# EDGAR Filing Document

**Accession Number:** 0000798290
**File Stem:** 0001206774-23-000303
**Filing Date:** 2023-3
**Character Count:** 1048460
**Document Hash:** 6d4a96442cc84ccd9d7d2af382d9940d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001206774-23-000303.hdr.sgml**: 20230303

**ACCESSION NUMBER**: 0001206774-23-000303

**CONFORMED SUBMISSION TYPE**: 497

**PUBLIC DOCUMENT COUNT**: 6

**FILED AS OF DATE**: 20230303

**DATE AS OF CHANGE**: 20230303

**EFFECTIVENESS DATE**: 20230303

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** HSBC FUNDS
- **CENTRAL INDEX KEY:** 0000798290
- **IRS NUMBER:** 043084306
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031

**FILING VALUES:**
- **FORM TYPE:** 497
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-07647
- **FILM NUMBER:** 23703295

**BUSINESS ADDRESS:**
- **STREET 1:** C/O HSBC FUNDS
- **STREET 2:** 452 FIFTH AVENUE
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 11108
- **BUSINESS PHONE:** 614-470-8000

**MAIL ADDRESS:**
- **STREET 1:** C/O CITI
- **STREET 2:** 4400 EASTON COMMONS, SUITE 200
- **CITY:** COLUMBUS
- **STATE:** OH
- **ZIP:** 43219-3035

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HSBC INVESTOR FUNDS
- **DATE OF NAME CHANGE:** 20010531

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** REPUBLIC FUNDS
- **DATE OF NAME CHANGE:** 19941013

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** FUNDTRUST /NY
- **DATE OF NAME CHANGE:** 19920703

## Series and Classes Contracts Data

### HSBC RadiantESG U.S. Smaller Companies Fund (Series ID: S000005038)

---

|  |  |  |
|:---|:---|:---|
| Class Name | Ticker Symbol | Class ID   |
| A Shares   | HSOAX         | C000013749 |
| C Shares   | HOPCX         | C000013751 |

---

### HSBC U.S. Government Money Market Fund (Series ID: S000005047)

---

|  |  |  |
|:---|:---|:---|
| Class Name                 | Ticker Symbol | Class ID   |
| A Shares                   | FTRXX         | C000013783 |
| Y Shares                   | RGYXX         | C000013784 |
| C Shares                   | HUMXX         | C000013786 |
| D Shares                   | HGDXX         | C000013787 |
| I Shares                   | HGIXX         | C000013788 |
| E Shares                   | nan           | C000081883 |
| Intermediary Class         | nan           | C000167214 |
| Intermediary Service Class | nan           | C000167215 |
| Class P                    | nan           | C000238466 |

---

### HSBC U.S. Treasury Money Market Fund (Series ID: S000005052)

---

|  |  |  |
|:---|:---|:---|
| Class Name                 | Ticker Symbol | Class ID   |
| A Shares                   | HWAXX         | C000013808 |
| Y Shares                   | HTYXX         | C000013809 |
| C Shares                   | HUCXX         | C000013811 |
| D Shares                   | HTDXX         | C000013812 |
| I Shares                   | HBIXX         | C000013813 |
| E Shares                   | nan           | C000081886 |
| Intermediary Class         | nan           | C000167218 |
| Intermediary Service Class | nan           | C000167219 |
| Class P                    | nan           | C000238467 |

---

### HSBC RadiantESG U.S. Smaller Companies Fund Class I (Series ID: S000053727)

---

|  |  |
|:---|:---|
| Class Name | Class ID   |
| Class I    | C000168898 |

---

### HSBC ESG Prime Money Market Fund (Series ID: S000068529)

---

|  |  |
|:---|:---|
| Class Name                 | Class ID   |
| Intermediary Service Class | C000219152 |
| Intermediary Class         | C000219153 |
| Class D                    | C000219154 |
| Class I                    | C000219155 |
| Class Y                    | C000219156 |
| Class P                    | C000238468 |

---

## Series and Classes Contracts Data

### HSBC RadiantESG U.S. Smaller Companies Fund (Series ID: S000005038)

| Class ID   | Class Name   | Ticker Symbol   |
|:---|:---|:---|
| C000013749 | A Shares     | HSOAX           |
| C000013751 | C Shares     | HOPCX           |

### HSBC U.S. Government Money Market Fund (Series ID: S000005047)

| Class ID   | Class Name                 | Ticker Symbol   |
|:---|:---|:---|
| C000013783 | A Shares                   | FTRXX           |
| C000013784 | Y Shares                   | RGYXX           |
| C000013786 | C Shares                   | HUMXX           |
| C000013787 | D Shares                   | HGDXX           |
| C000013788 | I Shares                   | HGIXX           |
| C000081883 | E Shares                   |  |
| C000167214 | Intermediary Class         |  |
| C000167215 | Intermediary Service Class |  |
| C000238466 | Class P                    |  |

### HSBC U.S. Treasury Money Market Fund (Series ID: S000005052)

| Class ID   | Class Name                 | Ticker Symbol   |
|:---|:---|:---|
| C000013808 | A Shares                   | HWAXX           |
| C000013809 | Y Shares                   | HTYXX           |
| C000013811 | C Shares                   | HUCXX           |
| C000013812 | D Shares                   | HTDXX           |
| C000013813 | I Shares                   | HBIXX           |
| C000081886 | E Shares                   |  |
| C000167218 | Intermediary Class         |  |
| C000167219 | Intermediary Service Class |  |
| C000238467 | Class P                    |  |

### HSBC RadiantESG U.S. Smaller Companies Fund Class I (Series ID: S000053727)

| Class ID   | Class Name   | Ticker Symbol   |
|:---|:---|:---|
| C000168898 | Class I      |  |

### HSBC ESG Prime Money Market Fund (Series ID: S000068529)

| Class ID   | Class Name                 | Ticker Symbol   |
|:---|:---|:---|
| C000219152 | Intermediary Service Class |  |
| C000219153 | Intermediary Class         |  |
| C000219154 | Class D                    |  |
| C000219155 | Class I                    |  |
| C000219156 | Class Y                    |  |
| C000238468 | Class P                    |  |

**<u>STATEMENT OF ADDITIONAL INFORMATION</u>**

**HSBC FUNDS**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**Class<br> A** | &nbsp;&nbsp;**Class<br> C** | &nbsp;&nbsp;**Class<br> D** | &nbsp;&nbsp;**Class<br> E** | &nbsp;&nbsp;**Class<br> I** | &nbsp;&nbsp;**Intermediary<br> Class** | &nbsp;&nbsp;**Intermediary<br> Service<br> Class** | &nbsp;&nbsp;**Class<br> P<sup>(2)</sup>** | &nbsp;&nbsp;**Class<br> Y** |
| &nbsp;&nbsp;HSBC U.S. Government Money Market Fund | &nbsp;&nbsp;FTRXX | &nbsp;&nbsp;HUMXX | &nbsp;&nbsp;HGDXX | &nbsp;&nbsp;HGEXX | &nbsp;&nbsp;HGIXX | &nbsp;&nbsp;HGGXX | &nbsp;&nbsp;HGFXX | &nbsp;&nbsp;HGPXX | &nbsp;&nbsp;RGYXX |
| &nbsp;&nbsp;HSBC U.S. Treasury Money Market Fund | &nbsp;&nbsp;HWAXX | &nbsp;&nbsp;HUCXX | &nbsp;&nbsp;HTDXX | &nbsp;&nbsp;HTEXX | &nbsp;&nbsp;HBIXX | &nbsp;&nbsp;HTGXX | &nbsp;&nbsp;HTFXX | &nbsp;&nbsp;HTPXX | &nbsp;&nbsp;HTYXX |
| &nbsp;&nbsp;HSBC ESG Prime Money Market Fund<sup>(1)</sup> | &nbsp;&nbsp;- | &nbsp;&nbsp;- | &nbsp;&nbsp;HEDXX | &nbsp;&nbsp;- | &nbsp;&nbsp;HEIXX | &nbsp;&nbsp;HEGXX | &nbsp;&nbsp;HETXX | &nbsp;&nbsp;HPPXX | &nbsp;&nbsp;HEYXX |

---

<sup>(1)</sup> As of the date of this SAI, the HSBC ESG Prime Money Market Fund has not commenced operations.

<sup>(2)</sup> As of the date of this SAI, the Class P shares of each of the HSBC U.S. Government Money Market Fund, HSBC U.S. Treasury Money Market Fund and HSBC ESG Prime Money Market Fund has not commenced operations.

P.O. Box 219691

Kansas City, MO 64121-9691

<u>General and Account Information - (800) 782-8183 (Toll Free)</u>

HSBC Global Asset Management (USA) Inc. <br> Investment Adviser and Administrator of the Funds<br> ("Adviser" or "Administrator")

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS ONLY AUTHORIZED FOR DISTRIBUTION WHEN PRECEDED OR ACCOMPANIED BY THE PROSPECTUS FOR THE FUNDS DATED FEBRUARY 28, 2023 (the "Prospectus"). This Statement of Additional Information ("SAI") contains additional and more detailed information than that set forth in the Prospectus and should be read in conjunction with the Prospectus. The Prospectus and SAI may be obtained without charge by writing or calling the HSBC Funds (the "Trust") at the address and telephone number printed above.

References in this SAI to the "Prospectus" are to the Prospectus dated February 28, 2023 of the Trust by which shares of the funds listed above (each a "Fund" and, collectively, the "Funds") are being offered. Unless the context otherwise requires, terms defined in the Prospectus have the same meaning in this SAI as in the Prospectus.

The U.S. Government Money Market Fund's and the U.S. Treasury Money Market Fund's current audited financial statements dated October 31, 2022 are incorporated herein by reference from the Annual Report of the Funds dated October 31, 2022 as filed with the Securities and Exchange Commission ("SEC"). Current audited financial statements for the ESG Prime Money Market Fund will be incorporated by reference from the Annual Report of the Fund when available. Copies of this Annual Report (when available) may be obtained without charge by writing or calling the Trust at the address and telephone number printed above.

February 28, 2023

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| **[GENERAL INFORMATION](#d415097a001)** | **[1](#d415097a001)** |
| **[INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS](#d415097a002)** | **[1](#d415097a002)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[U.S. Government Money Market Fund](#d415097a003)** | **[1](#d415097a003)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[U.S. Treasury Money Market Fund](#d415097a004)** | **[2](#d415097a004)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[ESG Prime Money Market Fund](#d415097a005)** | **[2](#d415097a005)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Qualifying as a Regulatory Investment Company](#d415097a006)** | **[4](#d415097a006)** |
| **[INVESTMENT TECHNIQUES AND RISKS](#d415097a007)** | **[4](#d415097a007)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Asset Backed-Securities](#d415097a008)** | **[5](#d415097a008)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Fixed Income Instruments](#d415097a009)** | **[6](#d415097a009)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Foreign Securities](#d415097a010)** | **[7](#d415097a010)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Global Financial Markets](#d415097a011)** | **[8](#d415097a011)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Investments in Other Investment Companies](#d415097a012)** | **[9](#d415097a012)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Liquidity](#d415097a013)** | **[10](#d415097a013)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Mortgage-Related Securities](#d415097a014)** | **[10](#d415097a014)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Municipal Obligations](#d415097a015)** | **[16](#d415097a015)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Obligations of Personal and Business Credit Institutions (Banking Industry)](#d415097a016)** | **[16](#d415097a016)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Operational Risk](#d415097a017)** | **[16](#d415097a017)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Repurchase Agreements](#d415097a018)** | **[17](#d415097a018)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Risks of Qualified Financial Contracts](#d415097a019)** | **[18](#d415097a019)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Selection of Money Market Investments](#d415097a020)** | **[18](#d415097a020)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Sovereign and Supranational Debt Obligations](#d415097a021)** | **[19](#d415097a021)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[U.S. Government Securities](#d415097a022)** | **[19](#d415097a022)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Variable Rate Demand Notes](#d415097a023)** | **[19](#d415097a023)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Portfolio Transactions](#d415097a024)** | **[20](#d415097a024)** |
| **[DISCLOSURE OF PORTFOLIO HOLDINGS](#d415097a025)** | **[23](#d415097a025)** |
| **[INVESTMENT RESTRICTIONS](#d415097a026)** | **[24](#d415097a026)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Non-Fundamental Restrictions](#d415097a027)** | **[24](#d415097a027)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Fundamental Restrictions](#d415097a028)** | **[24](#d415097a028)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Diversification and Other Measures](#d415097a029)** | **[27](#d415097a029)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Percentage and Rating Restrictions](#d415097a030)** | **[27](#d415097a030)** |
| **[MANAGEMENT OF THE TRUST](#d415097a031)** | **[27](#d415097a031)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Board of Trustees](#d415097a032)** | **[27](#d415097a032)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Committees](#d415097a033)** | **[31](#d415097a033)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Fund Ownership](#d415097a034)** | **[32](#d415097a034)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Trustee and Officer Compensation](#d415097a035)** | **[32](#d415097a035)** |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Investment Adviser](#d415097a036)** | **[33](#d415097a036)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Distribution Plans- Class A, Class C, and Class D Shares Only](#d415097a037)** | **[35](#d415097a037)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[The Distributor](#d415097a038)** | **[36](#d415097a038)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Payments to Financial Intermediaries](#d415097a039)** | **[37](#d415097a039)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Administrator and Sub-Administrator](#d415097a040)** | **[39](#d415097a040)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Transfer Agent](#d415097a041)** | **[39](#d415097a041)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Custodian and Fund Accounting Agent](#d415097a042)** | **[40](#d415097a042)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Shareholder Services Plan and Shareholder Servicing Agents](#d415097a043)** | **[40](#d415097a043)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Federal Banking Law](#d415097a044)** | **[41](#d415097a044)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Expenses](#d415097a045)** | **[42](#d415097a045)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Proxy Voting](#d415097a046)** | **[42](#d415097a046)** |
| **[DETERMINATION OF NET ASSET VALUE](#d415097a047)** | **[42](#d415097a047)** |
| **[PURCHASE OF SHARES](#d415097a048)** | **[44](#d415097a048)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Exchange Privilege – U.S. Government Money Market Fund and U.S. Treasury Money Market Fund Only](#d415097a049)** | **[45](#d415097a049)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[In-Kind Purchases](#d415097a050)** | **[45](#d415097a050)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Automatic Investment Plan](#d415097a051)** | **[46](#d415097a051)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Purchase through a Shareholder Servicing Agent or a Securities Broker](#d415097a052)** | **[46](#d415097a052)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Conversion Feature – Class C Shares – U.S. Government Money Market Fund and U.S. Treasury Money Market Fund](#d415097a053)** | **[46](#d415097a053)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Level Load Alternative – Class C Shares - U.S. Government Money Market Fund and U.S. Treasury Money Market Fund Only](#d415097a054)** | **[47](#d415097a054)** |
| **[REDEMPTION OF SHARES](#d415097a055)** | **[47](#d415097a055)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Systematic Withdrawal Plan](#d415097a056)** | **[49](#d415097a056)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Redemption of Shares Purchased Directly Through the Funds](#d415097a057)** | **[49](#d415097a057)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Check Redemption Service](#d415097a058)** | **[49](#d415097a058)** |
| **[RETIREMENT PLANS](#d415097a059)** | **[50](#d415097a059)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Individual Retirement Accounts ("IRAs")](#d415097a060)** | **[50](#d415097a060)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Defined Contribution Plans](#d415097a061)** | **[50](#d415097a061)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Section 457 Plan, 401(k) Plan, 403(b) Plan](#d415097a062)** | **[50](#d415097a062)** |
| **[DIVIDENDS AND DISTRIBUTIONS](#d415097a063)** | **[50](#d415097a063)** |
| **[DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES](#d415097a064)** | **[51](#d415097a064)** |
| **[OWNERSHIP OF THE FUNDS](#d415097a065)** | **[53](#d415097a065)** |
| **[TAXATION](#d415097a066)** | **[56](#d415097a066)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Federal Income Tax](#d415097a067)** | **[56](#d415097a067)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Distributions in General](#d415097a068)** | **[57](#d415097a068)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Sale, Exchange or Redemption of Shares](#d415097a069)** | **[58](#d415097a069)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Original Issue Discount/Market Discount](#d415097a070)** | **[59](#d415097a070)** |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Backup Withholding](#d415097a071)** | **[59](#d415097a071)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Other Taxation](#d415097a072)** | **[59](#d415097a072)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Foreign Shareholders](#d415097a073)** | **[59](#d415097a073)** |
| **[OTHER INFORMATION](#d415097a074)** | **[60](#d415097a074)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Capitalization](#d415097a075)** | **[60](#d415097a075)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Independent Registered Public Accounting Firm](#d415097a076)** | **[61](#d415097a076)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Counsel](#d415097a077)** | **[61](#d415097a077)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Code of Ethics](#d415097a078)** | **[61](#d415097a078)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Registration Statement](#d415097a079)** | **[61](#d415097a079)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Financial Statements](#d415097a080)** | **[61](#d415097a080)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**[Shareholder Inquiries](#d415097a081)** | **[61](#d415097a081)** |
| **[APPENDIX A - DESCRIPTION OF SECURITY RATINGS](#d415097a082)** | **[A-1](#d415097a082)** |
| **[APPENDIX B – ISS GUIDELINES](#d415097a083)** | **[B-1](#d415097a083)** |

---

**GENERAL INFORMATION**

The HSBC U.S. Government Money Market Fund ("U.S. Government Money Market Fund"), HSBC U.S. Treasury Money Market Fund ("U.S. Treasury Money Market Fund") and HSBC ESG Prime Money Market Fund ("ESG Prime Money Market Fund"), are separate series of the Trust, an open-end management investment company. Each Fund is a money market fund that must comply with the requirements of the SEC's Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act") and, by virtue of compliance with the diversification requirements of Rule 2a-7, is deemed to have satisfied the diversification requirements of the 1940 Act. Each Fund has its own distinct investment objective and policies. Each Fund is described in this SAI. The Trust includes certain equity funds that are covered in separate SAIs. As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations.

Shares of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund are divided into nine separate classes: Class A (the "Class A Shares"), Class C (the "Class C Shares"), Class D (the "Class D Shares"), Class E (the "Class E Shares"), Institutional Shares (the "Class I Shares"), Intermediary Class (the "Intermediary Shares"), Intermediary Service Class (the "Intermediary Service Shares"), Class P (the "Class P Shares") and Class Y (the "Class Y Shares"). Shares of the ESG Prime Money Market Fund are divided into six separate classes: Class D (the "Class D Shares"), Institutional Shares (the "Class I Shares"), Intermediary Class (the "Intermediary Shares"), Intermediary Service Class (the "Intermediary Service Shares"), Class P (the "Class P Shares") and Class Y (the "Class Y Shares"). See the Prospectus and "Purchase of Shares" for information about the various classes and eligibility to invest therein.

**INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS**

The following information supplements the discussion of the investment objective, policies, and risks of each Fund in the Funds' Prospectus.

The U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund are money market funds that follow investment and valuation policies designed to maintain a stable net asset value ("NAV") of $1.00 per share. There is no assurance that U.S. Government Money Market Fund or the U.S. Treasury Money Market Fund will be able to maintain a stable NAV of $1.00 per share. Although the ESG Prime Money Market Fund is a money market fund, the NAV of the Fund's shares will be calculated to four decimal places and will fluctuate with changes in the values of the Fund's portfolio securities. There can be no assurance that the investment objective of a Fund will be achieved.

Except as otherwise indicated, the investment objective and related policies and strategies of a Fund are not fundamental and may be changed by the Board of Trustees of the Trust (the "Board") without the approval of Fund shareholders. Shareholders will be given advance notice of material changes to a Fund's investment objective or other non-fundamental investment policies. If there is a change, shareholders should consider whether a Fund remains an appropriate investment in light of their then-current financial position and needs.

**U.S. Government Money Market Fund**

The Fund is a government money market fund and seeks to maintain a stable price of $1.00 per share. The Fund seeks to achieve its investment objective by investing at least 99.5% of its total assets in cash, securities issued or guaranteed by the United States or certain U.S. government agencies or instrumentalities ("U.S. Government Securities") and/or repurchase agreements that are collateralized fully by these types of obligations. In addition, the Fund must invest, under normal circumstances, at least 80% of its net assets, plus any borrowings for investment purposes, in U.S. Government Securities and repurchase agreements collateralized fully by these types of obligations. This policy is not fundamental and may be changed by the Board upon 60 days' notice to Fund shareholders. If there is a change, shareholders should consider whether the Fund remains an appropriate investment in light of their then-current financial position and needs. All investments on behalf of the Fund (*i.e.,* 100% of the Fund's investments) mature or are deemed to mature within 397 days from the date of acquisition, as calculated in accordance with Rule

2a-7. The Fund also must have a dollar-weighted average portfolio maturity of 60 days or less and a dollar-weighted average portfolio life of 120 days or less, each as calculated in accordance with Rule 2a-7.

The Fund invests in obligations of, or obligations guaranteed by, the U.S. Government, its agencies or instrumentalities. These include issues of the U.S. Treasury, such as bills, notes and bonds, and issues of agencies and instrumentalities established under the authority of an Act of Congress. Some of the latter category of obligations are supported by the "full faith and credit" of the United States, others are supported by the right of the issuer to borrow from the U.S. Treasury, and still others are supported only by the credit of the agency or instrumentality. Examples of each of the three types of obligations described in the preceding sentence are (i) obligations guaranteed by the Government National Mortgage Association ("GNMA"), (ii) obligations of the Federal National Mortgage Association ("FNMA"), and (iii) obligations of the Federal Farm Credit Bank, respectively. The Fund may also invest in securities of other money market funds that primarily invest in U.S. Government Securities and repurchase agreements collateralized by U.S. Government Securities.

**U.S. Treasury Money Market Fund**

The Fund is a government money market fund and seeks to maintain a stable price of $1.00 per share. The Fund seeks to achieve its investment objective by investing, under normal market conditions, exclusively in direct obligations of the U.S. Treasury. In addition, the Fund must invest, under normal circumstances, at least 80% of its net assets, plus any borrowings for investment purposes, in direct obligations of the U.S. Treasury. This policy is not fundamental and may be changed by the Board upon 60 days' notice to Fund shareholders. If there is a change, shareholders should consider whether the Fund remains an appropriate investment in light of their then-current financial position and needs. All investments on behalf of the Fund (*i.e.,* 100% of the Fund's investments) mature or are deemed to mature within 397 days from the date of acquisition, as calculated in accordance with Rule 2a-7. The Fund also must have a dollar-weighted average portfolio maturity of 60 days or less and a dollar-weighted average portfolio life of 120 days or less, as calculated in accordance with Rule 2a-7.

The Fund may not enter into loans of its portfolio securities, invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government, or invest in repurchase agreements under normal conditions. However, the Fund may temporarily invest in repurchase agreements collateralized by U.S. Treasury obligations.

The U.S. Treasury issues various types of marketable securities consisting of bills, notes, bonds and other debt securities. They are direct obligations of the U.S. Government and differ primarily in the length of their maturity. Treasury bills, the most frequently issued marketable U.S. Government security, have a maturity of up to one year and are issued on a discount basis.

**ESG Prime Money Market Fund**

The investment objective of the Fund is to provide shareholders of the Fund with liquidity and as high a level of current income as is consistent with the minimization of principal volatility, while considering select environmental, social and governance ("ESG") criteria. There can be no assurance that the investment objective of the Fund will be achieved. Except as otherwise indicated, the investment objective and related policies and strategies of the Fund are not fundamental and may be changed by the Board of Trustees of the Trust (the "Board") without the approval of Fund shareholders. Shareholders will be given advance notice of material changes to the Fund's investment objective or other non-fundamental investment policies. If there is a change, shareholders should consider whether the Fund remains an appropriate investment in light of their then-current financial position and needs.

The Fund seeks to achieve its investment objective by investing in a portfolio of high quality debt obligations with maturities of (or deemed maturities of) 397 days or less and repurchase agreements collateralized by these types of obligations. The Fund will maintain a dollar-weighted average portfolio maturity of 60 days or less and a dollar-weighted average portfolio life of 120 days or less, each as calculated in accordance with Rule 2a-7. Examples of these instruments include:

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| |
|:---|
| bank certificates of deposit ("CDs"): negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return; |
| time deposits: non-negotiable deposits maintained in banking institutions for specified periods of time and stated interest rates; |
| bankers' acceptances: negotiable drafts or bills of exchange that have been "accepted" by a bank, meaning, in effect, that the bank has unconditionally agreed to pay the face value of the instrument on maturity; |
| prime commercial paper: high-grade, short-term obligations issued by banks, corporations and other issuers; |
| corporate obligations: high-grade, short-term corporate obligations (other than prime commercial paper); |
| municipal obligations: high-grade, short-term municipal obligations; |
| Government securities: marketable securities issued or guaranteed as to principal and interest by the U.S. Government or by its agencies or instrumentalities; |
| repurchase agreements collateralized by U.S. Treasury or U.S. government agency obligations; and |
| repurchase agreements secured by collateral other than cash and U.S. government securities. |

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The Fund invests in high quality debt obligations that have been determined by the Adviser to present minimal credit risks to the Fund. In determining whether a security presents minimal credit risks to the Fund, the Adviser will analyze the capacity of the security's issuer or guarantor to meet its financial obligations and other factors, including any ratings by a nationally recognized statistical rating organization.

The Fund will also invest in issuers that are considered by the Adviser to be better at addressing ESG risks than other issuers in the Fund's investable universe. To identify issuers that are considered to be better at addressing ESG risks, the Adviser will use a combination of its own proprietary scoring system, which is partly based on third-party data, and individual environmental, social and governance (E, S and G) scores assigned by third parties, to assign a single ESG score to each approved issuer in the Fund's investable universe. The individual E, S and G scores and single ESG score measure the performance of an issuer's business operations and governance based on select E, S and/or G criteria deemed to be material by the Adviser and third-party research providers. ESG criteria deemed to be material by the Adviser and third-party research providers includes, for example, emissions, resource use, human and workforce rights, management behavior and corporate social responsibility.

Potential investments are evaluated and scored on a relative basis against other issuers in the investable universe. While an issuer's individual E, S and G scores and single ESG score will not be solely determinative of the inclusion or exclusion of the issuer, the Adviser will generally apply relative ESG score screens that will exclude issuers which rank in the bottom quartile for their single ESG score and/or bottom decile of any individual E, S or G score. The proprietary scoring system seeks to provide a more comprehensive approach to security selection than credit analysis alone.

The Adviser will also use a combination of sector specific and other screens to identify and exclude issuers that, among other things: (1) are involved in certain sectors, such as nuclear armaments and other controversial weapons; (2) derive material revenue (generally greater than 10%) from certain sectors, such as thermal coal extraction; and (3) are believed to be in breach of the principles outlined in the United Nations Global Compact.

Although the Fund must invest, under normal circumstances, at least 80% of its net assets, plus any borrowings for investment purposes, in debt obligations whose issuer or guarantor, in the opinion of the Adviser, meet the minimum ESG criteria described above at the time of purchase, the Fund generally expects to invest all or substantially all of its net assets in these investments. The Adviser will also seek to engage with issuers to address identified shortcomings in how they manage ESG risks to enable them to

understand that ESG performance is factored into decisions on whether their securities may be purchased by the Fund.

The Fund invests primarily in bank certificates of deposit, time deposits, bankers' acceptances, prime commercial paper, corporate obligations, municipal obligations, U.S. government securities and repurchase agreements collateralized by U.S. government securities. The Fund's investments may also include variable rate demand notes and repurchase agreements secured by collateral other than cash and U.S. government securities, including equity securities and investment grade debt securities, to the extent permitted by Rule 2a-7 under the 1940 Act.

The Fund may invest without limit in the domestic banking industry when, in the opinion of the Adviser, the yield, marketability and availability of investments meeting the Fund's quality standards and the minimum ESG criteria in such industry justify any additional risks associated with the concentration of the Fund's assets in the industry. The Fund may also invest without limit in commercial paper and short-term corporate obligations of domestic financial institutions. The Fund may also make investments in U.S. dollar denominated commercial paper and other obligations of foreign issuers and in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks or by foreign branches of U.S. banks.

The Fund seeks to maximize yields by portfolio trading and by buying and selling portfolio investments in anticipation of or in response to changing economic and money market conditions and trends. Additionally, the Fund will seek to take advantage of temporary disparities in yields of different segments of high-grade money market instruments or among particular instruments within the same segment of the market.

In purchasing and selling securities for the Fund, portfolio managers consider the Adviser's credit analysis and ESG criteria. Portfolio managers select investments from an approved credit list compiled by the Adviser's global credit, liquidity and ESG analysts, who have conducted an independent qualitative and quantitative review of each issuer on the list. Safety is prioritized, with additional emphasis placed on liquidity, yield and ESG criteria.

**Qualifying as a Regulatory Investment Company**

The Trust intends for each Fund to maintain its qualification as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order to maintain such qualification, among other things, at the close of each quarter of each Fund's taxable year, at least 50% of the Fund's total assets must be represented by cash, U.S. Government Securities, investment company securities and other securities limited in respect of any one issuer to not more than 5% in value of the total assets of the Fund and not more than 10% of the outstanding voting securities of such issuer. In addition, at the close of each quarter of its taxable year, not more than 25% of a Fund's total assets may be invested in securities of one issuer (or two or more issuers which are controlled by the Fund and which are determined to be engaged in the same or similar trades or businesses or related businesses) other than U.S. Government securities or the securities of other regulated investment companies or in the securities of one or more "qualified publicly traded partnerships".

**INVESTMENT TECHNIQUES AND RISKS**

Each Fund invests in a variety of securities in accordance with its investment objectives and policies (as described in the Prospectus and above in this SAI) and employs a number of investment techniques. Each type of security and technique involves certain risks. The following is an alphabetical list of the investment techniques used by the Funds as indicated in the table, and the main risks associated with those techniques. The risks are presented in an order intended to facilitate readability, and their order does not imply that the realization of one risk is likely to occur more frequently than another risk, nor does it imply that the realization of one risk is likely to have a greater adverse impact than another risk.

The table below indicates the types of investments and techniques that are material to the investment strategies employed by each Fund. In some cases, the omission of a Fund is not intended to imply that the

Fund is precluded from investing in the types of investments or employing the techniques indicated below. Generally, if a particular type of investment or technique is not indicated as being applicable to a particular Fund, the particular type of investment or technique will not be material to the investment strategies employed by the Fund, although any risk factors that are stated more generally with respect to any broader category of investment or technique may still apply.

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| | | | |
|:---|:---|:---|:---|
| **Type of Investment Technique or Risk** | **U.S. Government<br> Money Market<br> Fund** | **U.S. Treasury<br> Money Market<br> Fund** | **ESG Prime<br> Money Market<br> Fund** |
| Asset-Backed Securities | | | X |
| Cyber Security Risk | X | X | X |
| ESG Investing Risk | | | X |
| Fixed Income Securities | X | X | X |
| Foreign Securities | | | X |
| Global Financial Markets | X | X | X |
| Investments in Other Investment Companies | X | | X |
| Liquidity | X | X | X |
| Mortgage-Related Securities | X | | X |
| Municipal Obligations | | | X |
| Obligations of Personal and Business Credit Institutions (Banking Industry) | | | X |
| Operational Risk | X | X | X |
| Regulatory Risk | X | X | X |
| Repurchase Agreements | X | X\* | X |
| Risks of Qualified Financial Contracts | X | X | X |
| Selection of Money Market Investments | X | X | X |
| Sovereign and Supranational Debt Obligations | | | X |
| U.S. Government Securities | X | X | X |
| Variable Rate Demand Notes | | | X |

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\* The U.S. Treasury Money Market Fund, under adverse market conditions, temporarily may invest in repurchase agreements collateralized by U.S. Treasury obligations.

**Asset Backed-Securities**

The Fund may invest in asset-backed securities. Through the use of trusts and special purpose subsidiaries, various types of assets, including auto loans, credit card receivables, home equity loans, and student loans, are being securitized in pass-through structures similar to the mortgage pass-through structures described below, or in a pass-through structure similar to the collateralized mortgage structure.

Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, the Fund's ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. To the extent that the Fund invests in asset-backed securities, the values of the Fund's portfolio securities will vary with changes in market interest rates generally and the differentials in yields among various kinds of asset-backed securities.

Asset-backed securities present certain additional risks because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Credit card receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a

number of state and federal consumer credit laws, many of which give such debtors the right to set-off certain amounts owed on the credit cards, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles rather than residential real property. Most issuers of automobile receivables permit the loan servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in the underlying automobiles. Therefore, if the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, the Fund will be unable to possess and sell the underlying collateral and that the Fund's recoveries on repossessed collateral may not be available to support payments on these securities. The risks associated with asset-backed securities are often reduced by the addition of credit enhancements such as a letter of credit from a bank, excess collateral or a third-party guarantee. However, the Fund is subject to the credit risk of the person or entities providing the credit enhancements.

**Cyber Security Risk**

The Funds face greater risks of cyber security breaches because of the broad use of technology, such as computer systems and the internet, that has developed in the course of business. In general, cyber-attacks result from deliberate attacks but other events may have effects similar to those caused by cyber-attacks. Cyber-attacks include, among others, stealing, destroying or corrupting data that is maintained online or digitally, denial-of-service attacks on websites, and the unauthorized release of confidential information. Cyber-attacks affecting a Fund or its investment adviser, subadviser, custodian, transfer agent, intermediary or other third-party service provider may adversely impact the Funds. These cyber-attacks have the ability to cause disruptions and impact business operations, to result in financial losses, to prevent shareholders from transacting business, and to lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. Similar to operational risk in general, the Funds and their investment adviser have instituted risk management systems designed to minimize the risks associated with cyber security. However, it is not certain that these systems will succeed, especially because the Funds do not directly control the cyber security systems of the service providers to the Funds, their trading counterparties, or the issuers in which a Fund may invest. Moreover, there is a risk that the cyber-attacks will not be detected.

**Fixed Income Instruments**

The Funds invest in fixed income securities. The value of a Fund's investment in fixed income instruments may change as prevailing interest rates fluctuate. When interest rates decline, the value of fixed income securities can be expected to rise. However, a low interest rate environment poses additional risks to the Funds, which are heightened in a very low interest rate environment. Low yields on the Funds' portfolio holdings may have an adverse impact on a Fund's ability to generate a positive yield or pay expenses out of current income. Without maintaining a positive yield, it is difficult for the U.S. Government Money Market Fund and U.S. Treasury Money Market Fund to maintain a stable $1.00 NAV and for the ESG Prime Fund to minimize the volatility of its NAV. In addition, in a low interest rate environment, it is difficult for a Fund to achieve its investment objective.

When interest rates rise, the value of fixed income securities can be expected to decline. The Funds' investments in fixed income securities with longer terms to maturity or greater duration are subject to greater volatility than shorter-term obligations. Fluctuations in interest rates may affect the yield, volatility, liquidity and value of investments in income-producing or fixed income securities. A wide variety of factors can cause interest rates to rise (*e.g.,* central bank monetary policies, inflationary or deflationary pressures, changing inflation or real growth rates, general market and economic conditions, etc.). The risks associated with changing interest rates may have unpredictable effects on the markets and a Fund's investments. The Fund may face a heightened level of interest rate risk due to certain changes in monetary policy, such as certain interest rate changes by the Federal Reserve.

Outflows in the fixed income market could impose difficulties on dealers because the recent increase of assets in bond mutual funds and exchange traded funds has not been matched with a proportionate increase in dealer capacity. As such, dealer inventories appear to be at an all-time low, relative to the market size. This reduction in market-making capacity by dealers has the potential to decrease liquidity and increase volatility in fixed income markets.

After purchase by a Fund, a fixed income security may cease to be rated or its rating may be reduced below the minimum required for purchase. A fixed income security which has had its rating downgraded or revoked may be subject to greater risk to principal and income, and often involve greater volatility of price, than instruments in the higher rating categories. Such instruments are also subject to greater credit risks (including, without limitation, the possibility of default by or bankruptcy of its issuers of such securities) than securities in higher rating categories.

**ESG Investing Risk**

The incorporation of ESG criteria, including the ESG scores and the sector specific and other screens, into the investment process will cause the Fund to forgo investment opportunities available to other money market funds that do not use these criteria, or to increase or decrease its exposure to certain sectors, regions or countries or certain types of issuers. The Fund's investments in certain companies may be susceptible to various factors that may impact their businesses or operations, including costs associated with government budgetary constraints that impact publicly funded projects and clean energy initiatives, the effects of general economic conditions throughout the world, increased competition from other providers of services, unfavorable tax laws or accounting policies and high leverage. Moreover, certain investments may be dependent on U.S. and foreign government policies, including tax incentives and subsidies, which may change without notice. As a result of the foregoing, the Fund could underperform other money market funds that do not consider ESG criteria in their investment processes. In evaluating an issuer, the Adviser is dependent upon information and data that may be incomplete, inaccurate or unavailable, which could adversely affect the analysis of ESG criteria relevant to a particular issuer. Moreover, the Adviser's evaluation of ESG criteria may vary from that of other funds or their investment advisers because there are no generally accepted standards for ESG disclosure or evaluation.

Investing on the basis of ESG criteria is qualitative and subjective by nature and there can be no assurance that the process utilized by any third-party research or data providers or any judgment exercised by the Adviser or its affiliates will reflect the beliefs or values of any particular investor. Investors can differ in their views of what constitutes positive or negative ESG characteristics. As a result, the Fund may invest in companies that do not reflect the beliefs and values of any particular investor. Moreover, the assessment by the Adviser or its affiliates of an issuer may change over time, which could cause the Fund to hold securities that no longer meet the minimum ESG criteria. Constraints imposed by regulations applicable to money market funds or other considerations relating to credit quality, liquidity or yield, may limit the Adviser's ability to implement the Fund's ESG investment strategy.

**Foreign Securities**

The Fund may invest in securities of foreign issuers. Such investments by the Fund may be made in U.S. dollar-denominated commercial paper of foreign issuers and in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These foreign investments involve certain special risks described below.

Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Foreign securities, including those of emerging and frontier market issuers, are subject to additional risks, including international trade, social, political and regulatory risks. In addition,

regulators may not have as much access to foreign issuers to adequately audit and oversee issuers. As such, U.S. investors, including a Fund, may be subject to risks associated with less stringent accounting oversight. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations (including repatriation restrictions), tariffs and/or trade embargoes, expropriation or confiscatory taxation, other taxes imposed by the foreign country on the Fund's earnings, assets, or transactions, limitation on the removal of cash or other assets of the Fund, political or financial instability, the imposition of economic sanctions, or diplomatic and other developments which could affect such investments. Further, economies of particular countries or areas of the world may differ favorably or unfavorably from the economy of the United States. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Furthermore, dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply. Additional costs associated with an investment in foreign securities may include higher custodial fees than those that apply to domestic custodial arrangements, and transaction costs of foreign currency conversions. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries, and the degree of cooperation between issuers in certain foreign countries, including emerging and frontier markets countries, with foreign and U.S. financial regulators may vary significantly.

**Global Financial Markets**

Global economies and financial markets are becoming increasingly interconnected. Social, political and economic conditions (including recent instability and volatility) and events (including, but not limited to, armed conflicts, natural/environmental disasters, rapid inflation, supply chain disruptions, international sanctions, global recessions, pandemics, epidemics, social unrest, and government shutdowns and defaults) in one country, region or financial market, including a country, region or market in which a Fund has not invested, may adversely impact issuers in a different country, region or financial market, including a country, region or market in which a Fund has invested. As a result, a Fund could be negatively impacted if the values of its investments were harmed by these political or economic conditions or events. Such conditions and/or events may not have the same impact on all types of securities and may expose a Fund to greater market or liquidity risk or cause difficulty in valuing portfolio instruments held by the Fund. This could cause a Fund to underperform other types of investments. Moreover, such negative political and economic conditions and events could disrupt the processes necessary for a Fund's operations. For additional information, please see the discussion herein on "Operational Risk."

For example, the recent outbreak of an infectious respiratory illness caused by a novel strain of coronavirus (known as COVID-19) has caused volatility, severe market dislocations and liquidity constraints in markets around the world. The transmission of COVID-19 and efforts to contain its spread have led to severe macroeconomic disruptions, exchange closures, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff furloughs and reductions) and supply chains, and a reduction in consumer and business spending, as well as general concern and uncertainty that has negatively affected the economy. Certain of these consequences remain ongoing. Such events, or other disruptions caused by social, political, or economic conditions or other events, could adversely impact issuers, markets and economies (and, accordingly, a Fund) over the short- and long-term, including in ways that cannot be foreseen.

The severity or duration of such conditions and/or events may be affected by policy changes made by governments or quasi-governmental organizations. Historically, instability in the financial markets has led governments across the globe to take a number of actions designed to support the financial markets. For example, in response to the outbreak of COVID-19, the U.S. Government passed a series of economic relief packages, including the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and the American Rescue Plan Act of 2021 ("American Rescue Plan"), which provided approximately $2.0 trillion in economic relief to certain businesses and individuals affected by COVID-19. In addition, the United States Federal Reserve announced in March 2020 several initiatives designed to help money market mutual funds address illiquidity concerns stemming from COVID-19-related market dislocations and significant investor

demand for redemptions. There can be no guarantee that the CARES Act, American Rescue Plan, other economic stimulus bills (within the United States or other affected countries throughout the world), or other government actions will be sufficient or will have their intended effect, or will not result in unintended adverse economic consequences, such as increased inflationary pressure. Future government regulation and/or intervention may also change the way in which a Fund is regulated and could limit or preclude the Fund's ability to achieve its investment objective. Moreover, governments or their agencies may acquire distressed assets from financial institutions, may acquire ownership interests in those institutions, or may impose conditions on issuers receiving financial assistance (including by restricting or limiting their ability to pay dividends), all of which may affect a Fund's investments in ways that are unforeseeable.

Political institutions may not be able to effectively respond to these political and economic conditions and events, and these political institutions may erode over time. For example, one or more countries that have adopted the euro may abandon that currency and/or withdraw from the European Union, which could disrupt global markets and affect the liquidity and value of a Fund's investments, regardless of whether the Fund has significant exposure to European markets. In addition, countries in the Asian region (particularly China) may be adversely affected by social, political, economic and regulatory developments, including long-running border and diplomatic disputes with neighboring countries or the international community, that could adversely impact economies within individual Asian countries or the Asian region or the global market as a whole.

In addition, in the United States, total public debt as a percentage of gross domestic product has grown rapidly since 2008. High levels of national debt may raise concerns that the U.S. government will be unable to pay investors at maturity, may cause declines in currency valuations and may prevent the U.S. government from implementing effective fiscal policy.

**Investments in Other Investment Companies**

Subject to certain restrictions, the Funds may invest in securities issued by other money market funds that primarily invest in U.S. Government Securities and repurchase agreements collateralized by U.S. Government Securities. Such securities will be acquired by the Funds within the limits prescribed by the 1940 Act and the rules thereunder. Investors should recognize that the purchase of securities of other investment companies results in duplication of expenses such that investors indirectly bear a proportionate share of the operating expenses of such companies, including investment advisory and administrative services fees. In addition, the Funds will be affected by the investment policies, practices, and performance of such money market fund in direct proportion to the amount of assets the Fund invests therein.

The Trust may, in the future, seek to achieve a Fund's investment objective (subject to applicable investment restrictions) by investing all of the Fund's assets in an open-end management investment company having substantially the same investment objective, policies and restrictions as those applicable to the Fund. In such event, the investment advisory contract for the Fund would be terminated and the administrative services fees paid by the Fund would be reduced. Such investment would be made only if the Trustees of the Trust believe that the aggregate per share expenses of the Fund and such other investment company will be less than or approximately equal to the expenses which the Fund would incur if the Trust were to continue to retain the services of an investment adviser for the Fund and the assets of the Fund were to continue to be invested directly in portfolio securities.

In cases where (i) a Fund has an investment policy to invest under normal circumstances at least 80% of its net assets in a particular type or category of securities, and (ii) a Fund invests in another investment company that has a similar investment policy requiring it to invest under normal circumstances at least 80% of its net assets in that type or category of securities, the Fund will treat its investment in the other investment company as meeting the requirements of the Fund's policy concerning the investment of at least 80% of the Fund's net assets.

**Liquidity**

The Funds will comply with the liquidity requirements under Rule 2a-7, including the weekly and daily liquidity requirements. In addition, each Fund will not acquire an illiquid security (as defined below) if, immediately after the acquisition, the Fund would have invested more than 5% of its total assets in illiquid securities. An illiquid security is a security that cannot be sold or disposed of within seven calendar days in the ordinary course of business at approximately the amount at which a Fund has valued the security.

The policy with respect to the purchase of illiquid securities does not limit the acquisition of securities eligible for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "1933 Act") or commercial paper issued pursuant to Section 4(a)(2) under the 1933 Act that are determined to be liquid in accordance with guidelines established by the Board. There may be delays in selling these securities, and sales may be made at less favorable prices.

The Adviser may determine that a particular Rule 144A or Section 4(a)(2) security is liquid and thus not subject to the limitation on investments in illiquid securities, pursuant to guidelines adopted by the Board. Factors that the Adviser must consider in determining whether a particular Rule 144A security is liquid include the frequency of trades and quotes for the security, the number, diversity, and quality of dealers willing to purchase or sell the security and the number of other potential purchasers, dealer undertakings to make a market in the security, and the nature of the security and the nature of the market for the security (i.e., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Investing in Rule 144A securities could have the effect of increasing the level of a Fund's illiquidity to the extent that qualified institutions might become, for a time, uninterested in purchasing these securities.

**Mortgage-Related Securities**

The U.S. Government Money Market Fund and the ESG Prime Money Market Fund may invest in mortgage-backed certificates and other securities representing ownership interests in mortgage pools, including collateralized mortgage obligations ("CMOs"). Interest and principal payments on the mortgages underlying mortgage-backed securities are passed through to the holders of the mortgage-backed securities. Mortgage-backed securities currently offer yields higher than those available from many other types of fixed-income securities, but because of their prepayment aspects, their price volatility and yield characteristics will change based on changes in prepayment rates.

There are two methods of trading mortgage-backed securities. A specific pool transaction is a trade in which the pool number of the security to be delivered on the settlement date is known at the time the trade is made. This is in contrast with the typical mortgage transaction, called a TBA (to be announced) transaction, in which the type of mortgage securities to be delivered is specified at the time of trade but the actual pool numbers of the securities that will be delivered are not known at the time of the trade. For example, in a TBA transaction an investor could purchase $1 million of 30-year Federal National Mortgage Association ("FNMA") 9% mortgages and receive up to three pools on the settlement date. The pool numbers of the pools to be delivered at settlement will be announced shortly before settlement takes place. The terms of the TBA trade may be made more specific if desired. For example, an investor may request pools with particular characteristics, such as those that were issued prior to January 1, 1990. The most detailed specification of the trade is to request that the pool number be known prior to purchase. In this case, the investor has entered into a specific pool transaction. Generally, agency pass-through mortgage-backed securities are traded on a TBA basis. The specific pool numbers of the securities purchased do not have to be determined at the time of the trade.

Mortgage-backed securities have yield and maturity characteristics that are dependent on the mortgages underlying them. Thus, unlike traditional debt securities, which may pay a fixed rate of interest until maturity when the entire principal amount comes due, payments on these securities include both interest and a partial payment of principal. In addition to scheduled loan amortization, payments of principal may result from the voluntary prepayment, refinancing or foreclosure of the underlying mortgage loans. Such prepayments may significantly shorten the effective durations of mortgage-backed securities, especially

during periods of declining interest rates. Similarly, during periods of rising interest rates, a reduction in the rate of prepayments may significantly lengthen the effective durations of such securities.

Investment in mortgage-backed securities poses several risks, including interest rate, prepayment, market, and credit risk. Interest rate risk reflects the risk that, as interest rates rise, the value of mortgage-backed securities generally can be expected to fall. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions.

Market risk reflects the risk that the price of the security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and a Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold.

Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. Government-related agencies or instrumentalities may not be backed by the full faith and credit of the U.S. Government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions.

The financial crisis in 2007—particularly the increase in delinquencies and defaults on residential mortgages, falling home prices, and unemployment—had adversely affected the market for mortgage-related securities. In addition, various market and governmental actions may impair the ability to foreclose on or exercise other remedies against underlying mortgage holders, or may reduce the amount received upon foreclosure. These factors may cause mortgage-related securities to experience lower valuations and reduced liquidity. There is also no assurance that the U.S. Government will take action to support the mortgage-related securities industry, as it has in the past, should the economy experience another downturn. Further, future legislative and other government actions may significantly alter the manner in which the mortgage-related securities market functions. Each of these factors could ultimately increase the risk that a Fund could realize losses on mortgage-related securities.

**Mortgage Pass-Through Securities.** Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment that consists of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs that may be incurred. Some mortgage-related securities (such as securities issued by the Government National Mortgage Association ("GNMA")) are described as "modified pass-through." These securities entitle the holder to receive all interest and principal payments

owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.

The principal governmental guarantor of mortgage-related securities is GNMA. GNMA is a wholly owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration ("FHA") insured or Department of Veterans Affairs ("VA") guaranteed mortgages. Government-related guarantors

(*i.e.,* not backed by the full faith and credit of the U.S. Government) include the FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. Government.

In September 2008, the Federal Housing Finance Agency ("FHFA") placed FNMA and FHMLC into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of FNMA and FHLMC and of any stockholder, officer or director of FNMA and FHLMC with respect to FNMA and FHLMC and the assets of FNMA and FHLMC. FHFA selected a new chief executive officer and chairman of the board of directors for each of FNMA and FHLMC. The FHFA has indicated that the conservatorship of each enterprise will end when the director of FHFA determines that FHFA's plan to restore the enterprise to a safe and solvent condition has been completed. FNMA and FHLMC are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities. The steps taken in connection with the conservatorship are both intended to enhance each of FNMA's and FHLMC's ability to meet its obligations.

Under the Federal Housing Finance Regulatory Reform Act of 2008 (the "Reform Act"), which was included as part of the Housing and Economic Recovery Act of 2008, FHFA, as conservator or receiver, has the power to repudiate any contract entered into by FNMA or FHLMC prior to FHFA's appointment as conservator or receiver, as applicable, if FHFA determines, in its sole discretion, that performance of the contract is burdensome and that repudiation of the contract promotes the orderly administration of FNMA's or FHLMC's affairs. The Reform Act requires FHFA to exercise its right to repudiate any contract within a reasonable period of time after its appointment as conservator or receiver.

FHFA, in its capacity as conservator, has indicated that it has no intention to repudiate the guaranty obligations of FNMA or FHLMC because FHFA views repudiation as incompatible with the goals of the conservatorship. However, in the event that FHFA, as conservator or if it is later appointed as receiver for FNMA or FHLMC, were to repudiate any such guaranty obligation, the conservatorship or receivership estate, as applicable, would be liable for actual direct compensatory damages in accordance with the provisions of the Reform Act. Any such liability could be satisfied only to the extent of FNMA's or FHLMC's assets available therefor.

In the event of repudiation, the payments of interest to holders of FNMA or FHLMC mortgage-backed securities would be reduced if payments on the mortgage loans represented in the mortgage loan groups related to such mortgage-backed securities are not made by the borrowers or advanced by the servicer.

Any actual direct compensatory damages for repudiating these guaranty obligations may not be sufficient to offset any shortfalls experienced by such mortgage-backed security holders.

Further, in its capacity as conservator or receiver, FHFA has the right to transfer or sell any asset or liability of FNMA or FHLMC without any approval, assignment or consent. Although FHFA has stated that it has no present intention to do so, if FHFA, as conservator or receiver, were to transfer any such guaranty obligation to another party, holders of FNMA or FHLMC mortgage-backed securities would have to rely on that party for satisfaction of the guaranty obligation and would be exposed to the credit risk of that party.

In addition, certain rights provided to holders of mortgage-backed securities issued by FNMA and FHLMC under the operative documents related to such securities may not be enforced against FHFA, or enforcement of such rights may be delayed, during the conservatorship or any future receivership. The

operative documents for FNMA and FHLMC mortgage-backed securities may provide (or with respect to securities issued prior to the date of the appointment of the conservator may have provided) that upon the occurrence of an event of default on the part of FNMA or FHLMC, in its capacity as guarantor, which includes the appointment of a conservator or receiver, holders of such mortgage-backed securities have the right to replace FNMA or FHLMC as trustee if the requisite percentage of mortgage-backed securities holders consent. The Reform Act prevents mortgage-backed security holders from enforcing such rights if the event of default arises solely because a conservator or receiver has been appointed. The Reform Act also provides that no person may exercise any right or power to terminate, accelerate or declare an event of default under certain contracts to which FNMA or FHLMC is a party, or obtain possession of or exercise control over any property of FNMA or FHLMC, or affect any contractual rights of FNMA or FHLMC, without the approval of FHFA, as conservator or receiver, for a period of 45 or 90 days following the appointment of FHFA as conservator or receiver, respectively.

FHFA and the White House have made public statements regarding plans to consider ending the conservatorships of FNMA and FHLMC. In the event that FNMA and FHLMC are taken out of conservatorship, it is unclear how the capital structure of FNMA and FHLMC would be constructed and what effects, if any, there may be on FNMA's and FHLMC's creditworthiness and guarantees of certain mortgage-backed securities. It is also unclear whether the U.S. Treasury would continue to enforce its rights or perform its obligations related to senior preferred stock. Should FNMA's and FHLMC's conservatorship end, there could be an adverse impact on the value of their securities, which could cause losses to the Fund.

The conditions attached to the financial contribution made by the Treasury to FHLMC and FNMA and the issuance of senior preferred stock place significant restrictions on the activities of FHLMC and FNMA. FHLMC and FNMA must obtain the consent of the 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 FHLMC's and FNMA's respective portfolios of mortgages and mortgage- backed securities, and the purchase agreements entered into by FHLMC and FNMA 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 FHLMC and FNMA could be impacted by (among other things) the actions taken and restrictions placed on FHLMC and FNMA by the FHFA in its role as conservator, the restrictions placed on FHLMC's and FNMA's operations and activities as a result of the senior preferred stock investment made by the U.S. Treasury, market responses to developments at FHLMC and FNMA, 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 FHLMC and FNMA, including any such mortgage-backed securities held by a Fund.

Under the direction of the FHFA, FNMA and FHLMC have entered into a joint initiative to develop a common securitization platform for the issuance of a uniform mortgage-backed security (the "Single Security Initiative") that aligns the characteristics of FNMA and FHLMC certificates. The Single Security

Initiative seeks to support the overall liquidity of the TBA market. FNMA and FHLMC began issuing uniform mortgage-backed security in June 2019, and the effects it may have on the market for mortgage-backed securities are uncertain. While the initial effects of the issuance of uniform mortgage-backed securities on the market for mortgage-related securities have been relatively minimal, the long-term effects are still uncertain.

of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the Fund's investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. The Funds are subject to the liquidity requirements described above.

The assets underlying mortgage-related securities may be represented by a portfolio of first lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in turn be insured or guaranteed by the FHA or the VA. In the case of private issue mortgage-related securities whose underlying assets are neither U.S. Government securities nor U.S. Government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of principal and interest on the underlying mortgages.

**Collateralized Mortgage Obligations ("CMOs")**. A CMO is a hybrid between a mortgage-backed bond and a mortgage pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments. In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current interest. Interest on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B or C Bond currently being paid off. When the Series A, B and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.

**FHLMC CMOs**. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates that are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to approximately 100% of FHA prepayment experience applied to the mortgage collateral pool. All sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the "pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date.

If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds. Criteria for the mortgage loans in the pool backing the FHLMC CMOs are identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in the event of delinquencies and/or defaults.

**Stripped Mortgage-Backed Securities ("SMBS").** SMBS are derivative multi-class mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.

SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or IO class), while the other class will receive all of the principal (the principal-only or PO class). The cash flow and yields on IO and PO classes can be extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund's yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in these securities even if the security is in one of the highest rating categories.

Although SMBS are typically purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed "illiquid" and subject to a Fund's limitations on investments in illiquid securities.

**Mortgage-Backed Securities and Asset-Backed Securities - Types of Credit Support.** Mortgage-backed securities and asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failure by obligors on underlying assets to make payments, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. However, the Fund is subject to the credit risk of a person or entities providing the credit enhancements.

The ratings of mortgage-backed securities and asset-backed securities for which third-party credit enhancement provides liquidity protection or protection against losses from default are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of such securities could be subject to reduction in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experience on the underlying pool of assets is better than expected.

Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "overcollateralization" (where the scheduled payments on, or the principal amount of, the

underlying assets exceed those required to make payment of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information with respect to the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that which is anticipated could adversely affect the return on an investment in such a security.

**Municipal Obligations**

The Fund may invest in short-term, high quality, fixed rate and variable rate obligations issued by a state, territory or possession of the United States, and their authorities, agencies, political subdivisions and instrumentalities and other qualifying issuers, the interest on which is exempt from federal income taxes, including participation interests issued by banks, insurance companies or other financial institutions with respect to such obligations. (Such obligations, whether or not the interest thereon is subject to the federal alternative minimum tax, are referred herein as "Municipal Obligations.") In determining the tax status of interest on Municipal Obligations, the Adviser relies on opinions of bond counsel who may be counsel to the issuer.

**Obligations of Personal and Business Credit Institutions (Banking Industry)**

The Fund may invest without limit in the banking industry and in commercial paper and short-term corporate obligations of issuers in the personal credit institution and business credit institution industries when, in the opinion of the Adviser, the yield, marketability and availability of investments meeting the Fund's quality standards and the minimum ESG criteria in those industries justify any additional risks associated with the concentration of the Fund's assets in those industries. The Fund, however, will invest more than 25% of its assets in the personal credit institution or business credit institution industries only when, to the Adviser's knowledge, the yields then available on securities issued by companies in such industries and otherwise suitable for investment by the Fund exceed the yields then available on securities issued by companies in the banking industry and otherwise suitable for investment by the Fund. As a result, the Fund may be especially affected by favorable and adverse developments in or related to these industries. The activities of U.S. banks and most foreign banks are subject to comprehensive regulations which, in the case of U.S. regulations, have undergone substantial changes in the past decade. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operations and profitability of domestic and foreign banks. Significant developments in the U.S. banking industry have included increased competition from other types of financial institutions, increased acquisition activity and geographic expansion. Banks and other financial institutions may be particularly susceptible to certain economic factors, such as interest rate changes and adverse developments in the market for real estate. Fiscal and monetary policy and general economic cycles can affect the availability and cost of funds, loan demand and asset quality and thereby impact the earnings and financial conditions of banks and other financial institutions that operate in the banking industry and the personal credit institution and business credit institution industries.

**Operational Risk**

The Funds' investments or their service providers may be negatively impacted due to operational risks arising from factors such as processing errors and human errors, inadequate or failed internal or external processes, failures in systems and technology, changes in personnel, and errors caused by third-party service providers or trading counterparties. The use of certain investment strategies that involve manual or additional processing increases these risks. Although the Funds attempt to minimize such failures through controls and oversight, it is not possible to identify all of the operational risks that may affect a Fund or to develop processes and controls that completely eliminate or mitigate the occurrence of such failures. A Fund and its shareholders could be negatively impacted as a result.

In addition, the Funds rely on various sources to calculate their NAV. Therefore, each Fund is subject to certain operational risks associated with reliance on third party service providers and data sources. NAV calculation may be impacted by operational risks arising from factors such as failures in systems and technology. Such failures may result in delays in the calculation of a Fund's NAV and/or the inability to

calculate NAV over extended time periods. Each Fund may be unable to recover any losses associated with such failures.

The operation risks could also arise from events that are wholly or partially beyond the Funds' control. These events would include, but are not limited to, armed conflicts, natural disasters, pandemics, epidemics, social unrest, and government shutdowns.

**Regulatory Risk**

The SEC and other government agencies continue to review the regulation of money market funds and may implement certain regulatory changes in the future. These and other legal or regulatory changes may negatively impact a Fund. In December 2021, the SEC proposed amendments to Rule 2a-7, which governs money market funds. If the proposed amendments were adopted, all money market funds could be required to maintain a higher percentage of their portfolio in liquid assets, would be subject to additional reporting obligations, and could be restricted from implementing liquidity fees and/or redemption gates except in limited circumstances. Government money market funds, like the U.S. Government Money Market Fund and U.S. Treasury Money Market Fund, and retail money market funds could be prohibited from engaging in certain financial practices in order to maintain a stable NAV. Non-government money market funds, like the ESG Prime Money Market Fund, would be required to implement certain pricing mechanisms that could create operational challenges and additional costs. It is not presently possible to predict whether these proposed or other changes will be implemented and the ultimate effect that any such changes may have on the Funds.

**Repurchase Agreements**

The Funds may invest in repurchase agreements. The U.S. Treasury Money Market Fund may invest in repurchase agreements only in respect of direct obligations of the U.S. Treasury. A repurchase agreement arises when a buyer purchases an obligation and simultaneously agrees with the vendor to resell the obligation to the vendor at an agreed-upon price and time, which is usually not more than seven days from the date of purchase. The resale price of a repurchase agreement is greater than the purchase price, reflecting an agreed-upon market rate which is effective for the period of time the buyer's funds are invested in the obligation and which is not related to the coupon rate on the purchased obligation. Obligations serving as collateral for each repurchase agreement are delivered to a Fund's custodian bank either physically or in book entry form and the collateral is marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. A buyer of a repurchase agreement runs a risk of loss if, at the time of default by the issuer, the value of the collateral securing the agreement is less than the price paid for the repurchase agreement. A Fund may enter into repurchase agreements only with a vendor which is a member bank of the Federal Reserve System or which is a "primary dealer" (as designated by the Federal Reserve Bank of New York) in U.S. Government obligations. A Fund may also enter into a repurchase agreement with the Federal Reserve Bank of New York, the Fixed Income Clearing Corporation, or certain counterparties approved by the Adviser. The restrictions and procedures that govern the investment of a Fund's assets in repurchase obligations are designed to minimize the Fund's risk of losses from those investments. Repurchase agreements are considered collateralized loans under the 1940 Act.

The repurchase agreement provides that, in the event the seller fails to pay the price agreed upon on the agreed upon delivery date or upon demand, as the case may be, the Fund will have the right to liquidate the securities. If, at the time a Fund is contractually entitled to exercise its right to liquidate the securities, the seller is subject to a proceeding under the bankruptcy laws or its assets are otherwise subject to a stay order, the Fund's exercise of its right to liquidate the securities may be delayed and result in certain losses and costs to the Fund. The Funds have each adopted and follow procedures which are intended to minimize the risks of repurchase agreements. For example, each Fund only enters into repurchase agreements after the Adviser has determined that the seller is creditworthy, and the Adviser monitors that seller's creditworthiness on an ongoing basis. Moreover, under such agreements, the value of the securities (which are marked to market every business day) is required to be greater than the repurchase price, and the Funds have the right to make margin calls at any time if the value of the securities falls below the agreed upon margin.

All repurchase agreements entered into by the Funds are fully collateralized at all times during the period of the agreement in that the value of the collateral is at least equal to the amount of the loan, reduced by the transaction costs (including the loss of interest) that the Fund reasonably could expect to incur in the event that the Fund must liquidate the collateral, and the Fund or its custodian bank has possession of the collateral, which the Board believes gives the Fund a valid, perfected security interest in the collateral. The Board believes that the collateral underlying repurchase agreements may be more susceptible to claims of the seller's creditors than would be the case with securities owned by a Fund. Repurchase agreements give rise to income which does not qualify as tax-exempt income when distributed to Fund shareholders.

Repurchase agreements involving obligations other than U.S. Government Securities (such as commercial paper, corporate bonds, mortgage loans and equities) may be subject to special risks and may not have the benefit of certain protections in the event of the counterparty's insolvency. Moreover, repurchase agreements secured by obligations that are not eligible for direct investment under Rule 2a-7 under the 1940 Act or a Fund's investment strategies and limitations, may require the Fund to promptly dispose of such collateral if the seller or guarantor becomes insolvent. If the seller or guarantor becomes insolvent, a Fund may suffer delays, costs and possible losses in connection with the disposition of collateral.

**Risks of Qualified Financial Contracts**

Regulations adopted by federal banking regulators under the Dodd-Frank Act require that certain qualified financial contracts ("QFCs") with counterparties that are part of U.S. or foreign global systemically important banking organizations be amended to include contractual restrictions on close-out and cross-default rights. QFCs include, but are not limited to, repurchase agreements. If a covered counterparty of a Fund or certain of the covered counterparty's affiliates were to become subject to certain insolvency proceedings, the Fund may be temporarily unable to exercise certain default rights, and the QFC may be transferred to another entity. These requirements may impact a Fund's credit and counterparty risks.

**Selection of Money Market Investments**

The Funds invest in fixed income securities. The value of the fixed income securities in a Fund's portfolio can be expected to vary inversely with changes in prevailing interest rates. Although each Fund's investment policies are designed to minimize these changes and to maintain an NAV of $1.00 per share for the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund, there is no assurance that these policies will be successful. Withdrawals by shareholders could require the sale of portfolio investments at a time when such a sale might not otherwise be desirable.

Securities issued or guaranteed as to principal and interest by the U.S. Government include a variety of Treasury securities, which differ in their interest rates, maturities and dates of issue. Securities issued or

guaranteed by agencies or instrumentalities of the U.S. Government may or may not be supported by the full faith and credit of the United States or by the right of the issuer to borrow from the Treasury.

Considerations of portfolio quality, maturity, diversification and liquidity, as well as preservation of capital, mean that a Fund may not necessarily invest in money market instruments paying the highest available yield at a particular time. Consistent with its investment objectives, the Funds will each attempt to maximize yields by portfolio trading and by buying and selling portfolio investments in anticipation of, or in response to, changing economic and money market conditions and trends. The Funds will each also invest to take advantage of what the Adviser believes to be temporary disparities in yields of different segments of the high-grade money market or among particular instruments within the same segment of the market. In purchasing and selling securities for the Funds, portfolio managers consider the Adviser's credit analysis. With respect to the U.S. Government Money Market Fund and the ESG Prime Money Market Fund, portfolio managers select investments from an approved credit list compiled by the Adviser's global credit analysts, who have conducted an independent qualitative and quantitative review of each issuer on the list. Safety is prioritized, with additional emphasis placed on liquidity and yield. These policies, as well as the relatively short maturity of obligations purchased by a Fund, may result in frequent changes in the Fund's portfolio.

Portfolio turnover may give rise to taxable gains. The Funds do not usually pay brokerage commissions in connection with the purchase or sale of portfolio securities.

**Sovereign and Supranational Debt Obligations**

The Fund may invest in sovereign and supranational debt obligations. To the extent the Fund invests in sovereign and supranational debt instruments issued or guaranteed by foreign governments, agencies, and supranational entities ("sovereign debt obligations"), especially sovereign debt obligations of developing countries, an investment in the Fund may be subject to a high degree of risk, and the sovereign debt obligation may be in default or present the risk of default. The issuer of the obligation or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal and interest when due, and may require renegotiation or rescheduling of debt payments. These risks are heightened in market environments where interest rates are rising. In addition, prospects for repayment of principal and interest may depend on political as well as economic factors, such as an increase in levels of foreign debt or the imposition of international sanctions. The total public debt of governments as a percent of gross domestic product has grown rapidly since the beginning of the 2008 financial downturn. Although high levels of debt do not necessarily indicate or cause economic problems, high levels of debt may create certain systemic risks if sound debt management practices are not implemented. A high national debt level may increase market pressures to meet government funding needs, which may increase borrowing costs and cause a government to issue additional debt, thereby increasing the risk of refinancing. A high national debt also raises concerns that a government may be unable or unwilling to repay the principal or interest on its debt. Unsustainable debt levels can decline the valuation of currencies, and can prevent a government from implementing effective counter-cyclical fiscal policy during economic downturns.

**U.S. Government Securities**

The Funds may each invest in U.S. Government Securities. U.S. Government Securities include bills, notes, and bonds issued by the U.S. Treasury and securities issued or guaranteed by agencies or instrumentalities of the U.S. Government. The U.S. Treasury Money Market Fund invests only in obligations of the U.S. Treasury and therefore may not invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government.

Some U.S. Government securities are supported by the direct full faith and credit pledge of the U.S. Government; others are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as securities issued by the FNMA, are supported by the discretionary authority of the U.S. Government to purchase the agencies' obligations; and others are supported only by the credit of the issuing or guaranteeing instrumentality. There is no assurance that the U.S. Government will be able or willing to repay any principal or interest when due, or will provide financial support to a U.S. Government agency, authority, instrumentality or sponsored enterprise when it is not obligated by law to do so.

Regarding certain federal agency securities or government sponsored entity securities (such as debt securities or mortgage-backed securities issued by FNMA, FHLMC, Federal Home Loan Banks, Federal Farm Credit Bank and other government sponsored agencies), you should be aware that although the issuer may be chartered or sponsored by an Act of Congress, the issuer is not funded by congressional appropriations, and its securities are neither guaranteed nor insured by the U.S. Treasury. This risk does not apply to the Treasury Money Market Fund, which invests only in obligations of the U.S. Treasury and does not invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. government.

**Variable Rate Demand Notes**

The Fund may invest in variable rate demand notes, which provide for a periodic adjustment in the interest rate paid on the instrument and permit the holder to receive payment upon a specified number of days' notice of the unpaid principal balance plus accrued interest either from the issuer or by drawing on a bank letter of credit, a guarantee or an insurance policy issued with respect to such instrument or by tendering or "putting" such instrument to a third party.

Investments in floating or variable rate securities normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate, such as rates on Treasury bonds or bills or the prime rate at a major commercial bank, and that a bondholder can demand payment of the obligations on short notice at par plus accrued interest. While there is usually no established secondary market for issues of this type of security, the dealer that sells an issue of such securities frequently also offers to repurchase such securities at any time, at a repurchase price which varies and may be more or less than the amount the bondholder paid for them.

Because of the variable rate nature of the instruments, during periods when prevailing interest rates decline, the Fund's yield will decline and its shareholders will forgo the opportunity for capital appreciation. On the other hand, during periods when prevailing interest rates increase, the Fund's yield will increase and its shareholders will have reduced risk of capital depreciation. In certain cases, the interest rate index on which an instrument's yield is based may not rise and fall to the same extent or as quickly as the general market for municipal obligations. The value of these instruments may be more volatile than other floating rate municipal obligations.

Certain floating or variable rate obligations may carry a demand feature that would permit the holder to tender them back to the issuer of the underlying instrument, or to a third party, at par value prior to maturity.

The maturity of a floating rate obligation with a maturity in excess of 397 days is deemed to be the period until the Fund would be entitled to payment pursuant to demand rights. The maturity of a floating rate obligation with a maturity of 397 days or less is deemed to be one day. The maturity of a variable rate obligation with a maturity in excess of 397 days is deemed to be the longer of the period remaining until the next interest rate adjustment or the period until the Fund would be entitled to payment pursuant to demand rights. The maturity of a variable rate obligation with a maturity of 397 days or less is deemed to be the earlier of such periods. The deemed maturities of such floating or variable rate obligations will not apply for purposes of determining the Fund's dollar-weighted average portfolio life. If not redeemed for the Fund through the demand feature, an obligation matures on a specified date which may range up to 30 years from the date of issuance.

**Portfolio Transactions**

Portfolio securities normally will be purchased or sold from or to issuers directly or from or to dealers serving as market makers for the securities at a net price. Generally, money market securities are traded on a principal basis and do not involve brokerage commissions. The cost of executing portfolio securities transactions for each Fund primarily consists of dealer spreads and underwriting commissions. The Adviser is primarily responsible for portfolio decisions and the placing of portfolio transactions. The Trust

has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities for each Fund. Allocation of transactions, including their frequency, to various dealers is determined by the Adviser in its best judgment and in a manner deemed to be in the best interest of each Fund's shareholders rather than by any formula. In placing orders for each Fund, the primary consideration is prompt execution of orders in an effective manner at the most favorable price, although the Fund does not necessarily pay the lowest spread or commission available. Other factors taken into consideration are the dealer's general execution and operational facilities, the type of transaction involved and other factors, such as the dealer's risk in positioning the securities. To the extent consistent with applicable legal requirements, the Adviser may place orders for the purchase and sale of Fund investments for a Fund with a broker-dealer affiliate of the Adviser.

The Adviser may, in circumstances in which two or more dealers are in a position to offer comparable results and subject to certain conditions, give preference to a dealer that has provided statistical or other research services to the Adviser. By allocating transactions in this manner, the Adviser is able to supplement its research and analysis with the views and information of securities firms. These services, which in some cases may also be purchased for cash, include such matters as general economic and security market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to the Adviser in advising several of its clients (including the Funds), although not all of these services are necessarily useful and of value in

managing each Fund. The management fee paid from each Fund is not reduced because the Adviser and its affiliates receive such services.

Under the 1940 Act, persons affiliated with HSBC USA, Inc. ("HSBC USA"), the Adviser, the Trust or Foreside Distribution Services, L.P. ("Foreside" or "Distributor") are generally prohibited from dealing with a Fund as a principal in the purchase and sale of securities. A Fund may purchase securities from underwriting syndicates of which the Distributor or other affiliate is a member under certain conditions in accordance with the provisions of a rule adopted under the 1940 Act. Under the 1940 Act, persons affiliated with the Adviser, a Fund or Foreside may act as a broker for the Fund. In order for such persons to effect any portfolio transactions for a Fund, the commissions, fees or other remuneration received by such persons must be reasonable and fair compared to the commissions, fees or other remunerations paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on an exchange during a comparable period of time. This standard would allow the affiliate to receive no more than the remuneration that would be expected to be received by an unaffiliated broker in a commensurate arms-length transaction. The Trustees of the Trust regularly review any commissions paid by the Funds to affiliated brokers. The Funds will not do business with nor pay commissions to affiliates of the Adviser in any portfolio transactions where they act as principal.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as amended ("1934 Act"), the Adviser may cause each Fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to the Adviser an amount of commission for effecting a securities transaction for the Fund in excess of the commission which another broker-dealer would have charged for effecting that transaction, provided that the Adviser determines in good faith that the greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of either a particular transaction or its respective overall responsibilities to the Fund or to its other clients. Not all of such services are useful or of value in advising each Fund.

The term "brokerage and research services" includes advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or of purchasers or sellers of securities; furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; and effecting securities transactions and performing functions incidental thereto, such as clearance and settlement. Although commissions paid on every transaction will, in the judgment of the Adviser, be reasonable in relation to the value of the brokerage services provided, commissions exceeding those which another broker might charge may be paid to broker-dealers who were selected to execute transactions on behalf of the Funds and the Adviser's other clients in part for providing advice as to the availability of securities or of purchasers or sellers of securities and services in effecting securities transactions and performing

functions incidental thereto, such as clearance and settlement. The SEC has published interpretative guidance that tightened previously existing standards concerning the types of expenses that qualify for the Section 28(e) safe harbor and set forth certain steps that investment advisers would need to take in order to ensure such qualification.

Investment decisions for each Fund and for the other investment advisory clients of the Adviser are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought for certain clients even though it could have been sold for other clients at the same time, and a particular security may be sold for certain clients even though it could have been bought for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. In some instances, one client may sell a particular security to another client. Two or more clients may simultaneously purchase or sell the same security, in which event each day's transactions in that security are, insofar as practicable, averaged as to price and allocated between such clients in a manner which in the Adviser's opinion is equitable to each and in accordance with the amount being purchased or sold by each. In addition, when purchases or sales of the same security for a Fund and for other clients of the Adviser occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantage available to large denomination purchases or sales. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients in terms of the price paid or received or of the size of the position

obtainable. It is recognized that, in some cases, this system could have a detrimental effect on the price or volume of the security as far as a Fund is concerned. In other cases, however, the Adviser believes that the Funds' ability to participate in volume transactions will produce better executions for the Funds.

The Board has adopted a policy to ensure compliance with Rule 12b-1(h) under the 1940 Act in the selection of broker-dealers to execute portfolio transactions for the Funds. Generally, Rule 12b-1(h) prohibits the Funds from compensating a broker-dealer for promotion or sale of Fund shares by directing to the broker-dealer securities transactions or remuneration received or to be received from such portfolio securities transactions.

Since the Funds invest primarily in fixed-income securities, it is anticipated that most purchases and sales will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, the Funds would not ordinarily pay significant brokerage commissions with respect to their securities transactions.

In the United States and in some other countries debt securities are traded principally in the over-the-counter market on a net basis through dealers acting for their own account and not as brokers. In other countries, both debt and equity securities are traded on exchanges at fixed commission rates. The cost of securities purchased from underwriters includes an underwriter's commission or concession, and the prices at which securities are purchased and sold from and to dealers include a dealer's mark-up or mark-down. The Adviser normally seeks to deal directly with the primary market makers or on major exchanges unless, in its opinion, better prices are available elsewhere. Subject to the requirement of seeking best execution, securities may, as authorized by each investment advisory contract, be bought from or sold to dealers who have furnished statistical, research and other information or services to the Adviser. At present, no arrangements for the recapture of commission payments are in effect.

During the fiscal year ended October 31, 2022, the Funds acquired securities issued by their regular brokers or dealers, or their parent companies, as reflected in the table below. The following shows the aggregate holdings of the securities of each such issuer as of October 31, 2022. (For these purposes a regular broker or dealer includes any of the (a) ten brokers or dealers that received the greatest dollar amount of brokerage commissions by virtue of direct or indirect participation in the Trust's portfolio transactions during the most recent fiscal year, (b) ten brokers or dealers that engaged as principal in the largest dollar amount of portfolio transactions of the Trust during its most recent fiscal year, or (c) ten brokers or dealers that sold the largest dollar amount of securities of the Funds during the Trust's most

recent fiscal year.) As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the ESG Prime Money Market Fund has not paid any brokerage commissions.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**U.S. Government Money Market Fund** |  |  |
|  | &nbsp;&nbsp;**BlackRock Liquidity Fund** | $&nbsp;&nbsp;1104557339 |
|  | &nbsp;&nbsp;**Bank of NY Mellon** | $&nbsp;&nbsp;2000000000 |
|  | &nbsp;&nbsp;**Canadian Imperial Bank** | $&nbsp;&nbsp;475000000 |
|  | &nbsp;&nbsp;**Citigroup Global Markets** | $&nbsp;&nbsp;500000000 |
|  | &nbsp;&nbsp;**Deutsche Bank Securities, Inc.** | $&nbsp;&nbsp;500000000 |
|  | &nbsp;&nbsp;**Societe' Generale NY** | $&nbsp;&nbsp;1050000000 |
|  | &nbsp;&nbsp;**Standard Chartered Bank** | $&nbsp;&nbsp;1350000000 |
|  | &nbsp;&nbsp;**Toronto Dominion Bank** | $&nbsp;&nbsp;500000000 |
|  | &nbsp;&nbsp;**Wells Fargo Co** | $&nbsp;&nbsp;600000000 |

---

During the fiscal year ended October, 31 2022, the U.S. Treasury Money Market Fund did not acquire securities issued by their regular brokers or dealers, or their parent companies.

**DISCLOSURE OF PORTFOLIO HOLDINGS**

The Board has adopted policies and procedures relating to the disclosure of the Trust's portfolio securities (the "Policy"). The Policy is designed to ensure that the disclosure of holdings information is necessary to the Trust's operation or useful to the Trust's shareholders without compromising the integrity or performance of the Trust. Disclosure of information regarding the portfolio holdings of the Funds occurs only upon the determination, by the Trust's Chief Compliance Officer ("CCO"), that such disclosure is in the best interests of the Funds' shareholders and that it does not present a conflict of interest between the shareholders and the Adviser, principal underwriter, or any affiliated person of the Fund, the Adviser, or its principal underwriter.

The Trust discloses a complete schedule of investments in each Semi-Annual Report and Annual Report to Shareholders. Semi-Annual and Annual Reports are distributed to shareholders and are also available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov and on the Trust's website at https://www.assetmanagement.us.hsbc.com/en/institutional-investor/fund-centre.

The Funds will also disclose on the Adviser's Web site: (i) within five business days after the end of each month, a complete schedule of portfolio holdings and certain other information, including the dollar-weighted average portfolio maturity and dollar-weighted average portfolio life of each Fund; (ii) each business day, (a) the percentage of each Fund's total assets that are invested daily and weekly liquid assets, (b) each Fund's daily net inflows or outflows, and (c) each Fund's marked-to-market NAV per share. In addition, each Fund will file with the SEC on Form N-MFP, within five business days after the end of each month, more detailed portfolio holdings information of the Fund. The Funds' Form N-MFP filings will be available on the SEC's Web site, and the Adviser's Web site will contain a link to such filings.

The Funds will also publicly disclose the complete schedule of each Fund's portfolio holdings on a weekly or monthly basis. This information, which will include portfolio holdings, sector holdings and other characteristics, will generally be available on the Adviser's Web site subject to a delay of five (5) business days. The disclosure of weekly portfolio holdings information, however, may not occur when monthly portfolio holdings information will be available shortly before or after the date on which the weekly portfolio holdings information would otherwise be available. Portfolio holdings information will be available until it is updated as of the following period. The information on the Adviser's Web site is publicly available to all categories of persons.

The Trust or the Adviser may share non-public holdings information of the Trust on a more frequent basis with the Adviser and other service providers to the Trust (including the Trust's custodian; the Sub-Administrator; and pricing services such as FT Interactive). In addition, the Trust may share non-public holdings information with mutual fund ranking and rating services, including Standard & Poor's

Corporation, Morningstar, Lipper Analytical Services, FactSet, Fitch Ratings, Inc. Fundipedia and Bloomberg L.P. These service providers and other entities owe contractual, fiduciary, or other legal duties of confidentiality to the Trust or the Adviser that foster reasonable expectations that holdings information will not be misused. The Trust's officers may authorize disclosure of the Trust's holdings portfolio information to service providers where such service provider needs information to fulfill its duties.

The Trust may also disclose information about portfolio holdings to mutual fund evaluation services that agree not to disclose the information to third parties and that enter into a Confidentiality Agreement. Such Confidentiality Agreement provides, among other things, that non-public portfolio holdings information will be kept confidential and that such information will be used solely for the purpose of analysis and evaluation of the portfolio. Disclosures may be made to other third parties under a Confidentiality Agreement satisfactory to Fund counsel and the Trust's CCO. The Confidentiality Agreement prohibits anyone in possession of non-public holdings information from purchasing or selling securities based on such information, or from disclosing such information to other persons, except for those who are actually engaged in, and need to know, such information to perform services for the portfolio.

Currently, the Trust has arrangements to provide additional disclosure of holdings information to the following evaluation services: Lipper Analytical Services (10 days after the end of each month), Morningstar

(5 business days after the end of each month), Bloomberg L.P. (60 days after the end of each quarter), FactSet (daily), Fitch Ratings, Inc. (two times per month), Fundipedia (5 business days after the end of each month) and Standard & Poor's Corporation (between 3-5 days after the end of each week).

No compensation or other consideration is paid to or received by any party in connection with the disclosure of holdings information, including the Trust, the Adviser and its affiliates.

Pursuant to the Policy, the CCO may authorize exceptions and allow disclosures under other circumstances he or she deems appropriate. In addition, a Fund may disclose its holdings, as appropriate, in conformity with the foregoing principles. Compliance with the Policy (including the use of the portfolio holdings information) will be monitored by the CCO or his or her designee on a regular basis, and any violations constituting a "Material Compliance Matter" as defined under Rule 38a-1 under the 1940 Act will be reported by the CCO to the Board.

**INVESTMENT RESTRICTIONS**

Each Fund has adopted certain fundamental and non-fundamental investment restrictions. Fundamental investment restrictions may not be changed without approval by holders of a "majority of the outstanding shares" of the Fund, which, as used in this SAI, means the vote of the lesser of (i) 67% or more of the outstanding "voting securities" of the Fund present at a meeting, if the holders of more than 50% of the outstanding "voting securities" of the Fund are present or represented by proxy, or (ii) more than 50% of the outstanding "voting securities" of the Fund. The term "voting securities" as used in this paragraph has the same meaning as in the 1940 Act.

Notwithstanding anything contained herein to the contrary, the Funds will seek to comply with the maturity, quality, liquidity and diversification requirements of Rule 2a-7 under the 1940 Act, including the prohibition from acquiring an illiquid security if, immediately after the acquisition, a Fund would have more than 5% of its total assets invested in illiquid securities.

**Non-Fundamental Restrictions**

Each of the Funds is subject to the following non-fundamental restriction, in addition to the fundamental restrictions set forth below under the headings for each Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp; The Fund may not directly purchase securities or other instruments issued by companies that manufacture cluster munitions or anti-personnel mines. The Adviser uses the definitions within the 1997 Mine Ban Treaty and the 2008 Convention on Cluster Bombs for guidance and

implementation. The Fund may purchase securities of registered investment companies, ETNs or other pooled vehicles that invest in companies that manufacture cluster munitions or anti-personnel mines.

**Fundamental Restrictions**

**U.S. Government Money Market Fund.** As a matter of fundamental policy, the Trust, on behalf of the Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp; may not borrow money, except that, as a temporary measure for extraordinary or emergency purposes, the Fund may borrow from banks in an amount not to exceed 1/3 of the value of the net assets of the Fund including the amount borrowed (moreover, the Trust (on behalf of the Fund) may not purchase any securities at any time at which borrowings exceed 5% of the total assets of the Fund) taken in each case at market value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase any security or evidence of interest therein on margin, except that the Trust may obtain such short-term credit for the Fund as may be necessary for the clearance of purchases and sales of securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp; may not act as an underwriter of securities issued by others, except to the extent it could be considered an underwriter in the acquisition and disposition of restricted securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp; may make loans to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase or sell real estate (including limited partnership interests, but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts in the ordinary course of business (the Trust reserves the freedom of action to hold and to sell for the Fund real estate acquired as a result of its ownership of securities);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp; may not "concentrate" its investments in any one industry (excluding the U.S. Government, its agencies or instrumentalities and repurchase agreements collateralized by such investments), except to the extent permitted under the 1940 Act and the rules and regulations thereunder; provided, however, that the Fund may invest without limitation in U.S. dollar-denominated obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp; may issue senior securities to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp; may not pledge, mortgage or hypothecate for any purpose in excess of 10% of the net assets of the Fund (taken at market value);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp; may not sell any security which it does not own, unless, by virtue of its ownership of other securities, it has at the time of sale a right to obtain securities, without payment of further consideration, equivalent in kind and amount to the securities sold; and provided, that, if such right is conditional, the sale is made upon the same conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp; may not invest for the purpose of exercising control or management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp; may not, taken together with any investments described in Investment Restriction (14) below, invest more than 10% of the net assets of the Fund in securities that are not readily marketable, including debt securities for which there is no established market and fixed time deposits and repurchase agreements maturing in more than seven days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase or retain any securities issued by an issuer any of whose officers, directors, trustees or security holders is an officer or Trustee of the Trust, or is an officer or director of the Adviser, if after the purchase of the securities of such issuer by the Trust, on behalf of the Fund, one or more of such persons owns beneficially more than 1/2 of 1% of the shares or securities, or both, all taken at market value, of such issuer, and such persons owning more than 1/2 of 1% of such shares or securities together own beneficially more than 5% of such shares or securities, or both, all taken at market value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp; may not write, purchase or sell any put or call option or any combination thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp; may not, taken together with any investments described in Investment Restriction (11) above, invest in securities which are subject to legal or contractual restrictions on resale (other than fixed time deposits and repurchase agreements maturing in not more than seven days) if, as a result thereof, more than 10% of the net assets of the Fund, (taken at market value) would be so invested (including fixed time deposits and repurchase agreements maturing in more than seven days);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase securities of any issuer if such purchase at the time thereof would cause more than 10% of the voting securities of such issuer to be held for the Fund; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp; may not make short sales of securities or maintain a short position, unless, at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short, and unless not more than 10% of the net assets of the Fund (taken at market value) is held as collateral for such sales at any one time.

For the purposes of interpreting the fundamental policies, securities deemed to be liquid in accordance with the procedures adopted by the Board are not included in the limitation set forth in Items 11 and 14.

**U.S. Treasury Money Market Fund.** As a matter of fundamental policy, the Trust, on behalf of the Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase securities on margin (except for short-term credits necessary for the clearance of transactions) or make short sales of securities (the deposit or payment by the Fund of initial or maintenance margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp; may not underwrite securities of other issuers, to the extent that the purchase of municipal obligations, or other permitted investments, directly from the issuer thereof or from an underwriter for an issuer and the later disposition of such securities in accordance with the Fund's investment program may be deemed to be an underwriting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp; may not invest an amount equal to 10% or more of the value of its net assets in investments which are illiquid (including repurchase agreements and fixed time deposits not subject to withdrawal penalties having maturities of more than seven calendar days);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp; may not issue senior securities, borrow money or pledge or mortgage its assets, except the Fund may borrow from banks up to 33 1/3% of the current value of the total assets of the Fund and pledge up to 33 1/3% of its assets to secure such borrowings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp; may not make loans or lend its portfolio securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase securities other than direct obligations of the U.S. Treasury or repurchase agreements pertaining thereto (there being no limit on the amount of the assets of the U.S. Treasury Fund which may be invested in the securities of any one issuer of such obligations); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp; may not purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts in the ordinary course of business (the Trust reserves the freedom of action to hold and to sell for the Fund real estate acquired as a result of its ownership of securities).

For the purposes of interpreting the fundamental policies, securities deemed to be liquid in accordance with the procedures adopted by the Board are not included in the limitations set forth in Item 3.

**ESG Prime Money Market Fund.** As a matter of fundamental policy, the Trust, on behalf of the Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp; may borrow money to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp; may issue senior securities to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp; may not act as an underwriter of securities issued by others, except to the extent it could be considered an underwriter in the acquisition and disposition of restricted securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp; may not "concentrate" its investments in any one industry (excluding the U.S. Government, its agencies or instrumentalities and repurchase agreements collateralized by such investments), except to the extent permitted under the 1940 Act and the rules and regulations thereunder; provided, however, that the Fund may invest without limitation in U.S. dollar-denominated obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp; may purchase or sell real estate or any interest therein (such as securities or instruments backed by or related to real estate) to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. &nbsp;&nbsp;&nbsp;&nbsp; may purchase or sell commodities, including physical commodities, or contracts, instruments and interests relating to commodities to the extent permitted under the 1940 Act and the rules and regulations thereunder; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp; may make loans to the extent permitted under the 1940 Act and the rules and regulations thereunder.

**Diversification and Other Measures**

Each Fund's diversification tests are measured at the time of initial purchase and calculated as specified in Rule 2a-7 under the 1940 Act, which may allow a Fund to exceed the limits specified in the Prospectus for certain securities subject to guarantees or demand features. A Fund will be deemed to satisfy the maturity requirements described in the Prospectus to the extent that the Fund satisfies the applicable maturity requirements in Rule 2a-7 under the 1940 Act. The definition of issuer for purposes of these investment restrictions is the same as that described under "Investment Objective, Policies and Restrictions" in this SAI for the purpose of diversification under the 1940 Act.

It is the intention of each Fund, unless otherwise indicated, that with respect to the Fund's policies that are the result of the application of law, the Fund will take advantage of the flexibility provided by rules or interpretations of the SEC currently in existence or promulgated in the future or changes to such laws.

**Percentage and Rating Restrictions**

If a percentage restriction or a rating restriction on investment or utilization of assets set forth above or referred to in a Fund's Prospectus is adhered to at the time an investment is made or assets are so utilized, a later change in percentage resulting from changes in the value of the securities held by a Fund or a later change in the rating of a security held by a Fund is not considered a violation of policy. However, the Adviser will consider such change in its determination of whether to continue to hold the security and provided further, that the Adviser will take appropriate steps, which may include the disposition of portfolio securities, as may be necessary to satisfy the applicable requirements of the 1940 Act and/or the rules thereunder with respect to the Fund's investments in illiquid securities or any borrowings by the Fund.

**MANAGEMENT OF THE TRUST**

**Board of Trustees**

Overall responsibility for management of HSBC Funds (the "Trust") rests with the Board. The Trustees elect the officers of the Trust and appoint service providers to manage the Trust's day-to-day operations. The Trustees meet regularly to discuss and consider matters concerning the Trust and to oversee the Trust's activities, including the investment performance of the Fund and the operation of the Trust's compliance program, and to evaluate and address potential conflicts and risks associated with the Trust's activities.

**Board Composition And Leadership Structure**. The Trust has a Board of Trustees. The Board consists of five Trustees, four of whom are not "interested persons" (as that term is defined by Section 2(a)(19) of the 1940 Act) of the Trust (the "Independent Trustees") and one who is an "interested person" (as that term

is defined by Section 2(a)(19) of the 1940 Act). The Board is responsible for the overall management of the Trust, including general supervision and review of the Trust's investment activities. The Board elects the officers of the Trust who are responsible for administering the Trust's day-to-day operations. The Trust enters into agreements with various entities to manage the day-to-day operations of the Trust, including with the Adviser, the Subadvisers (as applicable), the administrator, the transfer agent, the distributor and the custodian. The Board is responsible for selecting these service providers (based on the recommendation of the Adviser), approving the terms of their contracts with the Trust and exercising general oversight of these service providers on an ongoing basis.

The Chair of the Board, Ms. Beck, is an Independent Trustee, and, among other duties and responsibilities, serves as a point person for communications between the Trustees and the Trust's management. The Trustees interact directly with the Chair, Chairs of the Trust's standing Committees, each other, the Trust's officers, and senior management of the Adviser and other service providers of the Trust at scheduled meetings and between meetings, as appropriate.

The Board has established the following standing committees: the Audit Committee and the Nominating and Corporate Governance Committee (the "Committees") to facilitate the Trustees' effective oversight of the management of those aspects of the Trust's operations. Each Committee has a Chair, who is an Independent Trustee. Each Committee's responsibilities are discussed in greater detail below. By assigning areas of responsibility to committees of Trustees, and to the full Board, the Board's leadership structure enables it to exercise informed and independent judgment over the matters within its purview.

**Board's Role in Risk Oversight of The Trust**. The Board, as a whole, considers risk management issues as part of its general oversight responsibilities throughout the year at regular Board meetings, as does each Committee of the Trust. The Board and its Committees consider risk management through, among other things, regular reports that have been developed by management, in consultation with the Board, its Committees, and counsel. These reports address investment, valuation, liquidity, operations, and compliance matters. The Board may also receive special written reports or presentations on cybersecurity and a variety of other risk issues, either upon request or upon the Adviser's initiative. In addition, the Board meets regularly with the Adviser's internal risk department and Fund Pricing Group to review reports on their examinations of liquidity risks, and when applicable, their fair value determinations on the Funds' investment portfolios.

With respect to investment risk, the Board receives regular written reports describing and analyzing the investment performance of the Funds, which may include the comparison of the Funds' performance to their respective benchmarks and/or peer groups when applicable. In addition, investment personnel for the Funds meet regularly with the Board to discuss Fund performance, including investment risk, liquidity and market updates. Also, to the extent that a Fund changes a particular investment strategy or invests in a new type of security that could have a material effect on the Fund's risk profile, the Board generally is consulted.

With respect to valuation, pursuant to Rule 2a-5 under the 1940 Act, the Board has designated the Adviser as the "Valuation Designee." As Valuation Designee, the Adviser performs fair value determinations relating to a particular Fund's investments and is responsible for, among other things, establishing, implementing and testing fair value methodologies. The Board receives regular and other periodic written reports on valuation matters and will review, no less frequently than annually, a written report prepared by the Adviser (as Valuation Designee) that assesses the adequacy and effectiveness of its process for determining fair value.

With respect to compliance risks, the Board selects the person to serve as the Trust's CCO pursuant to Rule 38a-1 under the 1940 Act. In addition, the Board recieves regular compliance reports and meets regularly with the CCO to discuss compliance issues, including compliance risks. In accordance with SEC rules, the Independent Trustees meet regularly in executive session with the CCO, and the CCO prepares and presents an annual written compliance report to the Board. The Board also meets regularly with the Chief Compliance Officer of the Adviser. The Board adopts compliance policies and procedures for the Trust and approves such procedures of certain of the Trust's service providers, such as the Adviser and

the Subadvisers (as applicable). The compliance policies and procedures are specifically designed to detect and prevent violations of the federal securities laws. In addition, the Board oversees compliance by third-party service providers with the Trust's compliance program and assess recommendations made by the CCO concerning changes and additions to the Trust's compliance program.

**Qualifications of The Trustees.** The names of the Trustees, their addresses, ages, positions held with the Trust, principal occupation(s) during the past five years, number of portfolios in the fund complex overseen, and other directorships held by each Trustee are set forth below.

**TRUSTEES**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Name, Address<sup>(1)</sup><br> and Age** | &nbsp;&nbsp;**Position(s)<br> Held With<br> Trust** | &nbsp;&nbsp;**Length of<br> Time Served** | &nbsp;&nbsp;**Principal<br> Occupation(s) During<br> Past 5 Years** | &nbsp;&nbsp;**Portfolios<br> in Fund<br> Complex<br> Overseen<br> by Trustee<sup>(2)</sup>** | &nbsp;&nbsp;**Other<br> Directorships<br> Held By Trustee<br> During the Past 5<br> Years<sup>(3)</sup>** |
| &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** |
| &nbsp;&nbsp;Marcia L. Beck<br> Age: 67 | &nbsp;&nbsp;Trustee and Chair | &nbsp;&nbsp;Indefinite; 2008 to present | &nbsp;&nbsp;Private Investor (1999 – present) | &nbsp;&nbsp;5 |  |
| &nbsp;&nbsp;Susan C. Gause<br> Age: 70 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2013 to present | &nbsp;&nbsp;Private Investor (2003 – present) | &nbsp;&nbsp;5 | &nbsp;&nbsp;Brighthouse Funds Trust II (fka Metropolitan Series Fund) (2012 – present); Brighthouse Funds Trust II (fka Met Investors Series Trust) (2008 – present) |
| &nbsp;&nbsp;Susan S. Huang<br> Age: 68 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2008 to present | &nbsp;&nbsp;Private Investor (2000 – present) | &nbsp;&nbsp;5 |  |
| &nbsp;&nbsp;Hugh T. Hurley III<br> Age: 58 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2020 to present | &nbsp;&nbsp;Private Investor (2017 – present) | &nbsp;&nbsp;5 | &nbsp;&nbsp;Oakmark Funds (2018 – present) |
| &nbsp;&nbsp;**Interested Trustee** | &nbsp;&nbsp;**Interested Trustee** | &nbsp;&nbsp;**Interested Trustee** | &nbsp;&nbsp;**Interested Trustee** | &nbsp;&nbsp;**Interested Trustee** | &nbsp;&nbsp;**Interested Trustee** |
| &nbsp;&nbsp;Paul D. Dawe <sup>(4)</sup><br> Age: 53 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2023 to present | &nbsp;&nbsp;Chief Executive Officer and Chief Operating Officer, HSBC Global Asset Management (USA) Inc. (2020 – present); Chief Operating Officer, HSBC Global Asset Management (USA) Inc. (2011 – 2020) | &nbsp;&nbsp;5 |  |

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(1) Each Independent Trustee may be contacted
 by writing to the Trustee, c/o DST Asset Manager Solutions, Inc., P.O. Box 219691, Kansas City, MO 64121-9691, Attn: Stefano Michelagnoli.
 Mr. Dawe may be contacted by writing to the Adviser, 452 Fifth Avenue, New York, New York 10018.

(2) The "Fund Complex" is comprised of the 5
portfolios of HSBC Funds.

(3) This column includes only directorships of companies required to report to
 the SEC under the Securities Exchange Act of 1934 (*i.e*., "public companies") or other investment companies registered under
 the 1940 Act.

(4) Mr. Dawe is considered an interested Trustee (*i.e*., not independent)
 because of his affiliation with the Adviser and its affiliates.

**OFFICERS**

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Name, Address and<br> Age** | &nbsp;&nbsp;**Position(s) <br> Held With<br> Trust** | &nbsp;&nbsp;**Term of Office<br> and Length of<br> Time Served** | &nbsp;&nbsp;**Principal Occupation(s) During Past 5 Years** |
| &nbsp;&nbsp;Stefano R. Michelagnoli<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 52 | &nbsp;&nbsp;President | &nbsp;&nbsp;One year; 2020 to present | &nbsp;&nbsp;Global Head of Client Operations, HSBC Global Asset Management (USA) Inc. (June 2020 – present); Regional Head of Product (Americas), HSBC Global Asset Management (USA) Inc. (2015 – June 2020) |
| &nbsp;&nbsp;James D. Levy<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 59 | &nbsp;&nbsp;Vice President | &nbsp;&nbsp;One year; 2014 to present | &nbsp;&nbsp;Vice President, Product Management, HSBC Global Asset Management (USA) Inc. (2014 – present) |
| &nbsp;&nbsp;Maria Clem Sell <sup>(1)</sup><br> 3 Canal Plaza, Suite 100<br> Portland, ME 04101<br> Age: 45 | &nbsp;&nbsp;Treasurer | &nbsp;&nbsp;One year; November 2022 to present | &nbsp;&nbsp;Senior Principal Consultant and Fund Treasurer, ACA Global (*f/k/a* Fore-side Financial Group, LLC) (2021 - present); Director, Franklin Templeton Investments (2014 – 2021) |
| &nbsp;&nbsp;Patrick J. Keniston <sup>(1)</sup><br> 3 Canal Plaza, Suite 100<br> Portland, ME 04101 <br> Age: 59 | &nbsp;&nbsp;Chief Compliance Officer and Secretary | &nbsp;&nbsp;One year; November 2022 to present | &nbsp;&nbsp;Senior Principal Consultant, ACA Global (*f/k/a* Foreside Fund Officer Services, LLC) (2008 – present) |
| &nbsp;&nbsp;James M. Curtis<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 54 | &nbsp;&nbsp;Chief Legal Officer | &nbsp;&nbsp;One year; 2018 to present | &nbsp;&nbsp;Associate General Counsel, HSBC Technology & Services (USA) Inc. (2018-present); Associate General Counsel, HSBC Securities (USA) Inc. (2005 – 2017) |

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<sup>(1)</sup> Mr. Keniston and Ms. Sell are also officers of certain other investment companies.

**Trustee Experience, Qualifications, Attributes or Skills.** The following provides an overview of the considerations that led the Board to conclude that each individual serving as a Trustee of the Trust should so serve. The current members of the Board joined at different points in time since 2008. Generally, no one factor was decisive in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (i) the individual's business and professional experience and accomplishments, including prior experience in the financial services and investment management fields or on other boards; (ii) the individual's ability to work effectively with other members of the Board; and (iii) how the individual's skills, experiences and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.

In addition to personal qualities, such as integrity, the role of an effective Trustee inherently requires the ability to comprehend, discuss and critically analyze materials and issues presented in exercising judgments and reaching informed conclusions relevant to his or her duties and obligations. The Board believes that the specific background of each Board member (including as set forth above) evidences such ability and is appropriate to his or her serving on the Board. The Chair of the Board, Ms. Beck, has asset management operating and leadership experience, having served as President and Trustee of the Goldman Sachs Mutual Funds, an unaffiliated mutual fund complex. Ms. Huang has asset management operating and leadership experience, having served as Senior Vice President of Schroder Investment Management, a global asset management company. Mses. Beck and Huang each has experience managing risk as well as portfolios of money market and fixed income instruments, respectively. Ms. Gause has significant experience in the financial services industry, having served as, among other things, Chief Executive Officer of Dresdner RCM Global Investors and Allianz Dresdner Asset Management, a global asset management company. In that position, Ms. Gause was responsible for the day-to-day activities of the investment adviser of various registered open-end funds. In addition, Ms. Gause has served as an independent director for another mutual fund complex since 2008. Mr. Hurley has significant experience in the investment

management and capital markets industries, having served in several senior executive management roles, including as Managing Director and Global Head of Product Strategy at BlackRock, Inc., a global asset management company. Mr. Hurley is also a National Association of Corporate Directors ("NACD") Governance Fellow and is NACD Directorship Certified<sup>TM</sup>. He has a B.S. in Finance and has held roles as finance chair, treasurer, and endowment chair in his previous positions, requiring him to work closely with audit and accounting professionals. In addition, Mr. Hurley serves as an independent director for another mutual fund complex and is a member of that complex's audit committee. Mr. Dawe has asset management operating and leadership experience and is currently the Chief Executive Officer and Chief Operating Officer of HSBC Global Asset Management (USA) Inc. Previously, he was the Chief Operating Officer of the Adviser and HSBC Global Asset Management (UK) Limited. As a result of Mr. Dawe's senior position with the Adviser, Mr. Dawe has in-depth and longstanding knowledge regarding the Trust and the Funds and is in a position to, among other things, continue to foster the relationship between the Funds and the Adviser and to provide access to resources for the benefit of the Trust and the Funds.

**Committees**

The Board currently has two standing committees: Audit Committee and Nominating and Corporate Governance Committee.

**Audit Committee**. The Audit Committee is comprised of all of the Independent Trustees of the Trust. The Audit Committee is currently chaired by Mr. Hurley. Ms. Beck, Mr. Hurley and Ms. Gause are audit committee financial experts of the Trust. The primary purpose of the Audit Committee is to oversee the accounting and financial reporting policies, practices and internal controls of the Trust. The Audit Committee, among other things: (i) recommends to the Board the selection, retention and termination of an independent public accounting firm; (ii) annually reviews the scope of the proposed audit and, generally, the audit procedures to be utilized and the proposed audit fees; (iii) reviews the results of the annual audit with the independent auditors and any reports from the independent auditors concerning an audit, as presented to the Audit Committee; (iv) reviews the annual financial statements of the Funds with management and the independent auditors; (v) approves the fees to be paid by the Trust to the independent auditors for its services; and (vi) reviews the adequacy and effectiveness of internal controls and procedures with management and the independent auditors. The Audit Committee of the Trust met four times during the most recently completed fiscal year.

**Nominating and Corporate Governance Committee**. The Nominating and Corporate Governance Committee is comprised of all of the Independent Trustees of the Trust. The Committee is currently chaired by Ms. Gause. This Committee, among other things: (i) makes nominations for trustee membership on the Board or a Committee; (ii) evaluates on a periodic basis the operations and effectiveness of the Board as a whole; (iii) periodically reviews the composition of the Board to determine whether it may be appropriate to add individuals with different backgrounds or skills from those already on the Board; (iv) periodically reviews industry best practices and Board governance procedures and recommends appropriate changes to the full Board; (v) periodically reviews Trustee compensation and Committee responsibilities and recommends any appropriate changes to the full Board; (vi) reviews the retention of professional liability insurance (D&O/E&O Insurance) and investment company fidelity bonds; and (vii) reviews the independence and performance of the Independent Trustee counsel. The Nominating and Corporate Governance Committee also considers nominees recommended by shareholders. Such recommendations should be forwarded to the President of the Trust. The Nominating and Corporate Governance Committee met four times during the most recently completed fiscal year.

When evaluating a person as a potential nominee to serve as an Independent Trustee, the Nominating and Corporate Governance Committee may consider, among other factors: (i) whether or not the person is "independent" and whether the person is otherwise qualified under applicable laws and regulations to serve as a Trustee; (ii) whether or not the person is willing to serve, and willing and able to commit the time necessary for the performance of the duties of an Independent Trustee; (iii) the contribution that the person can make to the Board, with consideration being given to the person's business experience, education and such other factors as the Committee may consider relevant; (iv) the character and integrity of the person;

(v) the desirable personality traits, including independence, leadership and the ability to work with the other members of the Board; and (vi) consistency with the 1940 Act.

The process of identifying nominees involves the consideration of candidates recommended by one or more of the following: current Independent Trustees, officers, and other sources that the Committee deems appropriate.

**Fund Ownership**

Listed below for each Trustee is a dollar range of securities beneficially owned in the Funds together with the aggregate dollar range of equity securities in all registered investment companies overseen by each Trustee in the HSBC Family of Funds, as of December 31, 2022 (unless otherwise stated). As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Trustees** | &nbsp;&nbsp;**Dollar Range of<br> Equity Securities<br> in the Fund** | &nbsp;&nbsp;**Aggregate Dollar<br> Range<sup>(2)</sup> of Securities in<br> All Registered<br> Investment Companies<br> Overseen By Trustee in<br> HSBC Family of Funds** |
| &nbsp;&nbsp;**Independent Trustees** |  |  |
| &nbsp;&nbsp;Marcia L. Beck |  | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Government Money Market Fund* | &nbsp;&nbsp;$50001-$100000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Treasury Money Market Fund* |  |  |
| &nbsp;&nbsp;Susan C. Gause |  | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Government Money Market Fund* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Treasury Money Market Fund* |  |  |
| &nbsp;&nbsp;Susan S. Huang |  | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Government Money Market Fund* | &nbsp;&nbsp;$50001-$100000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Treasury Money Market Fund* |  |  |
| &nbsp;&nbsp;Hugh T. Hurley, III |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Government Money Market Fund* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Treasury Money Market Fund* |  |  |
| &nbsp;&nbsp;**Interested Trustee** |  |  |
| &nbsp;&nbsp;Paul D. Dawe |  | &nbsp;&nbsp;Over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Government Money Market Fund* | &nbsp;&nbsp;Over $100,000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*HSBC U.S. Treasury Money Market Fund* |  |  |

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<sup>(1)</sup> Mr. Dawe commenced his term as an Interested Trustee as of February 27, 2023.

<sup>(2)</sup> Ownership disclosure is made using the following ranges: None; $1 - $10,000; $10,001 - $50,000; $50,001 - $100,000 and over $100,000.

As of February 1, 2023 the Trustees and officers of the Trust as a group beneficially owned less than 1% of the outstanding shares of the Funds.

**Trustee and Officer Compensation**

For the fiscal year ended October 31, 2022, the following compensation was paid to the Trustees.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Compensation From<br> the Funds<sup>(1)</sup>** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Interested<br> Trustee** |
|  | &nbsp;&nbsp;**Marcia L.<br> Beck** | &nbsp;&nbsp;**Susan C.<br> Gause** | &nbsp;&nbsp;**Susan S.<br> Huang** | &nbsp;&nbsp;**Hugh T.<br> Hurley III** | &nbsp;&nbsp;**Paul D.<br> Dawe** **<sup>(4)</sup>** |
| &nbsp;&nbsp;U.S. Government Money Market Fund | &nbsp;&nbsp;$82392.19 | &nbsp;&nbsp;$71725.53 | &nbsp;&nbsp;$68114.13 | &nbsp;&nbsp;$71729.14 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp;U.S. Treasury Money Market Fund | &nbsp;&nbsp;$82392.22 | &nbsp;&nbsp;$71725.55 | &nbsp;&nbsp;$68114.13 | &nbsp;&nbsp;$71729.18 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp;Pension Retirement Benefits Accrued As Part Of The Funds' Expenses <sup>(2)</sup> | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Estimated Annual Benefits Upon Retirement | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Total Compensation From Funds and Fund Complex<sup>(3)</sup> Paid To Trustees | &nbsp;&nbsp;$247176.63 | &nbsp;&nbsp;$215176.63 | &nbsp;&nbsp;$204342.39 | &nbsp;&nbsp;$215187.50 | &nbsp;&nbsp;$0 |

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<sup>(1)</sup> As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations.

<sup>(2)</sup> The Trust does not accrue pension or retirement benefits as part of Fund expenses, and Trustees are not entitled to retirement benefits upon retirement from the Board.

<sup>(3)</sup> For these purposes, the Fund Complex consisted of the 5 portfolios of HSBC Funds as of October 31, 2022.

<sup>(4)</sup> Mr. Dawe commenced his term as an Interested Trustee as of February 27, 2023.

None of the officers receive compensation directly from the Funds.

As of November 7, 2022, pursuant to a Fund principal financial officer ("PFO")/Treasurer, CCO, Secretary and AMLO Agreement between the Trust and Foreside Fund Officer Services, LLC ("Foreside") ("Fund Officer Agreement"), Foreside makes individuals available to serve as the Trust's CCO, the Anti-Money Laundering Officer, Secretary, and the Principal Financial Officer and Treasurer ("PFO"). Under the Fund Officer Agreement, Foreside provides a Secretary to, as applicable, sign documents requiring Secretary's signature, attend Board and Board Committee meetings; and assist in review of any minutes of Board and Board Committee meetings. The CCO also provides infrastructure and support in implementing the written policies and procedures comprising the Funds' Compliance Program. This includes providing support services to the CCO, developing standards for reports to the Board by Foreside and other service providers, and assisting in preparing or providing documentation for the Board to make findings and conduct reviews pertaining to the Funds' Compliance Program and related policies and procedures of Fund service providers. The PFO will perform the Fund PFO services including, but not limited to, (i) assisting with the planning and coordination of the Funds' annual financial statement audit; (ii) reviewing and commenting on each Fund's financial statements and shareholder reports; and (iii) reviewing and overseeing daily Fund expense payment authorizations, periodic budget/accrual review and authorization; and (iv) performing high level review of periodic fund distributions, fund tax returns and other tax reporting. For the services provided under the Fund Officer Agreement, the Trust currently pays Foreside $205,000 per annum, plus certain out of pocket expenses. Foreside pays the salary and other compensation earned by any such individuals as employees of Foreside.

**Investment Adviser**

HSBC Global Asset Management (USA) Inc. is the investment adviser to the Funds pursuant to an investment advisory contract (the "Advisory Contract") with the Trust. For investment advisory services, the Adviser is entitled to a fee from each Fund, which is accrued daily and paid monthly, and which is based on the Fund's daily net assets, at an annual rate of 0.10%.

The Adviser has entered into a contractual expense limitation agreement ("Agreement") with the Funds with respect to the Class E Shares, Class I Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares under which it will limit total expenses of a Fund (excluding interest, taxes, brokerage commissions, extraordinary expenses and estimated indirect expenses attributable to a Fund's investments in investment companies.) The expense limitations shall be in effect until March 1, 2024. The Agreement shall terminate upon the termination of the Advisory Contract between the Trust and the Adviser, or may be terminated upon written notice to the Adviser by the Board.

In addition to the contractual expense limitation agreement with the Funds discussed above, in an effort to avoid a negative yield for the Funds, the Adviser, working in conjunction with the Funds' other service providers, has voluntarily undertaken, or will voluntarily undertake, through a combination of waivers and reductions in fees and expenses, including shareholder servicing fees, to temporarily limit net operating expenses in excess of each Fund's daily yield. The Adviser may terminate these temporary waiver and expense limitation efforts at any time and shareholders should not expect these temporary waiver and expense limitation efforts to continue indefinitely.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of advisory fees incurred by each Fund was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022^** | **2021^** | **2020^** |
| U.S. Government Money Market Fund | $42897699 | $34565724 | $28438215 |
| U.S. Treasury Money Market Fund | $3245568 | $3637213 | $3181288 |

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^ Expense does not include deductions for waivers.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of advisory fees, including deductions for waivers, incurred by each Fund was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Government Money Market Fund | $26173784 | $6137581 | $21739336 |
| U.S. Treasury Money Market Fund | $619935 | $(1099695) | $152617 |

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As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the Fund has not incurred any advisory fees.

The Advisory Contract for the U.S. Government Money Market Fund, the U.S. Treasury Money Market Fund and the ESG Prime Money Market Fund will continue in effect through December 31, 2023. Thereafter, the Advisory Contract will continue in effect with respect to each Fund for successive periods not to exceed one (1) year provided such continuance is approved at least annually by (i) the holders of a majority of the outstanding voting securities of the Funds or by the Board, and (ii) a majority of the Trustees of the Trust who are not parties to the Advisory Contract or "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any such party. Notwithstanding the foregoing, the Advisory Contract may be terminated with respect to a Fund without penalty by either party on 60 days' written notice and will terminate automatically in the event of its assignment within the meaning of the 1940 Act.

The Adviser, located at 452 Fifth Avenue, New York, New York 10018, is a wholly-owned subsidiary of HSBC USA, Inc., a registered bank holding company. No securities or instruments issued by HSBC USA Inc. will be purchased for a Fund.

The Advisory Contract for the Funds provides that the Adviser will manage the portfolio of each Fund and will furnish to each of the Funds investment guidance and policy direction in connection therewith. The Adviser has agreed to provide the Trust with, among other things, information relating to composition, credit conditions and average maturity of the portfolio of each Fund. Pursuant to the Advisory Contract, the Adviser also furnishes to the Board periodic reports on the investment performance of each Fund.

The Adviser and the Trust have also entered into an Operational Support Services Agreement, under which the Adviser provides certain support services in connection with the operation of certain Classes of shares of the Funds. For its services, the Adviser is entitled to a fee from each Fund, computed daily and paid monthly, equal on an annual basis to 0.10% of the Fund's average daily net assets, with the exception of assets attributable to Class E and Class I Shares.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of operational support services fees incurred by each Fund was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022^** | **2021^** | **2020^** |
| U.S. Government Money Market Fund | $7079731 | $5504558 | $5111071 |
| U.S. Treasury Money Market Fund | $1635813 | $1469090 | $1351555 |

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^ Expense does not include deductions for waivers.

As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the Fund has not incurred any operational support services fees.

If the Adviser were prohibited from performing any of its services for the Trust under the Advisory Contract or the Operational Support Services Agreement, it is expected that the Board would recommend

to the Funds' shareholders that they approve new agreements with another entity or entities qualified to perform such services and selected by the Board.

The investment advisory services of the Adviser provided to the Funds are not exclusive under the terms of the Advisory Contract. The Adviser is free to and does render investment advisory services to others.

The Trust and the Adviser have each received an exemptive order from the SEC that allows the Adviser to enter into new investment sub-advisory contracts and to make material changes to existing sub-advisory contracts with certain unaffiliated subadvisers with the approval of the Board, but without shareholder approval. This authority is subject to certain conditions, including the requirement that the Trustees (including a majority of Independent Trustees) of the Trust must approve any new or amended agreements with subadvisers. In accordance with the exemptive order received from the SEC, an information statement providing details about the appointment of the new subadviser will be mailed to shareholders within 90 days of the change in subadviser. Shareholders will also receive an information statement describing material changes to a sub-advisory contract between the Adviser and a subadviser within 90 days of the material change. The Adviser remains responsible for the performance of each Fund, oversees subadvisers to ensure compliance with each Fund's investment policies and guidelines, and monitors each subadviser's adherence to its investment style and performance results in order to recommend any changes in a subadviser to the Board.

In the future, the Trust and the Adviser may, on behalf of the U.S. Government Money Market Fund or the ESG Prime Money Market Fund, receive an additional exemptive order that would allow the Adviser to implement new investment sub-advisory contracts and to make material changes to existing sub-advisory contracts with subadvisers that are affiliated with the Adviser with the approval of the Board of Trustees, but without shareholder approval. As with the current order, the new order would be subject to certain conditions, including that the Government Money Market Fund or the ESG Prime Money Market Fund, as appropriate, would notify shareholders and provide them with certain information upon the hiring of a subadviser.

None of the Funds covered by this SAI currently uses the services of a subadviser.

**Distribution Plans- Class A, Class C, and Class D Shares Only**

The Trust has adopted Distribution Plans (the "Distribution Plans") with respect to the Class A Shares (the "Class A Plan"), the Class C Shares (the "Class C Plan"), and the Class D Shares (the "Class D Plan") of the Funds. The Distribution Plans provide that they may not be amended to increase materially the costs which the Class A Shares, Class C Shares and Class D Shares may bear pursuant to the Class A Plan,

Class C Plan or Class D Plan without approval by shareholders of the Class A Shares, Class C Shares or Class D Shares, respectively, and that any material amendments of the Distribution Plans must be approved by the Board, and by the Independent Trustees of the Trust that have no direct or indirect financial interest in the operation of the Distribution Plans or in any related agreement ("Qualified Trustees"), by vote cast at a meeting called for the purpose of considering such amendments. The selection and nomination of the Qualified Trustees has been committed to the discretion of the Independent Trustees. The Distribution Plans have been approved, and are subject to annual approval, by the Board and by the Qualified Trustees, by vote cast at a meeting called for the purpose of voting on the Distribution Plans. The Board approved the Distribution Plans to stimulate sales of shares of the Funds in the face of competition from a variety of other investment companies and financial products. In approving the Distribution Plans, the Board considered the potential advantages to shareholders of the Funds of continued growth of the asset bases of the Funds (including greater liquidity, more investment flexibility and possible achievement of greater economies of scale). In adopting the Class A Plan, Class C Plan and Class D Plan, the Trustees considered alternative methods to distribute the Class A Shares, Class C Shares and Class D Shares and to reduce each class' expense ratio. The Trustees concluded that there was a reasonable likelihood that each Distribution Plan will benefit the respective class and that class' shareholders. The Distribution Plans are terminable with respect to the Class A Shares, Class C Shares or Class D Shares at any time by a vote of a majority of the Qualified Trustees or by vote of the holders of a majority of that class.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of distribution fees incurred by each Fund was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022^** | **2021^** | **2020^** |
| U.S. Government Money Market Fund | $0 | $0 | $0 |
| U.S. Treasury Money Market Fund | $0 | $0 | $0 |

---

^ Expense does not include deductions for waivers.

**The Distributor**

The Distributor, a wholly-owned subsidiary of Foreside Financial Group, LLC, doing business as ACA Group, is a member of FINRA. The Distributor's address is Three Canal Plaza, Suite 100, Portland, ME 04101. Foreside serves as distributor to the Funds under a Distribution Agreement with the Trust (the "Distribution Agreement"). Unless otherwise terminated, the Distribution Agreement will continue in effect for successive annual periods if, as to each Fund, such continuance is approved at least annually by (i) the vote of a majority of those members of the Board who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any such party, cast at a meeting for the purpose of voting on such approval and (ii) by the vote of the Board or the vote of a majority of the outstanding voting securities of such Fund. Under the terms of the Distribution Agreement, Foreside acts as the agent of the Trust in connection with the continuous offering of shares of the Funds. The Distributor continually distributes shares of the Funds on a best efforts basis. The Distributor is not affiliated with the Adviser, or any of its affiliates. The Distributor has no obligation to sell any specific quantity of Fund shares. The Distributor and its officers have no role in determining the investment policies or which securities are to be purchased or sold by the Trust.

Foreside has entered into a Distribution Services Agreement with the Adviser in connection with Foreside's services as distributor of the Funds pursuant to which the Adviser undertakes to pay Foreside amounts owed to Foreside under the terms of the Distribution Agreement to the extent that the Funds are not otherwise authorized to make such payments. The payments made by the Adviser to the Distributor do not represent an additional expense to a Fund or its shareholders.

Pursuant to the Distribution Plans adopted by the Trust, the Distributor is reimbursed by the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund monthly for costs and expenses incurred by the Distributor in connection with the distribution of Class A Shares, Class C Shares and Class D Shares of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund and for the provision of certain shareholder services with respect to these Shares. Payments to the Distributor are for various types of activities, including: (1) payments to broker-dealers which advise

shareholders regarding the purchase, sale or retention of Class A Shares, Class C Shares and Class D Shares of the Funds and which provide shareholders with personal services and account maintenance services ("service fees"), (2) payments to employees of the Distributor, and (3) printing and advertising expenses. Pursuant to the Class A and Class D Plans, the amount of the Distributor's reimbursement from a Fund may not exceed, on an annual basis, 0.25% of the average daily net assets of the Fund represented by Class A Shares and Class D Shares, respectively, outstanding during the period for which payment is being made. Pursuant to the Class C Plan, such payments by the Distributor to broker-dealers may be in amounts on an annual basis of up to 0.75% of U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund's average daily net assets as presented by Class C Shares outstanding during the period for which payment is being made. The aggregate fees paid to the Distributor pursuant to the Distribution Plans, and to shareholder servicing agents ("Shareholder Servicing Agents") pursuant to the Shareholder Services Plan (as discussed below), will not exceed, on an annual basis, 0.60%, 1.00%, 0.25%, 0.10%, 0.05%, 0.10% and 0.05%, of a Fund's average daily net assets represented by Class A Shares, Class C Shares, Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares, respectively, outstanding during the period for which payment is being made. Salary expenses of Foreside personnel who are responsible for marketing shares of the various series of the Trust may be allocated to such series on the basis of average net assets; travel expenses are allocated to, or divided among, the particular series for which they are incurred. The distribution fees collected from the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund by Foreside are used to pay commissions for the sale of Fund shares.

The Funds are not liable for distribution and shareholder servicing expenditures made by the Distributor in any given year in excess of the maximum amount payable under the Distribution Plans in that year.

**Payments to Financial Intermediaries**

The Adviser and/or its affiliates may, out of their own resources, and without cost to any Fund, provide compensation, which may be significant, to selected financial intermediaries to promote the sale, distribution and/or servicing of shares of the Funds ("Payments"). These arrangements are sometimes referred to as "revenue sharing" arrangements. Since these Payments are made out of the resources of the Adviser and/or its affiliates, they do not represent an additional charge to the Funds or their shareholders. Accordingly, these Payments are not reflected in the fee and expense tables in the Prospectus. In addition, these Payments do not change the price paid by investors for the purchase of a Fund's shares or the amount a Fund receives as proceeds from such purchases. These Payments are in addition to commissions and 12b-1 fees, shareholder servicing fees and sales charges borne by applicable shareholders.

The Adviser and/or its affiliates make these Payments primarily to compensate financial intermediaries for, among other things: marketing shares of the Funds, which may consist of Payments relating to the inclusion of the Funds on a financial intermediary's platform or portal or in certain advisory programs from time to time sponsored by the financial intermediaries; educational programs; scheduled interactions with the financial intermediaries' registered representatives or salespersons, including at conferences or seminars; provision of training and educational programs; marketing support fees for providing assistance in promoting the sale of Fund shares; and/or other specified and relevant services intended to assist in the sale, distribution, and/or servicing of Fund shares. With respect to certain financial intermediaries and related fund "supermarket" platform arrangements, the Funds and/or the Adviser, rather than the Distributor, typically enter into such agreements. These financial intermediaries may charge a fee for their services. These financial intermediaries may otherwise act as processing agents and are responsible for promptly transmitting purchase, redemption and other requests to the Funds.

In addition, the Adviser and/or its affiliates may, out of their own resources, and without cost to any Fund, make Payments (including through sub-transfer agency and networking arrangements) for sub-accounting, administrative and/or shareholder processing services that are in addition to the transfer agent, shareholder administration, servicing and processing fees paid by the Funds. These Payments may exceed amounts earned on these assets by the Adviser and/or its affiliates for the performance of these or similar services.

Generally, the Adviser and/or its affiliates negotiate the amount of Payments on an individual basis with each financial intermediary. In determining the amount of Payments to be made, the Adviser and/or its affiliates may consider a number of factors, including, without limitation, asset mix and length of relationship with the financial intermediary; the size of the customer/shareholder base of the financial intermediary; the manner in which customers of the financial intermediary make investments in the Funds; the nature and scope of services provided by the financial intermediary; and the costs incurred by the financial intermediary in connection with maintaining the infrastructure necessary or desirable to support investments in the Funds along with any other relevant factor that the Funds deem appropriate. Historically, these Payments have generally been structured as a percentage of average net assets attributable to the financial intermediary, but may also be structured as a fixed dollar amount, or a combination of the two, or may be calculated on another appropriate basis. Typically, the annual Payments to a financial intermediary are not expected to exceed 0.25% of a Fund's average net assets. The Adviser and/or its affiliates expect to periodically determine the advisability of continuing these Payments.

For the year ended December 31, 2022, the Adviser and/or its affiliates made Payments, related to 2022, out of their own assets to approximately 23 financial intermediaries (in addition to financial intermediaries), totaling approximately $23.9 million (excluding Payments made through sub-transfer agency and networking arrangements and certain other types of Payments described below), with respect to all funds of the Trust (including the Funds in this SAI). During this time, the Adviser has also made similar payments to its affiliates.

Periodically, and where appropriate, the Adviser and/or its affiliates may enter into similar arrangements with other financial intermediaries. Thus, the number of financial intermediaries that receive Payments is subject to change at any time without notice.

From time to time, and subject to applicable regulations, the Adviser and/or its affiliates may also be involved in cash and non-cash compensation arrangements with financial intermediaries to promote the sale of Fund shares in the form of, for example: occasional gifts; occasional meals, tickets or other entertainment; and/or sponsorship support of regional or national events. Subject to applicable FINRA regulations and other legal requirements, the Adviser and/or its affiliates may pay costs and expenses associated with these efforts (e.g., travel, lodging, entertainment and meals). Other compensation may also be offered from time to time to the extent not prohibited by applicable federal or state laws or FINRA regulations. This compensation is not included in, and is made in addition to, the Payments described above.

The Adviser and/or its affiliates may be incentivized to make Payments since they promote the sale and retention of Fund shares to clients of the financial intermediaries. When financial intermediaries sell or retain more shares of the Funds, the Adviser and/or its affiliates benefit from the incremental management and other fees paid by the Funds with respect to those assets.

The compensation or reimbursement received by financial intermediaries through commissions, sales charges, fees payable from the Funds, and/or revenue sharing arrangements may be more or less than the overall compensation or reimbursement on similar or other products and may influence your financial intermediary to introduce and recommend the Funds over other similar investment options. In addition, depending on the arrangements in place at any particular time, this compensation or reimbursement creates a conflict of interest for financial intermediaries as they may have a financial incentive for recommending a Fund (or a particular share class of a Fund) over another investment.

Although a Fund may use financial intermediaries that sell Fund shares to effect transactions for the Fund's portfolio, the Fund and the Adviser will not consider the sale of Fund shares as a factor when choosing financial intermediaries to effect those transactions.

Shareholders may obtain more information about these arrangements, including the conflicts of interests that such arrangements create, from their financial intermediaries and should so inquire if they would like additional information. Shareholders are encouraged to ask their financial intermediary how their respective financial intermediary will be compensated for investments made in the Funds.

Investors who purchase shares through financial intermediaries will be subject to the procedures of those intermediaries through which they purchase shares, which may include charges, investment minimums, cutoff times and other restrictions in addition to, or different from, those listed herein. Information concerning any charges or services will be provided to customers by the financial intermediary through which they purchase shares. Investors purchasing shares of the Funds through financial intermediaries should acquaint themselves with their financial intermediary's procedures and should read the Prospectus in conjunction with any materials and information provided by their financial intermediary. The financial intermediary, and not its customers, will be the shareholder of record, although costumers may have the right to vote shares depending upon their arrangement with the financial intermediary. The Distributor does not receive compensation from the Funds for its distribution services except the distribution/service fees with respect to the shares of those classes and Funds for which a Rule 12b-1 Plan is effective. However, the Adviser pays the Distributor a fee for certain distribution-related services.

**Administrator and Sub-Administrator**

Pursuant to an Amended and Restated Administration Services Agreement, the Adviser serves as the Trust's administrator (the "Administrator"), and in that role oversees and coordinates the activities of other service providers and monitors certain aspects of the Trust's operations. The Amended and Restated Administration Services Agreement was renewed for the one (1) year period ending December 31, 2023 and may be terminated upon not more than 60 days written notice by either party. The administration fee, computed daily and paid monthly (or at such times as the Adviser shall request), is equal on an annual basis to two basis points (0.02%) of average daily net assets.

The fee rate is determined on the basis of the aggregate average daily net assets of the HSBC Family of Funds. The total administration fee to be paid to the Administrator is allocated to each of the funds in the HSBC Family of Funds based upon its proportionate share of the aggregate net assets of the HSBC Family of Funds, and then allocated to each class of shares on a class basis.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of administration fees incurred by each Fund was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022^** | **<u>2021^</u>** | **<u>2020^</u>** |
| U.S. Government Money Market Fund | $13268768 | $11171907 | $9472636 |
| U.S. Treasury Money Market Fund | $1009076 | $1174693 | $1060920 |

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^ Expense does not include deductions for waivers.

As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the Fund has not incurred any administration fees.

Effective as of November 7, 2022, State Street Bank and Trust Company ("State Street"), One Lincoln Street, Boston, MA 02111 replaced Citi Fund Services Ohio, Inc. as the sub-administrator of the Trust. State Street provides fund administration, regulatory administration, custody and fund accounting services and certain other services pursuant to a Master Services Agreement with the Trust. For its services, State Street is entitled to a fee, payable by the Funds, based primarily on a Fund's net assets, subject to per Fund fees, miscellaneous fees and reimbursements of certain expenses.

**Transfer Agent**

Effective as of November 7, 2022, State Street replaced SS&C Global Investor and Distribution Solutions (formerly, DST Asset Manager Solutions, Inc.) ("SS&C") as the transfer agent of the Trust, although State Street has delegated its responsibilities to SS&C and SS&C continues to provide transfer agency services to the Trust. SS&C maintains an account for each shareholder of record, performs other transfer agency functions and acts as dividend disbursing agent for the Trust. The principal business address of SS&C is 2000 Crown Colony Drive, Quincy, Massachusetts 02169-0953.

**Custodian and Fund Accounting Agent**

Effective as of November 7, 2022, State Street replaced The Northern Trust Company as the custodian of the Trust and Citi Fund Services Ohio, Inc. as fund accounting agent. State Street provides custodial services and act as fund accounting agent pursuant to a Master Services Agreement with the Trust. State Street's responsibilities as custodian include safeguarding and controlling each Fund's cash and securities, handling the receipt and delivery of securities, determining income and collecting interest on each Fund's investments, maintaining books of original entry for portfolio and fund accounting and other required books and accounts in order to calculate the daily NAV of Shares of each Fund. Securities held for each Fund may be deposited into the Federal Reserve-Treasury Department Book Entry System or the Depository Trust Company. State Street does not determine the investment policies of the Funds or decide which securities will be purchased or sold for the Funds. For its services, State Street is entitled to a fee, payable by the Funds, based primarily on a Fund's net assets, subject to per Fund fees, miscellaneous fees and reimbursements of certain expenses.

Prior to November 7, 2022, Citi Fund Services Ohio, Inc. served as fund accounting agent to each Fund. For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of fund accounting fees incurred by the Funds was:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Government Money Market Fund | $70159 | $77222 | $77470 |
| U.S. Treasury Money Market Fund | $57464 | $58337 | $57844 |

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As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the Fund has not incurred any fund accounting fees.

**Shareholder Services Plan and Shareholder Servicing Agents**

The Trust has adopted a Shareholder Services Plan with respect to the Class A Shares, Class C Shares, Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares which provides that the Trust may obtain the services of certain financial institutions and securities brokers, as Shareholder Servicing Agents that shall, as agents for their customers who purchase the Funds' Class A Shares, Class C Shares, Class D, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares, perform certain shareholder account, administrative and service functions for such customers, and may enter into agreements providing for the payment of fees for such services. The Shareholder Services Plan continues in effect indefinitely if such continuance is specifically approved at least annually by a vote of both a majority of the Trustees and a majority of the Trustees who are not "interested persons" of the Trust and who have no direct or indirect financial interest in the operation of the Shareholder Services Plan or in any agreement related to such Plan ("Qualified Trustees"). The Shareholder Services Plan may be terminated at any time by a vote of a majority of the Qualified Trustees or with respect to a particular Class of Shares by a majority vote of the outstanding voting securities of that class. The Shareholder Services Plan may not be amended to increase materially the amount of permitted expenses thereunder with respect to the Class A Shares, Class C Shares, Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares or Class P Shares without the approval of a majority of shareholders of the particular class, and may not be materially amended in any case without a vote of the majority of both the Trustees and the Qualified Trustees.

The Trust has entered into a shareholder servicing agreement (a "Shareholder Servicing Agreement") with certain Shareholder Servicing Agents, including HSBC, pursuant to which the Shareholder Servicing Agent, as agent for its customers, among other things: answers customer inquiries regarding account status and history, the manner in which purchases, exchanges and redemptions of Class A Shares, Class C Shares, Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares of the Funds may be effected and certain other matters pertaining to the Funds; assists shareholders in designating and changing dividend options, account designations and addresses; provides necessary personnel and facilities to establish and maintain shareholder accounts and records; assists in processing purchase and redemption transactions; arranges for the wiring of funds; transmits and receives funds in

connection with customer orders to purchase or redeem Shares; verifies and guarantees shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; furnishes (either separately or on an integrated basis with other reports sent to a shareholder by a Shareholder Servicing Agent) monthly and year-end statements and confirmations of purchases and redemptions; transmits, on behalf of the Trust, proxy statements, annual reports, updated prospectuses and other communications from the Trust to the Funds' shareholders; receives, tabulates and transmits to the Trust proxies executed by shareholders with respect to meetings of shareholders of the Funds or the Trust; and provides such other related services as the Trust or a shareholder may request. With respect to Class A Shares, Class C Shares,

Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares, each Shareholder Servicing Agent receives a fee from the Funds for these services, which may be paid periodically, determined by a formula based upon the number of accounts serviced by such Shareholder Servicing Agent during the period for which payment is being made, the level of activity in accounts

serviced by such Shareholder Servicing Agent during such period, and the expenses incurred by such Shareholder Servicing Agent.

The Trust understands that some Shareholder Servicing Agents also may impose certain conditions on their customers, subject to the terms of the Prospectus, in addition to or different from those imposed by the Trust, such as requiring a different minimum initial or subsequent investment, account fees (a fixed amount per transaction processed), compensating balance requirements (a minimum dollar amount a customer must maintain in order to obtain the services offered), or account maintenance fees (a periodic charge based on a percentage of the assets in the account or of the dividends paid on those assets). Each Servicing Agent has agreed to transmit to its customers who are holders of Shares appropriate prior written disclosure of any fees that it may charge them directly and to provide written notice at least 30 days prior to the imposition of any transaction fees. Conversely, the Trust understands that certain Shareholder Servicing Agents may credit to the accounts of their customers from whom they are already receiving other fees amounts not exceeding such other fees or the fees received by the Shareholder Servicing Agent from the Fund with respect to those accounts.

For the fiscal year ended October 31, 2022, 2021 and, 2020, the Funds incurred the following shareholder servicing expenses:

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022^** | **2021^** | **2020^** |
| U.S. Government Money Market Fund | $6209064 | $6551703 | $6415487 |
| U.S. Treasury Money Market Fund | $1240949 | $1029779 | $755218 |

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| | |
|:---|:---|
| **^** | Expense does not include deductions for waivers. |

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As of the date of this SAI, the ESG Prime Money Market Fund has not commenced operations. As such, the Fund has not incurred any fund shareholder servicing expenses.

**Federal Banking Law**

The Gramm-Leach-Bliley Act of 1999 repealed certain provisions of the Glass-Steagall Act that had previously restricted the ability of banks and their affiliates to engage in certain mutual fund activities. Nevertheless, HSBC USA's and the Adviser's activities remain subject to, and may be limited by, applicable federal banking law and regulations. HSBC USA and the Adviser believe that they possess the legal authority to perform the services for the Funds contemplated by the Prospectus, this SAI, and the Advisory Contract without violation of applicable statutes and regulations. If future changes in these laws and regulations were to limit the ability of HSBC USA and the Adviser to perform these services, the Board would review the Trust's relationship with HSBC USA and the Adviser and consider taking all actions necessary in the circumstances, which could include recommending to shareholders the selection of another qualified adviser or, if that course of action appeared impractical, that the Funds be liquidated.

Entities that are part of banking organizations, such as the Adviser and its affiliates, are subject to extensive government regulation. Government regulation may change frequently and may have significant effects,

including limiting the ability of the Adviser and its affiliates from engaging in certain trading activities, which may adversely impact a Fund. For example, the so-called "Volcker Rule" prohibits the Adviser and its affiliates from engaging in certain trading activities. A Fund may be adversely impacted by this rule if the Adviser or its affiliates own 25% or more of a Fund's shares outside of any seeding period permitted by the rule. These restrictions may prevent a Fund from maintaining sufficient seed capital and may cause the Fund to liquidate at the end of the period if the Fund is not able to achieve sufficient scale. Other restrictions, including restrictions on trading and transactions with affiliates, can also apply. Funds that are not managed by entities that are part of banking organizations are not subject to these limitations.

**Expenses**

Except for the expenses paid by the Adviser and the Distributor, the Funds bear all costs of their operations. Expenses attributable to a class ("Class Expenses") shall be allocated to that class only. Class Expenses with respect to the Class A Shares, Class C Shares, Class D Shares, Class E Shares, Intermediary Shares, Intermediary Service Shares and Class P Shares must include payments made pursuant to their respective Distribution Plan or Shareholder Services Plan. In the event a particular expense is not reasonably allocable by class or to a particular class, it shall be treated as a Fund expense or a Trust expense. Trust expenses directly related to a Fund are charged to the Fund; other expenses are allocated among the applicable series of the Trust in relation to the net assets of each Fund equally or another appropriate basis.

**Proxy Voting**

The Trust has adopted Proxy Voting Policies that delegate the responsibility of voting proxies to the Adviser. In an effort to avoid conflicts of interest, the Adviser has, in turn, engaged Institutional Shareholder Services Inc. ("ISS") to provide proxy voting and related services and has delegated responsibility for voting proxies on behalf of the Funds to ISS. A summary of ISS' proxy voting guidelines is attached as an appendix to this SAI.

Information regarding how the Funds voted proxies relating to portfolio securities during the 12-month period ending June 30, 2022 is available (i) without charge, upon request, by calling 1-800-782-8183; and (ii) on the SEC's website at http://www.sec.gov.

**DETERMINATION OF NET ASSET VALUE**

The net asset value per share (NAV) of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund is determined every hour starting at 8:00 a.m. Eastern time, and the NAV of the ESG Prime Money Market Fund is determined at 8:00 a.m., 12:00 p.m. (noon) and 3:00 p.m. Eastern time on each day on which U.S. bond markets are open for trading (a "Money Market Business Day''). The final NAV is determined at 5:00 p.m. Eastern time for the U.S. Government Money Market Fund and at 2:00 p.m. Eastern time for the U.S. Treasury Money Market Fund. The Funds reserve the right to amend the times at which they determine NAV, or to determine NAV more or less frequently. The Funds reserve the right to close early based on recommendations by the Securities Industry and Financial Markets Association. If such closing time is prior to the time at which the Funds currently determines their NAV, the earlier closing time will be treated as the last time by which orders on that Money Market Fund Business Day must be received and NAV is calculated.

An order for shares of any Fund received in good order on a Money Market Business Day prior to the last determination of the NAV for that Fund will receive the dividend declared for the Fund on that Money Market Business Day. An order for shares of a Fund received in good order on a Money Market Business Day after the last NAV determination for that Fund will be effected at the first NAV determined on the next Money Market Business Day, and will start earning dividends on that Money Market Business Day. Orders for shares accepted on a Money Market Business Day after the last NAV determination will not earn dividends or receive any other compensation until those orders settle the following Money Market Business Day.

*<u>U.S. Government Money Market Fund and U.S. Treasury Money Market Fund</u>*

In the event the Board deems it necessary to establish NAVs for one or more Funds by utilizing available market quotations instead of the amortized cost method, the Board may discontinue the hourly calculation of NAVs for one or more Funds, in favor of a once-daily NAV calculation. In such circumstances, the NAV for the Funds would be determined daily at 5:00 p.m. Eastern Time for the U.S. Government Money Market Fund and at 2:00 p.m. Eastern Time for the U.S. Treasury Money Market Fund, until such time as the Board determines to reinstate the hourly NAV calculations. It is anticipated that the NAV of each class of shares will remain constant at $1.00, although no assurance can be given that the net asset value will remain constant on a continuing basis.

The Trust uses the amortized cost method to determine the value of each Fund's portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method involves valuing an obligation at its cost and amortizing any discount or premium over the period until maturity, regardless of the impact of fluctuating interest rates on the market value of the security. During these periods, the yield to a shareholder may differ somewhat from that which could be obtained from a similar fund which utilizes a method of valuation based upon market prices. Thus, during periods of declining interest rates, if the use of the amortized cost method resulted in a lower value of a Fund's portfolio on a particular day, a prospective investor in the Fund would be able to obtain a somewhat higher yield than would result from an investment in a fund utilizing solely market values, and existing Fund shareholders would receive correspondingly less income. The converse would apply during periods of rising interest rates.

Rule 2a-7 provides that, in order to value its portfolio using the amortized cost method, a Fund must maintain a dollar-weighted average portfolio maturity of 60 days or less and a dollar-weighted average portfolio life of 120 days or less (as calculated in accordance with Rule 2a-7) and only purchase securities having remaining maturities of (or deemed maturities of) 397 days or less, which are determined by the Trust's Board to be of high quality with minimal credit risks. Pursuant to Rule 2a-7, the Board has established procedures designed to stabilize, to the extent reasonably possible, the price per share of the Fund, as computed for the purpose of sales and redemptions, at $1.00. Such procedures include review of a Fund's portfolio holdings by the Board to determine whether the NAV of the Fund calculated by using available market quotations deviates from the $1.00 per share valuation based on amortized cost. The extent of any deviation is examined by the Board. If such deviation exceeds $0.050, the Board will promptly consider what action, if any, will be initiated. In the event the Board determines that a deviation exists which may result in material dilution or other unfair results to investors or existing shareholders, the Board will take such corrective action as it regards as necessary and appropriate, which may include suspending redemptions in order to liquidate a Fund in an orderly manner, selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity, withholding part or all of dividends or establishing a NAV per share by using available market quotations.

*<u>ESG Prime Money Market Fund</u>*

The value of assets in the Fund's portfolio is determined on the basis of their market value, or where market quotations are not readily available or are deemed unreliable due to a significant event or otherwise, based on fair value in accordance with procedures approved by the Adviser and the Board. The securities in which the Fund invests do not typically have readily available market quotations because these securities are not actively traded in the secondary markets. To value these securities, the Adviser will generally consider evaluated prices from third-party pricing services. Debt obligations with maturities of 60 days or less may be valued at amortized cost (provided that amortized cost is approximately the same as fair value) or on the basis of their market value. Although the Fund is a money market fund, the NAV of the Fund's shares will fluctuate with changes in the values of the Fund's portfolio securities.

*<u>All Funds</u>*

Subject to the Trust's compliance with applicable regulations, the Trust on behalf of each Fund has reserved the right to pay the redemption or repurchase price of shares, either totally or partially, by a distribution in kind of portfolio securities (instead of cash), as applicable. The securities so distributed would be valued at the same amount as that assigned to them in calculating the NAV for the shares being sold. If a shareholder received a distribution in kind, the shareholder could incur brokerage or other charges in converting the securities to cash.

**Purchase of Shares**

Shares may be purchased through the Funds, Shareholder Servicing Agents or Securities Brokers (as defined below). Class A Shares and Class Y Shares of the U.S. Government Money Market and U.S. Treasury Money Market Funds are continuously offered for sale at NAV (normally $1.00 per share) with no front-end sales charge to the public, and to customers of securities brokers that have entered into a dealer agreement with the Distributor ("Securities Brokers") or a financial institution, including a federal or state-chartered bank, trust company or savings and loan association, that has entered into a Shareholder Servicing Agreement with the Trust or the Distributor (together with Securities Brokers, "Servicing Agents"). Class Y Shares are subject to certain minimum investment requirements, as are Class E, Intermediary Shares, Intermediary Service Shares, Class I Shares and Class P Shares. Class E shares of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund are offered primarily for investments through portal providers, intermediaries (anyone facilitating the purchase of the Funds by their clients), and institutional direct clients, if they meet the minimum investment. Class I Shares of each Fund are offered primarily for direct investment by institutional investors. In addition, investment companies and products advised by the Adviser or its affiliates, employees of the Adviser, and members of the Board are eligible to invest in Class I Shares. Class D shares are similar to Class A shares, except that Class D shares of each Fund are offered to clients of the Adviser and its affiliates and are subject to lower operating expenses. Intermediary Shares, Intermediary Service Shares and Class P Shares of each Fund are offered primarily through intermediaries (anyone facilitating the purchase of the Fund by their clients) and bank sweep programs.

Class C Shares of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund are not offered for sale but are only offered as an exchange option for Class C shareholders of the Trust's other investment portfolios who wish to exchange some or all of those Class C shares for Class C Shares of the Funds. Although Class C Shares of the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund are not subject to a sales charge when a shareholder exchanges Class C shares of another Trust portfolio for Class C Shares of the Fund, they may be subject to a contingent deferred sales charge when they are redeemed. See "Contingent Deferred Sales Charge ("CDSC") -- Class C Shares" below. Class C Shares are also available to customers or HSBC sweep programs.

An order to purchase shares of the Funds that is received in good order prior to the close of business on a Money Market Business Day is effected on that day at the next determined NAV per share. In general, "good order" means that payment for your purchase and all the information needed to complete your order must be received by the Fund or the Fund's Transfer Agent before your order is processed. Shares purchased earn dividends from and including the day the purchase is effected. The Trust intends the Funds to be as fully invested at all times as is reasonably practicable in order to enhance the yield on its assets. Each Shareholder Servicing Agent or Securities Broker is responsible for and required to promptly forward orders for Shares to the Fund's transfer agent.

While there is no sales load on purchases of shares, the Distributor may receive fees from the Funds. See "Management of the Trust" and "The Distributor" above. Other funds which have investment objectives similar to those of the Funds but which do not pay some or all of such fees from their assets may offer a higher yield.

All purchase payments are invested in full and fractional Shares. The Trust reserves the right to cease offering shares for sale at any time or to reject any order for the purchase of Shares.

**Exchange Privilege – U.S. Government Money Market Fund and U.S. Treasury Money Market Fund Only**

By contacting the Transfer Agent or his Shareholder Servicing Agent or his Securities Broker, a shareholder of the Funds may exchange some or all of his Shares for shares of a corresponding class of another fund within the HSBC Family of Funds. By contacting the Transfer Agent or his Shareholder Servicing Agent or his Securities Broker, a shareholder of a Fund may exchange some or all of his Shares at NAV without a sales charge for Shares of the same class offered with the same or lower sales charge by another fund within the HSBC Family of Funds. Exchanges for Shares with a higher sales charge may be made upon payment of the sales charge differential.

An investor will receive Class A Shares of the Money Market Funds in exchange for Class A Shares of another fund within the HSBC Family of Funds, unless the investor is eligible to receive Class D Shares of the Money Market Funds, in which case the investor may receive Class D Shares of a Money Market Fund in exchange for such Class A Shares. Class D Shares may be exchanged for Class D Shares of other Money Market Funds. Class C Shares may be exchanged for shares of the same class of one or more of the Money Market Funds or other funds within the HSBC Family of Funds at NAV. Class E Shares, Intermediary Shares, Intermediary Service Shares, Class I Shares, Class P Shares and Class Y Shares may be exchanged for a corresponding class of the Money Market Funds or exchanged for Class I Shares of non-money market funds within the HSBC Family of Funds at NAV without a front-end sales charge provided that the amount to be exchanged meets the applicable minimum investment requirements. In each case, the exchange is conditioned upon being made in states where it is legally authorized. Exchanges of Class A Shares for Class A Shares of one or more funds within the HSBC Family of Funds may be made upon payment of the applicable sales charge, unless previously paid or otherwise exempt. Shareholders of Class A Shares and Class D Shares of the Funds who were shareholders as of December 31, 1997 will be grandfathered with respect to the funds within the HSBC Family of Funds and will be exempt from having to pay a sales charge on any new purchases of Class A Shares or Class D Shares of the Funds. An exchange of Class C Shares will not affect the holding period of the Class C Shares for purposes of determining the CDSC, if any, upon redemption. An exchange may result in a change in the number of Shares held, but not in the value of such Shares immediately after the exchange. Each exchange involves the redemption of the Shares to be exchanged and the purchase of the shares of the other funds within the HSBC Family of Funds, which may produce a gain or loss for tax purposes.

The exchange privilege (or any aspect of it) may be changed or discontinued upon 60 days written notice to shareholders and is available only to shareholders in states in which such exchanges may be legally made. A shareholder considering an exchange should obtain and read the prospectus of the other funds within the HSBC Family of Funds into which the exchange will be made and consider the differences in investment objectives and policies before making any exchange.

An exchange is considered a sale of shares and may result in a capital gain or loss for federal income tax purposes. A shareholder wishing to exchange his or her Shares may do so by contacting the Trust at 800-782-8183, by contacting his or her broker-dealer or by providing written instruction to the Trust.

**In-Kind Purchases**

The Trust, in its discretion, may permit purchases of Fund shares by means of in-kind contributions of portfolio securities under certain circumstances. An in-kind contribution must be made in the form of securities that are permissible investments for the Funds as described in the Prospectus. In connection with an in-kind securities purchase, the Funds will require, among other things, that the securities be valued in the same manner as they would be valued for purposes of computing a Fund's NAV; that the Funds receive satisfactory assurances that they will have good and marketable title to the securities received by them; and that the securities be in proper form for transfer to the Funds. In addition, the Funds generally will not accept securities of any issuer unless they are liquid, have a readily ascertainable market value, and are not subject to restrictions on resale.

The Funds will not be liable for any brokerage commission or fee (except for customary transfer fees) in connection with an in-kind purchase of Fund shares. Your broker may impose a fee in connection with processing your in-kind purchase of Fund shares. An investor contemplating an in-kind purchase of Fund shares should consult his or her tax adviser to determine the tax consequences under Federal and state law of making such a purchase.

**Automatic Investment Plan**

The Trust offers a plan for regularly investing specified dollar amounts ($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the Funds. If an Automatic Investment Plan is selected, subsequent investments will be automatic and will continue until such time as the Trust and the investor's bank are notified to discontinue further investments. Due to the varying procedures to prepare, process and to forward bank withdrawal information to the Trust, there may be a delay between the time of the bank withdrawal and the time the money reaches the Funds. The investment in the Funds will be made at the NAV per share determined on the day that both the check and the bank withdrawal data are received in required form by the Fund's transfer agent. Further information about the Automatic Investment Plan may be obtained from Citi at the telephone number listed under "Shareholder Inquiries."

For further information on how to purchase Shares, an investor should contact the Funds directly at HSBC Funds, PO Box 219691, Kansas City, MO 64121-9691 or by calling 1-800-782-8183.

**Purchase through a Shareholder Servicing Agent or a Securities Broker**

Shareholder Servicing Agents and Securities Brokers, if applicable, may offer services to their customers, including specialized procedures for the purchase and redemption of Shares, such as pre-authorized or automatic purchase and redemption programs and "sweep" checking programs. Each Shareholder Servicing Agent and Securities Broker may establish its own terms, conditions and charges, including limitations on the amounts of transactions, with respect to such services. Charges for these services may include fixed annual fees, account maintenance fees and minimum account balance requirements. The effect of any such fees will be to reduce the net return on the investment of customers of that Shareholder Servicing Agent or Securities Broker. Conversely, certain Servicing Agents may (although they are not required by the Trust to do so) credit to the accounts of their customers from whom they are already receiving other fees amounts not exceeding such other fees or the fees received by the Servicing Agent from the Funds, which will have the effect of increasing the net return on the investment of such customers of those Servicing Agents.

Shareholder Servicing Agents and Securities Brokers may transmit purchase payments on behalf of their customers by wire directly to the Funds' custodian bank by following the procedures described above.

For further information on how to direct a Securities Broker, if applicable, or a Shareholder Servicing Agent to purchase Shares, an investor should contact his Securities Broker or his Shareholder Servicing Agent.

**Conversion Feature – Class C Shares – U.S. Government Money Market Fund and U.S. Treasury Money Market Fund**

Class C Shares of the Fund will convert automatically to Class A Shares of the same Fund (or Class D Shares, depending on your eligibility), after five years from the beginning of the calendar month in which the Class C Shares were originally purchased. After conversion, the shares will be subject to the lower distribution and shareholder servicing fees charged on Class A Shares (or Class D Shares) which will increase the shareholder's investment return compared to the Class C Shares. A shareholder will not pay any sales charge or fees when his or her shares convert, nor will the transaction be subject to any tax. If an investor purchased Class C Shares of one fund which he or she exchanged for Class C Shares of another fund, the holding period will be calculated from the time of the original purchase of Class C Shares. The dollar value of Class A Shares (or Class D Shares) the investor receives will equal the dollar value of the Class C Shares converted.

**Level Load Alternative – Class C Shares - U.S. Government Money Market Fund and U.S. Treasury Money Market Fund Only**

Class C Shares of the Funds are available only by exchanging the Class C Shares of other HSBC Funds. If an investor exchanges Class C Shares of other HSBC Funds for Class C Shares of the Funds and wishes to sell his or her shares, the redemption may be subject to a 1.00% CDSC if the shares are redeemed less than one year after the original purchase of the Class C Shares. The CDSC will be assessed on the lesser of the current NAV or the NAV at the time of purchase.

In December 2021, the SEC proposed amendments to Rule 2a-7 that would, among other things, remove provisions that allow or require money market funds to impose liquidity fees or redemption gates. If the proposed amendments are adopted, the ESG Prime Money Market Fund could no longer impose such a fee or gate except in certain limited circumstances, such as in connection with the liquidation of the Fund.

**Redemption of Shares**

A shareholder may redeem all or any portion of the Shares in his account at any time at the NAV per share next calculated after a redemption request is received in good order by the Transfer Agent, with respect to Shares purchased directly through the Funds, or by his Securities Broker or his Shareholder Servicing Agent, if the Securities Broker or Shareholder Servicing Agent is authorized to receive orders for Fund shares on behalf of the Funds. Class A Shares, Class D Shares, Class E Shares, Class I Shares, Intermediary Shares, Intermediary Service Shares, Class P Shares and Class Y Shares may be redeemed without charge while Class C Shares may be subject to a CDSC. See "Level Load Alternative -- Class C Shares" above. See "Determination of Net Asset Value" above.

Except as otherwise set forth in the Prospectus, the proceeds of a redemption are normally paid from the Funds in U.S. dollars within one business day following the date on which the redemption is effected. The Funds may suspend the right of redemption and postpone for more than one day the date of payment upon redemption: (i) during periods in which there is a non-routine closure of the Fedwire or applicable Federal Reserve Banks, (ii) during periods when the New York Stock Exchange is closed other than for weekends and certain holidays or when trading on such Exchange is restricted, (iii) during periods in which, as a result of emergency, disposal, or evaluation of the NAV of the portfolio securities is not reasonably practicable, (iv) during periods in which the SEC has, by rule or regulation, deemed that trading shall be restricted or an emergency exists, (v) in certain circumstances when there has been a determination to liquidate a Fund, (vi) with respect to the ESG Prime Money Market Fund, during periods in which the Board of Trustees of the Fund has temporarily restricted redemptions from the Fund, or (vii) for such other periods as the SEC may permit for your protection. To be in a position to eliminate excessive expenses, the Trust reserves the right to redeem upon not less than 30 days' notice all Shares in an account which has a value below $50.00, provided that such involuntary redemptions will not result from fluctuations in the value of Fund Shares. A shareholder will be allowed to make additional investments prior to the date fixed for redemption to avoid liquidation of the account.

Unless Shares have been purchased directly from the Funds, a shareholder may redeem Shares only by authorizing his Securities Broker, if applicable, or his Shareholder Servicing Agent to redeem such Shares on his behalf (since the account and records of such a shareholder are established and maintained by his Securities Broker or his Shareholder Servicing Agent). For further information as to how to direct a Securities Broker or a Shareholder Servicing Agent to redeem Shares, a shareholder should contact his Securities Broker or his Shareholder Servicing Agent.

The Board has adopted procedures that provide that redemptions by shareholders may be satisfied by the distribution of portfolio securities in-kind, reflecting the shareholder's proportionate interest in the relevant Fund, subject to certain adjustments.

Redemption proceeds are generally paid in cash, but the Funds reserve the right to pay all or part of any redemption proceeds in-kind. However, the Funds have made an election pursuant to Rule 18f-1 under the 1940 Act to redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1.00% of the NAV

of the Fund during any 90-day period for any one shareholder. The Funds reserve the right to pay all or part of other redemptions by a distribution of portfolio securities in kind from the applicable Fund's portfolio. The securities distributed in kind would be valued at the same value as that assigned to them in calculating the NAV of the shares being redeemed. In the event a shareholder receives an in-kind distribution of portfolio securities, it would be the responsibility of the shareholder to dispose of the securities. The shareholder would be subject to the risks that the value of the securities would decline prior to their sale, that it would be difficult to sell the securities, and that brokerage fees could be incurred.

*<u>ESG Prime Money Market Fund</u>*

The Board of Trustees of the Fund is permitted to impose a liquidity fee (up to 2%) on redemptions from the Fund or a redemption gate to temporarily restrict redemptions from the Fund (up to 10 business days in any 90 day period), in the event that the Fund's "weekly liquid assets" fall beneath the thresholds listed below. For this purpose, weekly liquid assets are calculated as of the end of each business day. Weekly liquid assets generally include: cash, direct obligations of the U.S. Government, certain U.S. Government agency discount notes with remaining maturities of 60 days or less, securities that will mature or are subject to a demand feature that is exercisable and payable within five business days or amounts receivable and due unconditionally within five business days on pending sales of portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● 30% weekly liquid assets—If the Fund's weekly liquid assets fall below 30% of the Fund's total assets, and the Board determines it is in the best interests of the Fund, the Board may impose a liquidity fee of no more than 2% of the amount redeemed or a redemption gate that temporarily suspends the right of redemption.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● 10% weekly liquid assets—If the Fund's weekly liquid assets fall below 10% of the Fund's total assets, the Fund will impose, at the beginning of the next business day, a liquidity fee of 1% of the amount redeemed, unless the Board determines that imposing the fee would not be in the best interests of the Fund or determines that a lower or higher fee (not to exceed 2%) would be in the best interests of the Fund.

The Board of Trustees generally expects that a liquidity fee or redemption gate would be imposed during periods of extraordinary market stress, if such fee or gate is ever to be imposed. Liquidity fees and redemptions gates may be terminated at any time in the discretion of the Board and will terminate at the beginning of the next business day once the Fund has invested 30% or more of its total assets in weekly liquid assets. Announcements regarding the imposition of a liquidity fee or redemption gate, or the termination of a liquidity fee or redemption gate, will be filed with the SEC on Form N-CR and will be available on the Fund's website (https://www.assetmanagement.us.hsbc.com/en/institutional-investor/fund-centre). In addition, the Fund will make such announcements through a supplement to this prospectus and may make such announcements through a press release or by other means.

If the Fund imposes a redemption gate, the Fund and your financial adviser or broker will not accept redemption requests until the Fund has notified shareholders and other parties that the redemption gate has been lifted. Any redemption requests submitted while a redemption gate is in effect will be cancelled without further notice. If you still wish to redeem shares once the redemption gate has been lifted, you will need to submit a new request to the Fund or your financial adviser or broker. Unprocessed purchase orders that the Fund received prior to notification of the imposition of a liquidity fee or redemption gate will be canceled unless re-confirmed. Under certain circumstances, the Fund may, in its sole discretion, honor redemption orders (or pay redemptions without adding a liquidity fee to the redemption amount) if the Fund can verify that the redemption order was submitted to your financial adviser or broker or the Fund's Transfer Agent before the Fund imposed a liquidity fee or redemption gate.

A liquidity fee imposed by the Fund will reduce the amount you will receive upon the redemption of your shares, and will generally decrease the amount of any capital gain or increase the amount of any capital

loss you will recognize with respect to such redemption. If the Fund receives liquidity fees, it will consider the appropriate tax treatment of such fees to the Fund at such time.

**Systematic Withdrawal Plan**

Any shareholder who owns Shares with an aggregate value of $10,000 or more may establish a Systematic Withdrawal Plan under which he redeems at NAV the number of full and fractional shares which will produce the monthly, quarterly, semi-annual or annual payments specified (minimum $50.00 per payment). Depending on the amounts withdrawn, systematic withdrawals may deplete the investor's principal. Investors contemplating participation in the Systematic Withdrawal Plan should consult their tax advisors. No additional charge to the shareholder is made for this service.

**Redemption of Shares Purchased Directly Through the Funds**

Redemption by Letter. Redemptions may be made by letter to the Transfer Agent specifying the dollar amount or number of shares to be redeemed, account number and the Fund. The letter must be signed in exactly the same way the account is registered (if there is more than one owner of the Shares, all must sign). In connection with a written redemption request, all signatures of all registered owners or authorized parties must be guaranteed by an Eligible Guarantor Institution, which includes a domestic bank, broker, dealer, credit union, national securities exchange, registered securities association, clearing agency or savings association. The Transfer Agent, however, may reject redemption instructions if the guarantor is neither a member nor a participant in a signature guarantee program (currently known as "STAMP," "SEMP," or "NYSE MSP"). Corporations, partnerships, trusts or other legal entities may be required to submit additional documentation.

Redemption by Wire or Telephone. An investor may redeem shares of the Funds by wire or by telephone if he has checked the appropriate box on the Purchase Application or has filed a Telephone Authorization Form with the Trust. These redemptions may be paid from the Funds by wire or by check. The Trust reserves the right to refuse telephone wire redemptions and may limit the amount involved or the number of telephone redemptions. The telephone redemption procedure may be modified or discontinued at any time by the Trust. Instructions for wire redemptions are set forth in the Purchase Application. The Trust employs reasonable procedures to confirm that instructions communicated by telephone are genuine. For instance, the following information must be verified by the shareholder or Securities Broker at the time a request for a telephone redemption is effected: (1) shareholder's account number; (2) shareholder's social security number; and (3) name and account number of shareholder's designated Securities Broker or bank.

If the Trust fails to follow these or other established procedures, it may be liable for any losses due to unauthorized or fraudulent instructions.

**Check Redemption Service**

Shareholders may redeem Class A Shares or Class D Shares of the Funds by means of a Check Redemption Service. If Class A Shares or Class D Shares are held in book credit form and the Check Redemption Service has been elected on the Purchase Application on file with the Trust, redemptions of shares may be made by using redemption checks provided by the Trust. There is no charge for this service. Checks must be written for amounts of $250 or more, may be payable to anyone and negotiated in the normal way. If more than one shareholder owns the Class A Shares or Class D Shares, all must sign the check unless an election has been made to require only one signature on checks and that election has been filed with the Trust.

Class A Shares and Class D Shares represented by a redemption check continue to earn daily dividends until the check clears the banking system. When honoring a redemption check, the Trust causes the redemption of exactly enough full and fractional Class A Shares and Class D Shares of the Funds from an account to cover the amount of the check. The Check Redemption Services may be terminated at any time by the Trust.

If the Check Redemption Service is requested for an account in the name of a corporation or other institution, additional documents must be submitted with the application, i.e., corporations (Certification of Corporate Resolution), partnerships (Certification of Partnership) and trusts (Certification of Trustees). In addition,

since the share balance of the Fund account is changing on a daily basis, the total value of the Fund account cannot be determined in advance and the Fund account cannot be closed or entirely redeemed by check.

**Retirement Plans**

Class D Shares of the Funds are offered in connection with tax-deferred retirement plans. Application forms and further information about these plans, including applicable fees, are available from the Trust or the Distributor upon request. The tax law governing tax-deferred retirement plans is complex and changes frequently. Before investing in the Funds through one or more of these plans, an investor should consult his or her tax advisor.

**Individual Retirement Accounts ("IRAs")**

The shares may be used as a funding medium for an IRA. An Internal Revenue Service-approved IRA plan may be available from an investor's Shareholder Servicing Agent. The minimum initial investment for an IRA is $250; the minimum subsequent investment is $100. In general, IRAs are available to individuals who receive compensation or earned income and their spouses whether or not they are active participants in a tax-qualified or Government-approved retirement plan. In general, an IRA contribution by an individual who participates, or whose spouse participates, in a tax-qualified or Government-approved retirement plan may not be deductible, in whole or in part, depending upon the individual's income. Individuals also may establish an IRA to receive a "rollover" contribution of distributions from another IRA or a qualified plan. Tax advice should be obtained before planning a rollover or determining contribution limits.

**Defined Contribution Plans**

Investors who are self-employed may purchase shares of the Funds for retirement plans for self-employed persons who are known as defined contribution plans (formerly Keogh or H.R. 10 Plans). HSBC offers a prototype plan for money purchase and profit sharing defined contribution plans. The rules governing these plans are complex, and a tax advisor should be consulted.

**Section 457 Plan, 401(k) Plan, 403(b) Plan**

The Funds may be used as an investment vehicle for certain deferred compensation plans provided for by Section 457 of the Code with respect to service for state governments, local governments, rural electric cooperatives and political subdivisions, agencies, instrumentalities, tax-exempt organizations and certain affiliates of such entities. The Funds may also be used as an investment vehicle for both 401(k) plans and 403(b) plans.

**DIVIDENDS AND DISTRIBUTIONS**

The Trust declares all of each Fund's net investment income daily as a dividend to Fund shareholders. Dividends substantially equal to each Fund's net investment income earned during the month are distributed in that month to the Fund's shareholders of record. Generally, a Fund's net investment income consists of the interest and dividend income it earns, less expenses. In computing interest income, premiums are not amortized nor are discounts accrued on long-term debt securities in the Funds, except as required for federal income tax purposes.

Shares begin accruing dividends on the day they are purchased. Dividends are distributed monthly. Unless a shareholder elects to receive dividends in cash (subject to the policies of the shareholder's Shareholder Servicing Agent or Securities Broker), dividends are distributed in the form of additional

shares of the Funds at the rate of one share (and fraction thereof) of the Fund for each one dollar (and fraction thereof) of dividend income.

Each Fund's net realized capital gains, if any, are distributed to shareholders annually. Additional distributions are also made to each Fund's shareholders to the extent necessary to avoid application of the 4% non-deductible federal excise tax on certain undistributed income and net capital gains of regulated

investment companies. Unless a shareholder elects to receive dividends in cash, dividends are distributed in the form of additional shares of the Funds (purchased at their NAV without a sales charge).

For this purpose, the net income of the Funds (from the time of the immediately preceding determination thereof) consists of (i) all income accrued, less the amortization of any premium, on the assets of the Funds, less (ii) all actual and accrued expenses determined in accordance with generally accepted accounting principles. Interest income includes discount earned (including both original issue and market discount) on discount paper accrued ratably to the date of maturity and any net realized gains or losses on the assets of the Funds. Obligations held in the Government Money Market Fund and the U.S. Treasury Money Market Fund's portfolio are valued at amortized cost, which the Trustees of the Trust have determined in good faith constitutes fair value for the purposes of complying with the 1940 Act. This method provides certainty in valuation, but may result in periods during which the stated value of an obligation held for a Fund is higher or lower than the price the Fund would receive if the obligation were sold. This valuation method will continue to be used until such time as the Trustees of the Trust determine that it does not constitute fair value for such purposes.

Since the net income of the Funds is declared as a dividend each time the net income of the Funds is determined, the NAV per share of the Funds is expected to remain at $1.00 per share immediately after each such determination and dividend declaration. Any increase in the value of a shareholder's investment in the Funds, representing the reinvestment of dividend income, is reflected by an increase in the number of Shares in his account.

For the ESG Prime Money Market Fund, any increase in the value of a shareholder's investment in the Fund, representing the reinvestment of dividend income, is reflected by an increase in the number of Shares in his account.

It is expected that the Funds will have a positive net income at the time of each determination thereof. If, for any reason, the net income of the Funds determined at any time is a negative amount, which could occur, for instance, upon default by an issuer of an obligation held in a Fund's portfolio, the negative amount with respect to each shareholder account would first be offset from the dividends declared during the month with respect to each such account. If and to the extent that such negative amount exceeds such declared dividends at the end of the month, the number of outstanding Fund shares would be reduced by treating each shareholder as having contributed to the capital of the Fund that number of full and fractional shares in the account of such shareholder which represents his proportion of the amount of such excess. Each shareholder will be deemed to have agreed to such contribution in these circumstances by his investment in the Funds.

**DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES**

The Trust's Amended and Restated Agreement and Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (par value $0.001 per share) and to divide or combine the shares into a greater or lesser number of shares without thereby materially changing the proportionate beneficial interests in the Trust. Currently, the Trust has 5 operational series of shares, each of which constitutes a separately managed "Fund." The Trust reserves the right to create additional series of shares. Currently, the Funds issue separate classes of shares as described under "General Information."

Subject to the distinctions permitted among classes of the Trust or any series as established by the Trustees consistent with the requirements of the 1940 Act, each share of the Trust or any series shall represent an equal beneficial interest in the net assets of the Trust or such series, and each shareholder of the Trust or any series shall be entitled to receive such shareholder's pro rata share of distributions of income and capital gains, if any, made with respect to the Trust or such series. Upon redemption of the shares of any series, the applicable shareholder shall be paid solely out of the funds and property of such series of the Trust. Except as otherwise provided by the Trustees, shareholders shall have no preemptive or other right to subscribe to any additional shares or other securities issued by the Trust.

The Trustees may require shareholders to redeem shares for any reason under terms set by the Trustees. When issued, shares are fully paid and non-assessable. The Trustees may, however, cause shareholders, or shareholders of a particular series or class, to pay certain transfer agency, servicing or similar agent charges by setting off such charges due from such shareholder from declared but unpaid dividends owed such shareholder and/or by reducing the number of shares in the account of such shareholder by that number of full and/or fractional shares which represents the outstanding amount of such charges due from such shareholder.

Shareholders are entitled to one vote for each share held on matters on which they are entitled to vote (and a proportionate fractional vote for each fraction of a share). The Trust is not required and has no current intention to hold annual meetings of shareholders, although the Trust will hold special meetings of Fund shareholders when in the judgment of the Trustees of the Trust it is necessary or desirable to submit matters for a shareholder vote or as otherwise required by the 1940 Act or other applicable federal law. It is not anticipated that the Trust will hold shareholders' meetings unless required by law or its Amended and Restated Agreement and Declaration of Trust or By-Laws. On any matters submitted to a vote of the shareholders, all shares of the Trust then entitled to vote shall be voted in aggregate, except: (i) when required by the 1940 Act, shares shall be voted by individual series or class; (ii) when the matter involves any action that the Trustees have determined will affect only the interests of one or more series, then only shareholders of such series shall be entitled to vote thereon; and (iii) when the matter involves any action that the Trustees have determined will affect only the interests of one or more classes, then only the shareholders of such class or classes shall be entitled to vote thereon. Accordingly, shareholders of each series generally vote separately, for example, to approve investment advisory contracts or changes in fundamental investment policies or restrictions, but shareholders of all series may vote together to the extent required under the 1940 Act, such as in the election or selection of Trustees, principal underwriters and accountants for the Trust. Under certain circumstances, the shareholders of one or more series could control the outcome of these votes.

Shares of each class of a series represent an equal pro rata interest in such series and, generally, have identical voting, dividend, liquidation, and other rights, preferences, powers, terms and conditions, except that: (i) each class shall have a different designation; (ii) each class of shares shall bear any class expenses; and (iii) each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. Upon liquidation or dissolution of a Fund, shareholders of the Fund would generally be entitled to share pro rata in the net assets of the Fund's available for distribution to shareholders.

The shareholders of the Funds have the power to vote only: (i) for the election or removal of Trustees as and to the extent provided in the Trust's Amended and Restated Agreement and Declaration of Trust; (ii) with respect to such additional matters relating to the Trust as may be required by federal law including the 1940 Act, or any registration of the Trust with the SEC (or any successor agency) or any state; and (iii) as the Trustees may otherwise consider necessary or desirable in their sole discretion.

The Trust is an entity of the type commonly known as a "Delaware statutory trust." Under Delaware law and the Trust's Amended and Restated Agreement and Declaration of Trust, shareholders are entitled to the same limitation of personal liability extended to shareholders of corporations organized under Delaware law. Therefore, shareholders generally will not be subject to personal liability for Fund obligations. The risk that a shareholder will incur personal liability for Fund obligations is limited to the circumstances in which a state court may not apply Delaware law or the terms of the Trust's Amended and Restated Agreement and Declaration of Trust.

**OWNERSHIP OF THE FUNDS**

As of February 1, 2023, the following persons owned of record 5% or more of a Fund or class of shares:

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|:---|:---|:---|
| **Fund/Class** | **Name and Address** | **Percent of the<br> Class Total<br> Assets Held by<br> the Shareholder** |
| **HSBC U.S. Government Money Market Fund Class A** | | |
|  | Ascensus Trust Company\*<br> Bank of Taiwan 401K<br> P.O. Box 10758<br> Fargo, ND 58106-0758 | 79.63% |
|  | Ascensus Trust Company<br> GREATMATS.COM<br> P.O. Box 10758<br> Fargo, ND 58106-0758 | 7.76% |
| **HSBC U.S. Government Money Market Fund Class D** |  |  |
|  | Pershing LLC\*<br> For the Exclusive Benefit of its Customers<br> Attn Cash Management Services<br> 1 Pershing Plaza<br> Jersey City, NJ 07399-0001 | 82.72% |
|  | SEI Private Trust Company<br> c/o HSBC Bank<br> One Freedom Valley Drive<br> Oaks, PA 19456-9989 | 9.26% |
| **HSBC U.S. Government Money Market Fund Class I** |  |  |
|  | BofA Securities Inc.<br> For the Sole Benefit of its Customers<br> 200 N College St<br> Charlotte, NC 28202-2191 | 10.05% |
|  | State Street Global Market LLC<br> Attn Fund Connect<br> 1 Lincoln St SFC 6<br> Boston, MA 02111-2901 | 8.02% |
|  | Deloitte LLP<br> Attn Bank Reconciliation<br> 695 E Main Street STE 2<br> Stamford, CT 06901-2150 | 6.36% |
| **HSBC U.S. Government Money Market Fund Class Y** |  |  |
|  | HSBC Bank USA\*<br> Attn David Marrero<br> 452 5<sup>th</sup> Ave., 2<sup>nd</sup> Floor<br> New York, NY 10018-2333 | 35.34% |
|  | HSBC Bank USA\*<br> Attn David Marrero<br> 452 5<sup>th</sup> Ave., 2<sup>nd</sup> Floor<br> New York, NY 10018-2333 | 27.44% |
|  | HSBC FBO De Shaw & Co LP #3<br> 1166 Avenue of the Americas Fl 9<br> New York, NY 10036-2750 | 11.23% |
|  | HSBC FBO DELALV Portfolios LLC<br> 1166 Avenue of the Americas Fl 9<br> New York, NY 10036-2750 | 5.28% |

---

---

| | | |
|:---|:---|:---|
| **Fund/Class** | **Name and Address** | **Percent of the<br> Class Total<br> Assets Held by<br> the Shareholder** |
| **HSBC U.S. Government Money Market Fund Intermediary Service Share Class** | | |
|  | HSBC Bank USA National Association\*<br> as Agent<br> Corporate Trust and Loan Agency<br> Control Unit<br> 452 Fifth Avenue 8E6<br> New York, NY 10018 | 43.42% |
|  | Band & Co<br> c/o US Bank NA<br> PO Box 1787<br> Milwaukee, WI 53201-1787 | 10.13% |
|  | HSBC<br> FBO Rochester Institute of Technology<br> 7 Lomb Memorial Drive <br> Rochester, New York 14623-5602 | 6.79% |
| **HSBC U.S. Government Money Market Fund Intermediary Class** |  |  |
|  | Hare & Co 2\*<br> Attn STIF Operations<br> PO BOX 223910<br> Pittsburgh, PA 15251-2910 | 83.06% |
| **HSBC U.S. Treasury Money Market Fund Class D** |  |  |
|  | HSBC Bank USA\*<br> Attn David Marrero<br> 452 5<sup>th</sup> Ave., 2<sup>nd</sup> Floor<br> New York, NY 10018-2333 | 47.33% |
|  | SEI Private Trust Company\*<br> c/o HSBC Bank<br> One Freedom Valley Drive<br> Oaks, PA 19456-9989 | 27.58% |
|  | Pershing LLC<br> For the Exclusive Benefit of its Customers<br> Attn Cash Management Services<br> 1 Pershing Plaza<br> Jersey City, NJ 07399-0001 | 23.57% |
| **HSBC U.S. Treasury Money Market Fund Class I** |  |  |
|  | BofA Securities Inc.<br> For the Sole Benefit of its Customers <br> 200 N College St.<br> Charlotte, NC 28202-2191 | 23.37% |
|  | HSBC Bank USA<br> Attn David Marrero<br> 452 5<sup>th</sup> Ave., 2<sup>nd</sup> Floor<br> New York, NY 10018-2333 | 18.36% |
|  | SEI Private Trust Company<br> c/o HSBC Bank<br> One Freedom Valley Drive<br> Oaks, PA 19456-9989 | 9.77% |
|  | Hare & Co 2<br> Attn STIF Operations<br> PO BOX 223910<br> Pittsburgh, PA 15251-2910 | 7.48% |

---

---

| | | |
|:---|:---|:---|
| **Fund/Class** | **Name and Address** | **Percent of the<br> Class Total<br> Assets Held by<br> the Shareholder** |
|  | Goldman Sachs & Co LLC<br> 71 S Wacker Drive STE 500<br> Chicago, IL 60606-4673 | 6.96% |
| **HSBC U.S. Treasury Money Market Fund Class Y** |  |  |
|  | HSBC Bank USA\*<br> Attn David Marrerro<br> 452 5<sup>th</sup> Ave., 2<sup>nd</sup> Floor<br> New York, NY 10018-2333 | 98.78% |
| **HSBC U.S. Treasury Money Market Fund Intermediary Service Share Class** |  |  |
|  | Citibank\* <br> FBO CST Lazard Growth<br> 388 Greenwich St<br> New York, NY 10013-2362 | 38.50% |
|  | HSBC <br> FBO United Welfare Fund<br> Welfare Divison<br> 145 Huguenot St STE 100<br> New Rochelle, NY 10801-5251 | 21.37% |
|  | Softserve Inc.<br> 12800 University Dr. #410<br> Fort Meyers, FL 33907-5336 | 18.80% |
|  | HSBC Bank <br> USA National Association as AgentCorporate Trust and Loan Agency <br> Control Unit<br> 452 Fifth Ave, 8E6<br> New York, NY 10018 | 7.45% |
|  | HSBC<br> FBO Evergreen Life Limited<br> 700 E Palisade Ave<br> Englewood Cliffs, NJ 07632-3058 | 6.73% |
| **HSBC U.S. Treasury Money Market Fund Intermediary Class** |  |  |
|  | Hare & Co 2B\*<br> PO BOX 223910<br> Pittsburgh, PA 15251-2910 | 46.07% |
|  | PNC Capital Markets LLC\*<br> 249 Fifth Avenue<br> Mail Stop: P1-POPP-11-A<br> Pittsburgh, PA 15222-2707 | 26.37% |
|  | Hare & Co 2<br> Attn STIF Operations<br> PO BOX 223910<br> Pittsburgh, PA 15251-2910 | 21.63% |
|  | Lantheus Medical Imaging Inc.<br> 331 Treble Cove Rd<br> N. Billerica, MA 01862-2849 | 5.93% |

---

\*Entity owned more than 25% of the outstanding shares of the Fund. A shareholder owning of record or beneficially more than 25% of a Fund's outstanding shares may be considered a control person and could have a more significant effect on matters presented at a shareholders' meeting than votes of other shareholders.

**TAXATION**

**Federal Income Tax**

The following is a summary of certain U.S. federal income tax issues concerning the Funds and their shareholders. The Funds may also be subject to state, local, foreign or other taxes not discussed below. This discussion does not purport to be complete or to address all tax issues relevant to each shareholder. Prospective investors should consult their own tax advisors with regard to the federal, state, foreign and other tax consequences to them of the purchase, ownership or disposition of Fund shares. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative authorities, all of which are subject to change, which change may be retroactive. Future changes in tax laws may adversely impact the Funds and their shareholders.

The Funds each intend to be taxed as a regulated investment company under Subchapter M of the Code. Accordingly, each Fund must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities, or foreign currencies, net income derived from an interest in a qualified publicly traded partnership, or other income derived with respect to its business of investing in such stock, securities or currencies; and (b) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is represented by cash and cash items, U.S. Government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities and the securities of other regulated investment companies), in two or more issuers that the Fund controls and which are engaged in the same or similar trades or businesses, or of one or more qualified publicly traded partnerships.

As a regulated investment company, each Fund generally is not subject to U.S. federal income tax on income and gains that it distributes to shareholders, if at least 90% of the Fund's investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gains over net long-term capital losses) for the taxable year is distributed (*i.e., the 90% distribution requirement)*. The Funds intend to distribute all or substantially all of such income.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund must generally distribute for each calendar year an amount equal to the sum of (1) at least 98% of its ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) at least 98.2% of the excess of its capital gains over capital losses for the 12-month period ending October 31 of the calendar year, and (3) all such ordinary income and capital gains for previous years that were not distributed during such years.

A distribution will be treated as paid on December 31 of the calendar year if it is declared by a Fund in October, November or December of that year with a record date in such month and paid by the Fund during January of the following year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.

For federal income tax purposes, the Funds are generally permitted to carry forward a net capital loss in any year to offset its own capital gains, if any, during subsequent taxable years. Any such carryforward losses will retain their character as short-term or long-term.

As of the tax year ended October 31, 2022, the Funds had net capital loss carryforwards ("CLCFs") not subject to expiration as summarized in the table below. The Board does not intend to authorize a distribution of any realized gain for the Funds until any applicable CLCF has been offset or expires.

---

| | | | |
|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**Short Term <br> Amount ($)** | &nbsp;&nbsp;**Long Term <br> Amount ($)** | &nbsp;&nbsp;**Total ($)** |
| &nbsp;&nbsp;U.S. Government Money Market Fund | &nbsp;&nbsp;467350 | &nbsp;&nbsp;296871 | &nbsp;&nbsp;764221 |
| &nbsp;&nbsp;U.S. Treasury Money Market Fund | &nbsp;&nbsp;99406 | &nbsp;&nbsp;— | &nbsp;&nbsp;99406 |

---

The amount of capital losses that can be carried forward and used in any single year is subject to an annual limitation if there is a more than 50% "change in ownership" of a Fund. An ownership change generally results when shareholders owning 5% or more of a Fund increase their aggregate holdings by more than 50% over a three-year look-back period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing a Fund's ability to offset capital gains with those losses. An increase in the amount of taxable gains distributed to a Fund's shareholders could result from an ownership change. No Fund undertakes any obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of engaging in a tax-free reorganization with another fund. Moreover, because of circumstances beyond a Fund's control, there can be no assurance that a Fund will not experience, or has not already experienced, an ownership change. Additionally, if a Fund engages in a tax-free reorganization with another fund, the effect of these and other rules not discussed herein may be to disallow or postpone the use by the Fund of its capital loss carryovers (including any current year losses and built-in losses when realized) to offset its own gains or those of the other fund, or vice versa, thereby reducing the tax benefits Fund shareholders would otherwise have enjoyed from the use of such capital loss carryovers.

**Distributions in General**

Distributions of investment company taxable income generally are taxable to shareholders as ordinary income. It is not expected that such distributions will be eligible for the dividends-received deduction for corporations or for treatment as "qualified dividend income" for individuals.

If for any taxable year a Fund does not qualify for federal tax treatment as a regulated investment company, all of the Fund's net taxable investment income would (unless certain cure provisions apply) be subject to federal and, potentially, state income tax at regular corporate rates without any deduction for distributions to its shareholders. In such event, dividend distributions (including amounts derived from interest on municipal securities) would be taxable to a Fund's shareholders to the extent of the Fund's current and accumulated earnings and profits.

The excess of long-term capital gains over net short-term capital losses realized, if any, distributed and properly reported by the Funds, whether received in cash or reinvested in Fund Shares, will generally be taxable to shareholders as long-term capital gain, regardless of how long a shareholder has held Fund shares. Long-term capital gain distributions, if any, made to individuals are generally subject to a maximum federal income tax rate of 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions of any net short-term capital gains from assets held for one year or less will be taxed as ordinary income. Distributions will be subject to these capital gains rates regardless of how long a shareholder has held Fund shares.

Shareholders receiving distributions in the form of additional shares will be taxed on the amount of such distribution and will have a cost basis for federal income tax purposes in each share received equal to the amount of the cash the shareholder could have received. Shareholders will be notified annually as to the federal tax status of distributions.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Distributions in excess of a Fund's current and accumulated earnings and profits are treated as a tax-free return of a shareholder's investment to the extent of the shareholder's basis in the shares, and generally

as capital gain thereafter. A return of capital, which for tax purposes is treated as a return of a shareholder's investment, reduces the shareholder's basis in shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition of shares. A distribution will reduce a Fund's NAV per share and may be taxable to a shareholder as ordinary income or capital gain even though, from an economic standpoint, the distribution may constitute a return of capital.

Certain distributions reported by a Fund as Section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Code Section 163(j). Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that a Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of such Fund's business interest income over the sum of the Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

**Sale, Exchange or Redemption of Shares**

Upon disposition (by redemption, repurchase, sale or exchange) of Fund shares, a shareholder may realize a taxable gain or loss depending upon his basis in his shares. Realization of such a gain or loss is considered unlikely with respect to the U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund because of each Fund's policy to attempt to maintain a $1.00 per share NAV. Because the ESG Prime Money Market Fund does not seek to maintain a stable price per share, there may be tax consequences to you if you dispose of your shares in the ESG Prime Money Market Fund, for example, through redemption or sale. The amount of any gain or loss and the rate of tax will depend mainly upon how much you paid for the shares, how much you sell them for, and how long you held them. When you sell or exchange your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Capital losses in any year are deductible only to the extent of capital gains, plus, in the case of a non-corporate taxpayer, generally $3,000 of income. Certain other special tax rules may apply to your capital gains or losses on the ESG Prime Money Market Fund's shares.

With respect to any gain or loss recognized on the sale or exchange of shares of a Fund, unless a shareholder chooses to adopt a simplified "NAV method" of accounting (described below), any gain or loss generally will be treated as short-term capital gain or loss if the shareholder held its shares as capital assets for one year or less, and long-term capital gain or loss if the shareholder held its shares as capital assets for more than one year. The maximum individual tax rate applicable to long-term capital gains is generally 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts.

Any loss recognized on shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain distributions that were received with respect to the shares. Additionally, any loss realized on a sale or exchange of Fund shares will be disallowed under "wash sale rules" to the extent that the shares disposed of are replaced (including replacement through reinvesting of dividends and capital gain distributions in the Fund) within a period of 61 days beginning 30 days before and ending 30 days after the disposition of the shares. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. The Internal Revenue Service has determined not to apply the wash sale rules to certain redemptions of Fund shares if the Fund (i) is regulated as a money market fund, and (ii) has a floating NAV at the time of redemption.

If a shareholder elects to adopt the simplified "NAV method" of accounting, rather than compute gain or loss on every taxable sale or other disposition of shares of a Fund as described above, the shareholder would determine gain or loss based on the change in the aggregate value of its Fund shares during a computation period (such as the shareholder's taxable year), reduced by the shareholder's net investment (i.e., purchases minus sales) in those Fund shares during the computation period. Under the simplified "NAV method," any resulting capital gain or loss would be reportable on a net basis and would generally be

treated as a short-term capital gain or loss. If a shareholder uses the simplified "NAV method", the wash sale rules will generally not apply to disallow a loss incurred for a computation period.

**Original Issue Discount/Market Discount**

**Market Discount.** If a Fund purchases a debt security in the secondary market at a price lower than the stated redemption price at maturity of such debt security, the excess of the stated redemption price over the purchase price is "market discount." If the amount of market discount is more than a de minimis amount, a portion of such market discount must be included as ordinary income (not capital gain) by a Fund in respect of each taxable year in which the Fund owns an interest in such debt security and receives a principal payment on it. In particular, a Fund will be required to allocate that principal payment first to the portion of the market discount on the debt security that has accrued but has not previously been includable in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. Generally, market discount accrues on a daily basis for each day the debt security is held by a Fund, at a constant rate over the time remaining to the debt security's maturity or, at the election of the Fund, at a constant yield to maturity, which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the "accrued market discount" not previously taken into account.

**Original Issue Discount.** Certain debt securities acquired by a Fund may be treated as debt securities that were originally issued at a discount. Very generally, original issue discount is defined as the difference between the price at which a security was issued and its stated redemption price at maturity. Although a Fund receives no actual cash income from such a discount, original issue discount that accrues on debt securities in a given year generally are treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution requirements applicable to regulated investment companies. Some debt securities may be purchased by a Fund at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount generally represents market discount for federal income tax purposes (see above).

**Backup Withholding**

The Trust will be required to report to the Internal Revenue Service (the "IRS") all distributions by the Funds except in the case of certain exempt shareholders. All such distributions generally will be subject to withholding of federal income tax at a current rate of 24% ("backup withholding") in the case of nonexempt shareholders if (1) the shareholder fails to furnish the Funds with and to certify the shareholder's correct taxpayer identification number or social security number, (2) the IRS notifies the shareholder or the Funds that the shareholder has failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect, or (3) when required to do so, the shareholder fails to certify that he is not subject to backup withholding. If the withholding provisions are applicable, any such distributions whether reinvested in additional shares or taken in cash, will be reduced by the amounts required to be withheld.

Any amounts withheld may be credited against the shareholder's federal income tax liability. Investors may wish to consult their tax advisors about the applicability of the backup withholding provisions.

**Other Taxation**

Distributions may be subject to additional state and local taxes, depending on each shareholder's particular situation.

**Foreign Shareholders**

Taxation of a shareholder who, as to the United States, is a non-resident alien individual, foreign trust or estate, or foreign corporation ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a

Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, ordinary income dividends (including distributions of any net short-term capital gains) will generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend. Note that the preferential rate of tax applicable to qualified dividend income (discussed above) does not apply to dividends paid to foreign shareholders. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the sale of shares of a Fund, and distributions of net long-term capital gains that are reported as capital gain dividends. If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale of shares of a Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. If the Fund elects to report distributions of U.S. source interest and short-term capital gains, such distributions may be paid to foreign shareholders free of withholding. However, depending on the circumstances, the Fund may report all, some or none of the Fund's potentially eligible dividends as eligible for this exemption, and a portion of the Fund's distributions (e.g. interest from non-U.S. sources or any foreign currency gains) would be ineligible for this potential exemption from withholding. In addition, in the case of Fund Shares held through a financial intermediary, the intermediary may have withheld amounts even if a Fund reported all or a portion of a dividend payment as exempt from U.S. federal withholding tax. Affected shareholders should contact their financial intermediaries regarding the application of these rules to their accounts.

The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Funds, including the applicability of the U.S. estate tax and foreign taxes.

The Funds are required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Funds to enable the Funds to determine whether withholding is required.

**OTHER INFORMATION**

**Capitalization**

The Trust is an open-end, management investment company formed as a statutory trust under the laws of the State of Delaware on March 2, 2016. The U.S. Government Money Market Fund and the U.S. Treasury Money Market Fund were previously series of HSBC Funds, a different legal entity organized as a Massachusetts business trust (the "Predecessor Trust"). In 2016, at a special meeting of shareholders, the shareholders of each series of the Predecessor Trust (the "Predecessor Funds") approved the reorganization of the Predecessor Funds with and into corresponding "shell" series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any historical information provided for a Fund that relates to periods prior to June 24, 2016 is that of the corresponding Predecessor Fund.

The Predecessor Trust was a Massachusetts business trust established under a Declaration of Trust dated April 22, 1987, as a successor to two previously-existing Massachusetts business trusts, Fund Trust Tax-Free Trust (organized on July 30, 1986) and Fund Vest (organized on July 17, 1984, and since renamed Fund Source). Prior to October 3, 1994, the name of the Predecessor Trust was "Fund Trust." Prior to April 12, 2001, the name of the Predecessor Trust was "Republic Funds." Prior to February 28, 2012, the name of the Predecessor Trust was "HSBC Investor Funds."

The capitalization of the Trust consists solely of an unlimited number of shares of beneficial interest with a par value of $0.001 each. The Board may establish additional series (with different investment objectives and fundamental policies) and classes of shares within each series at any time in the future. Establishment and offering of additional classes or series will not alter the rights of the Funds' shareholders.

**Independent Registered Public Accounting Firm**

The Board has appointed PricewaterhouseCoopers LLP ("PwC") as the independent registered public accounting firm of the Trust. PwC audits the Trust's annual financial statements and prepares the Trust's income tax returns. PwC's address is 300 Madison Ave, New York, NY 10017.

**Counsel**

Dechert LLP, 1900 K Street, N.W., Washington, D.C. 20006, advises on certain legal matters in connection with the shares of the Funds offered by the Trust, and also acts as counsel to the Trust. Stradley Ronon Stevens & Young, LLP, 2000 K Street, N.W. Suite 700, Washington, D.C. 20006, acts as counsel to the Independent Trustees of the Trust.

**Code of Ethics**

The Trust, the Adviser and Foreside each has adopted a code of ethics, as required by applicable law, including Rule 17j-1 under the 1940 Act, which is designed to prevent affiliated persons of the Trust, the Adviser and Foreside from engaging in deceptive, manipulative, or fraudulent activities in connection with securities held or to be acquired by the Funds (which may also be held by persons subject to a code). Each Code sets forth restrictions with respect to certain transactions and contains preclearance and reporting obligations.

**Registration Statement**

This SAI and the Prospectus do not contain all the information included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to shares of the Funds; certain portions of which have been omitted pursuant to the rules and regulations of the SEC. The registration statement, including the exhibits filed therewith, may be obtained on the SEC's website at http://www.sec.gov or copies of this information may be obtained after paying a duplicating fee, by electronic request, at the following email address: publicinfo@sec.gov.

Statements contained herein and in the Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document which was filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.

**Financial Statements**

The U.S. Government Money Market and U.S. Treasury Money Market Funds' current audited financial statements dated October 31, 2022 have been audited by PwC, an independent registered public accounting firm, as indicated in its report with respect thereto, and are incorporated herein by reference from the Annual Report of the Funds dated October 31, 2022 as filed with the SEC. Copies of the report will be provided without charge to each person receiving this SAI. As of the date of this SAI, the ESG Prime Money Market Fund had not commenced operations and thus does not have audited financial statements.

**Shareholder Inquiries**

All shareholder inquiries should be directed to the Trust, P.O. Box 219691, Kansas City, MO 64121-9691.

General and Account Information: (800) 782-8183 (TOLL FREE)

**APPENDIX A - DESCRIPTION OF SECURITY RATINGS**

STANDARD & POOR'S

<u>Long-Term Issue Credit Ratings</u>

Issue credit ratings are based, in varying degrees, on Standard & Poor's analysis of the following considerations:

· Likelihood of payment – capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;

· Nature of and provisions of the obligation;

· Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

AAA An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

A An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

BBB An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

B An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment 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 commitment 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 commitment on the obligation.

CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.

C A 'C' rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the 'C' rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument's terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

D An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligation's rating is lowered to 'D' upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

Plus (+) or The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to Minus (-) show relative standing within the major rating categories.

NR This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

<u>Municipal Short-Term Note Ratings</u>

A Standard & Poor's U.S. municipal note rating reflects Standard & Poor's 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, Standard & Poor's analysis will review the following considerations:

· Amortization schedule – the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

· Source of payment – the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

Note rating symbols are as follows:

SP-1 Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

SP-3 Speculative capacity to pay principal and interest.

<u>Short-Term Issue Credit Ratings</u>

A-1 A short-term obligation rated 'A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial 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 commitment 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 lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

<u>Variable Rate Demand Obligations:</u>

Standard & Poor's assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term rating symbols are used for bonds to denote the long-term maturity and the short-term rating symbols for the put option (for example, 'AAA/A-1+'). With U.S. municipal short-term demand debt, note rating symbols are used with the short-term issue credit rating symbols (for example, 'SP-1+/A-1+').

MOODY'S INVESTORS SERVICE ("Moody's")

<u>Long-Term Obligation Ratings</u>

Moody's long-term ratings are opinions of the relative credit risk of financial obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings use Moody's Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.

Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.

Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.

Ba Obligations rated Ba are judged to have speculative elements 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 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 class 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.

<u>U.S. Municipal Short Term Obligation Ratings</u>

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.

<u>Demand Obligation Ratings</u>

In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the ability to receive purchase price upon demand ("demand feature"), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.

When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.

VMIG rating expirations are a function of each issue's specific structural or credit features.

VMIG 1 This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 2 This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 3 This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

SG This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

<u>Short-Term Obligation Ratings</u>

Moody's short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.

Moody's employs the following designations to indicate the relative repayment ability of rated issuers:

P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short term obligations.

NP Issuers (or supporting institutions) rated "Not Prime" do not fall within any of the Prime rating categories.

Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider.

FITCH, INC. ("Fitch Ratings")

<u>Corporate Finance Obligations – Long-Term Rating Scales</u>

Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment. This notably applies to covered bonds ratings, which incorporate both an indication of the probability of default and of the recovery given a default of this debt instrument.

The relationship between issuer scale and obligation scale assumes an historical average recovery of between 30%–50% on the senior, unsecured obligations of an issuer. As a result, individual obligations of entities, such as corporations, are assigned ratings higher, lower, or the same as that entity's issuer rating or Issuer Default Rating ("IDR").

AAA Highest credit quality. 'AAA' denotes the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

AA Very high credit quality. 'AA' ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

A High credit quality. 'A' ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

BBB Good credit quality. 'BBB' ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

BB Speculative. 'BB' ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.

B Highly speculative. 'B' ratings indicate that material credit risk is present.

CCC Substantial credit risk. 'CCC' ratings indicate that substantial credit risk is present.

CC Very high levels of credit risk. 'CC' ratings indicate very high levels of credit risk.

C Exceptionally high levels of credit risk. 'C' indicates exceptionally high levels of credit risk.

Defaulted obligations typically are not assigned 'D' ratings, but are instead rated in the 'B' to 'C' rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.

Notes: The modifiers "+" or "-" 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 'B'.

The subscript 'emr' is appended to a rating to denote embedded market risk which is beyond the scope of the rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.

<u>Short-Term Ratings Assigned to Obligations in Corporate, Public and Structured Finance</u>

A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as "short term" based on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.

F-1 Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

F-2 Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.

F-3 Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

B Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

C High short-term default risk. Default is a real possibility.

RD Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.

D Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.

**Appendix B – iSS GUIDELINES**

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**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| [**Coverage**](#v_001) | [8](#v_001) |
| [**1. Board of Directors**](#v_002) | [9](#v_002) |
| &nbsp;&nbsp;[Voting on Director Nominees in Uncontested Elections](#v_003) | [9](#v_003) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Independence](#v_004) | [9](#v_004) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[ISS Classification of Directors – U.S.](#v_005) | [10](#v_005) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Composition](#v_006) | [12](#v_006) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Attendance](#v_007) | [12](#v_007) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Overboarded Directors](#v_008) | [12](#v_008) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Gender Diversity](#v_009) | [12](#v_009) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Racial and/or Ethnic Diversity](#v_010) | [12](#v_010) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Responsiveness](#v_011) | [13](#v_011) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Accountability](#v_012) | [13](#v_012) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Poison Pills](#v_013) | [13](#v_013) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Unequal Voting Rights](#v_014) | [14](#v_014) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Classified Board Structure](#v_015) | [14](#v_015) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Removal of Shareholder Discretion on Classified Boards](#v_016) | [14](#v_016) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Governance Structure](#v_017) | [14](#v_017) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Unilateral Bylaw/Charter Amendments](#v_018) | [15](#v_018) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Restricting Binding Shareholder Proposals](#v_019) | [15](#v_019) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Director Performance Evaluation](#v_020) | [15](#v_020) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management Proposals to Ratify Existing Charter or Bylaw Provisions](#v_021) | [16](#v_021) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Audit-Related Practices](#v_022) | [16](#v_022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Compensation Practices](#v_023) | [16](#v_023) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Pledging of Company Stock](#v_024) | [17](#v_024) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Climate Accountability](#v_025) | [17](#v_025) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Governance Failures](#v_026) | [17](#v_026) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Voting on Director Nominees in Contested Elections](#v_027) | [18](#v_027) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Vote-No Campaigns](#v_028) | [18](#v_028) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Contests/Proxy Access](#v_029) | [18](#v_029) |
| &nbsp;&nbsp;[Other Board-Related Proposals](#v_030) | [18](#v_030) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Adopt Anti-Hedging/Pledging/Speculative Investments Policy](#v_031) | [18](#v_031) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Board Refreshment](#v_032) | [18](#v_032) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Term/Tenure Limits](#v_033) | [19](#v_033) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Age Limits](#v_034) | [19](#v_034) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Board Size](#v_035) | [19](#v_035) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Classification/Declassification of the Board](#v_036) | [19](#v_036) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[CEO Succession Planning](#v_037) | [19](#v_037) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Cumulative Voting](#v_038) | [19](#v_038) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Director and Officer Indemnification, Liability Protection, and Exculpation](#v_039) | [20](#v_039) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Establish/Amend Nominee Qualifications](#v_040) | [20](#v_040) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Establish Other Board Committee Proposals](#v_041) | [21](#v_041) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Filling Vacancies/Removal of Directors](#v_042) | [21](#v_042) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Independent Board Chair](#v_043) | [21](#v_043) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Majority of Independent Directors/Establishment of Independent Committees](#v_044) | [22](#v_044) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Majority Vote Standard for the Election of Directors](#v_045) | [22](#v_045) |

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Access](#v_046) | [22](#v_046) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Require More Nominees than Open Seats](#v_047) | [22](#v_047) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Engagement Policy (Shareholder Advisory Committee)](#v_048) | [23](#v_048) |
| [**2. Audit-Related**](#v_049) | [**24**](#v_049) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Auditor Indemnification and Limitation of Liability](#v_050) | [24](#v_050) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Auditor Ratification](#v_051) | [24](#v_051) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals Limiting Non-Audit Services](#v_052) | [24](#v_052) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals on Audit Firm Rotation](#v_053) | [25](#v_053) |
| [**3. Shareholder Rights & Defenses**](#v_054) | [**26**](#v_054) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Advance Notice Requirements for Shareholder Proposals/Nominations](#v_055) | [26](#v_055) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Amend Bylaws without Shareholder Consent](#v_056) | [26](#v_056) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Control Share Acquisition Provisions](#v_057) | [26](#v_057) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Control Share Cash-Out Provisions](#v_058) | [26](#v_058) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Disgorgement Provisions](#v_059) | [27](#v_059) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Fair Price Provisions](#v_060) | [27](#v_060) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Freeze-Out Provisions](#v_061) | [27](#v_061) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Greenmail](#v_062) | [27](#v_062) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Litigation Rights](#v_063) | [27](#v_063) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Federal Forum Selection Provisions](#v_064) | [27](#v_064) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Exclusive Forum Provisions for State Law Matters](#v_065) | [28](#v_065) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Fee shifting](#v_066) | [28](#v_066) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Net Operating Loss (NOL) Protective Amendments](#v_067) | [29](#v_067) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Poison Pills (Shareholder Rights Plans)](#v_068) | [29](#v_068) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy](#v_069) | [29](#v_069) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management Proposals to Ratify a Poison Pill](#v_070) | [29](#v_070) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)](#v_071) | [30](#v_071) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Voting Disclosure, Confidentiality, and Tabulation](#v_072) | [30](#v_072) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions](#v_073) | [30](#v_073) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reimbursing Proxy Solicitation Expenses](#v_074) | [31](#v_074) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reincorporation Proposals](#v_075) | [31](#v_075) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ability to Act by Written Consent](#v_076) | [31](#v_076) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ability to Call Special Meetings](#v_077) | [32](#v_077) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Stakeholder Provisions](#v_078) | [32](#v_078) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[State Antitakeover Statutes](#v_079) | [32](#v_079) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Supermajority Vote Requirements](#v_080) | [32](#v_080) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Virtual Shareholder Meetings](#v_081) | [33](#v_081) |
| [**4. Capital/Restructuring**](#v_082) | [**34**](#v_082) |
| &nbsp;&nbsp;[Capital](#v_083) | [34](#v_083) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Adjustments to Par Value of Common Stock](#v_084) | [34](#v_084) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Common Stock Authorization](#v_085) | [34](#v_085) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[General Authorization Requests](#v_086) | [34](#v_086) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Specific Authorization Requests](#v_087) | [35](#v_087) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Dual Class Structure](#v_088) | [35](#v_088) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Issue Stock for Use with Rights Plan](#v_089) | [35](#v_089) |

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;[Preemptive Rights](#v_090) | [35](#v_090) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Preferred Stock Authorization](#v_091) | [35](#v_091) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[General Authorization Requests](#v_092) | [35](#v_092) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Recapitalization Plans](#v_093) | [37](#v_093) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Reverse Stock Splits](#v_094) | [37](#v_094) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S.](#v_095) | [37](#v_095) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Share Repurchase Programs](#v_096) | [38](#v_096) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Share Repurchase Programs Shareholder Proposals](#v_097) | [38](#v_097) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Stock Distributions: Splits and Dividends](#v_098) | [38](#v_098) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Tracking Stock](#v_099) | [38](#v_099) |
| &nbsp;&nbsp;[Restructuring](#v_100) | [38](#v_100) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Appraisal Rights](#v_101) | [38](#v_101) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Asset Purchases](#v_102) | [39](#v_102) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Asset Sales](#v_103) | [39](#v_103) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Bundled Proposals](#v_104) | [39](#v_104) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Conversion of Securities](#v_105) | [39](#v_105) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans](#v_106) | [39](#v_106) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Formation of Holding Company](#v_107) | [40](#v_107) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Going Private and Going Dark Transactions (LBOs and Minority Squeeze-outs)](#v_108) | [40](#v_108) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Joint Ventures](#v_109) | [41](#v_109) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Liquidations](#v_110) | [41](#v_110) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Mergers and Acquisitions](#v_111) | [41](#v_111) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Private Placements/Warrants/Convertible Debentures](#v_112) | [42](#v_112) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Reorganization/Restructuring Plan (Bankruptcy)](#v_113) | [43](#v_113) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Special Purpose Acquisition Corporations (SPACs)](#v_114) | [43](#v_114) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions](#v_115) | [44](#v_115) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Spin-offs](#v_116) | [44](#v_116) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Value Maximization Shareholder Proposals](#v_117) | [44](#v_117) |
| [**5. Compensation**](#v_118) | [**45**](#v_118) |
| &nbsp;&nbsp;[Executive Pay Evaluation](#v_119) | [45](#v_119) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Advisory Votes on Executive Compensation—Management Proposals (Say-on-Pay)](#v_120) | [45](#v_120) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pay-for-Performance Evaluation](#v_121) | [46](#v_121) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Pay Practices](#v_122) | [47](#v_122) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Compensation Committee Communications and Responsiveness](#v_123) | [48](#v_123) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")](#v_124) | [48](#v_124) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale](#v_125) | [48](#v_125) |
| &nbsp;&nbsp;[Equity-Based and Other Incentive Plans](#v_126) | [49](#v_126) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Value Transfer (SVT)](#v_127) | [50](#v_127) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Three-Year Value-Adjusted Burn Rate](#v_128) | [50](#v_128) |
| &nbsp;&nbsp;[Egregious Factors](#v_129) | [50](#v_129) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Liberal Change in Control Definition](#v_130) | [50](#v_130) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Repricing Provisions](#v_131) | [51](#v_131) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Pay Practices or Significant Pay-for-Performance Disconnect](#v_132) | [51](#v_132) |
| &nbsp;&nbsp;[Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))](#v_133) | [51](#v_133) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;[Specific Treatment of Certain Award Types in Equity Plan Evaluations](#v_134) | [52](#v_134) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Dividend Equivalent Rights](#v_135) | [52](#v_135) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)](#v_136) | [52](#v_136) |
| &nbsp;&nbsp;[Other Compensation Plans](#v_137) | [52](#v_137) |
| &nbsp;&nbsp;&nbsp;&nbsp;[401(k) Employee Benefit Plans](#v_138) | [52](#v_138) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Ownership Plans (ESOPs)](#v_139) | [53](#v_139) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Purchase Plans—Qualified Plans](#v_140) | [53](#v_140) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Purchase Plans—Non-Qualified Plans](#v_141) | [53](#v_141) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Option Exchange Programs/Repricing Options](#v_142) | [53](#v_142) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Stock Plans in Lieu of Cash](#v_143) | [54](#v_143) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Transfer Stock Option (TSO) Programs](#v_144) | [54](#v_144) |
| &nbsp;&nbsp;[Director Compensation](#v_145) | [55](#v_145) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ratification of Director Pay Programs](#v_146) | [55](#v_146) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Equity Plans for Non-Employee Directors](#v_147) | [55](#v_147) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Non-Employee Director Retirement Plans](#v_148) | [56](#v_148) |
| &nbsp;&nbsp;[Shareholder Proposals on Compensation](#v_149) | [56](#v_149) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Bonus Banking/Bonus Banking "Plus"](#v_150) | [56](#v_150) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Compensation Consultants—Disclosure of Board or Company's Utilization](#v_151) | [56](#v_151) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Disclosure/Setting Levels or Types of Compensation for Executives and Directors](#v_152) | [56](#v_152) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Golden Coffins/Executive Death Benefits](#v_153) | [57](#v_153) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Hold Equity Past Retirement or for a Significant Period of Time](#v_154) | [57](#v_154) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pay Disparity](#v_155) | [57](#v_155) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pay for Performance/Performance-Based Awards](#v_156) | [57](#v_156) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pay for Superior Performance](#v_157) | [58](#v_157) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pre-Arranged Trading Plans (10b5-1 Plans)](#v_158) | [58](#v_158) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Prohibit Outside CEOs from Serving on Compensation Committees](#v_159) | [59](#v_159) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Recoupment of Incentive or Stock Compensation in Specified Circumstances](#v_160) | [59](#v_160) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Severance Agreements for Executives/Golden Parachutes](#v_161) | [59](#v_161) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Share Buyback Impact on Incentive Program Metrics](#v_162) | [59](#v_162) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Supplemental Executive Retirement Plans (SERPs)](#v_163) | [60](#v_163) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Tax Gross-Up Proposals](#v_164) | [60](#v_164) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity](#v_165) | [60](#v_165) |
| [**6. Routine/Miscellaneous**](#v_166) | [**61**](#v_166) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Adjourn Meeting](#v_167) | [61](#v_167) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Amend Quorum Requirements](#v_168) | [61](#v_168) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Amend Minor Bylaws](#v_169) | [61](#v_169) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Change Company Name](#v_170) | [61](#v_170) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Change Date, Time, or Location of Annual Meeting](#v_171) | [61](#v_171) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Other Business](#v_172) | [62](#v_172) |
| [**7. Social and Environmental Issues**](#v_173) | [**63**](#v_173) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Global Approach – E&S Shareholder Proposals](#v_174) | [63](#v_174) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Endorsement of Principles](#v_175) | [63](#v_175) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Animal Welfare](#v_176) | [63](#v_176) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;[Animal Welfare Policies](#v_177) | [63](#v_177) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Animal Testing](#v_178) | [64](#v_178) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Animal Slaughter](#v_179) | [64](#v_179) |
| &nbsp;&nbsp;[Consumer Issues](#v_180) | [64](#v_180) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Genetically Modified Ingredients](#v_181) | [64](#v_181) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Reports on Potentially Controversial Business/Financial Practices](#v_182) | [64](#v_182) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pharmaceutical Pricing, Access to Medicines, and Prescription Drug Reimportation](#v_183) | [65](#v_183) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Product Safety and Toxic/Hazardous Materials](#v_184) | [65](#v_184) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Tobacco-Related Proposals](#v_185) | [66](#v_185) |
| &nbsp;&nbsp;[Climate Change](#v_186) | [66](#v_186) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Say on Climate (SoC) Management Proposals](#v_187) | [66](#v_187) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Say on Climate (SoC) Shareholder Proposals](#v_188) | [67](#v_188) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Climate Change/Greenhouse Gas (GHG) Emissions](#v_189) | [67](#v_189) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Energy Efficiency](#v_190) | [68](#v_190) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Renewable Energy](#v_191) | [68](#v_191) |
| &nbsp;&nbsp;[Diversity](#v_192) | [68](#v_192) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Board Diversity](#v_193) | [68](#v_193) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Equality of Opportunity](#v_194) | [69](#v_194) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Gender Identity, Sexual Orientation, and Domestic Partner Benefits](#v_195) | [69](#v_195) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Gender, Race/Ethnicity Pay Gap](#v_196) | [69](#v_196) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Racial Equity and/or Civil Rights Audit Guidelines](#v_197) | [69](#v_197) |
| &nbsp;&nbsp;[Environment and Sustainability](#v_198) | [70](#v_198) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Facility and Workplace Safety](#v_199) | [70](#v_199) |
| &nbsp;&nbsp;&nbsp;&nbsp;[General Environmental Proposals and Community Impact Assessments](#v_200) | [70](#v_200) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Hydraulic Fracturing](#v_201) | [70](#v_201) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Operations in Protected Areas](#v_202) | [71](#v_202) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Recycling](#v_203) | [71](#v_203) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Sustainability Reporting](#v_204) | [71](#v_204) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Water Issues](#v_205) | [71](#v_205) |
| &nbsp;&nbsp;[General Corporate Issues](#v_206) | [72](#v_206) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Charitable Contributions](#v_207) | [72](#v_207) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Data Security, Privacy, and Internet Issues](#v_208) | [72](#v_208) |
| &nbsp;&nbsp;&nbsp;&nbsp;[ESG Compensation-Related Proposals](#v_209) | [72](#v_209) |
| &nbsp;&nbsp;[Human Rights, Human Capital Management, and International Operations](#v_210) | [72](#v_210) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Human Rights Proposals](#v_211) | [72](#v_211) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Mandatory Arbitration](#v_212) | [73](#v_212) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Operations in High-Risk Markets](#v_213) | [73](#v_213) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Outsourcing/Offshoring](#v_214) | [74](#v_214) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Sexual Harassment](#v_215) | [74](#v_215) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Weapons and Military Sales](#v_216) | [74](#v_216) |
| &nbsp;&nbsp;[Political Activities](#v_217) | [74](#v_217) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Lobbying](#v_218) | [74](#v_218) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Political Contributions](#v_219) | [75](#v_219) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;[Political Expenditures and Lobbying Congruency](#v_220) | [75](#v_220) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Political Ties](#v_221) | [75](#v_221) |
| [**8. Mutual Fund Proxies**](#v_222) | [**77**](#v_222) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Election of Directors](#v_223) | [77](#v_223) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes](#v_224) | [77](#v_224) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Converting Closed-end Fund to Open-end Fund](#v_225) | [77](#v_225) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Proxy Contests](#v_226) | [77](#v_226) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Investment Advisory Agreements](#v_227) | [77](#v_227) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Approving New Classes or Series of Shares](#v_228) | [78](#v_228) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Preferred Stock Proposals](#v_229) | [78](#v_229) |
| &nbsp;&nbsp;&nbsp;&nbsp;[1940 Act Policies](#v_230) | [78](#v_230) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Changing a Fundamental Restriction to a Nonfundamental Restriction](#v_231) | [78](#v_231) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Change Fundamental Investment Objective to Nonfundamental](#v_232) | [78](#v_232) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Name Change Proposals](#v_233) | [78](#v_233) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Change in Fund's Subclassification](#v_234) | [79](#v_234) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value](#v_235) | [79](#v_235) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Disposition of Assets/Termination/Liquidation](#v_236) | [79](#v_236) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Changes to the Charter Document](#v_237) | [79](#v_237) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Changing the Domicile of a Fund](#v_238) | [80](#v_238) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval](#v_239) | [80](#v_239) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Distribution Agreements](#v_240) | [80](#v_240) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Master-Feeder Structure](#v_241) | [80](#v_241) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Mergers](#v_242) | [80](#v_242) |
| &nbsp;&nbsp;[Shareholder Proposals for Mutual Funds](#v_243) | [80](#v_243) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Establish Director Ownership Requirement](#v_244) | [80](#v_244) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Reimburse Shareholder for Expenses Incurred](#v_245) | [81](#v_245) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Terminate the Investment Advisor](#v_246) | [81](#v_246) |

---

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**Coverage**

The U.S. research team provides proxy analyses and voting recommendations for the common shareholder meetings of U.S. - incorporated companies that are publicly-traded on U.S. exchanges, as well as certain OTC companies, if they are held in our institutional investor clients' portfolios. Coverage generally includes corporate actions for common equity holders, such as written consents and bankruptcies. ISS' U.S. coverage includes investment companies (including open-end funds, closed-end funds, exchange-traded funds, and unit investment trusts), limited partnerships ("LPs"), master limited partnerships ("MLPs"), limited liability companies ("LLCs"), and business development companies. ISS reviews its universe of coverage on an annual basis, and the coverage is subject to change based on client need and industry trends.

**Foreign-incorporated companies**

In addition to U.S.- incorporated, U.S.- listed companies, ISS' U.S. policies are applied to certain foreign- incorporated company analyses. Like the SEC, ISS distinguishes two types of companies that list but are not incorporated in the U.S.:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ Guidelines for the market that is responsible for, or most relevant to, the
item on the ballot.

U.S. incorporated companies listed only on non-U.S. exchanges are generally covered under the ISS guidelines for the market on which they are traded.

An FPI is generally covered under ISS' approach to FPIs outlined above, even if such FPI voluntarily files a proxy statement and/or other filing normally required of a U.S. Domestic Issuer, so long as the company retains its FPI status.

In all cases – including with respect to other companies with cross-market features that may lead to ballot items related to multiple markets – items that are on the ballot solely due to the requirements of another market (listing, incorporation, or national code) may be evaluated under the policy of the relevant market, regardless of the "assigned" primary market coverage.

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1. Board of Directors

Voting on Director Nominees in Uncontested Elections

Four fundamental principles apply when determining votes on director nominees:

**Independence**: Boards should be sufficiently independent from management (and significant shareholders) 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.

**Composition**: Companies should ensure that directors add value to the board through their specific skills and expertise and by having 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.

**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.

**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.

**General Recommendation:** Generally vote for director nominees, except under the following circumstances (with new nominees**<sup>1</sup>** considered on case-by-case basis):

**Independence**

Vote against**<sup>2</sup>** or withhold from non-independent directors (Executive Directors and Non-Independent Non- Executive Directors per ISS' Classification of Directors) when:

▪ 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.

**<sup>1</sup>** 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.

**<sup>2</sup>** 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.

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**ISS Classification of Directors – U.S.**

1. Executive Director

&nbsp;&nbsp;&nbsp;&nbsp;**1.1.** Current
 officer  ***<sup>1</sup>*** of the company or one of its affiliates  ***<sup>2</sup>*.** 

2. Non-Independent Non-Executive Director

<u>Board Identification</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.1. Director identified as not independent by the board.

<u>Controlling/Significant Shareholder</u>

&nbsp;&nbsp;&nbsp;&nbsp;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).

<u>Current Employment at Company or Related Company</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.3. Non-officer employee of the firm (including employee representatives).

&nbsp;&nbsp;&nbsp;&nbsp;2.4. Officer  ***<sup>1</sup>*** ,
 former officer, or general or limited partner of a joint venture or partnership with the
 company.

<u>Former Employment</u>

&nbsp;&nbsp;&nbsp;&nbsp;**2.5.** Former
 CEO of the company.  ***<sup>3, 4</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.6. Former
 non-CEO officer **<sup>1</sup>** of the company or an affiliate  ***<sup>2</sup>*** within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;**2.7.** Former
 officer  ***<sup>1</sup>*** of an acquired company within the past five years.  ***<sup>4</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.8. Officer  ***<sup>1</sup>*** of a former parent or predecessor firm at the time the company was sold or
 split off within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;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.  ***<sup>5</sup>*** 

<u>Family Members</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.10. Immediate
 family member  ***<sup>6</sup>*** of a current or former officer  ***<sup>1</sup>*** of the company or its affiliates  ***<sup>2</sup>*** within the last five years.

&nbsp;&nbsp;&nbsp;&nbsp;2.11. Immediate
 family member  ***<sup>6</sup>*** of a current employee of company or its affiliates  ***<sup>2</sup>*** 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).

<u>Professional, Transactional, and Charitable Relationships</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.12. Director
 who (or whose immediate family member  ***<sup>6</sup>***) currently provides professional
 services  ***<sup>7</sup>*** in excess of $10,000 per year to: the company, an affiliate  ***<sup>2</sup>*** ,
 or an individual officer of the company or an affiliate; or who is (or whose immediate family
 member  ***<sup>6</sup>*** is) a partner, employee, or controlling shareholder of an
 organization which provides the services.

&nbsp;&nbsp;&nbsp;&nbsp;2.13. Director
 who (or whose immediate family member  ***<sup>6</sup>***) currently has any material
 transactional relationship  ***<sup>8</sup>*** with the company or its affiliates  ***<sup>2</sup>*** ;
 or who is (or whose immediate family member  ***<sup>6</sup>*** is) a partner in, or
 a controlling shareholder or an executive officer of, an organization which has the material
 transactional relationship  ***<sup>8</sup>*** (excluding investments in the company
 through a private placement).

&nbsp;&nbsp;&nbsp;&nbsp;2.14. Director
 who (or whose immediate family member  ***<sup>6</sup>*)** is a trustee, director,
 or employee of a charitable or non-profit organization that receives material grants or endowments  ***<sup>8</sup>*** from the company or its affiliates  ***<sup>2</sup>*** .

<u>Other Relationships</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.15. Party
 to a voting agreement  ***<sup>9</sup>*** to vote in line with management on proposals
 being brought to shareholder vote.

&nbsp;&nbsp;&nbsp;&nbsp;2.16. Has (or
 an immediate family member  ***<sup>6</sup>*** has) an interlocking relationship as
 defined by the SEC involving members of the board of directors or its Compensation Committee.  ***<sup>10</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.17. Founder  ***<sup>11</sup>*** of the company but not currently an employee.

&nbsp;&nbsp;&nbsp;&nbsp;2.18. Director with pay comparable to Named Executive Officers.

&nbsp;&nbsp;&nbsp;&nbsp;2.19. Any material  ***<sup>12</sup>*** relationship with the company.

3. Independent Director

&nbsp;&nbsp;&nbsp;&nbsp;3.1. No material  ***<sup>12</sup>*** connection to the company other than a board seat.

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**Footnotes:**

*1.* The definition of officer will generally follow that of a "Section 16 officer" (officers subject to Section 16 of the Securities and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division, or policy function). Current interim officers are included in this category. For private companies, the equivalent positions are applicable. A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will generally be classified as a Non-Independent Non-Executive Director under "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 revenues, for a company that follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient's gross revenues, for a company that follows NYSE listing standards. For a company that follows neither of the preceding standards, ISS will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).

*9.* Dissident directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as Independent Directors if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders' interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships or related party transactions.

*10.* Interlocks include: executive officers serving as directors on each other's compensation or similar committees (or, in the absence of such a committee, on the board); or executive officers sitting on each other's boards and at least one serves on the other's compensation or similar committees (or, in the absence of such a committee, on the board).

*11.* The operating involvement of the founder with the company will be considered; if the founder was never employed by the company, ISS may deem him or her an Independent Director.

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*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.

**Composition**

**Attendance at Board and Committee Meetings:** Generally vote against or withhold from directors (except nominees who served only part of the fiscal year**<sup>3</sup>**) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following:

▪ 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.

If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote against or withhold from the director(s) in question.

**Overboarded Directors:** Generally vote against or withhold from individual directors who:

▪ 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 boards **<sup>4</sup>**.

**Gender Diversity** **:** Generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies where there are no women on the company's board. An exception will be made if there was at least one woman on the board at the preceding annual meeting and the board makes a firm commitment to return to a gender-diverse status within a year.

**Racial and/or Ethnic Diversity** **:** For companies in the Russell 3000 or S&P 1500 indices, generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members**<sup>5</sup>**. An exception will be made if there was racial and/or ethnic diversity on the board at the preceding annual meeting and the board makes a firm commitment to appoint at least one racial and/or ethnic diverse member within a year.

<sup>3</sup> Nominees who served for only part of the fiscal year are generally exempted from the attendance policy.

<sup>4</sup> 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.

<sup>5</sup> Aggregate diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity.

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**Responsiveness**

Vote case-by-case on individual directors, committee members, or the entire board of directors as appropriate if:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosed outreach efforts by the board to shareholders in the wake of the
vote;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Rationale provided in the proxy statement for the level of implementation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The subject matter of the proposal;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The level of support for and opposition to the resolution in past meetings;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Actions taken by the board in response to the majority vote and its engagement
with shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The continuation of the underlying issue as a voting item on the ballot (as
either shareholder or management proposals); and

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote case-by-case on Compensation Committee members (or, in exceptional cases, the full board) and the Say on Pay proposal if:

▪ The company's previous say-on-pay received the support of less than
70 percent of votes cast. Factors that will be considered are:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's response, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of engagement efforts with major institutional
investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of the specific concerns voiced by
dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of specific and meaningful actions
taken to address shareholders' concerns;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Other recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

**Accountability**

***P*** ***ROBLEMATIC TAKEOVER DEFENSES, CAPITAL STRUCTURE, AND GOVERNANCE STRUCTURE***

**Poison Pills:** Generally vote against or withhold from all nominees (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if:

▪ The company has a poison pill with a deadhand or slowhand feature **<sup>6</sup>**;

<sup>6</sup> 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.

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▪ 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 shareholders **<sup>7</sup>**.

Vote case-by-case on nominees if the board adopts an initial short-term pill**<sup>6</sup>** (with a term of one year or less) without shareholder approval, taking into consideration:

▪ 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.

**Unequal Voting Rights**: Generally vote withhold or against directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case), if the company employs a common stock structure with unequal voting rights**<sup>8</sup>**.

Exceptions to this policy will generally be limited to:

▪ Newly-public companies **<sup>9</sup>** 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.

**Classified Board Structure:** The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable.

**Removal of Shareholder Discretion on Classified Boards** : The company has opted into, or failed to opt out of, state laws requiring a classified board structure.

**Problematic Governance Structure** : For companies that hold or held their first annual meeting**<sup>9</sup>** of public shareholders after Feb. 1, 2015, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if, prior to or in connection with the company's public offering, the company or its board adopted the following bylaw or charter provisions that are considered to be materially adverse to shareholder rights:

▪ Supermajority vote requirements to amend the bylaws or charter;

▪ A classified board structure; or

▪ Other egregious provisions.

<sup>7</sup> Approval prior to, or in connection, with a company's becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient.

<sup>8</sup> 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").

<sup>9</sup> 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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A provision which specifies that the problematic structure(s) will be sunset within seven years of the date of going public will be considered a mitigating factor.

Unless the adverse provision is reversed or removed, vote case-by-case on director nominees in subsequent years.

**Unilateral Bylaw/Charter Amendments** **:** Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if the board amends the company's bylaws or charter without shareholder approval in a manner that materially diminishes shareholders' rights or that could adversely impact shareholders, considering the following factors:

▪ 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.

Unless the adverse amendment is reversed or submitted to a binding shareholder vote, in subsequent years vote case-by-case on director nominees. Generally vote against (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if the directors:

▪ Classified the board;

▪ Adopted supermajority vote requirements to amend the bylaws or charter;

▪ Eliminated shareholders' ability to amend bylaws;

▪ Adopted
 a f <u>ee-shifting provision</u>; or

▪ Adopted another provision deemed egregious.

**Restricting Binding Shareholder Proposals** **:** Generally vote against or withhold from the members of the governance committee if:

▪ 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.

Submission of management proposals to approve or ratify requirements in excess of SEC Rule 14a-8 for the submission of binding bylaw amendments will generally be viewed as an insufficient restoration of shareholders' rights. Generally continue to vote against or withhold on an ongoing basis until shareholders are provided with an unfettered ability to amend the bylaws or a proposal providing for such unfettered right is submitted for shareholder approval.

**Director Performance Evaluation** **:** The board lacks mechanisms to promote accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one-, three-, and five-year total shareholder returns in the bottom half of a company's four-digit GICS industry group (Russell 3000 companies only). Take into consideration the company's operational metrics and other factors as warranted. Problematic provisions include but are not limited to:

▪ A classified board structure;

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▪ 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.

**Management Proposals to Ratify Existing Charter or Bylaw Provisions** **:** Vote against/withhold from individual directors, members of the governance committee, or the full board, where boards ask shareholders to ratify existing charter or bylaw provisions considering the following factors:

▪ 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.

**Problematic Audit-Related Practices**

Generally vote against or withhold from the members of the Audit Committee if:

▪ 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.

Vote case-by-case on members of the Audit Committee and potentially the full board if:

▪ 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.

**Problematic Compensation Practices**

In the absence of an Advisory Vote on Executive Compensation (Say on Pay) ballot item or in egregious situations, vote against or withhold from the members of the Compensation Committee and potentially the full board if:

▪ 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.

Generally vote against or withhold from the Compensation Committee chair, other committee members, or potentially the full board if:

▪ 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.

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Generally vote against members of the board committee responsible for approving/setting non-employee director compensation if there is a pattern (i.e. two or more years) of awarding excessive non-employee director compensation without disclosing a compelling rationale or other mitigating factors.

**Problematic Pledging of Company Stock** : Vote against the members of the committee that oversees risks related to pledging, or the full board, where a significant level of pledged company stock by executives or directors raises concerns. The following factors will be considered:

▪ 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.

**Climate Accountability**

For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain**<sup>10</sup>**, generally vote against or withhold from the incumbent chair of the responsible committee (or other directors on a case-by-case basis) in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change to the company and the larger economy.

Minimum steps to understand and mitigate those risks are considered to be the following. Both minimum criteria will be required to be in alignment with the policy :

▪ Detailed disclosure of climate-related risks, such as according to the framework
established by the Task Force on Climate-related Financial Disclosures (TCFD), including:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Board governance measures;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Corporate strategy;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Risk management analyses; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Metrics and targets.

▪ Appropriate GHG emissions reduction targets.

At this time, "appropriate GHG emissions reductions targets" will be medium-term GHG reduction targets or Net Zero-by-2050 GHG reduction targets for a company's operations (Scope 1) and electricity use (Scope 2). Targets should cover the vast majority of the company's direct emissions.

**Governance Failures**

Under extraordinary circumstances, vote against or withhold from directors individually, committee members, or the entire board, due to:

▪ Material failures of governance, stewardship, risk oversight **<sup>11</sup>**,
or fiduciary responsibilities at the company;

▪ Failure to replace management as appropriate; or

<sup>10</sup> Companies defined as "significant GHG emitters" will be those on the current Climate Action 100+ Focus Group list.

<sup>11</sup> 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.

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&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Voting on Director Nominees in Contested Elections

**Vote-No Campaigns**

**General Recommendation:** In cases where companies are targeted in connection with public "vote-no" campaigns, evaluate director nominees under the existing governance policies for voting on director nominees in uncontested elections. Take into consideration the arguments submitted by shareholders and other publicly available information.

**Proxy Contests/Proxy Access**

**General Recommendation:** Vote case-by-case on the election of directors in contested elections, considering the following factors:

▪ 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.

In the case of candidates nominated pursuant to proxy access, vote case-by-case considering any applicable factors listed above or additional factors which may be relevant, including those that are specific to the company, to the nominee(s) and/or to the nature of the election (such as whether there are more candidates than board seats).

Other Board-Related Proposals

**Adopt Anti-Hedging/Pledging/Speculative Investments Policy**

**General Recommendation:** Generally vote for proposals seeking a policy that prohibits named executive officers from engaging in derivative or speculative transactions involving company stock, including hedging, holding stock in a margin account, or pledging stock as collateral for a loan. However, the company's existing policies regarding responsible use of company stock will be considered.

**Board Refreshment**

Board refreshment is best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs of the board are met and to bring in fresh perspectives, skills, and diversity as needed.

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**Term/Tenure Limits**

**General Recommendation:** Vote case-by-case on management proposals regarding director term/tenure limits, considering:

▪ 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.

Vote case-by-case on shareholder proposals asking for the company to adopt director term/tenure limits, considering:

▪ The scope of the shareholder proposal; and

▪ Evidence of problematic issues at the company combined with, or exacerbated
by, a lack of board refreshment.

**Age Limits**

**General Recommendation:** Generally vote against management and shareholder proposals to limit the tenure of independent directors through mandatory retirement ages. Vote for proposals to remove mandatory age limits.

**Board Size**

**General Recommendation:** Vote for proposals seeking to fix the board size or designate a range for the board size.

Vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

**Classification/Declassification of the Board**

**General Recommendation:** Vote against proposals to classify (stagger) the board.

Vote for proposals to repeal classified boards and to elect all directors annually.

**CEO Succession Planning**

**General Recommendation:** Generally vote for proposals seeking disclosure on a CEO succession planning policy, considering, at a minimum, the following factors:

▪ The reasonableness/scope of the request; and

▪ The company's existing disclosure on its current CEO succession planning
process.

**Cumulative Voting**

**General Recommendation:** Generally vote against management proposals to eliminate cumulate voting, and for shareholder proposals to restore or provide for cumulative voting, unless:

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▪ The company has proxy access **<sup>12</sup>**, 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.

Vote for proposals for cumulative voting at controlled companies (insider voting power > 50%).

**Director and Officer Indemnification, Liability Protection, and Exculpation**

**General Recommendation:** Vote case-by-case on proposals on director and officer indemnification, liability protection, and exculpation**<sup>13</sup>**.

Consider the stated rationale for the proposed change. Also consider, among other factors, the extent to which the proposal would:

▪ 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.

▪ 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.

Vote for those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if both of the following apply:

▪ 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.

**Establish/Amend Nominee Qualifications**

**General Recommendation:** Vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on the reasonableness of the criteria and the degree to which they may preclude dissident nominees from joining the board.

Vote case-by-case on shareholder resolutions seeking a director nominee who possesses a particular subject matter expertise, considering:

▪ The company's board committee structure, existing subject matter expertise,
and board nomination provisions relative to that of its peers;

<sup>12</sup> A proxy access right that meets the <u>recommended guidelines</u>.

<sup>13</sup> **Indemnification**: the condition of being secured against loss or damage.

**Limited liability**: a person's financial liability is limited to a fixed sum, or personal financial assets are not at risk if the individual loses a lawsuit that results in financial award/damages to the plaintiff.

**Exculpation**: to eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer.

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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.

**Establish Other Board Committee Proposals**

**General Recommendation:** Generally vote against shareholder proposals to establish a new board committee, as such proposals seek a specific oversight mechanism/structure that potentially limits a company's flexibility to determine an appropriate oversight mechanism for itself. However, the following factors will be considered:

▪ 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.

**Filling Vacancies/Removal of Directors**

**General Recommendation:** Vote against proposals that provide that directors may be removed only for cause.

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.

**Independent Board Chair**

**General Recommendation:** Generally vote for shareholder proposals requiring that the board chair position be filled by an independent director, taking into consideration the following:

▪ The scope and rationale of the proposal;

▪ The company's current board leadership structure;

▪ The company's governance structure and practices;

▪ Company performance; and

▪ Any other relevant factors that may be applicable.

The following factors will increase the likelihood of a "for" recommendation:

▪ 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

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▪ Evidence that the board has failed to intervene when management's interests
are contrary to shareholders' interests.

**Majority of Independent Directors/Establishment of Independent Committees**

**General Recommendation:** Vote for shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS' definition of Independent Director (See ISS' Classification of Directors.)

Vote for shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors unless they currently meet that standard.

**Majority Vote Standard for the Election of Directors**

**General Recommendation:** Generally vote for management proposals to adopt a majority of votes cast standard for directors in uncontested elections. Vote against if no carve-out for a plurality vote standard in contested elections is included.

Generally vote for precatory and binding shareholder resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve- out for a plurality vote standard when there are more nominees than board seats.

Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.

**Proxy Access**

**General Recommendation:** Generally vote for management and shareholder proposals for proxy access with the following provisions:

▪ **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.

Review for reasonableness any other restrictions on the right of proxy access. Generally vote against proposals that are more restrictive than these guidelines.

**Require More Nominees than Open Seats**

**General Recommendation:** Vote against shareholder proposals that would require a company to nominate more candidates than the number of open board seats.

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**Shareholder Engagement Policy (Shareholder Advisory Committee)**

**General Recommendation:** Generally vote for shareholder proposals requesting that the board establish an internal mechanism/process, which may include a committee, in order to improve communications between directors and shareholders, unless the company has the following features, as appropriate:

▪ 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.

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2. Audit-Related

**Auditor Indemnification and Limitation of Liability**

**General Recommendation:** Vote case-by-case on the issue of auditor indemnification and limitation of liability. Factors to be assessed include, but are not limited to:

▪ 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.

Vote against or withhold from members of an audit committee in situations where 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.

**Auditor Ratification**

**General Recommendation:** Vote for proposals to ratify auditors unless any of the following apply:

▪ 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 fees are excessive if:

▪ Non-audit ("other") fees > audit fees + audit-related fees
+ tax compliance/preparation fees

Tax compliance and preparation include the preparation of original and amended tax returns and refund claims, and tax payment planning. All other services in the tax category, such as tax advice, planning, or consulting, should be added to "Other" fees. If the breakout of tax fees cannot be determined, add all tax fees to "Other" fees.

In circumstances where "Other" fees include fees related to significant one-time capital structure events (such as initial public offerings, bankruptcy emergence, and spin-offs) and the company makes public disclosure of the amount and nature of those fees that are an exception to the standard "non-audit fee" category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.

**Shareholder Proposals Limiting Non-Audit Services**

**General Recommendation:** Vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

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**Shareholder Proposals on Audit Firm Rotation**

**General Recommendation:** Vote case-by-case on shareholder proposals asking for audit firm rotation, taking into account:

▪ 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.

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3. Shareholder Rights & Defenses

**Advance Notice Requirements for Shareholder Proposals/Nominations**

**General Recommendation:** Vote case-by-case on advance notice proposals, giving support to those proposals which allow shareholders to submit proposals/nominations as close to the meeting date as reasonably possible and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory, and shareholder review.

To be reasonable, the company's deadline for shareholder notice of a proposal/nominations must be no earlier than 120 days prior to the anniversary of the previous year's meeting and have a submittal window of no shorter than 30 days from the beginning of the notice period (also known as a 90-120-day window). The submittal window is the period under which shareholders must file their proposals/nominations prior to the deadline.

In general, support additional efforts by companies to ensure full disclosure in regard to a proponent's economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposals.

**Amend Bylaws without Shareholder Consent**

**General Recommendation:** Vote against proposals giving the board exclusive authority to amend the bylaws.

Vote case-by-case on proposals giving the board the ability to amend the bylaws in addition to shareholders, taking into account the following:

▪ 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.

**Control Share Acquisition Provisions**

**General Recommendation:** Vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.

Vote against proposals to amend the charter to include control share acquisition provisions.

Vote for proposals to restore voting rights to the control shares.

Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares.

**Control Share Cash-Out Provisions**

**General Recommendation:** Vote for proposals to opt out of control share cash-out statutes.

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Control share cash-out statutes give dissident shareholders the right to "cash-out" of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price.

**Disgorgement Provisions**

**General Recommendation:** Vote for proposals to opt out of state disgorgement provisions.

Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company's stock to disgorge, or pay back, to the company any profits realized from the sale of that company's stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor's gaining control status are subject to these recapture-of-profits provisions.

**Fair Price Provisions**

**General Recommendation:** Vote case-by-case on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.

Generally vote against fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.

**Freeze-Out Provisions**

**General Recommendation:** Vote for proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company.

**Greenmail**

**General Recommendation:** Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments.

Vote case-by-case on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders.

**Shareholder Litigation Rights**

**Federal Forum Selection Provisions**

Federal forum selection provisions require that U.S. federal courts be the sole forum for shareholders to litigate claims arising under federal securities law.

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**General Recommendation:** Generally vote for federal forum selection provisions in the charter or bylaws that specify "the district courts of the United States" as the exclusive forum for federal securities law matters, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

Vote against provisions that restrict the forum to a particular federal district court; unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

**Exclusive Forum Provisions for State Law Matters**

Exclusive forum provisions in the charter or bylaws restrict shareholders' ability to bring derivative lawsuits against the company, for claims arising out of state corporate law, to the courts of a particular state (generally the state of incorporation).

**General Recommendation:** Generally vote for charter or bylaw provisions that specify courts located within the state of Delaware as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

For states other than Delaware, vote case-by-case on exclusive forum provisions, taking into consideration:

▪ 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.

Generally vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters, or that specify a particular local court within the state; unilateral adoption of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

**Fee shifting**

Fee-shifting provisions in the charter or bylaws require that a shareholder who sues a company unsuccessfully pay all litigation expenses of the defendant corporation and its directors and officers.

**General Recommendation:** Generally vote against provisions that mandate fee-shifting whenever plaintiffs are not completely successful on the merits (i.e., including cases where the plaintiffs are partially successful).

Unilateral adoption of a fee-shifting provision will generally be considered an ongoing failure under the Unilateral Bylaw/Charter Amendments policy.

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**Net Operating Loss (NOL) Protective Amendments**

**General Recommendation:** Vote against proposals to adopt a protective amendment for the stated purpose of protecting a company's net operating losses (NOL) if the effective term of the protective amendment would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case, considering the following factors, for management proposals to adopt an NOL protective amendment that would remain in effect for the shorter of three years (or less) and the exhaustion of the NOL:

▪ 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.

Poison Pills (Shareholder Rights Plans)

**Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy**

**General Recommendation:** Vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it unless the company has: (1) A shareholder-approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:

▪ 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.

If the shareholder proposal calls for a time period of less than 12 months for shareholder ratification after adoption, vote for the proposal, but add the caveat that a vote within 12 months would be considered sufficient implementation.

**Management Proposals to Ratify a Poison Pill**

**General Recommendation:** Vote case-by-case on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

▪ 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;

▪ 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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In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company's existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.

**Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)**

**General Recommendation:** Vote against proposals to adopt a poison pill for the stated purpose of protecting a company's net operating losses (NOL) if the term of the pill would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case on management proposals for poison pill ratification, considering the following factors, if the term of the pill would be the shorter of three years (or less) and the exhaustion of the NOL:

▪ 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.

**Proxy Voting Disclosure, Confidentiality, and Tabulation**

**General Recommendation:** Vote case-by-case on proposals regarding proxy voting mechanics, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder rights. Specific issues covered under the policy include, but are not limited to, confidential voting of individual proxies and ballots, confidentiality of running vote tallies, and the treatment of abstentions and/or broker non-votes in the company's vote-counting methodology.

While a variety of factors may be considered in each analysis, the guiding principles are: transparency, consistency, and fairness in the proxy voting process. The factors considered, as applicable to the proposal, may include:

▪ 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.

**Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions**

**General Recommendation:** Generally vote against management proposals to ratify provisions of the company's existing charter or bylaws, unless these governance provisions align with best practice.

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In addition, voting against/withhold from individual directors, members of the governance committee, or the full board may be warranted, considering:

▪ 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.

**Reimbursing Proxy Solicitation Expenses**

**General Recommendation:** Vote case-by-case on proposals to reimburse proxy solicitation expenses.

When voting in conjunction with support of a dissident slate, vote for the reimbursement of all appropriate proxy solicitation expenses associated with the election.

Generally vote for shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:

▪ 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.

**Reincorporation Proposals**

**General Recommendation:** Management or shareholder proposals to change a company's state of incorporation should be evaluated case-by-case, giving consideration to both financial and corporate governance concerns including the following:

▪ 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.

**Shareholder Ability to Act by Written Consent**

**General Recommendation:** Generally vote against management and shareholder proposals to restrict or prohibit shareholders' ability to act by written consent.

Generally vote for management and shareholder proposals that provide shareholders with the ability to act by written consent, taking into account the following factors:

▪ Shareholders' current right to act by written consent;

▪ The consent threshold;

▪ The inclusion of exclusionary or prohibitive language;

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▪ Investor ownership structure; and

▪ Shareholder support of, and management's response to, previous shareholder proposals.

Vote case-by-case on shareholder proposals if, in addition to the considerations above, the company has the following governance and antitakeover provisions:

▪ An unfettered **<sup>14</sup>** 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.

**Shareholder Ability to Call Special Meetings**

**General Recommendation:** Vote against management or shareholder proposals to restrict or prohibit shareholders' ability to call special meetings.

Generally vote for management or shareholder proposals that provide shareholders with the ability to call special meetings taking into account the following factors:

▪ 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.

**Stakeholder Provisions**

**General Recommendation:** Vote against proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.

**State Antitakeover Statutes**

**General Recommendation:** Vote case-by-case on proposals to opt in or out of state takeover statutes (including fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, and anti-greenmail provisions).

**Supermajority Vote Requirements**

**General Recommendation:** Vote against proposals to require a supermajority shareholder vote.

Vote for management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote case-by-case, taking into account:

▪ Ownership structure;

▪ Quorum requirements; and

▪ Vote requirements.

**<sup>14</sup>** "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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**Virtual Shareholder Meetings**

**General Recommendation:** Generally vote for management proposals allowing for the convening of shareholder meetings by electronic means, so long as they do not preclude in-person meetings. Companies are encouraged to disclose the circumstances under which virtual-only**<sup>15</sup>** meetings would be held, and to allow for comparable rights and opportunities for shareholders to participate electronically as they would have during an in-person meeting.

Vote case-by-case on shareholder proposals concerning virtual-only meetings, considering:

▪ Scope and rationale of the proposal; and

▪ Concerns identified with the company's prior meeting practices.

**<sup>15</sup>** 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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**4. Capital/Restructuring**

Capital

**Adjustments to Par Value of Common Stock**

**General Recommendation:** Vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an anti-takeover device or some other negative corporate governance action.

Vote for management proposals to eliminate par value.

**Common Stock Authorization**

**General Authorization Requests**

**General Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of common stock that are to be used for general corporate purposes:

▪ 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.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

▪ 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.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

▪ 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.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

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**Specific Authorization Requests**

**General Recommendation:** Generally vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

▪ twice the amount needed to support the transactions on the ballot, and

▪ the allowable increase as calculated for general issuances above.

**Dual Class Structure**

**General Recommendation:** Generally vote against proposals to create a new class of common stock unless:

▪ 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.

**Issue Stock for Use with Rights Plan**

**General Recommendation:** Vote against proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder-approved shareholder rights plan (poison pill).

**Preemptive Rights**

**General Recommendation:** Vote case-by-case on shareholder proposals that seek preemptive rights, taking into consideration:

▪ The size of the company;

▪ The shareholder base; and

▪ The liquidity of the stock.

**Preferred Stock Authorization**

**General Authorization Requests**

**General Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of preferred stock that are to be used for general corporate purposes:

▪ 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.

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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.

▪ If no preferred shares are currently issued and outstanding, vote against the request, unless the company discloses a specific use
for the shares.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

▪ If the shares requested are blank check preferred shares that can be used for antitakeover purposes; **<sup>16</sup>** 

▪ 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); 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.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

▪ 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.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

**<u>Specific Authorization Requests</u>**

**General Recommendation:** Generally vote for proposals to increase the number of authorized preferred shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

▪ twice the amount needed to support the transactions on the ballot, and

▪ the allowable increase as calculated for general issuances above.

**<sup>16</sup>** 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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**Recapitalization Plans**

**General Recommendation:** Vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following:

▪ 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.

**Reverse Stock Splits**

**General Recommendation:** Vote for management proposals to implement a reverse stock split if:

▪ 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.

Vote case-by-case on proposals that do not meet either of the above conditions, taking into consideration the following factors:

▪ 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.

**Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S.**

**General Recommendation:** For U.S. domestic issuers incorporated outside the U.S. and listed <u>solely</u> on a U.S. exchange, generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.

For pre-revenue or other early-stage companies that are heavily reliant on periodic equity financing, generally vote for resolutions to authorize the issuance of common shares up to 50 percent of currently issued common share capital. The burden of proof will be on the company to establish that it has a need for the higher limit.

Renewal of such mandates should be sought at each year's annual meeting.

Vote case-by-case on share issuances for a specific transaction or financing proposal.

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**Share Repurchase Programs**

**General Recommendation:** For U.S.-incorporated companies, and foreign-incorporated U.S. Domestic Issuers that are traded solely on U.S. exchanges, vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, or to grant the board authority to conduct open- market repurchases, in the absence of company-specific concerns regarding:

▪ 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.

Vote case-by-case on proposals to repurchase shares directly from specified shareholders, balancing the stated rationale against the possibility for the repurchase authority to be misused, such as to repurchase shares from insiders at a premium to market price.

**Share Repurchase Programs Shareholder Proposals**

**General Recommendation:** Generally vote against shareholder proposals prohibiting executives from selling shares of company stock during periods in which the company has announced that it may or will be repurchasing shares of its stock. Vote for the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks.

**Stock Distributions: Splits and Dividends**

**General Recommendation:** Generally vote for management proposals to increase the common share authorization for stock split or stock dividend, provided that the effective increase in authorized shares is equal to or is less than the allowable increase calculated in accordance with ISS' Common Stock Authorization policy.

**Tracking Stock**

**General Recommendation:** Vote case-by-case on the creation of tracking stock, weighing the strategic value of the transaction against such factors as:

▪ 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.

Restructuring

**Appraisal Rights**

**General Recommendation:** Vote for proposals to restore or provide shareholders with rights of appraisal.

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**Asset Purchases**

**General Recommendation:** Vote case-by-case on asset purchase proposals, considering the following factors:

▪ Purchase price;

▪ Fairness opinion;

▪ Financial and strategic benefits;

▪ How the deal was negotiated;

▪ Conflicts of interest;

▪ Other alternatives for the business;

▪ Non-completion risk.

**Asset Sales**

**General Recommendation:** Vote case-by-case on asset sales, considering the following factors:

▪ 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.

**Bundled Proposals**

**General Recommendation:** Vote case-by-case on bundled or "conditional" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals.

**Conversion of Securities**

**General Recommendation:** Vote case-by-case on proposals regarding conversion of securities. When evaluating these proposals, the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.

Vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.

**Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans**

**General Recommendation:** Vote case-by-case on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, after evaluating:

▪ Dilution to existing shareholders' positions;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Terms of the offer - discount/premium in purchase price to investor, including any fairness opinion; termination penalties; exit strategy;

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&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

**Formation of Holding Company**

**General Recommendation:** Vote case-by-case on proposals regarding the formation of a holding company, taking into consideration the following:

▪ 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.

Absent compelling financial reasons to recommend for the transaction, vote against the formation of a holding company if the transaction would include either of the following:

▪ Increases in common or preferred stock in excess of the allowable maximum (see discussion under "Capital"); or

▪ Adverse changes in shareholder rights.

**Going Private and Going Dark Transactions (LBOs and Minority Squeeze-outs)**

**General Recommendation:** Vote case-by-case on going private transactions, taking into account the following:

▪ Offer price/premium;

▪ Fairness opinion;

▪ How the deal was negotiated;

▪ Conflicts of interest;

▪ Other alternatives/offers considered; and

▪ Non-completion risk.

Vote case-by-case on going dark transactions, determining whether the transaction enhances shareholder value by taking into consideration:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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?

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**Joint Ventures**

**General Recommendation:** Vote case-by-case on proposals to form joint ventures, taking into account the following:

▪ Percentage of assets/business contributed;

▪ Percentage ownership;

▪ Financial and strategic benefits;

▪ Governance structure;

▪ Conflicts of interest;

▪ Other alternatives; and

▪ Non-completion risk.

**Liquidations**

**General Recommendation:** Vote case-by-case on liquidations, taking into account the following:

▪ Management's efforts to pursue other alternatives;

▪ Appraisal value of assets; and

▪ The compensation plan for executives managing the liquidation.

Vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.

**Mergers and Acquisitions**

**General Recommendation:** Vote case-by-case on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

▪ *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

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worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

**Private Placements/Warrants/Convertible Debentures**

**General Recommendation:** Vote case-by-case on proposals regarding private placements, warrants, and convertible debentures taking into consideration:

▪ 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):

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's financial condition;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Degree of need for capital;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Use of proceeds;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Effect of the financing on the company's cost of capital;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Current and proposed cash burn rate;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Change in management;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Change in control;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Guaranteed board and committee seats;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Standstill provisions;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Voting agreements;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Veto power over certain corporate actions; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Minority versus majority ownership and corresponding minority discount or majority control premium.

▪ Conflicts of interest:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Conflicts of interest should be viewed from the perspective of the company and the investor.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Were the terms of the transaction negotiated at arm's length? Are managerial incentives aligned with shareholder interests?

▪ Market reaction:

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&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote for the private placement, or for the issuance of warrants and/or convertible debentures in a private placement, if it is expected that the company will file for bankruptcy if the transaction is not approved.

**Reorganization/Restructuring Plan (Bankruptcy)**

**General Recommendation:** Vote case-by-case on proposals to common shareholders on bankruptcy plans of reorganization, considering the following factors including, but not limited to:

▪ 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.

**Special Purpose Acquisition Corporations (SPACs)**

**General Recommendation:** Vote case-by-case on SPAC mergers and acquisitions taking into account the following:

▪ *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?

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**Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions**

**General Recommendation:** Vote case-by-case on SPAC extension proposals taking into account the length of the requested extension, the status of any pending transaction(s) or progression of the acquisition process, any added incentive for non-redeeming shareholders, and any prior extension requests.

▪ *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.

**Spin-offs**

**General Recommendation:** Vote case-by-case on spin-offs, considering:

▪ 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.

**Value Maximization Shareholder Proposals**

**General Recommendation:** Vote case-by-case on shareholder proposals seeking to maximize shareholder value by:

▪ Hiring a financial advisor to explore strategic alternatives;

▪ Selling the company; or

▪ Liquidating the company and distributing the proceeds to shareholders.

These proposals should be evaluated based on the following factors:

▪ 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.

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**5. Compensation**

Executive Pay Evaluation

Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:

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 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.

**Advisory Votes on Executive Compensation—Management Proposals (Say-on-Pay)**

**General Recommendation:** Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation.

Vote against Advisory Votes on Executive Compensation (Say-on-Pay or "SOP") if:

▪ 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.

Vote against or withhold from the members of the Compensation Committee and potentially the full board if:

▪ 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.

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Primary Evaluation Factors for Executive Pay

**Pay-for-Performance Evaluation**

ISS annually conducts a pay-for-performance analysis to identify strong or satisfactory alignment between pay and performance over a sustained period. With respect to companies in the S&P1500, Russell 3000, or Russell 3000E Indices**<sup>17</sup>**, this analysis considers the following:

1. Peer Group **<sup>18</sup>** 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 Alignment **<sup>19</sup>** – 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.

If the above analysis demonstrates significant unsatisfactory long-term pay-for-performance alignment or, in the case of companies outside the Russell indices, a misalignment between pay and performance is otherwise suggested, our analysis may include any of the following qualitative factors, as relevant to an evaluation of how various pay elements may work to encourage or to undermine long-term value creation and alignment with shareholder interests:

▪ 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 pay **<sup>20</sup>** compared to grant pay; and

▪ Any other factors deemed relevant.

**<sup>17</sup>** The Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities.

**<sup>18</sup>** 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.

**<sup>19</sup>** Only Russell 3000 Index companies are subject to the Absolute Alignment analysis.

**<sup>20</sup>** ISS research reports include realizable pay for S&P1500 companies.

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**Problematic Pay Practices**

Problematic pay elements are generally evaluated case-by-case considering the context of a company's overall pay program and demonstrated pay-for-performance philosophy. The focus is on executive compensation practices that contravene the global pay principles, including:

▪ 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.

The list of examples below highlights certain problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Excessive termination or CIC severance payments (generally exceeding 3 times base salary and average/target/most recent bonus);

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;▪ CIC excise tax gross-up entitlements (including "modified" gross-ups);

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

The above examples are not an exhaustive list. Please refer to ISS' U.S. Compensation Policies FAQ document for additional detail on specific pay practices that have been identified as problematic and may lead to negative vote recommendations.

**Options Backdating**

The following factors should be examined case-by-case to allow for distinctions to be made between "sloppy" plan administration versus deliberate action or fraud:

▪ 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.

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**Compensation Committee Communications and Responsiveness**

Consider the following factors case-by-case when evaluating ballot items related to executive pay on the board's responsiveness to investor input and engagement on compensation issues:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company
participants (including whether independent directors participated);

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of specific and meaningful actions taken to address shareholders' concerns;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Other recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

**Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")**

**General Recommendation:** Vote for annual advisory votes on compensation, which provide the most consistent and clear communication channel for shareholder concerns about companies' executive pay programs.

**Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale**

**General Recommendation:** Vote case-by-case on say on Golden Parachute proposals, including consideration of existing change-in-control arrangements maintained with named executive officers but also considering new or extended arrangements.

Features that may result in an "against" recommendation include one or more of the following, depending on the number, magnitude, and/or timing of issue(s):

▪ Single- or modified-single-trigger cash severance;

▪ Single-trigger acceleration of unvested equity awards;

▪ Full acceleration of equity awards granted shortly before the change in control;

▪ Acceleration of performance awards above the target level of performance without compelling rationale;

▪ Excessive cash severance (generally >3x base salary and bonus);

▪ Excise tax gross-ups triggered and payable;

▪ Excessive golden parachute payments (on an absolute basis or as a percentage of transaction equity value); or

▪ Recent amendments that incorporate any problematic features (such as those above) or recent actions (such
as extraordinary equity grants) that may make packages so attractive as to influence merger agreements that may not be in the best interests
of shareholders; or

▪ The company's assertion that a proposed transaction is conditioned on shareholder approval of the golden
parachute advisory vote.

Recent amendment(s) that incorporate problematic features will tend to carry more weight on the overall analysis. However, the presence of multiple legacy problematic features will also be closely scrutinized.

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In cases where the golden parachute vote is incorporated into a company's advisory vote on compensation (management say-on-pay), ISS will evaluate the say-on-pay proposal in accordance with these guidelines, which may give higher weight to that component of the overall evaluation.

Equity-Based and Other Incentive Plans

Please refer to ISS' U.S. Equity Compensation Plans FAQ document for additional details on the Equity Plan Scorecard policy.

**General Recommendation:** Vote case-by-case on certain equity-based compensation plans**<sup>21</sup>** depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated using an "Equity Plan Scorecard" (EPSC) approach with three pillars:

▪ **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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ SVT based only on new shares requested plus shares remaining for future grants.

▪ **Plan Features:** 

&nbsp;&nbsp;&nbsp;&nbsp;▪ Quality of disclosure around vesting upon a change in control (CIC);

&nbsp;&nbsp;&nbsp;&nbsp;▪ Discretionary vesting authority;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Liberal share recycling on various award types;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Lack of minimum vesting period for grants made under the plan;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Dividends payable prior to award vesting.

▪ **Grant Practices:** 

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's three-year burn rate relative to its industry/market cap peers;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Vesting requirements in CEO's recent equity grants (3-year look-back);

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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);

&nbsp;&nbsp;&nbsp;&nbsp;▪ The proportion of the CEO's most recent equity grants/awards subject to performance conditions;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the company maintains a sufficient claw-back policy;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the company maintains sufficient post-exercise/vesting share-holding requirements.

Generally vote against the plan proposal if the combination of above factors indicates that the plan is not, overall, in shareholders' interests, or if any of the following egregious factors ("overriding factors") apply:

▪ 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

**<sup>21</sup>** 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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▪ Any other plan features are determined to have a significant negative impact on shareholder interests.

**Further Information on certain EPSC Factors:**

**Shareholder Value Transfer (SVT)**

The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders' equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised (using two measures, in the case of plans subject to the Equity Plan Scorecard evaluation, as noted above). All award types are valued. For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full-value awards), the assumption is made that all awards to be granted will be the most expensive types.

For proposals that are not subject to the Equity Plan Scorecard evaluation, Shareholder Value Transfer is reasonable if it falls below a company-specific benchmark. The benchmark is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard: GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers' historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company-specific performance measures, size, and cash compensation into the industry cap equations to arrive at the company's benchmark.**<sup>22</sup>**

**Three-Year Value-Adjusted Burn Rate**

A "Value-Adjusted Burn Rate" is used for stock plan evaluations. Value-Adjusted Burn Rate benchmarks are calculated as the greater of: (1) an industry-specific threshold based on three-year burn rates within the company's GICS group segmented by S&P 500, Russell 3000 index (less the S&P 500) and non-Russell 3000 index; and (2) a *de minimis* threshold established separately for each of the S&P 500, the Russell 3000 index less the S&P 500, and the non-Russell 3000 index. Year-over-year burn-rate benchmark changes will be limited to a predetermined range above or below the prior year's burn-rate benchmark.

The Value-Adjusted Burn Rate is calculated as follows:

Value-Adjusted Burn Rate = ((# of options \* option's dollar value using a Black-Scholes model) + (# of full-value awards \* stock price)) / (Weighted average common shares \* stock price).

**Egregious Factors**

**Liberal Change in Control Definition**

Generally vote against equity plans if the plan has a liberal definition of change in control and the equity awards could vest upon such liberal definition of change in control, even though an actual change in control may not occur. Examples of such a definition include, but are not limited to, announcement or commencement of a tender

**<sup>22</sup>** For plans evaluated under the Equity Plan Scorecard policy, the company's SVT benchmark is considered along with other factors.

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offer, provisions for acceleration upon a "potential" takeover, shareholder approval of a merger or other transactions, or similar language.

**Repricing Provisions**

Vote against plans that expressly permit the repricing or exchange of underwater stock options/stock appreciate rights (SARs) without prior shareholder approval. "Repricing" typically includes the ability to do any of the following:

▪ 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.

While the above cover most types of repricing, ISS may view other provisions as akin to repricing depending on the facts and circumstances.

Also, vote against or withhold from members of the Compensation Committee who approved repricing (as defined above or otherwise determined by ISS), without prior shareholder approval, even if such repricings are allowed in their equity plan.

Vote against plans that do not expressly prohibit repricing or cash buyout of underwater options without shareholder approval if the company has a history of repricing/buyouts without shareholder approval, and the applicable listing standards would not preclude them from doing so.

**Problematic Pay Practices or Significant Pay-for-Performance Disconnect**

If the equity plan on the ballot is a vehicle for problematic pay practices, vote against the plan.

ISS may recommend a vote against the equity plan if the plan is determined to be a vehicle for pay-for- performance misalignment. Considerations in voting against the equity plan may include, but are not limited to:

▪ 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.

**Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))**

**General Recommendation:** Vote case-by-case on amendments to cash and equity incentive plans.

Generally vote for proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

▪ Addresses administrative features only; or

▪ Seeks approval for Section 162(m) purposes <u>only</u>, 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).

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Vote against proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

▪ 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 .

Vote case-by-case on all other proposals to amend <u>cash</u> incentive plans. This includes plans presented to shareholders for the first time after the company's IPO and/or proposals that bundle material amendment(s) other than those for Section 162(m) purposes.

Vote case-by-case on all other proposals to amend <u>equity</u> incentive plans, considering the following:

▪ If the proposal requests additional shares and/or the amendments include a term extension or addition
of full value awards as an award type, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis
of the overall impact of the amendments.

▪ If the plan is being presented to shareholders for the first time (including after the company's IPO), whether or not additional shares
are being requested, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact
of any amendments.

▪ If there is no request for additional shares and the amendments do not include a term extension or addition of full value awards as
an award type, then the recommendation will be based entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation
will be shown only for informational purposes.

In the first two case-by-case evaluation scenarios, the EPSC evaluation/score is the more heavily weighted consideration.

**Specific Treatment of Certain Award Types in Equity Plan Evaluations**

**Dividend Equivalent Rights**

Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured.

**Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)**

For Real Estate Investment Trusts (REITS), include the common shares issuable upon conversion of outstanding Operating Partnership (OP) units in the share count for the purposes of determining: (1) market capitalization in the Shareholder Value Transfer (SVT) analysis and (2) shares outstanding in the burn rate analysis.

Other Compensation Plans

**401(k) Employee Benefit Plans**

**General Recommendation:** Vote for proposals to implement a 401(k) savings plan for employees.

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**Employee Stock Ownership Plans (ESOPs)**

**General Recommendation:** Vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares).

**Employee Stock Purchase Plans—Qualified Plans**

**General Recommendation:** Vote case-by-case on qualified employee stock purchase plans. Vote for employee stock purchase plans where all of the following apply:

▪ 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.

Vote against qualified employee stock purchase plans where when the plan features do not meet all of the above criteria.

**Employee Stock Purchase Plans—Non-Qualified Plans**

**General Recommendation:** Vote case-by-case on nonqualified employee stock purchase plans. Vote for nonqualified employee stock purchase plans with all the following features:

▪ 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.

Vote against nonqualified employee stock purchase plans when the plan features do not meet all of the above criteria. If the matching contribution or effective discount exceeds the above, ISS may evaluate the SVT cost of the plan as part of the assessment.

**Option Exchange Programs/Repricing Options**

**General Recommendation:** Vote case-by-case on management proposals seeking approval to exchange/reprice options taking into consideration:

▪ 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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If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company's total cost of equity plans and its three-year average burn rate.

In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company's stock price demonstrates poor timing and warrants additional scrutiny. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.

Vote for shareholder proposals to put option repricings to a shareholder vote.

**Stock Plans in Lieu of Cash**

**General Recommendation:** Vote case-by-case on plans that provide participants with the option of taking all or a portion of their cash compensation in the form of stock.

Vote for non-employee director-only equity plans that provide a dollar-for-dollar cash-for-stock exchange.

Vote case-by-case on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation.

**Transfer Stock Option (TSO) Programs**

**General Recommendation:** One-time Transfers: Vote against or withhold from compensation committee members if they fail to submit one-time transfers to shareholders for approval.

Vote case-by-case on one-time transfers. Vote for if:

▪ 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.

Additionally, management should provide a clear explanation of why options are being transferred to a third-party institution and whether the events leading up to a decline in stock price were beyond management's control. A review of the company's historic stock price volatility should indicate if the options are likely to be back "in-the-money" over the near term.

Ongoing TSO program: Vote against equity plan proposals if the details of ongoing TSO programs are not provided to shareholders. Since TSOs will be one of the award types under a stock plan, the ongoing TSO program, structure, and mechanics must be disclosed to shareholders. The specific criteria to be considered in evaluating these proposals include, but not limited, to the following:

▪ Eligibility;

▪ Vesting;

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▪ Bid-price;

▪ Term of options;

▪ Cost of the program and impact of the TSOs on company's total option expense; and

▪ Option repricing policy.

Amendments to existing plans that allow for introduction of transferability of stock options should make clear that only options granted post-amendment shall be transferable.

Director Compensation

**Shareholder Ratification of Director Pay Programs**

**General Recommendation:** Vote case-by-case on management proposals seeking ratification of non-employee director compensation, based on the following factors:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The relative magnitude of director compensation as compared to companies of a similar profile;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The presence of problematic pay practices relating to director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Director stock ownership guidelines and holding requirements;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Equity award vesting schedules;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The mix of cash and equity-based compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Meaningful limits on director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The availability of retirement benefits or perquisites; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ The quality of disclosure surrounding director compensation.

**Equity Plans for Non-Employee Directors**

**General Recommendation:** Vote case-by-case on compensation plans for non-employee directors, based on:

▪ 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).

On occasion, non-employee director stock plans will exceed the plan cost or burn-rate benchmarks when combined with employee or executive stock plans. In such cases, vote case-by-case on the plan taking into consideration 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.

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**Non-Employee Director Retirement Plans**

**General Recommendation:** Vote against retirement plans for non-employee directors. Vote for shareholder proposals to eliminate retirement plans for non-employee directors.

Shareholder Proposals on Compensation

**Bonus Banking/Bonus Banking "Plus"**

**General Recommendation:** Vote case-by-case on proposals seeking deferral of a portion of annual bonus pay, with ultimate payout linked to sustained results for the performance metrics on which the bonus was earned (whether for the named executive officers or a wider group of employees), taking into account the following factors:

▪ 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.

**Compensation Consultants—Disclosure of Board or Company's Utilization**

**General Recommendation:** Generally vote for shareholder proposals seeking disclosure regarding the company, board, or compensation committee's use of compensation consultants, such as company name, business relationship(s), and fees paid.

**Disclosure/Setting Levels or Types of Compensation for Executives and Directors**

**General Recommendation:** Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.

Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation (such as types of compensation elements or specific metrics) to be used for executive or directors.

Generally vote against shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

Vote case-by-case on all other shareholder proposals regarding executive and director pay, taking into account relevant factors, including but not limited to: company performance, pay level and design versus peers, history of compensation concerns or pay-for-performance disconnect, and/or the scope and prescriptive nature of the proposal.

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**Golden Coffins/Executive Death Benefits**

**General Recommendation:** Generally vote for proposals calling for companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals for which the broad-based employee population is eligible.

**Hold Equity Past Retirement or for a Significant Period of Time**

**General Recommendation:** Vote case-by-case on shareholder proposals asking companies to adopt policies requiring senior executive officers to retain a portion of net shares acquired through compensation plans. The following factors will be taken into account:

▪ 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

▪ Problematic pay practices, current and past, which may demonstrate a short-term versus long-term focus.

**Pay Disparity**

**General Recommendation:** Vote case-by-case on proposals calling for an analysis of the pay disparity between corporate executives and other non-executive employees. The following factors will be considered:

▪ 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.

Generally vote against proposals calling for the company to use the pay disparity analysis or pay ratio in a specific way to set or limit executive pay.

**Pay for Performance/Performance-Based Awards**

**General Recommendation:** Vote case-by-case on shareholder proposals requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps:

▪ 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.

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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.

In general, vote for the shareholder proposal if the company does not meet both of the above two steps.

**Pay for Superior Performance**

**General Recommendation:** Vote case-by-case on shareholder proposals that request the board establish a pay-for- superior performance standard in the company's executive compensation plan for senior executives. These proposals generally include the following principles:

▪ 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.

Consider the following factors in evaluating this proposal:

▪ 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?

**Pre-Arranged Trading Plans (10b5-1 Plans)**

**General Recommendation:** Generally vote for shareholder proposals calling for the addition of certain safeguards in prearranged trading plans (10b5-1 plans) for executives. Safeguards may include:

▪ 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;

▪ 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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**Prohibit Outside CEOs from Serving on Compensation Committees**

**General Recommendation:** Generally vote against proposals seeking a policy to prohibit any outside CEO from serving on a company's compensation committee, unless the company has demonstrated problematic pay practices that raise concerns about the performance and composition of the committee.

**Recoupment of Incentive or Stock Compensation in Specified Circumstances**

**General Recommendation:** Vote case-by-case on proposals to recoup incentive cash or stock compensation made to senior executives if it is later determined that the figures upon which incentive compensation is earned turn out to have been in error, or if the senior executive has breached company policy or has engaged in misconduct that may be significantly detrimental to the company's financial position or reputation, or if the senior executive failed to manage or monitor risks that subsequently led to significant financial or reputational harm to the company.

Many companies have adopted policies that permit recoupment in cases where an executive's fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation. However, such policies may be narrow given that not all misconduct or negligence may result in significant financial restatements. Misconduct, negligence, or lack of sufficient oversight by senior executives may lead to significant financial loss or reputational damage that may have long-lasting impact.

In considering whether to support such shareholder proposals, ISS will take into consideration the following factors:

▪ 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.

**Severance Agreements for Executives/Golden Parachutes**

**General Recommendation:** Vote for shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for shareholder ratification, unless the proposal requires shareholder approval *prior* to entering into employment contracts.

Vote case-by-case on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:

▪ The triggering mechanism should be beyond the control of management;

▪ The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years
prior to the year in which the change of control occurs);

▪ Change-in-control payments should be
 double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a
result of the change in control. Change in control is defined as a change in the company ownership structure.

**Share Buyback Impact on Incentive Program Metrics**

**General Recommendation:** Vote case-by-case on proposals requesting the company exclude the impact of share buybacks from the calculation of incentive program metrics, considering the following factors:

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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.

**Supplemental Executive Retirement Plans (SERPs)**

**General Recommendation:** Generally vote for shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.

Generally vote for shareholder proposals requesting to limit the executive benefits provided under the company's supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive's annual salary or those pay elements covered for the general employee population.

**Tax Gross-Up Proposals**

**General Recommendation:** Generally vote for proposals calling for companies to adopt a policy of not providing tax gross-up payments to executives, except in situations where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.

**Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity**

**General Recommendation:** Vote case-by-case on shareholder proposals seeking a policy requiring termination of employment prior to severance payment and/or eliminating accelerated vesting of unvested equity.

The following factors will be considered:

▪ 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.);

▪ Current employment agreements, including potential poor pay practices such as gross-ups embedded in those
agreements.

Generally vote for proposals seeking a policy that prohibits automatic acceleration of the vesting of equity awards to senior executives upon a voluntary termination of employment or in the event of a change in control (except for pro rata vesting considering the time elapsed and attainment of any related performance goals between the award date and the change in control).

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6. Routine/Miscellaneous

**Adjourn Meeting**

**General Recommendation:** Generally vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.

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."

**Amend Quorum Requirements**

**General Recommendation:** Vote case-by-case on proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding, taking into consideration:

▪ 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.

In general, a quorum threshold kept as close to a majority of shares outstanding as is achievable is preferred.

Vote case-by-case on directors who unilaterally lower the quorum requirements below a majority of the shares outstanding, taking into consideration the factors listed above.

**Amend Minor Bylaws**

**General Recommendation:** Vote for bylaw or charter changes that are of a housekeeping nature (updates or corrections).

**Change Company Name**

**General Recommendation:** Vote for proposals to change the corporate name unless there is compelling evidence that the change would adversely impact shareholder value.

**Change Date, Time, or Location of Annual Meeting**

**General Recommendation:** Vote for management proposals to change the date, time, or location of the annual meeting unless the proposed change is unreasonable.

Vote against shareholder proposals to change the date, time, or location of the annual meeting unless the current scheduling or location is unreasonable.

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**Other Business**

**General Recommendation:** Vote against proposals to approve other business when it appears as a voting item.

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7. Social and Environmental Issues

Global Approach – E&S Shareholder Proposals

ISS applies a common approach globally to evaluating social and environmental proposals which cover a wide range of topics, including consumer and product safety, environment and energy, labor standards and human rights, workplace and board diversity, and corporate political issues. While a variety of factors goes into each analysis, the overall principle guiding all vote recommendations focuses on how the proposal may enhance or protect shareholder value in either the short or long term.

**General Recommendation:** Generally vote case-by-case, examining primarily whether implementation of the proposal is likely to enhance or protect shareholder value. The following factors will be considered:

▪ 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.

Endorsement of Principles

**General Recommendation:** Generally vote against proposals seeking a company's endorsement of principles that support a particular public policy position. Endorsing a set of principles may require a company to take a stand on an issue that is beyond its own control and may limit its flexibility with respect to future developments. Management and the board should be afforded the flexibility to make decisions on specific public policy positions based on their own assessment of the most beneficial strategies for the company.

Animal Welfare

**Animal Welfare Policies**

**General Recommendation:** Generally vote for proposals seeking a report on a company's animal welfare standards, or animal welfare-related risks, unless:

▪ 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.

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**Animal Testing**

**General Recommendation:** Generally vote against proposals to phase out the use of animals in product testing, unless:

▪ 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.

**Animal Slaughter**

**General Recommendation:** Generally vote against proposals requesting the implementation of Controlled Atmosphere Killing (CAK) methods at company and/or supplier operations unless such methods are required by legislation or generally accepted as the industry standard.

Vote case-by-case on proposals requesting a report on the feasibility of implementing CAK methods at company and/or supplier operations considering the availability of existing research conducted by the company or industry groups on this topic and any fines or litigation related to current animal processing procedures at the company.

Consumer Issues

**Genetically Modified Ingredients**

**General Recommendation:** Generally vote against proposals requesting that a company voluntarily label genetically engineered (GE) ingredients in its products. The labeling of products with GE ingredients is best left to the appropriate regulatory authorities.

Vote case-by-case on proposals asking for a report on the feasibility of labeling products containing GE ingredients, taking into account:

▪ 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.

Generally vote against proposals seeking a report on the social, health, and environmental effects of genetically modified organisms (GMOs). Studies of this sort are better undertaken by regulators and the scientific community.

Generally vote against proposals to eliminate GE ingredients from the company's products, or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company's products. Such decisions are more appropriately made by management with consideration of current regulations.

**Reports on Potentially Controversial Business/Financial Practices**

**General Recommendation:** Vote case-by-case on requests for reports on a company's potentially controversial business or financial practices or products, taking into account:

▪ Whether the company has adequately disclosed mechanisms in place to prevent abuses;

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▪ 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.

**Pharmaceutical Pricing, Access to Medicines, and Prescription Drug Reimportation**

**General Recommendation:** Generally vote against proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing practices.

Vote case-by-case on proposals requesting that a company report on its product pricing or access to medicine policies, considering:

▪ The potential for reputational, market, and regulatory risk exposure;

▪ Existing disclosure of relevant policies;

▪ Deviation from established industry norms;

▪ Relevant company initiatives to provide research and/or products to disadvantaged consumers;

▪ Whether the proposal focuses on specific products or geographic regions;

▪ The potential burden and scope of the requested report;

▪ Recent significant controversies, litigation, or fines at the company.

Generally vote for proposals requesting that a company report on the financial and legal impact of its prescription drug reimportation policies unless such information is already publicly disclosed.

Generally vote against proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Such matters are more appropriately the province of legislative activity and may place the company at a competitive disadvantage relative to its peers.

**Product Safety and Toxic/Hazardous Materials**

**General Recommendation:** Generally vote for proposals requesting that a company report on its policies, initiatives/procedures, and oversight mechanisms related to toxic/hazardous materials or product safety in its supply chain, unless:

▪ The company already discloses similar information through existing reports such as a supplier code of conduct and/or a sustainability
report;

▪ The company has formally committed to the implementation of a toxic/hazardous materials and/or product safety and supply chain reporting
and monitoring program based on industry norms or similar standards within a specified time frame; and

▪ The company has not been recently involved in relevant significant controversies, fines, or litigation.

Vote case-by-case on resolutions requesting that companies develop a feasibility assessment to phase-out of certain toxic/hazardous materials, or evaluate and disclose the potential financial and legal risks associated with utilizing certain materials, considering:

▪ The company's current level of disclosure regarding its product safety policies, initiatives, and oversight mechanisms;

▪ 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.

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Generally vote against resolutions requiring that a company reformulate its products.

**Tobacco-Related Proposals**

**General Recommendation:** Vote case-by-case on resolutions regarding the advertisement of tobacco products, considering:

▪ 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.

Vote case-by-case on proposals regarding second-hand smoke, considering;

▪ 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.

Generally vote against resolutions to cease production of tobacco-related products, to avoid selling products to tobacco companies, to spin-off tobacco-related businesses, or prohibit investment in tobacco equities. Such business decisions are better left to company management or portfolio managers.

Generally vote against proposals regarding tobacco product warnings. Such decisions are better left to public health authorities.

Climate Change

**Say on Climate (SoC) Management Proposals**

**General Recommendation:** Vote case-by-case on management proposals that request shareholders to approve the company's climate transition action plan**<sup>23</sup>**, taking into account the completeness and rigor of the plan. Information that will be considered where available includes the following:

▪ 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;

------

**<sup>23</sup>** 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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▪ 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.

**Say on Climate (SoC) Shareholder Proposals**

**General Recommendation:** Vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval or disapproval of its GHG emissions reduction plan, taking into account information such as the following:

▪ 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.

**Climate Change/Greenhouse Gas (GHG) Emissions**

**General Recommendation:** Generally vote for resolutions requesting that a company disclose 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 manages such risks, considering:

▪ 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.

Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:

▪ The company already discloses current, publicly-available information on the impacts that GHG emissions may have on the company as
well as associated company policies and procedures to address related risks and/or opportunities;

▪ The company's level of disclosure is comparable to that of industry peers; and

▪ There are no significant, controversies, fines, penalties, or litigation associated with the company's GHG emissions.

Vote case-by-case on proposals that call for the adoption of GHG reduction goals from products and operations, taking into account:

▪ 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.

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**Energy Efficiency**

**General Recommendation:** Generally vote for proposals requesting that a company report on its energy efficiency policies, unless:

▪ 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.

**Renewable Energy**

**General Recommendation:** Generally vote for requests for reports on the feasibility of developing renewable energy resources unless the report would be duplicative of existing disclosure or irrelevant to the company's line of business.

Generally vote against proposals requesting that the company invest in renewable energy resources. Such decisions are best left to management's evaluation of the feasibility and financial impact that such programs may have on the company.

Generally vote against proposals that call for the adoption of renewable energy goals, taking into account:

▪ 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.

Diversity

**Board Diversity**

**General Recommendation:** Generally vote for requests for reports on a company's efforts to diversify the board, unless:

▪ 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.

Vote case-by-case on proposals asking a company to increase the gender and racial minority representation on its board, taking into account:

▪ 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

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▪ Whether the company has had recent controversies, fines, or litigation regarding equal employment practices.

**Equality of Opportunity**

**General Recommendation:** Generally vote for proposals requesting a company disclose its diversity policies or initiatives, or proposals requesting disclosure of a company's comprehensive workforce diversity data, including requests for EEO-1 data, unless:

▪ The company publicly discloses equal opportunity policies and initiatives in a comprehensive manner;

▪ The company already publicly discloses comprehensive workforce diversity data; and

▪ The company has no recent significant EEO-related violations or litigation.

Generally vote against proposals seeking information on the diversity efforts of suppliers and service providers. Such requests may pose a significant burden on the company.

**Gender Identity, Sexual Orientation, and Domestic Partner Benefits**

**General Recommendation:** Generally vote for proposals seeking to amend a company's EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would be unduly burdensome.

Generally vote against proposals to extend company benefits to, or eliminate benefits from, domestic partners. Decisions regarding benefits should be left to the discretion of the company.

**Gender, Race/Ethnicity Pay Gap**

**General Recommendation:** Vote case-by-case on requests for reports on a company's pay data by gender or race/ ethnicity, or a report on a company's policies and goals to reduce any gender or race/ethnicity pay gaps, taking into account:

▪ 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.

**Racial Equity and/or Civil Rights Audit Guidelines**

**General Recommendation:** Vote case-by-case on proposals asking a company to conduct an independent racial equity and/or civil rights audit, taking into account:

▪ 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

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▪ Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to racial inequity or discrimination.

Environment and Sustainability

**Facility and Workplace Safety**

**General Recommendation:** Vote case-by-case on requests for workplace safety reports, including reports on accident risk reduction efforts, taking into account:

▪ 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.

Vote case-by-case on resolutions requesting that a company report on safety and/or security risks associated with its operations and/or facilities, considering:

▪ 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.

**General Environmental Proposals and Community Impact Assessments**

**General Recommendation:** Vote case-by-case on requests for reports on policies and/or the potential (community) social and/or environmental impact of company operations, considering:

▪ 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.

**Hydraulic Fracturing**

**General Recommendation:** Generally vote for proposals requesting greater disclosure of a company's (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations, considering:

▪ 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

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▪ Controversies, fines, or litigation related to the company's hydraulic fracturing operations.

**Operations in Protected Areas**

**General Recommendation:** Generally vote for requests for reports on potential environmental damage as a result of company operations in protected regions, unless:

▪ 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.

**Recycling**

**General Recommendation:** Vote case-by-case on proposals to report on an existing recycling program, or adopt a new recycling program, taking into account:

▪ 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.

**Sustainability Reporting**

**General Recommendation:** Generally vote for proposals requesting that a company report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, unless:

▪ 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.

**Water Issues**

**General Recommendation:** Vote case-by-case on proposals requesting a company report on, or adopt a new policy on, water-related risks and concerns, taking into account:

▪ 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.

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General Corporate Issues

**Charitable Contributions**

**General Recommendation:** Vote against proposals restricting a company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which, and if, contributions are in the best interests of the company.

**Data Security, Privacy, and Internet Issues**

**General Recommendation:** Vote case-by-case on proposals requesting the disclosure or implementation of data security, privacy, or information access and management policies and procedures, considering:

▪ 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.

**ESG Compensation-Related Proposals**

**General Recommendation:** Vote case-by-case on proposals seeking a report or additional disclosure on the company's approach, policies, and practices on incorporating environmental and social criteria into its executive compensation strategy, considering:

▪ 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.

Human Rights, Human Capital Management, and International Operations

**Human Rights Proposals**

**General Recommendation:** Generally vote for proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.

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Vote case-by-case on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:

▪ 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.

Vote case-by-case on 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, considering:

▪ 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;

▪ 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.

**Mandatory Arbitration**

**General Recommendation:** Vote case-by-case on requests for a report on a company's use of mandatory arbitration on employment-related claims, taking into account:

▪ 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.

**Operations in High-Risk Markets**

**General Recommendation:** Vote case-by-case on requests for a report on a company's potential financial and reputational risks associated with operations in "high-risk" markets, such as a terrorism-sponsoring state or politically/socially unstable region, taking into account:

▪ 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.

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**Outsourcing/Offshoring**

**General Recommendation:** Vote case-by-case on proposals calling for companies to report on the risks associated with outsourcing/plant closures, considering:

▪ 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.

**Sexual Harassment**

**General Recommendation:** Vote case-by-case on requests for a report on company actions taken to strengthen policies and oversight to prevent workplace sexual harassment, or a report on risks posed by a company's failure to prevent workplace sexual harassment, taking into account:

▪ 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.

**Weapons and Military Sales**

**General Recommendation:** Vote against reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales.

Generally vote against proposals asking a company to cease production or report on the risks associated with the use of depleted uranium munitions or nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Such contracts are monitored by government agencies, serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company's business.

Political Activities

**Lobbying**

**General Recommendation:** Vote case-by-case on proposals requesting information on a company's lobbying (including direct, indirect, and grassroots lobbying) activities, policies, or procedures, considering:

▪ 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.

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**Political Contributions**

**General Recommendation:** Generally vote for proposals requesting greater disclosure of a company's political contributions and trade association spending policies and activities, considering:

▪ 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.

Vote against proposals barring a company from making political contributions. Businesses are affected by legislation at the federal, state, and local level; barring political contributions can put the company at a competitive disadvantage.

Vote against proposals to publish in newspapers and other media a company's political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.

**Political Expenditures and Lobbying Congruency**

**General Recommendation:** Generally vote case-by-case on proposals requesting greater disclosure of a company's alignment of political contributions, lobbying, and electioneering spending with a company's publicly stated values and policies, considering:

▪ 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.

Generally vote case-by-case on proposals requesting comparison of a company's political spending to objectives that can mitigate material risks for the company, such as limiting global warming.

**Political Ties**

**General Recommendation:** Generally vote against proposals asking a company to affirm political nonpartisanship in the workplace, so long as:

▪ There are no recent, significant controversies, fines, or
 litigation regarding the company's political contributions or
trade association spending; and

W W W . I S S G O V E R N A N C E . C O M 75 of 82

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▪ The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs)
are strictly voluntary and prohibit coercion.

Vote against proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.

W W W . I S S G O V E R N A N C E . C O M 76 of 82

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8. Mutual Fund Proxies

**Election of Directors**

**General Recommendation:** Vote case-by-case on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.

**Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes**

**General Recommendation:** For closed-end management investment companies (CEFs), vote against or withhold from nominating/governance committee members (or other directors on a case-by-case basis) at CEFs that have not provided a compelling rationale for opting-in to a Control Share Acquisition statute, nor submitted a by-law amendment to a shareholder vote.

**Converting Closed-end Fund to Open-end Fund**

**General Recommendation:** Vote case-by-case on conversion proposals, considering the following factors:

▪ 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.

**Proxy Contests**

**General Recommendation:** Vote case-by-case on proxy contests, considering the following factors:

▪ Past performance relative to its peers;

▪ Market in which the fund invests;

▪ Measures taken by the board to address the issues;

▪ Past shareholder activism, board activity, and votes on related proposals;

▪ Strategy of the incumbents versus the dissidents;

▪ Independence of directors;

▪ Experience and skills of director candidates;

▪ Governance profile of the company;

▪ Evidence of management entrenchment.

**Investment Advisory Agreements**

**General Recommendation:** Vote case-by-case on investment advisory agreements, considering the following factors:

▪ 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).

W W W . I S S G O V E R N A N C E . C O M 77 of 82

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**Approving New Classes or Series of Shares**

**General Recommendation:** Vote for the establishment of new classes or series of shares.

**Preferred Stock Proposals**

**General Recommendation:** Vote case-by-case on the authorization for or increase in preferred shares, considering the following factors:

▪ Stated specific financing purpose;

▪ Possible dilution for common shares;

▪ Whether the shares can be used for antitakeover purposes.

**1940 Act Policies**

**General Recommendation:** Vote case-by-case on policies under the Investment Advisor Act of 1940, considering the following factors:

▪ Potential competitiveness;

▪ Regulatory developments;

▪ Current and potential returns; and

▪ Current and potential risk.

Generally vote for these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation.

**Changing a Fundamental Restriction to a Nonfundamental Restriction**

**General Recommendation:** Vote case-by-case on proposals to change a fundamental restriction to a non- fundamental restriction, considering the following factors:

▪ The fund's target investments;

▪ The reasons given by the fund for the change; and

▪ The projected impact of the change on the portfolio.

**Change Fundamental Investment Objective to Nonfundamental**

**General Recommendation:** Vote against proposals to change a fund's fundamental investment objective to non- fundamental.

**Name Change Proposals**

**General Recommendation:** Vote case-by-case on name change proposals, considering the following factors:

▪ Political/economic changes in the target market;

▪ Consolidation in the target market; and

▪ Current asset composition.

W W W . I S S G O V E R N A N C E . C O M 78 of 82

![](hsbc4150971-485bpos2x1.jpg)

**Change in Fund's Subclassification**

**General Recommendation:** Vote case-by-case on changes in a fund's sub-classification, considering the following factors:

▪ Potential competitiveness;

▪ Current and potential returns;

▪ Risk of concentration;

▪ Consolidation in target industry.

**Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value**

**General Recommendation:** Vote for proposals authorizing the board to issue shares below Net Asset Value (NAV) if:

▪ 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.

**Disposition of Assets/Termination/Liquidation**

**General Recommendation:** Vote case-by-case on proposals to dispose of assets, to terminate or liquidate, considering the following factors:

▪ Strategies employed to salvage the company;

▪ The fund's past performance;

▪ The terms of the liquidation.

**Changes to the Charter Document**

**General Recommendation:** Vote case-by-case on changes to the charter document, considering the following factors:

▪ The degree of change implied by the proposal;

▪ The efficiencies that could result;

▪ The state of incorporation;

▪ Regulatory standards and implications.

Vote against any of the following changes:

▪ 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;

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▪ 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.

**Changing the Domicile of a Fund**

**General Recommendation:** Vote case-by-case on re-incorporations, considering the following factors:

▪ Regulations of both states;

▪ Required fundamental policies of both states;

▪ The increased flexibility available.

**Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval**

**General Recommendation:** Vote against proposals authorizing the board to hire or terminate subadvisers without shareholder approval if the investment adviser currently employs only one subadviser.

**Distribution Agreements**

**General Recommendation:** Vote case-by-case on distribution agreement proposals, considering the following factors:

▪ 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.

**Master-Feeder Structure**

**General Recommendation:** Vote for the establishment of a master-feeder structure.

**Mergers**

**General Recommendation:** Vote case-by-case on merger proposals, considering the following factors:

▪ Resulting fee structure;

▪ Performance of both funds;

▪ Continuity of management personnel;

▪ Changes in corporate governance and their impact on shareholder rights.

Shareholder Proposals for Mutual Funds

**Establish Director Ownership Requirement**

**General Recommendation:** Generally vote against shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

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**Reimburse Shareholder for Expenses Incurred**

**General Recommendation:** Vote case-by-case on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote for the reimbursement of the proxy solicitation expenses.

**Terminate the Investment Advisor**

**General Recommendation:** Vote case-by-case on proposals to terminate the investment advisor, considering the following factors:

▪ 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.

W W W . I S S G O V E R N A N C E . C O M 81 of 82

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**GET STARTED WITH ISS SOLUTIONS**

Email <u>sales@issgovernance.com</u> or visit <u>www.issgovernance.com</u> for more information.

Founded in 1985, Institutional Shareholder Services group of companies (ISS) empowers investors and companies to build for long-term and sustainable growth by providing high-quality data, analytics and insight. ISS, which is majority owned by Deutsche Bourse Group, along with Genstar Capital and ISS management, is a leading provider of corporate governance and responsible investment solutions, market intelligence, fund services, and events and editorial content for institutional investors and corporations, globally. ISS' 2,600 employees operate worldwide across 29 global locations in 15 countries. Its approximately 3,400 clients include many of the world's leading institutional investors who rely on ISS' objective and impartial offerings, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS' expertise to help them make informed investment decisions. This document and all of the information contained in it, including without limitation all text, data, graphs, and charts (collectively, the "Information") is the property of Institutional Shareholder Services Inc. (ISS), its subsidiaries, or, in some cases third party suppliers.

The Information has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), or a promotion or recommendation of, any security, financial product or other investment vehicle or any trading strategy, and ISS does not endorse, approve, or otherwise express any opinion regarding any issuer, securities, financial products or instruments or trading strategies.

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Without limiting any of the foregoing and to the maximum extent permitted by law, in no event shall ISS have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits), or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited.© 2022 \| Institutional Shareholder Services and/or its affiliates

W W W . I S S G O V E R N A N C E . C O M 82 of 82

**<u>STATEMENT OF ADDITIONAL INFORMATION</u>**

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**EQUITY FUND** | &nbsp;&nbsp;**Class A** | &nbsp;&nbsp;**Class C** | &nbsp;&nbsp;**Class I** |
| &nbsp;&nbsp;HSBC RadiantESG U.S. Smaller Companies Fund (formerly, HSBC Opportunity Fund) | &nbsp;&nbsp;HSOAX | &nbsp;&nbsp;HOPCX | &nbsp;&nbsp;RESCX |

---

P.O. Box 219691

Kansas City, MO 64121-9691

<u>General and Account Information - (800) 782-8183 (Toll Free)</u>

HSBC Global Asset Management (USA) Inc.,<br> Investment Adviser and Administrator of the<br> Fund ("Adviser" or "Administrator") <br>RadiantESG Global Investors LLC, Subadviser<br> of the Fund ("RadiantESG" or "Subadviser")

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS ONLY AUTHORIZED FOR DISTRIBUTION WHEN PRECEDED OR ACCOMPANIED BY THE PROSPECTUS FOR THE FUND DATED FEBRUARY 28, 2023 (the "Prospectus"). This Statement of Additional Information ("SAI") contains additional and more detailed information than that set forth in the Prospectus and should be read in conjunction with the Prospectus. The Prospectus and SAI may be obtained without charge by writing or calling the HSBC Funds (the "Trust") at the address and telephone number printed above.

References in this SAI to the "Prospectus" are to the Prospectus dated February 28, 2023 of the Trust by which shares of the HSBC RadiantESG U.S. Smaller Companies Fund (formerly, HSBC Opportunity Fund) (the "Fund") are being offered. Unless the context otherwise requires, terms defined in the Prospectus have the same meaning in this SAI as in the Prospectus.

The Fund's current audited financial statements (and the audited financial statements of the corresponding portfolio into which the Fund invests) dated October 31, 2022, are incorporated herein by reference from the Annual Report of the Funds dated October 31, 2022, as filed with the Securities and Exchange Commission (the "SEC"). Copies of this Annual Report may be obtained without charge by writing or calling the Trust at the address and telephone number printed above.

February 28, 2023

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| **[GENERAL INFORMATION](#c_001)** | **[1](#c_001)** |
| **[INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS](#c_002)** | **[1](#c_002)** |
| **[INVESTMENT TECHNIQUES AND RISKS](#c_003)** | **[2](#c_003)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Cash Sweep Program](#c_004)** | **[2](#c_004)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Cyber Security Risk](#c_005)** | **[2](#c_005)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[ESG Investing](#c_006)** | **[3](#c_006)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Equity Securities](#c_007)** | **[4](#c_007)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Exchange Traded Funds](#c_008)** | **[4](#c_008)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Foreign Securities](#c_009)** | **[5](#c_009)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Global Financial Markets](#c_010)** | **[7](#c_010)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Illiquid Investments, Rule 144A Securities, and Section 4(a)(2) Securities](#c_011)** | **[8](#c_011)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Investment Company Securities](#c_012)** | **[8](#c_012)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Money Market Instruments](#c_013)** | **[8](#c_013)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Operational Risk](#c_014)** | **[9](#c_014)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Real Estate Securities](#c_015)** | **[9](#c_015)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Short-Term Trading](#c_016)** | **[10](#c_016)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[U.S. Government Securities](#c_017)** | **[10](#c_017)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Warrants](#c_018)** | **[10](#c_018)** |
| **[PORTFOLIO TURNOVER](#c_019)** | **[10](#c_019)** |
| **[PORTFOLIO TRANSACTIONS](#c_020)** | **[11](#c_020)** |
| **[DISCLOSURE OF PORTFOLIO HOLDINGS](#c_021)** | **[13](#c_021)** |
| **[INVESTMENT RESTRICTIONS](#c_022)** | **[14](#c_022)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Non-Fundamental Investment Restrictions](#c_023)** | **[14](#c_023)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Fundamental Investment Restrictions](#c_024)** | **[15](#c_024)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Percentage and Rating Restrictions](#c_025)** | **[17](#c_025)** |
| **[MANAGEMENT OF THE TRUST](#c_026)** | **[17](#c_026)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Board of Trustees](#c_027)** | **[17](#c_027)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Committees](#c_028)** | **[21](#c_028)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Fund Ownership](#c_029)** | **[22](#c_029)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Trustee and Officer Compensation](#c_030)** | **[22](#c_030)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Proxy Voting](#c_031)** | **[23](#c_031)** |
| **[INVESTMENT ADVISORY AND OTHER SERVICES](#c_032)** | **[24](#c_032)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Investment Adviser](#c_033)** | **[24](#c_033)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Subadviser](#c_034)** | **[25](#c_034)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Portfolio Managers](#c_035)** | **[25](#c_035)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Distribution Plans – Class A and Class C Shares Only](#c_036)** | **[27](#c_036)** |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;**[The Distributor](#c_037)** | **[28](#c_037)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Payments to Financial Intermediaries](#c_038)** | **[29](#c_038)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Shareholder Service Plans and Shareholder Servicing Agents](#c_039)** | **[30](#c_039)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Administrator and Sub-Administrator](#c_040)** | **[31](#c_040)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Transfer Agent](#c_041)** | **[32](#c_041)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Custodian and Fund Accounting Agent](#c_042)** | **[32](#c_042)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Federal Banking Law](#c_043)** | **[33](#c_043)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Expenses](#c_044)** | **[33](#c_044)** |
| **[DETERMINATION OF NET ASSET VALUE](#c_045)** | **[33](#c_045)** |
| **[PURCHASE OF SHARES](#c_046)** | **[37](#c_046)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Exchange Privilege](#c_047)** | **[38](#c_047)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[In-Kind Purchases](#c_048)** | **[39](#c_048)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Automatic Investment Plan](#c_049)** | **[39](#c_049)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Purchases through a Shareholder Servicing Agent or a Securities Broker](#c_050)** | **[40](#c_050)** |
| **[SALES CHARGES](#c_051)** | **[40](#c_051)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Class A Shares](#c_052)** | **[40](#c_052)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Sales Charge Waivers](#c_053)** | **[40](#c_053)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Concurrent Purchases](#c_054)** | **[41](#c_054)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Letter of Intent](#c_055)** | **[41](#c_055)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Right of Accumulation](#c_056)** | **[42](#c_056)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Conversation Feature – Class C Shares of the U.S. Smaller Companies Fund](#c_057)** | **[42](#c_057)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Level Load Alternative – Class C Shares of the U.S. Smaller Companies Fund](#c_058)** | **[42](#c_058)** |
| **[REDEMPTION OF SHARES](#c_059)** | **[42](#c_059)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Systematic Withdrawal Plan](#c_060)** | **[43](#c_060)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Redemption of Shares Purchased Directly through the Funds](#c_061)** | **[43](#c_061)** |
| **[RETIREMENT PLANS](#c_062)** | **[44](#c_062)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Individual Retirement Account Plans ("IRAs")](#c_063)** | **[44](#c_063)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Defined Contribution Plans](#c_064)** | **[44](#c_064)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Section 457 Plan, 401(K) Plan, 403(B) Plan](#c_065)** | **[44](#c_065)** |
| **[DIVIDENDS AND DISTRIBUTIONS](#c_066)** | **[45](#c_066)** |
| **[DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES](#c_067)** | **[45](#c_067)** |
| **[OWNERSHIP OF THE FUNDS](#c_068)** | **[46](#c_068)** |
| **[TAXATION](#c_069)** | **[47](#c_069)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Tax Status of the Funds](#c_070)** | **[48](#c_070)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[The Portfolio](#c_071)** | **[49](#c_071)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Distributions in General](#c_072)** | **[49](#c_072)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Sale, Exchange or Redemption of Shares](#c_073)** | **[50](#c_073)** |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;**[Backup Withholding](#c_074)** | **[51](#c_074)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Other Taxation](#c_075)** | **[51](#c_075)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Foreign Shareholders](#c_076)** | **[51](#c_076)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Fund Investments](#c_077)** | **[52](#c_077)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Foreign Tax Issues](#c_078)** | **[52](#c_078)** |
| **[OTHER INFORMATION](#c_079)** | **[54](#c_079)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Capitalization](#c_080)** | **[54](#c_080)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Independent Registered Public Accounting Firm](#c_081)** | **[55](#c_081)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Counsel](#c_082)** | **[55](#c_082)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Code of Ethics](#c_083)** | **[55](#c_083)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Registration Statement](#c_084)** | **[55](#c_084)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Financial Statements](#c_085)** | **[55](#c_085)** |
| &nbsp;&nbsp;&nbsp;&nbsp;**[Shareholder Inquiries](#c_086)** | **[55](#c_086)** |
| **[APPENDIX A – SUBADVISER PROXY VOTING GUIDELINES](#c_087)** | **[A-1](#c_087)** |
| **[APPENDIX B: ISS SUSTAINABILITY PROXY VOTING GUIDELINES](#c_088)** | **[B-1](#c_088)** |

---

**GENERAL INFORMATION**

The Fund is a series of the Trust, an open-end, management investment company that currently consists of multiple series, each of which has its own distinct investment objectives and policies. The Fund comprises two separate series of the Trust. The Class A Shares and Class C Shares are issued by one series of the Trust ("U.S. Smaller Companies Fund") and the Class I Shares are issued by another series of the Trust ("U.S. Smaller Companies Fund (Class I)"). For simplicity purposes, this SAI may use the term "Fund" to include the U.S. Smaller Companies Fund and the U.S. Smaller Companies Fund (Class I). The Fund is "diversified" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act") and is described in this SAI. The Trust also includes certain money market funds ("Money Market Funds") that are covered in a separate SAI.

The Fund seeks to achieve its investment objective by investing all of its assets in the HSBC RadiantESG U.S. Smaller Companies Portfolio (formerly, HSBC Opportunity Portfolio) (the "Portfolio"), an additional series of the Trust. The Portfolio has the same investment objective as the Fund. This two-tier fund structure is commonly referred to as a "master/feeder" structure because one fund (the Fund or "feeder fund") is investing all its assets in a second fund (the Portfolio or "master fund"). Fund shareholders bear the expenses of both the Fund and the Portfolio, which may be greater than other structures.

Any description of the Fund in this SAI is inclusive of the Portfolio. Shares of the U.S. Smaller Companies Fund are divided into two separate classes: Class A Shares (the "Class A Shares") and Class C Shares (the "Class C Shares"). The U.S. Smaller Companies Fund (Class I) only offers Class I Shares (the "Class I Shares"), which are offered to investment management clients of the Adviser and its affiliates, or to investors that meet certain minimum investment requirements.

Shares of the Fund are continuously offered by the Distributor (as defined below). Shares may be subject to certain investment minimums. See the Prospectus and "Purchase of Shares" and "Sales Charges" in this SAI for information about the various classes and eligibility to invest therein. See "Description Of Shares, Voting Rights, and Liabilities" and "Other Information – Capitalization" in this SAI for more information about the Trust.

**INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS**

The following information supplements the discussion of the investment objective, policies, and risks of the Fund in the Prospectus. It should be understood that all discussions of investment objectives, policies and risks of the Fund refer also to the investment objectives, policies and risks of the Portfolio. There can be no assurance that the investment objective of the Fund will be achieved. Except as otherwise indicated, the investment objective and related policies and strategies of the Fund are not fundamental and may be changed by the Board of Trustees of the Trust (the "Board") without the approval of Fund shareholders. Shareholders will be given at least 60 days' advance notice of any change in the Fund's 80% investment policy. Shareholders will be given advance notice of material changes to the Fund's investment objective or other non-fundamental investment policies. If there is a change, shareholders should consider whether the Fund remains an appropriate investment in light of their then-current financial position and needs.

RadiantESG uses proprietary models to evaluate companies along key fundamental characteristics as well as environmental, social, and governance ("ESG") criteria. In managing the Portfolio, RadiantESG seeks to identify and invest in companies with compelling fundamentals and attractive ESG profiles. The Subadviser believes that incorporating ESG criteria into its investment process is an important complement to its two fundamental models (Comprehensive Quality and Stock Sentiment). The Subadviser's objective in evaluating ESG considerations is to identify threats faced by companies, including transition and regulatory risk, as well as investment opportunities associated with the more efficient use of natural resources, more effective use of human resources, and better governance. The Subadviser also believes that attractive ESG characteristics will economically advantage companies relative to their peers, potentially characterized by superior earnings growth, fewer incidents of legal or regulatory action, greater talent attraction and retention, and fewer incidents of value-destroying ethical or governance malfeasance.

The Fund primarily invests in U.S. equity securities of small and mid-cap companies. Although the Fund will invest primarily in U.S. common stocks, the Fund may, to a limited extent, invest in other types of securities, such as non-U.S. securities listed on U.S. securities exchanges.

When RadiantESG believes that investing for temporary defensive reasons is appropriate, such as during times of international, political or economic uncertainty or turmoil, or in order to meet anticipated redemption requests, part or all of the Fund's assets may be invested in cash (including foreign currency) or cash equivalent short-term obligations including, but not limited to, certificates of deposit, commercial paper, short-term notes and U.S. Government securities. U.S. Government securities in which the Fund may invest include: (i) U.S. Treasury obligations, which differ only in their interest rates, maturities and times of issuance, including: U.S. Treasury bills (maturities of one year or less); U.S. Treasury notes (maturities of one to ten years); and U.S. Treasury bonds (generally maturities of greater than ten years), all of which are backed by the full faith and credit of the U.S. Government; and (ii) obligations issued or guaranteed by U.S. Government agencies, authorities or instrumentalities, some of which are backed by the full faith and credit of the U.S. Treasury (*e.g.,* direct pass-through certificates of the Government National Mortgage Association), some of which are supported by the right of the issuer to borrow from the U.S. Government (*e.g.,* obligations of Federal Home Loan Banks) and some of which are backed only by the credit of the issuer itself (*e.g.,* obligations of the Federal Farm Credit Bank). The Fund's investment objective may not be achieved when it is invested in a temporary defensive position.

**INVESTMENT TECHNIQUES AND RISKS**

The Fund invests in a variety of securities in accordance with its investment objective and policies (as described in the Prospectus and above in this SAI) and employs a number of investment techniques. Each type of security and technique involves certain risks. The following is an alphabetical list of the investment techniques used by the Fund and the main risks associated with those techniques. The risks are presented in an order intended to facilitate readability, and their order does not imply that the realization of one risk is likely to occur more frequently than another risk, nor does it imply that the realization of one risk is likely to have a greater adverse impact than another risk.

**Cash Sweep Program**

The Fund may participate in a cash sweep program (the "Cash Sweep Program"). In the Cash Sweep Program, the Fund's uninvested cash balances are used to purchase Class I Shares of the HSBC U.S. Government Money Market Fund (the "U. S. Government Money Market Fund"). The Cash Sweep Program can reduce exposure to the risk of counterparty default on repurchase agreements and the market risk associated with direct purchases of short-term obligations, while providing ready liquidity and increased diversity of holdings. Class I Shares of the U.S. Government Money Market Fund sold to and redeemed from a Fund will not be subject to a sales charge, as defined in rule 2341(b)(8) of the Conduct Rules of the Financial Industry Regulatory Authority ("FINRA"), or service fee, as defined in rule 2341(b)(9) of the Conduct Rules of FINRA, in connection with the purchase, sale, or redemption of such shares by the Fund, or the advisory fee for the Fund will be waived in an amount that offsets the amount of such sales charges and/or service fees incurred by the Fund. More detailed information about the U.S. Government Money Market Fund and money market funds in general may be found in the current Prospectus and the separate SAI that includes the various HSBC Money Market Funds and under "MONEY MARKET INSTRUMENTS" in this section.

**Cyber Security Risk**

The Fund and its service providers, including the Adviser and Subadviser, face greater risks of cyber security breaches because of the broad use of technology, such as computer and cloud-based systems and the internet, that has developed in the course of business. In general, cyber-attacks result from deliberate attacks but other events may have effects similar to those caused by cyber-attacks. Cyber-attacks include, among others, stealing, destroying or corrupting data that is maintained online or digitally (or in cloud-based systems), denial-of-service attacks on websites, and the unauthorized release of confidential information. Cyber-attacks affecting the Fund or its service providers, including the Adviser,

Subadviser, Sub-Administrator, fund accountant, custodian, transfer agent, any intermediary/trading counterparties or other third-party service providers, as well as the service providers used by the Fund's service providers, may adversely impact the Fund. These cyber-attacks have the ability to cause disruptions and impact trading and other business operations, to result in financial losses, to prevent the Fund from buying and selling securities (potentially at advantageous times), to prevent shareholders from transacting business, and to lead to violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. Similar to operational risk in general, the Fund and its service providers, including the Adviser and Subadviser, have instituted risk management systems designed to minimize the risks associated with cyber security. However, these systems may not succeed in detecting, preventing or remediating cyber-attacks. The Fund does not directly control the cyber security systems of its service providers, their trading counterparties, or the issuers in which the Fund may invest. Moreover, cyber-attacks are becoming increasingly sophisticated and may involve state-sponsored actors. Losses caused by cyber-attacks may not be recoverable.

**ESG Investing**

In selecting investments for the Fund, RadiantESG evaluates companies along key fundamental characteristics as well as ESG criteria. The incorporation of ESG criteria, including ESG and Impact scores and the identification of controversial business line and other screens, into the investment process will cause the Fund to forgo investment opportunities available to other mutual funds that do not use these criteria, or to increase or decrease its exposure to certain sectors or types of companies. For example, the Fund generally will not seek to invest in companies that operate in, or derive a specific amount of revenue from, controversial business lines, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Tobacco
Production and Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Coal
Mining Production and Services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Tar
Sands Extraction

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Civilian
Firearms

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Controversial
weapons

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· For-Profit
Prisons

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Factory
Farming

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Palm
Oil Production

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Gambling
(Pure Play)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Pornography

The Fund will also generally not seek to invest in companies with severe controversies (*e.g.,* severe violators of human rights and liberties). As a result of these policies, the Fund could underperform other mutual funds that do not consider ESG criteria in their investment processes.

In evaluating a company, RadiantESG is dependent upon third-party data that it believes to be reliable, but it does not guarantee the accuracy of such third-party data. ESG data from third-party data providers may be incomplete, inaccurate, or unavailable and may vary significantly from one provider to another, which could adversely affect the analysis of ESG criteria relevant to a particular company. In the course of gathering data, third-party data providers may make certain value judgments. Neither RadiantESG nor the Adviser verify these judgments, nor quantify their impact upon its analysis. Companies may provide limited ESG data directly.

Investing on the basis of ESG criteria is qualitative and subjective by nature and there can be no assurance that the process utilized by RadiantESG or any third-party research or data providers or any judgment exercised by RadiantESG will reflect the views of any particular investor. Currently, there is a lack of common industry standards relating to the development and application of ESG criteria, which may make it difficult to compare the Fund with other funds that incorporate ESG criteria into their portfolio construction processes, and the Fund's investments may differ substantially from these other funds. Investors can differ

in their views of what constitutes positive or negative ESG characteristics. RadiantESG's ESG criteria and ESG-related investment processes may be changed periodically without shareholder approval or notice.

**Equity Securities**

The Fund may invest in equity securities including common stock, preferred stock, warrants or rights to subscribe to common stock and, in general, any security that is convertible into or exchangeable for common stock. Investments in equity securities in general are subject to market risks that may cause their prices to fluctuate, sometimes dramatically and unpredictably, over time. Rights represent a privilege granted to existing shareholders of a company to subscribe to shares of a new issue of common stock before it is offered to the public. The value of convertible equity securities is also affected by prevailing interest rates, the credit quality of the issuer and any call provisions. Fluctuations in the value of equity securities in which the Fund invests will cause the NAV of the Fund to fluctuate.

Common stock generally takes the form of shares in a corporation. The value of a company's stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value also may fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock also may be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds, other debt and preferred stock. For this reason, the value of a company's stock will usually react more strongly than its bonds, other debt and preferred stock to actual or perceived changes in the company's financial condition or prospects.

Investments in small companies involve greater risk than is customarily associated with larger, more established companies due to the greater business risks of small size, limited markets and financial resources, narrow product lines and the frequent lack of depth or experience of management. These companies may be in the developmental stage or may be older companies undergoing significant changes. As a result, the prices of small-cap companies may rise and fall more sharply. The securities of small companies are often traded over-the-counter and may not be traded in volumes typical of securities traded on a national securities exchange. Consequently, the securities of small companies may have limited market stability and may be subject to more abrupt or erratic market movements than securities of larger, more established companies or the market averages in general.

Securities of companies considered to be growth investments may have rapid price swings in the event of earnings disappointments or during periods of market, political, regulatory and economic uncertainty. Securities of companies considered to be value investments can continue to be undervalued for long periods of time and not realize their expected value.

**Exchange Traded Funds**

Exchange traded funds ("ETFs") are investment companies that are bought and sold on a securities exchange. An ETF generally represents a portfolio of securities designed to track a particular market segment or index. The Fund could purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting an opportunity to purchase securities directly. An investment in an ETF, like one in any investment company, carries the same risks as those of its underlying securities. An ETF may fail to accurately track the returns of the market segment or index that it is designed to track, and the price of an ETF's shares may fluctuate or lose money. In addition, because they, unlike other investment companies, are traded on an exchange, ETFs are subject to the following risks: (i) the market price of the ETF's shares may trade at a premium or discount to the ETF's NAV; (ii) an active trading market for an ETF may not develop or be maintained; and (iii) there is no assurance that the requirements of the exchange necessary to maintain the listing of the ETF will continue to be met or remain unchanged. In the event substantial market or other disruptions affecting ETFs should occur in the future, the liquidity and

value of the Fund's shares could also be substantially and adversely affected. See also "Investment Company Securities" below.

**Foreign Securities**

The Fund may invest in foreign securities. Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Foreign securities, including those of emerging market issuers, are subject to additional risks, including international trade, social, political and regulatory risks. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations (including repatriation restrictions), tariffs and/or trade embargoes, expropriation or confiscatory taxation, other taxes imposed by the foreign country on the Fund's earnings, assets, or transactions, limitation on the removal of cash or other assets of the Fund, political or financial instability, the imposition of economic sanctions, or diplomatic and other developments (including wars and armed conflicts) which could affect such investments. The Fund may determine not to invest in, or may limit its overall investment in, a particular issuer, country, or geographic region due to, among other things, heightened risks regarding repatriation restrictions, confiscation of assets and property, expropriation or nationalization. Further, economies of particular countries or areas of the world may differ favorably or unfavorably from the economy of the United States. Changes in foreign exchange rates will affect the value of securities denominated or quoted in currencies other than the U.S. dollar. The currency in which the Fund's assets are denominated may be devalued against the U.S. dollar, resulting in a loss to the Fund. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Furthermore, dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply. Additional costs associated with an investment in foreign securities may include higher custodial fees than those that apply to domestic custodial arrangements, and transaction costs of foreign currency conversions. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries.

**Euro-Related Risks.** In the past, economic crises have brought several small economies in Europe to the brink of bankruptcy and many other economies into recession and weakened the banking and financial sectors of many European countries. In addition, due to large public deficits, some European countries may be dependent on assistance from other European governments and institutions or multilateral agencies and offices. Assistance may be dependent on a country's implementation of reforms or reaching a certain level of performance. Failure to reach those objectives or an insufficient level of assistance could result in a deep economic downturn that could significantly affect the value of the Fund's European investments. The Economic and Monetary Union of the European Union ("EMU") is comprised of the European Union members that have adopted the euro currency. By adopting the euro as its currency, a member state relinquishes control of its own monetary policies. As a result, European countries are significantly affected by fiscal and monetary controls implemented by the EMU. The euro currency may not fully reflect the strengths and weaknesses of the various economies that comprise the EMU and Europe generally. It is possible that EMU member countries could abandon the euro and return to a national currency and/or that the euro will cease to exist as a single currency in its current form. The effects of such an abandonment or a country's forced expulsion from the euro on that country, the rest of the EMU, and global markets are impossible to predict, but are likely to be negative.

In a June 2016 referendum, citizens of the United Kingdom voted to leave the European Union ("EU"). In March 2017, the United Kingdom formally notified the European Council of its intention to withdraw from the EU (commonly known as "Brexit") by invoking Article 50 of the Treaty on European Union, which triggered a two-year period of negotiations on the terms of Brexit. Brexit resulted in volatility in European and global markets and weakened the political, regulatory, consumer, corporate and financial confidence in the markets of the United Kingdom and throughout Europe. On January 31, 2020, the United Kingdom

withdrew from the EU. The EU-UK Trade and Cooperation Agreement ("TCA"), an agreement on the terms governing certain aspects of the EU-UK trade relationship, took effect in 2021. However, many aspects of the UK-EU trade relationship remain subject to further negotiation. It is not possible to anticipate the form or nature of the future trading relationship between the United Kingdom and the EU or predict the long term impact of Brexit. Brexit may lead to a call for similar referenda in other European jurisdictions, which may cause increased economic volatility in European and global markets.

**Asia (including the Middle East) Related Risks.** Many Asian countries are considered emerging or frontier markets, and these markets can be less economically and politically stable than developed markets such as the United States. The Asian region may be adversely affected by social, political, economic and regulatory developments, including long-running border and diplomatic disputes with neighboring countries or the international community. For example, the Asian region, and particularly China and South Korea, may be adversely affected by the social, political, economic and regulatory developments in North Korea and its relationship to the international community, including the United States. In addition, China's long-running conflict over Taiwan, border disputes with many of its neighbors, including Vietnam and Japan, and historically challenging relations with Japan could adversely impact economies in the region. Other potential sources of unrest include nuclear arms threats between India and Pakistan and separatist, ethnic and sectarian violence occurring in Indonesia and the Middle East. Such unrest would likely have a negative impact on the economies and securities markets in this region. Moreover, the Asian region has historically been prone to natural disasters, which have in the past, and may continue to, negatively impact the economy of a country in the Asian region.

The economies of many Asian countries differ from the economies of more developed countries in numerous respects, such as, financial system stability, rate of growth, inflation, capital reinvestment, resource self-sufficiency, the national balance of payments, sensitivity to global trade, and with respect to many countries within the Middle East, the sensitivity to the price of oil. Some Asian countries are highly dependent upon and may be affected by developments in other Asian countries, the United States and Europe as a result of their dependency on international trade. Changes in diplomatic relations, trade barriers or global export flows may have a significant impact on a particular Asian country or on the region as a whole. For example, the imposition of tariffs or other trade barriers by the United States or foreign governments on exports from China could adversely impact economies in China and the surrounding region.

There may be less publicly available information about companies in many Asian countries. In addition, some Asian securities are not rated by rating agencies like S&P, Moody's, or Fitch; or if they rated, they may be rated below investment grade (referred to as "junk bonds," which are typically speculative securities, and include unrated securities, regardless of quality), which may have a greater risk of default.

Moreover, the stock exchanges and financial and securities industries in many Asian countries do not generally have the level of government and regulatory oversight as in the United States or Europe. Financial intermediaries in countries in this region may not operate or perform as well as their counterparts in more developed securities capital markets. The auditing and reporting standards in some Asian emerging market countries also may not yield the same degree of shareholder protection or information to investors as those of developed countries. Specifically, the valuation of assets, depreciation, exchange differences, deferred taxation, contingent liability and consolidation may be treated differently in Asian countries than under the auditing and reporting standards that exist in more developed countries. As the legal systems in many Asian countries continue to develop, it may be more difficult to obtain or enforce a judgment.

The securities markets of many Asian countries are also significantly smaller, less liquid and more volatile than securities markets in the United States and Europe. Certain countries in this region are also undergoing a period of growth and change, which could lead to trading volatility and may impose difficulties regarding the operations, settlement and recording of securities transactions. Certain markets in these countries may also require significant withholding of dividends paid on portfolio securities and on realized capital gains, and there can be no assurance that repatriation of a Fund's income, gains or initial capital from these countries will necessarily occur.

**Global Financial Markets**

Global economies and financial markets are becoming increasingly interconnected. Social, political and economic conditions (including instability and volatility) and events (including, but not limited to, armed conflicts, natural/environmental disasters, rapid inflation, supply chain disruptions, international sanctions, global recessions, pandemics, epidemics, social unrest, economic sanctions, cyberattacks, and government shutdowns and defaults) in one country, region or financial market, including a country, region or market in which the Fund has not invested, may adversely impact issuers in a different country, region or financial market, including a country, region or market in which the Fund has invested. As a result, the Fund could be negatively impacted if the values of its investments were harmed by these political or economic conditions or events. Such conditions and/or events may not have the same impact on all types of securities and may expose the Fund to greater market or liquidity risk or cause difficulty in valuing portfolio instruments held by the Fund. This could cause the Fund to underperform other types of investments. Moreover, such negative political and economic conditions and events could disrupt the processes necessary for the Fund's operations. For additional information, please see the discussion herein on "Operational Risk."

For example, the recent outbreak of an infectious respiratory illness caused by a novel strain of coronavirus (known as COVID-19) has caused volatility, severe market dislocations and liquidity constraints in markets around the world. The transmission of COVID-19 and efforts to contain its spread led to severe macroeconomic disruptions, exchange closures, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, quarantines, event and service cancellations or interruptions, disruptions to business operations (including staff furloughs and reductions) and supply chains, and a reduction in consumer and business spending, as well as general concern and uncertainty that has negatively affected the economy. Certain of these consequences remain ongoing. Such events, or other disruptions caused by social, political, or economic conditions or other events, could adversely impact issuers, markets and economies (and, accordingly, the Fund) over the short- and long-term, including in ways that cannot be foreseen.

The severity or duration of such conditions and/or events may be affected by policy changes made by governments or quasi-governmental organizations. Historically, instability in the financial markets has led governments across the globe to take a number of actions designed to support the financial markets. For example, in response to the outbreak of COVID-19, the U.S. Government passed a series of economic relief packages, including the Coronavirus Aid, Relief and Economic Security Act and American Rescue Plan Act of 2021 which provided approximately $2.0 trillion in economic relief to certain businesses and individuals affected by COVID-19. There can be no guarantee that these and similar actions will be sufficient or will have their intended effect, or will not result in unintended adverse economic consequences, such as increased inflationary pressure. Future government regulation and/or intervention may also change the way in which the Fund is regulated and could limit or preclude the Fund's ability to achieve its investment objective. Moreover, governments or their agencies may acquire distressed assets from financial institutions, may acquire ownership interests in those institutions, or may impose conditions on issuers receiving financial assistance (including by restricting or limiting their ability to pay dividends), all of which may affect the Fund's investments in ways that are unforeseeable.

Political institutions may not be able to effectively respond to these political and economic conditions and events, and these political institutions may erode over time. For example, one or more countries that have adopted the euro may abandon that currency and/or withdraw from the European Union, which could disrupt global markets and affect the liquidity and value of the Fund's investments, regardless of whether the Fund has significant exposure to European markets. The risk of investing in Europe may also be heightened due to the armed conflict in Ukraine. In addition, countries in the Asian region (particularly China) may be adversely affected by social, political, economic and regulatory developments, including long-running border and diplomatic disputes with neighboring countries or the international community, that could adversely impact economies within individual Asian countries or the Asian region or the global market as a whole.

In addition, in the United States, total public debt as a percentage of gross domestic product has grown rapidly since 2008. High levels of national debt may raise concerns that the U.S. government will be unable to pay investors at maturity, may cause declines in currency valuations and may prevent the U.S. government from implementing effective fiscal policy. Export-driven economies, including the economies of a number of Asian countries, may be adversely affected by the U.S. and other large economies, with which they do business.

**Illiquid Investments, Rule 144A Securities, and Section 4(a)(2) Securities**

The Fund may purchase securities that are not registered or that are offered in exempt non-public offerings under the Securities Act of 1933, as amended ("1933 Act") ("Restricted Securities"), including securities eligible for resale to qualified institutional buyers pursuant to Rule 144A under the 1933 Act ("Rule 144A Securities") or commercial paper issued pursuant to Section 4(a)(2) under the 1933 Act ("4(a)(2) Securities"). However, pursuant to Rule 22e-4 under the 1940 Act, the Fund may not acquire any "illiquid investment" if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets. An "illiquid investment" is any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. Illiquid investments may include certain Restricted Securities, certain over-the-counter derivatives instruments, or securities or other financial instruments that are not readily marketable. The Trust has implemented a liquidity risk management program to identify illiquid investments pursuant to Rule 22e-4, and the Board has approved the designation of the Fund Liquidity Review Group to administer the Trust's liquidity risk management program.

Pursuant to the Trust's liquidity risk management program, the Fund Liquidity Review Group may determine that a particular Rule 144A Security, 4(a)(2) Security, or other investment is not illiquid and thus not subject to the limit on investment in illiquid investments based upon a review of relevant market, trading, and investment-specific considerations, including (1) the existence of an active market; (2) the number, diversity and quality of market participants and any dealer undertakings to make a market in the security; (3) the frequency of trades or quotes; (4) restrictions on trading and limitations on transfer; and (5) such other factors that the Fund Liquidity Review Group determines, in its discretion, to be relevant.

**Investment Company Securities**

Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, an investor becomes a shareholder of that investment company. As a result, the Fund's shareholders indirectly will bear the underlying fund's proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Fund's shareholders directly bear in connection with the Fund's own operations. In addition, the Fund will be affected by the investment policies, practices, and performance of such investment companies in direct proportion to the amount of assets the Fund invests therein. The Fund's investment in the securities of other investment companies may be particularly significant following its launch or in situations where the Fund is unable to access a particular country or market.

Generally, under the 1940 Act and related rules, the Fund may purchase an unlimited amount of shares of an affiliated fund or a money market fund. The Fund may also purchase shares of an unaffiliated fund as long as: (i) the Fund doesn't invest more than 5% of its total assets in the securities of any one investment company (ETF or other mutual funds); (ii) the Fund doesn't own more than 3% of the outstanding voting stock of any one investment company; or (iii) the Fund doesn't invest more than 10% of its total assets in the securities of other investment companies. The Fund may exceed these limits in reliance on exemptive rules adopted by, or exemptive orders issued by, the SEC.

**Money Market Instruments**

The Fund's investments in money market instruments, if any, will consist of: (i) short-term obligations of the U.S. Government, its agencies and instrumentalities; (ii) other short-term debt securities rated A or higher

by Moody's or S&P or, if unrated, of comparable quality in the opinion of the Adviser ; (iii) commercial paper, including master demand notes; (iv) bank obligations, including certificates of deposit, bankers' acceptances and time deposits; (v) repurchase agreements; and (vi) shares of money market funds, which may include the U.S. Government Money Market Fund. Securities issued or guaranteed as to principal and interest by the U.S. Government include a variety of Treasury securities, which differ in their interest rates, maturities and dates of issue. Securities issued or guaranteed by agencies or instrumentalities of the U.S. Government may or may not be supported by the full faith and credit of the United States or by the right of the issuer to borrow from the Treasury. Considerations of liquidity and preservation of capital mean that a Fund may not necessarily invest in money market instruments paying the highest available yield at a particular time.

**Operational Risk**

 

The Fund and its service providers, including the Adviser, Subadviser, Sub-Administrator, fund accountant, custodian and transfer agent, as well as the service providers of the Fund's service providers, rely on the security and reliability of information and communications technologies, systems and networks and may be negatively impacted if these technologies, systems and networks become compromised or unreliable. These operational risks arise from a variety of factors and could negatively impact the Fund and its shareholders. These factors include processing and human errors, inadequate or failed internal or external processes, failures in technology, systems and networks, cyber-attacks, changes in personnel, and errors caused by third-party service providers or trading counterparties. The use of certain investment strategies that involve manual processing or quantitative investment models increases these risks. Although the Fund and its service providers attempt to minimize such failures through controls and oversight, it is not possible to identify all of the operational risks that may affect the Fund or to develop processes and controls that completely eliminate or mitigate the occurrence of such failures. In addition, other disruptive events, including, but not limited to, natural disasters and public health crises (such as the COVID-19 pandemic), can adversely affect the Fund, in particular if the Fund's officers or the employees of its service providers, including the Adviser and Subadviser, are unable or unwilling to perform their responsibilities as a result of any such event. The Subadviser has a limited operating history and relies on one or more service providers to provide key operational services. Any disruption in these services could negatively impact the Fund and its shareholders.

In addition, the Fund relies on various sources to calculate its NAV. Therefore, the Fund is subject to certain operational risks associated with reliance on third party service providers and data sources. NAV calculation may be impacted by operational risks arising from factors such as failures in systems and technology. Such failures may result in delays in the calculation of the Fund's NAV and/or the inability to calculate NAV over extended time periods. The Fund may be unable to recover any losses associated with such failures.

**Real Estate Securities**

The Fund may invest in real estate investment trusts ("REITs"). REITs pool investors' funds for investment primarily in income producing real estate or real estate loans or interests. A REIT is not taxed on income distributed to shareholders if it complies with several requirements relating to its organization, ownership, assets, and income and a requirement that it distributes to its shareholders substantially all of its taxable income (other than net capital gains) for each taxable year. Failure to comply with federal tax requirements may affect the value of the REIT, which could have adverse consequences on the Fund. REITs can generally be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets directly in real property, derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs, which invest the majority of their assets in real estate mortgages, derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both Equity REITs and Mortgage REITs. The Fund will not invest in real estate directly, but only in securities issued by real estate companies. Investments in REITs and real estate companies subject the Fund to a number of risks. These include declines in the value of real estate, risks related to general and local economic conditions, dependency on management skill, heavy cash flow dependency, possible lack of availability of mortgage funds, overbuilding, extended vacancies of properties, increased competition, increases in property taxes and operating expenses,

changes in zoning laws, losses due to costs resulting from the clean-up of environmental problems, liability to third parties for damages resulting from the environmental problems, terrorist acts, demographic trends, casualty or condemnation losses, limitation on rents, changes in neighborhood values, the appeal of properties to tenants, and changes in interest rates.

**Short-Term Trading**

The Fund may engage in short-term trading. Although the Fund will not make a practice of short-term trading, purchases and sales of securities will be made whenever it is believed to be necessary or desirable to achieve the investment objective of the Fund. A change in the securities held by the Fund is known as "portfolio turnover." The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund's performance. Unsettled market economic conditions during certain periods require greater portfolio turnover in pursuing the Fund's investment objectives than would otherwise be the case. A higher incidence of portfolio turnover will result in greater transaction costs to the Fund.

**U.S. Government Securities**

The Fund may invest in U.S. Government securities to the extent set forth in the Prospectus and this SAI. U.S. Government securities include bills, notes, and bonds issued by the U.S. Treasury and securities issued or guaranteed by agencies or instrumentalities of the U.S. Government.

Some U.S. Government securities are supported by the direct full faith and credit pledge of the U.S. Government; others are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as securities issued by the FNMA, are supported by the discretionary authority of the U.S. Government to purchase the agencies' obligations; and others are supported only by the credit of the issuing or guaranteeing instrumentality. There is no assurance that the U.S. Government will be able or willing to repay any principal or interest when due, or will provide financial support to a U.S. Government agency, authority, instrumentality or sponsored enterprise when it is not obligated by law to do so.

**Warrants**

The Fund may purchase or sell warrants. A warrant is an instrument issued by a corporation that gives the holder the right to subscribe to a specific amount of the corporation's capital stock at a set price for a specified period of time. Warrants do not represent ownership of the securities, but only the right to buy the securities. The prices of warrants do not necessarily move parallel to the prices of underlying securities. Warrants may be considered speculative in that they have no voting rights, pay no dividends, and have no rights with respect to the assets of a corporation issuing them. Once a warrant expires, it has no value in the market. Warrant positions will not be used to increase the leverage of the Fund. Consequently, warrant positions are generally accompanied by cash positions equivalent to the required exercise amount.

**PORTFOLIO TURNOVER**

For the purposes of this section, the term "Fund" includes the Portfolio.

RadiantESG manages the Fund generally without regard to restrictions on portfolio turnover. In general, the Fund will not trade for short-term profits, but when circumstances warrant, investments may be sold without regard to the length of time held. The primary consideration in placing portfolio security transactions with broker-dealers for execution is to obtain, and maintain the availability of, execution at the most favorable prices and in the most effective manner possible. Expenses to the Fund, including brokerage commissions, and the realization of capital gains that are taxable to the Fund's shareholders tend to increase as the portfolio turnover increases.

For the fiscal periods ended October 31, 2022 and 2021, the portfolio turnover rate for the Fund was:

---

| | | |
|:---|:---|:---|
| **Fund<sup>(1)</sup>** | **2022** | **2021** |
| U.S. Smaller Companies Fund**<sup>(2)</sup>** | 120% | 78% |

---

---

| | | |
|:---|:---|:---|
| **Fund<sup>(1)</sup>** | **2022** | **2021** |
| U.S. Smaller Companies Fund (Class I)**<sup>(2)</sup>** | 120% | 78% |

---

<sup>(1)</sup> RadiantESG assumed day-to-day portfolio management responsibilities on June 28, 2022.

<sup>(2)</sup> For each of the Funds, the turnover rate is calculated based upon the Fund's interest in the Portfolio in which the Fund invested.

If the Fund has a high portfolio turnover rate (e.g., 100% or more), transaction costs incurred by the Fund, and the realized capital gains and losses, may be greater than those of a fund with a lesser portfolio turnover rate. See "Portfolio Transactions" and "Taxation."

**PORTFOLIO TRANSACTIONS**

For the purposes of this section, the term "Adviser" also includes the Subadviser for the Fund, and the term "Fund" includes the Portfolio.

The Adviser is primarily responsible for portfolio decisions and the placing of portfolio transactions. The Trust has no obligation to deal with any broker-dealer or group of broker-dealers in the execution of transactions in portfolio securities for the Fund. Allocation of transactions, including their frequency, to various broker-dealers is determined by the Adviser in its best judgment and in a manner deemed to be in the best interest of the Fund's shareholders rather than by any formula. In placing orders for the Fund, the primary consideration is prompt execution of orders in an effective manner at the most favorable price, although the Fund does not necessarily pay the lowest spread or commission available. Other factors taken into consideration are the broker-dealer's general execution and operational facilities, the type of transaction involved and other factors such as the broker-dealer's risk in positioning the securities. To the extent consistent with applicable legal requirements, the Adviser may place orders for the purchase and sale of investments for the Fund with a broker-dealer affiliate of the Adviser.

The Adviser may, in circumstances in which two or more broker-dealers are in a position to offer comparable results, and subject to certain conditions, give preference to a broker-dealer that has provided statistical or other research services to the Adviser. By allocating transactions in this manner, the Adviser is able to supplement its research and analysis with the views and information of securities firms. These services, which in some cases may also be purchased for cash, include such matters as general economic and security market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to the Adviser in advising several of its clients (including the Fund), although not all of these services are necessarily useful and of value in managing the Fund. The management fee paid from the Fund is not reduced because the Adviser and its affiliates receive such services.

Generally, fixed income securities and money market securities are traded on a principal basis and do not involve brokerage commissions. Under the 1940 Act, persons affiliated with HSBC USA, Inc. ("HSBC USA"), the Adviser, the Fund or Foreside Distribution Services, L.P. ("Foreside" or the "Distributor") are generally prohibited from dealing with the Fund as a principal in the purchase and sale of securities. The Fund may purchase securities from underwriting syndicates of which the Distributor or other affiliate is a member under certain conditions in accordance with the provisions of a rule adopted under the 1940 Act. Under the 1940 Act, persons affiliated with the Adviser, the Fund or the Distributor may act as a broker for the Fund. In order for such persons to effect any portfolio transactions for the Fund, the commissions, fees or other remuneration received by such persons must be reasonable and fair compared to the commissions, fees or other remunerations paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on an exchange during a comparable period of time. This standard would allow the affiliate to receive no more than the remuneration that would be expected to be received by an unaffiliated broker in a commensurate arms-length transaction. The Trustees of the Trust regularly review any commissions paid by the Fund to affiliated brokers. Unless authorized by law, the Fund will not do business with nor pay commissions to affiliates of the Adviser in any portfolio transactions where they act as principal.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Adviser may cause the Fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to the Adviser an amount of commission for effecting a securities transaction for the Fund in excess of the commission which another broker-dealer would have charged for effecting that transaction, provided the Adviser determines in good faith that the greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of either a particular transaction or its respective overall responsibilities to the Fund or to its other clients. Not all of such services are useful or of value in advising the Fund.

The European Union's Markets in Financial Instruments Directive ("MiFID II") requires investment managers and their clients that are regulated under MiFID II to pay for research services separately from trade execution services, either through their own resources or a research payment account funded by a specific charge to a client. MiFID II will restrict the use of soft dollars by affected investment managers. MiFID II's research requirements present various compliance and operational considerations for investment advisers and broker-dealers serving clients in both the United States and the EU.

The term "brokerage and research services" includes advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or of purchasers or sellers of securities; furnishing analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; and effecting securities transactions and performing functions incidental thereto, such as clearance and settlement. Although commissions paid on every transaction will, in the judgment of the Adviser, be reasonable in relation to the value of the brokerage services provided, commissions exceeding those which another broker might charge may be paid to broker-dealers who were selected to execute transactions on behalf of the Fund and the Adviser's other clients in part for providing advice as to the availability of securities or of purchasers or sellers of securities and services in effecting securities transactions and performing functions incidental thereto, such as clearance and settlement. The SEC has published interpretative guidance that tightened previously existing standards concerning the types of expenses that qualify for the Section 28(e) safe harbor and set forth certain steps that investment advisers would need to take in order to ensure such qualification.

Investment decisions for the Fund and for the other investment advisory clients of the Adviser are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought for certain clients even though it could have been sold for other clients at the same time, and a particular security may be sold for certain clients even though it could have been bought for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. In some instances, one client may sell a particular security to another client. Two or more clients may simultaneously purchase or sell the same security, in which event each day's transactions in that security are, insofar as practicable, averaged as to price and allocated between such clients in a manner which in the Adviser's opinion is equitable to each and in accordance with the amount being purchased or sold by each. In addition, when purchases or sales of the same security for the Fund and for other clients of the Adviser occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantage available to large denomination purchases or sales. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients in terms of the price paid or received or of the size of the position obtainable. It is recognized that, in some cases, this system could have a detrimental effect on the price or volume of the security as far as the Fund is concerned. In other cases, however, the Adviser believes that the Funds' ability to participate in volume transactions will produce better executions for the Fund.

The Board has adopted a policy to ensure compliance with Rule 12b-1(h) under the 1940 Act in the selection of broker-dealers to execute portfolio transactions for the Funds. Generally, Rule 12b-1(h) prohibits the Fund from compensating a broker-dealer for promotion or sale of Fund shares by directing to the broker-dealer securities transactions or remuneration received or to be received from such portfolio securities transactions.

For the fiscal years ended October 31, 2022, 2021 and 2020, the Fund (or the Portfolio) paid aggregate brokerage commissions as shown in the following table:

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| | | | |
|:---|:---|:---|:---|
| **Fund**<sup>(1)</sup> | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Portfolio<sup>(2)</sup> | $88070 | $101399 | $148130 |

---

<sup>(1)</sup> RadiantESG assumed day-to-day portfolio management responsibilities on June 28, 2022.

<sup>(2)</sup> Each of the Funds bears a proportionate share of the amounts applicable to the Portfolio, to the extent of their investment in the Portfolio.

During the fiscal year ended October 31, 2022, the Fund did not acquire securities issued by their regular brokers or dealers, or their parent companies.

**DISCLOSURE OF PORTFOLIO HOLDINGS**

The Board has adopted policies and procedures relating to disclosure of the Trust's portfolio securities (the "Policy"). The Policy is designed to ensure that the disclosure of holdings information where necessary to the Trust's operation or useful to the Trust's shareholders without compromising the integrity or performance of the Trust. Disclosure of information regarding the portfolio holdings of the Fund occurs only upon the determination, by the Trust's Chief Compliance Officer ("CCO"), that such disclosure is in the best interests of the Fund's shareholders and that it does not present a conflict of interest between the shareholders and the Adviser or Subadviser, principal underwriter, or any affiliated person of the Fund, the Adviser or Subadviser, or principal underwriter.

Pursuant to applicable law, the Trust is required to disclose its complete portfolio holdings quarterly, within 60 days of the end of each fiscal quarter. The Trust discloses a complete schedule of investments in each Semi-Annual Report and Annual Report to Shareholders. Semi-Annual and Annual Reports are distributed to shareholders and are also available, free of charge, on the EDGAR database on the SEC's website at www.sec.gov and on the Trust's website at https://www.assetmanagement.us.hsbc.com/en/institutional-investor/fund-centre.

The Fund also files its portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter with the SEC on Form N-PORT. Portfolio holdings information for the third month of each quarter is publicly available within 60 days of the end of the quarter at the websites listed above. The Trust's website also provides information about the Fund's top 10 holdings, sector holdings and other characteristics data as of the end of the most recent month. The Trust may publish the Fund's full portfolio holdings thirty (30) days after the end of each month. This information is available until updated as of the following month. The information on the Trust's website is publicly available to all categories of persons.

The Trust, Adviser or Subadviser may share non-public holdings information of the Fund on a more frequent basis with their service providers (including the Trust's Sub-Administrator; fund accountant; custodian; order management system provider, STP Investment Partners, LLC; operations service provider, STP Investment Services; proxy voting service provider, Institutional Shareholder Services; and pricing services such as FT Interactive). In addition, the Trust may share non-public holdings information with mutual fund ranking and rating services, including Standard & Poor's Corporation, Morningstar, Lipper Analytical Services, FactSet, Fitch Ratings, Inc., Fundipedia and Bloomberg L.P. These service providers and other entities owe contractual, fiduciary, or other legal duties of confidentiality to the Trust, Adviser or Subadviser that foster reasonable expectations that holdings information will not be misused. The Trust's officers may authorize disclosure of the Trust's holdings portfolio information to service providers where such service provider needs information to fulfill its duties.

The Trust may also disclose information about portfolio holdings to mutual fund evaluation services that agree not to disclose the information to third parties and that enter into a Confidentiality Agreement. Such Confidentiality Agreement provides, among other things, that non-public portfolio holdings information will be kept confidential and that such information will be used solely for the purpose of analysis and evaluation of the portfolio. Disclosures may be made to other third parties under a Confidentiality Agreement

satisfactory to Fund counsel and the Trust's CCO. The Confidentiality Agreement prohibits anyone in possession of non-public holdings information from purchasing or selling securities based on such information, or from disclosing such information to other persons, except for those who are actually engaged in, and need to know, such information to perform services for the portfolio.

Currently, the Trust has arrangements to provide additional disclosure of holdings information to the following evaluation services: Lipper Analytical Services (10 days after the end of each month), Morningstar (5 business days after the end of each month), Bloomberg L.P. (60 days after the end of each quarter), FactSet (daily), Fitch Ratings, Inc. (two times per month), Fundipedia (5 business days after the end of each month) and Standard & Poor's Corporation (between 3-5 days after the end of each week). No compensation or other consideration is paid to or received by any party in connection with the disclosure of holdings information, including the Trust or the Adviser, Subadviser and their affiliates.

Pursuant to the Policy, the CCO may authorize exceptions and allow disclosures under other circumstances he or she deems appropriate. In addition, the Fund may disclose its holdings, as appropriate, in conformity with the foregoing principles. Compliance with the Policy (including the use of the portfolio holdings information) will be monitored by the CCO or his or her designee on a regular basis, and any violations constituting a "Material Compliance Matter" as defined under Rule 38a-1 of the 1940 Act will be reported by the CCO to the Board.

**INVESTMENT RESTRICTIONS**

The Trust, with respect to the Fund and the Portfolio, has adopted certain fundamental and non-fundamental investment restrictions. Fundamental investment restrictions may not be changed without approval by holders of a "majority of the outstanding voting securities" of the Fund or Portfolio. The term "majority of the outstanding voting securities" as used in this SAI means the vote of the lesser of (i) 67% or more of the outstanding "voting securities" of the Fund or the Portfolio present at a meeting, if the holders of more than 50% of the outstanding "voting securities" are present or represented by proxy, or (ii) more than 50% of the outstanding "voting securities." The term "voting securities" as used in this paragraph has the same meaning as in the 1940 Act.

**Non-Fundamental Investment Restrictions**

Each of the Funds is subject to the following non-fundamental restrictions, in addition to the fundamental restrictions set forth below under the headings for each Fund:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Fund may not purchase on margin, except for use of short-term credit as may be necessary for the clearance of purchases and sales of securities, but it may make margin deposits in connection with transactions in options, futures, and options on futures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Fund may not sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in options and futures contracts are not deemed to constitute short sales of securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Fund may not invest in securities of any registered investment company except to the extent permitted under the 1940 Act generally or in accordance with any exemptive order granted to the Trust by the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Fund may not directly purchase securities or other instruments issued by companies that manufacture cluster munitions or anti-personnel mines. The Adviser uses the definitions within the 1997 Mine Ban Treaty and the 2008 Convention on Cluster Bombs for guidance and implementation. The Fund may purchase securities of registered investment companies, ETNs or other pooled vehicles that invest in companies that manufacture cluster munitions or anti-personnel mines.

**Fundamental Investment Restrictions**

As a matter of fundamental policy, the U.S. Smaller Companies Fund may (except that none of the following investment restrictions shall prevent the Trust from investing all of the Fund's assets in a separate registered investment company with substantially the same investment objective):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not borrow money or mortgage or hypothecate assets of the Portfolio (Fund), except that in an amount not to exceed 1/3 of the current value of the Portfolio's (Fund's) net assets, it may borrow money (including from a bank or through reverse repurchase agreements, forward roll transactions involving mortgage backed securities or other investment techniques entered into for the purpose of leverage), and except that it may pledge, mortgage or hypothecate not more than 1/3 of such assets to secure such borrowings, provided that collateral arrangements with respect to options and futures, including deposits of initial deposit and variation margin, are not considered a pledge of assets for purposes of this restriction and except that assets may be pledged to secure letters of credit solely for the purpose of participating in a captive insurance company sponsored by the Investment Company Institute;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not underwrite securities issued by other persons except insofar as the Portfolio (Fund) may technically be deemed an underwriter under the 1933 Act in selling a portfolio security;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not make loans to other persons except: (a) through the lending of the Portfolio's (Fund's) portfolio securities and provided that any such loans not exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b) through the use of repurchase agreements or the purchase of short term obligations; or (c) by purchasing a portion of an issue of debt securities of types distributed publicly or privately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts (except futures and option contracts) in the ordinary course of business (except that the Portfolio (Fund) may hold and sell, for the Portfolio's (Fund's) portfolio, real estate acquired as a result of the Portfolio's (Fund's) ownership of securities);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not concentrate its investments in any particular industry (excluding U.S. Government securities), but if it is deemed appropriate for the achievement of the Portfolio's (Fund's) investment objective(s), up to 25% of its total assets may be invested in any one industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not issue any senior security (as that term is defined in the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or the rules and regulations promulgated thereunder, provided that collateral arrangements with respect to options and futures, including deposits of initial deposit and variation margin, are not considered to be the issuance of a senior security for purposes of this restriction; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not with respect to 75% of its assets, invest more than 5% of its total assets in the securities (excluding U.S. Government securities) of any one issuer.

**U.S. Smaller Companies Fund (Class I)**

As a matter of fundamental policy, the U.S. Smaller Companies Fund (Class I) may (except that none of the following investment restrictions shall prevent the Trust from investing all of the Fund's assets in a separate registered investment company with substantially the same investment objective):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; borrow money to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; issue senior securities to the extent permitted under the 1940 Act and the rules and regulations thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not act as an underwriter of securities issued by others, except to the extent it could be considered an underwriter in the acquisition and disposition of restricted securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not make loans to other persons except: (a) through the lending of the Portfolio's (Fund's) portfolio securities and provided that any such loans not exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b) through the use of repurchase agreements or the purchase of short term obligations; or (c) by purchasing a portion of an issue of debt securities of types distributed publicly or privately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts (except futures and option contracts) in the ordinary course of business (except that the Portfolio (Fund) may hold and sell, for the Portfolio's (Fund's) portfolio, real estate acquired as a result of the Portfolio's (Fund's) ownership of securities);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not concentrate its investments in any particular industry (excluding U.S. Government securities), but if it is deemed appropriate for the achievement of the Portfolio's (Fund's) investment objective(s), up to 25% of its total assets may be invested in any one industry; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not, with respect to 75% of its assets, invest more than 5% of its total assets in the securities (excluding U.S. Government securities) of any one issuer.

**U.S. Smaller Companies Fund and U.S. Smaller Companies Fund (Class I)** 

The U.S. Smaller Companies Fund and U.S. Smaller Companies Fund (Class I) are also subject to the following restrictions which may be changed by the Board without shareholder approval (except that none of the following investment policies shall prevent the Trust from investing all of the assets of the U.S. Smaller Companies Fund or U.S. Smaller Companies Fund (Class I) in a separate registered investment company with substantially the same investment objective). As a matter of non-fundamental policy, the U.S. Smaller Companies Fund and U.S. Smaller Companies Fund (Class I) (U.S. Smaller Companies Portfolio) may not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; purchase warrants, valued at the lower of cost or market, in excess of 5% of the value of its net assets, except that this limitation does not apply to warrants acquired in units or attached to securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; write puts and calls on securities unless each of the following conditions are met: (a) the security underlying the put or call is within the investment policies of the Portfolio (Fund) and the option is issued by the Options Clearing Corporation, except for put and call options issued by non-U.S. entities or listed on non-U.S. securities or commodities exchanges; (b) the aggregate value of the obligations underlying the puts determined as of the date the options are sold shall not exceed 50% of the Portfolio's (Fund's) net assets; (c) the securities subject to the exercise of the call written by the Portfolio (Fund) must be owned by the Portfolio (Fund) at the time the call is sold and must continue to be owned by the Portfolio until the call has been exercised, has lapsed, or the Portfolio (Fund) has purchased a closing call, and such purchase has been confirmed, thereby extinguishing the Portfolio's (Fund's) obligation to deliver securities pursuant to the call it has sold; and (d) at the time a put is written, the Portfolio (Fund) segregates with its custodian assets consisting of cash or short-term U.S. Government securities equal in value to the amount the Portfolio (Fund) will be obligated to pay upon exercise of the put, marked to market daily (this segregation must be maintained until the put is exercised, has expired, or the Portfolio (Fund) has purchased a closing put, which is a put of the same series as the one previously written); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; buy and sell puts and calls on securities, stock index futures or options on stock index futures, or financial futures or options on financial futures unless such options are written by other persons and: (a) the options or futures are offered through the facilities of a national securities

association or are listed on a national securities or commodities exchange, except for put and call options issued by non-U.S. entities or listed on non-U.S. securities or commodities exchanges; (b) the aggregate premiums paid on all such options which are held at any time do not exceed 20% of the Portfolio's (Fund's) total net assets; and (c) the aggregate margin deposits required on all such futures or options thereon held at any time do not exceed 5% of the Portfolio's (Fund's) total assets.

**Percentage and Rating Restrictions**

If a percentage restriction or a rating restriction on investment or utilization of assets set forth above or referred to in a Fund's Prospectus is adhered to at the time an investment is made or assets are so utilized, a later change in percentage resulting from changes in the value of the securities held by a Fund or a later change in the rating of a security held by a Fund is not considered a violation of policy. However, the Adviser will consider such change in its determination of whether to continue to hold the security and provided further, that the Adviser will take appropriate steps, which may include the disposition of portfolio securities, as may be necessary to satisfy the applicable requirements of the 1940 Act and/or the rules thereunder with respect to the Funds' investments in illiquid investments or any borrowings by the Funds.

**MANAGEMENT OF THE TRUST**

**Board of Trustees**

Overall responsibility for management of HSBC Funds (the "Trust") rests with the Board. The Trustees elect the officers of the Trust and appoint service providers to manage the Trust's day-to-day operations. The Trustees meet regularly to discuss and consider matters concerning the Trust and to oversee the Trust's activities, including the investment performance of the Fund and the operation of the Trust's compliance program, and to evaluate and address potential conflicts and risks associated with the Trust's activities.

**Board Composition And Leadership Structure.** The Trust has a Board of Trustees. The Board consists of five Trustees, four of whom are not "interested persons" (as that term is defined by Section 2(a)(19) of the 1940 Act) of the Trust (the "Independent Trustees") and one who is an "interested person" (as that term is defined by Section 2(a)(19) of the 1940 Act). The Board is responsible for the overall management of the Trust, including general supervision and review of the Trust's investment activities. The Board elects the officers of the Trust who are responsible for administering the Trust's day-to-day operations. The Trust enters into agreements with various entities to manage the day-to-day operations of the Trust, including with the Adviser, the Subadviser, the administrator, the fund accountant, the transfer agent, the distributor and the custodian. The Board is responsible for selecting these service providers (based on the recommendation of the Adviser), approving the terms of their contracts with the Trust and exercising general oversight of these service providers on an ongoing basis.

The Chair of the Board, Ms. Beck, is an Independent Trustee, and, among other duties and responsibilities, serves as a point person for communications between the Trustees and the Trust's management. The Trustees interact directly with the Chair, Chairs of the Trust's standing Committees, each other, the Trust's officers, and senior management of the Adviser and other service providers of the Trust at scheduled meetings and between meetings, as appropriate.

The Board has established the following standing committees: the Audit Committee and the Nominating and Corporate Governance Committee (the "Committees") to facilitate the Trustees' effective oversight of the management of those aspects of the Trust's operations. Each Committee has a Chair, who is an Independent Trustee. Each Committee's responsibilities are discussed in greater detail below. By assigning areas of responsibility to committees of Trustees, and to the full Board, the Board's leadership structure enables it to exercise informed and independent judgment over the matters within its purview.

**Board's Role in Risk Oversight of The Trust**. The Board, as a whole, considers risk management issues as part of its general oversight responsibilities throughout the year at regular Board meetings, as does each Committee of the Trust. The Board and its Committees consider risk management through, among other things, regular reports that have been developed by management, in consultation with the Board, its

Committees and counsel. These reports address investment, valuation, liquidity, operations, and compliance matters. The Board may also receive special written reports or presentations on cybersecurity and a variety of other risk issues, either upon request or upon the Adviser's initiative. In addition, the Board meets regularly with the Adviser's internal risk department and Fund Pricing Group to review reports on their examinations of liquidity risks, and when applicable, their fair value determinations on the Fund's investment portfolios.

With respect to investment risk, the Board receives regular written reports describing and analyzing the investment performance of the Fund, which may include the comparison of the Fund's performance to its respective benchmark and/or peer groups when applicable. In addition, investment personnel for the Fund meet regularly with the Board to discuss Fund performance, including investment risk, liquidity and market updates. Also, to the extent that the Fund changes a particular investment strategy or invests in a new type of security that could have a material effect on the Fund's risk profile, the Board generally is consulted.

With respect to valuation, pursuant to Rule 2a-5 under the 1940 Act, the Board has designated the Adviser as the "Valuation Designee." As Valuation Designee, the Adviser performs fair value determinations relating to the Fund's investments and is responsible for, among other things, establishing, implementing and testing fair value methodologies. The Board receives regular and other periodic written reports on valuation matters and will review, no less frequently than annually, a written report prepared by the Adviser (as Valuation Designee) that assesses the adequacy and effectiveness of its process for determining fair value.

With respect to liquidity, the Trust has implemented a liquidity risk management program on behalf of the non-money market Funds (the "Liquidity Program") that is designed to assess and manage each non-money market Fund's liquidity risk. The Board has designated the Fund Liquidity Review Group to administer the Liquidity Program. The Fund Liquidity Review Group is comprised of representatives from the Adviser's investment, risk, operations, and compliance teams. Under the Liquidity Program, the Board reviews periodic reports concerning Fund liquidity and review, no less frequently than annually, a written report prepared by the Fund Liquidity Review Group that addresses the operation of the Liquidity Program and assesses its adequacy and effectiveness.

With respect to compliance risks, the Board selects the person to serve as the Trust's CCO pursuant to Rule 38a-1 under the 1940 Act. In addition, the Board receives regular compliance reports and meets regularly with the CCO to discuss compliance issues, including compliance risks. In accordance with SEC rules, the Independent Trustees meet regularly in executive session with the CCO, and the CCO prepares and presents an annual written compliance report to the Board. The Board also meets regularly with the Chief Compliance Officer of the Adviser. The Board adopts compliance policies and procedures for the Trust and approves such procedures of certain of the Trust's service providers, such as the Adviser and the Subadviser. The compliance policies and procedures are specifically designed to detect and prevent violations of the federal securities laws. In addition, the Board oversees compliance by third-party service providers with the Trust's compliance program and assess recommendations made by the CCO concerning changes and additions to the Trust's compliance program.

**Qualifications Of The Trustees.** The names of the Trustees, their addresses, ages, positions held with the Trust, principal occupation(s) during the past five years, number of portfolios in the fund complex overseen, and other directorships held by each Trustee are set forth below.

**TRUSTEES**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; <br>**Name, Address<sup>(1)</sup> and Age** | &nbsp;&nbsp; <br>**Position(s) Held With Trust** | &nbsp;&nbsp; <br>**Length of Time Served** | &nbsp;&nbsp; <br>**Principal Occupation(s) During Past 5 Years** | &nbsp;&nbsp;**Portfolios in Fund Complex Overseen by Trustee<sup>(2)</sup>** | &nbsp;&nbsp; <br>**Other Directorships Held By Trustee During the Past 5 Years<sup>(3)</sup>** |
| &nbsp;&nbsp; <br> **Independent Trustees** | &nbsp;&nbsp; <br> **Independent Trustees** | &nbsp;&nbsp; <br> **Independent Trustees** | &nbsp;&nbsp; <br> **Independent Trustees** | &nbsp;&nbsp; <br> **Independent Trustees** | &nbsp;&nbsp; <br> **Independent Trustees** |
| &nbsp;&nbsp; Marcia L. Beck<br> Age: 67<br>| &nbsp;&nbsp;Trustee and Chair | &nbsp;&nbsp;Indefinite; 2008 to present | &nbsp;&nbsp;Private Investor (1999 – present) | &nbsp;&nbsp;5 |  |
| &nbsp;&nbsp; Susan C. Gause<br> Age: 70 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2013 to present | &nbsp;&nbsp;Private Investor (2003 – present) | &nbsp;&nbsp;5 | &nbsp;&nbsp;Brighthouse Funds Trust II (fka Metropolitan Series Fund) (2012 – present); Brighthouse Funds Trust II (fka Met Investors Series Trust) (2008 – present)<br>|
| &nbsp;&nbsp; Susan S. Huang<br> Age: 68<br>| &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2008 to present | &nbsp;&nbsp;Private Investor (2000 – present) | &nbsp;&nbsp;5 |  |
| &nbsp;&nbsp; Hugh T. Hurley III<br> Age: 58<br>| &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2020 to present | &nbsp;&nbsp;Private Investor (2017 – present) | &nbsp;&nbsp;5 | &nbsp;&nbsp;Oakmark Funds (2018 – present) |
| &nbsp;&nbsp; <br> **Interested Trustee** | &nbsp;&nbsp; <br> **Interested Trustee** | &nbsp;&nbsp; <br> **Interested Trustee** | &nbsp;&nbsp; <br> **Interested Trustee** | &nbsp;&nbsp; <br> **Interested Trustee** | &nbsp;&nbsp; <br> **Interested Trustee** |
| &nbsp;&nbsp;Paul D. Dawe <sup>(4)</sup><br> Age: 53 | &nbsp;&nbsp;Trustee | &nbsp;&nbsp;Indefinite; 2023 to present | &nbsp;&nbsp;Chief Executive Officer and Chief Operating Officer, HSBC Global Asset Management (USA) Inc. (2020 – present); Chief Operating Officer, HSBC Global Asset Management (USA) Inc. (2011 – 2020) | &nbsp;&nbsp;5 |  |

---

(1) Each
 Independent Trustee may be contacted by writing to the Trustee, c/o DST Asset Manager Solutions,
 Inc., P.O. Box 219691, Kansas City, MO 64121-9691, Attn: Stefano Michelagnoli. Mr. Dawe
 may be contacted by writing to the Adviser, 452 Fifth Avenue, New York, New York 10018.

(2) The
"Fund Complex" is comprised of the 5 portfolios of HSBC Funds.

(3) This column includes
 only directorships of companies required to report to the SEC under the Securities Exchange
 Act of 1934 (*i.e*., "public companies") or other investment companies registered under
 the 1940 Act.

(4) Mr. Dawe is considered
 an interested Trustee (i.e., not independent) because of his affiliation with the Adviser
 and its affiliates.

**OFFICERS**

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Name, Address and Age** | &nbsp;&nbsp;**Position(s) Held With Trust** | &nbsp;&nbsp;**Term of Office and Length of Time Served** | &nbsp;&nbsp;**Principal Occupation(s) During Past 5 Years** |
| &nbsp;&nbsp; Stefano R. Michelagnoli<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 52<br>| &nbsp;&nbsp;President | &nbsp;&nbsp;One year; 2020 to present | &nbsp;&nbsp; Global Head of Client Operations, HSBC Global Asset Management (USA) Inc. (June 2020 – present); Regional Head of Product (Americas), HSBC Global Asset Management (USA) Inc. (2015 – June 2020)<br>|
| &nbsp;&nbsp; James D. Levy<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 59 | &nbsp;&nbsp;Vice President | &nbsp;&nbsp;One year; 2014 to present | &nbsp;&nbsp; Vice President, Product Management, HSBC Global Asset Management (USA) Inc. (2014 – present)<br>|
| &nbsp;&nbsp;Maria Clem Sell <sup>(1)</sup><br> 3 Canal Plaza, Suite 100<br> Portland, ME 04101<br> Age: 45 | &nbsp;&nbsp;Treasurer | &nbsp;&nbsp;One year; November 2022 to present | &nbsp;&nbsp;Senior Principal Consultant and Fund Treasurer, ACA Global (*f/k/a* Foreside Financial Group, LLC) (2021 - present); Director, Franklin Templeton Investments (2014 – 2021)<br>|
| &nbsp;&nbsp;Patrick J. Keniston <sup>(1)</sup><br> 3 Canal Plaza, Suite 100<br> Portland, ME 04101<br> Age: 59<br>| &nbsp;&nbsp;Chief Compliance Officer and Secretary | &nbsp;&nbsp;One year; November 2022 to present | &nbsp;&nbsp;Senior Principal Consultant, ACA Global (*f/k/a* Foreside Fund Officer Services, LLC) (2008 – present) |
| &nbsp;&nbsp; James M. Curtis<br> 452 Fifth Avenue<br> New York, NY 10018<br> Age: 54 | &nbsp;&nbsp;Chief Legal Officer | &nbsp;&nbsp;One year; 2018 to present | &nbsp;&nbsp; Associate General Counsel, HSBC Technology & Services (USA) Inc. (2018-present); Associate General Counsel, HSBC Securities (USA) Inc. (2005 – 2017)<br>|

---

<sup>(1)</sup> Mr. Keniston and Ms. Sell are also officers of certain other investment companies.

**Trustee Experience, Qualifications, Attributes or Skills.** The following provides an overview of the considerations that led the Board to conclude that each individual serving as a Trustee of the Trust should so serve. The current members of the Board joined at different points in time since 2008. Generally, no one factor was decisive in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (i) the individual's business and professional experience and accomplishments, including prior experience in the financial services and investment management fields or on other boards; (ii) the individual's ability to work effectively with other members of the Board; and (iii) how the individual's skills, experiences and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.

In addition to personal qualities, such as integrity, the role of an effective Trustee inherently requires the ability to comprehend, discuss and critically analyze materials and issues presented in exercising judgments and reaching informed conclusions relevant to his or her duties and obligations. The Board believes that the specific background of each Board member (including as set forth above) evidences such ability and is appropriate to his or her serving on the Board. The Chair of the Board, Ms. Beck, has asset management operating and leadership experience, having served as President and Trustee of the Goldman Sachs Mutual Funds, an unaffiliated mutual fund complex. Ms. Huang has asset management operating and leadership experience, having served as Senior Vice President of Schroder Investment Management, a global asset management company. Mses. Beck and Huang each has experience managing risk as well as portfolios of money market and fixed income instruments, respectively. Ms. Gause has significant experience in the financial services industry, having served as, among other things, Chief Executive Officer of Dresdner RCM Global Investors and Allianz Dresdner Asset Management, a global asset management company. In that position, Ms. Gause was responsible for the day-to-day activities of the investment adviser of various registered open-end funds. In addition, Ms. Gause has served as an independent director for another mutual fund complex since 2008. Mr. Hurley has significant experience in the investment management and capital markets industries, having served in several senior executive management roles,

including as Managing Director and Global Head of Product Strategy at BlackRock, Inc., a global asset management company. Mr. Hurley is also a National Association of Corporate Directors ("NACD") Governance Fellow and is NACD Directorship Certified<sup>TM</sup>. He has a B.S. in Finance and has held roles as finance chair, treasurer, and endowment chair in his previous positions, requiring him to work closely with audit and accounting professionals. In addition, Mr. Hurley serves as an independent director for another mutual fund complex and is a member of that complex's audit committee. Mr. Dawe has asset management operating and leadership experience and is currently the Chief Executive Officer and Chief Operating Officer of HSBC Global Asset Management (USA) Inc. Previously, he was the Chief Operating Officer of the Adviser and HSBC Global Asset Management (UK) Limited. As a result of Mr. Dawe's senior position with the Adviser, Mr. Dawe has in-depth and longstanding knowledge regarding the Trust and the Funds and is in a position to, among other things, continue to foster the relationship between the Funds and the Adviser and to provide access to resources for the benefit of the Trust and the Funds.

**Committees**

The Board currently has two standing committees: Audit Committee and Nominating and Corporate Governance Committee.

**Audit Committee**. The Audit Committee is comprised of all of the Independent Trustees of the Trust. The Audit Committee is currently chaired by Mr. Hurley. Ms. Beck, Mr. Hurley and Ms. Gause are audit committee financial experts of the Trust. The primary purpose of the Audit Committee is to oversee the accounting and financial reporting policies, practices and internal controls of the Trust. The Audit Committee, among other things: (i) recommends to the Board the selection, retention and termination of an independent public accounting firm; (ii) annually reviews the scope of the proposed audit and, generally, the audit procedures to be utilized and the proposed audit fees; (iii) reviews the results of the annual audit with the independent auditors and any reports from the independent auditors concerning an audit, as presented to the Audit Committee; (iv) reviews the annual financial statements of the Funds with management and the independent auditors; (v) approves the fees to be paid by the Trust to the independent auditors for its services; and (vi) reviews the adequacy and effectiveness of internal controls and procedures with management and the independent auditors. The Audit Committee of the Trust met four times during the most recently completed fiscal year.

**Nominating and Corporate Governance Committee**. The Nominating and Corporate Governance Committee is comprised of all of the Independent Trustees of the Trust. The Committee is currently chaired by Ms. Gause. This Committee, among other things: (i) makes nominations for trustee membership on the Board or a Committee; (ii) evaluates on a periodic basis the operations and effectiveness of the Board as a whole; (iii) periodically reviews the composition of the Board to determine whether it may be appropriate to add individuals with different backgrounds or skills from those already on the Board; (iv) periodically reviews industry best practices and Board governance procedures and recommends appropriate changes to the full Board; (v) periodically reviews Trustee compensation and Committee responsibilities and recommends any appropriate changes to the full Board; (vi) reviews the retention of professional liability insurance (D&O/E&O Insurance) and investment company fidelity bonds; and (vii) reviews the independence and performance of the Independent Trustee counsel. The Nominating and Corporate Governance Committee also considers nominees recommended by shareholders. Such recommendations should be forwarded to the President of the Trust. The Nominating and Corporate Governance Committee met four times during the most recently completed fiscal year.

When evaluating a person as a potential nominee to serve as an Independent Trustee, the Nominating and Corporate Governance Committee may consider, among other factors: (i) whether or not the person is "independent" and whether the person is otherwise qualified under applicable laws and regulations to serve as a Trustee; (ii) whether or not the person is willing to serve, and willing and able to commit the time necessary for the performance of the duties of an Independent Trustee; (iii) the contribution that the person can make to the Board, with consideration being given to the person's business experience, education and such other factors as the Committee may consider relevant; (iv) the character and integrity of the person; (v) the desirable personality traits, including independence, leadership and the ability to work with the other members of the Board; and (vi) consistency with the 1940 Act.

The process of identifying nominees involves the consideration of candidates recommended by one or more of the following: current Independent Trustees, officers, and other sources that the Committee deems appropriate.

**Fund Ownership**

Listed below for each Trustee is a dollar range of securities beneficially owned in the Fund together with the aggregate dollar range of equity securities in all registered investment companies overseen by each Trustee in the HSBC Family of Funds, as of December 31, 2022 (unless stated otherwise).

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| | | |
|:---|:---|:---|
| **Trustees** | **Dollar Range of Equity<br> Securities in the Fund** | **Aggregate Dollar Range<sup>(2)</sup> of<br> Securities in All Registered<br> Investment Companies Overseen<br> By Trustee in** <br> **HSBC Family of Funds** |
| &nbsp;&nbsp; <br> **Independent Trustees**<br>|  |  |
| &nbsp;&nbsp;Marcia L. Beck |  | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;Susan C. Gause | &nbsp;&nbsp;$50001-$100000 | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;Susan S. Huang |  | &nbsp;&nbsp;$50001-$100000 |
| &nbsp;&nbsp;Hugh T. Hurley III |  |  |
| &nbsp;&nbsp; <br> **Interested Trustee**<br>|  |  |
| &nbsp;&nbsp;Paul D. Dawe<sup>(1)</sup> |  | &nbsp;&nbsp;Over $100,000 |

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<sup>(1)</sup> Mr. Dawe commenced his term as an Interested Trustee as of February 27, 2023.

<sup>(2)</sup> Ownership disclosure is made using the following ranges: None; $1 - $10,000; $10,001 - $50,000; $50,001 - $100,000 and over $100,000.

As of February 1, 2023 the Trustees and officers of the Trust as a group beneficially owned less than 1% of the outstanding shares of the Fund.

**Trustee and Officer Compensation**

For the fiscal year ended October 31, 2022, the following compensation was paid to the Trustees:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Compensation From the Funds** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Interested Trustee** |
|  | &nbsp;&nbsp;**Marcia L. Beck** | &nbsp;&nbsp;**Susan C. Gause** | &nbsp;&nbsp;**Susan S. Huang** | &nbsp;&nbsp;**Hugh T. Hurley III** | &nbsp;&nbsp;**Paul D.**<br> **Dawe<sup>(3)</sup>** |
| &nbsp;&nbsp;U.S. Smaller Companies Fund | &nbsp;&nbsp;$41196.11 | &nbsp;&nbsp;$35862.78 | &nbsp;&nbsp;$34057.07 | &nbsp;&nbsp;$35864.59 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp; U.S. Smaller Companies Fund<br> (Class I) | &nbsp;&nbsp;$41196.11 | &nbsp;&nbsp;$35862.77 | &nbsp;&nbsp;$34057.06 | &nbsp;&nbsp;$35864.59 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp;Pension Or Retirement Benefits Accrued As Part Of The Funds' Expenses <sup>(1)</sup> | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Compensation From the Funds** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Independent Trustees** | &nbsp;&nbsp;**Interested Trustee** |
|  | &nbsp;&nbsp;**Marcia L. Beck** | &nbsp;&nbsp;**Susan C. Gause** | &nbsp;&nbsp;**Susan S. Huang** | &nbsp;&nbsp;**Hugh T. Hurley III** | &nbsp;&nbsp;**Paul D.**<br> **Dawe<sup>(3)</sup>** |
| &nbsp;&nbsp;Estimated Annual Benefits Upon Retirement | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A | &nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Total Compensation From Funds and Fund Complex<sup>(2)</sup> Paid To Trustees | &nbsp;&nbsp;$247176.63 | &nbsp;&nbsp;$215176.63  | &nbsp;&nbsp;$204342.39 | &nbsp;&nbsp;$215187.50  | &nbsp;&nbsp;$0 |

---

<sup>(1)</sup> The Trust does not accrue pension or retirement benefits as part of Fund expenses, and Trustees are not entitled to retirement benefits upon retirement from the Board.

<sup>(2)</sup> For these purposes, the Fund Complex consisted of the 5 portfolios of HSBC Funds as of October 31, 2022.

<sup>(3)</sup> Mr. Dawe commenced his term as an Interested Trustee as of February 27, 2023.

None of the officers receive compensation directly from the Fund.

As of November 7, 2022, pursuant to a Fund principal financial officer ("PFO")/Treasurer, CCO, Secretary and AMLO Agreement between the Trust and Foreside Fund Officer Services, LLC ("Foreside") ("Fund Officer Agreement"), Foreside makes individuals available to serve as the Trust's CCO, the Anti-Money Laundering Officer, Secretary, and the Principal Financial Officer and Treasurer ("PFO"). Under the Fund Officer Agreement, Foreside provides a Secretary to, as applicable, sign documents requiring Secretary's signature, attend Board and Board Committee meetings; and assist in review of any minutes of Board and Board Committee meetings. The CCO also provides infrastructure and support in implementing the written policies and procedures comprising the Funds' Compliance Program. This includes providing support services to the CCO, developing standards for reports to the Board by Foreside and other service providers, and assisting in preparing or providing documentation for the Board to make findings and conduct reviews pertaining to the Funds' Compliance Program and related policies and procedures of Fund service providers. The PFO will perform the Fund PFO services including, but not limited to, (i) assisting with the planning and coordination of the Funds' annual financial statement audit; (ii) reviewing and commenting on each Fund's financial statements and shareholder reports; and (iii) reviewing and overseeing daily Fund expense payment authorizations, periodic budget/accrual review and authorization; and (iv) performing high level review of periodic fund distributions, fund tax returns and other tax reporting. For the services provided under the Fund Officer Agreement, the Trust currently pays Foreside $205,000 per annum, plus certain out of pocket expenses. Foreside pays the salary and other compensation earned by any such individuals as employees of Foreside.

**Proxy Voting**

The Trust has adopted Proxy Voting Policies that delegate the responsibility of voting proxies to the Adviser. The Adviser has, in turn, delegated responsibility for voting proxies for the Portfolio to RadiantESG. RadiantESG seeks to vote proxies in the best interests of its clients. RadiantESG will generally vote in alignment with Institutional Shareholder Services Inc.'s ("ISS") Sustainability Proxy Voting Guidelines. The Subadviser's proxy voting guidelines, as well as ISS's Sustainability Proxy Voting Guidelines, are attached as appendices to this SAI.

Information regarding how the Portfolio voted proxies relating to portfolio securities during the 12-month period ending June 30, 2022 is available (i) without charge, upon request, by calling 1-800-782-8183; and (ii) on the SEC's website at http://www.sec.gov.

**INVESTMENT ADVISORY AND OTHER SERVICES**

**Investment Adviser**

HSBC Global Asset Management (USA) Inc. is the investment adviser to the Portfolio pursuant to an investment advisory contract (the "Advisory Contract") with the Trust. For its investment advisory services, the Adviser is entitled to a fee from the Portfolio, which is accrued daily and paid monthly, and which is based on the Portfolio's daily net assets, at an annual rate of 0.25%. The Advisory Contract for the Portfolio provides that the Adviser will manage the Portfolio, either directly or through one or more subadvisers, and will furnish to the Portfolio investment guidance and policy direction in connection therewith. The Adviser has agreed to provide the Trust with, among other things, information relating to composition of the Portfolio and periodic reports on performance.

The Adviser has retained the Subadviser to provide day-to-day management of the Portfolio. An affiliate of the Adviser owns a minority stake in the Subadviser and is entitled to appoint one individual to its Board of Managers. The Portfolio pays the Subadviser a fee pursuant to a sub-advisory agreement (the "Sub-Advisory Contract") between the Adviser and the Subadviser. For more information about the Subadviser and Sub-Advisory Contract, see "Investment Advisory and Other Services - Subadviser."

The Adviser has entered into a contractual expense limitation agreement ("Agreement") with the Fund under which it will limit total expenses of the Fund (excluding interest, taxes, brokerage commissions, extraordinary expenses and estimated indirect expenses attributable to the Fund's investments in investment companies other than the Portfolio) to an annual rate of 0.90% for Class I Shares, 1.45% for Class A Shares and 2.20% for Class C Shares. The expense limitations shall be in effect until June 30, 2023. The Agreement shall terminate upon the termination of the Advisory Contract between the Trust and the Adviser, or may be terminated upon written notice to the Adviser by the Board.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of advisory fees (including sub-advisory fees) incurred by the Portfolio was as follows (advisory and sub-advisory fees incurred by the Portfolio were borne indirectly by the Funds to the extent of their interest in the Portfolio):

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Portfolio | 487148 | $936197 | $992095 |

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The Advisory Contract for the Portfolio will continue in effect through December 31, 2023. Thereafter, the Advisory Contract will continue in effect with respect to the Portfolio for successive periods not to exceed one (1) year and continue thereafter, provided such continuance is approved at least annually by: (i) the holders of a majority of the outstanding voting securities of the Portfolio or by the Board; and (ii) a majority of the Trustees who are not parties to the Advisory Contract or "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any such party. Notwithstanding the foregoing, the Advisory Contract may be terminated with respect to the Portfolio without penalty by either party on 60 days written notice and will terminate automatically in the event of its assignment, within the meaning of the 1940 Act.

The Adviser, located at 452 Fifth Avenue, New York, New York 10018, is a wholly-owned subsidiary of HSBC USA, Inc., a registered bank holding company. No securities or instruments issued by HSBC USA Inc. or HSBC Bank USA, N.A. will be purchased for the Portfolio.

If the Adviser were prohibited from performing any of its services for the Trust under the Advisory Contract, it is expected that the Board would recommend to shareholders that they approve new agreements with another entity or entities qualified to perform such services and selected by the Board.

The investment advisory services of the Adviser provided to the Portfolio are not exclusive under the terms of the Advisory Contract. The Adviser is free to and does render investment advisory services to others.

The Trust and the Adviser have each received an exemptive order from the SEC that allows the Adviser to enter into new investment sub-advisory contracts and to make material changes to existing sub-advisory

contracts with certain unaffiliated subadvisers with the approval of the Board, but without shareholder approval. This authority is subject to certain conditions, including the requirement that the Trustees (including a majority of Independent Trustees) of the Trust must approve any new or amended agreements with subadvisers. In accordance with the exemptive order received from the SEC, an information statement providing details about the appointment of the new subadviser will be mailed to shareholders within 90 days of the change in subadviser. Shareholders will also receive an information statement describing material changes to a sub-advisory contract between the Adviser and a subadviser within 90 days of the material change. The Adviser remains responsible for monitoring and evaluating the performance of the Portfolio, oversees subadvisers to ensure compliance with the Portfolio's investment policies and guidelines, and monitors each subadviser's adherence to its investment style and performance results in order to recommend any changes in a subadviser to the Board.

**Subadviser**

RadiantESG Global Investors LLC, located at 21 Orinda Way, Suite C-546, Orinda, CA 94563, is the investment subadviser of the Portfolio. On June 28, 2022, RadiantESG assumed day-to-day management of the Portfolio. For its services, RadiantESG receives a fee equal on an annual basis to 0.35% of the Portfolio's average daily net assets. RadiantESG is controlled by its two co-founders, Heidi Ridley (Chief Executive Officer) and Kathryn McDonald (Head of Investments & Sustainability). Collectively, they own over 95% of the firm's outstanding voting shares.

The Subadviser is responsible for the investment management of the Portfolio's assets, including making investment decisions and placing orders for the purchase and sale of securities for the Portfolio directly with the issuers or with brokers or dealers selected by the Subadviser in its discretion. The investment advisory services of the Subadviser are not exclusive under the terms of the Sub-Advisory Contract. The Subadviser is free to and does render investment advisory services to others. The Subadviser also furnishes to the Board, which has overall responsibility for the business and affairs of the Trust, periodic reports on its services and the investment performance of the Portfolio.

For the period June 28, 2022 through October 31, 2022, the Portfolio paid RadiantESG, sub-advisory fees equal to $25,817. For the period November 1, 2021 through June 27, 2022, and the fiscal years ended October 31, 2021 and 2020, the Portfolio paid the prior subadviser, Westfield Capital Management Company, L.P., sub-advisory fees equal to $302,886, $643,636 and $682,065, respectively.

**Portfolio Managers**

The Prospectus identifies the individuals who are primarily responsible for the day-to-day management of the Portfolio (the "portfolio manager(s)"). This section of the SAI contains certain additional information about the portfolio manager(s), their compensation, other accounts managed by them, and potential conflicts of interest. This section includes information in a tabular format, as of October 31, 2022 about the other accounts, if any, in addition to the Portfolio, over which the portfolio manager(s) also have primary responsibility for day-to-day management.

The tables below show the number of other accounts managed by the portfolio manager(s) and the total assets in those accounts within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category of accounts, the tables also show the number of accounts and the total assets in the accounts with respect to which the advisory fee paid by the account holder is based on account performance, if applicable.

**Fund Ownership of Portfolio Managers.** As of October 31, 2022, the portfolio managers owned shares of the Fund as set forth in the table below. The following are the ranges: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over $1,000,000.

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| | |
|:---|:---|
| &nbsp;&nbsp;**Name of Portfolio Manager** | &nbsp;&nbsp;**Dollar Range of Equity Securities in the Fund** |
| &nbsp;&nbsp;Kathryn McDonald | &nbsp;&nbsp;None |
| &nbsp;&nbsp;Harry Prabandham | &nbsp;&nbsp;None |

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| | |
|:---|:---|
| &nbsp;&nbsp;**Name of Portfolio Manager** | &nbsp;&nbsp;**Dollar Range of Equity Securities in the Fund** |
| &nbsp;&nbsp;Kevin Lin | &nbsp;&nbsp;None |

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**Other Accounts Managed by Portfolio Managers**. Set forth below is information about the other accounts managed by the portfolio managers of the Portfolio as of October 31, 2022:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Name of Portfolio<br> Manager** | &nbsp;&nbsp;**Number of Other Accounts Managed and Total Assets (in millions) by Account Type** | &nbsp;&nbsp;**Number of Other Accounts Managed and Total Assets (in millions) by Account Type** | &nbsp;&nbsp;**Number of Other Accounts Managed and Total Assets (in millions) by Account Type** | &nbsp;&nbsp;**Number of Accounts and Total Assets (in millions) for which Advisory Fee is Performance Based** | &nbsp;&nbsp;**Number of Accounts and Total Assets (in millions) for which Advisory Fee is Performance Based** | &nbsp;&nbsp;**Number of Accounts and Total Assets (in millions) for which Advisory Fee is Performance Based** |
| &nbsp;&nbsp;**Name of Portfolio<br> Manager** | &nbsp;&nbsp;**Registered Investment Companies** | &nbsp;&nbsp;**Other Pooled Investment Vehicles** | &nbsp;&nbsp;**Other Accounts** | &nbsp;&nbsp;**Registered Investment Companies** | &nbsp;&nbsp;**Other Pooled Investment<br> Vehicles** | &nbsp;&nbsp;**Other Accounts** |
| &nbsp;&nbsp;Kathryn McDonald | &nbsp;&nbsp;0 | &nbsp;&nbsp;1 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 |
| &nbsp;&nbsp;Kathryn McDonald | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0.799 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp;Harry Prabandham | &nbsp;&nbsp;0 | &nbsp;&nbsp;1 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 |
| &nbsp;&nbsp;Harry Prabandham | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0.799 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 |
| &nbsp;&nbsp;Kevin Lin | &nbsp;&nbsp;0 | &nbsp;&nbsp;1 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 | &nbsp;&nbsp;0 |
| &nbsp;&nbsp;Kevin Lin | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0.799 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 | &nbsp;&nbsp;$0 |

---

**Portfolio Manager Compensation Structure**. Members of the RadiantESG investment team may be eligible to receive various components of compensation:

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
team members receive a base salary commensurate with industry standards.

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
team members are also eligible to participate in the firm's incentive compensation program including profits interest
awards and discretionary bonuses based on the employee's individual contributions to its client experience (performance delivery
and client support and partnership), creativity and innovation in ideas that benefit its clients and the firm, embodying the
firm's values, and adhering to the firm's governance structure.

&nbsp;&nbsp;&nbsp;&nbsp;· Investment
team members are also partners of the firm and equity shareholders. Equity ownership aligns employee interests with
those of their clients and allows for collective, long-term, economic participation in the firm's success.

**Potential Conflicts of Interest**. The simultaneous management of multiple accounts by the RadiantESG investment team can create a possible conflict of interest as the team must allocate its time across multiple accounts. This may result in the portfolio managers allocating unequal attention and time to the management of each client portfolio as each has different objectives, benchmarks, and investment restrictions. RadiantESG's proprietary investment research is applied to portfolio modeling and portfolio construction for each investment strategy. The resulting model portfolio is used consistently for each client portfolio in the same strategy.

RadiantESG established its Investment Forum to provide recommendations and oversight of investment research, models, products, strategies, portfolio management, and trading matters. Members of the RadiantESG Investment Forum oversee the adherence to risk tolerances, portfolio positioning, and performance. Proxy voting and engagement practices are also in the scope of their reviews. Client portfolios with similar investment objectives are reviewed as a group by the Investment Forum, as a matter of practice. Any discrepancies identified are researched and reviewed and any resulting exceptions or remedial actions are documented.

Trading practices must be fair to all clients. RadiantESG seeks to obtain best execution for client transactions. Considering that RadiantESG may have limited access to certain broker-dealers until it achieves a certain scale with regard to the amount of assets under management, the following steps are taken when selecting broker-dealers to execute client trades. RadiantESG's CCO, in conjunction with the Investment Forum:

&nbsp;&nbsp;&nbsp;&nbsp;· works to create a list of approved
broker-dealers to execute client trades

&nbsp;&nbsp;&nbsp;&nbsp;· periodically and systematically
monitors and evaluates the execution and performance capabilities of the broker-dealers on the approved list.

When selecting broker-dealers to execute client trades, the determinative factor is not the lowest possible commission cost, but whether the transaction represents the best qualitative execution. In making this determination, RadiantESG's policy is to consider the full range of the broker's services, including without limitation the value of any research provided, if applicable, execution capabilities, financial responsibility, administrative resources, responsiveness and commission rates. At this time, RadiantESG does not have directed brokerage relationships for its clients and does not select broker-dealers for trade execution based on the receipt of third-party research services. The RadiantESG Investment Forum also reviews transaction cost analysis data quarterly to monitor trading and commission activity.

Personal accounts may give rise to conflicts of interest. RadiantESG and its employees will, from time to time, for their own investment accounts, purchase, sell, hold or own securities or other assets which may be recommended for purchase, sale or ownership for one or more clients, including the Portfolio. RadiantESG has a Code of Ethics which regulates trading in such accounts; requirements include regular reporting and preclearance of transactions. RadiantESG's CCO reviews personal trading activity regularly.

RadiantESG manages an institutional commingled fund with a similar investment strategy as the Portfolio. The fund was seeded by one of RadiantESG's co-founders but as of December 31, 2022 is now available for investments from other qualified investors. This may create an incentive for the firm to favor this vehicle. To help ensure all clients are treated equitably and fairly, RadiantESG's CCO conducts periodic reviews of client portfolio(s) to ensure procedures have been followed and any potential conflicts of interest are mitigated.

**Distribution Plans – Class A and Class C Shares Only**

Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted Distribution Plans with respect to the Class A Shares (the "Class A Plan") and the Class C Shares (the "Class C Plan") of the U.S. Smaller Companies. The Distribution Plans provide that they may not be amended to increase materially the costs which either the Class A Shares and Class C Shares may bear pursuant to the Class A Plans and Class C Plan without approval by shareholders of the Class A Shares and Class C Shares, respectively, and that any material amendments of the Distribution Plans must be approved by the Board, and by the Independent Trustees of the Trust who have no direct or indirect financial interest in the operation of the Distribution Plans or in any related agreement ("Qualified Trustees"), by vote cast at a meeting called for the purpose of considering such amendments. The selection and nomination of the Qualified Trustees has been committed to the discretion of the Independent Trustees. The Distribution Plans have been approved, and are subject to annual approval, by the Board and by the Qualified Trustees, by vote cast at a meeting called for the purpose of voting on the Distribution Plans. The Board approved the Distribution Plans to stimulate sales of shares of the Fund in the face of competition from a variety of other investment companies and financial products. In approving the Distribution Plans, the Board considered the potential advantages to shareholders of continued growth of the asset bases of the Fund (including greater liquidity, more investment flexibility and possible achievement of greater economies of scale). In adopting the Class A Plans and Class C Plan, the Trustees considered alternative methods to distribute the Class A Shares and Class C Shares and to reduce each class's expense ratio. The Trustees concluded that there was a reasonable likelihood that each Distribution Plan will benefit their respective class and that class's shareholders. The Distribution Plans are terminable with respect to the Class A Shares and Class C Shares at any time by a vote of a majority of the Qualified Trustees or by vote of the holders of a majority of that class.

For the fiscal years ended October 31, 2022, 2021, and 2020, the Fund paid the following for distribution expenses:

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Fund | $202 | $293 | $453 |

---

**The Distributor**

The Distributor, a wholly-owned subsidiary of Foreside Financial Group, LLC, doing business as ACA Group, is a member of FINRA. The Distributor's address is Three Canal Plaza, Suite 100, Portland, ME 04101. Foreside serves as distributor to the Funds under a Distribution Agreement with the Trust (the "Distribution Agreement"). Unless otherwise terminated, the Distribution Agreement will continue in effect for successive annual periods if, as to the Fund, such continuance is approved at least annually by (i) the vote of a majority of those members of the Board who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any such party, cast at a meeting for the purpose of voting on such approval and (ii) by the vote of the Board or the vote of a majority of the outstanding voting securities of such Fund. Under the terms of the Distribution Agreement, Foreside acts as the agent of the Trust in connection with the continuous offering of shares of the Fund. The Distributor continually distributes shares of the Fund on a best efforts basis. The Distributor is not affiliated with the Adviser, or any of its affiliates. The Distributor has no obligation to sell any specific quantity of Fund shares. The Distributor and its officers have no role in determining the investment policies or which securities are to be purchased or sold by the Trust.

Foreside has entered into a Distribution Services Agreement with the Adviser in connection with Foreside's services as distributor of the Funds pursuant to which the Adviser undertakes to pay Foreside amounts owed to Foreside under the terms of the Distribution Agreement to the extent that the Funds are not otherwise authorized to make such payments. The payments made by the Adviser to the Distributor do not represent an additional expense to the Fund or its shareholders.

Pursuant to the Distribution Plans adopted by the Trust, the Distributor is reimbursed from the Fund monthly for costs and expenses incurred by the Distributor in connection with the distribution of Class A Shares and Class C Shares and for the provision of certain shareholder services with respect to these Shares. Payments to the Distributor are for various types of activities, including: (1) payments to broker-dealers which advise shareholders regarding the purchase, sale or retention of Class A Shares and Class C Shares and which provide shareholders with personal services and account maintenance services ("service fees"); (2) payments to employees of the Distributor; and (3) printing and advertising expenses. Pursuant to the Class A Plans, the amount of the Distributor's reimbursement from the Fund may not exceed on an annual basis 0.25% of the average daily net assets of the Fund represented by Class A Shares outstanding during the period for which payment is being made. Pursuant to the Class C Plan, such payments by the Distributor to broker-dealers may be in amounts on an annual basis of up to 0.75% of the U.S. Smaller Companies Fund's average daily net assets as presented by Class C Shares outstanding during the period for which payment is being made. The aggregate fees paid to the Distributor pursuant to the Distribution Plans, and to shareholder servicing agents ("Shareholder Servicing Agents") pursuant to the Shareholder Services Plan (as discussed below), will not exceed on an annual basis 0.50% of the Fund's average daily net assets represented by Class A Shares and 1.00% of the Fund's average daily net assets represented by Class C Shares outstanding during the period for which payment is being made. Shareholder Servicing Agents are financial institutions, such as a federal or state-chartered bank, trust company or savings and loan association that, on behalf of their customers, have entered into a shareholder servicing agreement with the Trust. Salary expenses of Foreside personnel who are responsible for marketing shares of the various series of the Trust may be allocated to such series on the basis of average net assets; travel expenses are allocated to, or divided among, the particular series for which it is incurred. The distribution fees collected from the Fund by Foreside are used to pay commissions for the sale of Fund shares.

The Fund is not liable for distribution and shareholder servicing expenditures made by the Distributor in any given year in excess of the maximum amount payable under the Distribution Plans in that year.

**Payments to Financial Intermediaries**

The Adviser and/or its affiliates may, out of their own resources, and without cost to the Fund, provide compensation, which may be significant, to selected financial intermediaries to promote the sale, distribution and/or servicing of shares of the Fund ("Payments"). These arrangements are sometimes referred to as "revenue sharing" arrangements. Since these Payments are made out of the resources of the Adviser and/or its affiliates, they do not represent an additional charge to the Fund or its shareholders. Accordingly, these Payments are not reflected in the fee and expense tables in the Prospectus. In addition, these Payments do not change the price paid by investors for the purchase of the Fund's shares or the amount the Fund receives as proceeds from such purchases. These Payments are in addition to commissions and 12b-1 fees, shareholder servicing fees and sales charges borne by shareholders.

The Adviser and/or its affiliates make these Payments primarily to compensate financial intermediaries for, among other things: marketing shares of the Fund, which may consist of Payments relating to the inclusion of the Fund on a financial intermediary's platform or portal or in certain advisory programs from time to time sponsored by the financial intermediaries; educational programs; scheduled interactions with the financial intermediaries' registered representatives or salespersons, including at conferences or seminars; provision of training and educational programs; marketing support fees for providing assistance in promoting the sale of Fund shares; and/or other specified and relevant services intended to assist in the sale, distribution, and/or servicing of Fund shares. With respect to certain financial intermediaries and related fund "supermarket" platform arrangements, the Fund and/or the Adviser, rather than the Distributor, typically enter into such agreements. These financial intermediaries may charge a fee for their services. These financial intermediaries may otherwise act as processing agents and are responsible for promptly transmitting purchase, redemption and other requests to the Fund.

In addition, the Adviser and/or its affiliates may, out of their own resources, and without cost to the Fund, make Payments (including through sub-transfer agency and networking arrangements) for sub-accounting, administrative and/or shareholder processing services that are in addition to the transfer agent, shareholder administration, servicing and processing fees paid by the Fund. These Payments may exceed amounts earned on these assets by the Adviser, the Distributor and/or their affiliates for the performance of these or similar services.

Generally, the Adviser and/or its affiliates negotiate the amount of Payments on an individual basis with each financial intermediary. In determining the amount of Payments to be made, the Adviser and/or its affiliates may consider a number of factors, including, without limitation, asset mix and length of relationship with the financial intermediary; the size of the customer/shareholder base of the financial intermediary; the manner in which customers of the financial intermediary make investments in the Fund; the nature and scope of services provided by the financial intermediary; and the costs incurred by the financial intermediary in connection with maintaining the infrastructure necessary or desirable to support investments in the Fund along with any other relevant factor that the Fund deems appropriate. Historically, these Payments have generally been structured as a percentage of average net assets attributable to the financial intermediary, but may also be structured as a fixed dollar amount, or a combination of the two, or may be calculated on another appropriate basis. Typically, the annual Payments to a financial intermediary are not expected to exceed 0.25% of the Fund's average net assets. The Adviser and/or its affiliates expect to periodically determine the advisability of continuing these Payments.

For the year ended December 31, 2022, the Adviser and/or its affiliates made Payments, related to 2022, out of their own assets to approximately 23 unaffiliated financial intermediaries (in addition to affiliated financial intermediaries), totaling approximately $23.9 million to affiliated and unaffiliated financial intermediaries (excluding Payments made through sub-transfer agency and networking arrangements and certain other types of Payments described below), with respect to all funds of the Trust (including the Fund in this SAI). During this time, the Adviser has also made similar payments to its affiliates.

Periodically, and where appropriate, the Adviser and/or its affiliates may enter into similar arrangements with other financial intermediaries. Thus, the number of financial intermediaries that receive Payments is subject to change at any time without notice.

From time to time, and subject to applicable regulations, the Adviser and/or its affiliates may also be involved in cash and non-cash compensation arrangements with financial intermediaries to promote the sale of Fund shares in the form of, for example: occasional gifts; occasional meals, tickets or other entertainment; and/or sponsorship support of regional or national events. Subject to applicable FINRA regulations and other legal requirements, the Adviser and/or its affiliates may pay costs and expenses associated with these efforts (e.g., travel, lodging, entertainment and meals). Other compensation may also be offered from time to time to the extent not prohibited by applicable federal or state laws or FINRA regulations. This compensation is not included in, and is made in addition to, the Payments described above.

The Adviser and/or its affiliates may be incentivized to make Payments since they promote the sale and retention of Fund shares to clients of the financial intermediaries. When financial intermediaries sell or retain more shares of the Fund, the Adviser and/or its affiliates benefit from the incremental management and other fees paid by the Fund with respect to those assets.

The compensation or reimbursement received by financial intermediaries through commissions, sales charges, fees payable from the Fund, and/or revenue sharing arrangements may be more or less than the overall compensation or reimbursement on similar or other products and may influence your financial intermediary to introduce and recommend the Fund over other similar investment options. In addition, depending on the arrangements in place at any particular time, this compensation or reimbursement creates a conflict of interest for financial intermediaries as they may have a financial incentive for recommending the Fund (or a particular share class of the Fund) over another investment.

Although the Fund may use financial intermediaries that sell Fund shares to effect transactions for the Fund's portfolio, the Fund, the Adviser and the Subadviser will not consider the sale of Fund shares as a factor when choosing financial intermediaries to effect those transactions.

Shareholders may obtain more information about these arrangements, including the conflicts of interests that such arrangements create, from their financial intermediaries and should so inquire if they would like additional information. Shareholders are encouraged to ask their financial intermediary how their respective financial intermediary will be compensated for investments made in the Fund.

Investors who purchase shares through financial intermediaries will be subject to the procedures of those intermediaries through which they purchase shares, which may include charges, investment minimums, cutoff times and other restrictions in addition to, or different from, those listed herein. Information concerning any charges or services will be provided to customers by the financial intermediary through which they purchase shares. Investors purchasing shares of the Fund through financial intermediaries should acquaint themselves with their financial intermediary's procedures and should read the Prospectus in conjunction with any materials and information provided by their financial intermediary. The financial intermediary, and not its customers, will be the shareholder of record, although costumers may have the right to vote shares depending upon their arrangement with the financial intermediary. The Distributor does not receive compensation from the Fund for its distribution services except the distribution/service fees with respect to the shares of those classes for which a Rule 12b-1 Plan is effective. However, the Adviser pays the Distributor a fee for certain distribution-related services.

**Shareholder Service Plans and Shareholder Servicing Agents**

The Trust has adopted a Shareholder Services Plan with respect to Class A Shares and Class C Shares of the Fund, which provides that the Trust may obtain the services of one or more shareholder servicing agents ("Shareholder Servicing Agents") that shall, as agents for their customers who purchase the Fund's Class A Shares and Class C Shares, perform certain shareholder account, administrative and service functions for such customers, and may enter into agreements providing for the payment of fees for such services. "Shareholder Servicing Agents" are financial institutions, such as a federal or state-chartered bank, trust company or saving and loan association that, on behalf of their customers, have entered into a shareholder servicing arrangement with the Trust. The Shareholder Services Plan continues in effect indefinitely if such continuance is specifically approved at least annually by a vote of both a majority of the Trustees and a majority of the Independent Trustees who have no direct or indirect financial interest in the

operation of the Shareholder Services Plan or in any agreement related to such Plan ("Qualified Trustees"). The Shareholder Services Plan may be terminated at any time by a vote of a majority of the Qualified Trustees or with respect to the Class A Shares or Class C Shares (as applicable) by a majority vote of shareholders of that class. The Shareholder Services Plan may not be amended to increase materially the amount of permitted expenses thereunder with respect to the Class A Shares or Class C Shares (as applicable) without the approval of a majority of shareholders of that class, and may not be materially amended in any case without a vote of the majority of both the Trustees and the Qualified Trustees.

The Trust has entered into a shareholder servicing agreement (a "Servicing Agreement") with certain Shareholder Servicing Agents, including the Adviser, pursuant to which the Shareholder Servicing Agent, as agent for its customers, among other things: answers customer inquiries regarding account status and history, the manner in which purchases, exchanges and redemptions of shares of the Fund may be effected and certain other matters pertaining to the Fund; assists shareholders in designating and changing dividend options, account designations and addresses; provides necessary personnel and facilities to establish and maintain shareholder accounts and records; assists in processing purchase and redemption transactions; arranges for the wiring of funds; transmits and receives funds in connection with customer orders to purchase or redeem Shares; verifies and guarantees shareholder signatures in connection with redemption orders and transfers and changes in shareholder-designated accounts; furnishes (either separately or on an integrated basis with other reports sent to a shareholder by a Shareholder Servicing Agent) monthly and year-end statements and confirmations of purchases and redemptions; transmits, on behalf of the Trust, proxy statements, annual reports, updated prospectuses and other communications from the Trust to the Fund's shareholders; receives, tabulates and transmits to the Trust proxies executed by shareholders with respect to meetings of shareholders of the Fund or the Trust; and provides such other related services as the Trust or a shareholder may request. "Servicing Agents" shall mean both Shareholder Servicing Agents and securities brokers who have entered into a dealer agreement or shareholder serving agreement on behalf of its customers ("Securities Brokers"). The Fund is authorized to pay a shareholder servicing fee up to 0.25%, on an annual basis, of the Fund's average daily net assets attributable to Class A Shares and Class C Shares (as applicable).

The Trust understands that some Shareholder Servicing Agents also may impose certain conditions on their customers, subject to the terms of the Prospectus, in addition to or different from those imposed by the Trust, such as requiring a different minimum initial or subsequent investment, account fees (a fixed amount per transaction processed), compensating balance requirements (a minimum dollar amount a customer must maintain in order to obtain the services offered), or account maintenance fees (a periodic charge based on a percentage of the assets in the account or of the dividends paid on those assets). Each Shareholder Servicing Agent has agreed to transmit to its customers who are holders of Shares appropriate prior written disclosure of any fees that it may charge them directly and to provide written notice at least 30 days prior to the imposition of any transaction fees. Conversely, the Trust understands that certain Shareholder Servicing Agents may credit to the accounts of their customers from whom they are already receiving other fees amounts not exceeding such other fees or the fees received by the Shareholder Servicing Agent from the Fund with respect to those accounts.

For the fiscal years ended October 31, 2022, 2021, and 2020, the Fund paid the following shareholder servicing expenses:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Fund** | **2022** | &nbsp;&nbsp;**2021** | &nbsp;&nbsp;**2020** |
| &nbsp;&nbsp;U.S. Smaller Companies Fund | $23031 | &nbsp;&nbsp;$28185 | &nbsp;&nbsp;$20061 |

---

**Administrator and Sub-Administrator**

Pursuant to an Amended and Restated Administration Services Agreement, the Adviser serves as the Trust's administrator (the "Administrator"), and in that role oversees and coordinates the activities of other service providers and monitors certain aspects of the Trust's operations. The Amended and Restated Administration Services Agreement was renewed for the one (1) year period ending December 31, 2023 and may be terminated upon not more than 60 days written notice by either party. The administration fee,

computed daily and paid monthly (or at such times as the Adviser shall request), is equal on an annual basis to two basis points (0.02%) of average daily net assets.

The fee rate is determined on the basis of the aggregate average daily net assets of the HSBC Family of Funds, but the assets of the Portfolio that reflects assets of the Fund are not double-counted. The total administration fee to be paid to the Administrator is allocated to each of the funds in the HSBC Family of Funds based upon its proportionate share of the aggregate net assets of the HSBC Family of Funds, and then allocated to each class of shares on a class basis. For assets invested in the Portfolio, the Portfolio pays half of the administration fee and the Funds pay half of the administration fee, for a combination at the total fee rate set forth above.

For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of administration fees incurred directly by the Funds was:

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Fund | $1572 | $1883 | $1481 |
| U.S. Smaller Companies Fund (Class I) | $8507 | $17001 | $19558 |

---

Effective as of November 7, 2022, State Street Bank and Trust Company ("State Street"), One Lincoln Street, Boston, MA 02111 replaced Citi Fund Services Ohio, Inc. as the sub-administrator of the Trust. State Street provides fund administration, regulatory administration, custody, fund accounting services and certain other services pursuant to a Master Services Agreement with the Trust. State Street is entitled to a fee, payable by the Funds, based primarily on a Fund's net assets, subject to per Fund fees, miscellaneous fees and reimbursements of certain expenses.

**Transfer Agent**

Effective as of November 7, 2022, State Street replaced SS&C Global Investor and Distribution Solutions (formerly, DST Asset Manager Solutions, Inc.) ("SS&C") as the transfer agent of the Trust, although State Street has delegated its responsibilities to SS&C and SS&C continues to provide transfer agency services to the Trust. SS&C maintains an account for each shareholder of record, performs other transfer agency functions and acts as dividend disbursing agent for the Trust. The principal business address of SS&C is 2000 Crown Colony Drive, Quincy, Massachusetts 02169-0953.

**Custodian and Fund Accounting Agent**

Effective as of November 7, 2022, State Street replaced The Northern Trust Company as the custodian of the Trust and Citi Fund Services Ohio, Inc. as fund accounting agent. State Street provides custodial services and acts as fund accounting agent pursuant to a Master Services Agreement with the Trust. State Street's responsibilities as custodian include safeguarding and controlling each Fund's cash and securities, handling the receipt and delivery of securities, determining income and collecting interest on each Fund's investments, maintaining books of original entry for portfolio and fund accounting and other required books and accounts in order to calculate the daily NAV of Shares of each Fund. Securities held for each Fund may be deposited into the Federal Reserve-Treasury Department Book Entry System or the Depository Trust Company. State Street does not determine the investment policies of the Funds or decide which securities will be purchased or sold for the Funds. For its services, State Street is entitled to a fee, payable by the Funds, based primarily on a Fund's net assets, subject to per Fund fees, miscellaneous fees and reimbursements of certain expenses.

Prior to November 7, 2022, Citi Fund Services Ohio, Inc. served as fund accounting agent to each Fund. For the fiscal years ended October 31, 2022, 2021, and 2020, the aggregate amount of fund accounting fees incurred by the Funds was:

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Fund | $18586 | $19006 | $18163 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **2022** | **2021** | **2020** |
| U.S. Smaller Companies Fund (Class I) | $13585 | $13996 | $14003 |

---

**Federal Banking Law**

The Gramm-Leach-Bliley Act of 1999 repealed certain provisions of the Glass-Steagall Act that had previously restricted the ability of banks and their affiliates to engage in certain mutual fund activities. Nevertheless, HSBC USA's and the Adviser's activities remain subject to, and may be limited by, applicable federal banking law and regulations. HSBC USA and the Adviser believe that they possess the legal authority to perform the services for the Funds contemplated by the Prospectus, this SAI, and the Advisory Contract without violation of applicable statutes and regulations. If future changes in these laws and regulations were to limit the ability of HSBC USA and the Adviser to perform these services, the Board would review the relationship with HSBC USA and the Adviser and consider taking all actions necessary in the circumstances, which could include recommending to shareholders the selection of another qualified advisor or, if that course of action appeared impractical, that a Fund be liquidated.

Entities that are part of banking organizations, such as the Adviser and its affiliates, are subject to extensive government regulation. Government regulation may change frequently and may have significant effects, including limiting the ability of the Adviser and its affiliates from engaging in certain trading activities, which may adversely impact the Fund or Portfolio. For example, the so-called "Volcker Rule" prohibits the Adviser and its affiliates from engaging in certain trading activities. The Fund may be adversely impacted by this rule if the Adviser or its affiliates own 25% or more of the Fund's shares outside of any seeding period permitted by the rule. These restrictions may prevent the Fund from maintaining sufficient seed capital and may cause the Fund to liquidate at the end of the period if the Fund is not able to achieve sufficient scale. Other restrictions, including restrictions on trading and transactions with affiliates, can also apply. Funds that are not managed by entities that are part of banking organizations are not subject to these limitations.

**Expenses**

Except for expenses paid by the Adviser and the Distributor, each Fund bears all the costs of its operations. Expenses attributable to a class ("Class Expenses") shall be allocated to that class only. Class Expenses with respect to the Class A Shares and Class C Shares must include payments made pursuant to their respective Distribution Plan or Shareholder Services Plan. In the event a particular expense is not reasonably allocable by class or to a particular class, it shall be treated as a Fund expense or a Trust expense. Trust expenses directly related to a Fund are charged to the Fund; other expenses are allocated among the applicable series of the Trust in relation to the net assets of each Fund equally or another appropriate basis.

**DETERMINATION OF NET ASSET VALUE**

The following information supplements and should be read in conjunction with the section in the Prospectus entitled, "Pricing of Fund Shares." Neither the Prospectus nor the below is meant to reflect a complete list of valuation methodologies that the Fund may use to value its investments.

The NAV of the Fund is determined once each day at the close of trading on the New York Stock Exchange ("Exchange"), normally at 4 p.m. Eastern time on days the Exchange is open. The Exchange is generally not open, and the Funds do not price their shares, on most U.S. national holidays (New Year's Day, Martin Luther King Jr. Day, President's Day, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day) and on Good Friday.

The value of assets in the Fund's portfolio is determined on the basis of their market value, or where market quotations are not readily available or are deemed unreliable due to a significant event or otherwise, based on fair value in accordance with procedures approved by the Adviser and the Board. Specific investments of the Fund are typically valued as follows:

Equity securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Exchange-traded, domestic equity
securities are valued at the last sales price on a national securities exchange (except the NASDAQ Stock Market) or, in the absence of
recorded sales, at the readily available closing bid price on such exchange. Such securities traded on the NASDAQ Stock Market are valued
at the NASDAQ Official Closing Price on the date of valuation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Domestic equity securities that
are not traded on an exchange are valued at the quoted bid price in the over-the-counter market.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Exchange
 traded, foreign equity securities are valued in the appropriate currency at the last quoted
 sale price or, in the absence of recorded sales, at the readily available closing bid
 price on such exchange. If no sale is available because the country is on holiday, the previous
 day's quoted sales price would be utilized.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Foreign equity securities that
are not exchange traded are valued in the appropriate currency at the average of the quoted bid and asked prices in the over-the-counter
market.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Rights and Warrants are
 valued at the last sales price on a national securities exchange. If these instruments are not scheduled to trade for a certain
 period or are unlisted, they are generally valued intrinsically based on the terms of the issuance and the price of the underlying security. The
 time value of the warrants may also be considered by the Adviser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Initial
 Public Offerings ("IPOs") are typically priced using corresponding approved independent
 pricing sources for equity securities. In instances where there is a time lag between
 the IPO and the commencement of public trading of the security there may be no vendor price
 available. In these instances, the purchase price may be utilized.

Convertible Securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Convertible
 securities are valued at the bid price as of the time NAV is determined by an approved independent
 pricing source, based upon market transactions for normal, institutional-size
 trading units of similar securities, as well as yield, quality, coupon rate, maturity, type
 of issue, trading characteristics and other market data, without exclusive reliance on quoted
 prices on an exchange or over-the-counter prices. If no current day bid price is available
 then they will be priced either using the last quoted sales price or most recent bid price,
 whichever is most recent.

Debt Securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Debt
 securities are valued at the evaluated price, as of the time NAV is determined, by
 an approved independent fair value pricing service, based upon market transactions
 for normal, institutional-size trading units of similar securities, as well as yield, quality,
 coupon rate, maturity, callability or prepayment option, type and size of issue, trading
 characteristics and other market data, without exclusive reliance on quoted prices on an
 exchange or over-the-counter prices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Debt
 securities with remaining maturities of 60 days or less may be valued at amortized cost unless
 it is determined that amortized cost does not represent fair value (e.g., securities that
 are not expected to mature at par). Issuer-specific and market-based considerations will
 be taken into account to determine whether amortized cost represents fair value. Debt securities
 with remaining maturities of 60 days or less that are not valued based on amortized cost
 are valued based on prices provided by independent fair value pricing services based
 on the services' proprietary pricing models.

Registered investment companies (including ETFs)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares of exchange traded and
closed-end registered investment companies are valued in the same manner as other equity securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Mutual funds are valued at their
NAVs, as reported to the investment adviser or its agent.

Foreign currencies

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Foreign
 currencies are valued at the last quoted foreign exchange bid quotation against the U.S.
 dollar from an approved independent pricing source.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The value of Fund assets and
liabilities denominated in currencies other than the U.S. dollar are translated into their U.S. dollar equivalent values at such last
foreign exchange bid quotation.

Interest income on long-term obligations in a Fund's portfolio is determined on the basis of interest accrued plus amortization of "original issue discount" (generally, the difference between issue price and stated redemption price at maturity) and premiums (generally, the excess of purchase price over stated redemption price at maturity). Interest income on short-term obligations is determined on the basis of interest accrued plus amortization of premium.

The accounting records of a Fund are maintained in U.S. dollars. The market value of investment securities, other assets and liabilities and forward contracts denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rates at the end of the period. Purchases and sales of securities, income receipts, and expense payments are translated at the exchange rate prevailing on the respective dates of such transactions. Reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received.

The Fund will fair value price its securities when market quotations are not readily available or are deemed unreliable in accordance with procedures approved by the Adviser and the Board. Generally, this would include securities for which trading has been halted, securities whose value has been materially affected by the occurrence of a significant event and other securities where a market price is not available from either a national pricing service or a broker. Fair value pricing should result in a more accurate determination of the Fund's NAV, which should eliminate the potential for stale pricing arbitrage opportunities in the Fund. However, fair value pricing involves the risk that the values used by the Fund to price its investments may be different from those used by other investment companies and investors to price the same investments.

Subject to the Trust's compliance with applicable regulations, the Trust on behalf of each Fund has reserved the right to pay the redemption or repurchase price of shares, either totally or partially, by a distribution in-kind of portfolio securities (instead of cash), as applicable. The securities so distributed would be valued at the same amount as that assigned to them in calculating the NAV for the shares being sold. If a shareholder received a distribution in-kind, the shareholder could incur brokerage or other charges in converting the securities to cash.

**PURCHASE OF SHARES**

Shares may be purchased through the Funds, Shareholder Servicing Agents or Securities Brokers (as defined above). Shares may be purchased at their NAV next determined after an order is transmitted to and accepted by the Transfer Agent or is received by a Shareholder Servicing Agent or a Securities Broker if it is transmitted to and accepted by the Transfer Agent. Purchases are effected on the same day the purchase order is received by the Transfer Agent provided such order is received prior to 4:00 p.m., Eastern Time, on any day in which regular trading occurs on the New York Stock Exchange, except on certain non-U.S. holidays as described above ("Fund Business Day"). Each Shareholder Servicing Agent or Securities Broker is responsible for and required to promptly forward orders for shares to the Transfer Agent.

All purchase payments are invested in full and fractional Shares. The Trust reserves the right to cease offering Shares for sale at any time or to reject any order for the purchase of Shares.

While there is no sales load on purchases of Class C Shares of the U.S. Smaller Companies Fund, the Distributor may receive fees from the Funds. Other funds which have investment objectives similar to those of a Fund but which do not pay some or all of such fees from their assets may offer a higher yield.

An investor may purchase Shares through the Funds directly or by authorizing his Shareholder Servicing Agent or Securities Broker to purchase such Shares on his behalf through the Transfer Agent.

Certain clients of the Adviser whose assets would be eligible for purchase by the Funds may purchase shares of the Trust with such assets. Assets purchased by the Funds will be subject to valuation and other procedures by the Board.

The following information supplements and should be read in conjunction with the sections in the Funds' Prospectus entitled "Purchasing and Adding to Your Shares" and "Distribution Arrangements/Sales Charges." The Prospectus contains a general description of how investors may buy shares of the Funds and states whether a Fund offers more than one class of shares. Class A Shares are generally sold with a sales charge payable at the time of purchase. The Prospectus contains a table of applicable CDSCs. After being held for five years, Class C Shares will automatically convert into Class A Shares, which are not subject to sales charges, or a CDSC. Class C Shares are offered without an initial sales charge. The U.S.

Smaller Companies Fund may sell shares without a sales charge or CDSC pursuant to special purchase plans the Trust signs.

The U.S. Smaller Companies Fund offers Class A Shares, Class C Shares and Class I Shares. When purchasing Fund shares, you must specify which Class is being purchased.

If Class I Shares are purchased through a broker or financial intermediary that is acting as an agent on behalf of an investor, the broker or financial intermediary may charge a commission. Class A Shares and Class C Shares (as applicable) are subject to different fees and expenses (which affect performance) and are entitled to different services than Class I Shares.

The decision as to which Class of shares is most beneficial to you depends on the amount and the intended length of your investment. You should consider whether, during the anticipated life of your investment in a Fund, the accumulated distribution fee, service fee and CDSC, if any, on Class C Shares of the U.S. Smaller Companies Fund would be less than the accumulated distribution fee and initial sales charge on Class A Shares of each Fund purchased at the same time, and to what extent, if any, such differential would be offset by the return on Class A Shares respectively. Additionally, investors qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time might consider purchasing Class A Shares of the U.S. Smaller Companies Fund because the accumulated continuing distribution and service fees on Class C Shares exceed the accumulated distribution fee and initial sales charge on Class A Shares during the life of the investment. Finally, you should consider the effect of the CDSC period and any conversion rights of the Classes in the context of your own investment time frame. Generally, Class A Shares will be most appropriate for investors who invest substantial amounts (e.g., over $50,000) in Fund shares.

Shares of the Funds are offered on a continuous basis at NAV, plus any applicable sales charge, by the Distributor as an investment vehicle for institutions, corporations, fiduciaries and individuals.

The sales load on Class A Shares does not apply in any instance to reinvested dividends or distributions.

From time to time, dealers who receive dealer discounts and broker commissions from the Distributor may reallow all or a portion of such dealer discounts and broker commissions to other dealers or brokers. Dealers may not use sales of a Fund's Shares to qualify for the compensation to the extent such may be prohibited by the laws of any state or any self-regulatory agency, such as FINRA. None of the aforementioned compensation is paid for by the Funds or their shareholders.

Stock certificates will not be issued with respect to the shares. The Transfer Agent shall keep accounts upon the book of the Trust for recordholders of such shares.

**Exchange Privilege**

By contacting the Transfer Agent or his Shareholder Servicing Agent or his Securities Broker, a shareholder of each Fund may exchange some or all of his Shares for shares of a corresponding class of another fund within the HSBC Family of Funds. By contacting the Transfer Agent or his Shareholder Servicing Agent or his Securities Broker, a shareholder of Class A Shares and Class C Shares may exchange some or all of his Shares at NAV without a sales charge for Shares of the same class offered with the same or lower sales charge by another fund within the HSBC Family of Funds. Exchanges for Shares with a higher sales charge may be made upon payment of the sales charge differential.

An investor will receive Class A Shares of a Fund in exchange for Class A Shares of another fund within the HSBC Family of Funds, unless the investor is eligible to receive Class D Shares of the Money Market Funds, in which case the investor will receive Class D Shares of a Money Market Fund in exchange for Class A Shares of another fund within the HSBC Family of Funds. Class C Shares and Class I Shares may be exchanged for shares of the same class of one or more funds within the HSBC Family of Funds at NAV without a front-end sales charge provided that the amount to be exchanged meets the applicable minimum investment requirements and the exchange is made in states where it is legally authorized. Exchanges into

Class A Shares may be made upon payment of the applicable sales charge, unless otherwise exempt. Shareholders of Class A Shares of the U.S. Smaller Companies Fund who are shareholders as of December 31, 1997 will be grandfathered with respect to the funds within the HSBC Family of Funds and will be exempt from having to pay a sales charge on any new purchases of Class A Shares of the Fund. An exchange of Class C Shares of the U.S. Smaller Companies Fund will not affect the holding period of the Class C Shares for purposes of determining the CDSC, if any, upon redemption. An exchange may result in a change in the number of Shares held, but not in the value of such Shares immediately after the exchange. Each exchange involves the redemption of the Shares to be exchanged and the purchase of the shares of the other funds within the HSBC Family of Funds, which may produce a gain or loss for tax purposes.

The exchange privilege (or any aspect of it) may be changed or discontinued upon 60 days written notice to shareholders and is available only to shareholders in states in which such exchanges may be legally made. A shareholder considering an exchange should obtain and read the prospectus of the other funds within the HSBC Family of Funds into which the exchange will be made and consider the differences in investment objectives and policies before making any exchange.

An exchange is considered a sale of shares and may result in a capital gain or loss for federal income tax purposes. A shareholder wishing to exchange his or her Shares may do so by contacting the Trust at 800-782-8183, by contacting his or her broker-dealer or by providing written instruction to the Trust.

**In-Kind Purchases**

The Trust, in its discretion, may permit purchases of Fund shares by means of in-kind contributions of portfolio securities under certain circumstances. An in-kind contribution must be made in the form of securities that are permissible investments for the Funds as described in the Prospectus. In connection with an in-kind securities purchase, the Funds will require, among other things, that the securities be valued in the same manner as they would be valued for purposes of computing a Fund's NAV; that the Funds receive satisfactory assurances that they will have good and marketable title to the securities received by them; and that the securities be in proper form for transfer to the Funds. In addition, the Funds generally will not accept securities of any issuer unless they are liquid, have a readily ascertainable market value, and are not subject to restrictions on resale.

The Funds will not be liable for any brokerage commission or fee (except for customary transfer fees) in connection with an in-kind purchase of Fund shares. Your broker may impose a fee in connection with processing your in-kind purchase of Fund shares. An investor contemplating an in-kind purchase of Fund shares should consult his or her tax adviser to determine the tax consequences under Federal and state law of making such a purchase.

**Automatic Investment Plan**

The Trust offers a plan for regularly investing specified dollar amounts ($25.00 minimum in monthly, quarterly, semi-annual or annual intervals) in the Funds. If an Automatic Investment Plan is selected, subsequent investments will be automatic and will continue until such time as the Trust and the investor's bank are notified in writing to discontinue further investments. Due to the varying procedures to prepare, process and forward the bank withdrawal information to the Trust, there may be a delay between the time of bank withdrawal and the time the money reaches the Funds. The investment in the Funds will be made at the NAV per share determined on the Fund Business Day that both the check and the bank withdrawal data are received in required form by the Transfer Agent. Further information about the Automatic Investment Plan may be obtained from Citi at the telephone number listed on the front cover.

For further information on how to purchase Shares, an investor should contact the Funds directly at HSBC Funds, P.O. Box 219691, Kansas City, MO 64121-9691 or by calling 1-800-782-8183.

**Purchases through a Shareholder Servicing Agent or a Securities Broker**

Shares are being offered to the public, to customers of a Shareholder Servicing Agent and to customers of a Securities Broker. Shareholder Servicing Agents and Securities Brokers may offer services to their customers, including specialized procedures for the purchase and redemption of Shares, such as pre-authorized or automatic purchase and redemption programs. Each Shareholder Servicing Agent and Securities Broker may establish its own terms, conditions and charges, including limitations on the amounts of transactions, with respect to such services. Charges for these services may include fixed annual fees, account maintenance fees and minimum account balance requirements. The effect of any such fees will be to reduce the net return on the investment of customers of that Shareholder Servicing Agent or Securities Broker. Conversely, certain Servicing Agents may (although they are not required by the Trust to do so) credit to the accounts of their customers from whom they are already receiving other fees amounts not exceeding such other fees or the fees received by the Servicing Agent and Securities Broker from the Funds, which will have the effect of increasing the net return on the investment of such customers of those Servicing Agents and Securities Brokers.

Shareholder Servicing Agents and Securities Brokers may transmit purchase payments on behalf of their customers by wire directly to the Funds' custodian bank by following the procedures described above.

For further information on how to direct a Securities Broker or a Shareholder Servicing Agent to purchase Shares, an investor should contact his Securities Broker or his Shareholder Servicing Agent.

**SALES CHARGES**

**Class A Shares**

The public offering price of the Class A Shares of the U.S. Smaller Companies Fund equals NAV plus the applicable sales charge. The Distributor receives this sales charge and may reallow it as dealer discounts and brokerage commissions as follows:

---

| | | |
|:---|:---|:---|
| **Size of Transaction at Offering<br> Price** | **Sales Charges as a<br> Percentage of<br> Offering Price** | **Percentage of Net<br> Amount Invested** |
| Less than $50,000 | 5.00% | 5.26% |
| $50,000 but less than $100,000 | 4.50% | 4.71% |
| $100,000 but less than $250,000 | 3.75% | 3.90% |
| $250,000 but less than $500,000 | 2.50% | 2.56% |
| $500,000 but less than $1,000,000 | 2.00% | 2.04% |
| $1,000,000 and over |  |  |

---

**Sales Charge Waivers**

The U.S. Smaller Companies Fund may waive sales charges for the purchase of Class A Shares of the U.S. Smaller Companies Fund by or on behalf of: (1) purchasers for whom HSBC or one of its affiliates acts in a fiduciary, advisory, custodial or similar capacity, (2) employees and retired employees (including spouses, children and parents of employees and retired employees) of HSBC, and any affiliates thereof, (3) Trustees of the Trust, (4) directors and retired directors (including spouses and children of directors and retired directors) of HSBC and any affiliates thereof, (5) purchasers who use proceeds from an account for which HSBC or one of its affiliates acts in a fiduciary, advisory, custodial or similar capacity, to purchase Class A Shares of the U.S. Smaller Companies Fund, (6) brokers, dealers and agents who have a sales agreement with the Distributor, and their employees (and the immediate family members of such individuals), (7) investment advisers or financial planners that have entered into an agreement with the Distributor and that place trades for their own accounts or the accounts of eligible clients and that charge a fee for their services, and clients of such investment advisers or financial planners who place trades for their own accounts if such accounts are linked to the master account of the investment adviser or financial

planner on the books and records of a broker or agent that has entered into an agreement with the Distributor, (8) orders placed on behalf of other investment companies distributed by Foreside or its affiliated companies, and (9) shares purchased by tax-qualified employee benefit plans. The U.S. Smaller Companies Fund may also waive sales charges for the purchase of Class A Shares that were subject to a sales charge or sales charges for the purchase of Class C Shares. The purchase must be made within 60 days of the redemption, and the Transfer Agent must be notified in writing by the investor, or by his or her financial institution, at the time the purchase is made. A copy of the investor's account statement showing such redemption must accompany such notice. To receive a sales charge waiver in conjunction with any of the above categories, shareholders must, at the time of purchase, give the Transfer Agent sufficient information to permit confirmation of qualification.

**Concurrent Purchases**

For purposes of qualifying for a lower sales charge, investors have the privilege of combining "concurrent purchases" of Class A Shares of any fund in the HSBC Family of Funds. For example, if a shareholder concurrently purchases Class A Shares in one of the Funds of the Trust sold with a sales charge at the total public offering price of $25,000 and Class A Shares in another Fund sold with a sales charge at the total public offering price of $75,000, the sales charge would be that applicable to a $100,000 purchase as shown in the appropriate table above. The investor's "concurrent purchases" described above shall include the combined purchases of the investor, the investor's spouse and children under the age of 21 and the purchaser's retirement plan accounts. To receive the applicable public offering price pursuant to this privilege, shareholders must, at the time of purchase, give the Transfer Agent sufficient information to permit confirmation of qualification. This privilege, however, may be modified or eliminated at any time or from time to time by the Trust without notice.

**Letter of Intent**

An investor may obtain a reduced sales charge by means of a written Letter of Intent, which expresses the intention of such investor to purchase Class A Shares of the U.S. Smaller Companies Fund at a designated total public offering price within a designated 13-month period. Each purchase of Class A Shares under a Letter of Intent will be made at the NAV plus the sales charge applicable at the time of such purchase to a single transaction of the total dollar amount indicated in the Letter of Intent (the "Applicable Sales Charge"). A Letter of Intent may include purchases of Class A Shares made not more than 90 days prior to the date such investor signs a Letter of Intent; however, the 13-month period during which the Letter of Intent is in effect will begin on the date of the earliest purchase to be included. An investor will receive as a credit against his/her purchase(s) of Class A Shares during this 90-day period at the end of the 13-month period, the difference, if any, between the sales load paid on previous purchases qualifying under the Letter of Intent and the Applicable Sales Charge.

A Letter of Intent is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Letter of Intent is 5% of such amount. Class A Shares purchased with the first 5% of such amount will be held in escrow (while remaining registered in the name of the investor) to secure payment of the higher sales charge applicable to the Class A Shares actually purchased if the full amount indicated is not purchased, and such escrowed Class A Shares will be involuntarily redeemed to pay the additional sales charge, if necessary. Dividends on escrowed Class A Shares, whether paid in cash or reinvested in additional Class A Shares, are not subject to escrow. The escrowed Class A Shares will not be available for disposal by the investor until all purchases pursuant to the Letter of Intent have been made or the higher sales charge has been paid. When the full amount indicated has been purchased, the escrow will be released. To the extent that an investor purchases more than the dollar amount indicated in the Letter of Intent and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period. The difference in sales charge will be used to purchase additional Class A Shares of the U.S. Smaller Companies Fund at the then-current public offering price subject to the rate of sales charge applicable to the actual amount of the aggregate purchases. For further information about Letters of Intent, interested investors should contact the Trust at 1-800-782-8183. This program, however, may be modified or eliminated at any time or from time to time by the Trust without notice.

**Right of Accumulation**

Pursuant to the right of accumulation, investors are permitted to purchase Class A Shares of the U.S. Smaller Companies Fund at the public offering price applicable to the total of: (a) the total public offering price of the Class A Shares of the U.S. Smaller Companies Fund then being purchased; plus (b) an amount equal to the then-current NAV of the "purchaser's combined holdings" of the Class A Shares of the U.S. Smaller Companies Fund that were subject to a sales charge, any Class A Shares and Class I Shares acquired through asset allocation programs such as the HSBC Spectrum Program, which were not subject to a sales charge, and any Class C Shares of the U.S. Smaller Companies Fund held. Class A Shares sold to purchasers for whom HSBC or one of its affiliates acts in a fiduciary, advisory, custodial (other than retirement accounts), agency, or similar capacity are not presently subject to a sales charge. The "purchaser's combined holdings" described above shall include the combined holdings of the purchaser, the purchaser's spouse and children under the age of 21 and the purchaser's retirement plan accounts. To receive the applicable public offering price pursuant to the right of accumulation, shareholders must, at the time of purchase, give the Transfer Agent sufficient information to permit confirmation of qualification. This right of accumulation, however, may be modified or eliminated at any time or from time to time by the Trust without notice.

**Conversation Feature – Class C Shares of the U.S. Smaller Companies Fund**

Class C Shares of the U.S. Smaller Companies Fund will convert to Class A Shares of the same Fund after five years from the beginning of the calendar month in which the Class C Shares were originally purchased. After conversion, the shares will be subject to the lower distribution and shareholder servicing fees charged on Class A Shares, which will increase the shareholder's investment return compared to the Class C Shares. A shareholder will not pay any sales charge or fees when his or her shares convert, nor will the transaction be subject to any tax. If an investor purchased Class C Shares of one Fund, which he or she exchanged for Class C Shares of another Fund, the holding period will be calculated from the time of the original purchase of Class C Shares. The dollar value of Class A Shares the investor receives will equal the dollar value of the Class C Shares converted.

**Level Load Alternative – Class C Shares of the U.S. Smaller Companies Fund**

Class C Shares of the U.S. Smaller Companies Fund may be purchased for individual accounts normally in amounts of less than $100,000. Class C Shares of the U.S. Smaller Companies Fund are sold at NAV without an initial sales charge but are subject to a CDSC of 1.00% on most redemptions made within one year after purchase (calculated from the last day of the month in which the shares were purchased). The CDSC will be assessed on an amount equal to the lesser of the current market value or the cost of the shares being redeemed. Class C Shares are subject to an annual 12b-1 fee of up to 1.00% of the average daily net assets of the Class.

The higher fees mean a higher expense ratio, so Class C Shares pay correspondingly lower dividends and may have a lower NAV than Class A Shares. Broker-dealers and other financial intermediaries whose clients have purchased Class C Shares may receive a trailing commission equal to 1.00% of the average daily NAV of such shares on an annual basis held by their clients more than one year from the date of purchase. Trailing commissions will commence immediately with respect to shares eligible for exemption from the CDSC normally applicable to Class C Shares.

**REDEMPTION OF SHARES**

A shareholder may redeem all or any portion of the shares in his account at any time at the NAV next determined after a redemption order in good order is furnished by the shareholder to the Transfer Agent, with respect to shares purchased directly through the Funds, or to his Securities Broker or his Shareholder Servicing Agent, and is transmitted to and received by the Transfer Agent. Class A Shares and Class I Shares of the applicable Funds may be redeemed without charge while Class C Shares of the U.S. Smaller Companies Fund may be subject to a CDSC. See "Level Load Alternative -- Class C Shares" above.

Redemptions are effected on the same day the redemption order is received by the Transfer Agent provided such order is received prior to the close of trading on the Exchange, on any Fund Business Day. See "Determination of Net Asset Value" above. Shares redeemed earn dividends up to and including the day prior to the day the redemption is effected.

Except as otherwise set forth in the Prospectus, the proceeds of a redemption are normally paid from each Fund in U.S. dollars within two business days (or such other times in accordance with the requirements of your financial intermediaries) following the date on which the redemption is effected, however, while not expected, payment of sales proceeds may take up to seven days. The Funds may suspend the right of redemption and postpone for more than seven days the date of payment upon redemption: (i) during periods when the Exchange is closed other than for weekends and certain holidays or when trading on such Exchange is restricted; (ii) during periods in which, as a result of emergency, disposal, or evaluation of the NAV of the portfolio securities is not reasonably practicable; or (iii) for such other periods as the SEC may permit. To be in a position to eliminate excessive expenses, the Trust reserves the right to redeem upon not less than 30 days' notice all shares in an account which has a value below $50, provided that such involuntary redemptions will not result from fluctuations in the value of Fund shares. A shareholder will be allowed to make additional investments prior to the date fixed for redemption to avoid liquidation of the account.

Unless shares have been purchased directly from the Funds, a shareholder may redeem shares only by authorizing his Securities Broker, if applicable, or his Shareholder Servicing Agent to redeem such Shares on his behalf (since the account and records of such a shareholder are established and maintained by his Securities Broker or his Shareholder Servicing Agent). For further information as to how to direct a Securities Broker or a Shareholder Servicing Agent to redeem shares, a shareholder should contact his Securities Broker or his Shareholder Servicing Agent.

The Board has adopted procedures that provide that redemptions by shareholders may be satisfied by the distribution of portfolio securities in-kind, reflecting the shareholder's proportionate interest in the relevant Fund, subject to certain adjustments.

Redemption proceeds are generally paid in cash, but the Funds reserve the right to pay all or part of any redemption proceeds in-kind. However, the Funds have made an election pursuant to Rule 18f-1 under the 1940 Act to redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1.00% of the NAV of the Fund during any 90-day period for any one shareholder. The Funds reserve the right to pay all or part of other redemptions by a distribution of portfolio securities in kind from the applicable Fund's portfolio. The securities distributed in kind would be valued at the same value as that assigned to them in calculating the NAV of the shares being redeemed. In the event a shareholder receives an in-kind distribution of portfolio securities, it would be the responsibility of the shareholder to dispose of the securities. The shareholder would be subject to any risk that the value of the securities would decline prior to their sale, that it would be difficult to sell the securities, and that brokerage fees could be incurred.

**Systematic Withdrawal Plan**

Any shareholder who owns shares with an aggregate value of $10,000 or more may establish a Systematic Withdrawal Plan under which he redeems at NAV the number of full and fractional shares that will produce the monthly, quarterly, semi-annual or annual payments specified (minimum $50.00 per payment). Depending on the amounts withdrawn, systematic withdrawals may deplete the investor's principal. Investors contemplating participation in this Systematic Withdrawal Plan should consult their tax advisers. No additional charge to the shareholder is made for this service.

**Redemption of Shares Purchased Directly through the Funds**

**Redemption by Letter.** Redemptions may be made by letter to the Transfer Agent specifying the dollar amount or number of shares to be redeemed, account number and the Fund. The letter must be signed in exactly the same way the account is registered (if there is more than one owner of the Shares, all must sign). In connection with a written redemption request, all signatures of all registered owners or authorized

parties must be guaranteed by an Eligible Guarantor Institution, which includes a domestic bank, broker, dealer, credit union, national securities exchange, registered securities association, clearing agency or savings association. The Funds' transfer agent, however, may reject redemption instructions if the guarantor is neither a member nor a participant in a signature guarantee program (currently known as "STAMP," "SEMP," or "NYSE MSP"). Corporations, partnerships, trusts or other legal entities may be required to submit additional documentation.

**Redemption by Wire or Telephone.** An investor may redeem shares of the Funds by wire or by telephone if he has checked the appropriate box on the Purchase Application or has filed a Telephone Authorization Form with the Trust. These redemptions may be paid from the applicable Fund by wire or by check. The Trust reserves the right to refuse telephone wire redemptions and may limit the amount involved or the number of telephone redemptions. The telephone redemption procedure may be modified or discontinued at any time by the Trust. Instructions for wire redemptions are set forth in the Purchase Application. The Trust employs reasonable procedures to confirm that instructions communicated by telephone are genuine. For instance, the following information must be verified by the shareholder or securities broker at the time a request for a telephone redemption is effected: (1) shareholder's account number; (2) shareholder's social security number; and (3) name and account number of shareholder's designated securities broker or bank. If the Trust fails to follow these or other established procedures, it may be liable for any losses due to unauthorized or fraudulent instructions.

**RETIREMENT PLANS**

Shares of the Funds are offered in connection with tax-deferred retirement plans. Application forms and further information about these plans, including applicable fees, are available from the Trust or the Sponsor upon request. The tax law governing tax-deferred retirement plans is complex and changes frequently. Before investing in the Funds through one or more of these plans, an investor should consult his or her tax adviser.

**Individual Retirement Account Plans ("IRAs")**

Shares of the Funds may be used as a funding medium for an IRA. An Internal Revenue Service-approved IRA plan may be available from an investor's Servicing Agent. In any event, such a plan is available from the Sponsor naming UMB Fund Services as custodian. The minimum initial investment for an IRA is $250; the minimum subsequent investment is $100. In general, IRAs are available to individuals who receive compensation or earned income and their spouses whether or not they are active participants in a tax- qualified or Government-approved retirement plan. In general, an IRA contribution by an individual who participates, or whose spouse participates, in a tax-qualified or Government-approved retirement plan may not be deductible, in whole or in part, depending upon the individual's income. Individuals also may establish an IRA to receive a "rollover" contribution of distributions from another IRA or a qualified plan. Tax advice should be obtained before planning a rollover or determining contribution limits.

**Defined Contribution Plans**

Investors who are self-employed may purchase shares of the Funds for retirement plans for self-employed persons that are known as defined contribution plans (formerly Keogh or H.R. 10 Plans). HSBC offers a prototype plan for money purchase and profit sharing defined contribution plans. The rules governing these plans are complex, and a tax adviser should be consulted.

**Section 457 Plan, 401(K) Plan, 403(B) Plan**

The Funds may be used as investment vehicles for certain deferred compensation plans provided for by Section 457 of the Internal Revenue Code of 1986, as amended (the "Code") with respect to service for state governments, local governments, rural electric cooperatives and political subdivisions, agencies, instrumentalities, tax-exempt organizations and certain affiliates of such entities. The Funds may also be used as investment vehicles for both 401(k) plans and 403(b) plans.

**DIVIDENDS AND DISTRIBUTIONS**

Generally, a Fund's net investment income consists of the interest and dividend income it earns, less expenses. In computing interest income, premiums are not amortized nor are discounts accrued on long-term debt securities in the Fund, except as required for federal income tax purposes. A Fund's net realized capital gains, if any, are distributed to shareholders annually. Additional distributions are also made to each Fund's shareholders to the extent necessary to avoid application of the 4% non-deductible federal excise tax on certain undistributed income and net capital gains of regulated investment companies. Shares begin accruing dividends on the day they are purchased.

Dividends for the Funds are distributed monthly. Unless a shareholder elects to receive dividends in cash (subject to the policies of the shareholder's Shareholder Servicing Agent or Securities Broker), dividends are distributed in the form of additional full and fractional shares of each Fund.

Certain mortgage-backed securities may provide for periodic or unscheduled payments of principal and interest as the mortgages underlying the securities are paid or prepaid. However, such principal payments (not otherwise characterized as ordinary discount income or bond premium expense) will not normally be considered as income to the U.S. Smaller Companies Fund or Portfolio and therefore will not be distributed as dividends to the shareholders of the Fund that invest in the Portfolio. Rather, these payments on mortgage-backed securities generally will be reinvested by the Portfolio in accordance with their investment objectives and policies.

**DESCRIPTION OF SHARES, VOTING RIGHTS, AND LIABILITIES**

The Trust's Amended and Restated Agreement and Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (par value $0.001 per share) and to divide or combine the shares into a greater or lesser number of shares without thereby materially changing the proportionate beneficial interests in the Trust. Currently, the Trust has 5 operational series of shares, each of which constitutes a separately managed "Fund." The Trust reserves the right to create additional series of shares. Currently, the Funds issue separate classes of shares as described under "General Information."

Subject to the distinctions permitted among classes of the Trust or any series as established by the Trustees consistent with the requirements of the 1940 Act, each share of the Trust or any series shall represent an equal beneficial interest in the net assets of the Trust or such series, and each shareholder of the Trust or any series shall be entitled to receive such shareholder's pro rata share of distributions of income and capital gains, if any, made with respect to the Trust or such series. Upon redemption of the shares of any series, the applicable shareholder shall be paid solely out of the funds and property of such series of the Trust. Except as otherwise provided by the Trustees, shareholders shall have no preemptive or other right to subscribe to any additional shares or other securities issued by the Trust.

The Trustees may require shareholders to redeem shares for any reason under terms set by the Trustees. When issued, shares are fully paid and non-assessable. The Trustees may, however, cause shareholders, or shareholders of a particular series or class, to pay certain transfer agency, servicing or similar agent charges by setting off such charges due from such shareholder from declared but unpaid dividends owed such shareholder and/or by reducing the number of shares in the account of such shareholder by that number of full and/or fractional shares which represents the outstanding amount of such charges due from such shareholder.

Shareholders are entitled to one vote for each share held on matters on which they are entitled to vote (and a proportionate fractional vote for each fraction of a share). The Trust is not required and has no current intention to hold annual meetings of shareholders, although the Trust will hold special meetings of Fund shareholders when in the judgment of the Trustees of the Trust it is necessary or desirable to submit matters for a shareholder vote or as otherwise required by the 1940 Act or other applicable federal law. It is not anticipated that the Trust will hold shareholders' meetings unless required by law or its Amended and Restated Agreement and Declaration of Trust or By-Laws. On any matters submitted to a vote of the

shareholders, all shares of the Trust then entitled to vote shall be voted in aggregate, except: (i) when required by the 1940 Act, shares shall be voted by individual series or class; (ii) when the matter involves any action that the Trustees have determined will affect only the interests of one or more series, then only shareholders of such series shall be entitled to vote thereon; and (iii) when the matter involves any action that the Trustees have determined will affect only the interests of one or more classes, then only the shareholders of such class or classes shall be entitled to vote thereon. Accordingly, shareholders of each series generally vote separately, for example, to approve investment advisory contracts or changes in fundamental investment policies or restrictions, but shareholders of all series may vote together to the extent required under the 1940 Act, such as in the election or selection of Trustees, principal underwriters and accountants for the Trust. Under certain circumstances, the shareholders of one or more series could control the outcome of these votes.

Shares of each class of a series represent an equal pro rata interest in such series and, generally, have identical voting, dividend, liquidation, and other rights, preferences, powers, terms and conditions, except that: (i) each class shall have a different designation; (ii) each class of shares shall bear any class expenses; and (iii) each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. Upon liquidation or dissolution of a Fund, shareholders of the Fund would generally be entitled to share pro rata in the net assets of the Fund's available for distribution to shareholders.

The shareholders of the Funds have the power to vote only: (i) for the election or removal of Trustees as and to the extent provided in the Trust's Amended and Restated Agreement and Declaration of Trust; (ii) with respect to such additional matters relating to the Trust as may be required by federal law including the 1940 Act, or any registration of the Trust with the SEC (or any successor agency) or any state; and (iii) as the Trustees may otherwise consider necessary or desirable in their sole discretion.

The Trust is an entity of the type commonly known as a "Delaware statutory trust." Under Delaware law and the Trust's Amended and Restated Agreement and Declaration of Trust, shareholders are entitled to the same limitation of personal liability extended to shareholders of corporations organized under Delaware law. Therefore, shareholders generally will not be subject to personal liability for Fund obligations. The risk that a shareholder will incur personal liability for Fund obligations is limited to the circumstances in which a state court may not apply Delaware law or the terms of the Trust's Amended and Restated Agreement and Declaration of Trust.

**OWNERSHIP OF THE FUNDS**

As of February 1, 2023, the following persons owned of record 5% or more of a Fund or class of shares:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Fund/Class** | **Name and Address** | **Percent of the Class Total Assets Held by the Shareholder** |
| &nbsp;&nbsp;**HSBC RadiantESG U.S. Smaller Companies Fund Class A** | | |
|  | Pershing LLC\*<br> 1 Pershing Plaza<br> Jersey City, NJ 07399-0002 | 62.30%<br>|
|  | Charles Schwab & Co. Inc.<br> Special Custody Account<br> FBO of Customers<br> Attn Mutual Funds<br> 101 Montgomery Street<br> San Francisco, CA 94101-4151 | 5.91%<br>|

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Fund/Class** | **Name and Address** | **Percent of the Class Total Assets Held by the Shareholder** |
| &nbsp;&nbsp;**HSBC RadiantESG U.S. Smaller Companies Fund Class C** | | |
|  | Pershing LLC\*<br> 1 Pershing Plaza<br> Jersey City, NJ 07399-0002 | 100.00%<br>|
| &nbsp;&nbsp;**HSBC RadiantESG U.S. Smaller Companies Fund Class I** |  |  |
|  | SEI Private Trust Company\*<br> c/o HSBC Bank<br> One Freedom Valley Drive<br> Oaks, PA 19456-9989 | 39.40%<br>|
|  | Charles Schwab & Co. Inc.<br> Special Custody Account<br> FBO of Customers<br> Attn Mutual Funds<br> 211 Main Street<br> San Francisco, CA 94105-1901 | 13.65%<br>|
|  | Capinco c/o US Bank NA<br> 1555 N Rivercenter Dr Ste 302<br> Milwaukee, WI 53212-3958 | 12.85%<br>|
|  | National Financial Services LLC<br> For the Exclusive Benefit of Our Customers<br> Newport Office Center III<br> 499 Washington Boulevard 5<sup>th</sup> Floor<br> Jersey City, NJ 07310-2010 | 12.05%<br>|
|  | SEI Private Trust Company<br> c/o HSBC Bank<br> One Freedom Valley Drive<br> Oaks, PA 19456-9989 | 10.59%<br>|
|  | Pershing LLC<br> 1 Pershing Plaza<br> Jersey City, NJ 07399-0002 | 6.34%<br>|

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\*Entity owned more than 25% of the outstanding shares of the Fund. A shareholder owning of record or beneficially more than 25% of a Fund's outstanding shares may be considered a control person and could have a more significant effect on matters presented at a shareholders' meeting than votes of other shareholders.

**TAXATION**

Set forth below is a discussion of certain U.S. federal income tax issues concerning the Funds and the purchase, ownership, and disposition of Fund shares. The information is current as of the date of this SAI. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to shareholders in light of their particular circumstances. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Prospective investors should consult their own tax adviser with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax consequences arising under the laws of any state, foreign country, or other taxing jurisdiction. Future changes in tax laws may adversely impact the Funds and their shareholders.

**Tax Status of the Funds**

The Funds each intend to be taxed as a regulated investment company under Subchapter M of the Code. Accordingly, each Fund must, among other things: (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities, foreign currencies, net income derived from an interest in a qualified publicly traded partnership or other income derived with respect to its business of investing in such stock, securities or currencies; and (b) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is represented by cash and cash items, U.S. Government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities and the securities of other regulated investment companies), in two or more issuers that the Fund controls and which are engaged in the same or similar trades or businesses or of one or more qualified publicly traded partnerships.

If for any taxable year a Fund does not qualify for federal tax treatment as a regulated investment company, all of the Fund's net taxable investment income would (unless certain cure provisions apply) be subject to federal and, potentially, state income tax at regular corporate rates without any deduction for distributions to its shareholders. In such event, dividend distributions (including amounts derived from interest on municipal securities) would be taxable to a Fund's shareholders to the extent of the Fund's current and accumulated earnings and profits.

As a regulated investment company, a Fund generally is not subject to U.S. federal income tax on income and gains that it distributes to shareholders, if at least 90% of the Fund's investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gains over net long-term capital losses) for the taxable year is distributed (*i.e.*, the 90% distribution requirement). Each Fund intends to distribute all or substantially all of such income.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax at the Fund level. To avoid the tax, each Fund must generally distribute during each calendar year an amount equal to the sum of: (1) at least 98% of its ordinary income (taking into account certain deferrals and elections) for the calendar year; (2) at least 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year; and (3) all ordinary income and capital gains for previous years that were not distributed or taxed during such years. To avoid application of the excise tax, the Funds intend to make distributions in accordance with the calendar year distribution requirement.

A distribution will be treated as paid on December 31 of a calendar year if it is declared by a Fund in October, November or December of that year with a record date in such a month and paid by the Fund during January of the following year. Such a distribution will be taxable to shareholders in the calendar year in which the distribution is declared, rather than the calendar year in which it is received.

For federal income tax purposes, the Funds are generally permitted to carry forward a net capital loss in any year to offset its own capital gains, if any, during subsequent taxable years. Any such carryforward losses will retain their character as short-term or long-term.

As of October 31, 2022, the Funds had net capital loss carryforwards ("CLCFs") not subject to expiration as summarized in the table below. The Board does not intend to authorize a distribution of any realized gain for the Funds until any applicable CLCF has been offset or expires.

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| | | | |
|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**Short Term Amount ($)** | &nbsp;&nbsp;**Long Term Amount ($)** | &nbsp;&nbsp;**Total ($)** |
| &nbsp;&nbsp;RadiantESG U.S. Smaller Companies Fund | &nbsp;&nbsp;1479847 | &nbsp;&nbsp;— | &nbsp;&nbsp;1479847 |
| &nbsp;&nbsp;RadiantESG U.S. Smaller Companies Fund (Class I) | &nbsp;&nbsp;4620788 | &nbsp;&nbsp;— | &nbsp;&nbsp;4620788 |

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The amount of capital losses that can be carried forward and used in any single year is subject to an annual limitation if there is a more than 50% "change in ownership" of a Fund. An ownership change generally results when shareholders owning 5% or more of a Fund increase their aggregate holdings by more than 50% over a three-year look-back period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing a Funds ability to offset capital gains with those losses. An increase in the amount of taxable gains distributed to a Fund's shareholders could result from an ownership change. No Fund undertakes any obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of engaging in a tax-free reorganization with another fund. Moreover, because of circumstances beyond a Fund's control, there can be no assurance that a Fund will not experience, or has not already experienced, an ownership change. Additionally, if a Fund engages in a tax-free reorganization with another fund, the effect of these and other rules not discussed herein may be to disallow or postpone the use by the Fund of its capital loss carryovers (including any current year losses and built-in losses when realized) to offset its own gains or those of the other fund, or vice versa, thereby reducing the tax benefits Fund shareholders would otherwise have enjoyed from the use of such capital loss carryovers.

**The Portfolio**

The Portfolio has obtained a ruling from the Internal Revenue Service that the Portfolio will be treated as a partnership for federal income tax purposes. For purposes of determining whether a Fund satisfies the income and diversification tests to maintain its status as a regulated investment company, the Fund, as an investor in the Portfolio, will be deemed to own a proportionate share of the Portfolio's income and assets.

**Distributions in General**

Distributions of investment company taxable income are generally taxable to a U.S. shareholder as ordinary income, whether paid in cash or shares (see below for information concerning reduced rates of tax for certain capital gain dividends). Dividends paid by a Fund to a corporate shareholder, to the extent such dividends are attributable to dividends received by the Fund from U.S. corporations, may, subject to limitation, be eligible for the dividends received deduction.

Generally, the maximum tax rate for individual taxpayers on long-term capital gains and on certain qualifying dividends on corporate stock is 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. These rates do not apply to corporate taxpayers. Each Fund will be able to separately report distributions of any qualifying long-term capital gains or qualifying dividends earned by the Fund that would be eligible for the lower maximum rate. A shareholder would also have to satisfy a more than 60-day holding period as well as other requirements with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower rate. Distributions from Funds investing in bonds and other debt instruments will generally not qualify for the lower rates. Note that distributions of earnings from dividends paid by "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established securities market in the U.S., and corporations eligible for the benefits of a comprehensive income tax treaty with the United States, which satisfy certain other requirements. Passive foreign investment companies are not treated as "qualified foreign corporations."

Individuals (and certain other non-corporate entities) are generally eligible for a 20% deduction with respect to taxable ordinary dividends from REITs through 2025. IRS regulations allow a regulated investment company to pass through to its shareholders such taxable ordinary REIT dividends. Accordingly, individual (and certain other non-corporate) shareholders of a regulated investment company that have received taxable ordinary REIT dividends may be able to take advantage of this 20% deduction with respect to any such amounts passed through.

Certain distributions reported by a Fund as Section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under

Section 163(j) of the Code. Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that such Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of such Fund's business interest income over the sum of such Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

The excess of net long-term capital gains over net short-term capital losses realized, distributed and properly reported by a Fund, whether paid in cash or reinvested in Fund shares, will generally be taxable to shareholders as long-term capital gain, regardless of how long a shareholder has held Fund shares. Long-term capital gain distributions made to individuals are generally subject to a maximum federal income tax rate of 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. Distributions of net short-term capital gains from the sale or disposition of Fund assets held for one year or less will be taxed as ordinary income.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Shareholders receiving distributions in the form of additional shares will be taxed on the amount of such distribution and will have a cost basis for federal income tax purposes in each share received equal to the amount of the cash the shareholder could have received. Shareholders will be notified annually as to the U.S. federal tax status of distributions.

If the NAV of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a partial return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time will include the amount of the forthcoming distribution, but the distribution will generally be taxable to the shareholder.

Distributions in excess of a Fund's current and accumulated earnings and profits are treated as a tax-free return of a shareholder's investment to the extent of the shareholder's basis in the shares, and generally as capital gain thereafter. A return of capital, which for tax purposes is treated as a return of a shareholder's investment, reduces the shareholder's basis in shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition of shares. A distribution will reduce a Fund's NAV per share and may be taxable to a shareholder as ordinary income or capital gain even though, from an economic standpoint, the distribution may constitute a return of capital.

**Sale, Exchange or Redemption of Shares**

Upon a redemption, sale or exchange of shares of a Fund, a shareholder will realize a taxable gain or loss depending upon his or her basis in the shares. A gain or loss will be treated as capital gain or loss if the shares are capital assets in the shareholder's hands, and the rate of tax will depend upon the shareholder's holding period for the shares. If an individual shareholder has held the shares as a capital asset for more than one year, the maximum current federal income tax rate is generally 15% or 20%, depending on whether the shareholder's income exceeds certain threshold amounts. Any loss realized on a redemption, sale or exchange also will be disallowed to the extent the shares disposed of are replaced (including through reinvestment of dividends) within a period of 61 days, beginning 30 days before and ending 30 days after the shares are disposed of. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. If a shareholder holds Fund shares for six months or less and during that period receives a distribution taxable to the shareholder as long-term capital gain, any loss realized on the sale of such shares during such six-month period would be a long-term loss to the extent of such distribution.

The Code requires the Funds to report to the Internal Revenue Service, and furnish to Fund shareholders, cost basis information for Fund shares purchased on or after January 1, 2012 and sold on or after that date. The Funds will permit Fund shareholders to elect from among several cost basis methods accepted by the Internal Revenue Service, including average cost. In the absence of an election by a shareholder, the Funds will use the average cost method with respect to that shareholder.

If, within 90 days after purchasing Fund shares with a sales charge, a shareholder exchanges the shares and acquires new shares at a reduced (or without any) sales charge pursuant to a right acquired with the original shares prior to February 1st of the calendar year following the initial acquisition of Fund shares, prior to February 1<sup>st</sup> of the calendar year following the initial acquisition of Fund shares, then the shareholder may not take the original sales charge into account in determining the shareholder's gain or loss on the disposition of the shares. Gain or loss will generally be determined by excluding all or a portion of the sales charge from the shareholder's tax basis in the exchanged shares, and the amount excluded will be treated as an amount paid for the new shares.

**Backup Withholding**

The Funds generally will be required to withhold federal income tax at a current rate of 24% ("backup withholding") from dividends paid, capital gain distributions, and redemption proceeds to shareholders if: (1) the shareholder fails to furnish the Funds with the shareholder's correct taxpayer identification number or social security number; (2) the Internal Revenue Service notifies the shareholder or the Funds that the shareholder has failed to report properly certain interest and dividend income to the Internal Revenue Service and to respond to notices to that effect; or (3) when required to do so, the shareholder fails to certify that he or she is not subject to backup withholding. Any amounts withheld may be credited against the shareholder's federal income tax liability.

**Other Taxation**

Distributions may be subject to additional state and local taxes, depending on each shareholder's particular situation.

**Foreign Shareholders**

Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, or foreign corporation or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, ordinary income dividends (including distributions of any net short-term capital gains) will generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend. Note that the preferential rate of tax applicable to qualified dividend income (discussed above) does not apply to dividends paid to foreign shareholders. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the sale of shares of a Fund, and distributions of net long-term capital gains that are reported as capital gain dividends. If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale of shares of a Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. If the Funds elect to report distributions derived from certain U.S. source interest and short-term capital gains, such distributions may be paid to foreign shareholders free of withholding. However, depending on the circumstances, a Fund may report all, some or none of the Fund's potentially eligible dividends as eligible for this exemption, and a portion of the Fund's distributions (e.g. interest from non-U.S. sources or any foreign currency gains) would be ineligible for this potential exemption from withholding. In addition, in the case of Fund Shares held through a financial intermediary, the intermediary may have withheld amounts even if a Fund reported all or a portion of a dividend payment as exempt from U.S. federal withholding tax. Affected shareholders should contact their financial intermediaries regarding the application of these rules to their accounts.

The Funds are required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Funds to enable the Funds to determine whether withholding is required.

The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Funds, including the applicability of the U.S. estate tax and foreign taxes.

**Fund Investments**

**Market Discount.** If a Fund purchases a debt security in the secondary market at a price lower than the stated redemption price at maturity of such debt security, the excess of the stated redemption price over the purchase price is "market discount." If the amount of market discount is more than a de minimis amount, a portion of such market discount must be included as ordinary income (not capital gain) by a Fund in respect of each taxable year in which the Fund owns an interest in such debt security and receives a principal payment on it. In particular, a Fund will be required to allocate that principal payment first to the portion of the market discount on the debt security that has accrued but has not previously been includable in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. Generally, market discount accrues on a daily basis for each day the debt security is held by a Fund, at a constant rate over the time remaining to the debt security's maturity or, at the election of the Fund, at a constant yield to maturity, which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the "accrued market discount" not previously taken into account.

**Constructive Sales.** Under certain circumstances, the Funds may recognize gain from a constructive sale of an "appreciated financial position" it holds if it enters into a short sale, forward contract or other transaction that substantially reduces the risk of loss with respect to the appreciated position. In that event, a Fund would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon a Fund's holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on a Fund's holding period and the application of various loss deferral provisions of the Code. Constructive sale treatment does not apply to transactions if such transaction is closed before the end of the 30th day after the close of a Fund's taxable year and the Fund holds the appreciated financial position throughout the 60-day period beginning with the day such transaction was closed.

**Foreign Tax Issues**

**Passive Foreign Investment Companies.** The Funds may invest in stocks of foreign companies that are considered as passive foreign investment companies ("PFICs") under the Code. In general, a foreign company is considered a PFIC if at least 50% of its assets constitute investment-type assets or 75% or more of its gross income constitutes investment-type income. In general, under the PFIC rules, an "excess distribution" received with respect to PFIC stock is treated as having been realized ratably over the period during which the Funds held the PFIC stock. A Fund itself will be subject to tax on the portion, if any, of the excess distribution that is allocated to that Fund's holding period in prior taxable years (and an interest factor will be added to the tax, as if the tax had actually been payable in such prior taxable years) even though that Fund distributes the corresponding income to shareholders. Excess distributions include any gain from the sale of PFIC stock as well as certain distributions from a PFIC. All excess distributions are characterized as ordinary income.

The Funds may be able to elect alternative tax treatment with respect to PFIC stock. Under an election that currently may be available, a Fund generally would be required to include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether any distributions are received from the PFIC. If this election is made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. Alternatively, each Fund may be able to elect to mark to market its PFIC stock, resulting in the stock being treated as having been sold at fair market value on the last business day of each taxable year. Any resulting gain would be reported by a Fund as ordinary income, and mark-to-market losses and any loss from an actual disposition of the Fund's shares would be deductible by the Fund as ordinary losses to the extent of any net mark-to-market gains included in income in prior taxable years.

Alternatively, a Fund may be able to elect to treat a PFIC investment as a "qualified electing fund" upon the condition precedent that the PFIC furnishes a PFIC annual information statement to the Fund. Under this election the Fund would be required to annually recognize its pro-rata share of net income and net capital gains of the PFIC regardless of whether they are actually distributed by the PFIC.

Because the application of the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject each Fund itself to tax on certain income from PFIC stock, the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock. Note that distributions from a PFIC are not eligible for the reduced rate of tax on "qualifying dividends."

**Foreign Taxes**. Income received by the Funds from sources within foreign countries may be subject to withholding and other income or similar taxes imposed by such countries. If more than 50% of the value of a Fund's total assets at the close of its taxable year consists of securities of foreign corporations, or if at least 50% of the value of a Fund's total assets at the close of each quarter of its taxable year is represented by interests in other regulated investment companies, and the Fund distributes at least 90% of its investment company taxable income, that Fund will be eligible and may (or may not) elect to "pass through" to that Fund's shareholders the amount of qualifying foreign taxes paid by the Fund (the "pass-through election"). Pursuant to this election, a shareholder will be required to include in gross income (in addition to taxable dividends actually received) his pro rata share of the qualifying foreign taxes paid by a Fund, and will be entitled either to deduct (as an itemized deduction) his pro rata share of foreign income and similar taxes in computing his taxable income or to use it as a foreign tax credit against his U.S. federal income tax liability, subject to limitations. No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions, but such a shareholder may be eligible to claim the foreign tax credit (see below). No credit may be claimed by a shareholder with respect to Fund shares that have been held less than 16 days. Each shareholder will be notified after the close of a Fund's taxable year whether the foreign taxes paid by the Fund will "pass through" for that year.

Generally, a credit for foreign taxes is subject to the limitation that it may not exceed the shareholder's U.S. tax attributable to his foreign source taxable income. For this purpose, if the pass-through election is made, the source of a Fund's income flows through to its shareholders. With respect to each Fund, gains from the sale of securities may be treated as derived from U.S. sources and certain currency fluctuation gains including fluctuation gains from foreign currency denominated debt securities, receivables and payables, may be treated as derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income (as defined for purposes of the foreign tax credit), including the foreign source passive income passed through by a Fund. Shareholders may be unable to claim a credit for the full amount of their proportionate share of the foreign taxes paid by a Fund. If a Fund is not eligible to, or does not, make the pass-through election, the foreign income taxes it pays generally will reduce investment company taxable income and the distributions by a Fund will be treated as U.S. source income. Furthermore, the amount of the foreign tax credit that is available to a shareholder may be limited to the extent that dividends from a foreign corporation qualify for the lower tax rate on "qualifying dividends."

**Foreign Currency**. Under the Code, gains or losses attributable to fluctuations in foreign currency exchange rates which occur between the time a Fund accrues income or other receivables or accrues

expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as "section 988" gains and losses, may increase or decrease the amount of a Fund's net investment income to be distributed to its shareholders as ordinary income. For example, fluctuations in exchange rates may increase the amount of income that each Fund must distribute in order to qualify for treatment as a regulated investment company and to prevent application of an excise tax on undistributed income. Alternatively, fluctuations in exchange rates may decrease or eliminate income available for distribution. If section 988 losses exceed other net investment income during a taxable year, a Fund would not be able to make ordinary dividend distributions, and any distributions made before the losses were realized would be recharacterized as a return of capital to shareholders for federal income tax purposes, rather than as an ordinary dividend, reducing each shareholder's basis in his or her Fund shares.

As described above, at least 90% of a Fund's gross income for each taxable year must be qualifying income. The Code expressly confers upon the Secretary of the Treasury of the United States the authority to issue tax regulations that would exclude income and gains from investments in foreign currencies from treatment as qualifying income in cases in which the foreign currency income or gains are not directly related to the company's principal business of investing in stocks or securities (or options or futures with respect to such stocks or securities). In light of this grant of regulatory authority, there is no assurance that the Secretary will not issue such regulations. Moreover, there is a remote possibility that such regulations may be applied retroactively, which could affect the ability of a Fund to qualify as a registered investment company.

**OTHER INFORMATION**

**Capitalization**

The Trust is an open-end, management investment company formed as a statutory trust under the laws of the State of Delaware on March 2, 2016. The Funds were previously series of HSBC Funds or HSBC Advisor Funds Trust, different legal entities organized as a Massachusetts business trust and New York trust, respectively (together, the "Predecessor Trusts"). In 2016, at a special meeting of shareholders, the shareholders of each series of the Predecessor Trusts (the "Predecessor Funds") approved the reorganization of the Predecessor Funds with and into corresponding "shell" series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any historical information provided for a Fund that relates to periods prior to June 24, 2016 is that of the corresponding Predecessor Fund.

The HSBC Predecessor Trust was a Massachusetts business trust established under a Declaration of Trust dated April 22, 1987, as a successor to two previously-existing Massachusetts business trusts, Fund Trust Tax-Free Trust (organized on July 30, 1986) and Fund Vest (organized on July 17, 1984, and since renamed Fund Source). Prior to October 3, 1994, the name of the Predecessor Trust was "Fund Trust." Prior to April 12, 2001, the name of the Predecessor Trust was "Republic Funds." Prior to February 28, 2012, the name of the Predecessor Trust was "HSBC Investor Funds." The HSBC Advisor Funds Trust Predecessor Trust was a Massachusetts business trust established under a Declaration of Trust dated April 5, 1996.

The capitalization of the Trust consists solely of an unlimited number of shares of beneficial interest with a par value of $0.001 each. The Board may establish additional series (with different investment objectives and fundamental policies) and classes of shares within each series at any time in the future. Establishment and offering of additional classes or series will not alter the rights of the Funds' shareholders.

**Independent Registered Public Accounting Firm**

The Board has appointed PricewaterhouseCoopers LLP ("PwC") as the independent registered public accounting firm of the Trust. PwC audits the Trust's annual financial statements and prepares the Trust's income tax returns. PwC's address is 300 Madison Ave, New York, NY 10017.

**Counsel**

Dechert LLP, 1900 K Street, N.W., Washington, D.C. 20006, advises on certain legal matters in connection with the shares of the Funds offered by the Trust, and also acts as counsel to the Trust. Stradley Ronon Stevens & Young, LLP, 2000 K Street, N.W. Suite 700, Washington, D.C. 20006, acts as counsel to the Independent Trustees of the Trust.

**Code of Ethics**

The Trust, and each of the Adviser, the Subadviser and Foreside have adopted a code of ethics, as required by applicable law, including Rule 17j-1 under the 1940 Act, which is designed to prevent affiliated persons of the Trust, the Adviser, the Subadviser and Foreside from engaging in deceptive, manipulative, or fraudulent activities in connection with securities held or to be acquired by the Funds (which may also be held by persons subject to a code). Each Code sets forth restrictions with respect to certain transaction and contains preclearance and reporting obligations.

**Registration Statement**

This SAI and the Prospectus do not contain all the information included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to shares of a Fund, certain portions of which have been omitted pursuant to the rules and regulations of the SEC. The registration statement, including the exhibits filed therewith, may be obtained on the SEC's website at http://www.sec.gov or copies of this information may be obtained after paying a duplicating fee, by electronic request, at the following email address: publicinfo@sec.gov.

Statements contained herein and in the Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document that was filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.

**Financial Statements**

Each Fund's current audited financial statements (and the audited financial statements of the Portfolio) dated October 31, 2022 have been audited by PwC, an independent registered public accounting firm, as indicated in its report with respect thereto, and are hereby incorporated herein by reference from the Annual Report of the Funds dated October 31, 2022, as filed with the SEC. Copies of the report will be provided without charge to each person receiving this SAI.

**Shareholder Inquiries**

All shareholder inquiries should be directed to the Trust, P.O. Box 219691, Kansas City, MO 64121-9691.

**General and Account Information**: (800) 782-8183 (TOLL FREE)

**APPENDIX A – SUBADVISER PROXY VOTING GUIDELINES**

**General**

RadiantESG's authority to vote proxies or act on other shareholder actions on behalf of its clients is established under the delegation of discretionary authority under the investment advisory agreement with its clients. Unless a client (including a "named fiduciary" under ERISA) specifically reserves the right, in writing, to vote its own proxies or to take shareholder action in other corporate actions, RadiantESG will vote all proxies or act on all other actions received in sufficient time prior to their deadlines as part of its full discretionary authority over the assets.

Proxies on securities will be voted for the exclusive benefit of and in the best economic interest of RadiantESG clients, as determined by RadiantESG in good faith. Such voting responsibilities will be exercised in a manner that is consistent with the general anti-fraud provisions of the Investment Advisers Act of 1940, as amended.

To the extent that RadiantESG invests in securities other than non-voting securities and has authority to vote proxies for such securities, RadiantESG will ensure that it maintains the appropriate records of how it voted these securities and provide those records within the appropriate time frame for the public filing of Form N-PX no later than August 31 of each year containing information in respect of the previous twelve-month period ending June 30. RadiantESG may engage the services of an independent third party to fulfill its voting and recordkeeping obligations.

**Voting Guidelines**

Proxy voting is a key dimension in RadiantESG's efforts to carefully consider Environmental, Social, and Governance (ESG) factors in all aspects of its investment process. RadiantESG's ethos is to approach public equities investing with an 'impact mindset' which requires voting proxies in a careful and considered way, putting client interest first, for all accounts for which RadiantESG has the power to vote. Specifically, RadiantESG defines 'best interest' as meaning best long-run economic interest, taking into consideration nuances of a company's given industry, its regulatory environment, its relationship to its stakeholders, and its ESG profile. RadiantESG believes this approach is consistent with its fiduciary duty to its clients.

RadiantESG has selected Institutional Shareholder Services (ISS) as its outsourced service provider for proxy research and execution. ISS provides proxy- and regulation-related research, voting recommendations, voting agent services (i.e. proxy voting), and recordkeeping. Additionally, they provide functionality that allows for easy production of proxy reporting metrics. Typically, RadiantESG will follow ISS' recommendations for voting given its alignment with ISS' Sustainability Proxy Voting Guidelines, but leaves the door open to voting against the ISS recommendation as merited on a case-by-case basis. RadiantESG will elect to vote differently than ISS' recommendation if it views a particular recommendation as not being in its clients' best interest.

The details of ISS' Sustainability Proxy Voting Guidelines can be found here: https://www.issgovernance.com/policy-gateway/voting-policies/

RadiantESG's policies are consistent with its belief that companies with stronger ESG profiles will benefit economically relative to their peers. Further, RadiantESG believes that, by pushing all companies to adopt ESG best practices, the aggregate economy will benefit. In this way, ESG-focused proxy voting is viewed as both an 'alpha' and a 'beta' pursuit. RadiantESG's voting policy encourages companies to control their own narrative (disclosure) and their own evolutionary path (action) when it comes to ESG matters, as opposed to being backed into a corner by regulation, taxation, or the simple physical limits of the planet. RadiantESG's voting practice includes the following general commitments:

***Environmental issues***

 ****

RadiantESG commits to voting for increased disclosure of relevant environmental data, voting for proposals related to reducing negative environmental impacts and/or improving positive impacts. Of specific interest are proposals associated with tangible action to reduce GHG emissions, the production and use of single-use plastics, and micro-plastics.

 **

***Social Issues***

 **

RadiantESG commits to voting for increased disclosure of data related to all aspects of a company's 'social' profile. The Firm notes a troubling absence of company-reported information on 'S' concepts that must be remedied in order to understand the risks shareholders face along this dimension. Of specific interest are proposals aimed at increasing disclosure of race and ethnicity (as permitted by law), increasing representation for women and historically under-represented groups in management, increasing supply chain transparency, increasing disclosure of animal testing and support for the adoption of strong ethical policies including the 'three Rs', and proposals aimed at disclosure and reduction workplace violence and discrimination.

***Governance Issues***

RadiantESG endeavors to vote all proxies. However, in very limited circumstances, there may be foreign market practices that discourage voting. An example would be countries that require 'share blocking', a practice that prevents the sale of shares prior to and after the voting date. This practice varies significantly on a country-by-country basis, but to the extent RadiantESG believes it may be limited in its ability to actively manage portfolios on its clients' behalf, it will refrain from voting. Another example would be the 'beneficial owner' or 'POA' requirement, in which the beneficial owner of the security must vote in person, or a representative with power of attorney must be designated. The former is impractical and the latter is cumbersome, expensive, and often ineffective. More benign voting impediments would be delayed receipt of proxy materials or voting limits for foreign shareholders.

RadiantESG commits to voting in support of independence and diversity at the Board level. The Firm will support initiatives to bolster shareholder rights (including voting against dual classes of stock). RadiantESG believes that shareholders should have a voice in executive compensation and severance packages and will vote accordingly, as well as voting for increased disclosure of political donations, charitable activity, and lobbying efforts.

***Informed voting***

 ****

RadiantESG believes that, as shareholders, rights and responsibilities to influence a company's path of travel through Voting should be exercised. It is therefore important to understand the current regulatory and business framework in which that company operates, the nature of the industry of which the company is a member, and best practices with respect to corporate governance, environmental, and social policy.

RadiantESG uses a number of sources to research how management and shareholder proposals are aligned with (or against) what it believes to be in the best long-term interest of investors. A primary source of information is ISS, RadiantESG's outsourced proxy voting provider. RadiantESG also uses a variety of publicly available sources focused on regulatory and legal analysis, not-for-profit organizations focused on key social or environmental themes, as well as considering the public stances of large asset owners who typically have well-researched opinions.

**Proxy Voting Oversight**

RadiantESG's Investment Forum will provide oversight of RadiantESG's Proxy Voting practices. The Investment Forum is comprised of portfolio management, compliance and other senior professionals. It is charged with reviewing the most recent proxy voting metrics, potential conflicts of interest, and Proxy Voting Policy overrides. The CCO or a person acting in a like capacity, shall be ultimately responsible for ensuring

that all proxies are voted in a timely manner and voted consistently across all portfolios or in accordance with any specific written instructions provided by RadiantESG or its clients.

RadiantESG's Proxy Voting Policy is reviewed annually for both compliance (tests for adherence to the Policy) and continued relevance and effectiveness. Policy changes are therefore annual, always with the goal of evolving our proxy voting policy to reflect the best interests of our clients.

On an annual basis (or more frequently, if merited), RadiantESG will formally evaluate the performance of the outsourced service provider, with a focus on three key criteria: 1) the quality of the providers voting research and recommendations, 2) the accuracy of voting per RadiantESG's Proxy Voting Policy, and 3) service provider business strength as measured by client service, absence of conflicts of interest, going concern risk, corporate activity that may compromise the services it receives, and service provider ethics.

**Conflicts of Interest**

Where a proxy proposal raises a material conflict of interest between RadiantESG interests and that of one or more its clients, RadiantESG shall resolve such conflict in the manner described below:

a. To the extent that RadiantESG has no discretion to deviate from the pre-determined voting policy with respect to the proposal in question, RadiantESG will vote in accordance with the policy.

b. To the extent that RadiantESG has discretion to deviate from the pre-determined voting policy with respect to the proposal in question, RadiantESG shall disclose the conflict to the relevant clients and obtain their consent to the proposed vote prior to voting the securities. The disclosure to the clients will include sufficient detail regarding the matter to be voted on and the nature of the conflict so that the clients would be able to make an informed decision regarding the vote. When a client does not respond to such a conflict disclosure request or denies the request, RadiantESG will abstain from voting the securities held by that client's account.

**Limitations**

In certain circumstances, in accordance with a client's investment advisory agreement (or other written directive) or where RadiantESG has determined that it is in the client's best interest, RadiantESG will not vote proxies received. The following are some circumstances where RadiantESG will limit its role in voting proxies received on client securities:

a. Client Maintains Proxy Voting Authority: Where a client specifies in writing that it will maintain the authority to vote proxies itself or that it has delegated the right to vote proxies to a third party, RadiantESG will not vote the securities and will direct the relevant custodian to send the proxy material directly to the client. Any proxy material received by RadiantESG will promptly be forwarded to the client.

b. Limited Value or Terminated Account: If RadiantESG concludes that the client's economic interest or the value of the portfolio holding is indeterminable or insignificant, RadiantESG will abstain from voting a client's proxies. RadiantESG will also abstain from voting a client's proxies where a proxy is received for a client's account that has been terminated. Regardless of any applicable record date of an issuer, RadiantESG will not vote proxies received for securities that are no longer held in a client's account.

c. Unjustifiable Costs: In certain circumstances, after doing a cost-benefit analysis, RadiantESG may abstain from voting where the cost of voting a client's proxy would exceed any anticipated benefits of the proxy proposal.

d. Shareblocking countries which prohibit the sale of securities for a period of time before and after the vote date.

**Disclosure to Clients**

Rule 206(4)-6 under the Advisers Act requires registered investment advisers to provide clients with a concise summary of RadiantESG's proxy voting policies and procedures and, upon request, to provide clients with a copy of such policies and procedures.

RadiantESG will describe in its Part 2 of Form ADV its proxy voting policies and procedures and advise clients how they may obtain information on how RadiantESG voted their securities. Clients may obtain information on RadiantESG's policies and procedures by written request addressed to RadiantESG.

RadiantESG will provide summaries on voting activities to clients who have made the requests, usually at quarterly intervals. These reports shall contain both quantitative and qualitative information.

**Record Keeping**

In accordance with Rule 204-2 under the Advisers Act, RadiantESG will maintain for the time periods set forth in the Rule:

a. This policy and any amendments thereto;

b. All proxy statements received regarding client securities (provided however, that RadiantESG may rely on the proxy statement filed on EDGAR as its records so long as it maintains a separate record identifying the statements that were received and relied upon);

c. A record of votes cast on behalf of clients (RadiantESG may rely on records of proxy votes maintained by a proxy voting service if the service has undertaken to provide a copy of such records promptly upon request);

d. Records of client requests for proxy voting information and RadiantESG's written responses to written or oral requests;

e. Any documents prepared by RadiantESG that were material to making a decision as to how to vote or that memorialized the basis for the decision; and

f. Records relating to requests made to clients regarding conflicts of interest in voting the proxy.

Form N-PX. Rule 30b1-4 under the 1940 Act requires mutual funds, as registered investment companies, to file, by August 31 of each year, their complete proxy voting records on Form N-PX for the 12-month period ended June 30. The CCO or person acting in a like capacity will review all reports on Form N-PX of the mutual fund clients of RadiantESG and assist the funds in the timely filing of all such reports on Form N-PX.

**APPENDIX B: ISS SUSTAINABILITY PROXY VOTING GUIDELINES**

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**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| [**Introduction**](#e_001) | [**8**](#e_001) |
| [**1. Routine/Miscellaneous**](#e_002) | [9](#e_002) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Adjourn Meeting](#e_003) | [9](#e_003) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Amend Quorum Requirements](#e_004) | [9](#e_004) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Amend Minor Bylaws](#e_005) | [9](#e_005) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Change Company Name](#e_006) | [9](#e_006) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Change Date, Time, or Location of Annual Meeting](#e_007) | [9](#e_007) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Other Business](#e_008) | [10](#e_008) |
| &nbsp;&nbsp;&nbsp;[Audit-Related](#e_009) | [10](#e_009) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Auditor Indemnification and Limitation of Liability](#e_010) | [10](#e_010) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Auditor Ratification](#e_011) | [10](#e_011) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals Limiting Non-Audit Services](#e_012) | [11](#e_012) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals on Audit Firm Rotation](#e_013) | [11](#e_013) |
| **[2. Board of Directors](#e_014)** | **[12](#e_014)** |
| &nbsp;&nbsp;&nbsp;[Voting on Director Nominees in Uncontested Elections](#e_015) | [12](#e_015) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Accountability](#e_016) | [12](#e_016) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Takeover Defenses, Capital Structure, and Governance Structures](#e_017) | [12](#e_017) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Audit-Related Practices](#e_018) | [15](#e_018) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Compensation Practices](#e_019) | [15](#e_019) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Environmental, Social and Governance (ESG) Failures](#e_020) | [16](#e_020) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Climate Risk Mitigation and Net Zero](#e_021) | [16](#e_021) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Responsiveness](#e_022) | [17](#e_022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Composition](#e_023) | [18](#e_023) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Gender Diversity](#e_024) | [18](#e_024) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Racial and/or Ethnic Diversity](#e_025) | [18](#e_025) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Independence](#e_026) | [18](#e_026) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Sustainability Policy Classification of Directors – U.S.](#e_027) | [20](#e_027) |
| &nbsp;&nbsp;&nbsp;[Other Board-Related Proposals](#e_028) | [22](#e_028) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Board Refreshment](#e_029) | [22](#e_029) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Board Size](#e_030) | [23](#e_030) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Classification/Declassification of the Board](#e_031) | [23](#e_031) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[CEO Succession Planning](#e_032) | [23](#e_032) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Cumulative Voting](#e_033) | [23](#e_033) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Director and Officer Indemnification, Liability Protection, and Exculpation](#e_034) | [24](#e_034) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Establish/Amend Nominee Qualifications](#e_035) | [24](#e_035) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Establish Other Board Committee Proposals](#e_036) | [24](#e_036) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Filling Vacancies/Removal of Directors](#e_037) | [25](#e_037) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Independent Board Chair](#e_038) | [25](#e_038) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Majority of Independent Directors/Establishment of Independent Committees](#e_039) | [25](#e_039) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Majority Vote Standard for the Election of Directors](#e_040) | [25](#e_040) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Access](#e_041) | [26](#e_041) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Require More Nominees than Open Seats](#e_042) | [26](#e_042) |

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<u>W W W . I S S G O V E R N A N C E . C O M</u> 2 of 82

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Engagement Policy (Shareholder Advisory Committee)](#e_043) | [26](#e_043) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Contests/Proxy Access - Voting for Director Nominees in Contested Elections](#e_044) | [26](#e_044) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Vote-No Campaigns](#e_045) | [27](#e_045) |
| [**3. Shareholder Rights & Defenses**](#e_046) | [**28**](#e_046) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Advance Notice Requirements for Shareholder Proposals/Nominations](#e_047) | [28](#e_047) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Amend Bylaws without Shareholder Consent](#e_048) | [28](#e_048) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Control Share Acquisition Provisions](#e_049) | [28](#e_049) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Control Share Cash-Out Provisions](#e_050) | [28](#e_050) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Disgorgement Provisions](#e_051) | [29](#e_051) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Fair Price Provisions](#e_052) | [29](#e_052) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Freeze-Out Provisions](#e_053) | [29](#e_053) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Greenmail](#e_054) | [29](#e_054) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Litigation Rights](#e_055) | [29](#e_055) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Federal Forum Selection Provisions](#e_055) | [29](#e_056) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Exclusive Forum Provisions for State Law Matters](#e_057) | [30](#e_057) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Fee Shifting](#e_058) | [30](#e_058) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Net Operating Loss (NOL) Protective Amendments](#e_059) | [30](#e_059) |
| &nbsp;&nbsp;&nbsp;[Poison Pills (Shareholder Rights Plans)](#e_060) | [31](#e_060) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy](#e_061) | [31](#e_061) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management Proposals to Ratify a Poison Pill](#e_062) | [31](#e_062) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)](#e_063) | [32](#e_063) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Voting Disclosure, Confidentiality, and Tabulation](#e_064) | [32](#e_064) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions](#e_065) | [32](#e_065) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reimbursing Proxy Solicitation Expenses](#e_066) | [33](#e_066) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reincorporation Proposals](#e_067) | [33](#e_067) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ability to Act by Written Consent](#e_068) | [33](#e_068) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ability to Call Special Meetings](#e_069) | [34](#e_069) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Stakeholder Provisions](#e_070) | [34](#e_070) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[State Antitakeover Statutes](#e_071) | [34](#e_071) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Supermajority Vote Requirements](#e_072) | [34](#e_072) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Virtual Shareholder Meetings](#e_073) | [35](#e_073) |
| [**4. Capital/Restructuring**](#e_074) | [**36**](#e_074) |
| &nbsp;&nbsp;&nbsp;[Capital](#e_075) | [36](#e_075) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Adjustments to Par Value of Common Stock](#e_076) | [36](#e_076) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Common Stock Authorization](#e_077) | [36](#e_077) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[General Authorization Requests](#e_078) | [36](#e_078) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Specific Authorization Requests](#e_079) | [37](#e_079) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Dual Class Structure](#e_080) | [37](#e_080) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Issue Stock for Use with Rights Plan](#e_081) | [37](#e_081) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Preemptive Rights](#e_082) | [37](#e_082) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Preferred Stock Authorization](#e_083) | [37](#e_083) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[General Authorization Requests](#e_084) | [37](#e_084) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Specific Authorization Requests](#e_085) | [38](#e_085) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Recapitalization Plans](#e_086) | [39](#e_086) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reverse Stock Splits](#e_087) | [39](#e_087) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Share Repurchase Programs](#e_088) | [39](#e_088) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Stock Distributions: Splits and Dividends](#e_089) | [39](#e_089) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Tracking Stock](#e_090) | [40](#e_090) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S.](#e_091) | [40](#e_091) |
| &nbsp;&nbsp;&nbsp;[Restructuring](#e_092) | [40](#e_092) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Appraisal Rights](#e_093) | [40](#e_093) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Asset Purchases](#e_094) | [40](#e_094) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Asset Sales](#e_095) | [41](#e_095) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Bundled Proposals](#e_096) | [41](#e_096) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Conversion of Securities](#e_097) | [41](#e_097) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans](#e_098) | [41](#e_098) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Formation of Holding Company](#e_099) | [42](#e_099) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Going Private and Going Dark Transactions (LBOs and Minority Squeeze-outs)](#e_100) | [42](#e_100) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Joint Ventures](#e_101) | [42](#e_101) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Liquidations](#e_102) | [43](#e_102) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Mergers and Acquisitions](#e_103) | [43](#e_103) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Private Placements/Warrants/Convertible Debentures](#e_104) | [43](#e_104) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reorganization/Restructuring Plan (Bankruptcy)](#e_105) | [44](#e_105) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Special Purpose Acquisition Corporations (SPACs)](#e_106) | [45](#e_106) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions](#e_107) | [45](#e_107) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Spin-offs](#e_108) | [46](#e_108) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Value Maximization Shareholder Proposals](#e_109) | [46](#e_109) |
| [**5.&nbsp;&nbsp;&nbsp;&nbsp;Compensation**](#e_110) | [**47**](#e_110) |
| &nbsp;&nbsp;&nbsp;[Executive Pay Evaluation](#e_110a) | [47](#e_110a) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Advisory Votes on Executive Compensation—Management Proposals (Management Say-on-Pay)](#e_111) | [47](#e_111) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pay-for-Performance Evaluation](#e_113) | [48](#e_113) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Pay Practices](#e_114) | [49](#e_114) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Compensation Committee Communications and Responsiveness](#e_116) | [49](#e_116) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")](#e_117) | [50](#e_117) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale](#e_118) | [50](#e_118) |
| &nbsp;&nbsp;&nbsp;[Equity-Based and Other Incentive Plans](#e_119) | [51](#e_119) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Value Transfer (SVT)](#e_121) | [52](#e_121) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Three-Year Value-Adjusted Burn Rate](#e_122) | [52](#e_122) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Egregious Factors](#e_123) | [52](#e_123) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Liberal Change in Control Definition](#e_124) | [52](#e_124) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Repricing Provisions](#e_125) | [53](#e_125) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Problematic Pay Practices or Significant Pay-for-Performance Disconnect](#e_126) | [53](#e_126) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Specific Treatment of Certain Award Types in Equity Plan Evaluations](#e_127) | [53](#e_127) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Dividend Equivalent Rights](#e_128) | [53](#e_128) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)](#e_129) | [54](#e_129) |
| &nbsp;&nbsp;&nbsp;[Other Compensation Plans](#e_130) | [54](#e_130) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[401(k) Employee Benefit Plans](#e_131) | [54](#e_131) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Ownership Plans (ESOPs)](#e_132) | [54](#e_132) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Purchase Plans—Qualified Plans](#e_133) | [54](#e_133) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Employee Stock Purchase Plans—Non-Qualified Plans](#e_134) | [54](#e_134) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))](#e_135) | [55](#e_135) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Option Exchange Programs/Repricing Options](#e_136) | [55](#e_136) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Stock Plans in Lieu of Cash](#e_137) | [56](#e_137) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Transfer Stock Option (TSO) Programs](#e_138) | [56](#e_138) |
| &nbsp;&nbsp;&nbsp;[Director Compensation](#e_139) | [57](#e_139) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Shareholder Ratification of Director Pay Programs](#e_140) | [57](#e_140) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Equity Plans for Non-Employee Directors](#e_141) | [57](#e_141) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Non-Employee Director Retirement Plans](#e_142) | [58](#e_142) |
| &nbsp;&nbsp;&nbsp;[Shareholder Proposals on Compensation](#e_143) | [58](#e_143) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Adopt Anti-Hedging/Pledging/Speculative Investments Policy](#e_144) | [58](#e_144) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Bonus Banking/Bonus Banking "Plus"](#e_145) | [58](#e_145) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Compensation Consultants—Disclosure of Board or Company's Utilization](#e_146) | [58](#e_146) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Disclosure/Setting Levels or Types of Compensation for Executives and Directors](#e_147) | [58](#e_147) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Golden Coffins/Executive Death Benefits](#e_148) | [59](#e_148) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Hold Equity Past Retirement or for a Significant Period of Time](#e_149) | [59](#e_149) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pay Disparity](#e_150) | [59](#e_150) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pay for Performance/Performance-Based Awards](#e_151) | [59](#e_151) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pay for Superior Performance](#e_152) | [60](#e_152) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pre-Arranged Trading Plans (10b5-1 Plans)](#e_153) | [60](#e_153) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Prohibit Outside CEOs from Serving on Compensation Committees](#e_154) | [60](#e_154) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Recoupment of Incentive or Stock Compensation in Specified Circumstances](#e_155) | [61](#e_155) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Severance Agreements for Executives/Golden Parachutes](#e_156) | [61](#e_156) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Share Buyback Proposals](#e_157) | [61](#e_157) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Supplemental Executive Retirement Plans (SERPs)](#e_158) | [62](#e_158) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Tax Gross-Up Proposals](#e_159) | [62](#e_159) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity](#e_160) | [62](#e_160) |
| [**6. Social and Environmental Issues**](#e_161) | [**63**](#e_161) |
| &nbsp;&nbsp;&nbsp;[Global Approach](#e_162) | [63](#e_162) |
| &nbsp;&nbsp;&nbsp;[Animal Welfare](#e_163) | [63](#e_163) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Animal Welfare Policies](#e_163) | [63](#e_163) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Animal Testing](#e_164) | [63](#e_164) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Animal Slaughter](#e_165) | [64](#e_165) |
| &nbsp;&nbsp;&nbsp;[Consumer Issues](#e_166) | [64](#e_166) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Genetically Modified Ingredients](#e_167) | [64](#e_167) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reports on Potentially Controversial Business/Financial Practices](#e_168) | [64](#e_168) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consumer Lending](#e_169) | [65](#e_169) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Pharmaceutical Pricing, Access to Medicines, Product Reimportation and Health Pandemics](#e_170) | [65](#e_170) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Health Pandemics](#e_171) | [65](#e_171) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Product Safety and Toxic/Hazardous Materials](#e_172) | [66](#e_172) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Tobacco-Related Proposals](#e_173) | [66](#e_173) |
| &nbsp;&nbsp;&nbsp;[Climate Change](#e_174) | [66](#e_174) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Climate Change/Greenhouse Gas (GHG) Emissions](#e_175) | [66](#e_175) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Say on Climate (SoC) Management Proposals](#e_176) | [67](#e_176) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Say on Climate (SoC) Shareholder Proposals](#e_177) | [67](#e_177) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Energy Efficiency](#e_178) | [68](#e_178) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Renewable Energy](#e_179) | [68](#e_179) |
| &nbsp;&nbsp;&nbsp;[Diversity](#e_180) | [68](#e_180) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Board Diversity](#e_181) | [68](#e_181) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Equality of Opportunity](#e_182) | [68](#e_182) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Gender Identity, Sexual Orientation, and Domestic Partner Benefits](#e_183) | [68](#e_183) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Gender, Race/Ethnicity Pay Gap](#e_184) | [69](#e_184) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Racial Equity and/or Civil Rights Audits](#e_185) | [69](#e_185) |
| &nbsp;&nbsp;&nbsp;[Environment and Sustainability](#e_186) | [69](#e_186) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Facility and Workplace Safety](#e_187) | [69](#e_187) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Hydraulic Fracturing](#e_188) | [69](#e_188) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Operations in Protected Areas](#e_189) | [69](#e_189) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Recycling](#e_190) | [70](#e_190) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Sustainability Reporting](#e_191) | [70](#e_191) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Water Issues](#e_192) | [70](#e_192) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Equator Principles](#e_193) | [71](#e_193) |
| &nbsp;&nbsp;&nbsp;[General Corporate Issues](#e_194) | [71](#e_194) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Charitable Contributions](#e_195) | [71](#e_195) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Data Security, Privacy, and Internet Issues](#e_196) | [71](#e_196) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Environmental, Social, and Governance (ESG) Compensation-Related Proposals](#e_197) | [71](#e_197) |
| &nbsp;&nbsp;&nbsp;[Human Rights, Labor Issues, and International Operations](#e_198) | [72](#e_198) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Human Rights Proposals](#e_199) | [72](#e_199) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Mandatory Arbitration](#e_200) | [73](#e_200) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[MacBride Principles](#e_201) | [73](#e_201) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Community Social and Environmental Impact Assessments](#e_202) | [73](#e_202) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Operations in High-Risk Markets](#e_203) | [73](#e_203) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Outsourcing/Offshoring](#e_204) | [74](#e_204) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Sexual Harassment](#e_205) | [74](#e_205) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Weapons and Military Sales](#e_206) | [74](#e_206) |
| &nbsp;&nbsp;&nbsp;[Political Activities](#e_207) | [74](#e_207) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Lobbying](#e_208) | [74](#e_208) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Political Contributions](#e_209) | [75](#e_209) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Political Ties](#e_210) | [75](#e_210) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Political Expenditures and Lobbying Congruency](#e_211) | [75](#e_211) |
| [**7.&nbsp;&nbsp;&nbsp;&nbsp;Mutual Fund Proxies**](#e_212) | [**76**](#e_212) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Election of Directors](#e_213) | [76](#e_213) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes](#a214) | [76](#a214) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Converting Closed-end Fund to Open-end Fund](#a215) | [76](#a215) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Proxy Contests](#a216) | [76](#a216) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Investment Advisory Agreements](#a217) | [77](#a217) |

---

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---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Approving New Classes or Series of Shares](#a218) | [77](#a218) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Preferred Stock Proposals](#a219) | [77](#a219) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[1940 Act Policies](#a220) | [77](#a220) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Changing a Fundamental Restriction to a Nonfundamental Restriction](#a221) | [77](#a221) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Change Fundamental Investment Objective to Nonfundamental](#a222) | [78](#a222) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Name Change Proposals](#a223) | [78](#a223) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Change in Fund's Subclassification](#a224) | [78](#a224) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value](#a225) | [78](#a225) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Disposition of Assets/Termination/Liquidation](#a226) | [78](#a226) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Changes to the Charter Document](#a227) | [79](#a227) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Changing the Domicile of a Fund](#a228) | [79](#a228) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval](#a229) | [79](#a229) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Distribution Agreements](#a230) | [79](#a230) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Master-Feeder Structure](#a231) | [79](#a231) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Mergers](#a232) | [80](#a232) |
| &nbsp;&nbsp;&nbsp;[Shareholder Proposals for Mutual Funds](#a233) | [80](#a233) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Establish Director Ownership Requirement](#a234) | [80](#a234) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Reimburse Shareholder for Expenses Incurred](#a235) | [80](#a235) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Terminate the Investment Advisor](#a236) | [80](#a236) |
| **[8.&nbsp;&nbsp;&nbsp;&nbsp;Foreign Private Issuers Listed on U.S. Exchanges](#a237)** | **[81](#a237)** |

---

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## Introduction
ISS recognizes the growing view among investment professionals that sustainability or environmental, social, and corporate governance (ESG) factors could present material risks to portfolio investments. Whereas investment managers have traditionally analyzed topics such as board accountability and executive compensation to mitigate risk, greater numbers are incorporating ESG performance into their investment making decisions in order to have a more comprehensive understanding of the overall risk profile of the companies in which they invest and ensure sustainable long-term profitability for their beneficiaries.

Investors concerned with portfolio value preservation and enhancement through the incorporation of sustainability factors can also carry out this active ownership approach through their proxy voting activity. In voting their shares, sustainability-minded investors are concerned not only with economic returns to shareholders and good corporate governance, but also with ensuring corporate activities and practices are aligned with the broader objectives of society. These investors seek standardized reporting on ESG issues, request information regarding an issuer's adoption of, or adherence to, relevant norms, standards, codes of conduct or universally recognized international initiatives including affirmative support for related shareholder resolutions advocating enhanced disclosure and transparency.

#### ISS' Sustainability Proxy Voting Guidelines
ISS has, therefore, developed proxy voting guidelines that are consistent with the objectives of sustainability-minded investors and fiduciaries. On matters of ESG import, ISS' Sustainability Policy seeks to promote support for recognized global governing bodies promoting sustainable business practices advocating for stewardship of environment, fair labor practices, non-discrimination, and the protection of human rights. Generally, ISS' Sustainability Policy will take as its frame of reference internationally recognized sustainability-related initiatives such as the United Nations Environment Programme Finance Initiative (UNEP FI), United Nations Principles for Responsible Investment (UNPRI), United Nations Global Compact, Global Reporting Initiative (GRI), Carbon Principles, International Labour Organization Conventions (ILO), Ceres Roadmap 2030, Global Sullivan Principles, MacBride Principles, and environmental and social European Union Directives. Each of these efforts promote a fair, unified and productive reporting and compliance environment which advances positive corporate ESG actions that promote practices that present new opportunities or that mitigate related financial and reputational risks.

On matters of corporate governance, executive compensation, and corporate structure, the Sustainability Policy guidelines are based on a commitment to create and preserve economic value and to advance principles of good corporate governance.

These guidelines provide an overview of how ISS approaches proxy voting issues for subscribers of the Sustainability Policy. We note there may be cases in which the final vote recommendation at a particular company varies from the voting guidelines due to the fact that we closely examine the merits of each proposal and consider relevant information and company-specific circumstances in arriving at our decisions. To that end, ISS engages with both interested shareholders as well as issuers to gain further insight into contentious issues facing the company. Where ISS acts as voting agent for clients, it follows each client's voting policy, which may differ in some cases from the policies outlined in this document. ISS updates its guidelines on an annual basis to take into account emerging issues and trends on environmental, social and corporate governance topics, as well as the evolution of market standards, regulatory changes and client feedback.

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1. Routine/Miscellaneous

### Adjourn Meeting
**Sustainability Policy Recommendation:** Generally vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.

▪ 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."

### Amend Quorum Requirements
**Sustainability Policy Recommendation:** Vote case-by-case on proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding, taking into consideration:

▪ 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.

In general, a quorum threshold kept as close to a majority of shares outstanding as is achievable is preferred.

Vote case-by-case on directors who unilaterally lower the quorum requirements below a majority of the shares outstanding, taking into consideration the factors listed above.

### Amend Minor Bylaws
**Sustainability Policy Recommendation:** Vote for bylaw or charter changes that are of a housekeeping nature (updates or corrections).

### Change Company Name
**Sustainability Policy Recommendation:** Vote for proposals to change the corporate name unless there is compelling evidence that the change would adversely impact shareholder value.

### Change Date, Time, or Location of Annual Meeting
**Sustainability Policy Recommendation:** Vote for management proposals to change the date, time, or location of the annual meeting unless the proposed change is unreasonable.

Vote against shareholder proposals to change the date, time, or location of the annual meeting unless the current scheduling or location is unreasonable.

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### Other Business
**Sustainability Policy Recommendation:** Vote against proposals to approve other business when it appears as voting item.

Audit-Related

### Auditor Indemnification and Limitation of Liability
**Sustainability Policy Recommendation:** Vote case-by-case on the issue of auditor indemnification and limitation of liability. Factors to be assessed include, but are not limited to:

▪ 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.

Vote against or withhold from members of an audit committee in situations where 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.

### Auditor Ratification
**Sustainability Policy Recommendation:** Vote for proposals to ratify auditors unless any of the following apply:

&nbsp;&nbsp;&nbsp;&nbsp;▪ An
 auditor has a financial interest in or association with the company, and is therefore not
 independent;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ Fees
 for non-audit services ("Other" fees) are excessive.

Non-audit fees are excessive if:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Non-audit
 ("other") fees > audit fees + audit-related fees + tax compliance/preparation
 fees

Tax compliance and preparation include the preparation of original and amended tax returns and refund claims, and tax payment planning. All other services in the tax category, such as tax advice, planning, or consulting, should be added to "Other" fees. If the breakout of tax fees cannot be determined, add all tax fees to "Other" fees.

In circumstances where "Other" fees include fees related to significant one-time capital structure events (such as initial public offerings, bankruptcy emergence, and spin-offs) and the company makes public disclosure of the amount and nature of those fees that are an exception to the standard "non-audit fee" category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.

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### Shareholder Proposals Limiting Non-Audit Services
**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

### Shareholder Proposals on Audit Firm Rotation
**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals asking for audit firm rotation, taking into account:

▪ 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.

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2.&nbsp;&nbsp;&nbsp;&nbsp;Board of Directors

Voting on Director Nominees in Uncontested Elections

Four fundamental principles apply when determining votes on director nominees:

▪ *<u>Accountability</u>* :
 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.

▪ *<u>Responsiveness</u>* :
 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.

▪ *<u>Composition</u>* :
 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.

▪ *<u>Independence</u>* :
 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.

**Sustainability Policy Recommendation:** Generally vote for director nominees, except under the following circumstances (with new nominees**<sup>1</sup>** considered on a case-by-case basis):

### Accountability

#### Problematic Takeover Defenses, Capital Structure, and Governance Structures
**Classified Board Structure:** The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable.

**Removal of Shareholder Discretion on Classified Boards:** The company has opted into, or failed to opt out of, state laws requiring a classified board structure.

**Director Performance Evaluation:** The board lacks mechanisms to promote accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one-, three-, and five-year total shareholder returns in the bottom half of a company's four-digit GICS industry group (Russell 3000<br>

**<sup>1</sup>** 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.

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companies only). Take into consideration the company's operational metrics and other factors as warranted. Problematic provisions include but are not limited to:

▪ 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.

**Poison Pills:** Generally vote against or withhold from all nominees (except new nominees<sup>1</sup>, who should be considered case-by-case) if:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has a poison pill with a deadhand or slowhand feature<sup>2</sup>;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has a long-term poison pill (with a term of over one year) that was not approved
 by the public shareholders **<sup>3</sup>**.

Vote case-by-case on nominees if the board adopts an initial short-term pill**<sup>3</sup>** (with a term of one year or less) without shareholder approval, taking into consideration:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

**Unilateral Bylaw/Charter Amendments:** Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees<sup>2</sup>, who should be considered case-by-case) if the board amends the company's bylaws or charter without shareholder approval in a manner that materially diminishes shareholders' rights or that could adversely impact shareholders, considering the following factors:

▪ 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. <br>
<br>

<sup>2</sup> If the 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.

<sup>3</sup> 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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Unless the adverse amendment is reversed or submitted to a binding shareholder vote, in subsequent years vote case-by-case on director nominees.

Generally vote against (except new nominees, who should be considered case-by-case) if the directors:

▪ 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.

**Problematic Governance Structure:** For companies that hold or held their first annual meeting**<sup>7</sup>** of public shareholders after Feb. 1, 2015, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees<sup>1</sup>, who should be considered case-by-case) if, prior to or in connection with the company's public offering, the company or its board adopted the following bylaw or charter provisions that are considered to be materially adverse to shareholder rights

▪ Supermajority
 vote requirements to amend the bylaws or charter;

▪ A
 classified board structure; or

▪ Other
 egregious provisions.

A provision which specifies that the problematic structure(s) will be sunset within seven years of the date of going public will be considered a mitigating factor.

Unless the adverse provision is reversed or removed, vote case-by-case on director nominees in subsequent years.

**Unequal Voting Rights:** Generally vote withhold or against directors individually, committee members, or the entire board (except new nominees<sup>1</sup>, who should be considered case-by-case), if the company employs a common stock structure with unequal voting rights**<sup>5</sup>**.

Exceptions to this policy will generally be limited to:

▪ Newly-public
 companies **<sup>6</sup>** 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.

**Management Proposals to Ratify Existing Charter or Bylaw Provisions:** Vote against/withhold from individual directors, members of the governance committee, or the full board, where boards ask shareholders to ratify existing charter or bylaw provisions considering the following factors:

▪ 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;

<sup>4</sup> Includes companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public offering.

<sup>5</sup> 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").

<sup>6</sup> 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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▪ 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.

**Restricting Binding Shareholder Proposals:** Generally vote against or withhold from members of the governance committee if:

▪ 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.

Submission of management proposals to approve or ratify requirements in excess of SEC Rule 14a-8 for the submission of binding bylaw amendments will generally be viewed as an insufficient restoration of shareholders' rights. Generally, continue to vote against or withhold on an ongoing basis until shareholders are provided with an unfettered ability to amend the bylaws or a proposal providing for such unfettered right is submitted for shareholder approval.

#### Problematic Audit-Related Practices
Generally, vote against or withhold from the members of the audit committee if:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 non-audit fees paid to the auditor are excessive (see discussion under "Auditor Ratification");

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company receives an adverse opinion on the company's financial statements from its
 auditor; or

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote case-by-case on members of the audit committee and potentially the full board if:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

#### Problematic Compensation Practices
In the absence of an Advisory Vote on Executive Compensation (Say on Pay) ballot item or in egregious situations, vote against or withhold from the members of the compensation committee and potentially the full board if:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company fails to include a Frequency of Say on Pay ballot item when required under SEC provisions.

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Generally vote against members of the board committee responsible for approving/setting non-employee director compensation if there is a pattern (i.e. two or more years) of awarding excessive non-employee director compensation without disclosing a compelling rationale or other mitigating factors.

**Problematic Pledging of Company Stock:** Vote against the members of the committee that oversees risks related to pledging, or the full board, where a significant level of pledged company stock by executives or directors raises concerns. The following factors will be considered:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 presence of an anti-pledging policy, disclosed in the proxy statement, that prohibits future
 pledging activity;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 magnitude of aggregate pledged shares in terms of total common shares outstanding, market
 value, and trading volume;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure
 of progress or lack thereof in reducing the magnitude of aggregate pledged shares over time;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure
 in the proxy statement that shares subject to stock ownership and holding requirements do
 not include pledged company stock; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Any
 other relevant factors.

#### Environmental, Social and Governance (ESG) Failures
Under extraordinary circumstances, vote against or withhold from directors individually, committee members, or the entire board, due to:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Material
 failures of governance, stewardship, risk oversight **<sup>7</sup>**, or fiduciary responsibilities
 at the company, including failure to adequately guard against or manage ESG risks;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Failure
 to replace management as appropriate; or

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

#### Climate Risk Mitigation and Net Zero
For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain**<sup>8</sup>**, generally vote against or withhold from the incumbent chair of the responsible committee (or other directors on a case-by-case basis) in cases where Sustainability Advisory Services determines that the company is not taking the minimum steps need to be aligned with a Net Zero by 2050 trajectory.

For **2023**, the minimum steps needed to be considered to be aligned with a Net Zero by 2050 trajectory are (all minimum criteria will be required to be in alignment with the policy):

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Board
 governance measures;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Corporate
 strategy;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Risk
 management analyses; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Metrics
 and targets.

<sup>7</sup> 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.

<sup>8</sup> For 2023, companies defined as "significant GHG emitters" will be those on the current Climate Action 100+ Focus Group list.

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&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has declared a Net Zero target by 2050 or sooner and the target includes scope 1,
 2, and relevant scope 3 emissions.

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has set a medium-term target for reducing its GHG emissions.

Expectations about what constitutes "minimum steps needed to be aligned with a Net Zero by 2050 trajectory" will increase over time.

### Responsiveness
Vote case-by-case on individual directors, committee members, or the entire board of directors as appropriate if:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote case-by-case on compensation committee members (or, in exceptional cases, the full board) and the Say on Pay proposal if:

▪ The
 company's previous say-on-pay received the support of less than 70 percent of votes
 cast. Factors that will be considered are:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's response, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure
 of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure
 of specific and meaningful actions taken to address shareholders' concerns;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Other
 recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether
 the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether
 the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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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### Composition
**Attendance at Board and Committee Meetings:** Generally vote against or withhold from directors (except nominees who served only part of the fiscal year**<sup>9</sup>**) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Medical
 issues/illness;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Family
 emergencies; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Missing
 only one meeting (when the total of all meetings is three or fewer).

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote against or withhold from the director(s) in question.

**Overboarded Directors:** Generally, vote against or withhold from individual directors who:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Sit
 on more than five public company boards; or

&nbsp;&nbsp;&nbsp;&nbsp;▪ Are
 CEOs of public companies who sit on the boards of more than two public companies besides
 their own— withhold only at their outside boards **<sup>10</sup>**.

#### Gender Diversity
**Sustainability Policy Recommendation:** Generally vote against or withhold from the chair of the nominating committee, or other nominees on a case-by-case basis, if the board lacks at least one director of an underrepresented gender identity**<sup>11</sup>**.

#### Racial and/or Ethnic Diversity
**Sustainability Policy Recommendation:** Generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members**<sup>12</sup>**.

### Independence
Vote against or withhold from non-independent directors (Executive Directors and Non-Independent Non-Executive Directors per Sustainability Advisory Services' Classification of Directors) when:

<sup>9</sup> Nominees who served for only part of the fiscal year are generally exempted from the attendance policy.

<sup>10</sup> 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.

<sup>11</sup> Underrepresented gender identity includes directors who identify as women or as non-binary.

<sup>12</sup> Aggregate diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity.

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&nbsp;&nbsp;&nbsp;&nbsp;▪ Independent
 directors comprise 50 percent or less of the board;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 non-independent director serves on the audit, compensation, or nominating committee;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company lacks an audit, compensation, or nominating committee so that the full board functions
 as that committee; or

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company lacks a formal nominating committee, even if the board attests that the independent
 directors fulfill the functions of such a committee.

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#### Sustainability Policy Classification of Directors – U.S.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Executive
 Director

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1. Current
 officer  ***<sup>[1]</sup>*** of the company or one of its affiliates  ***<sup>[2]</sup>*** .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Non-Independent
 Non-Executive Director<br> <u>Board Identification</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. Director
 identified as not independent by the board.

Controlling/Significant Shareholder

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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).

Current Employment at Company or Partnership

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3. Non-officer
 employee of the firm (including employee representatives).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4. Officer  ***<sup>[1]</sup>*** ,
 former officer, or general or limited partner of a joint venture or partnership with the
 company.

Former Employment

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5. Former
 CEO of the company.  ***<sup>[3],[4]</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6. Former
 non-CEO officer  ***<sup>[1]</sup>*** of the company or an affiliate  ***<sup>[2]</sup>*** within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7. Former
 officer *<sup>[1]</sup>* of an acquired company within the past five years  ***<sup>[4]</sup>*** .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8. Officer  ***<sup>[1]</sup>*** of a former parent or predecessor firm at the time the company
 was sold or split off within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.  ***<sup>[5]</sup>*** 

Family Members

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10. Immediate
 family member  ***<sup>[6]</sup>*** of a current or former officer  ***<sup>[1]</sup>*** of the company or its affiliates  ***<sup>[2]</sup>*** within the last five years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11. Immediate
 family member  ***<sup>[6]</sup>*** of a current employee of company or its affiliates  ***<sup>[2]</sup>*** 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).

Professional, Transactional, and Charitable Relationships

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12. Director
 who (or whose immediate family member  ***<sup>[6]</sup>***) currently provides professional
 services  ***<sup>[7]</sup>*** in excess of $10,000 per year to: the company, an affiliate  ***<sup>[2]</sup>*** ,
 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13. Director
 who (or whose immediate family member  ***<sup>[6]</sup>***) currently has any material
 transactional relationship  ***<sup>[8]</sup>*** with the company or its affiliates  ***<sup>[2]</sup>*** ;
 or who is (or whose immediately family member *<sup>[6]</sup>* is) a partner in, or a
 controlling shareholder or an executive officer of, an organization which has the material
 transactional relationship *<sup>[8]</sup>* (excluding investments in the company through
 a private placement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14. Director
 who (or whose immediate family member  ***<sup>[6]</sup>***) is a trustee, director,
 or employee of a charitable or non-profit organization that receives material grants or endowments  ***<sup>[8]</sup>*** from the company or its affiliates  ***<sup>[2]</sup>*** .

Other Relationships

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15. Party
 to a voting agreement  ***<sup>[9]</sup>*** to vote in line with management on proposals
 being brought to shareholder vote.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16. Has (or
 an immediate family member  ***<sup>[6]</sup>*** has) an interlocking relationship
 as defined by the SEC involving members of the board of directors or its Compensation Committee  ***<sup>[10]</sup>*** .

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17. Founder  ***<sup>[11]</sup>*** of the company but not currently an employee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18. Director
 with pay comparable to Named Executive Officers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19. Any material  ***<sup>[12]</sup>*** relationship with the company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Independent
 Director

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1. No material  ***<sup>[12]</sup>*** connection to the company other than a board seat.

#### Footnotes:
***<sup>[1]</sup>***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.

***<sup>[2]</sup>*** "Affiliate" includes a subsidiary, sibling company, or parent company. Sustainability Advisory Services 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.

***<sup>[3]</sup>*** Includes any former CEO of the company prior to the company's initial public offering (IPO).

***<sup>[4]</sup>*** When there is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, Sustainability Advisory Services 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.

***<sup>[5]</sup>*** Sustainability Advisory Services 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. Sustainability Advisory Services will also consider if a formal search process was under way for a full-time officer at the time.

***<sup>[6]</sup>*** "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.

***<sup>[7]</sup>*** 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

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a professional relationship. Insurance services and marketing services are assumed to be professional services unless the company explains why such services are not advisory.

***<sup>[8]</sup>*** 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, Sustainability Advisory Services will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).

***<sup>[9]</sup>*** 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.

***<sup>[10]</sup>*** 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).

***<sup>[11]</sup>*** The operating involvement of the founder with the company will be considered; if the founder was never employed by the company, Sustainability Advisory Services may deem him or her an independent outsider.

***<sup>[12]</sup>*** 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.

Other Board-Related Proposals

### Board Refreshment
Board refreshment is best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs of the board are met and to bring in fresh perspectives, skills, and diversity as needed.

#### Term/Tenure Limits
**Sustainability Policy Recommendation:** Vote case-by-case on management proposals regarding director term/tenure limits, considering:

▪ 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.

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Vote case-by-case on shareholder proposals asking for the company to adopt director term/tenure limits, considering:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 scope of the shareholder proposal; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Evidence
 of problematic issues at the company combined with, or exacerbated by, a lack of board refreshment.

#### Age Limits
**Sustainability Policy Recommendation:** Generally vote against management and shareholder proposals to limit the tenure of independent directors through mandatory retirement ages. Vote for proposals to remove mandatory age limits.

### Board Size
**Sustainability Policy Recommendation:** Vote for proposals seeking to fix the board size or designate a range for the board size.

Vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

### Classification/Declassification of the Board
**Sustainability Policy Recommendation:** Vote against proposals to classify (stagger) the board.

Vote for proposals to repeal classified boards and to elect all directors annually.

### CEO Succession Planning
**Sustainability Policy Recommendation:** Generally vote for proposals seeking disclosure on a CEO succession planning policy, considering, at a minimum, the following factors:

▪ The
 reasonableness/scope of the request; and

▪ The
 company's existing disclosure on its current CEO succession planning process.

### Cumulative Voting
**Sustainability Policy Recommendation:** Generally vote against management proposals to eliminate cumulate voting, and for shareholder proposals to restore or provide for cumulative voting, unless:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has proxy access, thereby allowing shareholders to nominate directors to the company's
 ballot; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote for proposals for cumulative voting at controlled companies (insider voting power > 50%).

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### Director and Officer Indemnification, Liability Protection, and Exculpation
**Sustainability Policy Recommendation:** Vote case-by-case on proposals on director and officer indemnification liability protection, and exculpation**<sup>13</sup>.**

Consider the stated rationale for the proposed change. Also consider, among other factors, the extent to which the proposal would:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Eliminate
 entirely directors' and officers' liability for monetary damages for violating the duty of
 care.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Eliminate
 directors' and officers' liability for monetary damages for violating the duty
 of loyalty.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Expand
 coverage beyond just legal expenses to liability for acts that are more serious violations
 of fiduciary obligation than mere carelessness.

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote for only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if both of the following apply:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ If
 only the director's legal expenses would be covered.

### Establish/Amend Nominee Qualifications
**Sustainability Policy Recommendation:** Vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on the reasonableness of the criteria and the degree to which they may preclude dissident nominees from joining the board.

Vote case-by-case on shareholder resolutions seeking a director nominee who possesses a particular subject matter expertise, considering:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's board committee structure, existing subject matter expertise, and board nomination
 provisions relative to that of its peers;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's existing board and management oversight mechanisms regarding the issue for
 which board oversight is sought;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's disclosure and performance relating to the issue for which board oversight
 is sought and any significant related controversies; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 scope and structure of the proposal.

### Establish Other Board Committee Proposals
**Sustainability Policy Recommendation:** Generally vote against shareholder proposals to establish a new board committee, as such proposals seek a specific oversight mechanism/structure that potentially limits a company's

**<sup>13</sup>Indemnification**: the condition of being secured against loss or damage.

**Limited liability**: a person's financial liability is limited to a fixed sum, or personal financial assets are not at risk if the individual loses a lawsuit that results in financial award/damages to the plaintiff.

**Exculpation**: to eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer.

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flexibility to determine an appropriate oversight mechanism for itself. However, the following factors will be considered:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Existing
 oversight mechanisms (including current committee structure) regarding the issue for which
 board oversight is sought;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Level
 of disclosure regarding the issue for which board oversight is sought;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Company
 performance related to the issue for which board oversight is sought;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Board
 committee structure compared to that of other companies in its industry sector; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 scope and structure of the proposal.

### Filling Vacancies/Removal of Directors
**Sustainability Policy Recommendation:** Vote against proposals that provide that directors may be removed only for cause.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Vote
 for proposals to restore shareholders' ability to remove directors with or without
 cause.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Vote
 against proposals that provide that only continuing directors may elect replacements to fill
 board vacancies.

&nbsp;&nbsp;&nbsp;&nbsp;▪ Vote
 for proposals that permit shareholders to elect directors to fill board vacancies.

### Independent Board Chair
One of the principal functions of the board is to monitor and evaluate the performance of the CEO and other executive officers. The board chair's duty to oversee management may be compromised when he/she is connected to or a part of the management team. Generally, Sustainability Advisory Services recommends supporting shareholder proposals that would require that the position of board chair be held by an individual with no materials ties to the company other than their board seat.

**Sustainability Policy Recommendation:** Generally, support shareholder proposals that would require the board chair to be independent of management.

### Majority of Independent Directors/Establishment of Independent Committees
**Sustainability Policy Recommendation:** Vote for shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by the Sustainability policy's definition of independent outsider. (See Sustainability Policy Classification of Directors – U.S.)

Vote for shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors unless they currently meet that standard.

### Majority Vote Standard for the Election of Directors
**Sustainability Policy Recommendation:** Generally vote for management proposals to adopt a majority of votes cast standard for directors in uncontested elections. Vote against if no carve-out for a plurality vote standard in contested elections is included.

Generally vote for precatory and binding shareholder resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does

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not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve- out for a plurality vote standard when there are more nominees than board seats.

Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.

### Proxy Access
**Sustainability Policy Recommendation:** Generally vote for management and shareholder proposals for proxy access with the following provisions:

&nbsp;&nbsp;&nbsp;&nbsp;▪ **Ownership threshold:** maximum requirement not more than three percent (3%) of the voting power;

&nbsp;&nbsp;&nbsp;&nbsp;▪ **Ownership duration:** maximum requirement not longer than three (3) years of continuous ownership
 for each member of the nominating group;

&nbsp;&nbsp;&nbsp;&nbsp;▪ **Aggregation:** minimal or no limits on the number of shareholders permitted to form a nominating group;

&nbsp;&nbsp;&nbsp;&nbsp;▪ **Cap:** cap on nominees of generally twenty-five percent (25%) of the board.

Review for reasonableness any other restrictions on the right of proxy access.

Generally vote against proposals that are more restrictive than these guidelines.

### Require More Nominees than Open Seats
**Sustainability Policy Recommendation:** Vote against shareholder proposals that would require a company to nominate more candidates than the number of open board seats.

### Shareholder Engagement Policy (Shareholder Advisory Committee)
**Sustainability Policy Recommendation:** Generally vote for shareholder proposals requesting that the board establish an internal mechanism/process, which may include a committee, in order to improve communications between directors and shareholders, unless the company has the following features, as appropriate:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Established
 a communication structure that goes beyond the exchange requirements to facilitate the exchange
 of information between shareholders and members of the board;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Effectively
 disclosed information with respect to this structure to its shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Company
 has not ignored majority-supported shareholder proposals or a majority withhold vote on a
 director nominee; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company has an independent chair or a lead director, according to ISS' Sustainability
 policy definition. This individual must be made available for periodic consultation and direct
 communication with major shareholders.

### Proxy Contests/Proxy Access -Voting for Director Nominees in Contested Elections
**Sustainability Policy Recommendation:** Vote case-by-case on the election of directors in contested elections, considering the following factors:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Long-term
 financial performance of the company relative to its industry;

▪ Management's
 track record;

▪ Background
 to the contested election;

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&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

In the case of candidates nominated pursuant to proxy access, vote case-by-case considering any applicable factors listed above or additional factors which may be relevant, including those that are specific to the company, to the nominee(s) and/or to the nature of the election (such as whether or not there are more candidates than board seats).

### Vote-No Campaigns
**Sustainability Policy Recommendation:** In cases where companies are targeted in connection with public "vote- no" campaigns, evaluate director nominees under the existing governance policies for voting on director nominees in uncontested elections. Take into consideration the arguments submitted by shareholders and other publicly available information.

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3. Shareholder Rights & Defenses

### Advance Notice Requirements for Shareholder Proposals/Nominations
**Sustainability Policy Recommendation:** Vote case-by-case on advance notice proposals, giving support to those proposals which allow shareholders to submit proposals/nominations as close to the meeting date as reasonably possible and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory, and shareholder review.

To be reasonable, the company's deadline for shareholder notice of a proposal/nominations must be no earlier than 120 days prior to the anniversary of the previous year's meeting and have a submittal window of no shorter than 30 days from the beginning of the notice period (also known as a 90-120 day window). The submittal window is the period under which shareholders must file their proposal/nominations prior to the deadline.

In general, support additional efforts by companies to ensure full disclosure in regard to a proponent's economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposals.

### Amend Bylaws without Shareholder Consent
**Sustainability Policy Recommendation:** Vote against proposals giving the board exclusive authority to amend the bylaws.

Vote for proposals giving the board the ability to amend the bylaws in addition to shareholders.

### Control Share Acquisition Provisions
Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares.

**Sustainability Policy Recommendation:** Vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.

Vote against proposals to amend the charter to include control share acquisition provisions.

Vote for proposals to restore voting rights to the control shares.

### Control Share Cash-Out Provisions
Control share cash-out statutes give dissident shareholders the right to "cash-out" of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price.

**Sustainability Policy Recommendation:** Vote for proposals to opt out of control share cash-out statutes.

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### Disgorgement Provisions
Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company's stock to disgorge, or pay back, to the company any profits realized from the sale of that company's stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor's gaining control status are subject to these recapture-of-profits provisions.

**Sustainability Policy Recommendation:** Vote for proposals to opt out of state disgorgement provisions.

### Fair Price Provisions
**Sustainability Policy Recommendation:** Vote case-by-case on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.

Generally vote against fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.

### Freeze-Out Provisions
**Sustainability Policy Recommendation:** Vote for proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company.

### Greenmail
Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders.

**Sustainability Policy Recommendation:** Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments.

Vote case-by-case on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

### Shareholder Litigation Rights

#### Federal Forum Selection Provisions
Federal forum selection provisions require that U.S. federal courts be the sole forum for shareholders to litigate claims arising under federal securities law.

**Sustainability Policy Recommendation:** Generally vote for federal forum selection provisions in the charter or bylaws that specify "the district courts of the United States" as the exclusive forum for federal securities law matters, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

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Vote against provisions that restrict the forum to a particular federal district court; unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

#### Exclusive Forum Provisions for State Law Matters
Exclusive forum provisions in the charter or bylaws restrict shareholders' ability to bring derivative lawsuits against the company, for claims arising out of state corporate law, to the courts of a particular state (generally the state of incorporation).

**Sustainability Policy Recommendation:** Generally vote for charter or bylaw provisions that specify courts located within the state of Delaware as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

For states other than Delaware, vote case-by-case on exclusive forum provisions, taking into consideration:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The
 company's stated rationale for adopting such a provision;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure
 of past harm from duplicative shareholder lawsuits in more than one forum;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Generally vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters, or that specify a particular local court within the state; unilateral adoption of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.

#### Fee Shifting
Fee-shifting provisions in the charter or bylaws require that a shareholder who sues a company unsuccessfully pay all litigation expenses of the defendant corporation and its directors and officers.

**Sustainability Policy Recommendation:** Generally vote against provisions that mandate fee-shifting whenever plaintiffs are not completely successful on the merits (i.e., including cases where the plaintiffs are partially successful).

Unilateral adoption of a fee-shifting provision will generally be considered an ongoing failure under the Unilateral Bylaw/Charter Amendments and Problematic Capital Structures policy.

### Net Operating Loss (NOL) Protective Amendments
**Sustainability Policy Recommendation:** Vote against proposals to adopt a protective amendment for the stated purpose of protecting a company's net operating losses (NOL) if the effective term of the protective amendment would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case, considering the following factors, for management proposals to adopt an NOL protective amendment that would remain in effect for the shorter of three years (or less) and the exhaustion of the NOL:

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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.

Poison Pills (Shareholder Rights Plans)

**Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy**

**Sustainability Policy Recommendation:** Vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it unless the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:

▪ 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.

If the shareholder proposal calls for a time period of less than 12 months for shareholder ratification after adoption, vote for the proposal, but add the caveat that a vote within 12 months would be considered sufficient implementation.

**Management Proposals to Ratify a Poison Pill**

**Sustainability Policy Recommendation:** Vote case-by-case on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

▪ 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.

In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company's existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.

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**Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)**

**Sustainability Policy Recommendation:** Vote against proposals to adopt a poison pill for the stated purpose of protecting a company's net operating losses (NOL) if the term of the pill would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case on management proposals for poison pill ratification, considering the following factors, if the term of the pill would be the shorter of three years (or less) and the exhaustion of the NOL:

▪ 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.

**Proxy Voting Disclosure, Confidentiality, and Tabulation**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals regarding proxy voting mechanics, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder rights. Specific issues covered under the policy include, but are not limited to, confidential voting of individual proxies and ballots, confidentiality of running vote tallies, and the treatment of abstentions and/or broker non-votes in the company's vote-counting methodology.

While a variety of factors may be considered in each analysis, the guiding principles are: transparency, consistency, and fairness in the proxy voting process. The factors considered, as applicable to the proposal, may include:

▪ 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.

**Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions**

**Sustainability Policy Recommendation:** Generally vote against management proposals to ratify provisions of the company's existing charter or bylaws, unless these governance provisions align with best practice.

In addition, voting against/withhold from individual directors, members of the governance committee, or the full board may be warranted, considering:

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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.

**Reimbursing Proxy Solicitation Expenses**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to reimburse proxy solicitation expenses.

When voting in conjunction with support of a dissident slate, vote for the reimbursement of all appropriate proxy solicitation expenses associated with the election.

Generally vote for shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:

▪ 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.

**Reincorporation Proposals**

**Sustainability Policy Recommendation:** Management or shareholder proposals to change a company's state of incorporation should be evaluated case-by-case, giving consideration to both financial and corporate governance concerns including the following:

▪ 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.

**Shareholder Ability to Act by Written Consent**

**Sustainability Policy Recommendation:** Generally vote against management and shareholder proposals to restrict or prohibit shareholders' ability to act by written consent.

Generally vote for management and shareholder proposals that provide shareholders with the ability to act by written consent, taking into account the following factors:

▪ Shareholders' current right to act by written consent;

▪ The consent threshold;

▪ The inclusion of exclusionary or prohibitive language;

▪ Investor ownership structure; and

▪ Shareholder support of, and management's response to, previous shareholder proposals.

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Vote case-by-case on shareholder proposals if, in addition to the considerations above, the company has the following governance and antitakeover provisions:

▪ An unfettered **<sup>14</sup>** 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.

**Shareholder Ability to Call Special Meetings**

**Sustainability Policy Recommendation:** Vote against management or shareholder proposals to restrict or prohibit shareholders' ability to call special meetings.

Generally vote for management or shareholder proposals that provide shareholders with the ability to call special meetings taking into account the following factors:

▪ 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.

**Stakeholder Provisions**

**Sustainability Policy Recommendation:** Vote against proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.

**State Antitakeover Statutes**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to opt in or out of state takeover statutes (including fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, and anti-greenmail provisions).

**Supermajority Vote Requirements**

**Sustainability Policy Recommendation:** Vote against proposals to require a supermajority shareholder vote.

Vote for management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote case-by-case, taking into account:

▪ Ownership structure;

▪ Quorum requirements; and

▪ Vote requirements.

**<sup>14</sup>** "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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**Virtual Shareholder Meetings**

**Sustainability Policy Recommendation:** Generally vote for management proposals allowing for the convening of shareholder meetings by electronic means, so long as they do not preclude in-person meetings. Companies are encouraged to disclose the circumstances under which virtual-only**<sup>15</sup>** meetings would be held, and to allow for comparable rights and opportunities for shareholders to participate electronically as they would have during an in- person meeting.

Vote case-by-case on shareholder proposals concerning virtual-only meetings, considering:

▪ Scope and rationale of the proposal; and

▪ Concerns identified with the company's prior meeting practices.

**<sup>15</sup>** 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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4. Capital/Restructuring

Capital

**Adjustments to Par Value of Common Stock**

**Sustainability Policy Recommendation:** Vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an anti-takeover device or some other negative corporate governance action.

Vote for management proposals to eliminate par value.

**Common Stock Authorization**

**General Authorization Requests**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of common stock that are to be used for general corporate purposes:

▪ 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.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

▪ 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.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

▪ 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.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

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**Specific Authorization Requests**

**Sustainability Policy Recommendation:** Generally vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

▪ twice the amount needed to support the transactions on the ballot, and

▪ the allowable increase as calculated for general issuances above.

**Dual Class Structure**

**Sustainability Policy Recommendation:** Generally vote against proposals to create a new class of common stock unless:

▪ The company discloses a compelling rationale for the dual-class capital structure, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's auditor has concluded that there is substantial doubt about the company's ability to continue
as a going concern; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

**Issue Stock for Use with Rights Plan**

**Sustainability Policy Recommendation:** Vote against proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder- approved shareholder rights plan (poison pill).

**Preemptive Rights**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals that seek preemptive rights, taking into consideration:

▪ The size of the company;

▪ The shareholder base; and

▪ The liquidity of the stock.

**Preferred Stock Authorization**

**General Authorization Requests**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of preferred stock that are to be used for general corporate purposes:

▪ 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.

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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.

▪ If no preferred shares are currently issued and outstanding, vote against the request, unless the company
discloses a specific use for the shares.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

▪ If the shares requested are blank check preferred shares that can be used for antitakeover purposes; **<sup>16</sup>** 

▪ 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.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

▪ 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.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

**Specific Authorization Requests**

**Sustainability Policy Recommendation:** Generally vote for proposals to increase the number of authorized preferred shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

▪ twice the amount needed to support the transactions on the ballot, and

▪ the allowable increase as calculated for general issuances above.

**<sup>16</sup>** 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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**Recapitalization Plans**

**Sustainability Policy Recommendation:** Vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following:

▪ 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.

**Reverse Stock Splits**

**Sustainability Policy Recommendation:** Vote for management proposals to implement a reverse stock split if:

▪ 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 Sustainability Advisory Services' Common Stock Authorization policy.

Vote case-by-case on proposals that do not meet either of the above conditions, taking into consideration the following factors:

▪ 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.

**Share Repurchase Programs**

**Sustainability Policy Recommendation:** For U.S.-incorporated companies, and foreign-incorporated U.S. Domestic Issuers that are traded solely on U.S. exchanges, vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, or to grant the board authority to conduct open-market repurchases, in the absence of company-specific concerns regarding:

▪ 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.

Vote case-by-case on proposals to repurchase shares directly from specified shareholders, balancing the stated rationale against the possibility for the repurchase authority to be misused, such as to repurchase shares from insiders at a premium to market price.

**Stock Distributions: Splits and Dividends**

**Sustainability Policy Recommendation:** Generally vote for management proposals to increase the common share authorization for stock split or stock dividend, provided that the effective increase in authorized shares is equal to

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or is less than the allowable increase calculated in accordance with Sustainability Advisory Services' Common Stock Authorization policy.

**Tracking Stock**

**Sustainability Policy Recommendation:** Vote case-by-case on the creation of tracking stock, weighing the strategic value of the transaction against such factors as:

▪ 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.

**Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S.**

**Sustainability Policy Recommendation:** For U.S. domestic issuers incorporated outside the U.S. and listed <u>solely</u> on a U.S. exchange, generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.

For pre-revenue or other early-stage companies that are heavily reliant on periodic equity financing, generally vote for resolutions to authorize the issuance of common shares up to 50 percent of currently issued common share capital. The burden of proof will be on the company to establish that it has a need for the higher limit.

Renewal of such mandates should be sought at each year's annual meeting.

Vote case-by-case on share issuances for a specific transaction or financing proposal.

Restructuring

**Appraisal Rights**

**Sustainability Policy Recommendation:** Vote for proposals to restore or provide shareholders with rights of appraisal.

**Asset Purchases**

**Sustainability Policy Recommendation:** Vote case-by-case on asset purchase proposals, considering the following factors:

▪ Purchase price;

▪ Fairness opinion;

▪ Financial and strategic benefits;

▪ How the deal was negotiated;

▪ Conflicts of interest;

▪ Other alternatives for the business;

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▪ Non-completion risk.

**Asset Sales**

**Sustainability Policy Recommendation:** Vote case-by-case on asset sales, considering the following factors:

▪ 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.

**Bundled Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on bundled or "conditional" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals.

**Conversion of Securities**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals regarding conversion of securities. When evaluating these proposals, the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.

Vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.

**Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, after evaluating:

▪ 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.

Vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

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**Formation of Holding Company**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals regarding the formation of a holding company, taking into consideration the following:

▪ 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.

Absent compelling financial reasons to recommend for the transaction, vote against the formation of a holding company if the transaction would include either of the following:

▪ Increases in common or preferred stock in excess of the allowable maximum (see discussion under "Capital");

or

▪ Adverse changes in shareholder rights.

**Going Private and Going Dark Transactions (LBOs and Minority Squeeze- outs)**

**Sustainability Policy Recommendation:** Vote case-by-case on going private transactions, taking into account the following:

▪ Offer price/premium;

▪ Fairness opinion;

▪ How the deal was negotiated;

▪ Conflicts of interest;

▪ Other alternatives/offers considered; and

▪ Non-completion risk.

Vote case-by-case on going dark transactions, determining whether the transaction enhances shareholder value by taking into consideration:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Are all shareholders able to participate in the transaction?

&nbsp;&nbsp;&nbsp;&nbsp;▪ Will there be a liquid market for remaining shareholders following the transaction?

&nbsp;&nbsp;&nbsp;&nbsp;▪ Does the company have strong corporate governance?

&nbsp;&nbsp;&nbsp;&nbsp;▪ Will insiders reap the gains of control following the proposed transaction?

&nbsp;&nbsp;&nbsp;&nbsp;▪ Does the state of incorporation have laws requiring continued reporting that may benefit shareholders?

**Joint Ventures**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to form joint ventures, taking into account the following:

▪ Percentage of assets/business contributed;

▪ Percentage ownership;

▪ Financial and strategic benefits;

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▪ Governance structure;

▪ Conflicts of interest;

▪ Other alternatives; and

▪ Non-completion risk.

**Liquidations**

**Sustainability Policy Recommendation:** Vote case-by-case on liquidations, taking into account the following:

▪ Management's efforts to pursue other alternatives;

▪ Appraisal value of assets; and

▪ The compensation plan for executives managing the liquidation.

Vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.

**Mergers and Acquisitions**

**Sustainability Policy Recommendation:** Vote case-by-case on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

▪ *<u>Valuation</u>* - 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.

▪ *<u>Strategic rationale</u>* - 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.

▪ *<u>Negotiations and process</u>* - 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.

▪ *<u>Conflicts of interest</u>* - 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.

▪ *<u>Governance</u>* - 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.

**Private Placements/Warrants/Convertible Debentures**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals regarding private placements, warrants, and convertible debentures taking into consideration:

▪ 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

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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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's financial condition;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Degree of need for capital;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Use of proceeds;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Effect of the financing on the company's cost of capital;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Current and proposed cash burn rate;

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Change in management;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Change in control;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Guaranteed board and committee seats;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Standstill provisions;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Voting agreements;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Veto power over certain corporate actions; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Minority versus majority ownership and corresponding minority discount or majority control premium

▪ Conflicts of interest:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Conflicts of interest should be viewed from the perspective of the company and the investor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Were the terms of the transaction negotiated at arm's length? Are managerial incentives aligned with
shareholder interests?

▪ Market reaction:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

Vote for the private placement, or for the issuance of warrants and/or convertible debentures in a private placement, if it is expected that the company will file for bankruptcy if the transaction is not approved.

**Reorganization/Restructuring Plan (Bankruptcy)**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to common shareholders on bankruptcy plans of reorganization, considering the following factors including, but not limited to:

▪ Estimated value and financial prospects of the reorganized company;

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▪ 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.

**Special Purpose Acquisition Corporations (SPACs)**

**Sustainability Policy Recommendation:** Vote case-by-case on SPAC mergers and acquisitions taking into account the following:

▪ *<u>Valuation</u>* —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.

▪ *<u>Market reaction</u>* —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.

▪ *<u>Deal timing</u>* —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.

▪ *<u>Negotiations and process</u>* —What was the process undertaken to identify potential
target companies within specified industry or location specified in charter? Consider the background of the sponsors.

▪ *<u>Conflicts of interest</u>* —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.

▪ *<u>Voting agreements</u>* —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?

▪ *<u>Governance</u>* —What is the impact of having the SPAC CEO or founder on key committees
following the proposed merger?

**Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions**

**Sustainability Policy Recommendation:** Vote case-by-case on SPAC extension proposals taking into account the length of the requested extension, the status of any pending transaction(s) or progression of the acquisition process, any added incentive for non-redeeming shareholders, and any prior extension requests.

▪ *<u>Length of request</u>* : Typically, extension requests range from two to six months, depending
on the progression of the SPAC's acquistion process.

▪ *<u>Pending transaction(s)</u>* <u>or *progression of the acquisition process*</u> *:* 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.

▪ *<u>Added incentive for non-redeeming shareholders</u>* : 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

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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.

▪ *<u>Prior extension requests</u>* : Some SPACs request additional time beyond the extension period
sought in prior extension requests.

**Spin-offs**

**Sustainability Policy Recommendation:** Vote case-by-case on spin-offs, considering:

▪ 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.

**Value Maximization Shareholder Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals seeking to maximize shareholder value by:

▪ Hiring a financial advisor to explore strategic alternatives;

▪ Selling the company; or

▪ Liquidating the company and distributing the proceeds to shareholders.

These proposals should be evaluated based on the following factors:

▪ 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.

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5. Compensation

Executive Pay Evaluation

Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:

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.

**Advisory Votes on Executive Compensation—Management Proposals (Management Say-on-Pay)**

**Sustainability Policy Recommendation:** Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation.

Vote against Advisory Votes on Executive Compensation (Say-on-Pay or "SOP") if:

▪ 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.

Vote against or withhold from the members of the compensation committee and potentially the full board if:

▪ 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.

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***P*** ***RIMARY EVALUATION FACTORS FOR EXECUTIVE PAY***

**Pay-for-Performance Evaluation**

Sustainability Advisory Services annually conducts a pay-for-performance analysis to identify strong or satisfactory alignment between pay and performance over a sustained period. With respect to companies in the Russell 3000 or Russell 3000E Indices**<sup>17</sup>**, this analysis considers the following:

1. Peer Group **<sup>18</sup>** Alignment:

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

&nbsp;&nbsp;&nbsp;&nbsp;▪ The rankings of CEO total pay and company financial performance within a peer group, each measured
over a three-year period.

&nbsp;&nbsp;&nbsp;&nbsp;▪ The multiple of the CEO's total pay relative to the peer group median in the most recent fiscal year.

2. Absolute Alignment **<sup>19</sup>** – 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.

If the above analysis demonstrates significant unsatisfactory long-term pay-for-performance alignment or, in the case of companies outside the Russell indices, misaligned pay and performance are otherwise suggested, our analysis may include any of the following qualitative factors, as relevant to evaluating how various pay elements may work to encourage or to undermine long-term value creation and alignment with shareholder interests:

▪ 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 pay **<sup>20</sup>** compared to grant pay; and

▪ Any other factors deemed relevant.

**<sup>17</sup>** The Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities.

**<sup>18</sup>** 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.

**<sup>19</sup>** Only Russell 3000 Index companies are subject to the Absolute Alignment analysis.

**<sup>20</sup>** Sustainability Advisory Services research reports include realizable pay for S&P1500 companies.

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**Problematic Pay Practices**

Problematic pay elements are generally evaluated case-by-case considering the context of a company's overall pay program and demonstrated pay-for-performance philosophy. The focus is on executive compensation practices that contravene the global pay principles, including:

▪ 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.

The list of examples below highlights certain problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Repricing or replacing of underwater stock options/SARs without prior shareholder approval (including
cash buyouts and voluntary surrender of underwater options);

&nbsp;&nbsp;&nbsp;&nbsp;▪ Extraordinary perquisites or tax gross-ups;

&nbsp;&nbsp;&nbsp;&nbsp;▪ New or materially amended agreements that provide for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Excessive termination or CIC severance payments (generally exceeding 3 times base salary and average/target/most
recent bonus);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ CIC excise tax gross-up entitlements (including "modified" gross-ups);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Multi-year guaranteed awards that are not at risk due to rigorous performance conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Liberal CIC definition combined with any single-trigger CIC benefits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Severance payments made when the termination is not clearly disclosed as involuntary (for example,
a termination without cause or resignation for good reason);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Any other provision or practice deemed to be egregious and present a significant risk to investors.

The above examples are not an exhaustive list. Please refer to ISS' U.S. Compensation Policies FAQ document for additional detail on specific pay practices that have been identified as problematic and may lead to negative vote recommendations.

**Options Backdating**

The following factors should be examined case-by-case to allow for distinctions to be made between "sloppy" plan

administration versus deliberate action or fraud:

▪ 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.

**Compensation Committee Communications and Responsiveness**

Consider the following factors case-by-case when evaluating ballot items related to executive pay on the board's responsiveness to investor input and engagement on compensation issues:

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▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's response, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ 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);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Disclosure of specific and meaningful actions taken to address shareholders' concerns;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Other recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

**Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")**

**Sustainability Policy Recommendation:** Vote for annual advisory votes on compensation, which provide the most consistent and clear communication channel for shareholder concerns about companies' executive pay programs.

**Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale**

**Sustainability Policy Recommendation:** Vote case-by-case on say on Golden Parachute proposals, including consideration of existing change-in-control arrangements maintained with named executive officers rather than focusing primarily on new or extended arrangements.

Features that may result in an "against" recommendation include one or more of the following, depending on the number, magnitude, and/or timing of issue(s):

▪ 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

▪ 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.

Recent amendment(s) that incorporate problematic features will tend to carry more weight on the overall analysis. However, the presence of multiple legacy problematic features will also be closely scrutinized.

In cases where the golden parachute vote is incorporated into a company's advisory vote on compensation (management say-on-pay), the say-on-pay proposal will be evaluated in accordance with these guidelines, which may give higher weight to that component of the overall evaluation.

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Equity-Based and Other Incentive Plans

Please refer to ISS' U.S. Equity Compensation Plans FAQ document for additional details on the Equity Plan Scorecard policy.

**Sustainability Policy Recommendation:** Vote case-by-case on certain equity-based compensation plans**<sup>21</sup>** depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated using an "Equity Plan Scorecard" (EPSC) approach with three pillars:

▪ **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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised
grants; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ SVT based only on new shares requested plus shares remaining for future grants.

▪ Plan Features:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Quality of disclosure around vesting upon a change in control (CIC);

&nbsp;&nbsp;&nbsp;&nbsp;▪ Discretionary vesting authority;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Liberal share recycling on various award types;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Lack of minimum vesting period for grants made under the plan;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Dividends payable prior to award vesting.

▪ Grant Practices:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The company's three year burn rate relative to its industry/market cap peers;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Vesting requirements in CEO'S recent equity grants (3-year look-back);

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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);

&nbsp;&nbsp;&nbsp;&nbsp;▪ The proportion of the CEO's most recent equity grants/awards subject to performance conditions;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the company maintains a sufficient claw-back policy;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Whether the company maintains sufficient post exercise/vesting share-holding requirements.

Generally vote against the plan proposal if the combination of above factors indicates that the plan is not, overall, in shareholders' interests, or if any of the following egregious factors ("overriding factors") apply:

▪ 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.

**<sup>21</sup>** 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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***F*** ***URTHER INFORMATION ON CERTAIN EPSC FACTORS***

***Shareholder Value Transfer (SVT)***

The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders' equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised (using two measures, in the case of plans subject to the Equity Plan Scorecard evaluation, as noted above). All award types are valued. For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full value awards), the assumption is made that all awards to be granted will be the most expensive types.

For proposals subject to Equity Plan Scorecard evaluation, Shareholder Value Transfer is reasonable if it falls below a company-specific benchmark. The benchmark is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard: GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers' historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company-specific performance measures, size and cash compensation into the industry cap equations to arrive at the company's benchmark.**<sup>22</sup>**

**Three-Year Value-Adjusted Burn Rate**

A "Value-Adjusted Burn Rate" is used for stock plan evaluations. Value-Adjusted Burn Rate benchmarks are calculated as the greater of: (1) an industry-specific threshold based on three-year burn rates within the company's GICS group segmented by S&P 500, Russell 3000 index (less the S&P 500) and non-Russell 3000 index; and (2) a *de minimis* threshold established separately for each of the S&P 500, the Russell 3000 index less the S&P 500, and the non-Russell 3000 index. Year-over-year burn-rate benchmark changes will be limited to a predetermined range above or below the prior year's burn-rate benchmark.

The Value-Adjusted Burn Rate will be calculated as follows:

Value-Adjusted Burn Rate = ((# of options \* option's dollar value using a Black-Scholes model) + (# of full-value awards \* stock price)) / (Weighted average common shares \* stock price).

**Egregious Factors**

**Liberal Change in Control Definition**

Generally vote against equity plans if the plan has a liberal definition of change in control and the equity awards could vest upon such liberal definition of change-in-control, even though an actual change in control may not occur. Examples of such a definition include, but are not limited to, announcement or commencement of a tender offer, provisions for acceleration upon a "potential" takeover, shareholder approval of a merger or other transactions, or similar language.

**<sup>22</sup>** For plans evaluated under the Equity Plan Scorecard policy, the company's SVT benchmark is considered along with other factors.

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**Repricing Provisions**

Vote against plans that expressly permit the repricing or exchange of underwater stock options/stock appreciate rights (SARs) without prior shareholder approval. "Repricing" includes the ability to do any of the following:

▪ 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.

While the above cover most types of repricing, Sustainability Advisory Services may view other provisions as akin to repricing depending on the facts and circumstances.

Also, vote against or withhold from members of the Compensation Committee who approved repricing (as defined above or otherwise determined by Sustainability Advisory Services) without prior shareholder approval, even if such repricings are allowed in their equity plan.

Vote against plans that do not expressly prohibit repricing or cash buyout of underwater options without shareholder approval if the company has a history of repricing/buyouts without shareholder approval, and the applicable listing standards would not preclude them from doing so.

**Problematic Pay Practices or Significant Pay-for-Performance Disconnect**

If the equity plan on the ballot is a vehicle for problematic pay practices, vote against the plan.

If a significant portion of the CEO's misaligned pay is attributed to non-performance-based equity awards, and there is an equity plan on the ballot with the CEO as one of the participants, Sustainability Advisory Services may recommend a vote against the equity plan. Considerations in voting against the equity plan may include, but are not limited to:

▪ 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.

**Specific Treatment of Certain Award Types in Equity Plan Evaluations**

**Dividend Equivalent Rights**

Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured.

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**Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)**

For Real Estate Investment Trusts (REITS), include the common shares issuable upon conversion of outstanding Operating Partnership (OP) units in the share count for the purposes of determining: (1) market capitalization in the Shareholder Value Transfer (SVT) analysis and (2) shares outstanding in the burn rate analysis.

Other Compensation Plans

**401(k) Employee Benefit Plans**

**Sustainability Policy Recommendation:** Vote for proposals to implement a 401(k) savings plan for employees.

**Employee Stock Ownership Plans (ESOPs)**

**Sustainability Policy Recommendation:** Vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares).

**Employee Stock Purchase Plans—Qualified Plans**

**Sustainability Policy Recommendation:** Vote case-by-case on qualified employee stock purchase plans. Vote for employee stock purchase plans where all of the following apply:

▪ 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.

Vote against qualified employee stock purchase plans where any of the following apply:

▪ 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.

**Employee Stock Purchase Plans—Non-Qualified Plans**

**Sustainability Policy Recommendation:** Vote case-by-case on nonqualified employee stock purchase plans. Vote for nonqualified employee stock purchase plans with all the following features:

▪ 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.

Vote against nonqualified employee stock purchase plans when any of the plan features do not meet the above criteria. If the company matching contribution or effective discount exceeds the above, Sustainability Advisory Services may evaluate the SVT cost as part of the assessment.

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**Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))**

**Sustainability Policy Recommendation:** Vote case-by-case on amendments to cash and equity incentive plans.

Generally vote for proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

▪ Addresses administrative features only; or

▪ Seeks approval for Section 162(m) purposes <u>only</u>, and the plan administering committee
 consists entirely of independent outsiders, per Sustainability Advisory Services' 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).

Vote against such proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

▪ Seeks
 approval for Section 162(m) purposes only, and the plan administering committee does not
 consist entirely of independent outsiders, per Sustainability
 Advisory Services' Classification of Directors .

Vote case-by-case on all other proposals to amend <u>cash</u> incentive plans. This includes plans presented to shareholders for the first time after the company's IPO and/or proposals that bundle material amendment(s) other than those for Section 162(m) purposes

Vote case-by-case on all other proposals to amend <u>equity</u> incentive plans, considering the following:

▪ 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.

**Option Exchange Programs/Repricing Options**

**Sustainability Policy Recommendation:** Vote case-by-case on management proposals seeking approval to exchange/reprice options taking into consideration:

▪ 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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If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company's total cost of equity plans and its three-year average burn rate.

In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company's stock price demonstrates poor timing. and warrants additional scrutiny. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.

Vote for shareholder proposals to put option repricings to a shareholder vote.

**Stock Plans in Lieu of Cash**

**Sustainability Policy Recommendation:** Vote case-by-case on plans that provide participants with the option of taking all or a portion of their cash compensation in the form of stock.

Vote for non-employee director-only equity plans that provide a dollar-for-dollar cash-for-stock exchange.

Vote case-by-case on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, no adjustments will be made to carve out the in-lieu-of cash compensation.

**Transfer Stock Option (TSO) Programs**

**Sustainability Policy Recommendation:** One-time Transfers: Vote against or withhold from compensation committee members if they fail to submit one-time transfers to shareholders for approval.

Vote case-by-case on one-time transfers. Vote for if:

▪ 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.

Additionally, management should provide a clear explanation of why options are being transferred to a third-party institution and whether the events leading up to a decline in stock price were beyond management's control. A review of the company's historic stock price volatility should indicate if the options are likely to be back "in-the- money" over the near term.

Ongoing TSO program: Vote against equity plan proposals if the details of ongoing TSO programs are not provided to shareholders. Since TSOs will be one of the award types under a stock plan, the ongoing TSO program, structure and mechanics must be disclosed to shareholders. The specific criteria to be considered in evaluating these proposals include, but not limited, to the following:

▪ Eligibility;

▪ Vesting;

▪ Bid-price;

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▪ Term of options;

▪ Cost of the program and impact of the TSOs on company's total option expense

▪ Option repricing policy.

Amendments to existing plans that allow for introduction of transferability of stock options should make clear that only options granted post-amendment shall be transferable.

Director Compensation

**Shareholder Ratification of Director Pay Programs**

**Sustainability Policy Recommendation:** Vote case-by-case on management proposals seeking ratification of non- employee director compensation, based on the following factors:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ The relative magnitude of director compensation as compared to companies of a similar profile;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The presence of problematic pay practices relating to director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Director stock ownership guidelines and holding requirements;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Equity award vesting schedules;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The mix of cash and equity-based compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ Meaningful limits on director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The availability of retirement benefits or perquisites; and

&nbsp;&nbsp;&nbsp;&nbsp;▪ The quality of disclosure surrounding director compensation.

**Equity Plans for Non-Employee Directors**

**Sustainability Policy Recommendation:** Vote case-by-case on compensation plans for non-employee directors, based on:

▪ 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).

On occasion, director stock plans will exceed the plan cost or burn rate benchmarks when combined with employee or executive stock plans. In such cases, vote case-by-case on the plan taking into consideration 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.

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**Non-Employee Director Retirement Plans**

**Sustainability Policy Recommendation:** Vote against retirement plans for non-employee directors.

Vote for shareholder proposals to eliminate retirement plans for non-employee directors.

Shareholder Proposals on Compensation

**Adopt Anti-Hedging/Pledging/Speculative Investments Policy**

**Sustainability Policy Recommendation:** Generally vote for proposals seeking a policy that prohibits named executive officers from engaging in derivative or speculative transactions involving company stock, including hedging, holding stock in a margin account, or pledging stock as collateral for a loan. However, the company's existing policies regarding responsible use of company stock will be considered.

**Bonus Banking/Bonus Banking "Plus"**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals seeking deferral of a portion of annual bonus pay, with ultimate payout linked to sustained results for the performance metrics on which the bonus was earned (whether for the named executive officers or a wider group of employees), taking into account the following factors:

▪ 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.

**Compensation Consultants—Disclosure of Board or Company's Utilization**

**Sustainability Policy Recommendation:** Generally vote for shareholder proposals seeking disclosure regarding the company, board, or compensation committee's use of compensation consultants, such as company name, business relationship(s), and fees paid.

**Disclosure/Setting Levels or Types of Compensation for Executives and Directors**

**Sustainability Policy Recommendation:** Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.

Vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation.

Vote against shareholder proposals seeking to eliminate stock options or any other equity grants to employees or directors.

Vote against shareholder proposals requiring director fees be paid in stock only.

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Generally vote against shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

Vote case-by-case on all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long-term corporate outlook.

**Golden Coffins/Executive Death Benefits**

**Sustainability Policy Recommendation:** Generally vote for proposals calling companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals that the broad-based employee population is eligible.

**Hold Equity Past Retirement or for a Significant Period of Time**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals asking companies to adopt policies requiring senior executive officers to retain a portion of net shares acquired through compensation plans. The following factors will be taken into account:

▪ 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

**Pay Disparity**

**Sustainability Policy Recommendation:** Generally vote case-by-case on proposals calling for an analysis of the pay disparity between corporate executives and other non-executive employees.

**Pay for Performance/Performance-Based Awards**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps:

▪ 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

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of the performance-based equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test.

In general, vote for the shareholder proposal if the company does not meet both of the above two steps.

**Pay for Superior Performance**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals that request the board establish a pay-for-superior performance standard in the company's executive compensation plan for senior executives. These proposals generally include the following principles:

▪ 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.

Consider the following factors in evaluating this proposal:

▪ 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?

Pre-Arranged Trading Plans (10b5-1 Plans)

**Sustainability Policy Recommendation:** Generally vote for shareholder proposals calling for the addition of certain safeguards in prearranged trading plans (10b5-1 plans) for executives. Safeguards may include:

▪ 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;

▪ Trades under a 10b5-1 Plan must be handled by a broker who does not handle other securities transactions
for the executive.

**Prohibit Outside CEOs from Serving on Compensation Committees**

**Sustainability Policy Recommendation:** Generally vote against proposals seeking a policy to prohibit any outside CEO from serving on a company's compensation committee, unless the company has demonstrated problematic pay practices that raise concerns about the performance and composition of the committee.

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**Recoupment of Incentive or Stock Compensation in Specified Circumstances**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to recoup incentive cash or stock compensation made to senior executives if it is later determined that the figures upon which incentive compensation is earned turn out to have been in error, or if the senior executive has breached company policy or has engaged in misconduct that may be significantly detrimental to the company's financial position or reputation, or if the senior executive failed to manage or monitor risks that subsequently led to significant financial or reputational harm to the company. Many companies have adopted policies that permit recoupment in cases where an executive's fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation. However, such policies may be narrow given that not all misconduct or negligence may result in significant financial restatements. Misconduct, negligence or lack of sufficient oversight by senior executives may lead to significant financial loss or reputational damage that may have long-lasting impact.

In considering whether to support such shareholder proposals, the following factors will be taken into consideration:

▪ 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.

**Severance Agreements for Executives/Golden Parachutes**

**Sustainability Policy Recommendation:** Vote for shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for shareholder ratification, unless the proposal requires shareholder approval *prior* to entering into employment contracts.

Vote case-by-case on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:

▪ The triggering mechanism should be beyond the control of management;

▪ The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years
prior to the year in which the change of control occurs);

▪ Change-in-control payments should be double-triggered, *i.e.*, (1) after a change in control has taken place, and (2) termination
of the executive as a result of the change in control. Change in control is defined as a change in the company ownership structure.

**Share Buyback Proposals**

**Sustainability Policy Recommendation:** Generally vote against shareholder proposals prohibiting executives from selling shares of company stock during periods in which the company has announced that it may or will be repurchasing shares of its stock. Vote for the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks.

Vote case-by-case on proposals requesting the company exclude the impact of share buybacks from the calculation of incentive program metrics, considering the following factors:

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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.

**Supplemental Executive Retirement Plans (SERPs)**

**Sustainability Policy Recommendation:** Generally vote for shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.

Generally vote for shareholder proposals requesting to limit the executive benefits provided under the company's supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive's annual salary or those pay elements covered for the general employee population.

**Tax Gross-Up Proposals**

**Sustainability Policy Recommendation:** Generally vote for proposals calling for companies to adopt a policy of not providing tax gross-up payments to executives, except in situations where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.

**Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals seeking a policy requiring termination of employment prior to severance payment and/or eliminating accelerated vesting of unvested equity.

The following factors will be considered:

▪ 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.

Generally vote for proposals seeking a policy that prohibits acceleration of the vesting of equity awards to senior executives in the event of a change in control (except for pro rata vesting considering the time elapsed and attainment of any related performance goals between the award date and the change in control).

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6. Social and Environmental Issues

Global Approach

Socially responsible shareholder resolutions receive a great deal more attention from institutional shareholders today than in the past. While focusing on value enhancement through risk mitigation and exposure to new sustainability-related opportunities, these resolutions also seek standardized reporting on ESG issues, request information regarding an issuer's adoption of, or adherence to, relevant norms, standards, codes of conduct or universally recognized international initiatives to promote disclosure and transparency. ISS' Sustainability Policy generally supports standards-based ESG shareholder proposals that enhance long-term shareholder and stakeholder value while aligning the interests of the company with those of society at large. In particular, the policy will focus on resolutions seeking greater transparency and/or adherence to internationally recognized standards and principles.

**Sustainability Policy Recommendation:** In determining our vote recommendation on standardized ESG reporting shareholder proposals, we also analyze the following factors:

▪ 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.

Animal Welfare

**Animal Welfare Policies**

**Sustainability Policy Recommendation:** Generally vote for proposals seeking a report on a company's animal

welfare standards, or animal welfare-related risks, unless:

▪ 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.

**Animal Testing**

**Sustainability Policy Recommendation:** Generally vote against proposals to phase out the use of animals in product testing, unless:

▪ The company is conducting animal testing programs that are unnecessary or not required by regulation;

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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.

**Animal Slaughter**

**Sustainability Policy Recommendation:** Generally vote against proposals requesting the implementation of Controlled Atmosphere Killing (CAK) methods at company and/or supplier operations unless such methods are required by legislation or generally accepted as the industry standard.

Vote case-by-case on proposals requesting a report on the feasibility of implementing CAK methods at company and/or supplier operations considering the availability of existing research conducted by the company or industry groups on this topic and any fines or litigation related to current animal processing procedures at the company.

Consumer Issues

**Genetically Modified Ingredients**

**Sustainability Policy Recommendation:** Generally vote against proposals requesting that a company voluntarily label genetically engineered (GE) ingredients in its products. The labeling of products with GE ingredients is best left to the appropriate regulatory authorities.

Vote case-by-case on proposals asking for a report on the feasibility of labeling products containing GE ingredients, taking into account:

▪ 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.

Generally vote FOR proposals seeking a report on the social, health, and environmental effects of genetically modified organism (GMOs).

Generally vote against proposals to eliminate GE ingredients from the company's products, or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company's products. Such decisions are more appropriately made by management with consideration of current regulations.

**Reports on Potentially Controversial Business/Financial Practices**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for reports on a company's potentially controversial business or financial practices or products, taking into account:

▪ 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.

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**Consumer Lending**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for reports on the company's lending guidelines and procedures taking into account:

▪ 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.

**Pharmaceutical Pricing, Access to Medicines, Product Reimportation and Health Pandemics**

**Sustainability Policy Recommendation:** Generally vote against proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing practices.

Vote case-by-case on proposals requesting that a company report on its product pricing or access to medicine policies, considering:

▪ 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.

Generally vote for proposals requesting that a company report on the financial and legal impact of its prescription drug reimportation policies unless such information is already publicly disclosed.

Generally vote against proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Such matters are more appropriately the province of legislative activity and may place the company at a competitive disadvantage relative to its peers.

**Health Pandemics**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for reports outlining the impact of health pandemics (such as HIV/AIDS, malaria, tuberculosis, and avian flu) on the company's operations and how the company is responding to the situation, taking into account:

▪ 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.

Vote against proposals asking companies to establish, implement, and report on a standard of response to health pandemics (such as HIV/AIDS, malaria, tuberculosis, and avian flu), unless the company has significant operations in the affected markets and has failed to adopt policies and/or procedures to address these issues comparable to those of industry peers.

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**Product Safety and Toxic/Hazardous Materials**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting that a company report on its policies, initiatives/procedures, and oversight mechanisms related to toxic/hazardous materials or product safety in its supply chain.

Generally vote for resolutions requesting that companies develop a feasibility assessment to phase-out of certain toxic/hazardous materials, or evaluate and disclose the potential financial and legal risks associated with utilizing certain materials.

Generally vote against resolutions requiring that a company reformulate its products.

**Tobacco-Related Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on resolutions regarding the advertisement of tobacco products, considering:

▪ 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.

Vote case-by-case on proposals regarding second-hand smoke, considering;

▪ 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.

Generally vote against resolutions to cease production of tobacco-related products, to avoid selling products to tobacco companies, to spin-off tobacco-related businesses, or prohibit investment in tobacco equities. Such business decisions are better left to company management or portfolio managers.

Generally vote against proposals regarding tobacco product warnings. Such decisions are better left to public health authorities.

Climate Change

**Climate Change/Greenhouse Gas (GHG) Emissions**

Climate change has emerged as the most significant environmental threat to the planet to date. Scientists agree that gases released by chemical reactions including the burning of fossil fuels contribute to a "greenhouse effect" that traps the planet's heat. Environmentalists claim that the greenhouse gases produced by the industrial age have caused recent weather crises such as heat waves, rainstorms, melting glaciers, rising sea levels and receding coastlines. With notable exceptions, business leaders have described the rise and fall of global temperatures as naturally occurring phenomena and depicted corporate impact on climate change as minimal. Shareholder proposals asking a company to issue a report to shareholders, "at reasonable cost and omitting proprietary information," on greenhouse gas emissions ask that the report include descriptions of efforts within companies to

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reduce emissions, their financial exposure and potential liability from operations that contribute to global warming, their direct or indirect efforts to promote the view that global warming is not a threat and their goals in reducing these emissions from their operations. Proponents argue that there is scientific proof that the burning of fossil fuels causes global warming, that future legislation may make companies financially liable for their contributions to global warming, and that a report on the company's role in global warming can be assembled at reasonable cost.

**Sustainability Policy Recommendation:**

▪ 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.

**Say on Climate (SoC) Management Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on management proposals that request shareholders to approve the company's climate transition action plan**<sup>23</sup>**, taking into account the completeness and rigor of the plan. Information that will be considered where available includes the following:

▪ 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;

▪ 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.

**Say on Climate (SoC) Shareholder Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval or disapproval of its GHG emissions reduction plan, taking into account information such as the following:

▪ The completeness and rigor of the company's climate-related disclosure;

▪ The company's actual GHG emissions performance;

<sup>23</sup> 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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▪ 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.

**Energy Efficiency**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting that a company report on its energy efficiency policies.

**Renewable Energy**

**Sustainability Policy Recommendation:** Generally vote for requests for reports on the feasibility of developing renewable energy resources.

Generally vote for proposals requesting that the company invest in renewable energy resources.

Diversity

**Board Diversity**

**Sustainability Policy Recommendation:** Generally vote for requests for reports on a company's efforts to diversify the board, unless:

▪ 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.

Generally vote for shareholder proposals that ask the company to take reasonable steps to increase the levels of underrepresented gender identities and racial minorities on the board.

**Equality of Opportunity**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting a company disclose its diversity policies or initiatives, or proposals requesting disclosure of a company's comprehensive workforce diversity data, including requests for EEO-1 data.

Generally vote for proposals seeking information on the diversity efforts of suppliers and service providers.

**Gender Identity, Sexual Orientation, and Domestic Partner Benefits**

**Sustainability Policy Recommendation:** Generally vote for proposals seeking to amend a company's EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would be unduly burdensome.

Generally vote for proposals to extend company benefits to domestic partners.

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**Gender, Race/Ethnicity Pay Gap**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for reports on a company's pay data by gender or race/ethnicity or a report on a company's policies and goals to reduce any gender or race/ethnicity pay gaps, taking into account:

▪ 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.

**Racial Equity and/or Civil Rights Audits**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting that a company conduct an independent racial equity and/or civil rights audit, considering company disclosures, policies, actions, and engagements.

Environment and Sustainability

**Facility and Workplace Safety**

**Sustainability Policy Recommendation:** Vote case-by-case on resolutions requesting that a company report on safety and/or security risks associated with its operations and/or facilities, considering:

▪ 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.

**Hydraulic Fracturing**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting greater disclosure of a company's (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations.

**Operations in Protected Areas**

**Sustainability Policy Recommendation:** Generally vote for requests for reports on potential environmental damage as a result of company operations in protected regions, unless:

▪ 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.

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**Recycling**

**Sustainability Policy Recommendation:** Vote FOR proposals to adopt a comprehensive recycling strategy, taking into account:

▪ 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.

**Sustainability Reporting**

The concept of sustainability is commonly understood as meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. Indeed, the term sustainability is complex and poses significant challenges for companies on many levels. Many in the investment community have termed this broader responsibility the "triple bottom line," referring to the triad of performance goals related to economic prosperity, social responsibility and environmental quality. In essence, the concept requires companies to balance the needs and interests of their various stakeholders while operating in a manner that sustains business growth for the long-term, supports local communities and protects the environment and natural capital for future generations.

Shareholders may request general environmental reports or reports on a specific location/operation, often requesting that the company detail the environmental risks and potential liabilities of a specific project. Companies have begun to report on environmental and sustainability issues using the Global Reporting Initiative (GRI) standards. The GRI was established in 1997 with the mission of developing globally applicable guidelines for reporting on economic, environmental, and social performance. The GRI was developed by Ceres (formerly known as the Coalition for Environmentally Responsible Economies, CERES) in partnership with the United Nations Environment Programme (UNEP).

**Sustainability Policy Recommendation:**

▪ 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 to prepare a sustainability report.

**Water Issues**

**Sustainability Policy Recommendation:** Generally vote for on proposals requesting a company to report on, or to adopt a new policy on, water-related risks and concerns, taking into account:

▪ 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.

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**Equator Principles**

The Equator Principles are the financial industry's benchmark for determining, assessing and managing social and environmental risk in project financing. First launched in June 2003, the Principles were ultimately adopted by over forty financial institutions over a three-year implementation period. Since its adoption, the Principles have undergone a number of revisions, expanding the use of performance standards and signatory banks' banks' commitments to social responsibility, including human rights, climate change, and transparency. The fourth iteration of the Principles was launched in November 2019, incorporating amendments and new commitment to human rights, climate change, Indigenous Peoples and biodiversity related topics. Financial institutions adopt these principles to ensure that the projects they finance are developed in a socially responsible manner and reflect sound environmental management practices. As of 2019, 101 financial institutions have officially adopted the Equator Principles.

**Sustainability Policy Recommendation:** Vote for shareholder proposals to study or implement the Equator Principles.

General Corporate Issues

**Charitable Contributions**

**Sustainability Policy Recommendation:** Vote against proposals restricting a company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which, and if, contributions are in the best interests of the company.

**Data Security, Privacy, and Internet Issues**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals requesting the disclosure or implementation of data security, privacy, or information access and management policies and procedures, considering:

▪ 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.

**Environmental, Social, and Governance (ESG) Compensation-Related Proposals**

**Sustainability Policy Recommendation:** Generally vote for proposals to link, or report on linking, executive compensation to environmental and social criteria (such as corporate downsizings, customer or employee satisfaction, community involvement, human rights, environmental performance, or predatory lending).

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Human Rights, Labor Issues, and International Operations

Investors, international human rights groups, and labor advocacy groups have long been making attempts to safeguard worker rights in the international marketplace. In instances where companies themselves operate factories in developing countries for example, these advocates have asked that the companies adopt global corporate human rights standards that guarantee sustainable wages and safe working conditions for their workers abroad. Companies that contract out portions of their manufacturing operations to foreign companies have been asked to ensure that the products they receive from those contractors have not been made using forced labor, child labor, or sweatshop labor. These companies are asked to adopt formal vendor standards that, among other things, include monitoring or auditing mechanisms. Globalization, relocation of production overseas, and widespread use of subcontractors and vendors, often make it difficult to obtain a complete picture of a company's labor practices in global markets. Many Investors believe that companies would benefit from adopting a human rights policy based on the Universal Declaration of Human Rights and the International Labor Organization's Core Labor Standards. Efforts that seek greater disclosure on a company's labor practices and that seek to establish minimum standards for a company's operations will be supported. In addition, requests for independent monitoring of overseas operations will be supported.

The Sustainability Policy generally supports 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; such as the use of slave, child, or prison labor; a government that is illegitimate; or there is a call by human rights advocates, pro- democracy organizations, or legitimately-elected representatives for economic sanctions. The use of child, sweatshop, or forced labor is unethical and can damage corporate reputations. Poor labor practices can lead to litigation against the company, which can be costly and time consuming.

**Human Rights Proposals**

**Sustainability Policy Recommendation:**

▪ 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.

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**Mandatory Arbitration**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for a report on a company's use of mandatory arbitration on employment-related claims, taking into account:

▪ 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.

**MacBride Principles**

These resolutions have called for the adoption of the MacBride Principles for operations located in Northern Ireland. They request companies operating abroad to support the equal employment opportunity policies that apply in facilities they operate domestically. The principles were established to address the sectarian hiring problems between Protestants and Catholics in Northern Ireland. It is well documented that Northern Ireland's Catholic community faced much higher unemployment figures than the Protestant community. In response to this problem, the U.K. government instituted the New Fair Employment Act of 1989 (and subsequent amendments) to address the sectarian hiring problems.

Many companies believe that the Act adequately addresses the problems and that further action, including adoption of the MacBride Principles, only duplicates the efforts already underway. In evaluating a proposal to adopt the MacBride Principles, shareholders must decide whether the principles will cause companies to divest, and therefore worsen the unemployment problem, or whether the principles will promote equal hiring practices. Proponents believe that the Fair Employment Act does not sufficiently address the sectarian hiring problems. They argue that the MacBride Principles serve to stabilize the situation and promote further investment.

**Sustainability Policy Recommendation:** Support the MacBride Principles for operations in Northern Ireland that request companies to abide by equal employment opportunity policies.

**Community Social and Environmental Impact Assessments**

**Sustainability Policy Recommendation:** Generally vote for requests for reports outlining policies and/or the potential (community) social and/or environmental impact of company operations considering:

▪ 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.

**Operations in High-Risk Markets**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for a report on a company's potential financial and reputational risks associated with operations in "high-risk" markets, such as a terrorism-sponsoring state or politically/socially unstable region, taking into account:

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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.

**Outsourcing/Offshoring**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals calling for companies to report on the risks associated with outsourcing/plant closures, considering:

▪ 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.

**Sexual Harassment**

**Sustainability Policy Recommendation:** Vote case-by-case on requests for a report on company actions taken to strengthen policies and oversight to prevent workplace sexual harassment, or a report on risks posed by a company's failure to prevent workplace sexual harassment, taking into account:

▪ 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.

**Weapons and Military Sales**

**Sustainability Policy Recommendation:** Vote against reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales.

Generally vote against proposals asking a company to cease production or report on the risks associated with the use of depleted uranium munitions or nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Such contracts are monitored by government agencies, serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company's business.

Political Activities

**Lobbying**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals requesting information on a company's lobbying (including direct, indirect, and grassroots lobbying) activities, policies, or procedures, considering:

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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.

**Political Contributions**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting greater disclosure of a company's political contributions and trade association spending policies and activities, considering:

▪ 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.

Vote against proposals barring a company from making political contributions. Businesses are affected by legislation at the federal, state, and local level; barring political contributions can put the company at a competitive disadvantage.

Vote against proposals to publish in newspapers and other media a company's political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.

**Political Ties**

**Sustainability Policy Recommendation:** Generally vote against proposals asking a company to affirm political nonpartisanship in the workplace, so long as:

▪ 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.

Vote against proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.

**Political Expenditures and Lobbying Congruency**

**Sustainability Policy Recommendation:** Generally vote for proposals requesting greater disclosure of a company's alignment of political contributions, lobbying, and electioneering spending with a company's publicly stated values and policies, unless the terms of the proposal are unduly restrictive. Additionally, Sustainability Advisory Services will consider whether:

▪ 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;

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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

**Election of Directors**

**Sustainability Policy Recommendation:** Vote case-by-case on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.

**Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes**

**Sustainability Policy Recommendation:** For closed-end management investment companies (CEFs), vote against or withhold from nominating/governance committee members (or other directors on a case-by-case basis) at CEFs that have not provided a compelling rationale for opting-in to a Control Share Acquisition statute, nor submitted a by-law amendment to a shareholder vote.

**Converting Closed-end Fund to Open-end Fund**

**Sustainability Policy Recommendation:** Vote case-by-case on conversion proposals, considering the following factors:

▪ 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.

**Proxy Contests**

**Sustainability Policy Recommendation:** Vote case-by-case on proxy contests, considering the following factors:

▪ 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.

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**Investment Advisory Agreements**

**Sustainability Policy Recommendation:** Vote case-by-case on investment advisory agreements, considering the following factors:

▪ 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).

**Approving New Classes or Series of Shares**

**Sustainability Policy Recommendation:** Vote for the establishment of new classes or series of shares.

**Preferred Stock Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on the authorization for or increase in preferred shares, considering the following factors:

▪ Stated specific financing purpose;

▪ Possible dilution for common shares;

▪ Whether the shares can be used for antitakeover purposes.

**1940 Act Policies**

**Sustainability Policy Recommendation:** Vote case-by-case on policies under the Investment Advisor Act of 1940, considering the following factors:

▪ Potential competitiveness;

▪ Regulatory developments;

▪ Current and potential returns; and

▪ Current and potential risk.

Generally vote for these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation.

**Changing a Fundamental Restriction to a Nonfundamental Restriction**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors:

▪ 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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**Change Fundamental Investment Objective to Nonfundamental**

**Sustainability Policy Recommendation:** Vote against proposals to change a fund's fundamental investment objective to non-fundamental.

**Name Change Proposals**

**Sustainability Policy Recommendation:** Vote case-by-case on name change proposals, considering the following factors:

▪ Political/economic changes in the target market;

▪ Consolidation in the target market; and

▪ Current asset composition.

**Change in Fund's Subclassification**

**Sustainability Policy Recommendation:** Vote case-by-case on changes in a fund's sub-classification, considering the following factors:

▪ Potential competitiveness;

▪ Current and potential returns;

▪ Risk of concentration;

▪ Consolidation in target industry.

**Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value**

**Sustainability Policy Recommendation:** Vote for proposals authorizing the board to issue shares below Net Asset Value (NAV) if:

▪ 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:

&nbsp;&nbsp;&nbsp;&nbsp;▪ Outperforming peers in its 8-digit GICS group as measured by one- and three-year median TSRs; or

&nbsp;&nbsp;&nbsp;&nbsp;▪ 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.

**Disposition of Assets/Termination/Liquidation**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to dispose of assets, to terminate or liquidate, considering the following factors:

▪ Strategies employed to salvage the company;

▪ The fund's past performance;

▪ The terms of the liquidation.

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**Changes to the Charter Document**

**Sustainability Policy Recommendation:** Vote case-by-case on changes to the charter document, considering the following factors:

▪ The degree of change implied by the proposal;

▪ The efficiencies that could result;

▪ The state of incorporation;

▪ Regulatory standards and implications.

Vote against any of the following changes:

▪ 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.

**Changing the Domicile of a Fund**

**Sustainability Policy Recommendation:** Vote case-by-case on re-incorporations, considering the following factors:

▪ Regulations of both states;

▪ Required fundamental policies of both states;

▪ The increased flexibility available.

**Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval**

**Sustainability Policy Recommendation:** Vote against proposals authorizing the board to hire or terminate subadvisers without shareholder approval if the investment adviser currently employs only one subadviser.

**Distribution Agreements**

**Sustainability Policy Recommendation:** Vote case-by-case on distribution agreement proposals, considering the following factors:

▪ 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.

**Master-Feeder Structure**

**Sustainability Policy Recommendation:** Vote for the establishment of a master-feeder structure.

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**Mergers**

**Sustainability Policy Recommendation:** Vote case-by-case on merger proposals, considering the following factors:

▪ Resulting fee structure;

▪ Performance of both funds;

▪ Continuity of management personnel;

▪ Changes in corporate governance and their impact on shareholder rights.

Shareholder Proposals for Mutual Funds

**Establish Director Ownership Requirement**

**Sustainability Policy Recommendation:** Generally vote against shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

**Reimburse Shareholder for Expenses Incurred**

**Sustainability Policy Recommendation:** Vote case-by-case on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote for the reimbursement of the proxy solicitation expenses.

**Terminate the Investment Advisor**

**Sustainability Policy Recommendation:** Vote case-by-case on proposals to terminate the investment advisor, considering the following factors:

▪ 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.

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**8.** **Foreign Private Issuers Listed on U.S. Exchanges** 

**Sustainability Policy Recommendation:** Vote against (or withhold from) non-independent director nominees at companies which fail to meet the following criteria: a majority-independent board, and the presence of an audit, a compensation, and a nomination committee, each of which is entirely composed of independent directors.

Where the design and disclosure levels of equity compensation plans are comparable to those seen at U.S. companies, U.S. compensation policy will be used to evaluate the compensation plan proposals. Otherwise, they, and all other voting items, will be evaluated using the relevant regional or market approach under the Sustainability proxy voting guidelines.

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