation rated “C” is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with 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 the next five business days in the absence of a stated grace period or within the earlier of the stated grace period or the next 30 calendar days. The “D” rating also will be used upon 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. A rating on an obligation is lowered to “D” if it is subject to a distressed debt restructuring
Plus (+) or minus (-) – Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories.
“NR” – This indicates that a rating has not been assigned, or is no longer assigned.
Local Currency and Foreign Currency Ratings - S&P Global Ratings’ issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. A foreign currency rating on an issuer can differ from the local currency rating on it when the obligor has a different capacity to meet its obligations denominated in its local currency, versus obligations denominated in a foreign currency.
Moody’s long-term ratings are forward-looking opinions of the relative credit risks of financial obligations with an original maturity of eleven months or more. Such ratings reflect both on the likelihood of default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. The following summarizes the ratings used by Moody’s for long-term debt:
“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 judged to be 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: 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.
A-4 |
“NR” – Is assigned to unrated obligations, obligation and/or program.
The following summarizes long-term ratings used by Fitch:
“AAA” – Securities considered to be of the 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” – Securities considered to be of 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” – Securities considered to be of 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” – Securities considered to be of 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” – Securities considered to be speculative. “BB” ratings indicates 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” – Securities considered to be highly speculative. “B” ratings indicate that material credit risk is present
“CCC” – A “CCC” rating indicates that substantial credit risk is present.
“CC” – A “CC” rating indicates very high levels of credit risk.
“C” – A “C” rating indicates exceptionally high levels of credit risk.
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. Fitch believes that this approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” obligation rating category, or to corporate finance obligation ratings in the categories below “CCC”.
“NR” – Is assigned to an unrated issue of a rated issuer.
The DBRS Morningstar long-term obligation ratings provide DBRS Morningstar’s opinion on the risk that investors may not be repaid in accordance with the terms under which the long-term obligation was issued. The obligations rated in this category typically have a term of one year or longer. All rating categories other than AAA and D also contain subcategories “(high)” and “(low)”. The absence of either a “(high)” or “(low)” designation indicates the rating is in the middle of the category. The following summarizes the ratings used by DBRS Morningstar for long-term debt:
“AAA” – Long-term debt rated “AAA” is of the highest credit quality. The capacity for the payment of financial obligations is exceptionally high and unlikely to be adversely affected by future events.
“AA” – Long-term debt rated “AA” is of superior credit quality. The capacity for the payment of financial obligations is considered high. Credit quality differs from “AAA” only to a small degree. Unlikely to be significantly vulnerable to future events.
“A” – Long-term debt rated “A” is of good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser credit quality than “AA.” May be vulnerable to future events, but qualifying negative factors are considered manageable.
A-5 |
“BBB” – Long-term debt rated “BBB” is of adequate credit quality. The capacity for the payment of financial obligations is considered acceptable. May be vulnerable to future events.
“BB” – Long-term debt rated “BB” is of speculative, non-investment grade credit quality. The capacity for the payment of financial obligations is uncertain. Vulnerable to future events.
“B” – Long-term debt rated “B” is of highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet financial obligations.
“CCC”, “CC” and “C” – Long-term debt rated in any of these categories is of very highly speculative credit quality. In danger of defaulting on financial obligations. There is little difference between these three categories, although “CC” and “C” ratings are normally applied to obligations that are seen as highly likely to default or subordinated to obligations rated in the “CCC” to “B” range. Obligations in respect of which default has not technically taken place but is considered inevitable may be rated in the “C” category.
“D” – A security rated “D” is assigned when the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is a failure to satisfy an obligation after the exhaustion of grace periods. DBRS Morningstar may also use “SD” (Selective Default) in cases where only some securities are impacted, such as the case of a “distressed exchange”.
Municipal Note Ratings
An S&P Global Ratings U.S. 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. |
Municipal Short-Term Note rating symbols are as follows:
“SP-1” – A municipal note rated “SP-1” exhibits a 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” – A municipal note rated “SP-2” exhibits a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
“SP-3” – A municipal note rated “SP-3” exhibits a speculative capacity to pay principal and interest.
“D” – This rating is assigned upon failure to pay the note when due, completion of a distressed debt restructuring, 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.
Moody’s uses the global short-term Prime rating scale (listed above under Short-Term Credit Ratings) for commercial paper issued by U.S. municipalities and nonprofits. These commercial paper programs may be backed by external letters of credit or liquidity facilities, or by an issuer’s self-liquidity.
For other short-term municipal obligations, Moody’s uses one of two other short-term rating scales, the Municipal Investment Grade (“MIG”) and Variable Municipal Investment Grade (“VMIG”) scales provided below.
A-6 |
Moody’s uses the MIG scale for U.S. municipal cash flow notes, bond anticipation notes and certain other short-term obligations, which typically mature in three years or less. Under certain circumstances, Moody’s uses the MIG scale for bond anticipation notes with maturities of up to five years.
MIG Scale
“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.
“NR” – Is assigned to an unrated obligation, obligation and/or program.
In the case of variable rate demand obligations (“VRDOs”), Moody’s assigns both a long-term rating and a short-term payment obligation rating. The long-term rating addresses the issuer’s ability to meet scheduled principal and interest payments. The short-term payment obligation rating addresses the ability of the issuer or the liquidity provider to meet any purchase price payment obligation resulting from optional tenders (“on demand”) and/or mandatory tenders of the VRDO. The short-term payment obligation rating uses the VMIG scale. Transitions of VMIG ratings with conditional liquidity support differ from transitions of Prime ratings reflecting the risk that external liquidity support will terminate if the issuer’s long-term rating drops below investment grade.
Moody’s typically assigns the VMIG rating if the frequency of the payment obligation is less than every three years. If the frequency of the payment obligation is less than three years but the obligation is payable only with remarketing proceeds, the VMIG short-term rating is not assigned and it is denoted as “NR”.
“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.
“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.
“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.
“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 a sufficiently strong short-term rating or may lack the structural and/or legal protections.
“NR” – Is assigned to an unrated obligation, obligation and/or program.
About Credit 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.
A-7 |
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.
Fitch’s credit ratings are forward-looking opinions on the relative ability of an entity or obligation to meet financial commitments. Issuer Default Ratings (IDRs) are assigned to corporations, sovereign entities, financial institutions such as banks, leasing companies and insurers, and public finance entities (local and regional governments). Issue-level ratings are also assigned and often include an expectation of recovery, which may be notched above or below the issuer-level rating. Issue ratings are assigned to secured and unsecured debt securities, loans, preferred stock and other instruments. Credit ratings are indications of the likelihood of repayment in accordance with the terms of the issuance. In limited cases, Fitch may include additional considerations (i.e., rate to a higher or lower standard than that implied in the obligation’s documentation).
DBRS Morningstar offers independent, transparent, and innovative credit analysis to the market. Credit ratings are forward-looking opinions about credit risk that reflect the creditworthiness of an issuer, rated entity, security and/or obligation based on DBRS Morningstar’s quantitative and qualitative analysis in accordance with applicable methodologies and criteria. They are meant to provide opinions on relative measures of risk and are not based on expectations of, or meant to predict, any specific default probability. Credit ratings are not statements of fact. DBRS Morningstar issues credit ratings using one or more categories, such as public, private, provisional, final(ized), solicited, or unsolicited. From time to time, credit ratings may also be subject to trends, placed under review, or discontinued. DBRS Morningstar credit ratings are determined by credit rating committees.
IV. Description of Mortgage-Backed Securities
Mortgage-Related Securities. The Core Fixed Income Portfolio and Short Term Tax Aware Fixed Income Portfolio may purchase mortgage-backed securities that are secured by entities such as the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), commercial banks, trusts, financial companies, finance subsidiaries of industrial companies, savings and loan associations, mortgage banks and investment banks. These certificates are in most cases pass- through instruments, through which the holder receives a share of all interest and principal payments from the mortgages underlying the certificate, net of certain fees. The average life of a mortgage-backed security varies with the underlying mortgage instruments, which have maximum maturities of 40 years. The average life is likely to be substantially less than the original maturity of the mortgage pools underlying the securities as the result of prepayments, mortgage refinancings or foreclosure. Mortgage prepayment rates are affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. Such prepayments are passed through to the registered holder with the regular monthly payments of principal and interest and have the effect of reducing future payments.
There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Mortgage-related securities guaranteed by GNMA include GNMA Mortgage Pass-Through Certificates (also known as “Ginnie Maes”) which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA is a wholly- owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-related securities issued by Fannie Mae include Fannie Mae guaranteed Mortgage Pass-Through Certificates (also known as “Fannie Maes”) which are solely the obligations of Fannie Mae, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury. Fannie Mae is a government-sponsored organization owned entirely by private stockholders. Fannie Maes are guaranteed as to timely payment of principal and interest by Fannie Mae. Mortgage-related securities issued by the Freddie Mac include Freddie Mac Mortgage Participation Certificates (also known as “Freddie Macs” or “PCs”). Freddie Mac is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by Freddie Mac. Freddie Mac guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When Freddie Mac does not guarantee timely payment of principal, Freddie Mac may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
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Investments in U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac may involve the risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
The extreme and unprecedented volatility and disruption that impacted the capital and credit markets during late 2008 and into 2009 have led to increased market concerns about Freddie Mac’s and Fannie Mae’s ability to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 6, 2008, both Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (“FHFA”). Under the plan of conservatorship, the FHFA has assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors, and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator’s appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator. In addition, in connection with the actions taken by the FHFA, the U.S. Treasury has entered into certain preferred stock purchase agreements with each of Freddie Mac and Fannie Mae which establish the U.S. Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae, which stock was issued in connection with financial contributions from the U.S. Treasury to Freddie Mac and Fannie Mae. The conditions attached to the financial contribution made by the U.S. Treasury to Freddie Mac and Fannie Mae and the issuance of this senior preferred stock place significant restrictions on the activities of Freddie Mac and Fannie Mae. Freddie Mac and Fannie Mae must obtain the consent of the U.S. Treasury to, among other things, (i) make any payment to purchase or redeem its capital stock or pay any dividend other than in respect of the senior preferred stock, (ii) issue capital stock of any kind, (iii) terminate the conservatorship of the FHFA except in connection with a receivership, or (iv) increase its debt beyond certain specified levels. In addition, significant restrictions are placed on the maximum size of each of Freddie Mac’s and Fannie Mae’s respective portfolios of mortgages and mortgage-backed securities portfolios, and the purchase agreements entered into by Freddie Mac and Fannie Mae provide that the maximum size of their portfolios of these assets must decrease by a specified percentage each year. The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac’s and Fannie Mae’s operations and activities as a result of the senior preferred stock investment made by the U.S. Treasury, market responses to developments at Freddie Mac and Fannie Mae, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on any mortgage-backed securities guaranteed by Freddie Mac and Fannie Mae. In addition On June 16, 2010, FHFA ordered Fannie Mae’s and Freddie Mac’s stock de-listed from the New York Stock Exchange after the price of common stock in Fannie Mae fell below the New York Stock Exchange’s minimum average closing price of $1 for more than 30 days.
In a February 2011 report to Congress from the U.S. Treasury and the Department of Housing and Urban Development, the Obama administration provided a plan to reform the U.S. housing finance market. The plan would reduce the role of and eventually eliminate Fannie Mae and Freddie Mac. Notably, the plan does not propose similar significant changes to GNMA, which guarantees payments on mortgage-related securities backed by federally insured or guaranteed loans such as those issued by the Federal Housing Authority or guaranteed by the Department of Veterans Affairs. The report also identified three proposals for Congress and the administration to consider for the long-term structure of the housing finance markets after the elimination of Fannie Mae and Freddie Mac, including implementing: (i) a privatized system of housing finance that limits government insurance to very limited groups of creditworthy low- and moderate-income borrowers; (ii) a privatized system with a government backstop mechanism that would allow the government to insure a larger share of the housing finance market during a future housing crisis; and (iii) a privatized system where the government would offer reinsurance to holders of certain highly-rated mortgage-related securities insured by private insurers and would pay out under the reinsurance arrangements only if the private mortgage insurers were insolvent.
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In addition, in August 2012, the U.S. Treasury announced that it had amended the terms of its bailout agreement with Fannie Mae and Freddie Mac in order to decrease the holdings of each firm more quickly. Under the amended agreement, both Fannie Mae and Freddie Mac will have to turn over all profits they earn every quarter. They will also have to accelerate the reduction of their mortgage holdings to hit a cap of $250 million by 2018, four years earlier than planned. Under the new arrangement, the portfolios of Fannie Mae and Freddie Mac can be no larger than $650 billion each at the end of 2012.
The Core Fixed Income Portfolio may invest in mortgage-backed securities issued or sponsored by both government and non-governmental entities. Privately issued mortgage-backed securities are generally backed by pools of conventional (i.e., non- government guaranteed or insured) mortgage loans. Privately-issued mortgage backed securities must have a rating of at least A by S&P or Moody’s or which if unrated, is in the Advisor’s opinion equivalent in credit quality to securities so rated. The ratings assigned by a rating organization (e.g., S&P or Moody’s) to privately-issued mortgage-backed securities address the likelihood of the receipt of all distributions on the underlying mortgage loans by the related certificate-holders under the agreements pursuant to which such certificates are issued. A rating organization’s ratings take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on such mortgage pool is adequate to make payments required by such certificates. A rating organization’s ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the related mortgage loans. Additionally, in order to receive a high quality rating from the rating organizations, privately issued mortgage-backed securities normally are structured with one or more types of “credit enhancement.” Credit enhancement falls generally into two categories: (i) liquidity protection and (ii) protection against losses resulting from default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pools of mortgages, the provision of a reserve fund, or a combination thereof, to ensure, subject to certain limitations, that scheduled payments on the underlying pool are made in a timely fashion. Protection against losses resulting from default relates to the ultimate payment of the obligations on at least a portion of the assets in the pool. Such credit support can be provided by, among other things, payment guarantees, letters of credit, pool insurance, subordination, or any combination thereof.
The Core Fixed Income Portfolio and Short Term Tax Aware Fixed Income Portfolio may also invest in multiple class securities, including collateralized mortgage obligations (“CMOs”) and Real Estate Mortgage Investment Conduit (“REMIC”) pass-through or participation certificates. CMOs provide an investor with a specified interest in the cash flow from a pool of underlying mortgages or of other mortgage-backed securities. These securities may be issued by U.S. Government agencies and instrumentalities such as Fannie Mae or sponsored enterprises such as Freddie Mac or by trusts formed by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class mortgage-backed securities represent direct ownership interests in, a pool of mortgage loans or mortgage-backed securities the payments on which are used to make payments on the CMOs or multiple class mortgage-backed securities.
Fannie Mae REMIC certificates are issued and guaranteed as to timely distribution of principal and interest by Fannie Mae. In addition, Fannie Mae will be obligated to distribute the principal balance of each class of REMIC certificates in full, whether or not sufficient funds are otherwise available.
Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC certificates and also guarantees the payment of principal as payments are required to be made on the underlying mortgage participation certificates (“PCs”). PCs represent undivided interests in specified level payment, residential mortgages or participations therein purchased by Freddie Mac and placed in a PC pool. With respect to principal payments on PCs, Freddie Mac generally guarantees ultimate collection of all principal of the related mortgage loans without offset or deduction. Freddie Mac also guarantees timely payment of principal of certain PCs.
CMOs and guaranteed REMIC certificates issued by Fannie Mae and Freddie Mac are types of multiple class mortgage-backed securities. Investors may purchase beneficial interests in REMICs, which are known as “regular” interests or “residual” interests. The Funds do not intend to purchase residual interests in REMICs. The REMIC certificates represent beneficial ownership interests in a REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage-backed securities. The obligations of Fannie Mae or Freddie Mac under their respective guaranty of the REMIC certificates are obligations solely of Fannie Mae or Freddie Mac, respectively.
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CMOs are issued in multiple classes, each with a specified fixed or floating interest rate and a final scheduled distribution date. In most cases, payments of principal are applied to the CMO classes in order of their respective stated maturities, so that no principal payments will be made on a CMO class until all other classes having an earlier stated maturity date are paid in full. These are referred to as “sequential pay” CMOs, or REMIC Certificates. A REMIC is a CMO that qualifies for special tax treatment under the Code, and invests in certain mortgages principally secured by interests in real property and other permitted investments.
Additional structures of CMOs and REMIC certificates include, among others, “parallel pay” CMOs and REMIC certificates. Parallel pay CMOs or REMIC certificates are those which are structured to apply principal payments and prepayments of mortgage assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
A wide variety of REMIC certificates may be issued in sequential pay or parallel pay structures. These securities include accrual certificates (also known as “Z-Bonds”), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class (“PAC”) certificates, which are parallel pay REMIC certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes or REMIC certificates (the “PAC Certificates”), even though all other principal payments and prepayments of the mortgage assets are then required to be applied to one or more other classes of the certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying mortgage assets. These tranches tend to have market prices and yields that are much more volatile than other PAC classes.
CMOs may involve additional risks other than those found in other types of mortgage-related obligations. CMOs may exhibit more price volatility and interest rate risk than other types of mortgage-related obligations. During periods of rising interest rates, CMOs may lose their liquidity as CMO market makers may choose not to repurchase, or may offer prices, based on current market conditions, which are unacceptable to the Portfolio based on the Portfolio’s analysis of the market value of the security.
The Core Fixed Income Portfolio and Short Term Tax Aware Fixed Income Portfolio may also invest in stripped mortgage-backed securities (“SMBS”) (including interest only and principal only securities), which are derivative multiple class mortgage-backed securities. The Core Fixed Income Portfolio and Short Term Tax Aware Fixed Income Portfolio may also invest in privately-issued SMBS. Although the market for such securities is increasingly liquid, privately-issued SMBS may not be readily marketable and will be considered illiquid for purposes of the Portfolio’s limitation on investments in illiquid securities. The Advisor may determine that SMBS which are U.S. Government securities are liquid for purposes of the Portfolio’s limitation on investments in illiquid securities.
SMBS are usually structured with two different classes: one that receives 100% of the interest payments and the other that receives 100% of the principal payments from a pool of mortgage loans. If the underlying mortgage loans experience different than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities. The market value of the class consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on a class of SMBS that receives all or most of the interest from mortgage loans are generally higher than prevailing market yields on other mortgage-backed securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped.
Because derivative mortgage-backed securities (such as principal-only (“POs”), interest-only (“IOs”) or inverse floating rate securities) are more exposed to mortgage prepayments, they generally involve a greater amount of risk. Small changes in prepayments can significantly impact the cash flow and the market value of these securities. The risk of faster than anticipated prepayments generally adversely affects IOs, super floaters and premium priced mortgage-backed securities. The risk of slower than anticipated prepayments generally adversely affects POs, floating-rate securities subject to interest rate caps, support tranches and discount priced mortgage- backed securities. In addition, particular derivative securities may be leveraged such that their exposure (i.e., price sensitivity) to interest rate and/or prepayment risk is magnified.
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V. Description of Asset-Backed Securities
Asset-Backed Securities. The Core Fixed Income Portfolio and Short Term Tax Aware Fixed Income Portfolio may invest in asset-backed securities. Asset-backed securities include interests in pools of receivables, such as motor vehicle installment purchase obligations and credit card receivables. Such securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pools of assets. Such securities may also be debt instruments, which are also known as collateralized obligations and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are not issued or guaranteed by the U.S. Government or its agencies or instrumentalities; however, the payment of principal and interest on such obligations may be guaranteed up to certain amounts and for a certain time period by a letter of credit issued by a financial institution (such as a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities may raise considerations peculiar to the financing of the instruments underlying such securities. For example, most organizations that issue asset-backed securities relating to motor vehicle installment purchase obligations perfect their interests in the respective obligations only by filing a financing statement and by having the servicer of the obligations, which is usually the originator, take custody thereof. In such circumstances, if the servicer were to sell the same obligations to another party, in violation of its duty not to do so, there is a risk that such party could acquire an interest in the obligations superior to that of the holders of the asset-backed securities. Also, although most of such obligations grant a security interest in the motor vehicle being financed, in most states the security interest in a motor vehicle must be noted on the certificate of title to perfect such security interest against competing claims of other parties. Due to the large number of vehicles involved, however, the certificate of title to each vehicle financed, pursuant to the obligations underlying the asset-backed securities, usually is not amended to reflect the assignment of the seller’s security interest for the benefit of the holders of the asset-backed securities. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. In addition, various state and Federal laws give the motor vehicle owner the right to assert against the holder of the owner’s obligation certain defenses such owner would have against the seller of the motor vehicle. The assertion of such defenses could reduce payments on the related asset-backed securities. Insofar as credit card receivables are concerned, credit card holders are entitled to the protection of a number of state and Federal consumer credit laws, many of which give such holders the right to set off certain amounts against balances owed on the credit card, thereby reducing the amounts paid on such receivables. In addition, unlike most other asset-backed securities, credit card receivables are unsecured obligations of the cardholder.
VI. Description of U.S. Government Securities and Certain Other Securities
The term “U.S. Government Securities” refers to a variety of securities which are issued or guaranteed by the United States Government, and by various agencies, authorities and instrumentalities which have been established or sponsored by the United States Government.
U.S. Treasury securities are backed by the “full faith and credit” of the United States. Securities issued or guaranteed by Federal agencies and U.S. Government sponsored enterprises or instrumentalities may or may not be backed by the full faith and credit of the United States. In the case of securities not backed by the full faith and credit of the United States, an investor must look principally to the agency, enterprise or instrumentality issuing or guaranteeing the obligation for ultimate repayment, and may not be able to assert a claim against the United States itself in the event the agency, enterprise or instrumentality does not meet its commitment. Agencies which are backed by the full faith and credit of the United States include the Export Import Bank, Farmers Home Administration, Federal Financing Bank and others. Certain agencies, enterprises and instrumentalities, such as the Government National Mortgage Association are, in effect, backed by the full faith and credit of the United States through provisions in their charters that they may make “indefinite and unlimited” drawings on the Treasury, if needed to service its debt. Debt from certain other agencies, enterprises and instrumentalities, including the Federal Home Loan Bank and Fannie Mae, are not guaranteed by the United States, but those institutions are protected by the discretionary authority for the U.S. Treasury to purchase certain amounts of their securities to assist the institution in meeting its debt obligations. Finally, other agencies, enterprises and instrumentalities, such as the Farm Credit System and the Freddie Mac, are federally chartered institutions under Government supervision, but their debt securities are backed only by the creditworthiness of those institutions, not the U.S. Government.
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Some of the U.S. Government agencies that issue or guarantee securities include the Export-Import Bank of the United States, Farmers Home Administration, Federal Housing Administration, Maritime Administration, Small Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency organized under Federal charter with Government supervision. Instrumentalities issuing or guaranteeing securities include, among others, Overseas Private Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit Banks, Fannie Mae and Freddie Mac.
On September 7, 2008, Fannie Mae and Freddie Mac were placed under the conservatorship of the FHFA. The long-term effect that this conservatorship will have on the securities issued or guaranteed by Fannie Mae and Freddie Mac is unclear. For more information about the conservatorship, see “Description of Mortgage-Backed Securities” above.
Investments in U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac may involve the risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
VII. Description of Municipal Obligations
Municipal Obligations generally include debt obligations issued by states and their political subdivisions, and duly constituted authorities and corporations, to obtain funds to construct, repair or improve various public facilities such as airports, bridges, highways, hospitals, housing, schools, streets and water and sewer works. Municipal Obligations may also be issued to refinance outstanding obligations as well as to obtain funds for general operating expenses and for loan to other public institutions and facilities.
Industrial revenue bonds in most cases are revenue bonds and generally do not have the pledge of the credit of the issuer. The payment of the principal and interest on such industrial revenue bonds is dependent solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. Short-term municipal obligations issued by states, cities, municipalities or municipal agencies, include Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan Notes and Short-Term Discount Notes. Project Notes are instruments guaranteed by the Department of Housing and Urban Development but issued by a state or local housing agency. While the issuing agency has the primary obligation on Project Notes, they are also secured by the full faith and credit of the United States.
Note obligations with demand or put options may have a stated maturity in excess of 13 months, but permit any holder to demand payment of principal plus accrued interest upon a specified number of days’ notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer of such notes normally has a corresponding right, after a given period, to repay in its discretion the outstanding principal of the note plus accrued interest upon a specific number of days’ notice to the bondholders. The interest rate on a demand note may be based upon a known lending rate, such as a bank’s prime rate, and be adjusted when such rate changes, or the interest rate on a demand note may be a market rate that is adjusted at specified intervals.
The yields of Municipal Obligations depend on, among other things, general money market conditions, conditions in the Municipal Obligation market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The ratings of Moody’s and S&P represent their opinions of the quality of the Municipal Obligations rated by them. It should be emphasized that such ratings are general and are not absolute standards of quality. Consequently, Municipal Obligations with the same maturity, coupon and rating may have different yields, while Municipal Obligations of the same maturity and coupon, but with different ratings may have the same yield.
Municipal Obligations are sometimes purchased on a “when issued” basis, which means the buyer has committed to purchase certain specified securities at an agreed upon price when they are issued. The period between commitment date and issuance date can be a month or more. It is possible that the securities will never be issued and the commitment cancelled.
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From time to time proposals have been introduced before Congress to restrict or eliminate the Federal income tax exemption for interest on Municipal Obligations. Similar proposals may be introduced in the future. If any such proposal were enacted, it might restrict or eliminate the ability of the High Yield Municipal, Muni Intermediate and Short Term Tax Aware Fixed Income Portfolios to achieve their investment objectives. In that event the Funds’ Board members and officers would reevaluate the High Yield Municipal, Muni Intermediate and Short Term Tax Aware Fixed Income Portfolios’ investment objectives and policies and consider recommending to their shareholders changes in such objectives and policies.
VIII. Foreign Investments
Investors should recognize that investing in foreign companies involves certain special considerations which are not typically associated with investing in U.S. companies. Because the stocks of foreign companies are frequently denominated in foreign currencies, and because the Equity Income, Quantitative U.S. Long/Short Equity, Strategic Equity, Quantitative International Equity, Global Secured Options, Responsible ESG U.S. Equity, Small Cap Equity, Quantitative U.S. Large Cap Core Equity, Quantitative U.S. Large Cap Growth Equity, Quantitative U.S. Large Cap Value Equity, Quantitative U.S. Small Cap Equity, Quantitative U.S. Total Market Equity and Women in Leadership U.S. Equity Portfolios may temporarily hold uninvested reserves in bank deposits in foreign currencies, these Portfolios may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, and may incur costs in connection with conversions between various currencies. The investment policies of the Global Secured Options Portfolio and Quantitative International Equity Portfolio permit the Portfolios to enter into forward foreign currency exchange contracts in order to hedge the Portfolio’s holdings and commitments against changes in the level of future currency rates. Such contracts involve an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards and they may have policies that are not comparable to those of domestic companies, there may be less information available about certain foreign companies than about domestic companies. Securities of some foreign companies are generally less liquid and more volatile than securities of comparable domestic companies. There is generally less government supervision and regulation of stock exchanges, brokers and listed companies than in the U.S. In addition, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect U.S. investments in foreign countries.
Although the Equity Income, Quantitative U.S. Long/Short Equity, Strategic Equity, Quantitative International Equity, Global Secured Options, Small Cap Equity, Quantitative U.S. Large Cap Core Equity, Quantitative U.S. Large Cap Growth Equity, Quantitative U.S. Large Cap Value Equity, Quantitative U.S. Small Cap Equity, Responsible ESG U.S. Equity, Quantitative U.S. Total Market Equity and Women in Leadership U.S. Equity Portfolios will endeavor to achieve most favorable execution costs in its portfolio transactions, commissions on many foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from the foreign companies comprising the Equity Income, Quantitative U.S. Long/Short Equity, Strategic Equity, Quantitative International Equity, Global Secured Options, Small Cap Equity, Quantitative U.S. Large Cap Core Equity, Quantitative U.S. Large Cap Growth Equity, Quantitative U.S. Large Cap Value Equity, Quantitative U.S. Small Cap Equity, Responsible ESG U.S. Equity, Quantitative U.S. Total Market Equity and Women in Leadership U.S. Equity Portfolios.
IX. Options
For the Quantitative U.S. Long/Short Equity Portfolio, Strategic Equity Portfolio, Global Secured Options Portfolio and Secured Options Portfolio, writing and purchase of options is a highly specialized activity which involves investment analysis and risks that are different from those associated with ordinary portfolio securities transactions.
Purchasing options to attempt to increase return through their price appreciation involves the risk of loss of option premium if the Advisor is incorrect in its expectation of the direction or magnitude of the change in securities prices. Writing options to seek to increase income in a Portfolio involves the risk of net loss (after receiving the option premium) if the Advisor is incorrect in its expectation of the direction or magnitude of the change in securities prices. The successful use of options for hedging purposes
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also depends in part on the degree of correlation between the option and a security or index of securities. If the Advisor is incorrect in its expectation of changes in securities prices or its estimation of the correlation between the option and a security index, the investment performance of a Portfolio will be less favorable than it would have been in the absence of such options transactions. The use of options may increase a Portfolio’s portfolio turnover rate. Higher rates of turnover may result in increased brokerage commissions, and could increase the amount of income received by a Portfolio that constitutes taxable capital gains. To the extent capital gains are realized, distributions from those gains may be ordinary income for Federal tax purposes.
Additionally, there is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange- traded option or option traded over-the-counter at any particular time. If a Portfolio is unable to effect a closing purchase transaction with respect to covered options it has written, the Portfolio will not be able to sell the underlying securities or dispose of segregated assets until the options expire or are exercised. Similarly, if the Portfolio is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of the underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (v) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
The Quantitative U.S. Long/Short Equity Portfolio, Strategic Equity Portfolio, Global Secured Options Portfolio and Secured Options Portfolio may purchase and sell both options that are traded on exchanges and options traded over-the-counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, each Portfolio will generally treat purchased over-the-counter options as illiquid investments and the assets used to cover over-the-counter options written by the Fund will be considered illiquid unless the over-the-counter options are sold to qualified dealers who agree that the Fund may repurchase any over-the-counter option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an over-the-counter option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.
X. Futures Contracts and Options on Futures Contracts.
To seek to increase total return or to hedge against changes in interest rates or securities prices, the Quantitative U.S. Long/Short Equity Portfolio, Global Secured Options Portfolio and Secured Options Portfolio may purchase and sell various kinds of futures contracts, and purchase and write call and put options on any of such futures contracts. A Portfolio may also enter into closing purchase and sale transactions with respect to any of such contracts and options. The futures contracts may be based on various securities, securities indices, and any other financial instruments and indices. A Portfolio will engage in futures and related options transactions for hedging purposes as described below or for purposes of seeking to increase total return, in each case, only to the extent permitted by regulations of the CFTC. All futures contracts entered into by a Portfolio are traded on U.S. exchanges or boards of trade that are licensed and regulated by the CFTC or on foreign exchanges.
Positions taken in the futures markets are not normally held to maturity but are instead liquidated through offsetting transactions, which may result in a profit or a loss. While futures contracts on securities will usually be liquidated in this manner, the Portfolio may instead make, or take, delivery of the underlying securities or currency whenever it appears economically advantageous to do so. A clearing corporation associated with the exchange on which futures on securities are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.
Hedging, by use of futures contracts, seeks to establish with more certainty than would otherwise be possible the effective price or rate of return on portfolio securities or securities that a Portfolio proposes to acquire or the exchange rate of currencies in which
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portfolio securities are quoted or denominated. A Portfolio may, for example, take a “short” position in the futures market by selling futures contracts to seek to hedge against an anticipated rise in interest rates or a decline in market prices that would adversely affect the value of the Portfolio’s portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by the Portfolio or securities with characteristics similar to those of the Portfolio’s portfolio securities. If, in the opinion of the Advisor, there is a sufficient degree of correlation between price trends for the Portfolio’s portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the Portfolio may also enter into such futures contracts as part of its hedging strategy. Although under some circumstances prices of securities in the Portfolio’s portfolio may be more or less volatile than prices of such futures contracts, the Advisor will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having the Portfolio enter into a greater or lesser number of futures contracts or by seeking to achieve only a partial hedge against price changes affecting the Portfolio’s portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the Portfolio’s portfolio securities would be substantially offset by a decline in the value of the futures position.
On other occasions, a Portfolio may take a “long” position by purchasing futures contracts. This would be done, for example, when the Portfolio anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices then available in the applicable market to be less favorable than prices that are currently available.
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Morningstar
Intermediate-Core Bond Average2 |
1 |
2 |
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6 |
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Shareholder
Fees
(fees
paid directly from your investment) |
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Maximum
Account Fee
(annual
percentage of assets under management)1 |
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1.25%
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Annual
Portfolio Operating Expenses
(expenses
that you pay each year as a percentage of the value of your investment) |
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Management
Fees |
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0.00%
|
Other
Expenses
(includes
0.15% shareholder servicing fees payable to Glenmede Trust) |
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0.25%
|
Total
Annual Portfolio Operating Expenses |
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|
0.25% |
1 |
Investors
in the Portfolio must be clients of The Glenmede Trust Company, N.A. (“Glenmede Trust”) or its affiliated companies (“Affiliates”).
The “Maximum Account Fee” in the above table is the current maximum annual fee that Glenmede Trust or its Affiliates would
charge its clients directly for fiduciary, trust and/or advisory services (e.g., personal trust, estate, advisory, tax and custodian services).
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1
Year |
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3
Years |
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5
Years |
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10
Years |
$26 |
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$80 |
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$141 |
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$318 |
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7 |
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8 |
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9 |
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Past
1
Year |
Past
5
Years |
Past
10
Years |
|||||||||
Return
Before Taxes |
4.47% |
1.73% |
1.86% |
||||||||
Return
After Taxes on Distributions |
4.46% |
1.61% |
1.78% |
||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
3.62% |
1.74% |
1.82% |
||||||||
Bloomberg
Municipal Bond Index2 (reflects no deduction for fees,
expenses
or taxes) |
6.40% |
2.25% |
3.03% |
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Bloomberg
Municipal 1-10 Year Blend Index (reflects no deduction for fees, expenses or taxes) |
4.60% |
1.96% |
2.19% |
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Morningstar
Muni National Intermediate Average3 |
5.61% |
1.88% |
2.30% |
1 |
In
certain cases, the Return After Taxes on Distribution and Sale of Fund Shares for a period may be higher than other return figures for
the same period. This will occur when a capital loss is realized upon the sale of fund shares and provides an assumed tax benefit that
increases the return. |
2 |
The
Bloomberg Municipal Bond Index is provided so that investors may compare the performance of the Portfolio with the performance
of a broad-based index that represents the overall municipal securities market. |
3 |
The
Morningstar Muni National Intermediate Average is provided so that investors may compare
the performance of the Portfolio with the performance of a peer group of funds that Morningstar, Inc. considers similar to the
Portfolio. |
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10 |
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Management
Fees |
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Other
Expenses
(includes
0.10% shareholder servicing fees payable to The Glenmede Trust Company, N.A.) |
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Total
Annual Portfolio Operating Expenses |
|||
Fee
Waivers and Expense Reimbursements1 |
|||
Net
Expenses |
1 |
Glenmede
Investment Management LP (the “Advisor”) has contractually agreed to waive
its fees and/or reimburse expenses to the extent that the Portfolio’s annual total operating expenses exceed 0.55% of the
Portfolio’s average daily net assets (excluding Acquired Fund fees and expenses, brokerage commissions, extraordinary items,
interest and taxes). The Advisor has contractually agreed to these waivers and/or reimbursements until at least February 28,
2025 and may discontinue this arrangement at any time thereafter. This contractual fee waiver agreement may not be terminated
before |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
$ |
$ | ||||||
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11 |
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12 |
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13 |
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14 |
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15 |
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Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Bloomberg
Municipal Bond Index2 (reflects no deduction for fees, expenses or taxes) |
|||||||||||
ICE
BofAML 1-3 Year U.S. Municipal Securities Index
(reflects
no deduction for fees, expenses or taxes) |
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Morningstar
Muni National Short Average3 |
1 |
2 |
3 |
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16 |
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|||
Management
Fees |
|||
Other
Expenses
(includes
0.15% shareholder servicing fees payable to Glenmede Trust) |
|||
Total
Annual Portfolio Operating Expenses |
1 |
1
Year |
3
Years |
5
Years |
10
Years | ||||||
$ |
$ |
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|
17 |
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18 |
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19 |
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Past
1
Year |
Past
5
Years |
Since
Inception
( ) |
|||||||||
Return
Before Taxes |
|||||||||||
Return
After Taxes on Distributions |
|||||||||||
Return
After Taxes on Distributions and Sale of Fund Shares1 |
|||||||||||
Bloomberg
Municipal Bond Index2 (reflects no deduction for fees, expenses or taxes) |
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Bloomberg
Muni High Yield 5% Tobacco Cap 2% Issuer Cap Index
(reflects
no deduction for fees, expenses or taxes) |
|||||||||||
Blended
Index (reflects no deduction for fees, expenses or taxes)3 |
N/A |
||||||||||
Morningstar
High Yield Muni Average4 |
|
20 |
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1 |
2 |
3 |
4 |
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21 |
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22 |
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23 |
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24 |
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25 |
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26 |
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27 |
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28 |
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29 |
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• |
Interest Rate Swaps,
Swaptions, Caps and Floors. Interest rate swaps involve the exchange by the Portfolio with another party of payments calculated by
reference to specified interest rates (e.g., an exchange of floating-rate payments for fixed-rate payments). Unless there is a counterparty
default, the risk of loss to the High Yield Municipal Portfolio from interest rate swap transactions is limited to the net amount of interest
payments that the Portfolio is contractually obligated to make. If the counterparty to an interest rate swap transaction defaults, the
High Yield Municipal Portfolio’s risk of loss consists of the net amount of interest payments that the Portfolio contractually is
entitled to receive. |
• |
Inflation (CPI) Swaps.
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer
Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded
fixed rate. Inflation swap agreements may be used to protect the NAV of the High Yield Municipal Portfolio against an unexpected change
in the rate of inflation measured by an inflation index since the value of these agreements may be expected to increase if inflation increases.
The Portfolio will enter into inflation swaps on a net basis. The values of inflation swap agreements are expected to change in response
to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation.
If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, leading to a decrease in value of an
inflation swap agreement. |
• |
Credit Default Swap Agreements.
The “buyer” in a credit default swap contract is obligated to pay the “seller” a periodic stream of payments over
the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference
obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or restructuring. A Portfolio may be either
the buyer or seller in the transaction. As a seller, a Portfolio receives a fixed rate of income throughout the term of the contract,
which typically is between one month and ten years, provided that no credit event occurs. If a credit event occurs, a Portfolio, as seller,
typically must pay the contingent payment to the buyer, which will be either (i) the “par value” (face amount) of the reference
obligation in which case the Portfolio will receive the reference obligation in return or (ii) an amount equal to the difference between
the face amount and the current market value of the reference |
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30 |
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31 |
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32 |
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33 |
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34 |
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35 |
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36 |
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37 |
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38 |
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39 |
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For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 9.16 | $ | 11.11 | $ | 11.71 | $ | 11.31 | $ | 10.49 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.23 | 0.18 | 0.14 | 0.21 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.30 | ) | (1.92 | ) | (0.36 | ) | 0.44 | 0.83 | ||||||||||||
Total from investment operations | (0.07 | ) | (1.74 | ) | (0.22 | ) | 0.65 | 1.08 | ||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.24 | ) | (0.21 | ) | (0.20 | ) | (0.25 | ) | (0.26 | ) | ||||||||||
Net realized capital gains | — | (0.00 | )2 | (0.18 | ) | — | — | |||||||||||||
Total distributions | (0.24 | ) | (0.21 | ) | (0.38 | ) | (0.25 | ) | (0.26 | ) | ||||||||||
Net asset value, end of year | $ | 8.85 | $ | 9.16 | $ | 11.11 | $ | 11.71 | $ | 11.31 | ||||||||||
Total return | (0.90 | )% | (15.80 | )% | (1.91 | )% | 5.82 | % | 10.46 | % | ||||||||||
Ratios to average net assets | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 365,032 | $ | 319,773 | $ | 424,512 | $ | 436,975 | $ | 505,603 | ||||||||||
Ratio of operating expenses to average net assets | 0.55 | % | 0.54 | % | 0.54 | % | 0.54 | % | 0.53 | % | ||||||||||
Ratio of net investment income to average net assets | 2.50 | % | 1.72 | % | 1.27 | % | 1.78 | % | 2.30 | % | ||||||||||
Portfolio turnover rate | 13 | % | 28 | % | 24 | % | 52 | % | 36 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
Amount
rounds to less than $0.01 per share. |
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40 |
|
For the Year Ended October 31, | ||||||||||||||||||||
20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 10.13 | $ | 11.19 | $ | 11.41 | $ | 11.25 | $ | 10.73 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.24 | 0.16 | 0.16 | 0.20 | 0.22 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.03 | ) | (0.99 | ) | (0.09 | ) | 0.21 | 0.52 | ||||||||||||
Total from investment operations | 0.21 | (0.83 | ) | 0.07 | 0.41 | 0.74 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.23 | ) | (0.16 | ) | (0.17 | ) | (0.21 | ) | (0.22 | ) | ||||||||||
Net realized capital gains | — | (0.07 | ) | (0.12 | ) | (0.04 | ) | — | ||||||||||||
Total distributions | (0.23 | ) | (0.23 | ) | (0.29 | ) | (0.25 | ) | (0.22 | ) | ||||||||||
Net asset value, end of year | $ | 10.11 | $ | 10.13 | $ | 11.19 | $ | 11.41 | $ | 11.25 | ||||||||||
Total return | 2.02 | % | (7.51 | )% | 0.60 | % | 3.64 | % | 6.90 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 311,153 | $ | 221,907 | $ | 336,064 | $ | 321,939 | $ | 311,319 | ||||||||||
Ratio of operating expenses to average net assets | 0.25 | % | 0.25 | % | 0.24 | % | 0.25 | % | 0.24 | % | ||||||||||
Ratio of net investment income to average net assets | 2.29 | % | 1.52 | % | 1.45 | % | 1.80 | % | 1.94 | % | ||||||||||
Portfolio turnover rate | 47 | % | 61 | % | 31 | % | 35 | % | 34 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
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41 |
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20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 9.67 | $ | 10.09 | $ | 10.16 | $ | 10.07 | $ | 9.90 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.16 | 0.08 | 0.08 | 0.11 | 0.13 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.07 | (0.42 | ) | (0.06 | ) | 0.09 | 0.17 | |||||||||||||
Total from investment operations | 0.23 | (0.34 | ) | 0.02 | 0.20 | 0.30 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.16 | ) | (0.08 | ) | (0.09 | ) | (0.11 | ) | (0.13 | ) | ||||||||||
Total distributions | (0.16 | ) | (0.08 | ) | (0.09 | ) | (0.11 | ) | (0.13 | ) | ||||||||||
Net asset value, end of year | $ | 9.74 | $ | 9.67 | $ | 10.09 | $ | 10.16 | $ | 10.07 | ||||||||||
Total return2 | 2.41 | % | (3.40 | )% | 0.15 | % | 1.96 | % | 3.03 | % | ||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 36,896 | $ | 56,963 | $ | 56,284 | $ | 53,525 | $ | 50,939 | ||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | 0.69 | % | 0.62 | % | 0.64%3 | 0.63%3 | 0.66%3 | |||||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | 0.55 | %4 | 0.55%4 | 0.55%3,4 | 0.55%3 | 0.55%3 | ||||||||||||||
Ratio of net investment income to average net assets | 1.68 | % | 0.84 | % | 0.77 | % | 1.08 | % | 1.33 | % | ||||||||||
Portfolio turnover rate | 45 | % | 56 | % | 25 | % | 59 | % | 25 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
3 |
This
ratio does not include the expenses for any exchange-traded funds and registered investment companies held in the Portfolio. |
4 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense was 0.55%, 0.55% and 0.55% for the years
ended October 31, 2023, 2022 and 2021, respectively. |
|
42 |
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20231 | 20221 | 20211 | 20201 | 20191 | ||||||||||||||||
Net asset value, beginning of year | $ | 8.94 | $ | 11.09 | $ | 10.65 | $ | 10.84 | $ | 10.16 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.35 | 0.28 | 0.27 | 0.30 | 0.31 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | (2.06 | ) | 0.44 | (0.19 | ) | 0.68 | ||||||||||||
Total from investment operations | 0.13 | (1.78 | ) | 0.71 | 0.11 | 0.99 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||
Net investment income | (0.36 | ) | (0.29 | ) | (0.27 | ) | (0.30 | ) | (0.31 | ) | ||||||||||
Net realized capital gains | — | (0.08 | ) | (0.00 | )2 | — | — | |||||||||||||
Total distributions | (0.36 | ) | (0.37 | ) | (0.27 | ) | (0.30 | ) | (0.31 | ) | ||||||||||
Net asset value, end of year | $ | 8.71 | $ | 8.94 | $ | 11.09 | $ | 10.65 | $ | 10.84 | ||||||||||
Total return | 1.26 | % | (16.42)%3 | 6.68%3 | 1.09%3 | 9.90%3 | ||||||||||||||
Ratios to average net assets/Supplemental data: | ||||||||||||||||||||
Net assets, at end of year (in 000s) | $ | 155,383 | $ | 156,810 | $ | 282,512 | $ | 232,783 | $ | 215,419 | ||||||||||
Ratio of operating expenses to average net assets | 0.89%4 | —% | —% | —% | —% | |||||||||||||||
Ratio of operating expenses before waiver/reimbursement to average net assets | —% | 0.98 | % | 1.01 | % | 1.02 | % | 1.00 | % | |||||||||||
Ratio of operating expenses after waiver/reimbursement to average net assets | —% | 0.96%5,6 | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||||
Ratio of net investment income to average net assets | 3.74 | % | 2.76 | % | 2.40 | % | 2.85 | % | 2.95 | % | ||||||||||
Portfolio turnover rate | 25 | % | 28 | % | 19 | % | 28 | % | 27 | % |
1 |
Per
share net investment income (loss) has been calculated using the average shares outstanding during the period. |
2 |
Amount
rounds to less than $0.01 per share. |
3 |
The
Total Return reflects fee waivers and/or expense reimbursements in effect and would have been lower in their absence. |
4 |
The
ratio of operating expenses excluding interest expense was 0.89% for the year ended October 31, 2023. |
5 |
Effective
May 9, 2022, the management fee payable to the Advisor was reduced from 0.65% to 0.57% of the Portfolio’s average
daily net assets. See Note 3. |
6 |
The
ratio of operating expenses after waiver/reimbursement excluding interest expense was 0.95% for the year ended October 31, 2022.
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(i) |
State Street, in connection with the provision
of services as the Funds’ custodian, administrator, transfer agent, securities lending agent and short sales lending agent; |
(ii) |
Third-party providers of proxy voting services,
such as Institutional Shareholder Services Inc. (“ISS”) and mailing services such as Broadridge Financial Solutions, Inc.
(“Broadridge”); |
(iii) |
Cohen &
Company, Ltd., the Funds’ independent registered public accountant, in connection with the provision of services related
to the audit of the Funds’ financial statements and certain non-audit services; |
(iv) |
Third-party providers of pricing/analytical/reconciliation
services, such as FT Interactive Data Corporation, FactSet, Bloomberg Valuation Service (BVAL) and Electra Information Systems; |
(v) |
Ratings and ranking organizations, such as Morningstar,
Inc. and Lipper/Thomson Reuters; |
(vi) |
Faegre Drinker Biddle & Reath LLP, in connection
with the provision of services as legal counsel to the Funds; |
(vii) |
Foreside Financial Group, LLC in connection with
the provision of services related to the Funds’ compliance program; |
(viii) |
Barclays Capital Inc., BTIG LLC, J.P. Morgan Securities
LLC and its affiliates, Goldman Sachs Execution and Clearing LP and Goldman, Sachs & Co., in connection with the performance of brokerage
and options trading and related functions; and |
(ix) |
Third-party financial printers, such as Broadridge
Financial Solutions. |
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30 |
|
(1) |
invest in commodities or commodity contracts,
except that each Portfolio may invest in futures contracts and options; |
(2) |
purchase or sell real estate, although it may
purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests
in real estate; |
(3) |
make loans, except (i) by purchasing bonds, debentures
or similar obligations (including repurchase agreements, subject to the limitation described in investment limitation (9) below, and money
market instruments, including bankers’ acceptances and commercial paper, and selling securities on a when issued, delayed settlement
or forward delivery basis) which are publicly or privately distributed, and (ii) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not inconsistent with the 1940 Act or the rules and regulations or
interpretations of the SEC thereunder; |
(4) |
purchase on margin or sell short, except as specified
above in investment limitation (1); |
(5) |
purchase more than 10% of any class of the outstanding
voting securities of any issuer; |
(6) |
issue senior securities, except that a Portfolio
may borrow money in accordance with investment limitation (7) below, purchase securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements; |
(7) |
borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then not in excess of 10% of its total assets at the time of the borrowing (entering into reverse
repurchase agreements and purchasing securities on a when issued, delayed settlement or forward delivery basis are not subject to this
investment limitation); |
(8) |
pledge, mortgage, or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectus and this SAI and in connection
with entering into futures contracts, but the deposit of assets in a segregated account in connection with the writing of covered put
and call options and the purchase of securities on a when issued, delayed settlement or forward delivery basis and collateral arrangements
with respect to initial or variation margin for futures contracts will not be deemed to be pledges of a Portfolio’s assets or the
purchase of any securities on margin for purposes of this investment limitation; |
(9) |
underwrite the securities of other issuers or
invest more than an aggregate of 10% of the total assets of the Portfolio, at the time of purchase, in securities for which there are
no readily available markets, including repurchase agreements which have maturities of more than seven days or, in the case of each Portfolio,
securities subject to legal or contractual restrictions on resale; |
(10) |
invest for the purpose of exercising control over
management of any company; |
(11) |
invest its assets in securities of any investment
company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940
Act; |
|
31 |
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(12) |
acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s total assets would be invested in securities
of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities; and |
(13) |
write or acquire options or interests in oil,
gas or other mineral exploration or development programs. Each Portfolio also will not: |
(14) |
with respect to 75% of its total assets, invest
more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities). |
(1) |
invest in commodities or commodity contracts,
except that each Portfolio may invest in futures contracts and options; |
(2) |
purchase or sell real estate, although it may
purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests
in real estate; |
(3) |
make loans, except (i) by purchasing bonds, debentures
or similar obligations (including repurchase agreements, subject to the limitation described in investment limitation (9) below, and money
market instruments, including bankers’ acceptances and commercial paper, and selling securities on a when issued, |
|
32 |
|
(4) |
purchase on margin or sell short, except as specified
above in investment limitation (1); |
(5) |
purchase more than 10% of any class of the outstanding
voting securities of any issuer; |
(6) |
issue senior securities, except that a Portfolio
may borrow money in accordance with investment limitation (7) below, purchase securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements; |
(7) |
borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then not in excess of 10% of its total assets at the time of the borrowing (entering into reverse
repurchase agreements and purchasing securities on a when issued, delayed settlement or forward delivery basis are not subject to this
investment limitation); |
(8) |
pledge, mortgage, or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectuses and this SAI and in connection
with entering into futures contracts, but the deposit of assets in a segregated account in connection with the writing of covered put
and call options and the purchase of securities on a when issued, delayed settlement or forward delivery basis and collateral arrangements
with respect to initial or variation margin for futures contracts will not be deemed to be pledges of a Portfolio’s assets or the
purchase of any securities on margin for purposes of this investment limitation; |
(9) |
underwrite the securities of other issuers or
invest more than an aggregate of 15% of the total assets of the Portfolio, at the time of purchase, in securities for which there are
no readily available markets, including repurchase agreements which have maturities of more than seven days or, in the case of each Portfolio,
securities subject to legal or contractual restrictions on resale; |
(10) |
invest for the purpose of exercising control over
management of any company; |
(11) |
invest its assets in securities of any investment
company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940
Act; |
(12) |
acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s net assets would be invested in securities
of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities; and |
(13) |
write or acquire options or interests in oil,
gas or other mineral exploration or development programs. |
(14) |
with respect to 75% of its total assets, invest
more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities). |
|
33 |
|
(1) |
invest in commodities or commodity contracts,
except that the Portfolio may invest in futures contracts, options, swaps and other derivative instruments; |
(2) |
purchase or sell real estate, although it may
purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests
in real estate; |
(3) |
make loans, except (1) by purchasing bonds, debentures
or similar obligations (including repurchase agreements and money market instruments, including bankers’ acceptances and commercial
paper, and selling securities on a when issued, delayed settlement or forward delivery basis) which are publicly or privately distributed,
and (2) by lending its portfolio securities to banks, brokers, dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder; |
(4) |
purchase more than 10% of any class of the outstanding
voting securities of any issuer; |
(5) |
issue senior securities to the extent such issuance
would violate applicable law; |
(6) |
borrow money, except (1) as a temporary measure
for extraordinary or emergency purposes, and then not in excess of 10% of its total assets at the time of the borrowing (entering into
reverse repurchase agreements, and purchasing securities on a when issued, delayed settlement or forward delivery basis are not subject
to this investment limitation), (2) the Portfolio may obtain such short-term credits as may be necessary for the clearance of purchases
and sales of portfolio securities, and (3) the Portfolio may purchase securities on margin to the extent permitted by applicable law.
Derivative transactions such as options, futures contracts and swaps are not considered to involve borrowings of money and are not subject
to these restrictions; |
(7) |
pledge, mortgage, or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectus and this SAI and in connection
with entering into futures contracts, but the deposit of assets in a segregated account in connection with futures, swaps, put and call
options and the purchase of securities on a when issued, delayed settlement or forward delivery basis or other permitted investment techniques
and collateral arrangements with respect to initial or variation margin for such transactions will not be deemed to be pledges or other
encumbrance of the Portfolio’s assets or the purchase of any securities on margin for purposes of this investment limitation; |
(8) |
invest for the purpose of exercising control over
management of any company; |
(9) |
invest its assets in securities of any investment
company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940
Act; |
(10) |
acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s total assets would be invested in securities
of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities; |
(11) |
invest in interests in oil, gas or other mineral
exploration or development programs; |
(12) |
with respect to 75% of its total assets, invest
more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities); and |
|
34 |
|
(13) |
underwrite the securities of other issuers, except
to the extent that the sale of portfolio securities by the Portfolio may be deemed to be an underwriting. |
(a) |
invest in commodities or commodity contracts,
except that each Portfolio may invest in futures contracts, options, swaps and other derivative instruments; |
(b) |
purchase or sell real estate, although it may
purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests
in real estate; |
(c) |
make loans, except (1) by purchasing bonds, debentures
or similar obligations (including repurchase agreements, subject to the limitation described in investment limitation (h) below, and money
market instruments, including bankers’ acceptances and commercial paper, and selling securities on a when issued, delayed settlement
or forward delivery basis) which are publicly or privately distributed, and (2) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not inconsistent with the 1940 Act or the rules and regulations or
interpretations of the SEC thereunder; |
(d) |
purchase more than 10% of any class of the outstanding
voting securities of any issuer; |
(e) |
issue senior securities to the extent such issuance
would violate applicable law; |
(f) |
borrow money, except (1) each Portfolio, to the
extent permitted by applicable law, may borrow from banks (as defined in the 1940 Act), other affiliated investment companies and other
persons, enter into reverse repurchase agreements, and purchase securities on a when issued, delayed settlement or forward delivery basis
in amounts up to 33⅓% of its total assets (including the amount borrowed), (2) each Portfolio may, to the extent permitted by applicable
law, borrow up to an additional 5% of its total assets for temporary purposes, (3) each Portfolio may obtain such short-term credits as
may be necessary for the clearance of purchases and sales of portfolio securities, and (4) each Portfolio may purchase securities on margin
to the extent permitted by applicable law. Short sales of securities as well as other derivative transactions such as futures contracts
and swaps are not considered to involve borrowings of money and are not subject to these restrictions; |
(g) |
pledge, mortgage, or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectus and this SAI and in connection
with entering into futures contracts, but the deposit of assets in a segregated account in connection with short sales, swaps, borrowings,
the writing of covered put and call options and the purchase of securities on a when issued, delayed settlement or forward delivery basis
or other permitted investment techniques and collateral arrangements with respect to initial or variation margin for such transactions
will not be deemed to be pledges or other encumbrance of a Portfolio’s assets or the purchase of any securities on margin for purposes
of this investment limitation; |
(h) |
invest for the purpose of exercising control over
management of any company; |
|
35 |
|
(i) |
invest its assets in securities of any investment
company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940
Act; |
(j) |
acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s total assets would be invested in securities
of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities; |
(k) |
write or acquire options or interests in oil,
gas or other mineral exploration or development programs; |
(l) |
with respect to 75% of its total assets, invest
more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities); and |
(m) |
underwrite the securities of other issuers, except
to the extent that the sale of portfolio securities by the Portfolio may be deemed to be an underwriting. |
(1) |
with respect to limitation (j), invest more than
25% of the value of its total assets in instruments issued by U.S. banks; or |
(2) |
invest more than an aggregate of 15% of the net
assets of the Portfolio, at the time of purchase, in illiquid securities. |
(1) |
invest in commodities or commodity contracts,
except that the Portfolio may invest in futures contracts, options, swaps and other derivative instruments; |
(2) |
purchase or sell real estate, although it may
purchase and sell securities of companies which deal in real estate and may purchase and sell securities which are secured by interests
in real estate; |
(3) |
make loans, except (1) by purchasing bonds, debentures
or similar obligations (including repurchase agreements and money market instruments, including bankers’ acceptances and commercial
paper, and selling securities on a when issued, delayed settlement or forward delivery basis) which are publicly or privately distributed,
and (2) by lending its portfolio securities to banks, brokers, dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder; |
(4) |
purchase more than 10% of any class of the outstanding
voting securities of any issuer; |
(5) |
issue senior securities to the extent such issuance
would violate applicable law; |
|
36 |
|
(6) |
borrow money, except (1) as a temporary measure
for extraordinary or emergency purposes, and then not in excess of 10% of its total assets at the time of the borrowing (entering into
reverse repurchase agreements, and purchasing securities on a when issued, delayed settlement or forward delivery basis are not subject
to this investment limitation), (2) the Portfolio may obtain such short-term credits as may be necessary for the clearance of purchases
and sales of portfolio securities, and (3) the Portfolio may purchase securities on margin to the extent permitted by applicable law.
Derivative transactions such as options, futures contracts and swaps are not considered to involve borrowings of money and are not subject
to these restrictions; |
(7) |
pledge, mortgage, or hypothecate any of its assets
to an extent greater than 10% of its total assets at fair market value, except as described in the Prospectus and this SAI and in connection
with entering into futures contracts, but the deposit of assets in a segregated account in connection with futures, swaps, put and call
options and the purchase of securities on a when issued, delayed settlement or forward delivery basis or other permitted investment techniques
and collateral arrangements with respect to initial or variation margin for such transactions will not be deemed to be pledges or other
encumbrance of the Portfolio’s assets or the purchase of any securities on margin for purposes of this investment limitation; |
(8) |
invest for the purpose of exercising control over
management of any company; |
(9) |
invest its assets in securities of any investment
company, except in connection with mergers, acquisitions of assets or consolidations and except as may otherwise be permitted by the 1940
Act; |
(10) |
acquire any securities of companies within one
industry if, as a result of such acquisition, more than 25% of the value of the Portfolio’s total assets would be invested in securities
of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities; |
(11) |
invest in interests in oil, gas or other mineral
exploration or development programs; |
(12) |
with respect to 75% of its total assets, invest
more than 5% of its total assets at the time of purchase in the securities of any single issuer (other than obligations issued or guaranteed
by the U.S. Government, its agencies, enterprises or instrumentalities); and |
(13) |
underwrite the securities of other issuers, except
to the extent that the sale of portfolio securities by the Portfolio may be deemed to be an underwriting. |
(a) |
with respect to limitation (10), invest more than
25% of the value of its total assets in instruments issued by U.S. banks; or |
(b) |
invest more than an aggregate of 15% of the net
assets of the Portfolio, at the time of purchase, in illiquid securities. |
|
37 |
|
|
38 |
|
Name
and Year of Birth |
Positions
with the
Funds
and Time
Served |
Principal
Occupations(s)
During
Past 5 Years |
Number
of
Portfolios
in
Fund
Complex
Overseen |
Other
Director-
ships
Held
During
Past
5 Years | ||||||||
Interested
Directors/Trustees (2) | ||||||||||||
Susan
W. Catherwood (2) Year of Birth: 1943 |
Director
of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) |
Director
(since 1988) and Member of the Investment Review/
Relationship
Oversight Committee (since 2001), Compensation Committee (since 1993) and Nominating Committee (since 2018), Glenmede Trust; Director,
The Glenmede Corporation (since 1988); Board Member, The Pew Charitable Trusts; Charter Trustee, The University of Pennsylvania; Chairman
Emeritus, The University Museum of The University of Pennsylvania; Chairman of the Board of Managers, The Christopher Ludwick Foundation;
Board Member, Monell Chemical Senses Center; Director: Thomas Skelton Harrison Foundation and The Catherwood Foundation; Fellow and serves
on Finance and Investment Committees, and former Board member, College of Physicians of Philadelphia; Former Member and Chair, The Women’s
Committee and Penn Museum Board of Overseers of the University of Pennsylvania; Former Board Chair, University of Pennsylvania Health
System
(1991-1999). |
18 |
None | ||||||||
Mary
Ann B. Wirts (2)
Year
of Birth: 1951 |
Director
of Glenmede Fund (since June 2020) and Trustee of Glenmede Portfolios (since June 2020) |
Managing
Director and Chief Administrative Officer of Glenmede Trust (until 2020); Managing Director and Chief Administrative Officer of Glenmede
Investment Management LP (2006-2020); First Vice President and Managing Director of Fixed Income of Glenmede Advisers (2000-2006). |
18 |
None | ||||||||
(2) |
Interested Directors/Trustees are those Directors/Trustees
who are “interested persons” of the Funds as defined in the 1940 Act. Susan W. Catherwood and Mary Ann B. Wirts are considered
to be “interested” Director/Trustees of the Funds because of their current or prior
affiliations with Glenmede Trust, the parent company of the Funds’ investment advisor, GIM, and/or their stock ownership in The
Glenmede Corporation, of which GIM is an affiliate. |
|
39 |
|
Name
and Year of Birth |
Positions
with the
Funds
and Time
Served |
Principal
Occupations(s)
During
Past 5 Years |
Number
of
Portfolios
in
Fund
Complex
Overseen |
Other
Director-
ships
Held
During
Past
5 Years | ||||||||
Independent
Directors/Trustees (1) | ||||||||||||
Andrew
Phillips
Year
of Birth: 1962 |
Director
of Glenmede Fund and Trustee of Glenmede Portfolios (since September 2022) |
Adjunct
Professor - College of Management (since 2021), Long Island University; Senior Performance Officer (2013 - 2015), Global Head of Institutional
and Alternatives Product Strategy
(2012
- 2013), Global Chief Performance Officer (2010 - 2012), Global Chief Operating Officer (2007 - 2010) and Managing Director - Americas
Fixed Income Executive Team, BlackRock, Inc. |
18 |
None | ||||||||
H.
Franklin Allen, Ph.D.
Year
of Birth: 1956 |
Director
of Glenmede Fund (since March 1991) and Trustee of Glenmede Portfolios (since May 1992) |
Vice
Dean Research and Faculty of the Imperial College Business School (since 2019), Professor of Finance and Economics and Executive Director
of the Brevan Howard Centre for Financial Analysis at the Imperial College London (since 2014); Professor Emeritus of Finance, The Wharton
School of The University of Pennsylvania since June 2016; Professor of Finance and Economics (1990-1994); Vice Dean and Director
of Wharton Doctoral Programs (1990-1993); Employed by The University of Pennsylvania (from 1980-2016). |
18 |
None | ||||||||
William
L. Cobb, Jr.
Year
of Birth: 1947 |
Director
of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) Chairman of the Funds (since December 2021) |
Former
Executive Vice President and Former Chief Investment Officer, The Church Pension Fund (defined benefit plan for retired clergy of the
Episcopal Church) (1999-2014); Chair and Member, Investment Committee, The Minister and Missionaries Benefit Board of the American Baptist
Church (until 2013); Vice Chairman, J.P. Morgan Investment Management (1994 - 1999). |
18 |
Director,
TCW Direct Lending LLC None | ||||||||
|
40 |
|
Name
and Year of Birth |
Positions
with the
Funds
and Time
Served |
Principal
Occupations(s)
During
Past 5 Years |
Number
of
Portfolios
in
Fund
Complex
Overseen |
Other
Director-
ships
Held
During
Past
5 Years | ||||||||
Rebecca
E. Duseau
Year
of Birth: 1963 |
Director
of Glenmede Fund and Trustee of Glenmede Portfolios (since December 2023) |
Cofounder
and Chief Compliance Officer (since 2000), Adamas Partners, LLC (investment firm); Chair of Investment Advisory Board (since 2020) for
Boston Family Advisors (multi-family office); Member of Investment Committees of Mass General Brigham (hospital) (since 2019) and Berklee
School of Music (since 2019); Chair of the Investment Committee and Member of the Finance Committee, Museum of Science (since 2023). |
18 |
None | ||||||||
Harry
Wong Year of Birth: 1948 |
Director
of Glenmede Fund and Trustee of Glenmede Portfolios (since February 2007) |
Former
Managing Director, Knight Capital Americas, L.P., an operating subsidiary of Knight Capital Group Inc. (investment banking) (2009 - 2011);
Managing Director, Long Point Advisors, LLC (business consulting) (2003 - 2012); Managing Director, BIO-IB LLC (healthcare investment
banking) (2004-2009) Senior Managing Director, ABN AMRO (investment banking)
(1990-2002);
Adjunct Faculty Member, Sacred Heart University (2003- 2007). |
18 |
None | ||||||||
(1) |
Independent Directors/Trustees are those Directors/Trustees
who are not “interested persons” of the Funds as defined in the 1940 Act. |
|
41 |
|
Name,
Address and
Year
of Birth |
Positions
Held with
the
Funds/Time Served |
Principal
Occupation(s) During Past 5 Years | ||||
Kent
E. Weaver, Jr.
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103
Year
of Birth: 1967 |
President
of the Funds since November 2019. |
President
of Glenmede Investment Management LP (since 2021); Director of Client Service of Glenmede Investment Management LP (July 2015-2021);
Former Director of Client Service and Sales, Chief Compliance Officer of Philadelphia International Advisors, LP (2002-June 2015). | ||||
Kimberly
C. Osborne
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103
Year
of Birth: 1966 |
Executive
Vice President of the Funds since December 1997; Assistant Treasurer of the Funds since December 2020. |
Client
Service Manager of Glenmede Investment Management LP (since 2006). Vice President of Glenmede Trust and Glenmede Advisers until 2008.
Employed by Glenmede Trust 1993-2008 and Glenmede Advisers 2000-2008. | ||||
Christopher
E. McGuire
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103
Year
of Birth: 1973 |
Treasurer
of the Funds since December 2019. |
Director
of Administration of Glenmede Investment Management LP (since October 2019); Managing Director, State Street Bank and Trust Company
(from 2007-October 2019). | ||||
Michael
P. Malloy
One
Logan Square, Suite 2000
Philadelphia,
PA 19103-6996
Year
of Birth: 1959 |
Secretary
of the Funds since January 1995. |
Partner
in the law firm of Faegre Drinker Biddle & Reath LLP. | ||||
Eimile
J. Moore
3
Canal Plaza, Suite
100,
3rd Floor Portland, ME 04101
Year
of Birth: 1969 |
Chief
Compliance Officer of the Funds since December 2017. |
Senior
Principal Consultant (Since 2011). | ||||
Daniel
P. Bulger
1650
Market Street,
Suite,
1200
Philadelphia,
PA 19103
Year
of Birth: 1966 |
Assistant
Secretary of the Funds since December 2022. |
Vice
President and Counsel, State Street Bank and Trust Company (2016-present). | ||||
Rebecca
Tran Savage
1650
Market Street,
Suite,
1200
Philadelphia,
PA 19103
Year
of Birth: 1981 |
Assistant
Secretary of the Funds since December 2022. |
Assistant
Vice President and Associate Counsel, State Street Bank and Trust Company (May 2022-present). | ||||
|
42 |
|
|
|
|
|
H.
Franklin Allen, Ph.D.: |
|
|
Dr. Allen
has substantial experience in the areas of finance and economics through his educational background and position for many years as a professor
of finance and economics at The Wharton School of The University of Pennsylvania and most recently as Vice Dean of Research and Faculty
of the Imperial College London Business School and Professor of Finance and Economics and Director of the Brevan Howard Centre for Financial
Analysis at the Imperial College London. |
Susan
W. Catherwood: |
|
|
Ms.
Catherwood has substantial business, finance and investment management experience through her board and committee positions with the parent
companies of the Advisor and her board and/or executive positions with academic entities, charitable foundations and companies. |
William
L. Cobb, Jr.: |
|
|
Mr. Cobb
has substantial investment management and business experience through his senior executive, chief investment officer and/or investment
committee positions with private and non-profit entities, as a senior executive officer of a global investment management firm and most
recently as a board member of a business development company. |
Rebecca
E. Duseau |
|
|
Ms. Duseau
has substantial investment management, compliance, risk management and business experience as a co-founder and executive of an investment
management firm. |
Andrew
Phillips: |
|
|
Mr. Phillips
has substantial investment management and business experience through his executive positions with a major investment management firm. |
Mary
Ann B. Wirts: |
|
|
Ms. Wirts
has substantial business, financial services and investment management experience through her senior executive positions with the Advisor
and its parent companies. |
Harry
Wong: |
|
|
Mr. Wong
has substantial finance, investment banking and capital markets experience through his positions as an executive in investment banking
businesses. |
|
|
|
|
|
43 |
|
|
44 |
|
Name
of Director/Trustee |
Dollar
Range of Equity Securities in
each
Portfolio of each Fund |
Aggregate
Dollar Range of Equity
Securities
in All Portfolios in the
Fund
Complex | |||||||
Interested
Directors/Trustees | |||||||||
Susan
W. Catherwood |
None |
|
None | ||||||
Mary
Ann B. Wirts |
Core
Fixed Income Portfolio
Quantitative
U.S. Large Cap
Core
Equity Portfolio |
Over
$100,000
Over
$100,000 |
Over
$100,000 | ||||||
Independent
Directors/Trustees | |||||||||
H.
Franklin Allen, Ph.D. |
None |
|
None | ||||||
William
L. Cobb, Jr. |
None
|
|
None | ||||||
Rebecca
E. Duseau |
None |
|
None | ||||||
Andrew
Phillips |
None |
|
None | ||||||
Harry
Wong |
None |
|
None | ||||||
|
45 |
|
Name
of Person Position* |
Aggregate
Compensation*
from
Glenmede
Fund |
Aggregate
Compensation*
from
Glenmede
Portfolios |
Pension
or
Retirement
Benefits
Accrued
as
Part of
Funds’
Expenses |
Estimated
Annual
Benefits
Upon
Retirement |
Total
Compensation*
from
the Fund
Complex** | ||||||||||
Interested
Directors/Trustees | |||||||||||||||
Susan
W. Catherwood, Director |
$ 124,000 |
$ 6,000 |
None |
None |
$ 130,000 | ||||||||||
Mary
Ann B. Wirts, Director |
$124,705 |
$6,000 |
None |
None |
$130,705
| ||||||||||
Independent
Directors/Trustees | |||||||||||||||
H.
Franklin Allen, Ph.D., Director |
$131,461 |
$6,000 |
None |
None |
$137,461
| ||||||||||
William
L. Cobb, Jr., Director |
$139,752 |
$6,000 |
None |
None |
$145,752
| ||||||||||
Harry
Wong, Director |
$136,321 |
$6,000 |
None |
None |
$142,321
| ||||||||||
Andrew
Phillips, Director |
$124,390 |
$6,000 |
None |
None |
$130,390
| ||||||||||
Rebecca
E Duseau** |
$0 |
$0 |
None |
None |
$0 |
* |
Compensation includes reimbursement of out-of-pocket
expenses incurred in attending Board meetings, where applicable. |
** |
Ms. Duseau
became a Director/Trustee of the Funds in December 2023, was not a member of the Boards
during the fiscal year ended October 31, 2023, and did not receive any compensation from the Funds. |
|
46 |
|
|
|
|
|
Name |
|
|
Position
with GIM |
Peter
J. Zuleba |
|
|
Managing
Director and Chief Executive Officer |
Raj
Tewari |
|
|
Managing
Director and Chief Operating Officer |
Kent
E. Weaver |
|
|
Managing
Director and President |
John
F. McCabe |
|
|
Managing
Director and General Counsel |
|
|
|
|
|
47 |
|
Name |
Position
with AllianceBernstein | ||
Seth
P. Bernstein |
Director,
President and Chief Executive Officer | ||
Karl
Sprules |
Chief
Operating Officer | ||
Mark
Manley |
General
Counsel | ||
Bill
Siemers |
Interim
Chief Financial Officer and Controller | ||
Onur
Erzan |
Head
of Global Client Group and Head of Private | ||
Joan
Lamm-Tennant |
Chair
of the Board | ||
Nella
Domenici |
Director | ||
Jeffrey
Hurd |
Director | ||
Daniel
G. Kaye |
Director | ||
Nick
Lane |
Director | ||
Das
Narayandas |
Director | ||
Mark
Pearson |
Director | ||
Charles
Stonehill |
Director | ||
Todd
Walthall |
Director | ||
Portfolio |
Percentage
of Average
Daily
Net Assets | ||
Quantitative
U.S. Large Cap Core Equity Portfolio |
0.55%
| ||
Quantitative
U.S. Large Cap Growth Equity Portfolio |
0.55% | ||
Quantitative
U.S. Large Cap Value Equity Portfolio |
0.55%1 | ||
Quantitative
U.S. Small Cap Equity Portfolio |
0.55%1 | ||
Quantitative
International Equity Portfolio |
0.75%2 | ||
Responsible
ESG U.S. Equity Portfolio |
0.55%1 | ||
Women
in Leadership U.S. Equity Portfolio |
0.55%1 | ||
Quantitative
U.S. Long/Short Equity Portfolio |
1.20%3 | ||
Quantitative
U.S. Total Market Equity Portfolio |
1.20%3 | ||
Strategic
Equity Portfolio |
0.55%
| ||
Equity
Income Portfolio |
0.55%1 | ||
Small
Cap Equity Portfolio |
0.55%
| ||
Secured
Options Portfolio |
0.55%
| ||
Global
Secured Options Portfolio |
0.55%2 | ||
Core
Fixed Income Portfolio |
0.35%
| ||
Muni
Intermediate Portfolio |
N/A4 | ||
Short
Term Tax Aware Fixed Income Portfolio |
0.35%5 | ||
High
Yield Municipal Portfolio |
0.57% |
1 |
The Advisor has contractually
agreed, until at least February 28, 2025, to
waive all or a portion of its investment advisory fees and/or reimburse expenses (excluding Acquired Fund fees and expenses, brokerage
commissions, extraordinary items, interest and taxes) to the extent that the Quantitative U.S. Large Cap Value Equity, Quantitative U.S.
Small Cap Equity, Responsible ESG U.S. Equity, Women in Leadership U.S. Equity, and Equity Income Portfolios’ total annual operating
expenses, as a percentage of such Portfolio’s average daily net assets, exceed 0.85% of such Portfolio’s average daily net
assets. The Advisor is not entitled to collect or make a claim for waived fees or reimbursed expenses at any time in the future. You will
be notified if the waivers are discontinued after that date. |
|
48 |
|
2 |
The Advisor has contractually
agreed, until at least February 28, 2025, to
waive all or a portion of its investment advisory fees and/or reimburse expenses (excluding Acquired Fund fees and expenses, brokerage
commissions, extraordinary items, interest and taxes) to the extent that the Quantitative International Equity and Global Secured Options
Portfolios’ total annual operating expenses, as a percentage of such Portfolio’s average daily net assets, exceed 1.00% of
such Portfolio’s average daily net assets. The Advisor is not entitled to collect or make a claim for waived fees or reimbursed
expenses at any time in the future. You will be notified if the waivers are discontinued after that date. |
3 |
The Advisor has contractually
agreed, until at least February 28, 2025, to
waive a portion of its advisory fees so that the management fees for the Quantitative U.S. Long/Short Equity and Quantitative U.S. Total
Market Equity Portfolios are 0.85% of each such Portfolio’s average daily net assets. GIM has also contractually agreed to waive
an additional portion of its advisory fees and/or reimburse the Portfolios to the extent that total annual Portfolio operating expenses,
as a percentage of the Portfolio’s average daily net assets, exceed 1.25% of the average daily net assets of the Quantitative U.S.
Long/Short Equity Portfolio’s Advisor Shares, 1.05% of the average daily net assets of the Quantitative U.S. Long/Short Equity Portfolio’s
Institutional Shares and 1.25% of the average daily net assets of the Quantitative U.S. Total Market Equity Portfolio (excluding Acquired
Fund fees and expenses, short- sale dividends, prime broker interest, brokerage commissions, taxes, interest, and extraordinary expenses).
The Advisor has contractually agreed to these waivers and/or reimbursements until at least February 28,
2025. You will be notified if the waivers are discontinued after that date. The Advisor is
not entitled to collect or make a claim for waived fees or reimbursed expenses at any time in the future. |
4 |
As noted in the Prospectus,
the Advisor does not receive any fee from the Muni Intermediate Portfolio for its investment services. |
5 |
The Advisor has contractually
agreed, until at least February 28, 2025, to
waive all or a portion of its investment advisory fees and/or reimburse expenses (excluding Acquired Fund fees and expenses, brokerage
commissions, extraordinary items, interest and taxes) to the extent that the Short Term Tax Aware Fixed Income Portfolio’s total
annual operating expenses, as a percentage of the Portfolio’s average daily net assets, exceed 0.55% of the Portfolio’s average
daily net assets (excluding Acquired Fund fees and expenses, brokerage commissions, extraordinary items, interest and taxes). The Advisor
is not entitled to collect or make a claim for waived fees or reimbursed expenses at any time in the future. You will be notified if the
waivers are discontinued after that date. |
|
49 |
|
Portfolio |
Total
Management
Fees
for
Fiscal
Year
ended
October 31,
2023 |
Total
Waived/
Reimbursed
for
Fiscal
Year
ended
October
31,
2023 |
Total
Management
Fees
for Fiscal
Year
ended
October 31,
2022 |
Total
Waived/
Reimbursed
for
Fiscal
Year
ended
October
31,
2022 |
Total
Management
Fees
for Fiscal
Year
ended
October 31,
2021 |
Total
Waived/
Reimbursed
for
Fiscal
Year
ended
October 31,
2021 | ||||||||||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
$4,721,318 |
$0 |
$6,615,381 |
$0 |
$7,588,526 |
$0
| ||||||||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio |
$11,511,367 |
$0 |
$12,995,994 |
$0 |
$12,444,966 |
$0
| ||||||||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
$9,363 |
$(33,996) |
$13,106 |
$(33,711) |
$12,153 |
$(35,371)
| ||||||||||||
Quantitative
U.S. Small Cap Equity Portfolio |
$8,457 |
$(33,923) |
$8,238 |
$(39,523) |
$7,827 |
$(37,040)
| ||||||||||||
Quantitative
International Equity Portfolio |
$178,220 |
$(75,745) |
$227,352 |
$(81,426) |
$376,729 |
$(92,575)
| ||||||||||||
Responsible
ESG U.S. Equity Portfolio |
$128,163 |
$(45,202) |
$158,653 |
$(47,697) |
$162,791 |
$(58,167)
| ||||||||||||
Women
in Leadership U.S. Equity Portfolio |
$119,341 |
$(46,554) |
$135,183 |
$(49,722) |
$151,033 |
$(51,809)
| ||||||||||||
Quantitative
U.S. Long/Short Equity Portfolio |
$630,180 |
$(229,377) |
$742,885 |
$
(246,812) |
$929,454 |
$(282,785) | ||||||||||||
Quantitative
U.S. Total Market Equity Portfolio |
$499,659 |
$(170,925) |
$534,025 |
$
(165,351) |
$410,408 |
$(136,648) | ||||||||||||
Strategic
Equity Portfolio |
$1,003,906 |
$0 |
$1,250,486 |
$0 |
$1,414,612 |
$0
| ||||||||||||
Equity
Income Portfolio |
$114,562 |
$(30,450) |
$121,580 |
$(27,068) |
$117,153 |
$(53,569)
| ||||||||||||
Small
Cap Equity Portfolio |
$5,784,976 |
$0 |
$7,387,860 |
$0 |
$7,816,936 |
$0
| ||||||||||||
Secured
Options Portfolio |
$2,809,043 |
$0 |
$2,601,151 |
$0 |
$2,302,449 |
$0
| ||||||||||||
Global
Secured Options Portfolio |
$122,156 |
$(33,774) |
$102,596 |
$(40,826) |
$73,346 |
$(39,838)
| ||||||||||||
Core
Fixed Income Portfolio |
$1,176,817 |
$0 |
$1,315,910 |
$0 |
$1,503,289 |
$0
| ||||||||||||
Muni
Intermediate Portfolio* |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A
| ||||||||||||
Short
Term Tax Aware Fixed Income Portfolio |
$154,906 |
$(60,649) |
$198,122 |
$(37,879) |
$186,994 |
$(48,494)
| ||||||||||||
High
Yield Municipal Portfolio |
$1,029,422 |
$0 |
$1,511,778 |
$(63,806) |
$1,750,547 |
$(23,408) |
* |
As noted in the Prospectus, the Advisor does not
receive any fee from the Muni Intermediate Portfolio for its investment services. |
|
50 |
|
Glenmede
Investment
Management
LP |
Type
of Accounts |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Number
of
Accounts
Managed
with
Performance-
Based
Advisory
Fees |
Total
Assets
Managed
with
Performance-
Based
Advisory
Fees | ||||||||||
Stephen
J. Mahoney |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
156 |
$720,432,733 |
None |
0 | |||||||||||
Vladimir
de Vassal |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
1 |
$7,849,604 |
None |
0 | |||||||||||
Other
Accounts |
312 |
$1,104,858,527 |
None |
0 | |||||||||||
Paul
T. Sullivan |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
1 |
$7,849,604 |
None |
0 | |||||||||||
Other
Accounts |
312 |
$1,104,858,527 |
None |
0 | |||||||||||
Alexander
R. Atanasiu |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
1 |
$7,849,604 |
None |
0 | |||||||||||
Other
Accounts |
312 |
$1,104,858,527 |
None |
0 | |||||||||||
Amy
T. Wilson |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
14 |
$106,216,234 |
None |
0 | |||||||||||
John
R. Kichula |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
883 |
$920,134,970 |
None |
0 | |||||||||||
Sean
Heron |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
85 |
$250,955,758 |
None |
0 | |||||||||||
Stacey
Gilbert |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
85 |
$250,955,758 |
None |
0 | |||||||||||
Mark
Livingston |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
883 |
$920,134,970 |
None |
0 | |||||||||||
Jordan
L. Irving |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
1 |
$6,830,996 |
None |
0 | |||||||||||
Other
Accounts |
27 |
$348,551,886 |
None |
0 | |||||||||||
Robert
M. Daly |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
1,572 |
$3,032,547,957 |
None |
0 | |||||||||||
|
51 |
|
Glenmede
Investment
Management
LP |
Type
of Accounts |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Number
of
Accounts
Managed
with
Performance-
Based
Advisory
Fees |
Total
Assets
Managed
with
Performance-
Based
Advisory
Fees | ||||||||||
J.
Douglas Wilson |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
1,416 |
$2,312,115,225 |
None |
0 | |||||||||||
David
M. Joyce |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
None |
0 |
None |
0 | |||||||||||
Other
Accounts |
1,416 |
$2,312,115,225 |
None |
0 | |||||||||||
Matthew
F. Shannon |
Registered
Investment Companies |
None |
0 |
None |
0 | ||||||||||
Other
Pooled Investment Vehicles |
1 |
$6,803,996 |
None |
0 | |||||||||||
Other
Accounts |
27 |
$348,551,886 |
None |
0 | |||||||||||
Matthew
J. Norton |
Registered
Investment Companies |
32 |
$22,021 |
0 |
0 | ||||||||||
Other
Pooled Investment Vehicles |
14 |
$7,969 |
0 |
0 | |||||||||||
Other
Accounts |
11,058 |
$31,141 |
3 |
$128 | |||||||||||
Andrew
D. Potter |
Registered
Investment Companies |
32 |
$22,021 |
0 |
0 | ||||||||||
Other
Pooled Investment Vehicles |
14 |
$7,969 |
0 |
0 | |||||||||||
Other
Accounts |
11,058 |
$31,141 |
3 |
$128 | |||||||||||
Portfolio/Portfolio
Manager |
Dollar
Range of Shares Beneficially Owned | ||
Quantitative
U.S. Large Cap CoreEquity Portfolio |
|||
Vladimir
de Vassal, CFA |
$500,001-$1,000,000 | ||
Paul
T. Sullivan, CFA |
$100,001-$500,000 | ||
Alexander
R. Atanasiu, CFA |
$500,001-$1,000,000 | ||
Quantitative
U.S. Large CapGrowth Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Quantitative
U.S. Large Cap Value Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Quantitative
U.S. Small Cap Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Quantitative
International Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Responsible
ESG U.S. Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Amy
T. Wilson, CFA |
None | ||
|
52 |
|
Portfolio/Portfolio
Manager |
Dollar
Range of Shares Beneficially Owned | ||
Women
in Leadership U.S. Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$10,001-$50,000 | ||
Paul
T. Sullivan, CFA |
None | ||
Alexander
R. Atanasiu, CFA |
None | ||
Amy
T. Wilson, CFA |
None | ||
Quantitative
U.S. Long/Short Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$50,001-$100,000 | ||
Paul
T. Sullivan, CFA |
$50,001-$100,000 | ||
Alexander
R. Atanasiu, CFA |
None | ||
Quantitative
U.S. Total Market Equity Portfolio |
|||
Vladimir
de Vassal, CFA |
$50,001-$100,000 | ||
Paul
T. Sullivan, CFA |
$50,001-$100,000 | ||
Alexander
R. Atanasiu, CFA |
None | ||
Strategic
Equity Portfolio |
|||
John
R. Kichula, CFA |
None | ||
Mark
Livingston, CFA |
None | ||
Equity
Income Portfolio |
|||
John
R. Kichula, CFA |
None | ||
Mark
Livingston, CFA |
None | ||
Small
Cap Equity Portfolio |
|||
Matthew
F. Shannon, CFA |
$100,001-$500,000 | ||
Jordan
L. Irving |
$100,001-$500,000 | ||
Global
Secured Options Portfolio |
|||
Sean
Heron, CFA |
None | ||
Stacey
Gilbert |
None | ||
Secured
Options Portfolio |
|||
Sean
Heron, CFA |
$500,001-$1,000,000 | ||
Stacey
Gilbert |
None | ||
Core
Fixed Income Portfolio |
|||
Stephen
J. Mahoney |
None | ||
Robert
M. Daly |
None | ||
Muni
Intermediate Portfolio |
|||
Robert
M. Daly |
None | ||
J.
Douglas Wilson |
None | ||
David
M. Joyce |
None | ||
Short
Term Tax Aware Fixed Income Portfolio |
|||
Robert
M. Daly |
None | ||
J.
Douglas Wilson |
None | ||
David
M. Joyce |
None | ||
High
Yield Municipal Portfolio |
|||
Matthew
J. Norton |
None | ||
Andrew
D. Potter |
None | ||
|
53 |
|
|
54 |
|
Portfolio |
October 31,
2023 |
October 31,
2022 |
October 31,
2021 | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
$ 322,535 |
$ 425,285 |
$ 591,619 | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio |
$730,926 |
$795,157 |
$960,431
| ||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
$26,973 |
$27,367 |
$28,572
| ||||||
Quantitative
U.S. Small Cap Equity Portfolio |
$26,855 |
$32,723 |
$29,744
| ||||||
Quantitative
International Equity Portfolio |
$38,764 |
$39,778 |
$42,993
| ||||||
Responsible
ESG U.S. Equity Portfolio |
$33,019 |
$39,972 |
$50,814
| ||||||
Women
in Leadership U.S. Equity Portfolio |
$32,379 |
$39,017 |
$42,178
| ||||||
Quantitative
U.S. Long/Short Equity Portfolio |
$71,598 |
$63,627 |
$77,759
| ||||||
Quantitative
U.S. Total Market Equity Portfolio |
$54,959 |
$51,675 |
$50,488
| ||||||
Strategic
Equity Portfolio |
$86,900 |
$102,465 |
$122,097
| ||||||
Equity
Income Portfolio |
$31,926 |
$31,875 |
$56,706
| ||||||
Small
Cap Equity Portfolio |
$640,588 |
$770,852 |
$753,447
| ||||||
Secured
Options Portfolio |
$211,558 |
$193,071 |
$199,327
| ||||||
Global
Secured Options Portfolio |
$47,499 |
$48,043 |
$40,692
| ||||||
Core
Fixed Income Portfolio |
$166.570 |
$163,537 |
$185,936
| ||||||
Muni
Intermediate Portfolio |
$162,936 |
$138,644 |
$147,568
| ||||||
Short
Term Tax Aware Fixed Income Portfolio |
$70,200 |
$62,678 |
$71,005
| ||||||
High
Yield Municipal Portfolio |
$149,336 |
$182,315 |
$165,225 |
|
55 |
|
Glenmede
Trust |
October 31,
2023 |
October 31,
2022 |
October 31,
2021 | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
$ 1,590,423 |
$ 2,184,121 |
$ 2,442,956 | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio |
$2,339,983 |
$2,892,471 |
$3,438,919
| ||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
$3,405 |
$4,766 |
$4,419
| ||||||
Quantitative
U.S. Small Cap Equity Portfolio |
$3,075 |
$2,996 |
$2,846
| ||||||
Quantitative
International Equity Portfolio |
$59,407 |
$75,784 |
$125,576
| ||||||
Responsible
ESG U.S. Equity Portfolio |
$46,605 |
$57,692 |
$59,197
| ||||||
Women
in Leadership U.S. Equity Portfolio |
$43,397 |
$49,158 |
$54,921
| ||||||
Quantitative
U.S. Long/Short Equity Portfolio |
$88,028 |
$108,324 |
$151,428
| ||||||
Quantitative
U.S. Total Market Equity Portfolio |
$83,277 |
$89,004 |
$68,401
| ||||||
Strategic
Equity Portfolio |
$365,057 |
$454,722 |
$514,404
| ||||||
Equity
Income Portfolio |
$41,659 |
$44,211 |
$42,601
| ||||||
Small
Cap Equity Portfolio |
$1,445,568 |
$1,670,870 |
$1,746,407
| ||||||
Secured
Options Portfolio |
$119,676 |
$167,261 |
$186,347
| ||||||
Global
Secured Options Portfolio |
$44,421 |
$37,308 |
$26,671
| ||||||
Core
Fixed Income Portfolio |
$336,233 |
$375,974 |
$429,511
| ||||||
Muni
Intermediate Portfolio |
$485,731 |
$439,473 |
$496,011
| ||||||
Short
Term Tax Aware Fixed Income Portfolio |
$44,259 |
$56,606 |
$53,427
| ||||||
High
Yield Municipal Portfolio |
$270,900 |
$510,432 |
$673,287 |
|
56 |
|
|
Fees
and/or compensation paid for securities lending activities and related services | ||||||||||||||||||||||||||
|
Gross
income
from
securities
lending
activities1 |
Fees
paid to
securities
lending
agent
from a
revenue
split |
Fees
paid for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled cash
collateral
reinvestment
vehicle)
that
are
not
included
in
the
revenue
split |
Administrative
fees
not
included
in
revenue
split |
Indemnification
fee
not
included
in
revenue split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
revenue
split |
Aggregate
fees/
compensation
for
securities
lending
activities |
Net
income
from
securities
lending
activities | ||||||||||||||||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
$112,974.27 |
$1,679.22 |
$804.30 |
$0.00 |
$0.00 |
$103,773.60 |
$0.00 |
$106,257.12 |
$6,717.15 | ||||||||||||||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio |
$212,386.91 |
$959.90 |
$1,570.55 |
$0.00 |
$0.00 |
$206,016.97 |
$0.00 |
$208,547.42 |
$3,843.30
| ||||||||||||||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
$91.99 |
$1.10 |
$0.69 |
$0.00 |
$0.00 |
$85.92 |
$0.00 |
$87.71 |
$4.28
| ||||||||||||||||||
Quantitative
U.S. Small Cap Equity Portfolio |
$1,486.99 |
$32.47 |
$9.92 |
$0.00 |
$0.00 |
$1,315.59 |
$0.00 |
$1,357.98 |
$129.01
| ||||||||||||||||||
Quantitative
International Equity Portfolio |
$30,381.78 |
$1,100.13 |
$195.70 |
$0.00 |
$0.00 |
$24,685.74 |
$0.00 |
$25,981.57 |
$4,400.21 | ||||||||||||||||||
Responsible
ESG U.S. Equity Portfolio |
$906.87 |
$5.07 |
$7.71 |
$0.00 |
$0.00 |
$874.30 |
$0.00 |
$887.08 |
$19.79
|
|
57 |
|
|
Fees
and/or compensation paid for securities lending activities and related services | ||||||||||||||||||||||||||
|
Gross
income
from
securities
lending
activities1 |
Fees
paid to
securities
lending
agent
from a
revenue
split |
Fees
paid for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled cash
collateral
reinvestment
vehicle)
that
are
not
included
in
the
revenue
split |
Administrative
fees
not
included
in
revenue
split |
Indemnification
fee
not
included
in
revenue split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
revenue
split |
Aggregate
fees/
compensation
for
securities
lending
activities |
Net
income
from
securities
lending
activities | ||||||||||||||||||
Women
in Leadership U.S. Equity Portfolio |
$16.68 |
$0.05 |
$0.13 |
$0.00 |
$0.00 |
$16.28 |
$0.00 |
$16.46 |
$0.22
| ||||||||||||||||||
Quantitative
U.S. Long/Short Equity Portfolio |
$27,950.31 |
$167.59 |
$198.31 |
$0.00 |
$0.00 |
$26,915.16 |
$0.00 |
$27,281.06 |
$671.00
| ||||||||||||||||||
Quantitative
U.S. Total Market Equity Portfolio |
$40,513.78 |
$18.00 |
$0.00 |
$0.00 |
$0.00 |
$40,424.48 |
$0.00 |
$40,442.48 |
$71.30
| ||||||||||||||||||
Strategic
Equity Portfolio |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00
| ||||||||||||||||||
Equity
Income Portfolio |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00 |
$0.00
| ||||||||||||||||||
Small
Cap Equity Portfolio |
$2,073,322.47 |
$11,295.15 |
$14,026.07 |
$0.00 |
$0.00 |
$2,002,816.25 |
$0.00 |
$2,028,137.47 |
$45,276.00 | ||||||||||||||||||
Secured
Options Portfolio* |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A
| ||||||||||||||||||
Global
Secured Options Portfolio* |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A
| ||||||||||||||||||
Core
Fixed Income Portfolio |
$642,396.27 |
$7,035.71 |
$4,279.64 |
$0.00 |
$0.00 |
$602,942.19 |
$0.00 |
$614,257.54 |
$28,172.00 | ||||||||||||||||||
Short
Term Tax Aware Fixed Income Portfolio |
$29,399.03 |
$1,495.44 |
$203.23 |
$0.00 |
$0.00 |
$21,717.98 |
$0.00 |
$23,416.65 |
$5,982.38
| ||||||||||||||||||
High
Yield Municipal Portfolio* |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A | ||||||||||||||||||
1 |
Includes income from
cash collateral reinvestment. |
* |
The Secured Options Portfolio, Global Secured Options
Portfolio, Muni Intermediate Portfolio and High Yield Municipal Portfolio did not participate in the securities lending program during
the fiscal year ended October 31, 2023. |
|
58 |
|
Portfolio |
Broker
Security |
Market
Value | ||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
WELLS
FARGO & CO. |
$4,164,317 | ||||
Strategic
Equity Portfolio |
JP
MORGAN CHASE & CO. |
$3,702,333 | ||||
Equity
Income Portfolio |
JP
MORGAN CHASE & CO. |
$521,753
| ||||
Core
Fixed Income Portfolio |
JP
MORGAN CHASE & CO. |
$5,383,397 |
Portfolio |
October
31, 2023 |
October
31, 2022 |
October
31, 2021 | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio |
$ 747,917 |
$ 856,921 |
$ 709,455 | ||||||
Quantitative
U.S. Large Cap Growth EquityPortfolio |
$1,417,416 |
$1,295,016 |
$743,651
| ||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
$1,165 |
$1,928 |
$1,561
| ||||||
Quantitative
U.S. Small Cap Equity Portfolio |
$5,728 |
$4,629 |
$3,953
| ||||||
Quantitative
International Equity Portfolio |
$12,864 |
$21,523 |
$50,247
| ||||||
Responsible
ESG U.S. Equity Portfolio |
$25,264 |
$37,042 |
$23,130
| ||||||
Women
in Leadership U.S. Equity Portfolio |
$22,638 |
$28,806 |
$24,063
| ||||||
Quantitative
U.S. Long/Short Equity Portfolio |
$120,997 |
$173,560 |
$173,609
| ||||||
Quantitative
U.S. Total Market Equity Portfolio |
$97,927 |
$106,849 |
$53,701
| ||||||
Strategic
Equity Portfolio |
$21,745 |
$25,261 |
$23,350
| ||||||
Small
Cap Equity Portfolio |
$553,905 |
$828,803 |
$1,114,579
| ||||||
Equity
Income Portfolio |
$4,521 |
$2,436 |
$5,300
| ||||||
Secured
Options Portfolio |
$85,667 |
$81,512 |
$58,890
| ||||||
Global
Secured Options Portfolio |
$10,348 |
$12,816 |
$6,808
| ||||||
Short
Term Tax Aware Fixed Income Portfolio |
$0 |
$201 |
$44 | ||||||
|
59 |
|
|
60 |
|
Portfolio |
Unlimited
(Short Term) |
Unlimited
(Long Term) | ||||
Muni
Intermediate Portfolio |
$ 4,121,267 |
$ 8,091,795 | ||||
Quantitative
U.S. Small Cap Equity Portfolio |
$7,517 |
—
| ||||
Quantitative
International Equity Portfolio |
$1,068,400 |
$55,853
| ||||
Secured
Options Portfolio |
$699,238 |
$856,319
| ||||
Global
Secured Options Portfolio* |
$4,883,418 |
$1,510,931
| ||||
Core
Fixed Income Portfolio |
$3,091,409 |
$9,186,597
| ||||
Short
Term Tax Aware Fixed Income Portfolio |
$201,485 |
$657,180
| ||||
High
Yield Municipal Portfolio |
$5,574,808 |
$5,925,806 |
* |
Utilization of the capital loss carryforwards of
the Global Secured Options Portfolio is severely limited currently and in future years pursuant to Internal Revenue Code Section 382.
|
|
61 |
|
|
62 |
|
|
63 |
|
|
64 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Core
Fixed Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place1650 Market
Street,
Suite 1200
Philadelphia,
PA 19103 |
Record |
91.64% | ||||||
Core
Fixed Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place1650 Market
Street,
Suite 1200
Philadelphia,
PA 19103 |
Record |
6.87%
| ||||||
Equity
Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place1650 Market
Street,
Suite 1200
Philadelphia,
PA 19103 |
Record |
87.31% | ||||||
Equity
Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place1650 Market
Street,
Suite 1200
Philadelphia,
PA 19103 |
Record |
9.66%
| ||||||
Quantitative
International Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
67.24% | ||||||
Quantitative
International Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
31.26% | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Advisor Shares |
Charles
Schwab & Co. Inc.
Attn:
Jill Khashayar
Glenmede
Funds
88
Kearny St.
San
Francisco, CA 94108 |
Record |
51.66% | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Advisor Shares |
National
Financial Services LLC
Attn:
Mutual Funds Department
4th
Floor, 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
21.23% |
|
65 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Advisor Shares |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
12.94% | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Advisor Shares |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
52.98% | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Advisor Shares |
National
Financial Services LLC Attn: Mutual Funds Department
4th
Floor, 499 Washington Blvd. |
Record |
21.60% | ||||||
|
Jersey
City, NJ 07310 |
|
| ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Advisor Shares |
Charles
Schwab & Co. Inc.
Attn:
Jill Khashayar
Glenmede
Funds
88
Kearny St.
San
Francisco, CA 94108 |
Record |
14.34% | ||||||
Quantitative
U.S. Long/Short Equity Portfolio - Advisor Shares |
Lauer
& Co.
c/o
The Glenmede Trust CompanyOne Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
92.83% | ||||||
Quantitative
U.S. Long/Short Equity Portfolio - Institutional Shares |
Pershing
LLC
P.O.
Box 2052
Jersey
City, NJ 07303 |
Record |
57.25% | ||||||
Quantitative
U.S. Long/Short Equity Portfolio - Institutional Shares |
National
Financial Services LLC Attn: Mutual Funds Department
499
Washington Blvd.
Jersey
City, NJ 07310 |
Record |
17.63% | ||||||
Quantitative
U.S. Long/Short Equity Portfolio - Institutional Shares |
Charles
Schwab & Co. Inc.
Attn:
Mutual Funds Department 211 Main Street
San
Francisco, CA 94105 |
Record |
17.04% | ||||||
Women
in Leadership U.S. Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
53.71% |
|
66 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Women
in Leadership U.S. Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
29.98% | ||||||
Women
in Leadership U.S. Equity Portfolio |
Charles
Schwab & Co. Inc.
211
Main St.
San
Francisco, CA 94105 |
Record |
10.51% | ||||||
Responsible
ESG U.S. Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
50.30% | ||||||
Responsible
ESG U.S. Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
45.54% | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Institutional Shares |
Charles
Schwab & Co. Inc.
Attn:
Mutual Funds Department
211
Main St.
San
Francisco, CA 94105 |
Record |
38.56% | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Institutional Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
25.69% | ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Institutional Shares |
Pershing
LLC
P.O
Box 2052
Jersey
City, NJ 07303 |
Record |
9.76%
| ||||||
Quantitative
U.S. Large Cap Growth Equity Portfolio - Institutional Shares |
Merrill
Lynch, Pierce, Fenner & Smith, Inc. For the Sole Benefit of its Customers
4800
Deer Lake Drive East
Jacksonville,
FL 32246 |
Record |
6.79%
| ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Institutional Shares |
SEI
Private Trust Company
c/o
First Horizon ID 683
1
Freedom Valley Drive,
Oaks,
PA 19456 |
Record |
15.48% | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Institutional Shares |
Vanguard
Fiduciary Trust
c/o
FBO 401K Clients,
Attn:
Investment Services,
P.O.
Box 2600 VM L
23
Valley Forge, PA 19482 |
Record |
13.82% |
|
67 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Institutional Shares |
Merrill
Lynch, Pierce, Fenner & Smith, Inc. For the Sole Benefit of its Customers
4800
Deer Lake Drive East
Jacksonville,
FL 32246 |
Record |
11.98%
| ||||||
Quantitative
U.S. Large Cap Core Equity Portfolio - Institutional Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
38.49% | ||||||
High
Yield Municipal Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
95.40% | ||||||
International
Secured Options Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
5.83%
| ||||||
Secured
Options Portfolio - Advisor Shares |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
36.19% | ||||||
Secured
Options Portfolio - Advisor Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
28.96% | ||||||
Secured
Options Portfolio - Advisor Shares |
Charles
Schwab & Co. Inc.
Attn:
Jill Khashayar
Glenmede
Funds
88
Kearny St.
San
Francisco, CA 94108 |
Record |
25.80% | ||||||
Secured
Options Portfolio - Institutional Shares |
Nevada
Office of Treasurer Nevada Higher Education Tuition Trust Fund
101
N. Carson Street, Suite 4 Carson City, NV 89701 |
Record |
16.69% | ||||||
Secured
Options Portfolio - Institutional Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
65.61% | ||||||
Secured
Options Portfolio - Institutional Shares |
Charles
Schwab & Co. Inc.
Attn:
Mutual Funds
211
Main Street
San
Francisco, CA 94105 |
Record |
6.14%
|
|
68 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Small
Cap Equity Portfolio - Advisor Shares |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
33.89% | ||||||
Small
Cap Equity Portfolio - Advisor Shares |
Charles
Schwab & Co. Inc.
Attn:
Jill Khashayar
Glenmede
Funds
88
Kearny St.
San
Francisco, CA 94108 |
Record |
26.38% | ||||||
Small
Cap Equity Portfolio - Advisor Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
22.47% | ||||||
Small
Cap Equity Portfolio - Advisor Shares |
Merrill
Lynch, Pierce, Fenner & Smith, Inc. For the Sole Benefit of its Customers
4800
Deer Lake Drive East Jacksonville, FL 32246 |
Record |
5.91%
| ||||||
Small
Cap Equity Portfolio - Institutional Shares |
Merrill
Lynch, Pierce, Fenner & Smith, Inc. For the Sole Benefit of its Customers
4800
Deer Lake Drive East Jacksonville, FL 32246 |
Record |
55.07% | ||||||
Small
Cap Equity Portfolio - Institutional Shares |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
34.23% | ||||||
Strategic
Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
88.27% | ||||||
Muni
Intermediate Portfolio |
The
Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
99.54% | ||||||
Short
Term Tax Aware Fixed Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
80.06% | ||||||
|
69 |
|
Portfolio |
Name
and Address of Owner |
Ownership
Type |
Percentage
of Outstanding Shares | ||||||
Short
Term Tax Aware Fixed Income Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
19.94% | ||||||
Quantitative
U.S. Total Market Equity Portfolio |
Charles
Schwab & Co. Inc.
Attn:
Jill Khashayar
Glenmede
Funds
88
Kearny St.
San
Francisco, CA 94108 |
Record |
38.58% | ||||||
Quantitative
U.S. Total Market Equity Portfolio |
National
Financial Services LLC 499 Washington Blvd.
Jersey
City, NJ 07310 |
Record |
31.83% | ||||||
Quantitative
U.S. Total Market Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
22.74% | ||||||
Quantitative
U.S. Large Cap Value Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
97.40% | ||||||
Quantitative
U.S. Small Cap Equity Portfolio |
Lauer
& Co.
c/o
The Glenmede Trust Company One Liberty Place
1650
Market Street,
Suite
1200
Philadelphia,
PA 19103 |
Record |
98.45% |
|
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GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-4 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-5 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-6 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-7 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-8 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-9 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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1. |
Routine/Miscellaneous |
• |
Vote for proposals that relate specifically to
soliciting votes for a merger or transaction if supporting that merger or transaction. |
• |
Vote against proposals if the wording is too vague
or if the proposal includes “other business.” |
• |
The new quorum threshold requested; |
• |
The rationale presented for the reduction; |
• |
The market capitalization of the company (size,
inclusion in indices); |
• |
The company’s ownership structure; |
• |
Previous voter turnout or attempts to achieve
quorum; |
• |
Any provisions or commitments to restore quorum
to a majority of shares outstanding, should voter turnout improve sufficiently; and |
• |
Other factors as appropriate. |
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B-10 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The terms of the auditor agreement--the degree
to which these agreements impact shareholders’ rights; |
• |
The motivation and rationale for establishing
the agreements; |
• |
The quality of the company’s disclosure;
and |
• |
The company’s historical practices in the
audit area. |
• |
An auditor has a financial interest in or association
with the company, and is therefore not independent; |
• |
There is reason to believe that the independent
auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position; |
• |
Poor accounting practices are identified that
rise to a serious level of concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures;
or |
• |
Fees for non-audit services (“Other”
fees) are excessive. |
• |
Non-audit (“other”) fees > audit
fees + audit-related fees + tax compliance/preparation fees |
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B-11 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The tenure of the audit firm; |
• |
The length of rotation specified in the proposal;
|
• |
Any significant audit-related issues at the company;
|
• |
The number of audit committee meetings held each
year; |
• |
The number of financial experts serving on the
committee; and |
• |
Whether the company has a periodic renewal process
where the auditor is evaluated for both audit quality and competitive price. |
2. |
Board of Directors |
• |
Accountability:
Boards should be sufficiently accountable to shareholders, including through transparency of the company’s governance practices
and regular board elections, by the provision of sufficient information for shareholders to be able to assess directors and board composition,
and through the ability of shareholders to remove directors. |
• |
Responsiveness:
Directors should respond to investor input, such as that expressed through significant opposition to management proposals, significant
support for shareholder proposals (whether binding or non- binding), and tender offers where a majority of shares are tendered. |
• |
Composition:
Companies should seek directors who can add value to the board through specific skills or expertise and who can devote sufficient time
and commitment to serve effectively. Boards should be of a size appropriate to accommodate diversity, expertise, and independence, while
ensuring active and collaborative participation by all members. Boards should be sufficiently diverse to ensure consideration of a wide
range of perspectives. |
• |
Independence:
Boards should be sufficiently independent from management (and significant shareholders) so as to ensure that they are able and motivated
to effectively supervise management’s performance for the benefit of all shareholders, including in setting and monitoring the execution
of corporate strategy, with appropriate use of shareholder capital, and in setting and monitoring executive compensation programs that
support that strategy. The chair of the board should ideally be an independent director, and all boards should have an independent leadership
position or a similar role in order to help provide appropriate counterbalance to executive management, as well as having sufficiently
independent committees that focus on key governance concerns such as audit, compensation, and nomination of directors. |
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B-12 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
A classified board structure; |
• |
A supermajority vote requirement; |
• |
Either a plurality vote standard in uncontested
director elections or a majority vote standard with no plurality carve-out for contested elections; |
• |
The inability of shareholders to call special
meetings; |
• |
The inability of shareholders to act by written
consent; |
• |
A multi-class capital structure; and/or |
• |
A non–shareholder-approved poison pill.
|
• |
The company has a poison pill with a deadhand
or slowhand feature2; |
• |
The board makes a material adverse modification
to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger, without shareholder approval; or |
• |
The company has a long-term poison pill (with
a term of over one year) that was not approved by the public shareholders3. |
• |
The disclosed rationale for the adoption; |
• |
The trigger; |
1 |
A
“new nominee” is a director who is being presented for election by shareholders for the first time. Recommendations on new
nominees who have served for less than one year are made on a case-by-case basis depending on the timing of their appointment and the
problematic governance issue in question. |
2 |
If
the short-term pill with a deadhand or slowhand feature is enacted but expires before the next shareholder vote, Glenmede Policy will
generally still recommend withhold/against nominees at the next shareholder meeting following its adoption. |
3 |
Approval
prior to, or in connection, with a company’s becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient. |
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B-13 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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The company’s market capitalization (including
absolute level and sudden changes); |
• |
A commitment to put any renewal to a shareholder
vote; and |
• |
Other factors as relevant. |
• |
The board’s
rationale for adopting the bylaw/charter amendment without shareholder ratification; |
• |
Disclosure
by the company of any significant engagement with shareholders regarding the amendment; |
• |
The level
of impairment of shareholders’ rights caused by the board’s unilateral amendment to the bylaws/charter; |
• |
The board’s
track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions; |
• |
The company’s
ownership structure; |
• |
The company’s
existing governance provisions; |
• |
The timing
of the board’s amendment to the bylaws/charter in connection with a significant business development; and, |
• |
Other factors,
as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders. |
• |
Classified
the board; |
• |
Adopted supermajority
vote requirements to amend the bylaws or charter; |
• |
Eliminated
shareholders’ ability to amend bylaws; |
• |
Adopted a
fee-shifting provision; or |
• |
Adopted another
provision deemed egregious. |
• |
Supermajority
vote requirements to amend the bylaws or charter; |
• |
A classified
board structure; or |
• |
Other egregious
provisions. |
4 |
Includes
companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public
offering. |
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B-14 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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Newly-public
companies6 with a sunset provision of no more than seven years from the date of going public; |
• |
Limited Partnerships
and the Operating Partnership (OP) unit structure of REITs; |
• |
Situations
where the unequal voting rights are considered de minimis; or |
• |
The company
provides sufficient protections for minority shareholders, such as allowing minority shareholders a regular binding vote on whether the
capital structure should be maintained. |
• |
The presence
of a shareholder proposal addressing the same issue on the same ballot; |
• |
The board’s
rationale for seeking ratification; |
• |
Disclosure
of actions to be taken by the board should the ratification proposal fail; |
• |
Disclosure
of shareholder engagement regarding the board’s ratification request; |
• |
The level
of impairment to shareholders’ rights caused by the existing provision; |
• |
The history
of management and shareholder proposals on the provision at the company’s past meetings; |
• |
Whether the
current provision was adopted in response to the shareholder proposal; |
• |
The company’s
ownership structure; and |
• |
Previous use
of ratification proposals to exclude shareholder proposals. |
• |
The company’s governing documents impose
undue restrictions on shareholders’ ability to amend the bylaws. Such restrictions include but are not limited to: outright prohibition
on the submission of binding shareholder proposals, or share ownership requirements, subject matter restrictions, or time holding requirement
in excess of SEC Rule 14a-8. Vote against or withhold on an ongoing basis. |
5 |
This
generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled
to vote on all the same ballot items or nominees; or stock with time-phased voting rights (“loyalty shares”). |
6 |
Newly-public
companies generally include companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete
a traditional initial public offering. |
|
B-15 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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The non-audit fees paid to the auditor are excessive
(see discussion under “Auditor Ratification”); |
• |
The company receives an adverse opinion on the
company’s financial statements from its auditor; or |
• |
There is persuasive evidence that the audit committee
entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders,
to pursue legitimate legal recourse against the audit firm. |
• |
Poor accounting practices are identified that
rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures.
Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective
actions, in determining whether withhold/against votes are warranted. |
• |
There is a significant misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders; |
• |
The company fails to include a Say on Pay ballot
item when required under SEC provisions, or under the company’s declared frequency of say on pay; or |
• |
The company fails to include a Frequency of Say
on Pay ballot item when required under SEC provisions. |
• |
The presence of an anti-pledging policy, disclosed
in the proxy statement, that prohibits future pledging activity; |
• |
The magnitude of aggregate pledged shares in terms
of total common shares outstanding, market value, and trading volume; |
• |
Disclosure of progress or lack thereof in reducing
the magnitude of aggregate pledged shares over time; |
• |
Disclosure in the proxy statement that shares
subject to stock ownership and holding requirements do not include pledged company stock; and |
• |
Any other relevant factors. |
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B-16 |
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GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Material failures of governance, stewardship,
risk oversight7, or fiduciary responsibilities at the company, including failure to
adequately guard against or manage ESG risks; |
• |
A lack of sustainability reporting in the company’s
public documents and/or website in conjunction with a failure to adequately manage or mitigate ESG risks; |
• |
Failure to replace management as appropriate;
or |
• |
Egregious actions related to a director’s
service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests
of shareholders at any company. |
• |
The company has detailed disclosure of climate-related
risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including: |
• |
Board governance measures; |
• |
Corporate strategy; |
• |
Risk management analyses; and |
• |
Metrics and targets |
• |
The company has declared a Net Zero target by
2050 or sooner and the target includes scope 1, 2, and relevant scope 3 emissions. |
• |
The company has set a medium-term target for reducing
its GHG emissions. |
7 |
Examples
of failure of risk oversight include, but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably
poor risk oversight of environmental and social issues, including climate change; significant environmental incidents including spills
and pollution; large scale or repeat workplace fatalities or injuries; significant adverse legal judgments or settlements; or hedging
of company stock. |
8 |
For
2024, companies defined as “significant GHG emitters” will be those on the current Climate Action 100+ Focus Group list. |
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B-17 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The board failed to act on a shareholder proposal
that received the support of a majority of the shares cast in the previous year or failed to act on a management proposal seeking to ratify
an existing charter/bylaw provision that received opposition of a majority of the shares cast in the previous year. Factors that will
be considered are: |
• |
Disclosed outreach efforts by the board to shareholders
in the wake of the vote; |
• |
Rationale provided in the proxy statement for
the level of implementation; |
• |
The subject matter of the proposal; |
• |
The level of support for and opposition to the
resolution in past meetings; |
• |
Actions taken by the board in response to the
majority vote and its engagement with shareholders; |
• |
The continuation of the underlying issue as a
voting item on the ballot (as either shareholder or management proposals); and |
• |
Other factors as appropriate. |
• |
The board failed to act on takeover offers where
the majority of shares are tendered; |
• |
At the previous board election, any director received
more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high
withhold/against vote. |
• |
The company’s previous say-on-pay received
the support of less than 70 percent of votes cast. Factors that will be considered are: |
• |
The company’s response, including: |
• |
Disclosure of engagement efforts with major institutional
investors regarding the issues that contributed to the low level of support (including the timing and frequency of engagements and whether
independent directors participated); |
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated; |
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
• |
The board implements an advisory vote on executive
compensation on a less frequent basis than the frequency that received the plurality of votes cast. |
|
B-18 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Medical issues/illness; |
• |
Family emergencies; and |
• |
Missing only one meeting (when the total of all
meetings is three or fewer). |
• |
In cases of chronic poor attendance without reasonable
justification, in addition to voting against the director(s) with poor attendance, generally vote against or withhold from appropriate
members of the nominating/governance committees or the full board. |
• |
Sit on more than five public company boards; or
|
• |
Are CEOs of public companies who sit on the boards
of more than two public companies besides their own—withhold only at their outside boards10.
|
• |
Independent directors comprise 50 percent or less
of the board; |
• |
The non-independent director serves on the audit,
compensation, or nominating committee; |
• |
The company lacks an audit, compensation, or nominating
committee so that the full board functions as that committee; or |
9 |
Nominees
who served for only part of the fiscal year are generally exempted from the attendance policy. |
10 |
Although
all of a CEO’s subsidiary boards will be counted as separate boards, Sustainability Advisory Services will not recommend a withhold
vote for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent, but may do
so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships. |
11 |
Underrepresented
gender identity includes directors who identify as women or as non-binary. |
12 |
Aggregate
diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity. |
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B-19 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company lacks a formal nominating committee,
even if the board attests that the independent directors fulfill the functions of such a committee. |
1. |
Executive Director
|
1.1. |
Current officer[1]
of the company or one of its affiliates[2]. |
2. |
Non-Independent Non-Executive Director |
2.1. |
Director identified as not independent by the
board. |
2.2. |
Beneficial owner of more than 50 percent of the
company’s voting power (this may be aggregated if voting power is distributed among more than one member of a group). |
2.3. |
Non-officer employee of the firm (including employee
representatives). |
2.4. |
Officer[1],
former officer, or general or limited partner of a joint venture or partnership with the company. |
2.5. |
Former CEO of the company.[3],[4] |
2.6. |
Former non-CEO officer[1]
of the company or an affiliate[2] within the past five years. |
2.7. |
Former officer[1]
of an acquired company within the past five years[4]. |
2.8. |
Officer[1]of
a former parent or predecessor firm at the time the company was sold or split off within the past five years. |
2.9. |
Former interim officer if the service was longer
than 18 months. If the service was between 12 and 18 months an assessment of the interim officer’s employment agreement will be
made.[5] |
2.10. |
Immediate family member[6]
of a current or former officer[1] of the company or its affiliates[2]
within the last five years. |
2.11. |
Immediate family member[6]
of a current employee of company or its affiliates[2] where additional factors
raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its
affiliates employ relatives of numerous board members; or a non-Section 16 officer in a key strategic role). |
2.12. |
Director who (or whose immediate family member[6])
currently provides professional services[7] in excess
of $10,000 per year to: the company, an affiliate[2],
or an individual officer of the company or an affiliate; either directly or is (or whose family member is) a partner, employee, or controlling
shareholder of an organization which provides the services. |
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B-20 |
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2.13. |
Director who (or whose immediate family member[6])
currently has any material transactional relationship[8]with the company or its affiliates[2];
or who is (or whose immediately family member[6] is) a partner in, or a controlling
shareholder or an executive officer of, an organization which has the material transactional relationship[8]
(excluding investments in the company through a private placement). |
2.14. |
Director who (or whose immediate family member[6])
is a trustee, director, or employee of a charitable or non-profit organization that receives material grants or endowments[8]
from the company or its affiliates[2]. |
2.15. |
Party to a voting agreement[9]
to vote in line with management on proposals being brought to shareholder vote. |
2.16. |
Has (or an immediate family member[6]
has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation Committee[10]. |
2.17. |
Founder[11]
of the company but not currently an employee. |
2.18. |
Director with pay comparable to Named Executive
Officers. |
2.19. |
Any material[12]relationship
with the company. |
3. |
Independent Director |
3.1. |
No material[12]
connection to the company other than a board seat. |
[1] |
The
definition of officer will generally follow that of a “Section 16 officer” (officers subject to Section 16 of the
Securities and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers
of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit,
division, or policy function). Current interim officers are included in this category. For private companies, the equivalent positions
are applicable. A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will be classified
as an Affiliated Outsider under “Any material relationship with the company.” However, if the company provides explicit disclosure
that the director is not receiving additional compensation in excess of $10,000 per year for serving in that capacity, then the director
will be classified as an Independent Outsider. |
[2] |
“Affiliate”
includes a subsidiary, sibling company, or parent company. Glenmede Policy uses 50 percent control ownership by the parent company as
the standard for applying its affiliate designation. The manager/advisor of an externally managed issuer (EMI) is considered an affiliate.
|
[3] |
Includes
any former CEO of the company prior to the company’s initial public offering (IPO). |
[4] |
When
there is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, Glenmede Policy will
generally classify such directors as independent unless determined otherwise taking into account the following factors: the applicable
listing standards determination of such director’s independence; any operating ties to the firm; and the existence of any other
conflicting relationships or related party transactions. |
[5] |
Glenmede
Policy will look at the terms of the interim officer’s employment contract to determine if it contains severance pay, long-term
health and pension benefits, or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. Glenmede
Policy will also consider if a formal search process was under way for a full-time officer at the time. |
[6] |
“Immediate
family member” follows the SEC’s definition of such and covers spouses, parents, children, step-parents, step-children, siblings,
in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer,
or significant shareholder of the company. |
[7] |
Professional
services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making,
and typically have a commission- or fee-based payment structure. Professional services generally include, but are not limited to the following:
investment banking/financial advisory services; commercial banking (beyond deposit services); investment services; insurance services;
accounting/audit services; consulting services; marketing services; legal services; property management services; realtor services; lobbying
services; executive search services; and IT consulting services. The following would generally be considered transactional relationships
and not professional services: deposit services; IT tech support services; educational services; and construction services. The case of
participation in a banking |
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B-21 |
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[8] |
A
material transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or
receives annual payments from, another entity exceeding the greater of $200,000 or 5 percent of the recipient’s gross revenues,
in the case of a company which follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient’s gross
revenues, in the case of a company which follows NYSE listing standards. In the case of a company which follows neither of the preceding
standards, Glenmede Policy will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds
from the transaction). |
[9] |
Dissident
directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as independent outsiders
if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders’
interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of
actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships
or related party transactions. |
[10] |
Interlocks
include: executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such
a committee, on the board); or executive officers sitting on each other’s boards and at least one serves on the other’s compensation
or similar committees (or, in the absence of such a committee, on the board). |
[11] |
The
operating involvement of the founder with the company will be considered; if the founder was never employed by the company, Glenmede Policy
may deem him or her an independent outsider. |
[12] |
For
purposes of Glenmede Policy’s director independence classification, “material” will be defined as a standard of relationship
(financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the
boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on
behalf of shareholders. |
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B-22 |
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• |
The rationale provided for adoption of the term/tenure
limit; |
• |
The robustness of the company’s board evaluation
process; |
• |
Whether the limit is of sufficient length to allow
for a broad range of director tenures; |
• |
Whether the limit would disadvantage independent
directors compared to non-independent directors; and |
• |
Whether the board will impose the limit evenly,
and not have the ability to waive it in a discriminatory manner. |
• |
The scope of the shareholder proposal; and |
• |
Evidence of problematic issues at the company
combined with, or exacerbated by, a lack of board refreshment. |
• |
The reasonableness/scope of the request; and |
• |
The company’s existing disclosure on its
current CEO succession planning process. |
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B-23 |
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• |
The company has proxy access, thereby allowing
shareholders to nominate directors to the company’s ballot; and |
• |
The company has adopted a majority vote standard,
with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address
failed elections. |
• |
Eliminate entirely directors’ and officers’
liability for monetary damages for violating the duty of care. |
• |
Eliminate directors’ and officers’
liability for monetary damages for violating the duty of loyalty. |
• |
Expand coverage beyond just legal expenses to
liability for acts that are more serious violations of fiduciary obligation than mere carelessness. |
• |
Expand the scope of indemnification to provide
for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification
for, at the discretion of the company’s board (i.e., “permissive indemnification”), but that previously the company
was not required to indemnify. |
• |
If the individual was found to have acted in good
faith and in a manner that the individual reasonably believed was in the best interests of the company; and |
• |
If only the director’s legal expenses would
be covered. |
• |
The company’s board committee structure,
existing subject matter expertise, and board nomination provisions relative to that of its peers; |
13 |
Indemnification:
the condition of being secured against loss or damage. |
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B-24 |
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The company’s existing board and management
oversight mechanisms regarding the issue for which board oversight is sought; |
• |
The company’s disclosure and performance
relating to the issue for which board oversight is sought and any significant related controversies; and |
• |
The scope and structure of the proposal. |
• |
Existing oversight mechanisms (including current
committee structure) regarding the issue for which board oversight is sought; |
• |
Level of disclosure regarding the issue for
which board oversight is sought; |
• |
Company performance related to the issue
for which board oversight is sought; |
• |
Board committee structure compared to that of
other companies in its industry sector; and |
• |
The scope and structure of the proposal. |
• |
Vote for proposals to restore shareholders’
ability to remove directors with or without cause. |
• |
Vote against proposals that provide that only
continuing directors may elect replacements to fill board vacancies. |
• |
Vote for proposals that permit shareholders to
elect directors to fill board vacancies. |
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B-25 |
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Ownership threshold:
maximum requirement not more than three percent (3%) of the voting power; |
• |
Ownership duration:
maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group; |
• |
Aggregation:
minimal or no limits on the number of shareholders permitted to form a nominating group; |
• |
Cap: cap
on nominees of generally twenty-five percent (25%) of the board. |
• |
Established a communication structure that goes
beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board; |
• |
Effectively disclosed information with respect
to this structure to its shareholders; |
• |
Company has not ignored majority-supported shareholder
proposals or a majority withhold vote on a director nominee; and |
• |
The company has an independent chair or a lead
director, according to Glenmede Policy’s definition. This individual must be made available for periodic consultation and direct
communication with major shareholders. |
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B-26 |
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Long-term financial performance of the company
relative to its industry; |
• |
Management’s track record; |
• |
Background to the contested election; |
• |
Nominee qualifications and any compensatory arrangements;
|
• |
Strategic plan of dissident slate and quality
of the critique against management; |
• |
Likelihood that the proposed goals and objectives
can be achieved (both slates); and |
• |
Stock ownership positions. |
3. |
Shareholder Rights & Defenses |
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B-27 |
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B-28 |
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The company’s stated rationale for adopting
such a provision; |
• |
Disclosure of past harm from duplicative shareholder
lawsuits in more than one forum; |
• |
The breadth of application of the charter or bylaw
provision, including the types of lawsuits to which it would apply and the definition of key terms; and |
• |
Governance features such as shareholders’
ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the charter or
bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested
elections. |
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B-29 |
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The ownership threshold (NOL protective amendments
generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of
an existing 5-percent holder); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision
or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL); |
• |
The company’s existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
Shareholders have approved the adoption of the
plan; or |
• |
The board, in its exercise of its fiduciary responsibilities,
determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that
would result from seeking stockholder approval (i.e., the “fiduciary out” provision).
A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire.
If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate. |
• |
No lower than a 20% trigger, flip-in or flip-over;
|
• |
A term of no more than three years; |
• |
No dead-hand, slow-hand, no-hand or similar feature
that limits the ability of a future board to redeem the pill; |
• |
Shareholder redemption feature (qualifying offer
clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special
meeting or seek a written consent to vote on rescinding the pill. |
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B-30 |
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The ownership threshold to transfer (NOL pills
generally have a trigger slightly below 5 percent); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision,
or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs); |
• |
The company’s existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
The scope and structure of the proposal; |
• |
The company’s stated confidential voting
policy (or other relevant policies) and whether it ensures a “level playing field” by providing shareholder proponents
with equal access to vote information prior to the annual meeting; |
• |
The company’s vote standard for management
and shareholder proposals and whether it ensures consistency and fairness in the proxy voting process and maintains the integrity
of vote results; |
• |
Whether the company’s disclosure regarding
its vote counting method and other relevant voting policies with respect to management and shareholder proposals are consistent and clear;
|
• |
Any recent controversies or concerns related to
the company’s proxy voting mechanics; |
• |
Any unintended consequences resulting from implementation
of the proposal; and |
• |
Any other factors that may be relevant. |
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B-31 |
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The presence of a shareholder proposal addressing
the same issue on the same ballot; |
• |
The board’s rationale for seeking ratification;
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• |
Disclosure of actions to be taken by the board
should the ratification proposal fail; |
• |
Disclosure of shareholder engagement regarding
the board’s ratification request; |
• |
The level of impairment to shareholders’
rights caused by the existing provision; |
• |
The history of management and shareholder proposals
on the provision at the company’s past meetings; |
• |
Whether the current provision was adopted in response
to the shareholder proposal; |
• |
The company’s ownership structure; and |
• |
Previous use of ratification proposals to exclude
shareholder proposals. |
• |
The election of fewer than 50% of the directors
to be elected is contested in the election; |
• |
One or more of the dissident’s candidates
is elected; |
• |
Shareholders are not permitted to cumulate their
votes for directors; and |
• |
The election occurred, and the expenses were incurred,
after the adoption of this bylaw. |
• |
Reasons for reincorporation; |
• |
Comparison of company’s governance practices
and provisions prior to and following the reincorporation; and |
• |
Comparison of corporation laws of original state
and destination state. |
• |
Vote for reincorporation when the economic factors
outweigh any neutral or negative governance changes. |
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B-32 |
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Shareholders’ current right to act by written
consent; |
• |
The consent threshold; |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
• |
An unfettered14
right for shareholders to call special meetings at a 10 percent threshold; |
• |
A majority vote standard in uncontested director
elections; |
• |
No non-shareholder-approved pill; and |
• |
An annually elected board. |
• |
Shareholders’ current right to call special
meetings; |
• |
Minimum ownership threshold necessary to call
special meetings (10% preferred); |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
14 |
“Unfettered”
means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold,
and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than
90 prior to the next annual meeting. |
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B-33 |
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Ownership structure; |
• |
Quorum requirements; and |
• |
Vote requirements. |
• |
Scope and rationale of the proposal; and |
• |
Concerns identified with the company’s prior
meeting practices. |
4. |
Capital/Restructuring |
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized
shares. |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares. |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage. |
• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization. |
15 |
Virtual-only
shareholder meeting” refers to a meeting of shareholders that is held exclusively using technology without a corresponding in-person
meeting. |
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B-34 |
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The proposal seeks to increase the number of authorized
shares of the class of common stock that has superior voting rights to other share classes; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); or |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
• |
The company discloses a compelling rationale for
the dual-class capital structure, such as: |
• |
The company’s auditor has concluded that
there is substantial doubt about the company’s ability to continue as a going concern; or |
• |
The new class of shares will be transitory; |
• |
The new class is intended for financing purposes
with minimal or no dilution to current shareholders in both the short term and long term; and |
• |
The new class is not designed to preserve or increase
the voting power of an insider or significant shareholder. |
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B-35 |
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The size of the company; |
• |
The shareholder base; and |
• |
The liquidity of the stock. |
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized
shares. |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares. |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage. |
• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization. |
• |
If no preferred shares are currently issued and
outstanding, vote against the request, unless the company discloses a specific use for the shares. |
• |
If the shares requested are blank check preferred
shares that can be used for antitakeover purposes16 |
• |
The company seeks to increase a class of non-convertible
preferred shares entitled to more than one vote per share on matters that do not solely affect the rights of preferred stockholders “supervoting
shares”); |
• |
The company seeks to increase a class of convertible
preferred shares entitled to a number of votes greater than the number of common shares into which they’re convertible (“supervoting
shares”) on matters that do not solely affect the rights of preferred stockholders; |
• |
The stated intent of the increase in the general
authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); or |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
16 |
To
be acceptable, appropriate disclosure would be needed that the shares are “declawed”: i.e., representation by the board that
it will not, without prior stockholder approval, issue or use the preferred stock for any defensive or anti-takeover purpose or for the
purpose of implementing any stockholder rights plan. |
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B-36 |
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The stated intent of the increase in the general
authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
• |
More simplified capital structure; |
• |
Enhanced liquidity; |
• |
Fairness of conversion terms; |
• |
Impact on voting power and dividends; |
• |
Reasons for the reclassification; |
• |
Conflicts of interest; and |
• |
Other alternatives considered. |
• |
The number of authorized shares will be proportionately
reduced; or |
• |
The effective increase in authorized shares is
equal to or less than the allowable increase calculated in accordance with Glenmede’s Common Stock Authorization policy. |
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B-37 |
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Stock exchange notification to the company of
a potential delisting; |
• |
Disclosure of substantial doubt about the company’s
ability to continue as a going concern without additional financing; |
• |
The company’s rationale; or |
• |
Other factors as applicable. |
• |
Greenmail, |
• |
The use of buybacks to inappropriately manipulate
incentive compensation metrics, |
• |
Threats to the company’s long-term viability,
or |
• |
Other company-specific factors as warranted. |
• |
Adverse governance changes; |
• |
Excessive increases in authorized capital stock;
|
• |
Unfair method of distribution; |
• |
Diminution of voting rights; |
• |
Adverse conversion features; |
• |
Negative impact on stock option plans; and |
• |
Alternatives such as spin-off. |
|
B-38 |
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• |
Purchase price; |
• |
Fairness opinion; |
• |
Financial and strategic benefits; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives for the business; |
• |
Non-completion risk. |
• |
Impact on the balance sheet/working capital; |
• |
Potential elimination of diseconomies; |
• |
Anticipated financial and operating benefits;
|
• |
Anticipated use of funds; |
• |
Value received for the asset; |
• |
Fairness opinion; |
• |
How the deal was negotiated; |
• |
Conflicts of interest. |
|
B-39 |
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• |
Dilution to existing shareholders’ positions;
|
• |
Terms of the offer - discount/premium in purchase
price to investor, including any fairness opinion; termination penalties; exit strategy; |
• |
Financial issues - company’s financial situation;
degree of need for capital; use of proceeds; effect of the financing on the company’s cost of capital; |
• |
Management’s efforts to pursue other alternatives;
|
• |
Control issues - change in management; change
in control, guaranteed board and committee seats; standstill provisions; voting agreements; veto power over certain corporate actions;
and |
• |
Conflict of interest - arm’s length transaction,
managerial incentives. |
• |
The reasons for the change; |
• |
Any financial or tax benefits; |
• |
Regulatory benefits; |
• |
Increases in capital structure; and |
• |
Changes to the articles of incorporation or bylaws
of the company. |
• |
Increases in common or preferred stock in excess
of the allowable maximum (see discussion under “Capital”); or |
• |
Adverse changes in shareholder rights. |
|
B-40 |
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• |
Offer price/premium; |
• |
Fairness opinion; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives/offers considered; and |
• |
Non-completion risk. |
• |
Whether the company has attained benefits from
being publicly-traded (examination of trading volume, liquidity, and market research of the stock); |
• |
Balanced interests of continuing vs. cashed-out
shareholders, taking into account the following: |
• |
Are all shareholders able to participate in the
transaction? |
• |
Will there be a liquid market for remaining shareholders
following the transaction? |
• |
Does the company have strong corporate governance?
|
• |
Will insiders reap the gains of control following
the proposed transaction? |
• |
Does the state of incorporation have laws requiring
continued reporting that may benefit shareholders? |
• |
Percentage of assets/business contributed; |
• |
Percentage ownership; |
• |
Financial and strategic benefits; |
• |
Governance structure; |
• |
Conflicts of interest; |
• |
Other alternatives; and |
• |
Non-completion risk. |
• |
Management’s efforts to pursue other alternatives;
|
• |
Appraisal value of assets; and |
• |
The compensation plan for executives managing
the liquidation. |
|
B-41 |
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• |
Valuation
- Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide
an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic
rationale. |
• |
Market
reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of
a deal. |
• |
Strategic
rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not
be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration
of historical acquisitions. |
• |
Negotiations
and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A
fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’
competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no
auction) can also affect shareholder value. |
• |
Conflicts
of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider
shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a
merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to
support or recommend the merger. |
• |
Governance
- Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to
the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as
valuation) outweigh any deterioration in governance. |
• |
Dilution to existing shareholders’ position:
The amount and timing of shareholder ownership dilution should be weighed against the needs and proposed shareholder benefits of the capital
infusion. Although newly issued common stock, absent preemptive rights, is typically dilutive to existing shareholders, share price appreciation
is often the necessary event to trigger the exercise of “out of the money” warrants and convertible debt. In these instances
from a value standpoint, the negative impact of dilution is mitigated by the increase in the company’s stock price that must occur
to trigger the dilutive event. |
• |
Terms of the offer (discount/premium in purchase
price to investor, including any fairness opinion, conversion features, termination penalties, exit strategy): |
• |
The terms of the offer should be weighed against
the alternatives of the company and in light of company’s financial condition. Ideally, the conversion price for convertible debt
and the exercise price for warrants should be at a premium to the then prevailing stock price at the time of private placement. |
• |
When evaluating the magnitude of a private placement
discount or premium, consider factors that influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring
costs, capital scarcity, information asymmetry and anticipation of future performance. |
|
B-42 |
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• |
Financial issues: |
• |
The company’s financial condition; |
• |
Degree of need for capital; |
• |
Use of proceeds; |
• |
Effect of the financing on the company’s
cost of capital; |
• |
Current and proposed cash burn rate; |
• |
Going concern viability and the state of the capital
and credit markets. |
• |
Management’s efforts to pursue alternatives
and whether the company engaged in a process to evaluate alternatives: A fair, unconstrained process helps to ensure the best price for
shareholders. Financing alternatives can include joint ventures, partnership, merger or sale of part or all of the company. |
• |
Control issues: |
• |
Change in management; |
• |
Change in control; |
• |
Guaranteed board and committee seats; |
• |
Standstill provisions; |
• |
Voting agreements; |
• |
Veto power over certain corporate actions; and
|
• |
Minority versus majority ownership and corresponding
minority discount or majority control premium |
• |
Conflicts of interest: |
• |
Conflicts of interest should be viewed from the
perspective of the company and the investor. |
• |
Were the terms of the transaction negotiated at
arm’s length? Are managerial incentives aligned with shareholder interests? |
• |
Market reaction: |
• |
The market’s response to the proposed deal.
A negative market reaction is a cause for concern. Market reaction may be addressed by analyzing the one day impact on the unaffected
stock price. |
• |
Estimated value and financial prospects of the
reorganized company; |
• |
Percentage ownership of current shareholders in
the reorganized company; |
• |
Whether shareholders are adequately represented
in the reorganization process (particularly through the existence of an official equity committee); |
• |
The cause(s) of the bankruptcy filing, and the
extent to which the plan of reorganization addresses the cause(s); |
|
B-43 |
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• |
Existence of a superior alternative to the plan
of reorganization; and |
• |
Governance of the reorganized company. |
• |
Valuation—Is
the value being paid by the SPAC reasonable? SPACs generally lack an independent fairness opinion and the financials on the target may
be limited. Compare the conversion price with the intrinsic value of the target company provided in the fairness opinion. Also, evaluate
the proportionate value of the combined entity attributable to the SPAC IPO shareholders versus the pre-merger value of SPAC. Additionally,
a private company discount may be applied to the target, if it is a private entity. |
• |
Market
reaction—How has the market responded to the proposed deal? A negative market reaction may be a cause for concern. Market
reaction may be addressed by analyzing the one-day impact on the unaffected stock price. |
• |
Deal
timing—A main driver for most transactions is that the SPAC charter typically requires the deal to be complete
within 18 to 24 months, or the SPAC is to be liquidated. Evaluate the valuation, market reaction, and potential conflicts of interest
for deals that are announced close to the liquidation date. |
• |
Negotiations
and process—What was the process undertaken to identify potential target companies within specified industry or location
specified in charter? Consider the background of the sponsors. |
• |
Conflicts
of interest—How are sponsors benefiting from the transaction compared to IPO shareholders? Potential conflicts could
arise if a fairness opinion is issued by the insiders to qualify the deal rather than a third party or if management is encouraged to
pay a higher price for the target because of an 80% rule (the charter requires that the fair market value of the target is at least
equal to 80% of net assets of the SPAC). Also, there may be sense of urgency by the management team of the SPAC to close the deal since
its charter typically requires a transaction to be completed within the 18-24 month timeframe. |
• |
Voting
agreements—Are the sponsors entering into enter into any voting agreements/ tender offers with shareholders who are
likely to vote against the proposed merger or exercise conversion rights? |
• |
Governance—What
is the impact of having the SPAC CEO or founder on key committees following the proposed merger? |
• |
Length
of request: Typically, extension requests range from two to six months, depending on the progression of the SPAC’s
acquistion process. |
• |
Pending
transaction(s) or progression
of the acquisition process: Sometimes an intial business combination was already put to a shareholder vote, but, for varying
reasons, the transaction could not be consummated by the termination date and the SPAC is requesting an extension. Other times, the SPAC
has entered into a definitive transaction agreement, but needs additional time to consummate or hold the shareholder meeting. |
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B-44 |
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Added
incentive for non-redeeming shareholders: Sometimes the SPAC sponsor (or other insiders) will contribute, typically as a
loan to the company, additional funds that will be added to the redemption value of each public share as long as such shares are not redeemed
in connection with the extension request. The purpose of the “equity kicker” is to incentivize shareholders to hold their
shares through the end of the requested extension or until the time the transaction is put to a shareholder vote, rather than electing
redeemption at the extension proposal meeting. |
• |
Prior
extension requests: Some SPACs request additional time beyond the extension period sought in prior extension requests. |
• |
Tax and regulatory advantages; |
• |
Planned use of the sale proceeds; |
• |
Valuation of spinoff; |
• |
Fairness opinion; |
• |
Benefits to the parent company; |
• |
Conflicts of interest; |
• |
Managerial incentives; |
• |
Corporate governance changes; |
• |
Changes in the capital structure. |
• |
Hiring a financial advisor to explore strategic
alternatives; |
• |
Selling the company; or |
• |
Liquidating the company and distributing the proceeds
to shareholders. |
• |
Prolonged poor performance with no turnaround
in sight; |
• |
Signs of entrenched board and management (such
as the adoption of takeover defenses); |
• |
Strategic plan in place for improving value; |
• |
Likelihood of receiving reasonable value in a
sale or dissolution; and |
• |
The company actively exploring its strategic options,
including retaining a financial advisor. |
|
B-45 |
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5. |
Compensation
|
1. |
Maintain appropriate pay-for-performance alignment,
with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract,
retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration,
among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based
plan costs; |
2. |
Avoid arrangements that risk “pay for failure”:
This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;
|
3. |
Maintain an independent and effective compensation
committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and
a sound process for compensation decision-making (e.g., including access to independent expertise
and advice when needed); |
4. |
Provide shareholders with clear, comprehensive
compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to
evaluate executive pay practices fully and fairly; |
5. |
Avoid inappropriate pay to non-executive directors:
This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence
and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a
variety of generally accepted best practices. |
• |
There is an unmitigated misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders. |
• |
There is no SOP on the ballot, and an against
vote on an SOP is warranted due to pay for performance misalignment, problematic pay practices, or the lack of adequate responsiveness
on compensation issues raised previously, or a combination thereof; |
• |
The board fails to respond adequately to a previous
SOP proposal that received less than 70 percent support of votes cast; |
• |
The company has recently practiced or approved
problematic pay practices, such as option repricing or option backdating; or |
• |
The situation is egregious. |
|
B-46 |
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1. |
Peer Group18
Alignment: |
• |
The degree of alignment between the company’s
annualized TSR rank and the CEO’s annualized total pay rank within a peer group, each measured over a three-year period. |
• |
The rankings of CEO total pay and company financial
performance within a peer group, each measured over a three-year period. |
• |
The multiple of the CEO’s total pay relative
to the peer group median in the most recent fiscal year. |
2. |
Absolute Alignment19
– the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years –
i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period. |
• |
The ratio of performance- to time-based incentive
awards; |
• |
The overall ratio of performance-based compensation;
|
• |
The rigor of performance goals; |
• |
The complexity and risks around pay program design;
|
• |
The transparency and clarity of disclosure; |
• |
The company’s peer group benchmarking practices;
|
• |
Financial/operational results, both absolute and
relative to peers; |
• |
Special circumstances related to, for example,
a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards); |
• |
Realizable pay20
compared to grant pay; and |
• |
Any other factors deemed relevant. |
17 |
The
Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities.
|
18 |
The
revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial
firms), GICS industry group, and company’s selected peers’ GICS industry group, with size constraints, via a process designed
to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market cap bucket
that is reflective of the company’s. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant. |
19 |
Only
Russell 3000 Index companies are subject to the Absolute Alignment analysis. |
20 |
Glenmede
Policy research reports include realizable pay for S&P1500 companies. |
|
B-47 |
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• |
Problematic practices related to non-performance-based
compensation elements; |
• |
Incentives that may motivate excessive risk-taking
or present a windfall risk; and |
• |
Pay decisions that circumvent pay-for-performance,
such as options backdating or waiving performance requirements. |
• |
Repricing or replacing of underwater stock options/SARs
without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
• |
Extraordinary perquisites or tax gross-ups; |
• |
New or materially amended agreements that provide
for: |
• |
Excessive termination or CIC severance payments
(generally exceeding 3 times base salary and average/target/most recent bonus); |
• |
CIC severance payments without involuntary job
loss or substantial diminution of duties (“single” or “modified single” triggers) or in connection with a problematic
Good Reason definition; |
• |
CIC excise tax gross-up entitlements (including
“modified” gross-ups); |
• |
Multi-year guaranteed awards that are not at risk
due to rigorous performance conditions; |
• |
Liberal CIC definition combined with any single-trigger
CIC benefits; |
• |
Insufficient executive compensation disclosure
by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI’s executives
is not possible; |
• |
Severance payments made when the termination is
not clearly disclosed as involuntary (for example, a termination without cause or resignation for good reason); |
• |
Any other provision or practice deemed to be egregious
and present a significant risk to investors. |
• |
Reason and motive for the options backdating issue,
such as inadvertent vs. deliberate grant date changes; |
• |
Duration of options backdating; |
• |
Size of restatement due to options backdating;
|
• |
Corrective actions taken by the board or compensation
committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
|
B-48 |
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• |
Adoption of a grant policy that prohibits backdating,
and creates a fixed grant schedule or window period for equity grants in the future. |
• |
Failure to respond to majority-supported shareholder
proposals on executive pay topics; or |
• |
Failure to adequately respond to the company’s
previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account: |
• |
The company’s response, including: |
• |
Disclosure of engagement efforts with major institutional
investors regarding the issues that contributed to the low level of support (including the timing and frequency of engagements and whether
independent directors participated); |
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated;
|
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
• |
Single- or modified-single-trigger cash severance;
|
• |
Single-trigger acceleration of unvested equity
awards; |
• |
Full acceleration of equity awards granted shortly
before the change in control; |
• |
Acceleration of performance awards above the target
level of performance without compelling rationale; |
• |
Excessive cash severance (>3x base salary and
bonus); |
• |
Excise tax gross-ups triggered and payable; |
• |
Excessive golden parachute payments (on an absolute
basis or as a percentage of transaction equity value); or |
|
B-49 |
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• |
Recent amendments that incorporate any problematic
features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence
merger agreements that may not be in the best interests of shareholders; or |
• |
The company’s assertion that a proposed
transaction is conditioned on shareholder approval of the golden parachute advisory vote. |
• |
Plan Cost:
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated
Shareholder Value Transfer (SVT) in relation to peers and considering both: |
• |
SVT based on new shares requested plus shares
remaining for future grants, plus outstanding unvested/unexercised grants; and |
• |
SVT based only on new shares requested plus shares
remaining for future grants. |
• |
Plan
Features: |
• |
Quality of disclosure around vesting upon a change
in control (CIC); |
• |
Discretionary vesting authority; |
• |
Liberal share recycling on various award types;
|
• |
Lack of minimum vesting period for grants made
under the plan; |
• |
Dividends payable prior to award vesting. |
• |
Grant
Practices: |
• |
The company’s three year burn rate relative
to its industry/market cap peers; |
• |
Vesting requirements in CEO’S recent equity
grants (3-year look-back); |
• |
The estimated duration of the plan (based on the
sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years);
|
• |
The proportion of the CEO’s most recent
equity grants/awards subject to performance conditions; |
21 |
Proposals
evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and
directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees
and/or employees and directors; amended plans will be further evaluated case-by-case. |
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B-50 |
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• |
Whether the company maintains a sufficient claw-back
policy; |
• |
Whether the company maintains sufficient post
exercise/vesting share-holding requirements. |
• |
Awards may vest in connection with a liberal change-of-control
definition; |
• |
The plan would permit repricing or cash buyout
of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies --
or by not prohibiting it when the company has a history of repricing – for non-listed companies); |
• |
The plan is a vehicle for problematic pay practices
or a significant pay-for-performance disconnect under certain circumstances; |
• |
The plan is excessively dilutive to shareholders’
holdings; |
• |
The plan contains an evergreen (automatic share
replenishment) feature; or |
• |
Any other plan features are determined to have
a significant negative impact on shareholder interests. |
22 |
For
plans evaluated under the Equity Plan Scorecard policy, the company’s SVT benchmark is considered along with other factors. |
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B-51 |
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• |
Amend the terms of outstanding options or SARs
to reduce the exercise price of such outstanding options or SARs; |
• |
Cancel outstanding options or SARs in exchange
for options or SARs with an exercise price that is less than the exercise price of the original options or SARs; |
• |
Cancel underwater options in exchange for stock
awards; or |
• |
Provide cash buyouts of underwater options. |
• |
Magnitude of pay misalignment; |
• |
Contribution of non–performance-based equity
grants to overall pay; and |
• |
The proportion of equity awards granted in the
last three fiscal years concentrated at the named executive officer level. |
|
B-52 |
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• |
Purchase price is at least 85 percent of fair
market value; |
• |
Offering period is 27 months or less; and |
• |
The number of shares allocated to the plan is
10 percent or less of the outstanding shares. |
• |
Purchase price is less than 85 percent of fair
market value; or |
• |
Offering period is greater than 27 months; or
|
• |
The number of shares allocated to the plan is
more than ten percent of the outstanding shares. |
• |
Broad-based participation (i.e.,
all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company); |
• |
Limits on employee contribution, which may be
a fixed dollar amount or expressed as a percent of base salary; |
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B-53 |
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• |
Company matching contribution up to 25 percent
of employee’s contribution, which is effectively a discount of 20 percent from market value; |
• |
No discount on the stock price on the date of
purchase when there is a company matching contribution. |
• |
Addresses administrative features only; or |
• |
Seeks approval for Section 162(m) purposes
only, and the plan administering committee consists entirely of independent outsiders,
per Glenmede Policy’s Classification of Directors. Note that if the company is presenting the plan to shareholders for the
first time after the company’s initial public offering (IPO), or if the proposal is bundled with other material plan amendments,
then the recommendation will be case-by-case (see below). |
• |
Seeks approval for Section 162(m) purposes
only, and the plan administering committee does not consist entirely of independent outsiders, per Glenmede
Policy’s Classification of Directors. |
• |
If the proposal requests additional shares and/or
the amendments may potentially increase the transfer of shareholder value to employees, the recommendation will be based on the Equity
Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments. |
• |
If the plan is being presented to shareholders
for the first time after the company’s IPO, whether or not additional shares are being requested, the recommendation will be based
on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any amendments. |
• |
If there is no request for additional shares and
the amendments are not deemed to potentially increase the transfer of shareholder value to employees, then the recommendation will be
based entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation will be shown for informational purposes.
|
• |
Historic trading patterns--the stock price should
not be so volatile that the options are likely to be back “in-the-money” over the near term; |
• |
Rationale for the re-pricing--was the stock price
decline beyond management’s control? |
• |
Is this a value-for-value exchange? |
• |
Are surrendered stock options added back to the
plan reserve? |
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B-54 |
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2024
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Timing--repricing should occur at least one year
out from any precipitous drop in company’s stock price; |
• |
Option vesting--does the new option vest immediately
or is there a black-out period? |
• |
Term of the option--the term should remain the
same as that of the replaced option; |
• |
Exercise price--should be set at fair market or
a premium to market; |
• |
Participants--executive officers and directors
must be excluded. |
• |
Executive officers and non-employee directors
are excluded from participating; |
• |
Stock options are purchased by third-party financial
institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other
appropriate financial models; |
• |
There is a two-year minimum holding period for
sale proceeds (cash or stock) for all participants. |
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B-55 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Eligibility; |
• |
Vesting; |
• |
Bid-price; |
• |
Term of options; |
• |
Cost of the program and impact of the TSOs on
company’s total option expense |
• |
Option repricing policy. |
• |
If the equity plan under which non-employee director
grants are made is on the ballot, whether or not it warrants support; and |
• |
An assessment of the following qualitative factors:
|
• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
• |
The total estimated cost of the company’s
equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) based on
new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; |
• |
The company’s three-year burn rate relative
to its industry/market cap peers; and |
• |
The presence of any egregious plan features (such
as an option repricing provision or liberal CIC vesting risk). |
|
B-56 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
• |
The company’s past practices regarding equity
and cash compensation; |
• |
Whether the company has a holding period or stock
ownership requirements in place, such as a meaningful retention ratio (at least 50 percent for full tenure); and |
• |
Whether the company has a rigorous claw-back policy
in place. |
|
B-57 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The percentage/ratio of net shares required to
be retained; |
• |
The time period required to retain the shares;
|
• |
Whether the company has equity retention, holding
period, and/or stock ownership requirements in place and the robustness of such requirements; |
• |
Whether the company has any other policies aimed
at mitigating risk taking by executives; |
• |
Executives’ actual stock ownership and the
degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s existing requirements;
and |
• |
First, vote for shareholder proposals advocating
the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced
options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion
of |
|
B-58 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Second, assess the rigor of the company’s
performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical
or peer group comparison, generally vote for the proposal. Furthermore, if target performance results in an above target payout, vote
for the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based
equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test. |
• |
Set compensation targets for the plan’s
annual and long-term incentive pay components at or below the peer group median; |
• |
Deliver a majority of the plan’s target
long-term compensation through performance-vested, not simply time-vested, equity awards; |
• |
Provide the strategic rationale and relative weightings
of the financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components
of the plan; |
• |
Establish performance targets for each plan financial
metric relative to the performance of the company’s peer companies; |
• |
Limit payment under the annual and performance-vested
long-term incentive components of the plan to when the company’s performance on its selected financial performance metrics exceeds
peer group median performance. |
• |
What aspects of the company’s annual and
long-term equity incentive programs are performance driven? |
• |
If the annual and long-term equity incentive programs
are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed
peer group? |
• |
Can shareholders assess the correlation between
pay and performance based on the current disclosure? |
• |
What type of industry and stage of business cycle
does the company belong to? |
• |
Adoption, amendment, or termination of a 10b5-1
Plan must be disclosed within two business days in a Form 8-K; |
• |
Amendment or early termination of a 10b5-1 Plan
is allowed only under extraordinary circumstances, as determined by the board; |
• |
Ninety days must elapse between adoption or amendment
of a 10b5-1 Plan and initial trading under the plan; |
|
B-59 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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Reports on Form 4 must identify transactions
made pursuant to a 10b5-1 Plan; |
• |
An executive may not trade in company stock outside
the 10b5-1 Plan. |
• |
Trades under a 10b5-1 Plan must be handled by
a broker who does not handle other securities transactions for the executive. |
• |
If the company has adopted a formal recoupment
policy; |
• |
The rigor of the recoupment policy focusing on
how and under what circumstances the company may recoup incentive or stock compensation; |
• |
Whether the company has chronic restatement history
or material financial problems; |
• |
Whether the company’s policy substantially
addresses the concerns raised by the proponent; |
• |
Disclosure of recoupment of incentive or stock
compensation from senior executives or lack thereof; or |
• |
Any other relevant factors. |
• |
The company’s
severance or change-in-control agreements in place, and the presence of problematic features (such as excessive severance entitlements,
single triggers, excise tax gross-ups, etc.); |
• |
Any existing
limits on cash severance payouts or policies which require shareholder ratification of severance payments exceeding a certain level; |
• |
Any recent
severance-related controversies; and |
• |
Whether the
proposal is overly prescriptive, such as requiring shareholder approval of severance that does not exceed market norms. |
|
B-60 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The frequency and timing of the company’s
share buybacks; |
• |
The use of per-share metrics in incentive plans;
|
• |
The effect of recent buybacks on incentive metric
results and payouts; and |
• |
Whether there is any indication of metric result
manipulation. |
• |
The company’s current treatment of equity
in change-of-control situations (i.e. is it double triggered, does it allow for the assumption of equity by acquiring company, the treatment
of performance shares, etc.); |
• |
Current employment agreements, including potential
poor pay practices such as gross-ups embedded in those agreements. |
|
B-61 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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6. |
Social and Environmental Issues |
• |
Whether the proposal itself is well framed and
reasonable; |
• |
Whether adoption of the proposal would have either
a positive or negative impact on the company’s short-term or long-term share value; |
• |
The percentage of sales, assets and earnings affected;
|
• |
Whether the company has already responded in some
appropriate manner to the request embodied in a proposal; |
• |
Whether the company’s analysis and voting
recommendation to shareholders is persuasive; |
• |
Whether there are significant controversies, fines,
penalties, or litigation associated with the company’s environmental or social practices; |
• |
What other companies have done in response to
the issue addressed in the proposal; |
• |
Whether implementation of the proposal would achieve
the objectives sought in the proposal; and |
• |
The degree to which the company’s stated
position on the issues raised in the proposal could affect its reputation or sales, or leave it vulnerable to a boycott or selective purchasing.
|
• |
The company has already published a set of animal
welfare standards and monitors compliance; |
• |
The company’s standards are comparable to
industry peers; and |
• |
There are no recent significant fines, litigation,
or controversies related to the company’s and/or its suppliers’ treatment of animals. |
|
B-62 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company is conducting animal testing programs
that are unnecessary or not required by regulation; |
• |
The company is conducting animal testing when
suitable alternatives are commonly accepted and used by industry peers; or |
• |
There are recent, significant fines or litigation
related to the company’s treatment of animals. |
• |
The potential impact of such labeling on the company’s
business; |
• |
The quality of the company’s disclosure
on GE product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and |
• |
Company’s current disclosure on the feasibility
of GE product labeling. |
• |
Whether the company has adequately disclosed mechanisms
in place to prevent abuses; |
• |
Whether the company has adequately disclosed the
financial risks of the products/practices in question; |
• |
Whether the company has been subject to violations
of related laws or serious controversies; and |
• |
Peer companies’ policies/practices in this
area. |
|
B-63 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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Whether the company has adequately disclosed mechanisms
in place to prevent abusive lending practices; |
• |
Whether the company has adequately disclosed the
financial risks of the lending products in question; |
• |
Whether the company has been subject to violations
of lending laws or serious lending controversies; and |
• |
Peer companies’ policies to prevent abusive
lending practices. |
• |
The potential for reputational, market, and regulatory
risk exposure; |
• |
Existing disclosure of relevant policies; |
• |
Deviation from established industry norms; |
• |
Relevant company initiatives to provide research
and/or products to disadvantaged consumers; |
• |
Whether the proposal focuses on specific products
or geographic regions; |
• |
The potential burden and scope of the requested
report; and |
• |
Recent significant controversies, litigation,
or fines at the company. |
• |
The scope of the company’s operations in
the affected/relevant area(s); |
• |
The company’s existing healthcare policies,
including benefits and healthcare access; and |
• |
Company donations to relevant healthcare providers.
|
|
B-64 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Recent related fines, controversies, or significant
litigation; |
• |
Whether the company complies with relevant laws
and regulations on the marketing of tobacco; |
• |
Whether the company’s advertising restrictions
deviate from those of industry peers; |
• |
Whether the company entered into the Master Settlement
Agreement, which restricts marketing of tobacco to youth; and |
• |
Whether restrictions on marketing to youth extend
to foreign countries. |
• |
Whether the company complies with all laws and
regulations; |
• |
The degree that voluntary restrictions beyond
those mandated by law might hurt the company’s competitiveness; and |
• |
The risk of any health-related liabilities. |
|
B-65 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Vote for shareholder proposals seeking information
on the financial, physical, or regulatory risks it faces related to climate change- on its operations and investments, or on how the company
identifies, measures, and manage such risks. |
• |
Vote for shareholder proposals calling for the
reduction of GHG emissions. |
• |
Vote for shareholder proposals seeking reports
on responses to regulatory and public pressures surrounding climate change, and for disclosure of research that aided in setting company
policies around climate change. |
• |
Vote for shareholder proposals requesting a report/disclosure
of goals on GHG emissions from company operations and/or products. |
• |
The extent to which the company’s climate
related disclosures are in line with TCFD recommendations and meet other market standards; |
• |
Disclosure of its operational and supply chain
GHG emissions (Scopes 1, 2, and 3); |
• |
The completeness and rigor of company’s
short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant); |
• |
Whether the company has sought and approved third-party
approval that its targets are science-based; |
• |
Whether the company has made a commitment to be
“net zero” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050; |
• |
Whether the company discloses a commitment to
report on the implementation of its plan in subsequent years; |
• |
Whether the company’s climate data has received
third-party assurance; |
• |
Disclosure of how the company’s lobbying
activities and its capital expenditures align with company strategy; |
• |
Whether there are specific industry decarbonization
challenges; and |
• |
The company’s related commitment, disclosure,
and performance compared to its industry peers. |
23 |
Variations
of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan. |
|
B-66 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The completeness and rigor of the company’s
climate-related disclosure; |
• |
The company’s actual GHG emissions performance;
|
• |
Whether the company has been the subject of recent,
significant violations, fines, litigation, or controversy related to its GHG emissions; and |
• |
Whether the proposal’s request is unduly
burdensome (scope or timeframe) or overly prescriptive. |
• |
The gender and racial minority representation
of the company’s board is reasonably inclusive in relation to companies of similar size and business; and |
• |
The board already reports on its nominating procedures
and gender and racial minority initiatives on the board and within the company. |
|
B-67 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company’s current policies and disclosure
related to both its diversity and inclusion policies and practices and its compensation philosophy and fair and equitable compensation
practices; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to gender, race, or ethnicity pay gap issues; |
• |
The company’s disclosure regarding gender,
race, or ethnicity pay gap policies or initiatives compared to its industry peers; and |
• |
Local laws regarding categorization of race and/or
ethnicity and definitions of ethnic and/or racial minorities. |
• |
The company’s compliance with applicable
regulations and guidelines; |
• |
The company’s current level of disclosure
regarding its security and safety policies, procedures, and compliance monitoring; and |
• |
The existence of recent, significant violations,
fines, or controversy regarding the safety and security of the company’s operations and/or facilities. |
• |
Operations in the specified regions are not permitted
by current laws or regulations; |
• |
The company does not currently have operations
or plans to develop operations in these protected regions; or |
• |
The company’s disclosure of its operations
and environmental policies in these regions is comparable to industry peers. |
|
B-68 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The nature of the company’s business; |
• |
The current level of disclosure of the company’s
existing related programs; |
• |
The timetable and methods of program implementation
prescribed by the proposal; |
• |
The company’s ability to address the issues
raised in the proposal; and |
• |
How the company’s recycling programs compare
to similar programs of its industry peers. |
• |
Vote for shareholder proposals seeking greater
disclosure on the company’s environmental and social practices, and/or associated risks and liabilities. |
• |
Vote for shareholder proposals asking companies
to report in accordance with the Global Reporting Initiative (GRI). |
• |
Vote for shareholder proposals seeking
the preparation of sustainability reports. |
• |
Vote for shareholder
proposals to study or implement the CERES Roadmap 2030. |
• |
Vote for shareholder
proposals to study or implement the Equator Principles. |
|
B-69 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company’s current disclosure of relevant
policies, initiatives, oversight mechanisms, and water usage metrics; |
• |
Whether or not the company’s existing water-related
policies and practices are consistent with relevant internationally recognized standards and national/local regulations; |
• |
The potential financial impact or risk to the
company associated with water-related concerns or issues; and |
• |
Recent, significant company controversies, fines,
or litigation regarding water use by the company and its suppliers. |
• |
The level of disclosure of company policies and
procedures relating to data security, privacy, freedom of speech, information access and management, and Internet censorship; |
• |
Engagement in dialogue with governments or relevant
groups with respect to data security, privacy, or the free flow of information on the Internet; |
• |
The scope of business involvement and of investment
in countries whose governments censor or monitor the Internet and other telecommunications; |
• |
Applicable market-specific laws or regulations
that may be imposed on the company; and |
• |
Controversies, fines, or litigation related to
data security, privacy, freedom of speech, or Internet censorship. |
|
B-70 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Generally vote for proposals requesting a report
on company or company supplier labor and/or human rights standards and policies. |
• |
Vote for shareholder proposals to implement human
rights standards and workplace codes of conduct. |
• |
Vote for shareholder proposals calling for the
implementation and reporting on ILO codes of conduct, SA 8000 Standards, or the Global Sullivan Principles. |
• |
Vote for shareholder proposals that call for the
adoption and/or enforcement of principles or codes relating to countries in which there are systematic violations of human rights. |
• |
Vote for shareholder proposals that call for independent
monitoring programs in conjunction with local and respected religious and human rights groups to monitor supplier and licensee compliance
with codes. |
• |
Vote for shareholder proposals that seek publication
of a “Code of Conduct” to the company’s foreign suppliers and licensees, requiring they satisfy all applicable standards
and laws protecting employees’ wages, benefits, working conditions, freedom of association, and other rights. |
• |
Vote for shareholder proposals seeking reports
on, or the adoption of, vendor standards including: reporting on incentives to encourage suppliers to raise standards rather than terminate
contracts and providing public disclosure of contract supplier reviews on a regular basis. |
|
B-71 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Vote for shareholder proposals to adopt labor
standards for foreign and domestic suppliers to ensure that the company will not do business with foreign suppliers that manufacture products
for sale using forced labor, child labor, or that fail to comply with applicable laws protecting employee’s wages and working conditions.
|
• |
Vote for proposals requesting that a company conduct
an assessment of the human rights risks in its operations or in its supply chain, or report on its human rights risk assessment process.
|
• |
The company’s current policies and practices
related to the use of mandatory arbitration agreements on workplace claims; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to the use of mandatory arbitration agreements on workplace claims; and |
• |
The company’s disclosure of its policies
and practices related to the use of mandatory arbitration agreements compared to its peers. |
• |
Current disclosure of applicable policies and
risk assessment report(s) and risk management procedures; |
• |
The impact of regulatory non-compliance, litigation,
remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including
the management of relevant community and stakeholder relations; |
• |
The nature, purpose, and scope of the company’s
operations in the specific region(s); |
• |
The degree to which company policies and procedures
are consistent with industry norms; and |
• |
Scope of the resolution. |
|
B-72 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The nature, purpose, and scope of the operations
and business involved that could be affected by social or political disruption; |
• |
Current disclosure of applicable risk assessment(s)
and risk management procedures; |
• |
Compliance with U.S. sanctions and laws; |
• |
Consideration of other international policies,
standards, and laws; and |
• |
Whether the company has been recently involved
in recent, significant controversies, fines or litigation related to its operations in “high-risk” markets. |
• |
Controversies surrounding operations in the relevant
market(s); |
• |
The value of the requested report to shareholders;
|
• |
The company’s current level of disclosure
of relevant information on outsourcing and plant closure procedures; and |
• |
The company’s existing human rights standards
relative to industry peers. |
• |
The company’s current policies, practices,
oversight mechanisms related to preventing workplace sexual harassment; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to workplace sexual harassment issues; and |
• |
The company’s disclosure regarding workplace
sexual harassment policies or initiatives compared to its industry peers. |
|
B-73 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company’s current disclosure of relevant
lobbying policies, and management and board oversight; |
• |
The company’s disclosure regarding trade
associations or other groups that it supports, or is a member of, that engage in lobbying activities; and |
• |
Recent significant controversies, fines, or litigation
regarding the company’s lobbying-related activities. |
• |
The company’s policies, and management and
board oversight related to its direct political contributions and payments to trade associations or other groups that may be used for
political purposes; |
• |
The company’s disclosure regarding its support
of, and participation in, trade associations or other groups that may make political contributions; and |
• |
Recent significant controversies, fines, or litigation
related to the company’s political contributions or political activities. |
• |
There are
no recent, significant controversies, fines, or litigation regarding the company’s political contributions or trade association
spending; and |
• |
The company
has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary
and prohibit coercion. |
• |
The company’s
policies, management, board oversight, governance processes, and level of disclosure related to direct political contributions, lobbying
activities, and payments to trade associations, political action committees, or other groups that may be used for political purposes; |
|
B-74 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The company’s
disclosure regarding: the reasons for its support of candidates for public offices; the reasons for support of and participation in trade
associations or other groups that may make political contributions; and other political activities; |
• |
Any incongruencies
identified between a company’s direct and indirect political expenditures and its publicly stated values and priorities; |
• |
Recent significant
controversies related to the company’s direct and indirect lobbying, political contributions, or political activities. |
7. |
Mutual Fund Proxies |
• |
Past performance as a closed-end fund; |
• |
Market in which the fund invests; |
• |
Measures taken by the board to address the discount;
and |
• |
Past shareholder activism, board activity, and
votes on related proposals. |
• |
Past performance relative to its peers; |
• |
Market in which fund invests; |
• |
Measures taken by the board to address the issues;
|
• |
Past shareholder activism, board activity, and
votes on related proposals; |
• |
Strategy of the incumbents versus the dissidents;
|
• |
Independence of directors; |
• |
Experience and skills of director candidates;
|
• |
Governance profile of the company; |
• |
Evidence of management entrenchment. |
|
B-75 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Proposed and current fee schedules; |
• |
Fund category/investment objective; |
• |
Performance benchmarks; |
• |
Share price performance as compared with peers;
|
• |
Resulting fees relative to peers; |
• |
Assignments (where the advisor undergoes a change
of control). |
• |
Stated specific financing purpose; |
• |
Possible dilution for common shares; |
• |
Whether the shares can be used for antitakeover
purposes. |
• |
Potential competitiveness; |
• |
Regulatory developments; |
• |
Current and potential returns; and |
• |
Current and potential risk. |
• |
The fund’s target investments; |
• |
The reasons given by the fund for the change;
and |
• |
The projected impact of the change on the portfolio.
|
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B-76 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Political/economic changes in the target market;
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• |
Consolidation in the target market; and |
• |
Current asset composition. |
• |
Potential competitiveness; |
• |
Current and potential returns; |
• |
Risk of concentration; |
• |
Consolidation in target industry. |
• |
The proposal to allow share issuances below NAV
has an expiration date no more than one year from the date shareholders approve the underlying proposal, as required under the Investment
Company Act of 1940; |
• |
The sale is deemed to be in the best interests
of shareholders by (1) a majority of the company’s independent directors and (2) a majority of the company’s directors who
have no financial interest in the issuance; and |
• |
The company has demonstrated responsible past
use of share issuances by either: |
• |
Outperforming peers in its 8-digit GICS group
as measured by one- and three-year median TSRs; or |
• |
Providing disclosure that its past share issuances
were priced at levels that resulted in only small or moderate discounts to NAV and economic dilution to existing non-participating shareholders.
|
• |
Strategies employed to salvage the company; |
• |
The fund’s past performance; |
• |
The terms of the liquidation. |
|
B-77 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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The degree of change implied by the proposal;
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• |
The efficiencies that could result; |
• |
The state of incorporation; |
• |
Regulatory standards and implications. |
• |
Removal of shareholder approval requirement to
reorganize or terminate the trust or any of its series; |
• |
Removal of shareholder approval requirement for
amendments to the new declaration of trust; |
• |
Removal of shareholder approval requirement to
amend the fund’s management contract, allowing the contract to be modified by the investment manager and the trust management, as
permitted by the 1940 Act; |
• |
Allow the trustees to impose other fees in addition
to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a
fund’s shares; |
• |
Removal of shareholder approval requirement to
engage in and terminate subadvisory arrangements; |
• |
Removal of shareholder approval requirement to
change the domicile of the fund. |
• |
Regulations of both states; |
• |
Required fundamental policies of both states;
|
• |
The increased flexibility available. |
• |
Fees charged to comparably sized funds with similar
objectives; |
• |
The proposed distributor’s reputation and
past performance; |
• |
The competitiveness of the fund in the industry;
|
• |
The terms of the agreement. |
|
B-78 |
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2024
GLENMEDE – SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Resulting fee structure; |
• |
Performance of both funds; |
• |
Continuity of management personnel; |
• |
Changes in corporate governance and their impact
on shareholder rights. |
• |
Performance of the fund’s Net Asset Value
(NAV); |
• |
The fund’s history of shareholder relations;
|
• |
The performance of other funds under the advisor’s
management. |
8. |
Foreign Private Issuers Listed on U.S. Exchanges
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B-79 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-81 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-82 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-83 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-84 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-85 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-86 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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B-87 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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1. |
Routine/Miscellaneous
|
• |
Vote for proposals that relate specifically to
soliciting votes for a merger or transaction if supporting that merger or transaction. |
• |
Vote against proposals if the wording is too vague
or if the proposal includes “other business.” |
• |
The new quorum threshold requested; |
• |
The rationale presented for the reduction; |
• |
The market capitalization of the company (size,
inclusion in indices); |
• |
The company’s ownership structure; |
• |
Previous voter turnout or attempts to achieve
quorum; |
• |
Any provisions or commitments to restore quorum
to a majority of shares outstanding, should voter turnout improve sufficiently; and |
• |
Other factors as appropriate. |
|
B-88 |
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|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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|
• |
The terms of the auditor agreement--the degree
to which these agreements impact shareholders’ rights; |
• |
The motivation and rationale for establishing
the agreements; |
• |
The quality of the company’s disclosure;
and |
• |
The company’s historical practices in the
audit area. |
• |
An auditor has a financial interest in or association
with the company, and is therefore not independent; |
• |
There is reason to believe that the independent
auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position; |
• |
Poor accounting practices are identified that
rise to a serious level of concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures;
or |
• |
Fees for non-audit services (“Other”
fees) are excessive. |
• |
Non-audit (“other”) fees > audit
fees + audit-related fees + tax compliance/preparation fees |
|
B-89 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The tenure of the audit firm; |
• |
The length of rotation specified in the proposal;
|
• |
Any significant audit-related issues at the company;
|
• |
The number of audit committee meetings held each
year; |
• |
The number of financial experts serving on the
committee; and |
• |
Whether the company has a periodic renewal process
where the auditor is evaluated for both audit quality and competitive price. |
2. |
Board
of Directors |
• |
Accountability:
Boards should be sufficiently accountable to shareholders, including through transparency of the company’s governance practices
and regular board elections, by the provision of sufficient information for shareholders to be able to assess directors and board composition,
and through the ability of shareholders to remove directors. |
• |
Responsiveness:
Directors should respond to investor input, such as that expressed through significant opposition to management proposals, significant
support for shareholder proposals (whether binding or non- binding), and tender offers where a majority of shares are tendered. |
• |
Composition:
Companies should seek directors who can add value to the board through specific skills or expertise and who can devote sufficient time
and commitment to serve effectively. Boards should be of a size appropriate to accommodate diversity, expertise, and independence, while
ensuring active and collaborative participation by all members. Boards should be sufficiently diverse to ensure consideration of a wide
range of perspectives. |
• |
Independence:
Boards should be sufficiently independent from management (and significant shareholders) so as to ensure that they are able and motivated
to effectively supervise management’s performance for the benefit of all shareholders, including in setting and monitoring the execution
of corporate strategy, with appropriate use of shareholder capital, and in setting and monitoring executive compensation programs that
support that strategy. The chair of the board should ideally be an independent director, and all boards should have an independent leadership
position or a similar role in order to help provide appropriate counterbalance to executive management, as well as having sufficiently
independent committees that focus on key governance concerns such as audit, compensation, and nomination of directors. |
1 |
A
“new nominee” is a director who is being presented for election by shareholders for the first time. Recommendations on new
nominees who have served for less than one year are made on a case-by-case basis depending on the timing of their appointment and the
problematic governance issue in question. |
|
B-90 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
A classified board structure; |
• |
A supermajority vote requirement; |
• |
Either a plurality vote standard in uncontested
director elections or a majority vote standard with no plurality carve-out for contested elections; |
• |
The inability of shareholders to call special
meetings; |
• |
The inability of shareholders to act by written
consent; |
• |
A multi-class capital structure; and/or |
• |
A non–shareholder-approved poison pill.
|
• |
The company has a poison pill with a deadhand
or slowhand feature2; |
• |
The board makes a material adverse modification
to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger, without shareholder approval; or |
• |
The company has a long-term poison pill (with
a term of over one year) that was not approved by the public shareholders3. |
• |
The disclosed rationale for the adoption; |
• |
The trigger; |
• |
The company’s market capitalization (including
absolute level and sudden changes); |
• |
A commitment to put any renewal to a shareholder
vote; and |
• |
Other factors as relevant. |
2 |
If
the short-term pill with a deadhand or slowhand feature is enacted but expires before the next shareholder vote, Glenmede Policy will
generally still recommend withhold/against nominees at the next shareholder meeting following its adoption |
3 |
Approval
prior to, or in connection, with a company’s becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient.
|
|
B-91 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The board’s
rationale for adopting the bylaw/charter amendment without shareholder ratification; |
• |
Disclosure
by the company of any significant engagement with shareholders regarding the amendment; |
• |
The level
of impairment of shareholders’ rights caused by the board’s unilateral amendment to the bylaws/charter; |
• |
The board’s
track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions; |
• |
The company’s
ownership structure; |
• |
The company’s
existing governance provisions; |
• |
The timing
of the board’s amendment to the bylaws/charter in connection with a significant business development; and, |
• |
Other factors,
as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders. |
• |
Classified
the board; |
• |
Adopted supermajority
vote requirements to amend the bylaws or charter; |
• |
Eliminated
shareholders’ ability to amend bylaws; |
• |
Adopted a
fee-shifting provision; or |
• |
Adopted another
provision deemed egregious. |
• |
Supermajority
vote requirements to amend the bylaws or charter; |
• |
A classified
board structure; or |
• |
Other egregious
provisions. |
4 |
Includes
companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public
offering. |
|
B-92 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Newly-public
companies6 with a sunset provision of no more than seven years from the date of going public; |
• |
Limited Partnerships
and the Operating Partnership (OP) unit structure of REITs; |
• |
Situations
where the unequal voting rights are considered de minimis; or |
• |
The company
provides sufficient protections for minority shareholders, such as allowing minority shareholders a regular binding vote on whether the
capital structure should be maintained. |
• |
The presence
of a shareholder proposal addressing the same issue on the same ballot; |
• |
The board’s
rationale for seeking ratification; |
• |
Disclosure
of actions to be taken by the board should the ratification proposal fail; |
• |
Disclosure
of shareholder engagement regarding the board’s ratification request; |
• |
The level
of impairment to shareholders’ rights caused by the existing provision; |
• |
The history
of management and shareholder proposals on the provision at the company’s past meetings; |
• |
Whether the
current provision was adopted in response to the shareholder proposal; |
• |
The company’s
ownership structure; and |
• |
Previous use
of ratification proposals to exclude shareholder proposals. |
• |
The company’s governing documents impose
undue restrictions on shareholders’ ability to amend the bylaws. Such restrictions include but are not limited to: outright prohibition
on the submission of binding shareholder proposals, or share ownership requirements, subject matter restrictions, or time holding requirement
in excess of SEC Rule 14a-8. Vote against or withhold on an ongoing basis. |
5 |
This
generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled
to vote on all the same ballot items or nominees; or stock with time-phased voting rights (“loyalty shares”) . |
6 |
Newly-public
companies generally include companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete
a traditional initial public offering. |
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B-93 |
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The non-audit fees paid to the auditor are excessive
(see discussion under “Auditor Ratification”); |
• |
The company receives an adverse opinion on the
company’s financial statements from its auditor; or |
• |
There is persuasive evidence that the audit committee
entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders,
to pursue legitimate legal recourse against the audit firm. |
• |
Poor accounting practices are identified that
rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures.
Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective
actions, in determining whether withhold/against votes are warranted. |
• |
There is a significant misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders; |
• |
The company fails to include a Say on Pay ballot
item when required under SEC provisions, or under the company’s declared frequency of say on pay; or |
• |
The company fails to include a Frequency of Say
on Pay ballot item when required under SEC provisions. |
• |
The presence of an anti-pledging policy, disclosed
in the proxy statement, that prohibits future pledging activity; |
• |
The magnitude of aggregate pledged shares in terms
of total common shares outstanding, market value, and trading volume; |
• |
Disclosure of progress or lack thereof in reducing
the magnitude of aggregate pledged shares over time; |
• |
Disclosure in the proxy statement that shares
subject to stock ownership and holding requirements do not include pledged company stock; and |
• |
Any other relevant factors. |
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B-94 |
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Material failures of governance, stewardship,
risk oversight7, or fiduciary responsibilities at the company, including failure to
adequately guard against or manage ESG risks; |
• |
A lack of sustainability reporting in the company’s
public documents and/or website in conjunction with a failure to adequately manage or mitigate ESG risks; |
• |
Failure to replace management as appropriate;
or |
• |
Egregious actions related to a director’s
service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests
of shareholders at any company. |
• |
The company has detailed disclosure of climate-related
risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including: |
• |
Board governance measures; |
• |
Corporate strategy; |
• |
Risk management analyses; and |
• |
Metrics and targets |
• |
The company has declared a Net Zero target by
2050 or sooner and the target includes scope 1, 2, and relevant scope 3 emissions. |
• |
The company has set a medium-term target for reducing
its GHG emissions. |
7 |
Examples
of failure of risk oversight include, but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably
poor risk oversight of environmental and social issues, including climate change; significant environmental incidents including spills
and pollution; large scale or repeat workplace fatalities or injuries; significant adverse legal judgments or settlements; or hedging
of company stock. |
8 |
For
2024, companies defined as “significant GHG emitters” will be those on the current
Climate Action 100+ Focus Group list. |
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B-95 |
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The board failed to act on a shareholder proposal
that received the support of a majority of the shares cast in the previous year or failed to act on a management proposal seeking to ratify
an existing charter/bylaw provision that received opposition of a majority of the shares cast in the previous year. Factors that will
be considered are: |
• |
Disclosed outreach efforts by the board to shareholders
in the wake of the vote; |
• |
Rationale provided in the proxy statement for
the level of implementation; |
• |
The subject matter of the proposal; |
• |
The level of support for and opposition to the
resolution in past meetings; |
• |
Actions taken by the board in response to the
majority vote and its engagement with shareholders; |
• |
The continuation of the underlying issue as a
voting item on the ballot (as either shareholder or management proposals); and |
• |
Other factors as appropriate. |
• |
The board failed to act on takeover offers where
the majority of shares are tendered; |
• |
At the previous board election, any director received
more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high
withhold/against vote. |
• |
The company’s previous say-on-pay received
the support of less than 70 percent of votes cast. Factors that will be considered are: |
• |
The company’s response, including: |
• |
Disclosure of engagement efforts with major institutional
investors regarding the issues that contributed to the low level of support (including the timing and frequency of engagements and whether
independent directors participated); |
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated; |
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
• |
The board implements an advisory vote on executive
compensation on a less frequent basis than the frequency that received the plurality of votes cast. |
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B-96 |
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Medical issues/illness; |
• |
Family emergencies; and |
• |
Missing only one meeting (when the total of all
meetings is three or fewer). |
• |
In cases of chronic poor attendance without reasonable
justification, in addition to voting against the director(s) with poor attendance, generally vote against or withhold from appropriate
members of the nominating/governance committees or the full board. |
• |
Sit on more than five public company boards; or
|
• |
Are CEOs of public companies who sit on the boards
of more than two public companies besides their own—withhold only at their outside boards10.
|
• |
Independent directors comprise 50 percent or less
of the board; |
• |
The non-independent director serves on the audit,
compensation, or nominating committee; |
9 |
Nominees
who served for only part of the fiscal year are generally exempted from the attendance policy. |
10 |
Although
all of a CEO’s subsidiary boards will be counted as separate boards, Sustainability Advisory
Services will not recommend a withhold vote for the CEO of a parent company board or any of the controlled (>50 percent ownership)
subsidiaries of that parent, but may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary
relationships. |
11 |
Aggregate
diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity. |
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B-97 |
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The company lacks an audit, compensation, or nominating
committee so that the full board functions as that committee; or |
• |
The company lacks a formal nominating committee,
even if the board attests that the independent directors fulfill the functions of such a committee. |
1. |
Executive Director |
1.1. |
Current officer[1]
of the company or one of its affiliates[2]. |
2. |
Non-Independent Non-Executive Director |
2.1. |
Director identified as not independent by the
board. |
2.2. |
Beneficial owner of more than 50 percent of the
company’s voting power (this may be aggregated if voting power is distributed among more than one member of a group). |
2.3. |
Non-officer employee of the firm (including employee
representatives). |
2.4. |
Officer[1],
former officer, or general or limited partner of a joint venture or partnership with the company. |
2.5. |
Former CEO of the company.[3],[4] |
2.6. |
Former non-CEO officer[1] of the company
or an affiliate[2] within the past five years. |
2.7. |
Former officer[1]
of an acquired company within the past five years[4]. |
2.8. |
Officer[1]
of a former parent or predecessor firm at the time the company was sold or split off within the past five years. |
2.9. |
Former interim officer if the service was longer
than 18 months. If the service was between 12 and 18 months an assessment of the interim officer’s employment agreement will be
made.[5] |
2.10. |
Immediate family member[6]
of a current or former officer[1] of the company or its affiliates[2]
within the last five years. |
2.11. |
Immediate family member[6]
of a current employee of company or its affiliates[2] where additional factors raise
concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates
employ relatives of numerous board members; or a non-Section 16 officer in a key strategic role). |
2.12. |
Director who (or whose immediate family member[6])
currently provides professional services[7] in excess of $10,000 per year
to: the company, an affiliate[2], or an individual officer of the company or
an affiliate; either directly or is (or whose family member is) a partner, employee, or controlling shareholder of an organization which
provides the services. |
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B-98 |
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2.13. |
Director who (or whose immediate family member[6])
currently has any material transactional relationship[8] with the company or its affiliates[2];
or who is (or whose immediately family member[6] is) a partner in, or a controlling
shareholder or an executive officer of, an organization which has the material transactional relationship[8]
(excluding investments in the company through a private placement). |
2.14. |
Director who (or whose immediate family member[6])
is a trustee, director, or employee of a charitable or non-profit organization that receives material grants or endowments[8]
from the company or its affiliates[2]. |
2.15. |
Party to a voting agreement[9]
to vote in line with management on proposals being brought to shareholder vote. |
2.16. |
Has (or an immediate family member[6]
has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation Committee[10]. |
2.17. |
Founder[11]
of the company but not currently an employee. |
2.18. |
Director with pay comparable to Named Executive
Officers. |
2.19. |
Any material[12]
relationship with the company. |
3. |
Independent Director |
3.1. |
No material[12]
connection to the company other than a board seat. |
[1] |
The definition
of officer will generally follow that of a “Section 16 officer” (officers subject to Section 16 of the Securities
and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers of a company
(including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division, or
policy function). Current interim officers are included in this category. For private companies, the equivalent positions are applicable.
A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will be classified as an Affiliated
Outsider under “Any material relationship with the company.” However, if the company provides explicit disclosure that the
director is not receiving additional compensation in excess of $10,000 per year for serving in that capacity, then the director will be
classified as an Independent Outsider. |
[2] |
“Affiliate”
includes a subsidiary, sibling company, or parent company. Glenmede Policy uses 50 percent control ownership by the parent company as
the standard for applying its affiliate designation. The manager/advisor of an externally managed issuer (EMI) is considered an affiliate.
|
[3] |
Includes
any former CEO of the company prior to the company’s initial public offering (IPO). |
[4] |
When there
is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, Glenmede Policy will generally
classify such directors as independent unless determined otherwise taking into account the following factors: the applicable listing standards
determination of such director’s independence; any operating ties to the firm; and the existence of any other conflicting relationships
or related party transactions. |
[5] |
Glenmede
Policy will look at the terms of the interim officer’s employment contract to determine if it contains severance pay, long-term
health and pension benefits, or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. Glenmede
Policy will also consider if a formal search process was under way for a full-time officer at the time. |
[6] |
“Immediate
family member” follows the SEC’s definition of such and covers spouses, parents, children, step-parents, step-children, siblings,
in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer,
or significant shareholder of the company. |
[7] |
Professional
services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making,
and typically have a commission- or fee-based payment structure. Professional services generally include, but are not limited to the following:
investment banking/financial advisory services; commercial banking (beyond deposit services); investment services; insurance services;
accounting/audit services; consulting services; marketing services;legal services; property management services; realtor services; lobbying
services; executive search services; and IT consulting services. The following would generally be considered transactional relationships
and not professional services: deposit services; IT tech support services; educational services; and construction services. The case of
participation in a banking syndicate by a non-lead bank should be considered a transactional (and hence subject to the associated materiality
test) |
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B-99 |
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[8] |
A material
transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or receives
annual payments from, another entity exceeding the greater of $200,000 or 5 percent of the recipient’s gross revenues, in the case
of a company which follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient’s gross revenues,
in the case of a company which follows NYSE listing standards. In the case of a company which follows neither of the preceding standards,
Glenmede Policy will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).
|
[9] |
Dissident
directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as independent outsiders
if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders’
interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of
actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships
or related party transactions. |
[10] |
Interlocks
include: executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such
a committee, on the board); or executive officers sitting on each other’s boards and at least one serves on the other’s compensation
or similar committees (or, in the absence of such a committee, on the board). |
[11] |
The operating
involvement of the founder with the company will be considered; if the founder was never employed by the company, Glenmede Policy may
deem him or her an independent outsider. |
[12] |
For purposes
of Glenmede Policy’s director independence classification, “material” will be defined as a standard of relationship
(financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the
boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on
behalf of shareholders. |
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B-100 |
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The rationale provided for adoption of the term/tenure
limit; |
• |
The robustness of the company’s board evaluation
process; |
• |
Whether the limit is of sufficient length to allow
for a broad range of director tenures; |
• |
Whether the limit would disadvantage independent
directors compared to non-independent directors; and |
• |
Whether the board will impose the limit evenly,
and not have the ability to waive it in a discriminatory manner. |
• |
The scope of the shareholder proposal; and |
• |
Evidence of problematic issues at the company
combined with, or exacerbated by, a lack of board refreshment. |
• |
The reasonableness/scope of the request; and |
• |
The company’s existing disclosure on its
current CEO succession planning process. |
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B-101 |
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• |
The company has proxy access, thereby allowing
shareholders to nominate directors to the company’s ballot; and |
• |
The company has adopted a majority vote standard,
with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address
failed elections. |
• |
Eliminate entirely directors’ and officers’
liability for monetary damages for violating the duty of care. |
• |
Eliminate directors’ and officers’
liability for monetary damages for violating the duty of loyalty. |
• |
Expand coverage beyond just legal expenses to
liability for acts that are more serious violations of fiduciary obligation than mere carelessness. |
• |
Expand the scope of indemnification to provide
for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification
for, at the discretion of the company’s board (i.e., “permissive indemnification”), but that previously the company
was not required to indemnify. |
• |
If the individual was found to have acted in good
faith and in a manner that the individual reasonably believed was in the best interests of the company; and |
• |
If only the director’s legal expenses would
be covered. |
13 |
Indemnification:
the condition of being secured against loss or damage. |
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B-102 |
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2024
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The company’s board committee structure,
existing subject matter expertise, and board nomination provisions relative to that of its peers; |
• |
The company’s existing board and management
oversight mechanisms regarding the issue for which board oversight is sought; |
• |
The company’s disclosure and performance
relating to the issue for which board oversight is sought and any significant related controversies; and |
• |
The scope and structure of the proposal. |
• |
Existing oversight mechanisms (including current
committee structure) regarding the issue for which board oversight is sought; |
• |
Level of disclosure regarding the issue for
which board oversight is sought; |
• |
Company performance related to the issue
for which board oversight is sought; |
• |
Board committee structure compared to that of
other companies in its industry sector; and |
• |
The scope and structure of the proposal. |
• |
Vote for proposals to restore shareholders’
ability to remove directors with or without cause. |
• |
Vote against proposals that provide that only
continuing directors may elect replacements to fill board vacancies. |
• |
Vote for proposals that permit shareholders to
elect directors to fill board vacancies. |
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B-103 |
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Ownership threshold:
maximum requirement not more than three percent (3%) of the voting power; |
• |
Ownership duration:
maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group; |
• |
Aggregation:
minimal or no limits on the number of shareholders permitted to form a nominating group; |
• |
Cap: cap
on nominees of generally twenty-five percent (25%) of the board. |
• |
Established a communication structure that goes
beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board; |
• |
Effectively disclosed information with respect
to this structure to its shareholders; |
• |
Company has not ignored majority-supported shareholder
proposals or a majority withhold vote on a director nominee; and |
• |
The company has an independent chair or a lead
director, according to Glenmede Policy’s definition. This individual must be made available for periodic consultation and direct
communication with major shareholders. |
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B-104 |
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Long-term financial performance of the company
relative to its industry; |
• |
Management’s track record; |
• |
Background to the contested election; |
• |
Nominee qualifications and any compensatory arrangements;
|
• |
Strategic plan of dissident slate and quality
of the critique against management; |
• |
Likelihood that the proposed goals and objectives
can be achieved (both slates); and |
• |
Stock ownership positions. |
3. |
Shareholder
Rights & Defenses |
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B-105 |
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B-106 |
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• |
The company’s stated rationale for adopting
such a provision; |
• |
Disclosure of past harm from duplicative shareholder
lawsuits in more than one forum; |
• |
The breadth of application of the charter or bylaw
provision, including the types of lawsuits to which it would apply and the definition of key terms; and |
• |
Governance features such as shareholders’
ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the charter or
bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested
elections. |
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B-107 |
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• |
The ownership threshold (NOL protective amendments
generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of
an existing 5-percent holder); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision
or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL); |
• |
The company’s existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
Shareholders have approved the adoption of the
plan; or |
• |
The board, in its exercise of its fiduciary responsibilities,
determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that
would result from seeking stockholder approval (i.e., the “fiduciary out” provision).
A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire.
If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate. |
• |
No lower than a 20% trigger, flip-in or flip-over;
|
• |
A term of no more than three years; |
• |
No dead-hand, slow-hand, no-hand or similar feature
that limits the ability of a future board to redeem the pill; |
• |
Shareholder redemption feature (qualifying offer
clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special
meeting or seek a written consent to vote on rescinding the pill. |
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B-108 |
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The ownership threshold to transfer (NOL pills
generally have a trigger slightly below 5 percent); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision,
or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs); |
• |
The company’s existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
The scope and structure of the proposal; |
• |
The company’s stated confidential voting
policy (or other relevant policies) and whether it ensures a “level playing field” by providing shareholder proponents
with equal access to vote information prior to the annual meeting; |
• |
The company’s vote standard for management
and shareholder proposals and whether it ensures consistency and fairness in the proxy voting process and maintains the integrity
of vote results; |
• |
Whether the company’s disclosure regarding
its vote counting method and other relevant voting policies with respect to management and shareholder proposals are consistent and clear;
|
• |
Any recent controversies or concerns related to
the company’s proxy voting mechanics; |
• |
Any unintended consequences resulting from implementation
of the proposal; and |
• |
Any other factors that may be relevant. |
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B-109 |
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The presence of a shareholder proposal addressing
the same issue on the same ballot; |
• |
The board’s rationale for seeking ratification;
|
• |
Disclosure of actions to be taken by the board
should the ratification proposal fail; |
• |
Disclosure of shareholder engagement regarding
the board’s ratification request; |
• |
The level of impairment to shareholders’
rights caused by the existing provision; |
• |
The history of management and shareholder proposals
on the provision at the company’s past meetings; |
• |
Whether the current provision was adopted in response
to the shareholder proposal; |
• |
The company’s ownership structure; and |
• |
Previous use of ratification proposals to exclude
shareholder proposals. |
• |
The election of fewer than 50% of the directors
to be elected is contested in the election; |
• |
One or more of the dissident’s candidates
is elected; |
• |
Shareholders are not permitted to cumulate their
votes for directors; and |
• |
The election occurred, and the expenses were incurred,
after the adoption of this bylaw. |
• |
Reasons for reincorporation; |
• |
Comparison of company’s governance practices
and provisions prior to and following the reincorporation; and |
• |
Comparison of corporation laws of original state
and destination state. |
• |
Vote for reincorporation when the economic factors
outweigh any neutral or negative governance changes. |
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B-110 |
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• |
Shareholders’ current right to act by written
consent; |
• |
The consent threshold; |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
• |
An unfettered14
right for shareholders to call special meetings at a 10 percent threshold; |
• |
A majority vote standard in uncontested director
elections; |
• |
No non-shareholder-approved pill; and |
• |
An annually elected board. |
• |
Shareholders’ current right to call special
meetings; |
• |
Minimum ownership threshold necessary to call
special meetings (10% preferred); |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
14 |
“Unfettered”
means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold,
and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than
90 prior to the next annual meeting. |
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B-111 |
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• |
Ownership structure; |
• |
Quorum requirements; and |
• |
Vote requirements. |
• |
Scope and rationale of the proposal; and |
• |
Concerns identified with the company’s prior
meeting practices. |
4. |
Capital/Restructuring
|
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized
shares. |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares. |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage. |
• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization. |
15 |
Virtual-only
shareholder meeting” refers to a meeting of shareholders that is held exclusively using technology without a corresponding in-person
meeting. |
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B-112 |
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• |
The proposal seeks to increase the number of authorized
shares of the class of common stock that has superior voting rights to other share classes; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); or |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
• |
The company discloses a compelling rationale for
the dual-class capital structure, such as: |
• |
The company’s auditor has concluded that
there is substantial doubt about the company’s ability to continue as a going concern; or |
• |
The new class of shares will be transitory; |
• |
The new class is intended for financing purposes
with minimal or no dilution to current shareholders in both the short term and long term; and |
• |
The new class is not designed to preserve or increase
the voting power of an insider or significant shareholder. |
|
B-113 |
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2024
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• |
The size of the company; |
• |
The shareholder base; and |
• |
The liquidity of the stock. |
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized
shares. |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares. |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage. |
• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization. |
• |
If no preferred shares are currently issued and
outstanding, vote against the request, unless the company discloses a specific use for the shares. |
• |
If the shares requested are blank check preferred
shares that can be used for antitakeover purposes;16 |
• |
The company seeks to increase a class of non-convertible
preferred shares entitled to more than one vote per share on matters that do not solely affect the rights of preferred stockholders “supervoting
shares”); |
• |
The company seeks to increase a class of convertible
preferred shares entitled to a number of votes greater than the number of common shares into which they’re convertible (“supervoting
shares”) on matters that do not solely affect the rights of preferred stockholders; |
• |
The stated intent of the increase in the general
authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); or |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
16 |
To
be acceptable, appropriate disclosure would be needed that the shares are “declawed”: i.e., representation by the board that
it will not, without prior stockholder approval, issue or use the preferred stock for any defensive or anti-takeover purpose or for the
purpose of implementing any stockholder rights plan. |
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B-114 |
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• |
The stated intent of the increase in the general
authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
• |
More simplified capital structure; |
• |
Enhanced liquidity; |
• |
Fairness of conversion terms; |
• |
Impact on voting power and dividends; |
• |
Reasons for the reclassification; |
• |
Conflicts of interest; and |
• |
Other alternatives considered. |
• |
The number of authorized shares will be proportionately
reduced; or |
• |
The effective increase in authorized shares is
equal to or less than the allowable increase calculated in accordance with Glenmede’s Common Stock Authorization policy. |
|
B-115 |
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2024
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• |
Stock exchange notification to the company of
a potential delisting; |
• |
Disclosure of substantial doubt about the company’s
ability to continue as a going concern without additional financing; |
• |
The company’s rationale; or |
• |
Other factors as applicable. |
• |
Greenmail, |
• |
The use of buybacks to inappropriately manipulate
incentive compensation metrics, |
• |
Threats to the company’s long-term viability,
or |
• |
Other company-specific factors as warranted. |
• |
Adverse governance changes; |
• |
Excessive increases in authorized capital stock;
|
• |
Unfair method of distribution; |
• |
Diminution of voting rights; |
• |
Adverse conversion features; |
• |
Negative impact on stock option plans; and |
• |
Alternatives such as spin-off. |
|
B-116 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Purchase price; |
• |
Fairness opinion; |
• |
Financial and strategic benefits; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives for the business; |
• |
Non-completion risk. |
• |
Impact on the balance sheet/working capital; |
• |
Potential elimination of diseconomies; |
• |
Anticipated financial and operating benefits;
|
• |
Anticipated use of funds; |
• |
Value received for the asset; |
• |
Fairness opinion; |
• |
How the deal was negotiated; |
• |
Conflicts of interest. |
|
B-117 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Dilution to existing shareholders’ positions;
|
• |
Terms of the offer - discount/premium in purchase
price to investor, including any fairness opinion; termination penalties; exit strategy; |
• |
Financial issues - company’s financial situation;
degree of need for capital; use of proceeds; effect of the financing on the company’s cost of capital; |
• |
Management’s efforts to pursue other alternatives;
|
• |
Control issues - change in management; change
in control, guaranteed board and committee seats; standstill provisions; voting agreements; veto power over certain corporate actions;
and |
• |
Conflict of interest - arm’s length transaction,
managerial incentives. |
• |
The reasons for the change; |
• |
Any financial or tax benefits; |
• |
Regulatory benefits; |
• |
Increases in capital structure; and |
• |
Changes to the articles of incorporation or bylaws
of the company. |
|
B-118 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Increases in common or preferred stock in excess
of the allowable maximum (see discussion under “Capital”); or |
• |
Adverse changes in shareholder rights. |
• |
Offer price/premium; |
• |
Fairness opinion; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives/offers considered; and |
• |
Non-completion risk. |
• |
Whether the company has attained benefits from
being publicly-traded (examination of trading volume, liquidity, and market research of the stock); |
• |
Balanced interests of continuing vs. cashed-out
shareholders, taking into account the following: |
• |
Are all shareholders able to participate in the
transaction? |
• |
Will there be a liquid market for remaining shareholders
following the transaction? |
• |
Does the company have strong corporate governance?
|
• |
Will insiders reap the gains of control following
the proposed transaction? |
• |
Does the state of incorporation have laws requiring
continued reporting that may benefit shareholders? |
• |
Percentage of assets/business contributed; |
• |
Percentage ownership; |
• |
Financial and strategic benefits; |
• |
Governance structure; |
• |
Conflicts of interest; |
• |
Other alternatives; and |
• |
Non-completion risk. |
|
B-119 |
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2024
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• |
Management’s efforts to pursue other alternatives;
|
• |
Appraisal value of assets; and |
• |
The compensation plan for executives managing
the liquidation. |
• |
Valuation
- Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide
an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic
rationale. |
• |
Market
reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of
a deal. |
• |
Strategic
rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not
be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration
of historical acquisitions. |
• |
Negotiations
and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A
fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’
competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no
auction) can also affect shareholder value. |
• |
Conflicts
of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider
shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a
merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to
support or recommend the merger. |
• |
Governance
- Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to
the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as
valuation) outweigh any deterioration in governance. |
• |
Dilution to existing shareholders’ position:
The amount and timing of shareholder ownership dilution should be weighed against the needs and proposed shareholder benefits of the capital
infusion. Although newly issued common stock, absent preemptive rights, is typically dilutive to existing shareholders, share price appreciation
is often the necessary event to trigger the exercise of “out of the money” warrants and convertible debt. In these instances
from a value standpoint, the negative impact of dilution is mitigated by the increase in the company’s stock price that must occur
to trigger the dilutive event. |
|
B-120 |
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2024
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• |
Terms of the offer (discount/premium in purchase
price to investor, including any fairness opinion, conversion features, termination penalties, exit strategy): |
• |
The terms of the offer should be weighed against
the alternatives of the company and in light of company’s financial condition. Ideally, the conversion price for convertible debt
and the exercise price for warrants should be at a premium to the then prevailing stock price at the time of private placement. |
• |
When evaluating the magnitude of a private placement
discount or premium, consider factors that influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring
costs, capital scarcity, information asymmetry and anticipation of future performance. |
• |
Financial issues: |
• |
The company’s financial condition; |
• |
Degree of need for capital; |
• |
Use of proceeds; |
• |
Effect of the financing on the company’s
cost of capital; |
• |
Current and proposed cash burn rate; |
• |
Going concern viability and the state of the capital
and credit markets. |
• |
Management’s efforts to pursue alternatives
and whether the company engaged in a process to evaluate alternatives: A fair, unconstrained process helps to ensure the best price for
shareholders. Financing alternatives can include joint ventures, partnership, merger or sale of part or all of the company. |
• |
Control issues: |
• |
Change in management; |
• |
Change in control; |
• |
Guaranteed board and committee seats; |
• |
Standstill provisions; |
• |
Voting agreements; |
• |
Veto power over certain corporate actions; and
|
• |
Minority versus majority ownership and corresponding
minority discount or majority control premium |
• |
Conflicts of interest: |
• |
Conflicts of interest should be viewed from the
perspective of the company and the investor. |
• |
Were the terms of the transaction negotiated at
arm’s length? Are managerial incentives aligned with shareholder interests? |
• |
Market reaction: |
• |
The market’s response to the proposed deal.
A negative market reaction is a cause for concern. Market reaction may be addressed by analyzing the one day impact on the unaffected
stock price. |
|
B-121 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Estimated value and financial prospects of the
reorganized company; |
• |
Percentage ownership of current shareholders in
the reorganized company; |
• |
Whether shareholders are adequately represented
in the reorganization process (particularly through the existence of an official equity committee); |
• |
The cause(s) of the bankruptcy filing, and the
extent to which the plan of reorganization addresses the cause(s); |
• |
Existence of a superior alternative to the plan
of reorganization; and |
• |
Governance of the reorganized company. |
• |
Valuation—Is
the value being paid by the SPAC reasonable? SPACs generally lack an independent fairness opinion and the financials on the target may
be limited. Compare the conversion price with the intrinsic value of the target company provided in the fairness opinion. Also, evaluate
the proportionate value of the combined entity attributable to the SPAC IPO shareholders versus the pre-merger value of SPAC. Additionally,
a private company discount may be applied to the target, if it is a private entity. |
• |
Market
reaction—How has the market responded to the proposed deal? A negative market reaction may be a cause for concern. Market
reaction may be addressed by analyzing the one-day impact on the unaffected stock price. |
• |
Deal
timing—A main driver for most transactions is that the SPAC charter typically requires the deal to be complete
within 18 to 24 months, or the SPAC is to be liquidated. Evaluate the valuation, market reaction, and potential conflicts of interest
for deals that are announced close to the liquidation date. |
• |
Negotiations
and process—What was the process undertaken to identify potential target companies within specified industry or location
specified in charter? Consider the background of the sponsors. |
• |
Conflicts
of interest—How are sponsors benefiting from the transaction compared to IPO shareholders? Potential conflicts could
arise if a fairness opinion is issued by the insiders to qualify the deal rather than a third party or if management is encouraged to
pay a higher price for the target because of an 80% rule (the charter requires that the fair market value of the target is at least
equal to 80% of net assets of the SPAC). Also, there may be sense of urgency by the management team of the SPAC to close the deal since
its charter typically requires a transaction to be completed within the 18-24 month timeframe. |
• |
Voting
agreements—Are the sponsors entering into enter into any voting agreements/ tender offers with shareholders who are
likely to vote against the proposed merger or exercise conversion rights? |
• |
Governance—What
is the impact of having the SPAC CEO or founder on key committees following the proposed merger? |
|
B-122 |
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2024
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• |
Length
of request: Typically, extension requests range from two to six months, depending on the progression of the SPAC’s
acquistion process. |
• |
Pending
transaction(s) or progression
of the acquisition process: Sometimes an intial business combination was already put to a shareholder vote, but, for varying
reasons, the transaction could not be consummated by the termination date and the SPAC is requesting an extension. Other times, the SPAC
has entered into a definitive transaction agreement, but needs additional time to consummate or hold the shareholder meeting. |
• |
Added
incentive for non-redeeming shareholders: Sometimes the SPAC sponsor (or other insiders) will contribute, typically as a
loan to the company, additional funds that will be added to the redemption value of each public share as long as such shares are not redeemed
in connection with the extension request. The purpose of the “equity kicker” is to incentivize shareholders to hold their
shares through the end of the requested extension or until the time the transaction is put to a shareholder vote, rather than electing
redeemption at the extension proposal meeting. |
• |
Prior
extension requests: Some SPACs request additional time beyond the extension period sought in prior extension requests. |
• |
Tax and regulatory advantages; |
• |
Planned use of the sale proceeds; |
• |
Valuation of spinoff; |
• |
Fairness opinion; |
• |
Benefits to the parent company; |
• |
Conflicts of interest; |
• |
Managerial incentives; |
• |
Corporate governance changes; |
• |
Changes in the capital structure. |
• |
Hiring a financial advisor to explore strategic
alternatives; |
• |
Selling the company; or |
• |
Liquidating the company and distributing the proceeds
to shareholders. |
|
B-123 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Prolonged poor performance with no turnaround
in sight; |
• |
Signs of entrenched board and management (such
as the adoption of takeover defenses); |
• |
Strategic plan in place for improving value; |
• |
Likelihood of receiving reasonable value in a
sale or dissolution; and |
• |
The company actively exploring its strategic options,
including retaining a financial advisor. |
5. |
Compensation
|
1. |
Maintain appropriate pay-for-performance alignment,
with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract,
retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration,
among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based
plan costs; |
2. |
Avoid arrangements that risk “pay for failure”:
This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;
|
3. |
Maintain an independent and effective compensation
committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and
a sound process for compensation decision-making (e.g., including access to independent expertise
and advice when needed); |
4. |
Provide shareholders with clear, comprehensive
compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to
evaluate executive pay practices fully and fairly; |
5. |
Avoid inappropriate pay to non-executive directors:
This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence
and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a
variety of generally accepted best practices. |
• |
There is an unmitigated misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders. |
|
B-124 |
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• |
There is no SOP on the ballot, and an against
vote on an SOP is warranted due to pay for performance misalignment, problematic pay practices, or the lack of adequate responsiveness
on compensation issues raised previously, or a combination thereof; |
• |
The board fails to respond adequately to a previous
SOP proposal that received less than 70 percent support of votes cast; |
• |
The company has recently practiced or approved
problematic pay practices, such as option repricing or option backdating; or |
• |
The situation is egregious. |
1. |
Peer Group18
Alignment: |
• |
The degree of alignment between the company’s
annualized TSR rank and the CEO’s annualized total pay rank within a peer group, each measured over a three-year period. |
• |
The rankings of CEO total pay and company financial
performance within a peer group, each measured over a three-year period. |
• |
The multiple of the CEO’s total pay relative
to the peer group median in the most recent fiscal year. |
2. |
Absolute Alignment19
– the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years – i.e., the difference
between the trend in annual pay changes and the trend in annualized TSR during the period. |
• |
The ratio of performance- to time-based incentive
awards; |
• |
The overall ratio of performance-based compensation;
|
• |
The rigor of performance goals; |
• |
The complexity and risks around pay program design;
|
17 |
The
Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities.
|
18 |
The
revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial
firms), GICS industry group, and company’s selected peers’ GICS industry group, with size constraints, via a process designed
to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market cap bucket
that is reflective of the company’s. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant. |
19 |
Only
Russell 3000 Index companies are subject to the Absolute Alignment analysis. |
|
B-125 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The transparency and clarity of disclosure; |
• |
The company’s peer group benchmarking practices;
|
• |
Financial/operational results, both absolute and
relative to peers; |
• |
Special circumstances related to, for example,
a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards); |
• |
Realizable pay20
compared to grant pay; and |
• |
Any other factors deemed relevant. |
• |
Problematic practices related to non-performance-based
compensation elements; |
• |
Incentives that may motivate excessive risk-taking
or present a windfall risk; and |
• |
Pay decisions that circumvent pay-for-performance,
such as options backdating or waiving performance requirements. |
• |
Repricing or replacing of underwater stock options/SARs
without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
• |
Extraordinary perquisites or tax gross-ups; |
• |
New or materially amended agreements that provide
for: |
• |
Excessive termination or CIC severance payments
(generally exceeding 3 times base salary and average/target/most recent bonus); |
• |
CIC severance payments without involuntary job
loss or substantial diminution of duties (“single” or “modified single” triggers) or in connection with a problematic
Good Reason definition; |
• |
CIC excise tax gross-up entitlements (including
“modified” gross-ups); |
• |
Multi-year guaranteed awards that are not at risk
due to rigorous performance conditions; |
• |
Liberal CIC definition combined with any single-trigger
CIC benefits; |
• |
Insufficient executive compensation disclosure
by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI’s executives
is not possible; |
• |
Severance payments made when the termination is
not clearly disclosed as involuntary (for example, a termination without cause or resignation for good reason); |
• |
Any other provision or practice deemed to be egregious
and present a significant risk to investors. |
20 |
Glenmede
Policy research reports include realizable pay for S&P1500 companies. |
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Reason and motive for the options backdating issue,
such as inadvertent vs. deliberate grant date changes; |
• |
Duration of options backdating; |
• |
Size of restatement due to options backdating;
|
• |
Corrective actions taken by the board or compensation
committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
• |
Adoption of a grant policy that prohibits backdating,
and creates a fixed grant schedule or window period for equity grants in the future. |
• |
Failure to respond to majority-supported shareholder
proposals on executive pay topics; or |
• |
Failure to adequately respond to the company’s
previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account: |
• |
The company’s response, including: |
• |
Disclosure of engagement efforts with major institutional
investors regarding the issues that contributed to the low level of support (including the timing and frequency of engagements and whether
independent directors participated); |
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated;
|
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
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Single- or modified-single-trigger cash severance;
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• |
Single-trigger acceleration of unvested equity
awards; |
• |
Full acceleration of equity awards granted shortly
before the change in control; |
• |
Acceleration of performance awards above the target
level of performance without compelling rationale; |
• |
Excessive cash severance (>3x base salary and
bonus); |
• |
Excise tax gross-ups triggered and payable; |
• |
Excessive golden parachute payments (on an absolute
basis or as a percentage of transaction equity value); or |
• |
Recent amendments that incorporate any problematic
features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence
merger agreements that may not be in the best interests of shareholders; or |
• |
The company’s assertion that a proposed
transaction is conditioned on shareholder approval of the golden parachute advisory vote. |
• |
Plan Cost:
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated
Shareholder Value Transfer (SVT) in relation to peers and considering both: |
• |
SVT based on new shares requested plus shares
remaining for future grants, plus outstanding unvested/unexercised grants; and |
• |
SVT based only on new shares requested plus shares
remaining for future grants. |
• |
Plan Features:
|
• |
Quality of disclosure around vesting upon a change
in control (CIC); |
• |
Discretionary vesting authority; |
21 |
Proposals
evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and
directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees
and/or employees and directors; amended plans will be further evaluated case-by-case. |
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Liberal share recycling on various award types; |
• |
Lack of minimum vesting period for grants made
under the plan; |
• |
Dividends payable prior to award vesting. |
• |
Grant Practices:
|
• |
The company’s three year burn rate relative
to its industry/market cap peers; |
• |
Vesting requirements in CEO’S recent equity
grants (3-year look-back); |
• |
The estimated duration of the plan (based on the
sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years);
|
• |
The proportion of the CEO’s most recent
equity grants/awards subject to performance conditions; |
• |
Whether the company maintains a sufficient claw-back
policy; |
• |
Whether the company maintains sufficient post
exercise/vesting share-holding requirements. |
• |
Awards may vest in connection with a liberal change-of-control
definition; |
• |
The plan would permit repricing or cash buyout
of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies --
or by not prohibiting it when the company has a history of repricing – for non-listed companies); |
• |
The plan is a vehicle for problematic pay practices
or a significant pay-for-performance disconnect under certain circumstances; |
• |
The plan is excessively dilutive to shareholders’
holdings; |
• |
The plan contains an evergreen (automatic share
replenishment) feature; or |
• |
Any other plan features are determined to have
a significant negative impact on shareholder interests. |
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B-129 |
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• |
Amend the terms of outstanding options or SARs
to reduce the exercise price of such outstanding options or SARs; |
• |
Cancel outstanding options or SARs in exchange
for options or SARs with an exercise price that is less than the exercise price of the original options or SARs; |
• |
Cancel underwater options in exchange for stock
awards; or |
• |
Provide cash buyouts of underwater options. |
22 |
For
plans evaluated under the Equity Plan Scorecard policy, the company’s SVT benchmark is considered along with other factors. |
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Magnitude of pay misalignment; |
• |
Contribution of non–performance-based equity
grants to overall pay; and |
• |
The proportion of equity awards granted in the
last three fiscal years concentrated at the named executive officer level. |
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B-131 |
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Purchase price is at least 85 percent of fair
market value; |
• |
Offering period is 27 months or less; and |
• |
The number of shares allocated to the plan is
10 percent or less of the outstanding shares. |
• |
Purchase price is less than 85 percent of fair
market value; or |
• |
Offering period is greater than 27 months; or
|
• |
The number of shares allocated to the plan is
more than ten percent of the outstanding shares. |
• |
Broad-based participation (i.e.,
all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company); |
• |
Limits on employee contribution, which may be
a fixed dollar amount or expressed as a percent of base salary; |
• |
Company matching contribution up to 25 percent
of employee’s contribution, which is effectively a discount of 20 percent from market value; |
• |
No discount on the stock price on the date of
purchase when there is a company matching contribution. |
• |
Addresses administrative features only; or |
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B-132 |
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Seeks approval for Section 162(m) purposes
only, and the plan administering committee consists entirely of independent outsiders, per Glenmede Policy’s Classification of Directors.
Note that if the company is presenting the plan to shareholders for the first time after the company’s initial public offering
(IPO), or if the proposal is bundled with other material plan amendments, then the recommendation will be case-by-case (see below). |
• |
Seeks approval for Section 162(m) purposes
only, and the plan administering committee does not consist entirely of independent outsiders, per Glenmede
Policy’s Classification of Directors. |
• |
If the proposal requests additional shares and/or
the amendments may potentially increase the transfer of shareholder value to employees, the recommendation will be based on the Equity
Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments. |
• |
If the plan is being presented to shareholders
for the first time after the company’s IPO, whether or not additional shares are being requested, the recommendation will be based
on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any amendments. |
• |
If there is no request for additional shares and
the amendments are not deemed to potentially increase the transfer of shareholder value to employees, then the recommendation will be
based entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation will be shown for informational purposes.
|
• |
Historic trading patterns--the stock price should
not be so volatile that the options are likely to be back “in-the-money” over the near term; |
• |
Rationale for the re-pricing--was the stock price
decline beyond management’s control? |
• |
Is this a value-for-value exchange? |
• |
Are surrendered stock options added back to the
plan reserve? |
• |
Timing--repricing should occur at least one year
out from any precipitous drop in company’s stock price; |
• |
Option vesting--does the new option vest immediately
or is there a black-out period? |
• |
Term of the option--the term should remain the
same as that of the replaced option; |
• |
Exercise price--should be set at fair market or
a premium to market; |
• |
Participants--executive officers and directors
must be excluded. |
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B-133 |
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Executive officers and non-employee directors
are excluded from participating; |
• |
Stock options are purchased by third-party financial
institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other
appropriate financial models; |
• |
There is a two-year minimum holding period for
sale proceeds (cash or stock) for all participants. |
• |
Eligibility; |
• |
Vesting; |
• |
Bid-price; |
• |
Term of options; |
• |
Cost of the program and impact of the TSOs on
company’s total option expense |
• |
Option repricing policy. |
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B-134 |
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If the equity plan under which non-employee director
grants are made is on the ballot, whether or not it warrants support; and |
• |
An assessment of the following qualitative factors:
|
• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
• |
The total estimated cost of the company’s
equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) based on
new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; |
• |
The company’s three-year burn rate relative
to its industry/market cap peers; and |
• |
The presence of any egregious plan features (such
as an option repricing provision or liberal CIC vesting risk). |
• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
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B-135 |
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The company’s past practices regarding equity
and cash compensation; |
• |
Whether the company has a holding period or stock
ownership requirements in place, such as a meaningful retention ratio (at least 50 percent for full tenure); and |
• |
Whether the company has a rigorous claw-back policy
in place. |
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B-136 |
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The percentage/ratio of net shares required to
be retained; |
• |
The time period required to retain the shares;
|
• |
Whether the company has equity retention, holding
period, and/or stock ownership requirements in place and the robustness of such requirements; |
• |
Whether the company has any other policies aimed
at mitigating risk taking by executives; |
• |
Executives’ actual stock ownership and the
degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s existing requirements;
and |
• |
First, vote for shareholder proposals advocating
the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced
options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion
of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria
to be considered as performance-based awards. Further, premium-priced options should have a meaningful premium to be considered performance-based
awards. |
• |
Second, assess the rigor of the company’s
performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical
or peer group comparison, generally vote for the proposal. Furthermore, if target performance results in an above target payout, vote
for the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based
equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test. |
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• |
Set compensation targets for the plan’s
annual and long-term incentive pay components at or below the peer group median; |
• |
Deliver a majority of the plan’s target
long-term compensation through performance-vested, not simply time-vested, equity awards; |
• |
Provide the strategic rationale and relative weightings
of the financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components
of the plan; |
• |
Establish performance targets for each plan financial
metric relative to the performance of the company’s peer companies; |
• |
Limit payment under the annual and performance-vested
long-term incentive components of the plan to when the company’s performance on its selected financial performance metrics exceeds
peer group median performance. |
• |
What aspects of the company’s annual and
long-term equity incentive programs are performance driven? |
• |
If the annual and long-term equity incentive programs
are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed
peer group? |
• |
Can shareholders assess the correlation between
pay and performance based on the current disclosure? |
• |
What type of industry and stage of business cycle
does the company belong to? |
• |
Adoption, amendment, or termination of a 10b5-1
Plan must be disclosed within two business days in a Form 8-K; |
• |
Amendment or early termination of a 10b5-1 Plan
is allowed only under extraordinary circumstances, as determined by the board; |
• |
Ninety days must elapse between adoption or amendment
of a 10b5-1 Plan and initial trading under the plan; |
• |
Reports on Form 4 must identify transactions
made pursuant to a 10b5-1 Plan; |
• |
An executive may not trade in company stock outside
the 10b5-1 Plan. |
• |
Trades under a 10b5-1 Plan must be handled by
a broker who does not handle other securities transactions for the executive. |
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B-138 |
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If the company has adopted a formal recoupment
policy; |
• |
The rigor of the recoupment policy focusing on
how and under what circumstances the company may recoup incentive or stock compensation; |
• |
Whether the company has chronic restatement history
or material financial problems; |
• |
Whether the company’s policy substantially
addresses the concerns raised by the proponent; |
• |
Disclosure of recoupment of incentive or stock
compensation from senior executives or lack thereof; or |
• |
Any other relevant factors. |
• |
The company’s
severance or change-in-control agreements in place, and the presence of problematic features (such as excessive severance entitlements,
single triggers, excise tax gross-ups, etc.); |
• |
Any existing
limits on cash severance payouts or policies which require shareholder ratification of severance payments exceeding a certain level; |
• |
Any recent
severance-related controversies; and |
• |
Whether the
proposal is overly prescriptive, such as requiring shareholder approval of severance that does not exceed market norms. |
• |
The frequency and timing of the company’s
share buybacks; |
• |
The use of per-share metrics in incentive plans;
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B-139 |
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The effect of recent buybacks on incentive metric
results and payouts; and |
• |
Whether there is any indication of metric result
manipulation. |
• |
The company’s current treatment of equity
in change-of-control situations (i.e. is it double triggered, does it allow for the assumption of equity by acquiring company, the treatment
of performance shares, etc.); |
• |
Current employment agreements, including potential
poor pay practices such as gross-ups embedded in those agreements. |
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B-140 |
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6. |
Social
and Environmental Issues |
• |
Whether the proposal itself is well framed and
reasonable; |
• |
Whether adoption of the proposal would have either
a positive or negative impact on the company’s short-term or long-term share value; |
• |
The percentage of sales, assets and earnings affected;
|
• |
Whether the company has already responded in some
appropriate manner to the request embodied in a proposal; |
• |
Whether the company’s analysis and voting
recommendation to shareholders is persuasive; |
• |
Whether there are significant controversies, fines,
penalties, or litigation associated with the company’s environmental or social practices; |
• |
What other companies have done in response to
the issue addressed in the proposal; |
• |
Whether implementation of the proposal would achieve
the objectives sought in the proposal; and |
• |
The degree to which the company’s stated
position on the issues raised in the proposal could affect its reputation or sales, or leave it vulnerable to a boycott or selective purchasing.
|
• |
The company has already published a set of animal
welfare standards and monitors compliance; |
• |
The company’s standards are comparable to
industry peers; and |
• |
There are no recent significant fines, litigation,
or controversies related to the company’s and/or its suppliers’ treatment of animals. |
• |
The company is conducting animal testing programs
that are unnecessary or not required by regulation; |
|
B-141 |
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• |
The company is conducting animal testing when
suitable alternatives are commonly accepted and used by industry peers; or |
• |
There are recent, significant fines or litigation
related to the company’s treatment of animals. |
• |
The potential impact of such labeling on the company’s
business; |
• |
The quality of the company’s disclosure
on GE product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and |
• |
Company’s current disclosure on the feasibility
of GE product labeling. |
• |
Whether the company has adequately disclosed mechanisms
in place to prevent abuses; |
• |
Whether the company has adequately disclosed the
financial risks of the products/practices in question; |
• |
Whether the company has been subject to violations
of related laws or serious controversies; and |
• |
Peer companies’ policies/practices in this
area. |
• |
Whether the company has adequately disclosed mechanisms
in place to prevent abusive lending practices; |
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B-142 |
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• |
Whether the company has adequately disclosed the
financial risks of the lending products in question; |
• |
Whether the company has been subject to violations
of lending laws or serious lending controversies; and |
• |
Peer companies’ policies to prevent abusive
lending practices. |
• |
The potential for reputational, market, and regulatory
risk exposure; |
• |
Existing disclosure of relevant policies; |
• |
Deviation from established industry norms; |
• |
Relevant company initiatives to provide research
and/or products to disadvantaged consumers; |
• |
Whether the proposal focuses on specific products
or geographic regions; |
• |
The potential burden and scope of the requested
report; and |
• |
Recent significant controversies, litigation,
or fines at the company. |
• |
The scope of the company’s operations in
the affected/relevant area(s); |
• |
The company’s existing healthcare policies,
including benefits and healthcare access; and |
• |
Company donations to relevant healthcare providers.
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Recent related fines, controversies, or significant
litigation; |
• |
Whether the company complies with relevant laws
and regulations on the marketing of tobacco; |
• |
Whether the company’s advertising restrictions
deviate from those of industry peers; |
• |
Whether the company entered into the Master Settlement
Agreement, which restricts marketing of tobacco to youth; and |
• |
Whether restrictions on marketing to youth extend
to foreign countries. |
• |
Whether the company complies with all laws and
regulations; |
• |
The degree that voluntary restrictions beyond
those mandated by law might hurt the company’s competitiveness; and |
• |
The risk of any health-related liabilities. |
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B-144 |
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• |
Vote for shareholder proposals seeking information
on the financial, physical, or regulatory risks it faces related to climate change- on its operations and investments, or on how the company
identifies, measures, and manage such risks. |
• |
Vote for shareholder proposals calling for the
reduction of GHG emissions. |
• |
Vote for shareholder proposals seeking reports
on responses to regulatory and public pressures surrounding climate change, and for disclosure of research that aided in setting company
policies around climate change. |
• |
Vote for shareholder proposals requesting a report/disclosure
of goals on GHG emissions from company operations and/or products. |
• |
The extent to which the company’s climate
related disclosures are in line with TCFD recommendations and meet other market standards; |
• |
Disclosure of its operational and supply chain
GHG emissions (Scopes 1, 2, and 3); |
• |
The completeness and rigor of company’s
short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant); |
• |
Whether the company has sought and approved third-party
approval that its targets are science-based; |
• |
Whether the company has made a commitment to be
“net zero” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050; |
• |
Whether the company discloses a commitment to
report on the implementation of its plan in subsequent years; |
• |
Whether the company’s climate data has received
third-party assurance; |
• |
Disclosure of how the company’s lobbying
activities and its capital expenditures align with company strategy; |
• |
Whether there are specific industry decarbonization
challenges; and |
• |
The company’s related commitment, disclosure,
and performance compared to its industry peers. |
• |
The completeness and rigor of the company’s
climate-related disclosure; |
• |
The company’s actual GHG emissions performance;
|
23 |
Variations
of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan.
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B-145 |
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• |
Whether the company has been the subject of recent,
significant violations, fines, litigation, or controversy related to its GHG emissions; and |
• |
Whether the proposal’s request is unduly
burdensome (scope or timeframe) or overly prescriptive. |
• |
The gender
and racial minority representation of the company’s board is reasonably inclusive in relation to companies of similar size and business;
and |
• |
The board
already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company. |
• |
The company’s current policies and disclosure
related to both its diversity and inclusion policies and practices and its compensation philosophy and fair and equitable compensation
practices; |
|
B-146 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to gender, race, or ethnicity pay gap issues; |
• |
The company’s disclosure regarding gender,
race, or ethnicity pay gap policies or initiatives compared to its industry peers; and |
• |
Local laws regarding categorization of race and/or
ethnicity and definitions of ethnic and/or racial minorities. |
• |
The company’s compliance with applicable
regulations and guidelines; |
• |
The company’s current level of disclosure
regarding its security and safety policies, procedures, and compliance monitoring; and |
• |
The existence of recent, significant violations,
fines, or controversy regarding the safety and security of the company’s operations and/or facilities. |
• |
Operations in the specified regions are not permitted
by current laws or regulations; |
• |
The company does not currently have operations
or plans to develop operations in these protected regions; or |
• |
The company’s disclosure of its operations
and environmental policies in these regions is comparable to industry peers. |
• |
The nature of the company’s business; |
• |
The current level of disclosure of the company’s
existing related programs; |
• |
The timetable and methods of program implementation
prescribed by the proposal; |
• |
The company’s ability to address the issues
raised in the proposal; and |
• |
How the company’s recycling programs compare
to similar programs of its industry peers. |
|
B-147 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Vote for shareholder proposals seeking greater
disclosure on the company’s environmental and social practices, and/or associated risks and liabilities. |
• |
Vote for shareholder proposals asking companies
to report in accordance with the Global Reporting Initiative (GRI). |
• |
Vote for shareholder proposals seeking
the preparation of sustainability reports. |
• |
Vote for shareholder
proposals to study or implement the CERES Roadmap 2030. |
• |
Vote for shareholder
proposals to study or implement the Equator Principles. |
• |
The company’s current disclosure of relevant
policies, initiatives, oversight mechanisms, and water usage metrics; |
• |
Whether or not the company’s existing water-related
policies and practices are consistent with relevant internationally recognized standards and national/local regulations; |
• |
The potential financial impact or risk to the
company associated with water-related concerns or issues; and |
• |
Recent, significant company controversies, fines,
or litigation regarding water use by the company and its suppliers. |
|
B-148 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The level of disclosure of company policies and
procedures relating to data security, privacy, freedom of speech, information access and management, and Internet censorship; |
• |
Engagement in dialogue with governments or relevant
groups with respect to data security, privacy, or the free flow of information on the Internet; |
• |
The scope of business involvement and of investment
in countries whose governments censor or monitor the Internet and other telecommunications; |
• |
Applicable market-specific laws or regulations
that may be imposed on the company; and |
• |
Controversies, fines, or litigation related to
data security, privacy, freedom of speech, or Internet censorship. |
|
B-149 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Generally vote for proposals requesting a report
on company or company supplier labor and/or human rights standards and policies. |
• |
Vote for shareholder proposals to implement human
rights standards and workplace codes of conduct. |
• |
Vote for shareholder proposals calling for the
implementation and reporting on ILO codes of conduct, SA 8000 Standards, or the Global Sullivan Principles. |
• |
Vote for shareholder proposals that call for the
adoption and/or enforcement of principles or codes relating to countries in which there are systematic violations of human rights. |
• |
Vote for shareholder proposals that call for independent
monitoring programs in conjunction with local and respected religious and human rights groups to monitor supplier and licensee compliance
with codes. |
• |
Vote for shareholder proposals that seek publication
of a “Code of Conduct” to the company’s foreign suppliers and licensees, requiring they satisfy all applicable standards
and laws protecting employees’ wages, benefits, working conditions, freedom of association, and other rights. |
• |
Vote for shareholder proposals seeking reports
on, or the adoption of, vendor standards including: reporting on incentives to encourage suppliers to raise standards rather than terminate
contracts and providing public disclosure of contract supplier reviews on a regular basis. |
• |
Vote for shareholder proposals to adopt labor
standards for foreign and domestic suppliers to ensure that the company will not do business with foreign suppliers that manufacture products
for sale using forced labor, child labor, or that fail to comply with applicable laws protecting employee’s wages and working conditions.
|
• |
Vote for proposals requesting that a company conduct
an assessment of the human rights risks in its operations or in its supply chain, or report on its human rights risk assessment process.
|
• |
The company’s current policies and practices
related to the use of mandatory arbitration agreements on workplace claims; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to the use of mandatory arbitration agreements on workplace claims; and |
|
B-150 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The company’s disclosure of its policies
and practices related to the use of mandatory arbitration agreements compared to its peers. |
• |
Current disclosure of applicable policies and
risk assessment report(s) and risk management procedures; |
• |
The impact of regulatory non-compliance, litigation,
remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including
the management of relevant community and stakeholder relations; |
• |
The nature, purpose, and scope of the company’s
operations in the specific region(s); |
• |
The degree to which company policies and procedures
are consistent with industry norms; and |
• |
Scope of the resolution. |
• |
The nature, purpose, and scope of the operations
and business involved that could be affected by social or political disruption; |
• |
Current disclosure of applicable risk assessment(s)
and risk management procedures; |
• |
Compliance with U.S. sanctions and laws; |
• |
Consideration of other international policies,
standards, and laws; and |
• |
Whether the company has been recently involved
in recent, significant controversies, fines or litigation related to its operations in “high-risk” markets. |
|
B-151 |
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Controversies surrounding operations in the relevant
market(s); |
• |
The value of the requested report to shareholders;
|
• |
The company’s current level of disclosure
of relevant information on outsourcing and plant closure procedures; and |
• |
The company’s existing human rights standards
relative to industry peers. |
• |
The company’s current policies, practices,
oversight mechanisms related to preventing workplace sexual harassment; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to workplace sexual harassment issues; and |
• |
The company’s disclosure regarding workplace
sexual harassment policies or initiatives compared to its industry peers. |
• |
The company’s current disclosure of relevant
lobbying policies, and management and board oversight; |
• |
The company’s disclosure regarding trade
associations or other groups that it supports, or is a member of, that engage in lobbying activities; and |
• |
Recent significant controversies, fines, or litigation
regarding the company’s lobbying-related activities. |
|
B-152 |
|
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2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
The company’s policies, and management and
board oversight related to its direct political contributions and payments to trade associations or other groups that may be used for
political purposes; |
• |
The company’s disclosure regarding its support
of, and participation in, trade associations or other groups that may make political contributions; and |
• |
Recent significant controversies, fines, or litigation
related to the company’s political contributions or political activities. |
• |
There are
no recent, significant controversies, fines, or litigation regarding the company’s political contributions or trade association
spending; and |
• |
The company
has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary
and prohibit coercion. |
• |
The company’s policies, management, board
oversight, governance processes, and level of disclosure related to direct political contributions, lobbying activities, and payments
to trade associations, political action committees, or other groups that may be used for political purposes; |
• |
The company’s disclosure regarding: the
reasons for its support of candidates for public offices; the reasons for support of and participation in trade associations or other
groups that may make political contributions; and other political activities; |
• |
Any incongruencies identified between a company’s
direct and indirect political expenditures and its publicly stated values and priorities; |
• |
Recent significant controversies related to the
company’s direct and indirect lobbying, political contributions, or political activities. |
|
B-153 |
|
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|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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7. |
Mutual
Fund Proxies |
• |
Past performance as a closed-end fund; |
• |
Market in which the fund invests; |
• |
Measures taken by the board to address the discount;
and |
• |
Past shareholder activism, board activity, and
votes on related proposals. |
• |
Past performance relative to its peers; |
• |
Market in which fund invests; |
• |
Measures taken by the board to address the issues;
|
• |
Past shareholder activism, board activity, and
votes on related proposals; |
• |
Strategy of the incumbents versus the dissidents;
|
• |
Independence of directors; |
• |
Experience and skills of director candidates;
|
• |
Governance profile of the company; |
• |
Evidence of management entrenchment. |
• |
Proposed and current fee schedules; |
• |
Fund category/investment objective; |
• |
Performance benchmarks; |
• |
Share price performance as compared with peers;
|
|
B-154 |
|
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|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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• |
Resulting fees relative to peers; |
• |
Assignments (where the advisor undergoes a change
of control). |
• |
Stated specific financing purpose; |
• |
Possible dilution for common shares; |
• |
Whether the shares can be used for antitakeover
purposes. |
• |
Potential competitiveness; |
• |
Regulatory developments; |
• |
Current and potential returns; and |
• |
Current and potential risk. |
• |
The fund’s target investments; |
• |
The reasons given by the fund for the change;
and |
• |
The projected impact of the change on the portfolio.
|
• |
Political/economic changes in the target market;
|
• |
Consolidation in the target market; and |
• |
Current asset composition. |
|
B-155 |
|
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|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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|
• |
Potential competitiveness; |
• |
Current and potential returns; |
• |
Risk of concentration; |
• |
Consolidation in target industry. |
• |
The proposal to allow share issuances below NAV
has an expiration date no more than one year from the date shareholders approve the underlying proposal, as required under the Investment
Company Act of 1940; |
• |
The sale is deemed to be in the best interests
of shareholders by (1) a majority of the company’s independent directors and (2) a majority of the company’s directors who
have no financial interest in the issuance; and |
• |
The company has demonstrated responsible past
use of share issuances by either: |
• |
Outperforming peers in its 8-digit GICS group
as measured by one- and three-year median TSRs; or |
• |
Providing disclosure that its past share issuances
were priced at levels that resulted in only small or moderate discounts to NAV and economic dilution to existing non-participating shareholders.
|
• |
Strategies employed to salvage the company; |
• |
The fund’s past performance; |
• |
The terms of the liquidation. |
• |
The degree of change implied by the proposal;
|
• |
The efficiencies that could result; |
• |
The state of incorporation; |
• |
Regulatory standards and implications. |
• |
Removal of shareholder approval requirement to
reorganize or terminate the trust or any of its series; |
• |
Removal of shareholder approval requirement for
amendments to the new declaration of trust; |
|
B-156 |
|
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|
|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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|
• |
Removal of shareholder approval requirement to
amend the fund’s management contract, allowing the contract to be modified by the investment manager and the trust management, as
permitted by the 1940 Act; |
• |
Allow the trustees to impose other fees in addition
to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a
fund’s shares; |
• |
Removal of shareholder approval requirement to
engage in and terminate subadvisory arrangements; |
• |
Removal of shareholder approval requirement to
change the domicile of the fund. |
• |
Regulations of both states; |
• |
Required fundamental policies of both states;
|
• |
The increased flexibility available. |
• |
Fees charged to comparably sized funds with similar
objectives; |
• |
The proposed distributor’s reputation and
past performance; |
• |
The competitiveness of the fund in the industry;
|
• |
The terms of the agreement. |
• |
Resulting fee structure; |
• |
Performance of both funds; |
• |
Continuity of management personnel; |
• |
Changes in corporate governance and their impact
on shareholder rights. |
|
B-157 |
|
|
|
|
|
2024
GLENMEDE – WOMEN IN LEADERSHIP PROXY VOTING GUIDELINES |
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|
• |
Performance of the fund’s Net Asset Value
(NAV); |
• |
The fund’s history of shareholder relations;
|
• |
The performance of other funds under the advisor’s
management. |
8. |
Foreign
Private Issuers Listed on U.S. Exchanges |
|
B-158 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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B-160 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-161 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-162 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-163 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-164 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-165 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-166 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
U.S. Domestic Issuers – which have a majority
of outstanding shares held in the U.S. and meet other criteria, as determined by the SEC, and are subject to the same disclosure and listing
standards as U.S. incorporated companies (e.g. they are required to file DEF14A proxy statements) – are generally covered under
standard U.S. policy guidelines. |
• |
Foreign
Private Issuers (FPIs) – which are allowed to take exemptions from most disclosure requirements (e.g., they are allowed to
file 6-K for their proxy materials) and U.S. listing standards – are generally covered under a combination of policy guidelines:
|
• |
FPI Guidelines (see the Americas
Regional Proxy Voting Guidelines), may apply to companies incorporated in governance havens, and apply certain minimum independence
and disclosure standards in the evaluation of key proxy ballot items, such as the election of directors; and/or |
• |
Guidelines for the market that is responsible
for, or most relevant to, the item on the ballot. |
|
B-167 |
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UNITED
STATES
Proxy
Voting Guidelines |
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1. |
Board
of Directors |
• |
Independent directors comprise 50 percent or less
of the board; |
• |
The non-independent director serves on the audit,
compensation, or nominating committee; |
• |
The company lacks an audit, compensation, or nominating
committee so that the full board functions as that committee; or |
• |
The company lacks a formal nominating committee,
even if the board attests that the independent directors fulfill the functions of such a committee. |
1 |
A
“new nominee” is a director who is being presented for election by shareholders for the first time. Recommendations on new
nominees who have served for less than one year are made on a case-by-case basis depending on the timing of their appointment and the
problematic governance issue in question. |
2 |
In
general, companies with a plurality vote standard use “Withhold” as the contrary vote option in director elections; companies
with a majority vote standard use “Against”. However, it will vary by company and the proxy must be checked to determine the
valid contrary vote option for the particular company. |
|
B-168 |
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UNITED
STATES
Proxy
Voting Guidelines |
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1. |
Executive Director |
1.1. |
Current officer1
of the company or one of its affiliates2. |
2. |
Non-Independent Non-Executive Director |
2.1. |
Director identified as not independent by the
board. |
2.2. |
Beneficial owner of more than 50 percent of the
company’s voting power (this may be aggregated if voting power is distributed among more than one member of a group). |
2.3. |
Non-officer employee of the firm (including employee
representatives). |
2.4. |
Officer1, former officer, or general
or limited partner of a joint venture or partnership with the company. |
2.5. |
Former CEO of the company.3,
4 |
2.6. |
Former non-CEO officer1
of the company or an affiliate2 within the past five years. |
2.7. |
Former officer1
of an acquired company within the past five years.4 |
2.8. |
Officer1
of a former parent or predecessor firm at the time the company was sold or split off within the past five years. |
2.9. |
Former interim officer if the service was longer
than 18 months. If the service was between 12 and 18 months an assessment of the interim officer’s employment agreement will be
made.5 |
2.10. |
Immediate family member6
of a current or former officer1of the company or its affiliates2
within the last five years. |
2.11. |
Immediate family member6
of a current employee of company or its affiliates2 where additional factors raise
concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates
employ relatives of numerous board members; or a non-Section 16 officer in a key strategic role). |
2.12. |
Director who (or whose immediate family member6)
currently provides professional services7 in excess of $10,000 per year to: the company,
an affiliate2, or an individual officer of the company or an affiliate; or who is (or
whose immediate family member6 is) a partner, employee, or controlling shareholder
of an organization which provides the services. |
2.13. |
Director who (or whose immediate family member6)
currently has any material transactional relationship8with the company or its affiliates2;
or who is (or whose immediate family member6 is) a partner in, or a controlling shareholder
or an executive officer of, an organization which has the material transactional relationship8
(excluding investments in the company through a private placement). |
2.14. |
Director who (or whose immediate family member6)
is a trustee, director, or employee of a charitable or non-profit organization that receives material grants or endowments8
from the company or its affiliates2. |
|
B-169 |
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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2.15. |
Party to a voting agreement9
to vote in line with management on proposals being brought to shareholder vote. |
2.16. |
Has (or an immediate family member6
has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation Committee.10 |
2.17. |
Founder11
of the company but not currently an employee. |
2.18. |
Director with pay comparable to Named Executive
Officers. |
2.19. |
Any material12
relationship with the company. |
3. |
Independent Director |
3.1. |
No material12
connection to the company other than a board seat. |
1 |
The definition
of officer will generally follow that of a “Section 16 officer” (officers subject to Section 16 of the Securities
and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers of a company
(including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division, or
policy function). Current interim officers are included in this category. For private companies, the equivalent positions are applicable.
A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will generally be classified as
a Non-Independent Non-Executive Director under “Any material relationship with the company.” However, if the company provides
explicit disclosure that the director is not receiving additional compensation exceeding $10,000 per year for serving in that capacity,
then the director will be classified as an Independent Director. |
2 |
“Affiliate”
includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard
for applying its affiliate designation. The manager/advisor of an externally managed issuer (EMI) is considered an affiliate. |
3 |
Includes
any former CEO of the company prior to the company’s initial public offering (IPO). |
4 |
When there
is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, ISS will generally classify
such directors as independent unless determined otherwise taking into account the following factors: the applicable listing standards
determination of such director’s independence; any operating ties to the firm; and the existence of any other conflicting relationships
or related party transactions. |
5 |
ISS will
look at the terms of the interim officer’s employment contract to determine if it contains severance pay, long-term health and pension
benefits, or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider
if a formal search process was under way for a full-time officer at the time. |
6 |
“Immediate
family member” follows the SEC’s definition of such and covers spouses, parents, children, step-parents, step-children, siblings,
in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer,
or significant shareholder of the company. |
7 |
Professional
services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making,
and typically have a commission- or fee-based payment structure. Professional services generally include but are not limited to the following:
investment banking/financial advisory services, commercial banking (beyond deposit services), investment services, insurance services,
accounting/audit services, consulting services, marketing services, legal services, property management services, realtor services, lobbying
services, executive search services, and IT consulting services. The following would generally be considered transactional relationships
and not professional services: deposit services, IT tech support services, educational services, and construction services. The case of
participation in a banking syndicate by a non-lead bank should be considered a transactional (and hence subject to the associated materiality
test) rather than a professional relationship. “Of Counsel” relationships are only considered immaterial if the individual
does not receive any form of compensation (in excess of $10,000 per year) from, or is a retired partner of, the firm providing the professional
service. The case of a company providing a professional service to one of its directors or to an entity with which one of its directors
is affiliated, will be considered a transactional rather than a professional relationship. Insurance services and marketing services are
assumed to be professional services unless the company explains why such services are not advisory. |
8 |
A material
transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or receives
annual payments from, another entity, exceeding the greater of: $200,000 or 5 percent of the recipient’s gross |
|
B-170 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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9 |
Dissident
directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as Independent Directors
if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders’
interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of
actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships
or related party transactions. |
10 |
Interlocks
include: executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such
a committee, on the board); or executive officers sitting on each other’s boards and at least one serves on the other’s compensation
or similar committees (or, in the absence of such a committee, on the board). |
11 |
The operating
involvement of the founder with the company will be considered; if the founder was never employed by the company, ISS may deem him or
her an Independent Director. |
12 |
For purposes
of ISS’s director independence classification, “material” will be defined as a standard of relationship (financial,
personal, or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in
a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders. |
|
B-171 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
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• |
Medical issues/illness; |
• |
Family emergencies; and |
• |
Missing only one meeting (when the total of all
meetings is three or fewer). |
• |
Sit on more than five public company boards; or
|
• |
Are CEOs of public companies who sit on the boards
of more than two public companies besides their own—withhold only at their outside boards4.
|
• |
The board failed to act on a shareholder proposal
that received the support of a majority of the shares cast in the previous year or failed to act on a management proposal seeking to ratify
an existing charter/bylaw provision that received opposition of a majority of the shares cast in the previous year. Factors that will
be considered are: |
• |
Disclosed outreach efforts by the board to shareholders
in the wake of the vote; |
• |
Rationale provided in the proxy statement for
the level of implementation; |
• |
The subject matter of the proposal; |
3 |
Nominees
who served for only part of the fiscal year are generally exempted from the attendance policy. |
4 |
Although
all of a CEO’s subsidiary boards with publicly-traded common stock will be counted as separate boards, ISS will not recommend a
withhold vote for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent but
may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships. |
5 |
Aggregate
diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity. |
|
B-172 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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|
• |
The level of support for and opposition to the
resolution in past meetings; |
• |
Actions taken by the board in response to the
majority vote and its engagement with shareholders; |
• |
The continuation of the underlying issue as a
voting item on the ballot (as either shareholder or management proposals); and |
• |
Other factors as appropriate. |
• |
The board failed to act on takeover offers where
the majority of shares are tendered; or |
• |
At the previous board election, any director received
more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high
withhold/against vote. |
• |
The company’s previous say-on-pay received
the support of less than 70 percent of votes cast. Factors that will be considered are: |
• |
The company’s response, including: |
• |
Disclosure of engagement efforts with major institutional
investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated);
|
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; and |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated;
|
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
• |
The board implements an advisory vote on executive
compensation on a less frequent basis than the frequency that received the plurality of votes cast. |
• |
The company has a poison pill with a deadhand
or slowhand feature6; |
• |
The board makes a material adverse modification
to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger, without shareholder approval; or |
• |
The company has a long-term poison pill (with
a term of over one year) that was not approved by the public shareholders7. |
• |
The disclosed rationale for the adoption; |
6 |
If
a short-term pill with a deadhand or slowhand feature is enacted but expires before the next shareholder vote, ISS will generally still
recommend withhold/against nominees at the next shareholder meeting following its adoption. |
7 |
Approval
prior to, or in connection, with a company’s becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient. |
|
B-173 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
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|
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|
• |
The trigger; |
• |
The company’s market capitalization (including
absolute level and sudden changes); |
• |
A commitment to put any renewal to a shareholder
vote; and |
• |
Other factors as relevant. |
• |
Newly-public companies9
with a sunset provision of no more than seven years from the date of going public; |
• |
Limited Partnerships and the Operating Partnership
(OP) unit structure of REITs; |
• |
Situations where the super-voting shares represent
less than 5% of total voting power and therefore considered to be de minimis; or |
• |
The company provides sufficient protections for
minority shareholders, such as allowing minority shareholders a regular binding vote on whether the capital structure should be maintained.
|
• |
Supermajority vote requirements to amend the bylaws
or charter; |
• |
A classified board structure; or |
• |
Other egregious provisions. |
• |
The board’s rationale for adopting the bylaw/charter
amendment without shareholder ratification; |
• |
Disclosure by the company of any significant engagement
with shareholders regarding the amendment; |
• |
The level of impairment of shareholders’
rights caused by the board’s unilateral amendment to the bylaws/charter; |
8 |
This
generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled
to vote on all the same ballot items or nominees; or stock with time-phased voting rights (“loyalty shares”). |
9 |
Includes
companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public
offering. |
|
B-174 |
|
|
|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
|
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|
• |
The board’s track record with regard to
unilateral board action on bylaw/charter amendments or other entrenchment provisions; |
• |
The company’s ownership structure; |
• |
The company’s existing governance provisions;
|
• |
The timing of the board’s amendment to the
bylaws/charter in connection with a significant business development; and |
• |
Other factors, as deemed appropriate, that may
be relevant to determine the impact of the amendment on shareholders. |
• |
Classified the board; |
• |
Adopted supermajority vote requirements to amend
the bylaws or charter; |
• |
Eliminated shareholders’ ability to amend
bylaws; |
• |
Adopted a fee-shifting
provision; or |
• |
Adopted another provision deemed egregious. |
• |
The company’s governing documents impose
undue restrictions on shareholders’ ability to amend the bylaws. Such restrictions include but are not limited to: outright prohibition
on the submission of binding shareholder proposals or share ownership requirements, subject matter restrictions, or time holding requirements
in excess of SEC Rule 14a-8. Vote against or withhold on an ongoing basis. |
• |
A classified board structure; |
• |
A supermajority vote requirement; |
• |
Either a plurality vote standard in uncontested
director elections, or a majority vote standard in contested elections; |
• |
The inability of shareholders to call special
meetings; |
• |
The inability of shareholders to act by written
consent; |
• |
A multi-class capital structure; and/or |
• |
A non-shareholder-approved poison pill. |
• |
The presence of a shareholder proposal addressing
the same issue on the same ballot; |
|
B-175 |
|
|
|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
• |
The board’s rationale for seeking ratification;
|
• |
Disclosure of actions to be taken by the board
should the ratification proposal fail; |
• |
Disclosure of shareholder engagement regarding
the board’s ratification request; |
• |
The level of impairment to shareholders’
rights caused by the existing provision; |
• |
The history of management and shareholder proposals
on the provision at the company’s past meetings; |
• |
Whether the current provision was adopted in response
to the shareholder proposal; |
• |
The company’s ownership structure; and |
• |
Previous use of ratification proposals to exclude
shareholder proposals. |
• |
The non-audit fees paid to the auditor are excessive;
|
• |
The company receives an adverse opinion on the
company’s financial statements from its auditor; or |
• |
There is persuasive evidence that the Audit Committee
entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders,
to pursue legitimate legal recourse against the audit firm. |
• |
Poor accounting practices are identified that
rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures.
Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective
actions, in determining whether withhold/against votes are warranted. |
• |
There is an unmitigated misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; or |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders. |
• |
The company fails to include a Say on Pay ballot
item when required under SEC provisions, or under the company’s declared frequency of say on pay; or |
• |
The company fails to include a Frequency of Say
on Pay ballot item when required under SEC provisions. |
• |
The presence of an anti-pledging policy, disclosed
in the proxy statement, that prohibits future pledging activity; |
|
B-176 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
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|
• |
The magnitude of aggregate pledged shares in terms
of total common shares outstanding, market value, and trading volume; |
• |
Disclosure of progress or lack thereof in reducing
the magnitude of aggregate pledged shares over time; |
• |
Disclosure in the proxy statement that shares
subject to stock ownership and holding requirements do not include pledged company stock; and |
• |
Any other relevant factors. |
• |
Detailed disclosure of climate-related risks,
such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including: |
• |
Board governance measures; |
• |
Corporate strategy; |
• |
Risk management analyses; and |
• |
Metrics and targets. |
• |
Appropriate GHG emissions reduction targets. |
• |
Material failures of governance, stewardship,
risk oversight11, or fiduciary responsibilities at the company; |
• |
Failure to replace management as appropriate;
or |
• |
Egregious actions related to a director’s
service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests
of shareholders at any company. |
10 |
Companies
defined as “significant GHG emitters” will be those on the current Climate Action 100+ Focus Group list. |
11 |
Examples
of failure of risk oversight include but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably poor risk oversight of environmental
and social issues, including climate change; significant adverse legal judgments or settlement; or hedging of company stock. |
|
B-177 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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|
• |
Long-term financial performance of the company
relative to its industry; |
• |
Management’s track record; |
• |
Background to the contested election; |
• |
Nominee qualifications and any compensatory arrangements;
|
• |
Strategic plan of dissident slate and quality
of the critique against management; |
• |
Likelihood that the proposed goals and objectives
can be achieved (both slates); and |
• |
Stock ownership positions. |
• |
The rationale provided for adoption of the term/tenure
limit; |
• |
The robustness of the company’s board evaluation
process; |
• |
Whether the limit is of sufficient length to allow
for a broad range of director tenures; |
• |
Whether the limit would disadvantage independent
directors compared to non-independent directors; and |
• |
Whether the board will impose the limit evenly,
and not have the ability to waive it in a discriminatory manner. |
• |
The scope of the shareholder proposal; and |
• |
Evidence of problematic issues at the company
combined with, or exacerbated by, a lack of board refreshment. |
|
B-178 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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• |
The reasonableness/scope of the request; and |
• |
The company’s existing disclosure on its
current CEO succession planning process. |
• |
The company has proxy access12,
thereby allowing shareholders to nominate directors to the company’s ballot; and |
• |
The company has adopted a majority vote standard,
with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address
failed elections. |
• |
Eliminate directors’ and officers’
liability for monetary damages for violating the duty of care; |
• |
Eliminate directors’ and officers’
liability for monetary damages for violating the duty of loyalty; |
• |
Expand coverage beyond just legal expenses to
liability for acts that are more serious violations of fiduciary obligation than mere carelessness; and |
• |
Expand the scope of indemnification to provide
for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification
for, at the discretion of the company’s board (i.e., “permissive indemnification”),
but that previously the company was not required to indemnify. |
12 |
A
proxy access right that meets the recommended guidelines. |
13 |
Indemnification:
the condition of being secured against loss or damage. |
|
B-179 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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|
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|
• |
If the individual was found to have acted in good
faith and in a manner that the individual reasonably believed was in the best interests of the company; and |
• |
If only the individual’s legal expenses
would be covered. |
• |
The company’s
board committee structure, existing subject matter expertise, and board nomination provisions relative to that of its peers; |
• |
The company’s existing board and management
oversight mechanisms regarding the issue for which board oversight is sought; |
• |
The company’s disclosure and performance
relating to the issue for which board oversight is sought and any significant related controversies; and |
• |
The scope and structure of the proposal. |
• |
Existing oversight mechanisms (including current
committee structure) regarding the issue for which board oversight is sought; |
• |
Level of disclosure regarding the issue for
which board oversight is sought; |
• |
Company performance related to the issue
for which board oversight is sought; |
• |
Board committee structure compared to that of
other companies in its industry sector; and |
• |
The scope and structure of the proposal. |
• |
The scope and rationale of the proposal; |
• |
The company’s current board leadership structure;
|
• |
The company’s governance structure and practices;
|
|
B-180 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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|
• |
Company performance; and |
• |
Any other relevant factors that may be applicable.
|
• |
A majority non-independent board and/or the presence
of non-independent directors on key board committees; |
• |
A weak or poorly-defined lead independent director
role that fails to serve as an appropriate counterbalance to a combined CEO/chair role; |
• |
The presence of an executive or non-independent
chair in addition to the CEO, a recent recombination of the role of CEO and chair, and/or departure from a structure with an independent
chair; |
• |
Evidence that the board has failed to oversee
and address material risks facing the company; |
• |
A material governance failure, particularly if
the board has failed to adequately respond to shareholder concerns or if the board has materially diminished shareholder rights; or |
• |
Evidence that the board has failed to intervene
when management’s interests are contrary to shareholders’ interests. |
• |
Ownership threshold:
maximum requirement not more than three percent (3%) of the voting power; |
• |
Ownership duration:
maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group; |
• |
Aggregation: minimal or no limits on the
number of shareholders permitted to form a nominating group; and |
• |
Cap: cap
on nominees of generally twenty-five percent (25%) of the board. |
|
B-181 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Established a communication structure that goes
beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board; |
• |
Effectively disclosed information with respect
to this structure to its shareholders; |
• |
Company has not ignored majority-supported shareholder
proposals, or a majority withhold vote on a director nominee; and |
• |
The company has an independent chair or a lead
director, according to ISS’ definition. This individual must be made available for
periodic consultation and direct communication with major shareholders. |
2. |
Audit-Related
|
• |
The terms of the auditor agreement—the degree
to which these agreements impact shareholders’ rights; |
• |
The motivation and rationale for establishing
the agreements; |
• |
The quality of the company’s disclosure;
and |
• |
The company’s historical practices in the
audit area. |
• |
An auditor has a financial interest in or association
with the company, and is therefore not independent; |
• |
There is reason to believe that the independent
auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position; |
• |
Poor accounting practices are identified that
rise to a serious level of concern, such as fraud or misapplication of GAAP; or |
• |
Fees for non-audit services (“Other”
fees) are excessive. |
• |
Non-audit (“other”) fees > audit
fees + audit-related fees + tax compliance/preparation fees |
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B-182 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The tenure of the audit firm; |
• |
The length of rotation specified in the proposal;
|
• |
Any significant audit-related issues at the company;
|
• |
The number of Audit Committee meetings held each
year; |
• |
The number of financial experts serving on the
committee; and |
• |
Whether the company has a periodic renewal process
where the auditor is evaluated for both audit quality and competitive price. |
3. |
Shareholder
Rights & Defenses |
• |
Any impediments to shareholders’ ability
to amend the bylaws (i.e. supermajority voting requirements); |
• |
The company’s ownership structure and historical
voting turnout; |
• |
Whether the board could amend bylaws adopted by
shareholders; and |
• |
Whether shareholders would retain the ability
to ratify any board-initiated amendments. |
|
B-183 |
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UNITED
STATES
Proxy
Voting Guidelines |
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B-184 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The company’s stated rationale for adopting
such a provision; |
• |
Disclosure of past harm from duplicative shareholder
lawsuits in more than one forum; |
• |
The breadth of application of the charter or bylaw
provision, including the types of lawsuits to which it would apply and the definition of key terms; and |
• |
Governance features such as shareholders’
ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the charter or
bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested
elections. |
|
B-185 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The ownership threshold (NOL protective amendments
generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of
an existing 5-percent holder); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision
or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL); |
• |
The company’s existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
Shareholders have approved the adoption of the
plan; or |
• |
The board, in its exercise of its fiduciary responsibilities,
determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that
would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this fiduciary
out will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of
the votes cast on this issue, the plan will immediately terminate. |
• |
No lower than a 20 percent trigger, flip-in or
flip-over; |
• |
A term of no more than three years; |
• |
No deadhand, slowhand, no-hand, or similar feature
that limits the ability of a future board to redeem the pill; and |
• |
Shareholder redemption feature (qualifying offer
clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special
meeting or seek a written consent to vote on rescinding the pill. |
|
B-186 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The ownership threshold to transfer (NOL pills
generally have a trigger slightly below 5 percent); |
• |
The value of the NOLs; |
• |
Shareholder protection mechanisms (sunset provision,
or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs); |
• |
The company’s existing governance structure,
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance
concerns; and |
• |
Any other factors that may be applicable. |
• |
The scope and structure of the proposal; |
• |
The company’s stated confidential voting
policy (or other relevant policies) and whether it ensures a “level playing field” by providing shareholder proponents
with equal access to vote information prior to the annual meeting; |
• |
The company’s vote standard for management
and shareholder proposals and whether it ensures consistency and fairness in the proxy voting process and maintains the integrity
of vote results; |
• |
Whether the company’s disclosure regarding
its vote counting method and other relevant voting policies with respect to management and shareholder proposals are consistent and clear;
|
• |
Any recent controversies or concerns related to
the company’s proxy voting mechanics; |
• |
Any unintended consequences resulting from implementation
of the proposal; and |
• |
Any other factors that may be relevant. |
• |
The presence of a shareholder proposal addressing
the same issue on the same ballot; |
• |
The board’s rationale for seeking ratification;
|
• |
Disclosure of actions to be taken by the board
should the ratification proposal fail; |
• |
Disclosure of shareholder engagement regarding
the board’s ratification request; |
|
B-187 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The level of impairment to shareholders’
rights caused by the existing provision; |
• |
The history of management and shareholder proposals
on the provision at the company’s past meetings; |
• |
Whether the current provision was adopted in response
to the shareholder proposal; |
• |
The company’s ownership structure; and |
• |
Previous use of ratification proposals to exclude
shareholder proposals. |
• |
The election of fewer than 50 percent of the directors
to be elected is contested in the election; |
• |
One or more of the dissident’s candidates
is elected; |
• |
Shareholders are not permitted to cumulate their
votes for directors; and |
• |
The election occurred, and the expenses were incurred,
after the adoption of this bylaw. |
• |
Reasons for reincorporation; |
• |
Comparison of company’s governance practices
and provisions prior to and following the reincorporation; and |
• |
Comparison of corporation laws of original state
and destination state. |
• |
Shareholders’ current right to act by written
consent; |
• |
The consent threshold; |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
|
B-188 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
An unfettered14
right for shareholders to call special meetings at a 10 percent threshold; |
• |
A majority vote standard in uncontested director
elections; |
• |
No non-shareholder-approved pill; and |
• |
An annually elected board. |
• |
Shareholders’ current right to call special
meetings; |
• |
Minimum ownership threshold necessary to call
special meetings (10 percent preferred); |
• |
The inclusion of exclusionary or prohibitive language;
|
• |
Investor ownership structure; and |
• |
Shareholder support of, and management’s
response to, previous shareholder proposals. |
• |
Ownership structure; |
• |
Quorum requirements; and |
• |
Vote requirements. |
14 |
“Unfettered”
means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold,
and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than
90 prior to the next annual meeting. |
|
B-189 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Scope and rationale of the proposal; and |
• |
Concerns identified with the company’s prior
meeting practices. |
4. |
Capital/Restructuring
|
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized share; |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares; |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage; or |
• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization. |
• |
The proposal seeks to increase the number of authorized
shares of the class of common stock that has superior voting rights to other share classes; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); or |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
15 |
Virtual-only
shareholder meeting” refers to a meeting of shareholders that is held exclusively using technology without a corresponding in-person
meeting. |
|
B-190 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
• |
The company discloses a compelling rationale for
the dual-class capital structure, such as: |
• |
The company’s auditor has concluded that
there is substantial doubt about the company’s ability to continue as a going concern; or |
• |
The new class of shares will be transitory; |
• |
The new class is intended for financing purposes
with minimal or no dilution to current shareholders in both the short term and long term; and |
• |
The new class is not designed to preserve or increase
the voting power of an insider or significant shareholder. |
• |
The size of the company; |
• |
The shareholder base; and |
• |
The liquidity of the stock. |
• |
If share usage (outstanding plus reserved) is
less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized shares; |
• |
If share usage is 50% to 100% of the current authorized,
vote for an increase of up to 100% of current authorized shares; |
• |
If share usage is greater than current authorized
shares, vote for an increase of up to the current share usage. |
|
B-191 |
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|
UNITED
STATES
Proxy
Voting Guidelines |
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• |
In the case of a stock split, the allowable increase
is calculated (per above) based on the post-split adjusted authorization; or |
• |
If no preferred shares are currently issued and
outstanding, vote against the request, unless the company discloses a specific use for the shares. |
• |
If the shares requested are blank check preferred
shares that can be used for antitakeover purposes;16 |
• |
The company seeks to increase a class of non-convertible
preferred shares entitled to more than one vote per share on matters that do not solely affect the rights of preferred stockholders “supervoting
shares”); |
• |
The company seeks to increase a class of convertible
preferred shares entitled to a number of votes greater than the number of common shares into which they are convertible (“supervoting
shares”) on matters that do not solely affect the rights of preferred stockholders; |
• |
The stated intent of the increase in the general
authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
• |
On the same ballot is a proposal for a reverse
split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
• |
The company has a non-shareholder approved poison
pill (including an NOL pill); and |
• |
The company has previous sizeable placements (within
the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder
approval. |
• |
In, or subsequent to, the company’s most
recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
• |
The company states that there is a risk of imminent
bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
• |
A government body has in the past year required
the company to increase its capital ratios. |
• |
twice the amount needed to support the transactions
on the ballot, and |
• |
the allowable increase as calculated for general
issuances above. |
16 |
To
be acceptable, appropriate disclosure would be needed that the shares are “declawed”: i.e., representation by the board that
it will not, without prior stockholder approval, issue or use the preferred stock for any defensive or anti-takeover purpose or for the
purpose of implementing any stockholder rights plan. |
|
B-192 |
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
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• |
More simplified capital structure; |
• |
Enhanced liquidity; |
• |
Fairness of conversion terms; |
• |
Impact on voting power and dividends; |
• |
Reasons for the reclassification; |
• |
Conflicts of interest; and |
• |
Other alternatives considered. |
• |
The number of authorized shares will be proportionately
reduced; or |
• |
The effective increase in authorized shares is
equal to or less than the allowable increase calculated in accordance with ISS’ Common
Stock Authorization policy. |
• |
Stock exchange notification to the company of
a potential delisting; |
• |
Disclosure of substantial doubt about the company’s
ability to continue as a going concern without additional financing; |
• |
The company’s rationale; or |
• |
Other factors as applicable. |
• |
Greenmail; |
• |
The use of buybacks to inappropriately manipulate
incentive compensation metrics; |
• |
Threats to the company’s long-term viability;
or |
|
B-193 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
Other company-specific factors as warranted. |
• |
Adverse governance changes; |
• |
Excessive increases in authorized capital stock;
|
• |
Unfair method of distribution; |
• |
Diminution of voting rights; |
• |
Adverse conversion features; |
• |
Negative impact on stock option plans; and |
• |
Alternatives such as spin-off. |
• |
Purchase price; |
• |
Fairness opinion; |
• |
Financial and strategic benefits; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives for the business; and |
• |
Non-completion risk. |
|
B-194 |
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
Impact on the balance sheet/working capital; |
• |
Potential elimination of diseconomies; |
• |
Anticipated financial and operating benefits;
|
• |
Anticipated use of funds; |
• |
Value received for the asset; |
• |
Fairness opinion; |
• |
How the deal was negotiated; and |
• |
Conflicts of interest. |
• |
Dilution to existing shareholders’ positions;
|
• |
Terms of the offer - discount/premium in purchase
price to investor, including any fairness opinion; termination penalties; exit strategy; |
• |
Financial issues - company’s financial situation;
degree of need for capital; use of proceeds; effect of the financing on the company’s cost of capital; |
• |
Management’s efforts to pursue other alternatives;
|
• |
Control issues - change in management; change
in control, guaranteed board and committee seats; standstill provisions; voting agreements; veto power over certain corporate actions;
and |
• |
Conflict of interest - arm’s length transaction,
managerial incentives. |
|
B-195 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
The reasons for the change; |
• |
Any financial or tax benefits; |
• |
Regulatory benefits; |
• |
Increases in capital structure; and |
• |
Changes to the articles of incorporation or bylaws
of the company. |
• |
Increases in common or preferred stock in excess
of the allowable maximum (see discussion under “Capital”); or |
• |
Adverse changes in shareholder rights. |
• |
Offer price/premium; |
• |
Fairness opinion; |
• |
How the deal was negotiated; |
• |
Conflicts of interest; |
• |
Other alternatives/offers considered; and |
• |
Non-completion risk. |
• |
Whether the company has attained benefits from
being publicly-traded (examination of trading volume, liquidity, and market research of the stock); and |
• |
Balanced interests of continuing vs. cashed-out
shareholders, taking into account the following: |
• |
Are all shareholders able to participate in the
transaction? |
• |
Will there be a liquid market for remaining shareholders
following the transaction? |
• |
Does the company have strong corporate governance?
|
• |
Will insiders reap the gains of control following
the proposed transaction? and |
• |
Does the state of incorporation have laws requiring
continued reporting that may benefit shareholders? |
• |
Percentage of assets/business contributed; |
• |
Percentage ownership; |
• |
Financial and strategic benefits; |
• |
Governance structure; |
• |
Conflicts of interest; |
• |
Other alternatives; and |
|
B-196 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
Non-completion risk. |
• |
Management’s efforts to pursue other alternatives;
|
• |
Appraisal value of assets; and |
• |
The compensation plan for executives managing
the liquidation. |
• |
Valuation
- Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide
an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction, and strategic
rationale. |
• |
Market reaction
- How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal. |
• |
Strategic rationale
- Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive
or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical
acquisitions. |
• |
Negotiations
and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A fair process
helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’ competency.
The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value. |
• |
Conflicts of
interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders?
As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if
they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend
the merger. The CIC figure presented in the “ISS Transaction Summary” section of this report is an aggregate figure that can
in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive,
analyze the underlying assumptions to determine whether a potential conflict exists. |
• |
Governance
- Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to
the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as
valuation) outweigh any deterioration in governance. |
• |
Dilution to existing shareholders’ position:
The amount and timing of shareholder ownership dilution should be weighed against the needs and proposed shareholder benefits of the capital
infusion. Although newly issued common stock, absent preemptive rights, is typically dilutive to existing shareholders, share price appreciation
is often the necessary event to trigger the exercise of “out of the money” warrants and convertible debt. In these instances
from a value standpoint, the negative impact of dilution is mitigated by the increase in the company’s stock price that must occur
to trigger the dilutive event. |
|
B-197 |
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
• |
Terms of the offer (discount/premium in purchase
price to investor, including any fairness opinion, conversion features, termination penalties, exit strategy): |
• |
The terms of the offer should be weighed against
the alternatives of the company and in light of company’s financial condition. Ideally, the conversion price for convertible debt
and the exercise price for warrants should be at a premium to the then prevailing stock price at the time of private placement. |
• |
When evaluating the magnitude of a private placement
discount or premium, consider factors that influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring
costs, capital scarcity, information asymmetry, and anticipation of future performance. |
• |
Financial issues: |
• |
The company’s financial condition; |
• |
Degree of need for capital; |
• |
Use of proceeds; |
• |
Effect of the financing on the company’s
cost of capital; |
• |
Current and proposed cash burn rate; and |
• |
Going concern viability and the state of the capital
and credit markets. |
• |
Management’s efforts to pursue alternatives
and whether the company engaged in a process to evaluate alternatives: A fair, unconstrained process helps to ensure the best price for
shareholders. Financing alternatives can include joint ventures, partnership, merger, or sale of part or all of the company. |
• |
Control issues: |
• |
Change in management; |
• |
Change in control; |
• |
Guaranteed board and committee seats; |
• |
Standstill provisions; |
• |
Voting agreements; |
• |
Veto power over certain corporate actions; and
|
• |
Minority versus majority ownership and corresponding
minority discount or majority control premium. |
• |
Conflicts of interest: |
• |
Conflicts of interest should be viewed from the
perspective of the company and the investor; and |
• |
Were the terms of the transaction negotiated at
arm’s length? Are managerial incentives aligned with shareholder interests? |
• |
Market reaction: |
• |
The market’s response to the proposed deal.
A negative market reaction is a cause for concern. Market reaction may be addressed by analyzing the one-day impact on the unaffected
stock price. |
• |
Estimated value and financial prospects of the
reorganized company; |
• |
Percentage ownership of current shareholders in
the reorganized company; |
|
B-198 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
• |
Whether shareholders are adequately represented
in the reorganization process (particularly through the existence of an Official Equity Committee); |
• |
The cause(s) of the bankruptcy filing, and the
extent to which the plan of reorganization addresses the cause(s); |
• |
Existence of a superior alternative to the plan
of reorganization; and |
• |
Governance of the reorganized company. |
• |
Valuation -
Is the value being paid by the SPAC reasonable? SPACs generally lack an independent fairness opinion and the financials on the target
may be limited. Compare the conversion price with the intrinsic value of the target company provided in the fairness opinion. Also, evaluate
the proportionate value of the combined entity attributable to the SPAC IPO shareholders versus the pre-merger value of SPAC. Additionally,
a private company discount may be applied to the target if it is a private entity. |
• |
Market reaction
- How has the market responded to the proposed deal? A negative market reaction may be a cause for concern. Market reaction
may be addressed by analyzing the one-day impact on the unaffected stock price. |
• |
Deal timing
- A main driver for most transactions is that the SPAC charter typically requires the deal to be complete within 18 to 24 months,
or the SPAC is to be liquidated. Evaluate the valuation, market reaction, and potential conflicts of interest for deals that are announced
close to the liquidation date. |
• |
Negotiations
and process - What was the process undertaken to identify potential target companies within specified industry or location specified
in charter? Consider the background of the sponsors. |
• |
Conflicts of
interest - How are sponsors benefiting from the transaction compared to IPO shareholders? Potential conflicts could arise if a
fairness opinion is issued by the insiders to qualify the deal rather than a third party or if management is encouraged to pay a higher
price for the target because of an 80 percent rule (the charter requires that the fair market value of the target is at least equal
to 80 percent of net assets of the SPAC). Also, there may be sense of urgency by the management team of the SPAC to close the deal since
its charter typically requires a transaction to be completed within the 18-24-month timeframe. |
• |
Voting agreements
- Are the sponsors entering into enter into any voting agreements/tender offers with shareholders who are likely to vote against the proposed
merger or exercise conversion rights? |
• |
Governance
- What is the impact of having the SPAC CEO or founder on key committees following the proposed merger? |
• |
Length of request:
Typically, extension requests range from two to six months, depending on the progression of the SPAC’s acquistion process. |
• |
Pending transaction(s)
or progression of the acquisition process: Sometimes an intial business combination was already
put to a shareholder vote, but, for varying reasons, the transaction could not be consummated by the termination date and the SPAC is
requesting an extension. Other times, the SPAC has entered into a definitive transaction agreement, but needs additional time to consummate
or hold the shareholder meeting. |
• |
Added incentive
for non-redeeming shareholders: Sometimes the SPAC sponsor (or other insiders) will contribute, typically as a loan to the company,
additional funds that will be added to the redemption value of |
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B-199 |
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UNITED
STATES
Proxy
Voting Guidelines |
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Prior extension
requests: Some SPACs request additional time beyond the extension period sought in prior extension requests. |
• |
Tax and regulatory advantages; |
• |
Planned use of the sale proceeds; |
• |
Valuation of spinoff; |
• |
Fairness opinion; |
• |
Benefits to the parent company; |
• |
Conflicts of interest; |
• |
Managerial incentives; |
• |
Corporate governance changes; and |
• |
Changes in the capital structure. |
• |
Hiring a financial advisor to explore strategic
alternatives; |
• |
Selling the company; or |
• |
Liquidating the company and distributing the proceeds
to shareholders. |
• |
Prolonged poor performance with no turnaround
in sight; |
• |
Signs of entrenched board and management (such
as the adoption of takeover defenses); |
• |
Strategic plan in place for improving value; |
• |
Likelihood of receiving reasonable value in a
sale or dissolution; and |
• |
The company actively exploring its strategic options,
including retaining a financial advisor. |
5. |
Compensation
|
1. |
Maintain appropriate pay-for-performance alignment,
with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract,
retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration,
among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based
plan costs; |
2. |
Avoid arrangements that risk “pay for failure”:
This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;
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B-200 |
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UNITED
STATES
Proxy
Voting Guidelines |
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3. |
Maintain an independent and effective compensation
committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and
a sound process for compensation decision-making (e.g., including access to independent expertise
and advice when needed); |
4. |
Provide shareholders with clear, comprehensive
compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to
evaluate executive pay practices fully and fairly; and |
5. |
Avoid inappropriate pay to non-executive directors:
This principle recognizes the interests of shareholders in ensuring that compensation to outside directors is reasonable and does not
compromise their independence and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market
level, it may incorporate a variety of generally accepted best practices. |
• |
There is an unmitigated misalignment between CEO
pay and company performance (pay for performance); |
• |
The company maintains significant problematic
pay practices; or |
• |
The board exhibits a significant level of poor
communication and responsiveness to shareholders. |
• |
There is no SOP on the ballot, and an against
vote on an SOP would otherwise be warranted due to pay-for-performance misalignment, problematic pay practices, or the lack of adequate
responsiveness on compensation issues raised previously, or a combination thereof; |
• |
The board fails to respond adequately to a previous
SOP proposal that received less than 70 percent support of votes cast; |
• |
The company has recently practiced or approved
problematic pay practices, such as option repricing or option backdating; or |
• |
The situation is egregious. |
1. |
Peer Group18
Alignment: |
• |
The degree of alignment between the company’s
annualized TSR rank and the CEO’s annualized total pay rank within a peer group, each measured over a three-year period. |
• |
The rankings of CEO total pay and company financial
performance within a peer group, each measured over a three-year period. |
17 |
The
Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities. |
18 |
The
revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial
firms), GICS industry group, and company’s selected peers’ GICS industry group, with size constraints, via a process designed
to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market-cap bucket
that is reflective of the company’s market cap. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant. |
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B-201 |
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UNITED
STATES
Proxy
Voting Guidelines |
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The multiple of the CEO’s total pay relative
to the peer group median in the most recent fiscal year. |
2. |
Absolute Alignment19
– the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years – i.e., the difference
between the trend in annual pay changes and the trend in annualized TSR during the period. |
• |
The ratio of performance- to time-based incentive
awards; |
• |
The overall ratio of performance-based compensation
to fixed or discretionary pay; |
• |
The rigor of performance goals; |
• |
The complexity and risks around pay program design;
|
• |
The transparency and clarity of disclosure; |
• |
The company’s peer group benchmarking practices;
|
• |
Financial/operational results, both absolute and
relative to peers; |
• |
Special circumstances related to, for example,
a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards); |
• |
Realizable pay20
compared to grant pay; and |
• |
Any other factors deemed relevant. |
• |
Problematic practices related to non-performance-based
compensation elements; |
• |
Incentives that may motivate excessive risk-taking
or present a windfall risk; and |
• |
Pay decisions that circumvent pay-for-performance,
such as options backdating or waiving performance requirements. |
• |
Repricing or replacing of underwater stock options/SARs
without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
• |
Extraordinary perquisites or tax gross-ups; |
• |
New or materially amended agreements that provide
for: |
• |
Excessive termination or CIC severance payments
(generally exceeding 3 times base salary and average/target/most recent bonus); |
• |
CIC severance payments without involuntary job
loss or substantial diminution of duties (“single” or “modified single” triggers) or in connection with a problematic
Good Reason definition; |
• |
CIC excise tax gross-up entitlements (including
“modified” gross-ups); and/or |
• |
Multi-year guaranteed awards that are not at risk
due to rigorous performance conditions; |
19 |
Only
Russell 3000 Index companies are subject to the Absolute Alignment analysis. |
20 |
ISS
research reports include realizable pay for S&P1500 companies. |
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B-202 |
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UNITED
STATES
Proxy
Voting Guidelines |
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Liberal CIC definition combined with any single-trigger
CIC benefits; |
• |
Insufficient executive compensation disclosure
by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI’s executives
is not possible; |
• |
Severance payments made when the termination is
not clearly disclosed as involuntary (for example, a termination without cause or resignation for good reason); and/or |
• |
Any other provision or practice deemed to be egregious
and present a significant risk to investors. |
• |
Reason and motive for the options backdating issue,
such as inadvertent vs. deliberate grant date changes; |
• |
Duration of options backdating; |
• |
Size of restatement due to options backdating;
|
• |
Corrective actions taken by the board or compensation
committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
• |
Adoption of a grant policy that prohibits backdating
and creates a fixed grant schedule or window period for equity grants in the future. |
• |
Failure to respond to majority-supported shareholder
proposals on executive pay topics; or |
• |
Failure to adequately respond to the company’s
previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account: |
• |
Disclosure of engagement efforts with major institutional
investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated);
|
• |
Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition; |
• |
Disclosure of specific and meaningful actions
taken to address shareholders’ concerns; |
• |
Other recent compensation actions taken by the
company; |
• |
Whether the issues raised are recurring or isolated;
|
• |
The company’s ownership structure; and |
• |
Whether the support level was less than 50 percent,
which would warrant the highest degree of responsiveness. |
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B-203 |
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UNITED
STATES
Proxy
Voting Guidelines |
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Single- or modified-single-trigger cash severance;
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• |
Single-trigger acceleration of unvested equity
awards; |
• |
Full acceleration of equity awards granted shortly
before the change in control; |
• |
Acceleration of performance awards above the target
level of performance without compelling rationale; |
• |
Excessive cash severance (generally >3x base
salary and bonus); |
• |
Excise tax gross-ups triggered and payable; |
• |
Excessive golden parachute payments (on an absolute
basis or as a percentage of transaction equity value); or |
• |
Recent amendments that incorporate any problematic
features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence
merger agreements that may not be in the best interests of shareholders; or |
• |
The company’s assertion that a proposed
transaction is conditioned on shareholder approval of the golden parachute advisory vote. |
• |
Plan Cost:
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated
Shareholder Value Transfer (SVT) in relation to peers and considering both: |
• |
SVT based on new shares requested plus shares
remaining for future grants, plus outstanding unvested/unexercised grants; and |
• |
SVT based only on new shares requested plus shares
remaining for future grants. |
• |
Plan Features:
|
• |
Quality of disclosure around vesting upon a change
in control (CIC); |
• |
Discretionary vesting authority; |
21 |
Proposals
evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and
directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees
and/or employees and directors; amended plans will be further evaluated case-by-case. |
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B-204 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Liberal share recycling on various award types;
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• |
Lack of minimum vesting period for grants made
under the plan; and |
• |
Dividends payable prior to award vesting. |
• |
Grant Practices:
|
• |
The company’s three-year burn rate relative
to its industry/market cap peers; |
• |
Vesting requirements in CEO’s recent equity
grants (3-year look-back); |
• |
The estimated duration of the plan (based on the
sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years);
|
• |
The proportion of the CEO’s most recent
equity grants/awards subject to performance conditions; |
• |
Whether the company maintains a sufficient claw-back
policy; and |
• |
Whether the company maintains sufficient post-exercise/vesting
share-holding requirements. |
• |
Awards may vest in connection with a liberal change-of-control
definition; |
• |
The plan would permit repricing or cash buyout
of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies –
or by not prohibiting it when the company has a history of repricing – for non-listed companies); |
• |
The plan is a vehicle for problematic pay practices
or a significant pay-for-performance disconnect under certain circumstances; |
• |
The plan is excessively dilutive to shareholders’
holdings; |
• |
The plan contains an evergreen (automatic share
replenishment) feature; or |
• |
Any other plan features are determined to have
a significant negative impact on shareholder interests. |
22 |
For
plans evaluated under the Equity Plan Scorecard policy, the company’s SVT benchmark is considered along with other factors. |
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B-205 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Amend the terms of outstanding options or SARs
to reduce the exercise price of such outstanding options or SARs; |
• |
Cancel outstanding options or SARs in exchange
for options or SARs with an exercise price that is less than the exercise price of the original options or SARs; |
• |
Cancel underwater options in exchange for stock
awards; or |
• |
Provide cash buyouts of underwater options. |
• |
Severity of the pay-for-performance misalignment;
|
• |
Whether problematic equity grant practices are
driving the misalignment; and/or |
• |
Whether equity plan awards have been heavily concentrated
to the CEO and/or the other NEOs. |
|
B-206 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Addresses administrative features only; or |
• |
Seeks approval for Section 162(m) purposes
only, and the plan administering committee consists entirely of independent directors,
per ISS’ Classification of Directors. Note that if the company is presenting the plan to shareholders for the first time for
any reason (including after the company’s initial public offering), or if the proposal is bundled with other material plan amendments,
then the recommendation will be case-by-case (see below). |
• |
Seeks approval for Section 162(m) purposes
only, and the plan administering committee does not consist entirely of independent directors, per ISS’
Classification of Directors. |
• |
If the proposal requests additional shares and/or
the amendments include a term extension or addition of full value awards as an award type, the recommendation will be based on the Equity
Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments; |
• |
If the plan is being presented to shareholders
for the first time (including after the company’s IPO), whether or not additional shares are being requested, the recommendation
will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any amendments;
and |
• |
If there is no request for additional shares and
the amendments do not include a term extension or addition of full value awards as an award type, then the recommendation will be based
entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation will be shown only for informational purposes.
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B-207 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Purchase price is at least 85 percent of fair
market value; |
• |
Offering period is 27 months or less; and |
• |
The number of shares allocated to the plan is
10 percent or less of the outstanding shares. |
• |
Broad-based participation; |
• |
Limits on employee contribution, which may be
a fixed dollar amount or expressed as a percent of base salary; |
• |
Company matching contribution up to 25 percent
of employee’s contribution, which is effectively a discount of 20 percent from market value; and |
• |
No discount on the stock price on the date of
purchase when there is a company matching contribution. |
• |
Historic trading patterns--the stock price should
not be so volatile that the options are likely to be back “in-the-money” over the near term; |
• |
Rationale for the re-pricing--was the stock price
decline beyond management’s control?; |
• |
Is this a value-for-value exchange?; |
• |
Are surrendered stock options added back to the
plan reserve?; |
• |
Timing--repricing should occur at least one year
out from any precipitous drop in company’s stock price; |
• |
Option vesting--does the new option vest immediately
or is there a black-out period?; |
• |
Term of the option--the term should remain the
same as that of the replaced option; |
• |
Exercise price--should be set at fair market or
a premium to market; and |
• |
Participants--executive officers and directors
must be excluded. |
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B-208 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Executive officers and non-employee directors
are excluded from participating; |
• |
Stock options are purchased by third-party financial
institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other
appropriate financial models; and |
• |
There is a two-year minimum holding period for
sale proceeds (cash or stock) for all participants. |
• |
Eligibility; |
• |
Vesting; |
• |
Bid-price; |
• |
Term of options; |
• |
Cost of the program and impact of the TSOs on
company’s total option expense; and |
• |
Option repricing policy. |
|
B-209 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
If the equity plan under which non-employee director
grants are made is on the ballot, whether or not it warrants support; and |
• |
An assessment of the following qualitative factors:
|
• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
• |
The total estimated cost of the company’s
equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) based on
new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; |
• |
The company’s three-year burn rate relative
to its industry/market cap peers (in certain circumstances); and |
• |
The presence of any egregious plan features (such
as an option repricing provision or liberal CIC vesting risk). |
• |
The relative magnitude of director compensation
as compared to companies of a similar profile; |
• |
The presence of problematic pay practices relating
to director compensation; |
• |
Director stock ownership guidelines and holding
requirements; |
• |
Equity award vesting schedules; |
• |
The mix of cash and equity-based compensation;
|
• |
Meaningful limits on director compensation; |
• |
The availability of retirement benefits or perquisites;
and |
• |
The quality of disclosure surrounding director
compensation. |
|
B-210 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The company’s past practices regarding equity
and cash compensation; |
• |
Whether the company has a holding period or stock
ownership requirements in place, such as a meaningful retention ratio (at least 50 percent for full tenure); and |
• |
Whether the company has a rigorous claw-back policy
in place. |
• |
The percentage/ratio of net shares required to
be retained; |
• |
The time period required to retain the shares;
|
• |
Whether the company has equity retention, holding
period, and/or stock ownership requirements in place and the robustness of such requirements; |
|
B-211 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Whether the company has any other policies aimed
at mitigating risk taking by executives; |
• |
Executives’ actual stock ownership and the
degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s existing requirements;
and |
• |
Problematic pay practices, current and past, which
may demonstrate a short-term versus long-term focus. |
• |
The company’s current level of disclosure
of its executive compensation setting process, including how the company considers pay disparity; |
• |
If any problematic pay practices or pay-for-performance
concerns have been identified at the company; and |
• |
The level of shareholder support for the company’s
pay programs. |
• |
First, vote for shareholder proposals advocating
the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options, or premium-priced
options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion
of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria
to be considered as performance-based awards. Further, premium-priced options should have a meaningful premium to be considered performance-based
awards; and |
• |
Second, assess the rigor of the company’s
performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical
or peer group comparison, generally vote for the proposal. Furthermore, if target performance results in an above target payout, vote
for the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based
equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test. |
• |
Set compensation targets for the plan’s
annual and long-term incentive pay components at or below the peer group median; |
• |
Deliver a majority of the plan’s target
long-term compensation through performance-vested, not simply time-vested, equity awards; |
• |
Provide the strategic rationale and relative weightings
of the financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components
of the plan; |
• |
Establish performance targets for each plan financial
metric relative to the performance of the company’s peer companies; and |
|
B-212 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Limit payment under the annual and performance-vested
long-term incentive components of the plan to when the company’s performance on its selected financial performance metrics exceeds
peer group median performance. |
• |
What aspects of the company’s annual and
long-term equity incentive programs are performance driven? |
• |
If the annual and long-term equity incentive programs
are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed
peer group? |
• |
Can shareholders assess the correlation between
pay and performance based on the current disclosure? and |
• |
What type of industry and stage of business cycle
does the company belong to? |
• |
Adoption, amendment, or termination of a 10b5-1
Plan must be disclosed in a Form 8-K; |
• |
Amendment or early termination of a 10b5-1 Plan
allowed only under extraordinary circumstances, as determined by the board; |
• |
Request that a certain number of days that must
elapse between adoption or amendment of a 10b5-1 Plan and initial trading under the plan; |
• |
Reports on Form 4 must identify transactions
made pursuant to a 10b5-1 Plan; |
• |
An executive may not trade in company stock outside
the 10b5-1 Plan; and |
• |
Trades under a 10b5-1 Plan must be handled by
a broker who does not handle other securities transactions for the executive. |
• |
If the company has adopted a formal recoupment
policy; |
• |
The rigor of the recoupment policy focusing on
how and under what circumstances the company may recoup incentive or stock compensation; |
• |
Whether the company has chronic restatement history
or material financial problems; |
|
B-213 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Whether the company’s policy substantially
addresses the concerns raised by the proponent; |
• |
Disclosure of recoupment of incentive or stock
compensation from senior executives or lack thereof; and |
• |
Any other relevant factors. |
• |
The company’s
severance or change-in-control agreements in place, and the presence of problematic features
(such as excessive severance entitlements, single triggers, excise tax gross-ups, etc.); |
• |
Any existing
limits on cash severance payouts or policies which require shareholder ratification of severance payments exceeding a certain level; |
• |
Any recent
severance-related controversies; and |
• |
Whether the
proposal is overly prescriptive, such as requiring shareholder approval of severance that does not exceed market norms. |
• |
The frequency and timing of the company’s
share buybacks; |
• |
The use of per-share metrics in incentive plans;
|
• |
The effect of recent buybacks on incentive metric
results and payouts; and |
• |
Whether there is any indication of metric result
manipulation. |
|
B-214 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The company’s current treatment of equity
upon employment termination and/or in change-in-control situations (i.e., vesting is double triggered and/or pro rata, does it allow for
the assumption of equity by acquiring company, the treatment of performance shares, etc.); and |
• |
Current employment agreements, including potential
poor pay practices such as gross-ups embedded in those agreements. |
6. |
Routine/Miscellaneous
|
• |
The new quorum threshold requested; |
• |
The rationale presented for the reduction; |
• |
The market capitalization of the company (size,
inclusion in indices); |
• |
The company’s ownership structure; |
• |
Previous voter turnout or attempts to achieve
quorum; |
• |
Any provisions or commitments to restore quorum
to a majority of shares outstanding, should voter turnout improve sufficiently; and |
• |
Other factors as appropriate. |
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B-215 |
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UNITED
STATES
Proxy
Voting Guidelines |
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7. |
Social
and Environmental Issues |
• |
If the issues presented in the proposal are being
appropriately or effectively dealt with through legislation or government regulation; |
• |
If the company has already responded in an appropriate
and sufficient manner to the issue(s) raised in the proposal; |
• |
Whether the proposal’s request is unduly
burdensome (scope or timeframe) or overly prescriptive; |
• |
The company’s approach compared with any
industry standard practices for addressing the issue(s) raised by the proposal; |
• |
Whether there are significant controversies, fines,
penalties, or litigation associated with the company’s practices related to the issue(s) raised in the proposal; |
• |
If the proposal requests increased disclosure
or greater transparency, whether reasonable and sufficient information is currently available to shareholders from the company or from
other publicly available sources; and |
• |
If the proposal requests increased disclosure
or greater transparency, whether implementation would reveal proprietary or confidential information that could place the company at a
competitive disadvantage. |
|
B-216 |
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|
UNITED
STATES
Proxy
Voting Guidelines |
|
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• |
The company has already published a set of animal
welfare standards and monitors compliance; |
• |
The company’s standards are comparable to
industry peers; and |
• |
There are no recent significant fines, litigation,
or controversies related to the company’s and/or its suppliers’ treatment of animals. |
• |
The company is conducting animal testing programs
that are unnecessary or not required by regulation; |
• |
The company is conducting animal testing when
suitable alternatives are commonly accepted and used by industry peers; or |
• |
There are recent, significant fines or litigation
related to the company’s treatment of animals. |
• |
The potential impact of such labeling on the company’s
business; |
• |
The quality of the company’s disclosure
on GE product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and |
• |
Company’s current disclosure on the feasibility
of GE product labeling. |
|
B-217 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Whether the company has adequately disclosed mechanisms
in place to prevent abuses; |
• |
Whether the company has adequately disclosed the
financial risks of the products/practices in question; |
• |
Whether the company has been subject to violations
of related laws or serious controversies; and |
• |
Peer companies’ policies/practices in this
area. |
• |
The potential for reputational, market, and regulatory
risk exposure; |
• |
Existing disclosure of relevant policies; |
• |
Deviation from established industry norms; |
• |
Relevant company initiatives to provide research
and/or products to disadvantaged consumers; |
• |
Whether the proposal focuses on specific products
or geographic regions; |
• |
The potential burden and scope of the requested
report; and |
• |
Recent significant controversies, litigation,
or fines at the company. |
• |
The company already discloses similar information
through existing reports such as a supplier code of conduct and/or a sustainability report; |
• |
The company has formally committed to the implementation
of a toxic/hazardous materials and/or product safety and supply chain reporting and monitoring program based on industry norms or similar
standards within a specified time frame; or |
• |
The company has not been recently involved in
relevant significant controversies, fines, or litigation. |
• |
The company’s current level of disclosure
regarding its product safety policies, initiatives, and oversight mechanisms; |
|
B-218 |
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
Current regulations in the markets in which the
company operates; and |
• |
Recent significant controversies, litigation,
or fines stemming from toxic/hazardous materials at the company. |
• |
Recent related fines, controversies, or significant
litigation; |
• |
Whether the company complies with relevant laws
and regulations on the marketing of tobacco; |
• |
Whether the company’s advertising restrictions
deviate from those of industry peers; |
• |
Whether the company entered into the Master Settlement
Agreement, which restricts marketing of tobacco to youth; and |
• |
Whether restrictions on marketing to youth extend
to foreign countries. |
• |
Whether the company complies with all laws and
regulations; |
• |
The degree that voluntary restrictions beyond
those mandated by law might hurt the company’s competitiveness; and |
• |
The risk of any health-related liabilities. |
• |
The extent to which the company’s climate
related disclosures are in line with TCFD recommendations and meet other market standards; |
• |
Disclosure of its operational and supply chain
GHG emissions (Scopes 1, 2, and 3); |
• |
The completeness and rigor of company’s
short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant); |
• |
Whether the company has sought and received third-party
approval that its targets are science-based; |
• |
Whether the company has made a commitment to be
“net zero” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050; |
• |
Whether the company discloses a commitment to
report on the implementation of its plan in subsequent years; |
• |
Whether the company’s climate data has received
third-party assurance; |
23 |
Variations
of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan. |
|
B-219 |
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UNITED
STATES
Proxy
Voting Guidelines |
|
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• |
Disclosure of how the company’s lobbying
activities and its capital expenditures align with company strategy; |
• |
Whether there are specific industry decarbonization
challenges; and |
• |
The company’s related commitment, disclosure,
and performance compared to its industry peers. |
• |
The completeness and rigor of the company’s
climate-related disclosure; |
• |
The company’s actual GHG emissions performance;
|
• |
Whether the company has been the subject of recent,
significant violations, fines, litigation, or controversy related to its GHG emissions; and |
• |
Whether the proposal’s request is unduly
burdensome (scope or timeframe) or overly prescriptive. |
• |
Whether the company already provides current,
publicly-available information on the impact that climate change may have on the company as well as associated company policies and procedures
to address related risks and/or opportunities; |
• |
The company’s level of disclosure compared
to industry peers; and |
• |
Whether there are significant controversies, fines,
penalties, or litigation associated with the company’s climate change-related performance. |
• |
The company already discloses current, publicly-available
information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address
related risks and/or opportunities; |
• |
The company’s level of disclosure is comparable
to that of industry peers; or |
• |
There are no significant, controversies, fines,
penalties, or litigation associated with the company’s GHG emissions. |
• |
Whether the company provides disclosure of year-over-year
GHG emissions performance data; |
• |
Whether company disclosure lags behind industry
peers; |
• |
The company’s actual GHG emissions performance;
|
• |
The company’s current GHG emission policies,
oversight mechanisms, and related initiatives; and |
• |
Whether the company has been the subject of recent,
significant violations, fines, litigation, or controversy related to GHG emissions. |
|
B-220 |
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UNITED
STATES
Proxy
Voting Guidelines |
|
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• |
The company complies with applicable energy efficiency
regulations and laws, and discloses its participation in energy efficiency policies and programs, including disclosure of benchmark data,
targets, and performance measures; or |
• |
The proponent requests adoption of specific energy
efficiency goals within specific timelines. |
• |
The scope and structure of the proposal; |
• |
The company’s current level of disclosure
on renewable energy use and GHG emissions; and |
• |
The company’s disclosure of policies, practices,
and oversight implemented to manage GHG emissions and mitigate climate change risks. |
• |
The gender and racial minority representation
of the company’s board is reasonably inclusive in relation to companies of similar size and business; or |
• |
The board already reports on its nominating procedures
and gender and racial minority initiatives on the board and within the company. |
• |
The degree of existing gender and racial minority
diversity on the company’s board and among its executive officers; |
• |
The level of gender and racial minority representation
that exists at the company’s industry peers; |
• |
The company’s established process for addressing
gender and racial minority board representation; |
• |
Whether the proposal includes an overly prescriptive
request to amend nominating committee charter language; |
• |
The independence of the company’s nominating
committee; |
• |
Whether the company uses an outside search firm
to identify potential director nominees; and |
• |
Whether the company has had recent controversies,
fines, or litigation regarding equal employment practices. |
|
B-221 |
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|
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UNITED
STATES
Proxy
Voting Guidelines |
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• |
The company publicly discloses equal opportunity
policies and initiatives in a comprehensive manner; |
• |
The company already publicly discloses comprehensive
workforce diversity data; or |
• |
The company has no recent significant EEO-related
violations or litigation. |
• |
The company’s current policies and disclosure
related to both its diversity and inclusion policies and practices and its compensation philosophy on fair and equitable compensation
practices; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to gender, race, or ethnicity pay gap issues; |
• |
The company’s disclosure regarding gender,
race, or ethnicity pay gap policies or initiatives compared to its industry peers; and |
• |
Local laws regarding categorization of race and/or
ethnicity and definitions of ethnic and/or racial minorities. |
• |
The company’s established process or framework
for addressing racial inequity and discrimination internally; |
• |
Whether the company adequately discloses workforce
diversity and inclusion metrics and goals; |
• |
Whether the company has issued a public statement
related to its racial justice efforts in recent years, or has committed to internal policy review; |
• |
Whether the company has engaged with impacted
communities, stakeholders, and civil rights experts; |
• |
The company’s track record in recent years
of racial justice measures and outreach externally; and |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to racial inequity or discrimination. |
|
B-222 |
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|
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UNITED
STATES
Proxy
Voting Guidelines |
|
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• |
The company’s current level of disclosure
of its workplace health and safety performance data, health and safety management policies, initiatives, and oversight mechanisms; |
• |
The nature of the company’s business, specifically
regarding company and employee exposure to health and safety risks; |
• |
Recent significant controversies, fines, or violations
related to workplace health and safety; and |
• |
The company’s workplace health and safety
performance relative to industry peers. |
• |
The company’s compliance with applicable
regulations and guidelines; |
• |
The company’s current level of disclosure
regarding its security and safety policies, procedures, and compliance monitoring; and |
• |
The existence of recent, significant violations,
fines, or controversy regarding the safety and security of the company’s operations and/or facilities. |
• |
Current disclosure of applicable policies and
risk assessment report(s) and risk management procedures; |
• |
The impact of regulatory non-compliance, litigation,
remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including
the management of relevant community and stakeholder relations; |
• |
The nature, purpose, and scope of the company’s
operations in the specific region(s); |
• |
The degree to which company policies and procedures
are consistent with industry norms; and |
• |
The scope of the resolution. |
• |
The company’s current level of disclosure
of relevant policies and oversight mechanisms; |
• |
The company’s current level of such disclosure
relative to its industry peers; |
• |
Potential relevant local, state, or national regulatory
developments; and |
• |
Controversies, fines, or litigation related to
the company’s hydraulic fracturing operations. |
• |
Operations in the specified regions are not permitted
by current laws or regulations; |
|
B-223 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
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• |
The company does not currently have operations
or plans to develop operations in these protected regions; or |
• |
The company’s disclosure of its operations
and environmental policies in these regions is comparable to industry peers. |
• |
The nature of the company’s business; |
• |
The current level of disclosure of the company’s
existing related programs; |
• |
The timetable and methods of program implementation
prescribed by the proposal; |
• |
The company’s ability to address the issues
raised in the proposal; and |
• |
How the company’s recycling programs compare
to similar programs of its industry peers. |
• |
The company already discloses similar information
through existing reports or policies such as an environment, health, and safety (EHS) report; a comprehensive code of corporate conduct;
and/or a diversity report; or |
• |
The company has formally committed to the implementation
of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame. |
• |
The company’s current disclosure of relevant
policies, initiatives, oversight mechanisms, and water usage metrics; |
• |
Whether or not the company’s existing water-related
policies and practices are consistent with relevant internationally recognized standards and national/local regulations; |
• |
The potential financial impact or risk to the
company associated with water-related concerns or issues; and |
• |
Recent, significant company controversies, fines,
or litigation regarding water use by the company and its suppliers. |
|
B-224 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
The level of disclosure of company policies and
procedures relating to data security, privacy, freedom of speech, information access and management, and Internet censorship; |
• |
Engagement in dialogue with governments or relevant
groups with respect to data security, privacy, or the free flow of information on the Internet; |
• |
The scope of business involvement and of investment
in countries whose governments censor or monitor the Internet and other telecommunications; |
• |
Applicable market-specific laws or regulations
that may be imposed on the company; and |
• |
Controversies, fines, or litigation related to
data security, privacy, freedom of speech, or Internet censorship. |
• |
The scope and prescriptive nature of the proposal;
|
• |
The company’s current level of disclosure
regarding its environmental and social performance and governance; |
• |
The degree to which the board or compensation
committee already discloses information on whether it has considered related E&S criteria; and |
• |
Whether the company has significant controversies
or regulatory violations regarding social or environmental issues. |
• |
The degree to which existing relevant policies
and practices are disclosed; |
• |
Whether or not existing relevant policies are
consistent with internationally recognized standards; |
• |
Whether company facilities and those of its suppliers
are monitored and how; |
• |
Company participation in fair labor organizations
or other internationally recognized human rights initiatives; |
• |
Scope and nature of business conducted in markets
known to have higher risk of workplace labor/human rights abuse; |
• |
Recent, significant company controversies, fines,
or litigation regarding human rights at the company or its suppliers; |
• |
The scope of the request; and |
• |
Deviation from industry sector peer company standards
and practices. |
• |
The degree to which existing relevant policies
and practices are disclosed, including information on the implementation of these policies and any related oversight mechanisms; |
• |
The company’s industry and whether the company
or its suppliers operate in countries or areas where there is a history of human rights concerns; |
|
B-225 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
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|
• |
Recent significant controversies, fines, or litigation
regarding human rights involving the company or its suppliers, and whether the company has taken remedial steps; and |
• |
Whether the proposal is unduly burdensome or overly
prescriptive. |
• |
The company’s current policies and practices
related to the use of mandatory arbitration agreements on workplace claims; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to the use of mandatory arbitration agreements on workplace claims; and |
• |
The company’s disclosure of its policies
and practices related to the use of mandatory arbitration agreements compared to its peers. |
• |
The nature, purpose, and scope of the operations
and business involved that could be affected by social or political disruption; |
• |
Current disclosure of applicable risk assessment(s)
and risk management procedures; |
• |
Compliance with U.S. sanctions and laws; |
• |
Consideration of other international policies,
standards, and laws; and |
• |
Whether the company has been recently involved
in recent, significant controversies, fines, or litigation related to its operations in “high-risk” markets. |
• |
Controversies surrounding operations in the relevant
market(s); |
• |
The value of the requested report to shareholders;
|
• |
The company’s current level of disclosure
of relevant information on outsourcing and plant closure procedures; and |
• |
The company’s existing human rights standards
relative to industry peers. |
• |
The company’s current policies, practices,
oversight mechanisms related to preventing workplace sexual harassment; |
• |
Whether the company has been the subject of recent
controversy, litigation, or regulatory actions related to workplace sexual harassment issues; and |
|
B-226 |
|
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|
|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
|
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|
• |
The company’s disclosure regarding workplace
sexual harassment policies or initiatives compared to its industry peers. |
• |
The company’s current disclosure of relevant
lobbying policies, and management and board oversight; |
• |
The company’s disclosure regarding trade
associations or other groups that it supports, or is a member of, that engage in lobbying activities; and |
• |
Recent significant controversies, fines, or litigation
regarding the company’s lobbying-related activities. |
• |
The company’s policies, and management and
board oversight related to its direct political contributions and payments to trade associations or other groups that may be used for
political purposes; |
• |
The company’s disclosure regarding its support
of, and participation in, trade associations or other groups that may make political contributions; and |
• |
Recent significant controversies, fines, or litigation
related to the company’s political contributions or political activities. |
• |
The company’s policies, management, board
oversight, governance processes, and level of disclosure related to direct political contributions, lobbying activities, and payments
to trade associations, political action committees, or other groups that may be used for political purposes; |
|
B-227 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
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|
• |
The company’s disclosure regarding: the
reasons for its support of candidates for public offices; the reasons for support of and participation in trade associations or other
groups that may make political contributions; and other political activities; |
• |
Any incongruencies identified between a company’s
direct and indirect political expenditures and its publicly stated values and priorities; and |
• |
Recent significant controversies related to the
company’s direct and indirect lobbying, political contributions, or political activities. |
• |
There are no recent, significant controversies,
fines, or litigation regarding the company’s political contributions or trade association spending; and |
• |
The company has procedures in place to ensure
that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibit coercion. |
8. |
Mutual
Fund Proxies |
• |
Past performance as a closed-end fund; |
• |
Market in which the fund invests; |
• |
Measures taken by the board to address the discount;
and |
• |
Past shareholder activism, board activity, and
votes on related proposals. |
• |
Past performance relative to its peers; |
• |
Market in which the fund invests; |
|
B-228 |
|
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|
UNITED
STATES
Proxy
Voting Guidelines |
|
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|
• |
Measures taken by the board to address the issues;
|
• |
Past shareholder activism, board activity, and
votes on related proposals; |
• |
Strategy of the incumbents versus the dissidents;
|
• |
Independence of directors; |
• |
Experience and skills of director candidates;
|
• |
Governance profile of the company; and |
• |
Evidence of management entrenchment. |
• |
Proposed and current fee schedules; |
• |
Fund category/investment objective; |
• |
Performance benchmarks; |
• |
Share price performance as compared with peers;
|
• |
Resulting fees relative to peers; and |
• |
Assignments (where the advisor undergoes a change
of control). |
• |
Stated specific financing purpose; |
• |
Possible dilution for common shares; and |
• |
Whether the shares can be used for antitakeover
purposes. |
• |
Potential competitiveness; |
• |
Regulatory developments; |
• |
Current and potential returns; and |
• |
Current and potential risk. |
• |
The fund’s target investments; |
• |
The reasons given by the fund for the change;
and |
|
B-229 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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• |
The projected impact of the change on the portfolio.
|
• |
Political/economic changes in the target market;
|
• |
Consolidation in the target market; and |
• |
Current asset composition. |
• |
Potential competitiveness; |
• |
Current and potential returns; |
• |
Risk of concentration; and |
• |
Consolidation in target industry. |
• |
The proposal to allow share issuances below NAV
has an expiration date no more than one year from the date shareholders approve the underlying proposal, as required under the Investment
Company Act of 1940; |
• |
The sale is deemed to be in the best interests
of shareholders by (1) a majority of the company’s independent directors and (2) a majority of the company’s directors who
have no financial interest in the issuance; and |
• |
The company has demonstrated responsible past
use of share issuances by either: |
• |
Outperforming peers in its 8-digit GICS group
as measured by one- and three-year median TSRs; or |
• |
Providing disclosure that its past share issuances
were priced at levels that resulted in only small or moderate discounts to NAV and economic dilution to existing non-participating shareholders.
|
• |
Strategies employed to salvage the company; |
• |
The fund’s past performance; and |
• |
The terms of the liquidation. |
• |
The degree of change implied by the proposal;
|
• |
The efficiencies that could result; |
|
B-230 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
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|
• |
The state of incorporation; and |
• |
Regulatory standards and implications. |
• |
Removal of shareholder approval requirement to
reorganize or terminate the trust or any of its series; |
• |
Removal of shareholder approval requirement for
amendments to the new declaration of trust; |
• |
Removal of shareholder approval requirement to
amend the fund’s management contract, allowing the contract to be modified by the investment manager and the trust management, as
permitted by the 1940 Act; |
• |
Allow the trustees to impose other fees in addition
to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a
fund’s shares; |
• |
Removal of shareholder approval requirement to
engage in and terminate subadvisory arrangements; or |
• |
Removal of shareholder approval requirement to
change the domicile of the fund. |
• |
Regulations of both states; |
• |
Required fundamental policies of both states;
and |
• |
The increased flexibility available. |
• |
Fees charged to comparably sized funds with similar
objectives; |
• |
The proposed distributor’s reputation and
past performance; |
• |
The competitiveness of the fund in the industry;
and |
• |
The terms of the agreement. |
• |
Resulting fee structure; |
• |
Performance of both funds; |
• |
Continuity of management personnel; and |
• |
Changes in corporate governance and their impact
on shareholder rights. |
|
B-231 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
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|
• |
Performance of the fund’s Net Asset Value
(NAV); |
• |
The fund’s history of shareholder relations;
and |
• |
The performance of other funds under the advisor’s
management. |
|
B-232 |
|
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|
|
UNITED
STATES
Proxy
Voting Guidelines |
|
|
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|
B-233 |
|
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|
INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-235 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-236 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-237 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-238 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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1. |
Operational
Items |
• |
There are concerns about the accounts presented
or audit procedures used; or |
• |
The company is not responsive to shareholder questions
about specific items that should be publicly disclosed. |
• |
The name of the proposed auditors has not been
published; |
• |
There are serious concerns about the effectiveness
of the auditors; |
• |
The lead audit partner(s) has been linked with
a significant auditing controversy; |
• |
There is reason to believe that the auditor has
rendered an opinion which is neither accurate nor indicative of the company’s financial position; |
• |
The lead audit partner(s) has previously served
the company in an executive capacity or can otherwise be considered affiliated with the company; |
• |
The auditors are being changed without explanation;
|
• |
Fees for non-audit services exceed either 100
percent of standard audit-related fees or any stricter limit set in local best practice recommendations or law; or |
• |
Audit fees are undisclosed. |
• |
There are serious concerns about the statutory
reports presented or the audit procedures used; |
• |
Questions exist concerning any of the statutory
auditors being appointed; or |
• |
The auditors have previously served the company
in an executive capacity or can otherwise be considered affiliated with the company. |
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B-239 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
The dividend payout ratio has been consistently
below 30 percent without adequate explanation; or |
• |
The payout is excessive given the company’s
financial position. |
• |
Whether the proposal allows for a cash option;
and |
• |
If the proposal is in line with market standards.
|
• |
Whether the company has committed to ensuring
shareholders will have the same rights participating electronically as they would have for an in-person meeting; |
• |
Rationale of the circumstances under which virtual-only
meetings would be held; |
• |
In-person or hybrid meetings are not precluded;
|
• |
Whether an authorization is restricted in time
or allows for the possibility of virtual-only meetings indefinitely; and |
• |
Local laws and regulations concerning the convening
of virtual meetings. |
1 |
The
phrase “hybrid shareholder meeting” refers to an in-person meeting in which shareholders are also permitted to participate
online. |
2 |
The
phrase “virtual-only shareholder meeting” refers to a meeting of shareholders that is held exclusively through the use of
online technology without a corresponding in-person meeting. |
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B-240 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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2. |
Board
of Directors |
• |
Adequate disclosure has not been provided in a
timely manner; |
• |
There are clear concerns over questionable finances
or restatements; |
• |
There have been questionable transactions with
conflicts of interest; |
• |
There are any records of abuses against minority
shareholder interests; |
• |
The board fails to meet minimum corporate governance
standards, including board independence standards; |
• |
There are specific concerns about the individual,
such as criminal wrongdoing or breach of fiduciary responsibilities; or |
• |
Repeated absences at board and key committee3
meetings have not been explained (in countries where this information is disclosed). |
• |
For Japan,
if the company has an audit-committee-board structure or a traditional two-tier board structure as opposed to three committees, vote against
incumbent representative directors if the board lacks at least one director of an underrepresented gender identity. |
• |
For Malaysia,
vote against or withhold from incumbent members of the nominating committee if the board is not comprised of at least 30 percent underrepresented
gender identities. |
• |
For Canada,
vote against or withhold from the chair of the nominating committee if: |
• |
the board is not comprised of at least 30 percent
underrepresented gender identities; or |
• |
the board lacks at least one racially or ethnically
diverse director. |
• |
For the UK,
generally vote against or withhold from the incumbent chair of the nominating committee if: |
• |
the board is not comprised of at least 33 percent
underrepresented gender identities; or |
• |
the board lacks at least one racially diverse
director. |
• |
For Australia,
vote against or withhold votes from the chair of the nominating committee if the board is not comprised of at least 30 percent underrepresented
gender identities. |
• |
For Continental
European markets, generally vote against or withhold from incumbent members of the nominating committee if the board is not comprised
of at least 40 percent underrepresented gender identities. |
• |
Vote against or withhold from other director nominees
on a case-by-case basis. |
3 |
Key
committees are usually the ones performing the functions of audit, remuneration and nomination (plus risk for financial institutions).
|
4 |
Underrepresented
gender identities include directors who identify as women or as non-binary. |
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B-241 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Material failures of governance, stewardship,
risk oversight5, or fiduciary responsibilities at the company, including failure to
adequately manage or mitigate environmental, social and governance (ESG) risks; |
• |
A lack of sustainability reporting in the company’s
public documents and/or website in conjunction with a failure to adequately manage or mitigate ESG risks; |
• |
Failure to replace management as appropriate;
or |
• |
Egregious actions related to the director(s)’
service on the boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests
of shareholders at any company. |
• |
Detailed disclosure of climate-related risks,
such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including: |
• |
Board governance measures; |
• |
Corporate strategy; |
• |
Risk management analyses; and |
• |
Metrics and targets. |
• |
The company has declared a target of Net Zero
by 2050 or sooner and the target includes scope 1, 2, and relevant scope 3 emissions. |
• |
The company has set a medium-term target for reducing
its GHG emissions. |
• |
The board is less than majority independent; or
|
• |
The board lacks a separate compensation or nominating
committee. |
5 |
Examples
of failure of risk oversight include but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably
poor risk oversight of environmental and social issues, including climate change; significant environmental incidents including spills
and pollution; large scale or repeat workplace fatalities or injuries; significant adverse legal judgments or settlements; or hedging
of company stock. |
6 |
For
2024, companies defined as “significant GHG emitters” will be those on the current Climate Action 100+ Focus Group list. |
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B-242 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Are Executive Directors; |
• |
Are Controlling Shareholders; or |
• |
Is a Non-employee officer of the company or its
affiliates if he/she is among the five most highly compensated. |
• |
Are members of the audit committee; |
• |
Are members of the compensation committee or the
nominating committee and the committee is not majority independent; or |
• |
Are board members and the entire board fulfills
the role of a compensation committee or a nominating committee and the board is not majority independent. |
• |
Are non-CEO directors and serve on more than five
public company boards; or |
• |
Are CEOs of public companies who serve on the
boards of more than two public companies besides their |
• |
Transitioning
directors: It is preferable for a director to step down from a board at the annual meeting to ensure orderly transitions, which
may result in a director being temporarily overboarded (e.g. joining a new board in March but stepping off another board in June). Sustainability
Advisory Services will generally not count a board for policy application purposes when it is publicly-disclosed that the director will
be stepping off that board at its next annual meeting. This disclosure must be included within the company’s proxy circular to be
taken into consideration. Conversely, Sustainability Advisory Services will include the new boards that the director is joining even if
the shareholder meeting with his or her election has not yet taken place. |
• |
The size and scope of the management services
agreement; |
• |
Executive compensation in comparison to issuer
peers and/or similarly structured issuers; |
• |
Overall performance; |
• |
Related party transactions; |
7 |
Although
a CEO’s subsidiary boards will be counted as separate boards, Sustainability Advisory Services will not recommend a withhold vote
for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent but may do so at
subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationship. |
|
B-243 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Board and committee independence; |
• |
Conflicts of interest and process for managing
conflicts effectively; |
• |
Disclosure and independence of the decision-making
process involved in the selection of the management services provider; |
• |
Risk mitigating factors included within the management
services agreement such as fee recoupment mechanisms; |
• |
Historical compensation concerns; |
• |
Executives’ responsibilities; and |
• |
Other factors that may reasonably be deemed appropriate
to assess an externally-managed issuer’s governance framework. |
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B-244 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Fewer than 50 percent of the board members elected
by shareholders – excluding, where relevant, employee shareholder representatives – would be independent; or |
• |
Fewer than one-third of all board members would
be independent. |
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B-245 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Any person who holds more than five mandates at
listed companies will be classified as overboarded. For the purposes of calculating this limit, a non-executive directorship counts as
one mandate, a non-executive chair position counts as two mandates, and a position as executive director (or a comparable role) is counted
as three mandates. |
• |
Also, any person who holds the position of executive
director (or a comparable role) at one company and serves as a non-executive chair at a different company will be classified as overboarded.
|
• |
An adverse vote recommendation will not be applied
to a director within a company where they serve as CEO; instead, any adverse vote recommendations will be applied to their additional
seats on other company boards. For chairs, negative recommendations would first be applied towards non-executive positions held, but the
chair position itself would be targeted where they are being elected as chair for the first time or, when in aggregate their chair positions
are three or more in number, or if the chair holds an outside executive position. |
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B-246 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Newly-public companies9
with a sunset provision of no more than seven years from the date of going public; |
• |
Situations where the unequal voting rights are
considered de minimis10; or |
• |
The company provides sufficient protections for
minority shareholders, for example such as allowing minority shareholders a regular binding vote on whether the capital structure should
be maintained or a commitment to abolish the structure by the next AGM. |
8 |
This
generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled
to vote on all the same ballot items or nominees; or stock with time-phased voting rights (“loyalty shares” or “double-voting”
shares). |
9 |
Newly-public
companies generally include companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete
a traditional initial public offering. |
10 |
Distortion
between voting and economic power does not exceed 10 percent, where this is calculated relative to the entire share capital for multiple
share classes and on individual shareholder or concert level in case of loyalty share structures. |
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B-247 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
A member of the executive management would be
a member of the committee; |
• |
More than one board member who is dependent on
a major shareholder would be on the committee; or |
• |
The chair of the board would also be the chair
of the committee. |
|
B-248 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Sit on more than five public company boards; or
|
• |
Are CEOs of public companies who sit on the boards
of more than two public companies besides their own— recommend against only at their outside boards11
|
• |
Candidates who can be identified as representatives
of minority shareholders of the company, or independent candidates: |
• |
Candidates whose professional background may have
the following benefits: |
• |
Increasing the diversity of incumbent directors’
professional profiles and skills (thanks to their financial expertise, international experience, executive positions/directorships at
other listed companies, or other relevant factors. |
• |
Bringing to the current board of directors relevant
experience in areas linked to the company’s business, evidenced by current or past board memberships or management functions at
other companies. |
• |
Incumbent board members and candidates explicitly
supported by the company’s management. |
• |
Employee or executive of the company or a wholly-owned
subsidiary of the company; |
• |
Any director who is classified as a non-executive,
but receives salary, fees, bonus, and/or other benefits that are in line with the highest-paid executives of the company. |
11 |
Although
all of a CEO’s subsidiary boards with publicly-traded common stock will be counted as separate boards, Sustainability Advisory Services
will not recommend an against vote for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries
of that parent but may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships. |
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B-249 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Any director who is attested by the board to be
a non-independent NED; |
• |
Any director specifically designated as a representative
of a shareholder of the company; |
• |
Any director who is also an employee or executive
of a significant1 shareholder of the company; |
• |
Any director who is also an employee or executive
of a subsidiary, associate, joint venture, or company that is affiliated with a significant1
shareholder of the company; |
• |
Any director who is nominated by a dissenting
significant shareholder unless there is a clear lack of material2 connection with the
dissident, either currently or historically; |
• |
Beneficial owner (direct or indirect) of at least
10 percent of the company’s stock, either in economic terms or in voting rights (this may be aggregated if voting power is distributed
among more than one member of a defined group, e.g., members of a family that beneficially own less than 10 percent individually, but
collectively own more than 10 percent), unless market best practice dictates a lower ownership and/or disclosure threshold (and in other
special market-specific circumstances); |
• |
Government representative; |
• |
Currently provides or has provided (or a relative3
provides) during the most recently concluded financial year under review professional services4
to the company, to an affiliate of the company, or to an individual officer of the company or of one of its affiliates in the latest fiscal
year in excess of USD 10,000 per year; |
• |
Represents customer, supplier, creditor, banker,
or other entity with which the company maintains a transactional/commercial relationship (unless the company discloses information to
apply a materiality test3); |
• |
Any director who has a conflicting relationship
with the company, including but not limited to cross-directorships with executive directors or the chair of the company; |
• |
Relative3 of a current or former executive
of the company or its affiliates; |
• |
A new appointee elected other than by a formal
process through the general meeting (such as a contractual appointment by a substantial shareholder); |
• |
Founder/co-founder/member of founding family but
not currently an employee or executive; |
• |
Former executive or employee (five-year cooling
off period); Years of service is generally not a determining factor unless it is recommended best practice in a market and/or in extreme
circumstances, in which case it may be considered6. |
• |
Any additional relationship or principle considered
to compromise independence under local corporate governance best practice guidance7.
|
• |
No material2 connection, either direct
or indirect, to the company (other than a board seat) or to a significant shareholder. |
• |
Represents employees or employee shareholders
of the company (classified as “employee representative” and considered a non-independent NED). |
1 |
At
least 10 percent of the company’s stock, unless market best practice dictates a lower ownership and/or disclosure threshold. |
2 |
For
purposes of Sustainability Advisory Services’ director independence classification, “material” will be defined as a
standard of relationship financial, personal, or otherwise that a reasonable person might conclude could potentially influence one’s
objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary
standards on behalf of shareholders. |
|
B-250 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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3 |
“Relative”
follows the definition of “immediate family members” which covers spouses, parents, children, stepparents, step-children,
siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive
officer, or significant shareholder of the company. |
4 |
Professional
services can be characterized as advisory in nature and generally include the following: investment banking/financial advisory services;
commercial banking (beyond deposit services); investment services; insurance services; accounting/audit services; consulting services;
marketing services; and legal services. The case of participation in a banking syndicate by a non-lead bank should be considered a transaction
(and hence subject to the associated materiality test) rather than a professional relationship. |
5 |
A
business relationship may be material if the transaction value (of all outstanding transactions) entered into between the company and
the company or organization with which the director is associated is equivalent to either 1 percent of the company’s turnover or
1 percent of the turnover of the company or organization with which the director is associated; or |
6 |
For
example, in continental Europe and Latin America, directors with a tenure exceeding 12 years will be considered non-independent. In the
United Kingdom, Ireland, Hong Kong and Singapore, directors with a tenure exceeding nine years will be considered non-independent, unless
the company provides sufficient and clear justification that the director is independent despite his long tenure.
For purposes of independence classification of directors incorporated in
the Middle East and Africa region, this criterion will be taken into account in accordance with market best practice and disclosure standards
and availability. |
7 |
For
MEA markets, directors’ past services as statutory auditor/partner of the statutory audit firm will be taken into account, with
cooling-off periods in accordance with local market best practice. |
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B-251 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Company performance relative to its peers; |
• |
Strategy of the incumbents versus the dissidents;
|
• |
Independence of directors/nominees; |
• |
Experience and skills of board candidates; |
• |
Governance profile of the company; |
• |
Evidence of management entrenchment; |
• |
Responsiveness to shareholders; |
• |
Whether a takeover offer has been rebuffed; and
|
• |
Whether minority or majority representation is
being sought. |
• |
A lack of oversight or actions by board members
which invoke shareholder distrust related to malfeasance or poor supervision, such as operating in private or company interest rather
than in shareholder interest; |
• |
Any legal issues (e.g. civil/criminal) aiming
to hold the board responsible for breach of trust in the past or related to currently alleged actions yet to be confirmed (and not only
the fiscal year in question), such as price fixing, insider trading, bribery, fraud, and other illegal actions; or |
• |
Other material failures of governance or fiduciary
responsibilities at the company, including failure to adequately manage or mitigate environmental, social and governance (ESG) risks;
or |
• |
A lack of sustainability reporting in the company’s
public documents and/or website in conjunction with a failure to adequately manage or mitigate environmental, social and governance (ESG)
risks. |
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B-252 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Vote proposals seeking indemnification and liability
protection for directors and officers on a case-by-case basis. |
• |
Vote against proposals to indemnify auditors.
|
• |
Vote for proposals to fix board size. |
• |
Vote against the introduction of classified boards
and mandatory retirement ages for directors. |
• |
Vote against proposals to alter board structure
or size in the context of a fight for control of the company or the board. |
3. |
Capital
Structure |
• |
The general issuance authority exceeds one-third
(33 percent) of the issued share capital. Assuming it is no more than one-third, a further one-third of the issued share capital may also
be applied to a fully pre-emptive rights issue taking the acceptable aggregate authority to two-thirds (66 percent); or |
• |
The routine authority to disapply pre-emption
rights exceeds 20 percent of the issued share capital, provided that any amount above 10 percent is to be used for the purposes of an
acquisition or a specified capital investment. For the general disapplication authority and specific disapplication authority, a further
disapplication of up to 2 percent may be used for each authority for the purposes of a follow-on offer. |
• |
Vote for general issuance requests with preemptive
rights, or without preemptive rights but with a binding “priority right,” for a maximum of 50 percent over currently issued
capital. |
• |
Generally vote for general authorities to issue
shares without preemptive rights up to a maximum of 10 percent of share capital. When companies are listed on a regulated market, the
maximum discount on share issuance price proposed in the resolution must, in addition, comply with the legal discount for a vote for to
be warranted. |
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B-253 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Limit the issuance request to 10 percent or less
of the relevant class of issued share capital for cash and non-cash consideration; |
• |
Limit the discount to 10 percent of the market
price of shares (rather than the maximum 20 percent permitted by the Listing Rules ) for issuance for cash and non-cash consideration;
and |
• |
Have no history of renewing the General Issuance
Mandate several times within a period of one year which may result in the share issuance limit exceeding 10 percent of the relevant class
of issued share capital for issuance for cash and non-cash consideration within the 12-month period. |
• |
Whether the company has provided adequate and
timely disclosure including detailed information regarding the rationale for the proposed program; |
• |
Whether the proposed amount to be approved under
such authority, the use of the resources, the length of the authorization, the nature of the securities to be issued under such authority,
including any potential risk of dilution to shareholders is disclosed; and |
• |
Whether there are concerns regarding questionable
finances, the use of the proceeds, or other governance concerns. |
|
B-254 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Vote for the creation of a new class of preferred
stock or for issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect
the rights of existing shareholders. |
• |
Vote for the creation/issuance of convertible
preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the guidelines on equity issuance
requests. |
• |
Vote against the creation of a new class of preference
shares that would carry superior voting rights to the common shares. |
• |
Vote against the creation of blank check preferred
stock unless the board clearly states that the authorization will not be used to thwart a takeover bid. |
• |
Vote proposals to increase blank check preferred
authorizations on a case-by-case basis. |
• |
A repurchase limit of up to 10 percent of issued
share capital; |
• |
A holding limit of up to 10 percent of a company’s
issued share capital in treasury (“on the shelf”); and |
• |
Duration of no more than 5 years, or such lower
threshold as may be set by applicable law, regulation, or code of governance best practice. |
|
B-255 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
A holding limit of up to 10 percent of a company’s
issued share capital in treasury (“on the shelf”); and |
• |
Duration of no more than 18 months. |
• |
A holding limit of up to 10 percent of a company’s
issued share capital in treasury (“on the shelf”); and |
• |
Duration of no more than 18 months. |
• |
The repurchase can be used for takeover defenses;
|
• |
There is clear evidence of abuse; |
• |
There is no safeguard against selective buybacks;
|
• |
Pricing provisions and safeguards are deemed to
be unreasonable in light of market practice. |
• |
Whether other resolutions are bundled with the
issuance; |
• |
Whether the rationale for the private placement
issuance is disclosed; |
• |
Dilution to existing shareholders’ position:
|
• |
issuance that represents no more than 30 percent
of the company’s outstanding shares on a non-diluted basis is considered generally acceptable; |
• |
Discount/premium in issuance price to the unaffected
share price before the announcement of the private placement; |
• |
Market reaction: The market’s response to
the proposed private placement since announcement; and |
• |
Other applicable factors, including conflict of
interest, change in control/management, evaluation of other alternatives. |
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B-256 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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4. |
Compensation
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• |
Provide shareholders with clear, comprehensive
compensation disclosures; |
• |
Maintain appropriate pay structure with emphasis
on long-term shareholder value; |
• |
Avoid arrangements that risk “pay for failure;”
|
• |
Maintain an independent and effective compensation
committee; |
• |
Avoid inappropriate pay to non-executive directors.
|
• |
Executive compensation-related proposals; and
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• |
Non-executive director compensation-related proposals
|
12 |
Definition of
Pay-for-Performance Evaluation: |
• |
Peer Group Alignment:
|
• |
The degree of alignment between the company’s
annualized TSR rank and the CEO’s annualized total pay rank within a peer group, each measured over a three-year period. |
• |
The multiple of the CEO’s total pay relative
to the peer group median. |
• |
Absolute Alignment
– the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years – i.e., the
difference between the trend in annual pay changes and the trend in annualized TSR during the period. |
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B-257 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Provide shareholders with clear and comprehensive
compensation disclosures: |
• |
Information on compensation-related proposals
shall be made available to shareholders in a timely manner; |
• |
The level of disclosure of the proposed compensation
policy and remuneration report shall be sufficient for shareholders to make an informed decision and shall be in line with what local
market best practice standards dictate; |
• |
Remuneration report disclosure is expected to
include amongst others: amounts paid to executives, alignment between company performance and payout to executives, disclosure of variable
incentive targets and according levels of achievement and performance awards made, after the relevant performance period (ex-post), and
disclosure and explanation of use of any discretionary authority or derogation clause by the board or remuneration committee to adjust
pay outcomes. |
• |
Companies are expected to provide meaningful information
regarding the average remuneration of employees of the company, in a manner which permits comparison with directors’ remuneration.
|
• |
Companies shall adequately disclose all elements
of the compensation, including: |
• |
Any short- or long-term compensation component
must include a maximum award limit. |
• |
Long-term incentive plans must provide sufficient
disclosure of (i) the exercise price/strike price (options); (ii) discount on grant; (iii) grant date/period; (iv) exercise/vesting period;
and, if applicable, (v) performance criteria. |
• |
Discretionary payments, if applicable. |
• |
The derogation policy, if applicable, which shall
clearly define and limit any elements (e.g., base salary, STI, LTI, etc.) and extent (e.g., caps, weightings, etc.) to which derogations
may apply. |
• |
Maintain appropriate pay structure with emphasis
on long-term shareholder value: |
• |
The structure of the company’s short-term
incentive plan shall be appropriate. |
• |
The compensation policy must notably avoid guaranteed
or discretionary compensation. |
• |
The structure of the company’s long-term
incentives shall be appropriate, including, but not limited to, dilution, vesting period, and, if applicable, performance conditions.
|
• |
Equity-based plans or awards that are linked to
long-term company performance will be evaluated using Sustainability Advisory Services’ general policy for equity-based plans; and
|
• |
For awards granted to executives, Sustainability
Advisory Services will generally require a clear link between shareholder value and awards, and stringent performance-based elements.
|
• |
The balance between short- and long-term variable
compensation shall be appropriate. |
• |
The company’s executive compensation policy
must notably avoid disproportionate focus on short-term variable element(s) |
• |
Avoid arrangements that risk “pay for failure”:
|
• |
The board shall demonstrate good stewardship of
investor’s interests regarding executive compensation practices (principle being supported by Pay for Performance Evaluation). |
• |
There shall be a clear link between the company’s
performance and variable incentives. Financial and non-financial conditions, including ESG criteria, are relevant as long as they reward
an effective performance in line with the purpose, strategy, and objectives adopted by the company. |
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B-258 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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There shall not be significant discrepancies between
the company’s performance, financial and non-financial, and real executive payouts. |
• |
The level of pay for the CEO and members of executive
management should not be excessive relative to peers, company performance, and market practices. |
• |
Significant pay increases shall be explained by
a detailed and compelling disclosure. |
• |
Termination payments13
must not be in excess of (i) 24 months’ pay or of (ii) any more restrictive provision pursuant to local legal requirements and/or
market best practices. |
• |
Arrangements with a company executive regarding
pensions and post-mandate exercise of equity-based awards must not result in an adverse impact on shareholders’ interests or be
misaligned with good market practices. |
• |
Maintain an independent and effective compensation
committee: |
• |
No executives may serve on the compensation committee.
|
• |
In certain markets the compensation committee
shall be composed of a majority of independent members, as per Sustainability Advisory Services policies on director election and board
or committee composition. |
• |
Compensation committees should use the discretion
afforded them by shareholders to ensure that rewards properly reflect business performance14.
|
• |
Avoid inappropriate pay to non-executive directors.
|
• |
Documents (including general meeting documents,
annual report) provided prior to the general meeting do not mention fees paid to non-executive directors. |
• |
Proposed amounts are excessive relative to other
companies in the country or industry. |
• |
The company intends to increase the fees excessively
in comparison with market/sector practices, without stating compelling reasons that justify the increase. |
• |
Proposals provide for the granting of stock options,
performance-based equity compensation (including stock appreciation rights and performance-vesting restricted stock), and performance-based
cash to non-executive directors. |
• |
Proposals introduce retirement benefits for non-executive
directors. |
13 |
Termination
payments’ means any payment linked to early termination of contracts for executive or managing directors, including payments related
to the duration of a notice period or a non-competition clause included in the contract. |
14 |
In
cases where a remuneration committee uses its discretion to determine payments, it should provide a clear explanation of its reasons,
which are expected to be clearly justified by the financial results and the underlying performance of the company. |
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B-259 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Proposals include both cash and share-based components
to non-executive directors. |
• |
Proposals bundle compensation for both non-executive
and executive directors into a single resolution. |
• |
The volume of awards (to be) transferred to participants
under all outstanding plans must not be excessive: the awards must not exceed 5 percent of a company’s issued share capital. This
number can be up to 10 percent for high-growth companies or particularly well-designed plans (e.g., with challenging performance criteria,
extended vesting/performance period, etc.). |
• |
The plan(s) must be sufficiently long-term in
nature/structure: the vesting of awards (i) must occur no less than three years from the grant date, and (ii) if applicable, should be
conditioned on meeting performance targets that are measured over a period of at least three consecutive years; |
• |
If applicable, performance criteria must be fully
disclosed, measurable, quantifiable, and long-term oriented. |
• |
The awards must be granted at market price. Discounts,
if any, must be mitigated by performance criteria or other features that justify such discount. |
• |
To have egregious remuneration practices; |
• |
To have failed to follow market practice by not
submitting expected resolutions on executive compensation; or |
• |
To have failed to respond to significant shareholder
dissent on remuneration-related proposals; |
• |
The reelection of the chair of the remuneration
committee or, where relevant, any other members of the remuneration committee; |
• |
The reelection of the board chair; |
• |
The discharge of directors; or |
• |
The annual report and accounts. |
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B-260 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Adjusting the strike price for future ordinary
dividends AND including expected dividend yield above 0 percent when determining the number of options awarded under the plan; |
• |
Having significantly higher expected dividends
than actual historical dividends; |
• |
Favorably adjusting the terms of existing options
plans without valid reason; and/or |
• |
Any other provisions or performance measures that
result in undue award. |
• |
For every share matching plan, Sustainability
requires a holding period. |
• |
For plans without performance criteria, the shares
must be purchased at market price. |
• |
For broad-based share matching plans directed
at all employees, Sustainability accepts an arrangement up to a |
• |
There is a misalignment between CEO pay and company
performance (pay for performance); |
• |
The company maintains problematic pay practices;
or |
• |
The board exhibits poor communication and responsiveness
to shareholders. |
• |
Rationale for determining compensation (e.g.,
why certain elements and pay targets are used, how they are used in relation to the company’s business strategy, and specific incentive
plan goals, especially retrospective goals) and linkage of compensation to long-term performance; |
• |
Evaluation of peer group benchmarking used to
set target pay or award opportunities; |
• |
Analysis of company performance and executive
pay trends over time, taking into account our Pay-for- Performance policy; |
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B-261 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Mix of fixed versus variable and performance versus
non-performance-based pay. |
• |
Assessment of compensation components included
in the Problematic Pay Practices policy such as: perks, severance packages, employee loans, supplemental executive pension plans, internal
pay disparity and equity |
• |
Existence of measures that discourage excessive
risk taking which include but are not limited to: clawbacks, holdbacks, stock ownership requirements, deferred compensation practices
etc. |
• |
Clarity of disclosure (e.g. whether the company’s
Form 51-102F6 disclosure provides timely, accurate, clear information about compensation practices in both tabular format and narrative
discussion); |
• |
Assessment of board’s responsiveness to
investor concerns on compensation issues (e.g., whether the company engaged with shareholders and / or responded to majority-supported
shareholder proposals relating to executive pay). |
• |
Plan Cost:
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated
Shareholder Value Transfer (SVT) in relation to peers and considering both: |
• |
SVT based on new shares requested plus shares
remaining for future grants, plus outstanding unvested/unexercised grants; and |
• |
SVT based only on new shares requested plus shares
remaining for future grants. |
• |
Plan Features:
|
• |
Absence of problematic change-in-control (CIC)
provisions, including: |
• |
Single-trigger acceleration of award vesting in
connection with a CIC; and |
15 |
In
cases where certain historic grant data are unavailable (e.g. following an IPO or emergence from bankruptcy), Special Cases models will
be applied which omit factors requiring these data. |
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B-262 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Settlement of performance-based equity at target
or above in the event of a CIC-related acceleration of vesting regardless of performance. |
• |
No financial assistance to plan participants for
the exercise or settlement of awards; |
• |
Public disclosure of the full text of the plan
document; and |
• |
Reasonable share dilution from equity plans relative
to market best practices. |
• |
Grant Practices:
|
• |
Reasonable three-year average burn rate relative
to market best practices; |
• |
Meaningful time vesting requirements for the CEO’s
most recent equity grants (three-year lookback); |
• |
The issuance of performance-based equity to the
CEO; |
• |
A clawback provision applicable to equity awards;
and |
• |
Post-exercise or post-settlement share-holding
requirements (S&P/TSX Composite Index only). |
• |
Discretionary or insufficiently limited non-employee
director participation; |
• |
An amendment provision which fails to adequately
restrict the company’s ability to amend the plan without shareholder approval; |
• |
A history of repricing stock options without shareholder
approval (three-year look-back); |
• |
The plan is a vehicle for problematic pay practices
or a significant pay-for-performance disconnect under certain circumstances; or |
• |
Any other plan features that are determined to
have a significant negative impact on shareholder interests. |
• |
Excessive (relative to standard market practice)
inducement grants issued upon the appointment or election of a new director to the board (consideration will be given to the form in which
the compensation has been issued and the board’s rationale for the inducement grant); |
• |
Performance-based equity grants to non-employee
directors which could pose a risk of aligning directors’ interests away from those of shareholders and toward those of management;
and |
• |
Other significant problematic practices relating
to director compensation. |
• |
Reasonable limit on employee contribution (may
be expressed as a fixed dollar amount or as a percentage of base salary excluding bonus, commissions and special compensation); |
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B-263 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Employer contribution of up to 25 percent of employee
contribution and no purchase price discount or employer contribution of more than 25 percent of employee contribution and SVT cost of
the company’s equity plans is within the allowable cap for the company; |
• |
Purchase price is at least 80 percent of fair
market value with no employer contribution; |
• |
Potential dilution together with all other equity-based
plans is 10 percent of outstanding common shares or less; and |
• |
The Plan Amendment Provision requires shareholder
approval for amendments to: |
• |
The number of shares reserved for the plan; |
• |
The allowable purchase price discount; |
• |
The employer matching contribution amount. |
• |
Potential dilution together with all other equity-based
compensation is ten percent of the outstanding common shares or less. |
• |
Director stock ownership guidelines of a minimum
of three times annual cash retainer; |
• |
Vesting schedule or mandatory deferral period
which requires that shares in payment of deferred units may not be paid out until the end of three years; |
• |
The mix of remuneration between cash and equity;
and |
• |
Other forms of equity-based compensation, i.e.
stock options, restricted stock. |
5. |
Environmental
and Social Issues |
• |
Whether the proposal itself is well framed and
reasonable; |
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B-264 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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• |
Whether adoption of the proposal would have either
a positive or negative impact on the company’s short-term or long-term share value; |
• |
The percentage of sales, assets and earnings affected;
|
• |
Whether the company has already responded in some
appropriate manner to the request embodied in a proposal; |
• |
Whether the company’s analysis and voting
recommendation to shareholders is persuasive; |
• |
What other companies have done in response to
the issue; |
• |
Whether there are significant controversies, fines,
penalties, or litigation associated with the company’s environmental or social practices; |
• |
Whether implementation of the proposal would achieve
the objectives sought in the proposal. |
• |
Vote for shareholder proposals seeking information
on the financial, physical, or regulatory risks it faces related to climate change- on its operations and investments, or on how the company
identifies, measures, and manage such risks. |
• |
Vote for shareholder proposals calling for the
reduction of GHG emissions. |
• |
Vote for shareholder proposals seeking reports
on responses to regulatory and public pressures surrounding climate change, and for disclosure of research that aided in setting company
policies around climate change. |
• |
Vote for shareholder proposals requesting a report/disclosure
of goals on GHG emissions from company operations and/or products. |
• |
Vote case-by-case on shareholder proposals that
request the company to its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval
or disapproval of its GHG emissions reduction plan. Factors such as the completeness and rigor of the company’s climate-related
disclosure, the company’s actual GHG emissions performance, whether the company has been the subject of recent, significant violations,
fines, litigation, or controversy related to its GHG emissions, and whether the proposal’s request is unduly burdensome (scope or
timeframe) or overly prescriptive will be taken into account. |
• |
The extent to which the company’s climate
related disclosures are in line with TCFD recommendations and meet other market standards; |
• |
Disclosure of its operational and supply chain
GHG emissions (Scopes 1, 2, and 3); |
• |
The completeness and rigor of company’s
short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions in line with Paris Agreement goals (Scopes
1, 2, and 3 if relevant); |
• |
Whether the company has sought and received third-party
approval that its targets are science-based; |
• |
Whether the company has made a commitment to be
“net zero” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050; |
16 |
Variations
of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan. |
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B-265 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Whether the company discloses a commitment to
report on the implementation of its plan in subsequent years; |
• |
Whether the company’s climate data has received
third-party assurance; |
• |
Disclosure of how the company’s lobbying
activities and its capital expenditures align with company strategy; |
• |
Whether there are specific industry decarbonization
challenges; and |
• |
The company’s related commitment, disclosure,
and performance compared to its industry peers. |
6. |
Other
Items |
• |
Valuation
- Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide
an initial starting point for assessing valuation reasonableness, Sustainability places emphasis on the offer premium, market reaction,
and strategic rationale; |
• |
Market
reaction - How has the market responded to the proposed deal? A negative market reaction will cause Sustainability to scrutinize
a deal more closely; |
• |
Strategic
rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not
be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration
of historical acquisitions; |
• |
Conflicts
of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider
shareholders? Sustainability will consider whether any special interests may have influenced these directors and officers to support or
recommend the merger; |
• |
Governance
- Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to
the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as
valuation) outweigh any deterioration in governance. |
• |
Stakeholder
impact - Impact on community stakeholders including impact on workforce, environment, etc. |
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B-266 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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The parties on either side of the transaction;
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• |
The nature of the asset to be transferred/service
to be provided; |
• |
The pricing of the transaction (and any associated
professional valuation); |
• |
The views of independent directors (where provided);
|
• |
The views of an independent financial adviser
(where appointed); |
• |
Whether any entities party to the transaction
(including advisers) is conflicted; and |
• |
The stated rationale for the transaction, including
discussions of timing. |
• |
Transactions involving the sale or purchase of
property and/or assets; |
• |
Transactions involving the lease of property and/or
assets; |
• |
Transactions involving the provision or receipt
of services or leases; and |
• |
Transactions involving the acquisition or transfer
of intangible items (e.g., research and development, trademarks, license agreements). |
• |
Jurisdiction of incorporation; |
• |
Board rationale for adopting exclusive forum;
|
• |
Legal actions subject to the exclusive forum provision;
|
• |
Evidence of past harm as a result of shareholder
legal action against the company originating outside of the jurisdiction of incorporation; |
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B-267 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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Company corporate governance provisions and shareholder
rights; |
• |
Any other problematic provisions that raise
concerns regarding shareholder rights. |
7. |
Foreign
Private Issuers |
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B-268 |
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INTERNATIONAL
2024
SUSTAINABILITY PROXY VOTING GUIDELINES |
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B-269 |
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THE GLENMEDE FUND, INC.
PART C. OTHER INFORMATION
Item 28. Exhibits
(6) | Opinion of Counsel as to Legality of Securities Being Registered is incorporated herein by reference to Exhibit (i)(6) of Post-Effective Amendment No. 52. |
EX-101.INS | XBRL Instance Document | |
EX-101.SCH | XBRL Taxonomy Extension Schema Document | |
EX-101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
EX-101.LAB | XBRL Taxonomy Extension Labels Linkbase | |
EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Item 29. | Persons Controlled by or Under Common Control with Registrant |
Registrant is not controlled by or under common control with any person. Registrant is controlled by its Board of Directors.
Item 30. | Indemnification |
Reference is made to Article Ten of the Registrant’s Amended and Restated Articles of Incorporation, incorporated herein by reference to Exhibit (a)(1). Insofar as indemnification for liability arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 31. | Business and Other Connections of Investment Advisor |
(a) | Glenmede Investment Management LP |
Reference is made to the caption of “Investment Advisor” in the Prospectuses in Part A of this Registration Statement and “Investment Advisory and Other Services” in Part B of this Registration Statement. | |
Set forth below is a list of all of the directors, senior officers and those officers primarily responsible for Registrant’s affairs and, with respect to each such person, the name and business address of the Company (if any) with which such person has been connected at any time since October 31, 2021, as well as the capacity in which such person was connected. |
Name and Position with Glenmede Investment Management LP |
Business Address of other Company | Connection with other Company | ||
Peter Zuleba, Managing Director and Chief Executive Officer
|
The Glenmede Trust Company, N.A.
|
Chief Executive Officer, President and Board Member
| ||
Philadelphia Health Partnership | Chairperson | |||
Raj Tewari, Managing Director and Chief Operating Officer |
The Glenmede Trust Company, N.A. | Managing Director and Chief Operating Officer | ||
Heights Philadelphia | Board Member | |||
John F. McCabe, Managing Director and General Counsel | The Glenmede Trust Company, N.A. | Managing Director and General Counsel | ||
Support Center for Child Advocates | Board Member |
(b) AllianceBernstein L.P.
Reference is made to the caption of “Investment Advisor” in the Prospectuses in Part A of this Registration Statement and “Investment Advisory and Other Services” in Part B of this Registration Statement.
Item 32. | Principal Underwriters |
Item 32(a) Quasar Distributors, LLC (the “Distributor”) serves as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended:
1. | Advisor Managed Portfolios |
2. | Capital Advisors Growth Fund, Series of Advisors Series Trust |
3. | Chase Growth Fund, Series of Advisors Series Trust |
4. | Davidson Multi Cap Equity Fund, Series of Advisors Series Trust |
5. | Edgar Lomax Value Fund, Series of Advisors Series Trust |
6. | First Sentier American Listed Infrastructure Fund, Series of Advisors Series Trust |
7. | First Sentier Global Listed Infrastructure Fund, Series of Advisors Series Trust |
8. | Fort Pitt Capital Total Return Fund, Series of Advisors Series Trust |
9. | Huber Large Cap Value Fund, Series of Advisors Series Trust |
10. | Huber Mid Cap Value Fund, Series of Advisors Series Trust |
11. | Huber Select Large Cap Value Fund, Series of Advisors Series Trust |
12. | Huber Small Cap Value Fund, Series of Advisors Series Trust |
13. | Logan Capital Broad Innovative Growth ETF, Series of Advisors Series Trust |
14. | Medalist Partners MBS Total Return Fund, Series of Advisors Series Trust |
15. | Medalist Partners Short Duration Fund, Series of Advisors Series Trust |
16. | O’Shaughnessy Market Leaders Value Fund, Series of Advisors Series Trust |
17. | PIA BBB Bond Fund, Series of Advisors Series Trust |
18. | PIA High Yield (MACS) Fund, Series of Advisors Series Trust |
19. | PIA High Yield Fund, Series of Advisors Series Trust |
20. | PIA MBS Bond Fund, Series of Advisors Series Trust |
21. | PIA Short-Term Securities Fund, Series of Advisors Series Trust |
22. | Poplar Forest Cornerstone Fund, Series of Advisors Series Trust |
23. | Poplar Forest Partners Fund, Series of Advisors Series Trust |
24. | Pzena Emerging Markets Value Fund, Series of Advisors Series Trust |
25. | Pzena International Small Cap Value Fund, Series of Advisors Series Trust |
26. | Pzena International Value Fund, Series of Advisors Series Trust |
27. | Pzena Mid Cap Value Fund, Series of Advisors Series Trust |
28. | Pzena Small Cap Value Fund, Series of Advisors Series Trust |
29. | Reverb ETF, Series of Advisors Series Trust |
30. | Scharf Fund, Series of Advisors Series Trust |
31. | Scharf Global Opportunity Fund, Series of Advisors Series Trust |
32. | Scharf Multi-Asset Opportunity Fund, Series of Advisors Series Trust |
33. | Shenkman Capital Floating Rate High Income Fund, Series of Advisors Series Trust |
34. | Shenkman Capital Short Duration High Income Fund, Series of Advisors Series Trust |
35. | VegTech Plant-based Innovation & Climate ETF, Series of Advisors Series Trust |
36. | The Aegis Funds |
37. | Allied Asset Advisors Funds |
38. | Angel Oak Funds Trust |
39. | Angel Oak Strategic Credit Fund |
40. | Brookfield Infrastructure Income Fund Inc. |
41. | Brookfield Investment Funds |
42. | Buffalo Funds |
43. | DoubleLine Funds Trust |
44. | EA Series Trust (f/k/a Alpha Architect ETF Trust) |
45. | Ecofin Tax-Advantaged Social Impact Fund, Inc. |
46. | AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF, Series of ETF Series Solutions |
47. | AAM Low Duration Preferred and Income Securities ETF, Series of ETF Series Solutions |
48. | AAM S&P 500 Emerging Markets High Dividend Value ETF, Series of ETF Series Solutions |
49. | AAM S&P 500 High Dividend Value ETF, Series of ETF Series Solutions |
50. | AAM S&P Developed Markets High Dividend Value ETF, Series of ETF Series Solutions |
51. | AAM Transformers ETF, Series of ETF Series Solutions |
52. | AlphaMark Actively Managed Small Cap ETF, Series of ETF Series Solutions |
53. | Aptus Collared Income Opportunity ETF, Series of ETF Series Solutions |
54. | Aptus Defined Risk ETF, Series of ETF Series Solutions |
55. | Aptus Drawdown Managed Equity ETF, Series of ETF Series Solutions |
56. | Aptus Enhanced Yield ETF, Series of ETF Series Solutions |
57. | Aptus Large Cap Enhanced Yield ETF, Series of ETF Series Solutions |
58. | Bahl & Gaynor Income Growth ETF, Series of ETF Series Solutions |
59. | Blue Horizon BNE ETF, Series of ETF Series Solutions |
60. | BTD Capital Fund, Series of ETF Series Solutions |
61. | Carbon Strategy ETF, Series of ETF Series Solutions |
62. | Cboe Vest 10 Year Interest Rate Hedge ETF, Series of ETF Series Solutions |
63. | ClearShares OCIO ETF, Series of ETF Series Solutions |
64. | ClearShares Piton Intermediate Fixed Income Fund, Series of ETF Series Solutions |
65. | ClearShares Ultra-Short Maturity ETF, Series of ETF Series Solutions |
66. | Distillate International Fundamental Stability & Value ETF, Series of ETF Series Solutions |
67. | Distillate Small/Mid Cash Flow ETF, Series of ETF Series Solutions |
68. | Distillate U.S. Fundamental Stability & Value ETF, Series of ETF Series Solutions |
69. | ETFB Green SRI REITs ETF, Series of ETF Series Solutions |
70. | Hoya Capital High Dividend Yield ETF, Series of ETF Series Solutions |
71. | Hoya Capital Housing ETF, Series of ETF Series Solutions |
72. | iBET Sports Betting & Gaming ETF, Series of ETF Series Solutions |
73. | International Drawdown Managed Equity ETF, Series of ETF Series Solutions |
74. | LHA Market State Alpha Seeker ETF, Series of ETF Series Solutions |
75. | LHA Market State Tactical Beta ETF, Series of ETF Series Solutions |
76. | LHA Market State Tactical Q ETF, Series of ETF Series Solutions |
77. | LHA Risk-Managed Income ETF, Series of ETF Series Solutions |
78. | Loncar Cancer Immunotherapy ETF, Series of ETF Series Solutions |
79. | Loncar China BioPharma ETF, Series of ETF Series Solutions |
80. | McElhenny Sheffield Managed Risk ETF, Series of ETF Series Solutions |
81. | Nationwide Dow Jones® Risk-Managed Income ETF, Series of ETF Series Solutions |
82. | Nationwide Nasdaq-100 Risk-Managed Income ETF, Series of ETF Series Solutions |
83. | Nationwide Russell 2000® Risk-Managed Income ETF, Series of ETF Series Solutions |
84. | Nationwide S&P 500® Risk-Managed Income ETF, Series of ETF Series Solutions |
85. | NETLease Corporate Real Estate ETF, Series of ETF Series Solutions |
86. | Opus Small Cap Value ETF, Series of ETF Series Solutions |
87. | Roundhill Acquirers Deep Value ETF, Series of ETF Series Solutions |
88. | The Acquirers Fund, Series of ETF Series Solutions |
89. | U.S. Global GO GOLD and Precious Metal Miners ETF, Series of ETF Series Solutions |
90. | U.S. Global JETS ETF, Series of ETF Series Solutions |
91. | U.S. Global Sea to Sky Cargo ETF, Series of ETF Series Solutions |
92. | US Vegan Climate ETF, Series of ETF Series Solutions |
93. | Vest 2 Year Interest Rate Hedge ETF, Series of ETF Series Solutions |
94. | First American Funds Trust |
95. | FundX Investment Trust |
96. | The Glenmede Fund, Inc. |
97. | The Glenmede Portfolios |
98. | The GoodHaven Funds Trust |
99. | Harding, Loevner Funds, Inc. |
100. | Hennessy Funds Trust |
101. | Horizon Funds |
102. | Hotchkis & Wiley Funds |
103. | Intrepid Capital Management Funds Trust |
104. | Jacob Funds Inc. |
105. | The Jensen Quality Growth Fund Inc. |
106. | Kirr, Marbach Partners Funds, Inc. |
107. | Leuthold Funds, Inc. |
108. | Core Alternative ETF, Series of Listed Funds Trust |
109. | Wahed Dow Jones Islamic World ETF, Series of Listed Funds Trust |
110. | Wahed FTSE USA Shariah ETF, Series of Listed Funds Trust |
111. | LKCM Funds |
112. | LoCorr Investment Trust |
113. | MainGate Trust |
114. | ATAC Rotation Fund, Series of Managed Portfolio Series |
115. | Coho Relative Value Equity Fund, Series of Managed Portfolio Series |
116. | Coho Relative Value ESG Fund, Series of Managed Portfolio Series |
117. | Cove Street Capital Small Cap Value Fund, Series of Managed Portfolio Series |
118. | Ecofin Global Energy Transition Fund, Series of Managed Portfolio Series |
119. | Ecofin Global Renewables Infrastructure Fund, Series of Managed Portfolio Series |
120. | Ecofin Global Water ESG Fund, Series of Managed Portfolio Series |
121. | Ecofin Sustainable Water Fund, Series of Managed Portfolio Series |
122. | Jackson Square Large-Cap Growth Fund, Series of Managed Portfolio Series |
123. | Jackson Square SMID-Cap Growth Fund, Series of Managed Portfolio Series |
124. | Kensington Active Advantage Fund, Series of Managed Portfolio Series |
125. | Kensington Defender Fund, Series of Managed Portfolio Series |
126. | Kensington Dynamic Growth Fund, Series of Managed Portfolio Series |
127. | Kensington Managed Income Fund, Series of Managed Portfolio Series |
128. | LK Balanced Fund, Series of Managed Portfolio Series |
129. | Muhlenkamp Fund, Series of Managed Portfolio Series |
130. | Nuance Concentrated Value Fund, Series of Managed Portfolio Series |
131. | Nuance Concentrated Value Long Short Fund, Series of Managed Portfolio Series |
132. | Nuance Mid Cap Value Fund, Series of Managed Portfolio Series |
133. | Olstein All Cap Value Fund, Series of Managed Portfolio Series |
134. | Olstein Strategic Opportunities Fund, Series of Managed Portfolio Series |
135. | Port Street Quality Growth Fund, Series of Managed Portfolio Series |
136. | Principal Street High Income Municipal Fund, Series of Managed Portfolio Series |
137. | Principal Street Short Term Municipal Fund, Series of Managed Portfolio Series |
138. | Reinhart Genesis PMV Fund, Series of Managed Portfolio Series |
139. | Reinhart International PMV Fund, Series of Managed Portfolio Series |
140. | Reinhart Mid Cap PMV Fund, Series of Managed Portfolio Series |
141. | Tortoise Energy Infrastructure and Income Fund, Series of Managed Portfolio Series |
142. | Tortoise Energy Infrastructure Total Return Fund, Series of Managed Portfolio Series |
143. | Tortoise North American Pipeline Fund, Series of Managed Portfolio Series |
144. | Greenspring Income Opportunities Fund, Series of Manager Directed Portfolios |
145. | Hood River International Opportunity Fund, Series of Manager Directed Portfolios |
146. | Hood River Small-Cap Growth Fund, Series of Manager Directed Portfolios |
147. | Mar Vista Strategic Growth Fund, Series of Manager Directed Portfolios |
148. | Vert Global Sustainable Real Estate ETF, Series of Manager Directed Portfolios |
149. | Matrix Advisors Funds Trust |
150. | Matrix Advisors Value Fund, Inc. |
151. | Monetta Trust |
152. | Nicholas Equity Income Fund, Inc. |
153. | Nicholas Fund, Inc. |
154. | Nicholas II, Inc. |
155. | Nicholas Limited Edition, Inc. |
156. | Oaktree Diversified Income Fund Inc. |
157. | Permanent Portfolio Family of Funds |
158. | Perritt Funds, Inc. |
159. | Procure ETF Trust II |
160. | Professionally Managed Portfolios |
161. | Prospector Funds, Inc. |
162. | Provident Mutual Funds, Inc. |
163. | Abbey Capital Futures Strategy Fund, Series of The RBB Fund, Inc. |
164. | Abbey Capital Multi-Asset Fund, Series of The RBB Fund, Inc. |
165. | Adara Smaller Companies Fund, Series of The RBB Fund, Inc. |
166. | Aquarius International Fund, Series of The RBB Fund, Inc. |
167. | Boston Partners All Cap Value Fund, Series of The RBB Fund, Inc. |
168. | Boston Partners Emerging Markets Dynamic Equity Fund, Series of The RBB Fund, Inc. |
169. | Boston Partners Emerging Markets Fund, Series of The RBB Fund, Inc. |
170. | Boston Partners Global Equity Fund, Series of The RBB Fund, Inc. |
171. | Boston Partners Global Long/Short Fund, Series of The RBB Fund, Inc. |
172. | Boston Partners Global Sustainability Fund, Series of The RBB Fund, Inc. |
173. | Boston Partners Long/Short Equity Fund, Series of The RBB Fund, Inc. |
174. | Boston Partners Long/Short Research Fund, Series of The RBB Fund, Inc. |
175. | Boston Partners Small Cap Value Fund II, Series of The RBB Fund, Inc. |
176. | Campbell Systematic Macro Fund, Series of The RBB Fund, Inc. |
177. | F/m 10-Year Investment Grade Corporate Bond ETF, Series of The RBB Fund, Inc. |
178. | F/m 2-Year Investment Grade Corporate Bond ETF, Series of The RBB Fund, Inc. |
179. | F/m 3-Year Investment Grade Corporate Bond ETF, Series of The RBB Fund, Inc. |
180. | F/m Opportunistic Income ETF, Series of The RBB Fund, Inc. |
181. | Motley Fool 100 Index ETF, Series of The RBB Fund, Inc. |
182. | Motley Fool Capital Efficiency 100 Index ETF, Series of The RBB Fund, Inc. |
183. | Motley Fool Global Opportunities ETF, Series of The RBB Fund, Inc. |
184. | Motley Fool Mid-Cap Growth ETF, Series of The RBB Fund, Inc. |
185. | Motley Fool Next Index ETF, Series of The RBB Fund, Inc. |
186. | Motley Fool Small-Cap Growth ETF, Series of The RBB Fund, Inc. |
187. | Optima Strategic Credit Fund, Series of The RBB Fund, Inc. |
188. | SGI Dynamic Tactical ETF, Series of The RBB Fund, Inc. |
189. | SGI Global Equity Fund, Series of The RBB Fund, Inc. |
190. | SGI Peak Growth Fund, Series of The RBB Fund, Inc. |
191. | SGI Prudent Growth Fund, Series of The RBB Fund, Inc. |
192. | SGI Small Cap Core Fund, Series of The RBB Fund, Inc. |
193. | SGI U.S. Large Cap Core ETF, Series of The RBB Fund, Inc. |
194. | SGI U.S. Large Cap Equity Fund, Series of The RBB Fund, Inc. |
195. | SGI U.S. Small Cap Equity Fund, Series of The RBB Fund, Inc. |
196. | US Treasury 10 Year Note ETF, Series of The RBB Fund, Inc. |
197. | US Treasury 12 Month Bill ETF, Series of The RBB Fund, Inc. |
198. | US Treasury 2 Year Note ETF, Series of The RBB Fund, Inc. |
199. | US Treasury 20 Year Bond ETF, Series of The RBB Fund, Inc. |
200. | US Treasury 3 Month Bill ETF, Series of The RBB Fund, Inc. |
201. | US Treasury 3 Year Note ETF, Series of The RBB Fund, Inc. |
202. | US Treasury 30 Year Bond ETF, Series of The RBB Fund, Inc. |
203. | US Treasury 5 Year Note ETF, Series of The RBB Fund, Inc. |
204. | US Treasury 6 Month Bill ETF, Series of The RBB Fund, Inc. |
205. | US Treasury 7 Year Note ETF, Series of The RBB Fund, Inc. |
206. | WPG Partners Select Small Cap Value Fund, Series of The RBB Fund, Inc. |
207. | WPG Partners Small Cap Value Diversified Fund, Series of The RBB Fund, Inc. |
208. | The RBB Fund Trust |
209. | RBC Funds Trust |
210. | Series Portfolios Trust |
211. | Thompson IM Funds, Inc. |
212. | TrimTabs ETF Trust |
213. | Trust for Advised Portfolios |
214. | Bright Rock Mid Cap Growth Fund, Series of Trust for Professional Managers |
215. | Bright Rock Quality Large Cap Fund, Series of Trust for Professional Managers |
216. | CrossingBridge Low Duration High Yield Fund, Series of Trust for Professional Managers |
217. | CrossingBridge Responsible Credit Fund, Series of Trust for Professional Managers |
218. | CrossingBridge Ultra-Short Duration Fund, Series of Trust for Professional Managers |
219. | RiverPark Strategic Income Fund, Series of Trust for Professional Managers |
220. | Dearborn Partners Rising Dividend Fund, Series of Trust for Professional Managers |
221. | Jensen Global Quality Growth Fund, Series of Trust for Professional Managers |
222. | Jensen Quality Value Fund, Series of Trust for Professional Managers |
223. | Rockefeller Climate Solutions Fund, Series of Trust for Professional Managers |
224. | Rockefeller US Small Cap Core Fund, Series of Trust for Professional Managers |
225. | Terra Firma US Concentrated Realty Fund, Series of Trust for Professional Managers |
226. | USQ Core Real Estate Fund |
227. | Wall Street EWM Funds Trust |
228. | Wisconsin Capital Funds, Inc. |
(b) | The following are the Officers and Manager of the Distributor, the Registrant’s underwriter. The Distributor’s main business address is 111 E. Kilbourn Ave., Suite 2200, Milwaukee, WI 53202. |
Name |
Address | Position with Underwriter |
Position with Registrant | |||
Teresa Cowan | 111 E. Kilbourn Ave, Suite 2200, Milwaukee, WI 53202 | President/Manager | None | |||
Chris Lanza | Three Canal Plaza, Suite 100, Portland, ME 04101 | Vice President | None | |||
Kate Macchia | Three Canal Plaza, Suite 100, Portland, ME 04101 | Vice President | None | |||
Susan L. LaFond | 111 E. Kilbourn Ave, Suite 2200, Milwaukee, WI 53202 | Vice President and Chief Compliance Officer and Treasurer | None | |||
Kelly B. Whetstone | Three Canal Plaza, Suite 100, Portland, ME 04101 | Secretary | None | |||
Weston Sommers | Three Canal Plaza, Suite 100, Portland, ME 04101 | Financial and Operations Principal and Chief Financial Officer | None |
(c) | Not applicable. |
Item 33. | Location of Accounts and Records |
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), and the Rules thereunder will be maintained at the offices of:
(1) | Glenmede Investment Management LP |
One Liberty Place
1650 Market Street, Suite 1200
Philadelphia, Pennsylvania 19103
(records relating to its functions as investment advisor)
(2) | AllianceBernstein L.P. |
501 Commerce Street
Nashville, TN 37203
(records relating to its functions as sub-investment advisor to the High Yield Municipal Portfolio)
(3) | State Street Bank and Trust Company |
1 Congress Street, Suite 1
Boston, MA 02114
(records relating to its functions as custodian, administrator, transfer agent, dividend disbursing agent, securities lending agent and short sales lending agent)
(4) | Quasar Distributors, LLC |
3 Canal Plaza
Suite 100
Portland, ME 04101
(records relating to its functions as distributor)
(5) | Faegre Drinker Biddle & Reath LLP |
One Logan Square
Suite 2000
Philadelphia, Pennsylvania 19103-6996
(Registrant’s minute books)
Item 34. | Management Services |
Not applicable.
Item 35. | Undertakings |
(a) | Registrant undertakes to comply with the provisions of Section 16(c) of the 1940 Act in regard to shareholders’ right to call a meeting of shareholders for the purpose of voting on the removal of directors and to assist in shareholder communications in such matters, to the extent required by law. Specifically, the Registrant will, if requested to do so by the holders of at least 10% of the Registrant’s outstanding shares, call a meeting of shareholders for the purpose of voting upon the question of the removal of directors, and the Registrant will assist in shareholder communications as required by Section 16(c) of the 1940 Act. |
(b) | Registrant undertakes to furnish to each person to whom a prospectus is delivered, a copy of Registrant’s latest annual report to shareholders, upon request and without charge. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 117 to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933, as amended, and has duly caused this Post-Effective Amendment No. 117 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania on the 27th day of February, 2024.
THE GLENMEDE FUND, INC. | ||
By |
/s/ Kent E. Weaver |
|
Kent E. Weaver | ||
President | ||
(Chief Executive Officer) |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment No. 117 to the Registration Statement has been signed below by the following persons in the capacities indicated on the 27th day of June 2024.
Signature | Title | Date | ||
* William L. Cobb, Jr. |
Chairman | February 27, 2024 | ||
/s/ Kent E. Weaver Kent E. Weaver |
President (Chief Executive Officer) | February 27, 2024 | ||
* H. Franklin Allen, Ph.D. |
Director | February 27, 2024 | ||
* Susan W. Catherwood |
Director | February 27, 2024 | ||
* Mary Ann B. Wirts |
Director | February 27, 2024 | ||
* Harry Wong |
Director | February 27, 2024 | ||
* Andrew Phillips |
Director | February 27, 2024 | ||
Director | ||||
Rebecca E. Duseau | ||||
/s/ Christopher E. McGuire Christopher E. McGuire |
(Chief Financial Officer and Principal Financial Officer) | February 27, 2024 |
*By |
/s/ Michael P. Malloy |
|
Michael P. Malloy, Attorney-in-fact |
EXHIBIT INDEX
Exhibit No.