Form 497 JPMORGAN TRUST IV
Table of Contents
J.P. MORGAN FUNDS
JPMorgan Macro Opportunities Fund
(All Share Classes)
(a series of JPMorgan Trust IV)
Supplement dated April 7, 2020 to the Prospectus dated April 7, 2020
Effective immediately, shareholder servicing representatives will be available from 8:00 am to 6:00 pm ET by calling the service center at 1-800-480-4111. This schedule will be in place until further notice.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS FOR FUTURE REFERENCE
SUP-MO-420
Table of Contents
NON-FUNDAMENTAL INVESTMENT OBJECTIVES |
An investment objective is fundamental if it cannot be changed without the consent of a majority of the outstanding shares of the Fund. The investment objective for the Fund is non-fundamental and may be changed without the consent of a majority of the outstanding shares of that Fund. |
Macro Opportunities Fund | |
Asia Pacific Market Risk | • |
CFTC Regulation Risk | ○ |
Commodities Risk | ○ |
Convertible Securities Risk | ○ |
Credit Risk | • |
Currency Risk | • |
Depositary Receipt Risk | • |
Derivatives Risk | • |
Equity Market Risk | • |
European Market Risk | • |
Exchange-Traded Fund (ETF) and Other Investment Company Risk | • |
Foreign Securities and Emerging Markets Risk | • |
General Market Risk | • |
Geographic Focus Risk | • |
Government Securities Risk | • |
High Portfolio Turnover Risk | • |
High Yield Securities Risk | • |
Industry and Sector Focus Risk | • |
Inflation-Linked Securities Risk | • |
Interest Rate Risk | • |
Large Cap Company Risk | • |
Latin America Market Risk | • |
Mortgage-Related and Other Asset-Backed Securities Risk | • |
Preferred Stock Risk | ○ |
Prepayment and Call Risk | ○ |
Real Estate Securities Risk | • |
Risk Assocaited with the Fund Holding Cash, Money Market Instruments and Other Short-Term Investments | • |
Securities Lending Risk | ○ |
Short Positions Risk | • |
Smaller Company Risk | • |
Sovereign Debt Risk | • |
Subsidiary Risk | ○ |
Swap Agreement Risk | • |
Tax Risk | • |
Transactions and Liquidity Risk | • |
Volcker Rule Risk | ○ |
• | Main Risks |
○ | Additional Risks |
WHAT IS A DERIVATIVE? |
Derivatives are securities or contracts (for example, futures and options) that derive their value from the performance of underlying assets or securities. |
WHAT IS A CASH EQUIVALENT? |
Cash equivalents are highly liquid, high-quality instruments with maturities of three months or less on the date they are purchased. They include securities issued by the U.S. government, its agencies and instrumentalities, repurchase agreements, certificates of deposit, bankers’ acceptances, commercial paper, money market mutual funds and bank deposit accounts. |
• | The amount you plan to invest; |
• | The length of time you expect to hold your investment; |
• | The total costs associated with your investment, including any sales charges that you pay when you buy or sell your Fund shares and expenses that are paid out of Fund assets over time; |
• | Whether you qualify for any reduction or waiver of sales charges; |
• | Whether you plan to take any distributions in the near future; |
• | The availability of the share class; |
• | The services that will be available to you; |
• | The amount of compensation that your Financial Intermediary will receive; and |
• | The advantages and disadvantages of each share class. |
Class A | Class C | Class I | |
Eligibility 1,2 | May be purchased by the general public | May be purchased by the general public3 | Limited
to certain investors, including: • Purchases directly from the Fund through JPMorgan Distribution Services, Inc. (the “Distributor”) by institutional investors, such as corporations, pension and profit sharing plans and foundations meeting the minimum investment requirements; • Purchases through your Financial Intermediary or any other organization, including affiliates of JPMorgan Chase & Co. (JPMorgan Chase), authorized to act in a fiduciary, advisory or custodial capacity for its clients or customers; • Purchases through a brokerage program of a Financial Intermediary that has entered into a written agreement with the Distributor to offer such shares (“Eligible Brokerage Program”); and • Purchases by employees of JPMorgan Chase and its affiliates and officers or trustees of the J.P. Morgan Funds.4 |
Minimum Investment1,5,6 | $1,000 for the Fund or $50, if establishing a monthly $50 Systematic Investment Plan7 | $1,000 for the Fund or $50, if establishing a monthly $50 Systematic Investment Plan7 | $1,000,000
– An investor can combine purchases of Class I Shares of other J.P. Morgan Funds in order to meet the minimum. $1,000 for the Fund or $50, if establishing a monthly $50 Systematic Investment Plan for investments through an Eligible Brokerage Program. $1,000 for the Fund or $50 if establishing a monthly $50 Systematic Investment Plan8 for investments by employees of JPMorgan Chase and its affiliates and officers or trustees of the J.P. Morgan Funds.4 |
Class A | Class C | Class I | |
Minimum Subsequent Investments1 | $50 8 | $50 8 | No minimum except $50 for investments by employees of JPMorgan Chase and its affiliates and officers or trustees of the J.P. Morgan Funds and investments through an Eligible Brokerage Program. |
Systematic Investment Plan | Yes | Yes | No, except for investments by employees of JPMorgan Chase and its affiliates and officers or trustees of the J.P. Morgan Funds and investments through an Eligible Brokerage Program. |
Systematic Redemption Plan | Yes | Yes | No, except for investments by employees of JPMorgan Chase and its affiliates and officers or trustees of the J.P. Morgan Funds. |
Front-End
Sales Charge (refer to Sales Charges and Financial Intermediary Compensation Section for more details) |
Up to 5.25% reduced or waived for large purchases and certain investors, eliminated for purchases of $1,000,000 or more. | None | None |
Contingent
Deferred Sales Charge (CDSC) (refer to Sales Charges and Financial Intermediary Compensation Section for more details) |
On
purchases of $1 million or more: • 1.00% on redemptions made within 12 months after purchase. • 0.50% on redemptions made between 12 and 18 months after purchase. Waived under certain circumstances. |
•
1.00% on redemptions made within 12 months after purchase. Waived under certain circumstances. |
None |
Distribution (12b-1) Fee | 0.25% of the average daily net assets. | 0.75% of the average daily net assets. | None |
Service Fee | 0.25% of the average daily net assets. | 0.25% of the average daily net assets. | 0.25% of the average daily net assets. |
Redemption Fee | None | None | None |
Class A | Class C | Class I | |
Conversion Feature9 | None | Class
C Shares will be converted to Class A Shares in the following instances: • If an investor is eligible to purchase Class A Shares, then their Class C Share positions will convert to Class A Shares after 10 years, calculated from the first day of the month of purchase and processed on the tenth business day of the anniversary month. • If Class C Shares held in an account with a third party broker of record are transferred to an account with the Distributor after April 10, 2017, those Class C Shares will be converted to Class A Shares on the tenth business day of the month following the transfer. |
None |
Advantages | If you are eligible to have the sales charge reduced or eliminated or you have a long-term investment horizon, these shares have lower distribution fees over a longer term investment horizon than Class C Shares. | No front-end sales charge is assessed so you own more shares initially. These shares may make sense for investors who have a shorter investment horizon relative to Class A Shares. | No front-end sales charge or CDSC is assessed so you own more shares initially. In addition, Class I Shares have lower fees than Class A and Class C Shares. |
Disadvantages | A front-end sales charge is generally assessed, diminishing the number of shares owned. If you are eligible to have the sales charge reduced or eliminated, you may be subject to a CDSC. Class A Shares may not make sense for investors who have a shorter investment horizon relative to Class C Shares. | Shares are subject to CDSC and have higher ongoing distribution fees. This means that over the long term Class C Shares accrue higher fees than Class A Shares. | Limited availability and higher minimum initial investment than Class A and Class C Shares. |
1 | Financial Intermediaries or other organizations making the Funds available to their clients or customers may impose minimums which may be different from the requirements for investors purchasing directly from the Funds. |
2 | Certain Retirement Plans may purchase Shares. For more information, see “ELIGIBLE RETIREMENT PLANS” below. |
3 | Investors who hold shares in accounts where the Distributor is broker of record are no longer eligible to purchase Class C Shares. In addition, shareholders are ineligible to hold Class C Shares if they are eligible for conversion to Class A Shares. |
4 | Must be purchased directly from the Funds or on approved JPMorgan Chase & Co. affiliated platforms by officers, directors, trustees, retirees and employees and their immediate family members (i.e., spouses, domestic partners, children, grandchildren, parents, grandparents and any dependent of the person, as defined in section 152 of the Internal Revenue Code) of J.P. Morgan Funds or JPMorgan Chase and its subsidiaries and affiliates. Approved affiliated platforms may impose minimums which may be different from the requirements for investors purchasing directly from the Funds. |
5 | Investment minimums may be waived for certain types of Group Retirement Plans, as well as for certain fee-based programs. The J.P. Morgan Funds reserve the right to waive any initial or subsequent investment minimum. |
6 | Please see “MINIMUM ACCOUNT BALANCE” for more information about minimum balance requirements. |
7 | You are eligible for the lower $50 initial investment amount as long as you agree to make regular monthly investments of at least $50 until you reach the required $1,000 investment amount per fund. Once the required amount is reached, you must maintain the minimum $1,000 investment in the Fund. |
8 | Minimum subsequent investment amount for Systematic Investment Plans established before 3/1/15 is $25. |
9 | Please see “Class C Shares Conversion Feature” for more information about the conversion feature. |
• | Employer sponsored retirement, deferred compensation, employee benefit plans (including health savings accounts) and trusts used to fund those plans held directly at a broker dealer or financial intermediary (that is outside of retirement plan record keeping or third party administrator platform). Employer sponsored plans include 401(k) plans, 457 plans, 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans, retiree health benefit plans, group annuity separate accounts offered to retirement plans, and non-qualified deferred compensation plans. Purchases may be subject to applicable sales charges as described in this prospectus. |
• | Group Retirement Plans (and their successor, related, and affiliated plans) which have these share classes available to participants on or before 4/3/2017, may continue to open accounts for new participants in such share classes of the Fund and purchase additional shares in existing participant accounts. |
• | Group Retirement Plans (or financial intermediary platforms available to Group Retirement Plans) that were approved by a Fund and the Distributor after 4/3/2017 and before 12/31/18 because the particular Group Retirement Plan had operational difficulties in implementing the eligibility restrictions may continue to purchase Class A, Class C, Class I or Class L Shares of the Funds. |
• | Select Financial Intermediaries, which have received written approval from the Fund on behalf of existing Group Retirement Plan Participants that hold Class C shares, may purchase Class A shares. |
Class
A Shares Amount of Investment |
Sales
Charge as a % of Offering Price |
Sales
Charge as a % of your Investment1 |
Commission
as a % of Offering Price2 |
CDSC |
Less than $50,000 | 5.25 | 5.54 | 4.75 | 0.00 |
$50,000 to $99,999 | 4.50 | 4.71 | 4.05 | 0.00 |
$100,000 to $249,999 | 3.50 | 3.63 | 3.05 | 0.00 |
$250,000 to $499,999 | 2.50 | 2.56 | 2.05 | 0.00 |
$500,000 to $999,999 | 2.00 | 2.04 | 1.60 | 0.00 |
Amount of Investment | Sales
Charge as a %of Offering Price |
Sales
Charge as a % of your Investment |
Finder’s
Fee as a % of your Investment3 |
CDSC
as a % of your Redemption3,4 |
$1,000,000 to $3,999,999 | 0.00 | 0.00 | 1.00 | 0-12
months — 1.00% 12-18 months — 0.50% |
$4,000,000 to $9,999,999 | 0.00 | 0.00 | 0.75 | |
$10,000,000 to $49,999,999 | 0.00 | 0.00 | 0.50 | |
$50,000,000 or more | 0.00 | 0.00 | 0.25 |
1 | The actual sales charge you pay may differ slightly from the rates disclosed above due to rounding calculations. |
2 | The sales charge is allocated between your Financial Intermediary and the Distributor. The Distributor, at its discretion, may re-allow the entire sales charge to your Financial Intermediary; in those instances such Financial Intermediaries may be deemed to be underwriters under the Securities Act of 1933. |
3 | The Distributor or its affiliates pays any finder’s fee to your Financial Intermediary. The Distributor or its affiliates may withhold finder’s fees with respect to short-term investments. |
4 | Please see the “Exchanging Fund Shares” section for details regarding CDSC and exchanges. |
Class
A Shares Amount of Investment |
Sales
Charge as a %of Offering Price |
Sales
Charge as a % of your Investment |
Finder’s
Fee as a % of your Investment |
CDSC
as a % of your Redemption1 |
$0 to $3,999,999 | 0.00 | 0.00 | 1.00 | 0.00 |
$4,000,000 to $9,999,999 | 0.00 | 0.00 | 0.75 | 0.00 |
$10,000,000 to $49,999,999 | 0.00 | 0.00 | 0.50 | 0.00 |
$50,000,000 or more | 0.00 | 0.00 | 0.25 | 0.00 |
1 | If a plan redeems the shares for which a finder’s fee has been paid within 18 months of the purchase date, no CDSC is charged; however, the Distributor reserves the right to reclaim the finder’s fee paid to the Financial Intermediary. |
Class
C Shares Amount of Investment |
Sales
Charge as a % of Offering Price |
Sales
Charge as a % of your Investment |
Commission
as a % of Offering Price |
CDSC
as a % of your Redemption |
All Investments | 0.00 | 0.00 | 1.00 | 0-12 months —1.00% |
1. | Your account(s); |
2. | Account(s) of your spouse or domestic partner; |
3. | Account(s) of children under the age of 21 who share your residential address; |
4. | Trust accounts established by any of the individuals in items (1) through (3) above. If the person(s) who established the trust is deceased, the trust account may be aggregated with the account(s) of the primary beneficiary of the trust; |
5. | Solely controlled business accounts; and |
6. | Single-participant retirement plans of any of the individuals in items (1) through (3) above. |
1. | Bought with the reinvestment of dividends and capital gains distributions. |
2. | Acquired in exchange for shares of another J.P. Morgan Fund if a comparable sales charge has been paid for the exchanged shares. |
3. | Bought by officers, directors, trustees, retirees and employees, and their immediate family members (i.e., spouses, domestic partners, children, grandchildren, parents, grandparents and any dependent of the person, as defined in Section 152 of the Internal Revenue Code) of: |
• | J.P. Morgan Funds. |
• | JPMorgan Chase and its subsidiaries and affiliates. |
4. | Bought by employees of: |
• | DST Asset Manager Solutions, Inc. and its subsidiaries and affiliates. |
• | Financial Intermediaries or financial institutions that have entered into dealer agreements with the Funds or the Distributor and their subsidiaries and affiliates (or otherwise have an arrangement with a Financial Intermediary or financial institution with respect to sales of Fund shares). This waiver includes the employees’ immediate family members (i.e., spouses, domestic partners, children, grandchildren, parents, grandparents and any dependent of the employee, as defined in Section 152 of the Internal Revenue Code). |
5. | Bought by: |
• | Employer sponsored retirement, deferred compensation, employee benefit plans (including health savings accounts) and trusts used to fund those plans. Employer sponsored plans include 401(k) plans, 457 plans, 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans, retiree health benefit plans and non-qualified deferred compensation plans. Traditional IRAs, Roth IRAs, Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and KEOGHs plans do not qualify under this waiver. |
• | Financial Intermediaries, including affiliates of JPMorgan Chase, who have a dealer arrangement with the Distributor, act in a custodial capacity, or who place trades for their own accounts or for the accounts of their clients and who charge a management, asset allocation, consulting, or other fee for their services. |
• | Financial Intermediaries who have entered into an agreement with the Distributor and have been approved by the Distributor to offer Fund shares to investment brokerage programs in which the end shareholder makes investment decisions independent of a financial advisor; these programs may or may not charge a transaction fee. |
• | Tuition programs that qualify under Section 529 of the Internal Revenue Code. |
• | A bank, trust company or thrift institution which is acting as a fiduciary exercising investment discretion, provided that appropriate notification of such fiduciary relationship is reported at the time of the investment to the Fund or the Fund’s Distributor. |
6. | Bought in connection with plans of reorganization of a J.P. Morgan Fund, such as mergers, asset acquisitions and exchange offers to which the Fund is a party. However, you may pay a CDSC when you redeem the Fund shares you received in connection with the plan of reorganization. |
7. | Purchased in Individual Retirement Accounts (IRAs) established prior to September 2, 2014: |
i. | That were established through a rollover from a qualified retirement plan for which J.P. Morgan Retirement Plan Services LLC had a contractual relationship to provide recordkeeping for the plan (an “RPS Rollover IRA”) or an IRA that was subsequently established in connection with the RPS Rollover IRA; |
ii. | Where JPMorgan Institutional Investments Inc. continues to be the broker of record for the IRA; and |
iii. | Where UMB Bank, n.a. continues to serve as custodian for the IRA. |
1. | If you participate in a Systematic Redemption Plan and withdraw no more than the amount permitted to be withdrawn without a CDSC. Please refer to Systematic Redemption Plan in the “HOW TO REDEEM” table below. |
2. | Made due to the death or disability of a shareholder. For shareholders that become disabled, the redemption must be made within one year of initial qualification for Social Security disability payments or within one year of becoming disabled as defined in section 72(m)(7) of the Internal Revenue Code. This waiver is only available for accounts opened prior to the shareholder’s disability. In order to qualify for the waiver, the Distributor must be notified of the death or disability at the time of the redemption order and be provided with satisfactory evidence of such death or disability. |
3. | That represent a Required Minimum Distribution from your IRA Account or other qualifying retirement plan. The waiver only applies to the pro rata required minimum distribution amount from the assets invested in one or more of the J.P. Morgan Funds. |
4. | That are part of a J.P. Morgan Fund-initiated event, such as mergers, liquidations, asset acquisitions, and exchange offers to which the Fund is a party, or result from a failure to maintain the required minimum balance in an account. However, you may pay a sales charge when you redeem the Fund shares you received in connection with the Fund-initiated event. |
5. | Exchanged into the same share class of other J.P. Morgan Funds. Your new Fund will be subject to the CDSC of the Fund from which you exchanged and the current holding period is carried over to your new shares. Please read “Exchanging Fund Shares” for more information. |
6. | For Class C Shares only, if your Financial Intermediary has notified the Distributor before you invest that it is waiving its commission. |
7. | Sold as a return of excess contributions from an IRA Account. |
8. | Sold to pay the Distributor or a Financial Intermediary account-related fees (only if the transaction is initiated by the Distributor or the Financial Intermediary). |
• | Class A Shares if they are bought with proceeds from the sale of Class A Shares of a J.P. Morgan Fund |
• | Class A Shares if they are bought with proceeds from the sale of Class I Shares or Class L Shares of a J.P. Morgan Fund |
• | Class A Shares if they are bought with proceeds from the sale of Class R6 Shares of a J.P. Morgan Fund held in a fee-based advisory account |
• | Class A Shares if they are bought with proceeds from the sale of Morgan Shares of a J.P. Morgan Money Market Fund, provided that the Morgan Shares were acquired from Class A Shares where a sales charge was paid or waived |
Class | Rule 12b-1 Fee |
Class A | 0.25% |
Class C | 0.75% |
Class I | None |
Class | Service Fee |
Class A | 0.25% |
Class C | 0.25% |
Class I | 0.25% |
• | If an investor is eligible to purchase Class A Shares, then their Class C Share positions will convert to Class A Shares after 10 years, calculated from the first day of the month of purchase and processed on the tenth business day of the anniversary month. |
• | If Class C Shares held in an account with a third party broker of record are transferred to an account with the Distributor after April 10, 2017, those Class C Shares will be converted to Class A Shares on the tenth business day of the month following the transfer. |
HOW TO PURCHASE DIRECTLY WITH THE J.P. MORGAN FUNDS | ||
Opening a New Account | Purchasing into an Existing Account | |
By
Phone or Online 1-800-480-4111 Shareholder Services representatives are available Monday through Friday from 8:00 am to 7:00 pm ET. www.jpmorganfunds.com Note: Certain account types are not available for online account access. Please call for additional information. |
A
new account generally may not be opened by phone or online. Employees of JPMorgan Chase & Co. may open a new account online. A new fund position can be added to an existing account by phone or online if you have bank information on file. The minimum initial investment requirement must be met. |
You must already have bank information on file. If we do not have bank information on file, you must submit written instructions. Please call for instructions on how to add bank information to your account. |
By
Mail Regular mailing address: J.P. Morgan Funds Services P.O. Box 219143 Kansas City, MO 64121-9143 Overnight mailing address: J.P. Morgan Funds Services 430 W 7th Street, Suite 219143 Kansas City, MO 64105-1407 |
Mail
the completed and signed application with a check to our Regular or Overnight mailing address. Refer to the Additional Information Regarding Purchases section |
Please mail your check and include your name, the Fund name, and your fund account number. |
All
checks must be made payable to one of the following: • J.P. Morgan Funds; or • The specific Fund in which you are investing. Please include your existing account number, if applicable. All checks must be in U.S. dollars. The J.P. Morgan Funds do not accept credit cards, cash, starter checks, money orders or credit card checks. The Funds reserve the right to refuse “third-party” checks and checks drawn on non-U.S. financial institutions even if payment may be effected through a U.S. financial institution. Checks made payable to any individual or company and endorsed to J.P. Morgan Funds or the Fund are considered third-party checks. | ||
By
ACH or Wire1 1-800-480-4111 Wire Instructions: DST Asset Manager Solutions, Inc. 2000 Crown Colony Drive Quincy, MA 02169 Attn: J.P. Morgan Funds Services ABA: 021 000 021 DDA: 323 125 832 FBO: Fund Name Fund: Fund # Account: Your Account # and Your Account Registration |
You
may include bank information on your application for your initial purchase to be processed via Automated Clearing House (ACH) rather than sending a check. New accounts cannot be opened by wire purchase. |
Purchase
by ACH: To process a purchase via ACH using bank information on file you may call us or process the purchase online. Purchase by Wire: If you choose to pay by wire, please call to notify the Fund of your purchase. You must also initiate the wire with your financial institution. |
HOW TO PURCHASE DIRECTLY WITH THE J.P. MORGAN FUNDS | ||
Opening a New Account | Purchasing into an Existing Account | |
Systematic Investment Plan1 | You
may include instructions to set up a Systematic Investment Plan on your application. Bank Information must be included. Refer to Choosing A Share Class for fund minimums. |
If
bank information is on file, you may call, go online or mail written instructions to start, edit or delete a Systematic Investment Plan. You cannot have a Systematic Investment Plan and a Systematic Redemption Plan or Systematic Exchange Plan on the same fund account. If bank information is not on file, you will be required to submit a completed form with your bank information and Systematic Investment Plan details. |
1 | The Funds currently do not charge for these services, but may impose a charge in the future. However, your bank may impose a charge for debiting your bank account. |
EXCHANGE PRIVILEGES |
Class A Shares of the Fund may be exchanged for: |
• Class A Shares of another J.P. Morgan Fund, |
• Morgan Shares of a J.P. Morgan money market fund (except for JPMorgan Prime Money Market Fund), or |
• Another share class of the same Fund if you are eligible to purchase that class. |
Class C Shares of the Fund may be exchanged for: |
• Class C Shares of another J.P. Morgan Fund (except for JPMorgan Prime Money Market Fund). Your new Class C Shares will be subject to the CDSC of the Fund from which you exchanged, and the current holding period for your exchanged Class C Shares is carried over to your new shares. |
• Class I or Class L Shares, if available, of the same fund provided you meet the eligibility requirements for the class you are exchanging into. In addition, the Class C Shares that you wish to exchange must not currently be subject to any CDSC. |
Class I Shares of the Fund may be exchanged for: |
• Class I Shares of another J.P. Morgan Fund, |
• Morgan Shares of a J.P. Morgan money market fund (except for JPMorgan Prime Money Market Fund), or |
• Another share class of the same Fund if you are eligible to purchase that class. |
• | All exchanges are subject to meeting any investment minimum or eligibility requirements of the new Fund and class. |
• | The J.P. Morgan Funds will provide 60 days’ written notice of any termination of or material change to your exchange privilege. |
• | All exchanges are based upon the net asset value that is next calculated after the Fund receives your order, provided the exchange out of one Fund must occur before the exchange into the other Fund. |
• | In order for an exchange to take place on the date that the order is submitted, the order must be received prior to the close of both the Fund that you wish to exchange into and the Fund that you wish to exchange out of, otherwise, the exchange will occur on the following business day on which both Funds are open. |
• | A shareholder that exchanges into shares of the Fund that accrues dividends daily, including a money market fund, will not accrue a dividend on the day of the exchange. A shareholder that exchanges out of shares of the Fund that accrues a daily dividend will accrue a dividend on the day of the exchange. |
• | The exchange privilege is not intended as a way for you to speculate on short-term movements in the market. Therefore, to prevent disruptions in the management of J.P. Morgan Funds, certain J.P. Morgan Funds limit excessive exchange activity as described in the “Frequent Trading Policy” section. Your exchange privilege will be limited or revoked if the exchange activity is considered excessive. In addition, any J.P. Morgan Fund may reject any exchange request for any reason, including if it is not in the best interests of the Fund and/or its shareholders to accept the exchange. |
• | For Class A and Class C Shares only, you can set up a systematic exchange program to automatically exchange shares on a regular basis. However, you cannot have simultaneous systematic investment plans for the same Fund. You may call 1-800-480-4111 for complete instructions. |
1. | Your new Class A (Morgan Shares of a J.P. Morgan money market fund) or Class C Shares will be subject to the CDSC of the Fund from which you exchanged, and |
2. | The current holding period for your exchanged Class A (Morgan Shares of a J.P. Morgan money market fund) or Class C Shares, is carried over to your new shares. |
HOW TO REDEEM | |
By
Phone or Online Note: Certain account types are not available for online account access. |
Call
us at 1-800-480-4111 Shareholder Services representatives are available Monday through Friday from 8:00 am to 7:00 pm ET. www.jpmorganfunds.com |
By Mail | Regular
mailing address: J.P. Morgan Funds Services P.O. Box 219143 Kansas City, MO 64121-9143 Overnight mailing address: J.P. Morgan Funds Services 430 W 7th Street, Suite 219143 Kansas City, MO 64105-1407 |
Systematic
Redemption Plan2, 3 Note: The Funds currently do not charge for this service, but may impose a charge in the future. |
You
may include instructions to set up a Systematic Redemption Plan on your application. Payment instructions must be included. You may call, or mail written instructions to start, edit or delete a Systematic Redemption Plan. You may send a written redemption request to your Financial Intermediary, if applicable, or to the Fund at the following address: J.P. Morgan Funds Services P.O. Box 219143 Kansas City, MO 64121-9143 You may redeem over the phone. Please see “Can I redeem by phone?” for more information. If you own Class A or Class C Shares, the applicable CDSC will be deducted from those payments unless such payments are made: 4 • Monthly and constitute no more than 1/12 of 10% of your then-current balance in the Fund each month; or • Quarterly and constitute no more than ¼ of 10% of your then-current balance in the Fund each quarter. It may not be in your best interest to buy additional Class A Shares while participating in a Systematic Redemption Plan. This is because Class A Shares have an upfront sales charge. |
1 | You cannot request a redemption by check to be sent to an address updated within 15 days. |
2 | If the amount of the systematic payment exceeds the income earned by your account since the previous payment under the Systematic Redemption Plan, payments will be made by redeeming some of your shares. This will reduce the amount of your investment, up to possibly closing your account. |
3 | The Funds currently do not charge for these services, but may impose a charge in the future. However, your bank may impose a charge for crediting your bank account. |
4 | Your current balance in the Fund for purposes of these calculations will be determined by multiplying the number of shares held by the last calculated NAV per share of the applicable class. |
• | You want to redeem shares with a value of $50,000 or more and you want to receive your proceeds in the form of a check; or |
• | You want your payment sent to an address, bank account or payee other than the one currently designated on your Fund account. |
1. | Trading on the NYSE is restricted; |
2. | The NYSE is closed (other than weekend and holiday closings); |
3. | Federal securities laws permit; |
4. | The SEC has permitted a suspension; or |
5. | An emergency exists, as determined by the SEC. |
1. | Trades that occur through omnibus accounts at Financial Intermediaries as described above; |
2. | Purchases, redemptions and exchanges made on a systematic basis; |
3. | Automatic reinvestments of dividends and distributions; |
4. | Purchases, redemptions or exchanges that are part of a rebalancing program, such as a wrap, advisory or bona fide asset allocation program, which includes investment models developed and maintained by a financial intermediary; |
5. | Redemptions of shares to pay fund or account fees; |
6. | Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund; |
7. | Transactions in Section 529 college savings plans; |
8. | Transactions in Fund of Fund Products; and |
9. | Transactions within a Retirement account such as: |
• | Shares redeemed to return an excess contribution; |
• | Transactions initiated by sponsors of group employee benefit plans or other related accounts; |
• | Retirement plan contributions, loans, distributions, and hardship withdrawals; |
• | IRA re-characterizations and conversions; and |
• | IRA purchases of shares by asset transfer or direct rollover. |
• | Reinvest all distributions in additional Fund shares; |
• | Take distributions of net investment income in cash and reinvest distributions of net capital gain in additional shares; |
• | Take distributions of net capital gain in cash and reinvest distributions of net investment income; or |
• | Take all distributions in cash. |
Not later than 60 days after the end of each fiscal quarter, the Fund will make available upon request a complete schedule of its portfolio holdings as of the last day of that quarter.
The Fund will post these quarterly schedules on J.P. Morgan Funds’ website at www.jpmorganfunds.com and on the SEC’s website at www.sec.gov.
In addition, from time to time, the Fund may post portfolio holdings on J.P. Morgan Funds’ website on a more frequent basis.
The Fund may disclose its ten largest portfolio holdings and the percentage that each of these ten largest portfolio holdings represents of the Funds’ portfolio as of the most recent month end online at www.jpmorganfunds.com, no sooner than 10 calendar days after month end.
• | Shares must be held at a plan level or |
• | Shares must be held at the Fund level through an omnibus account of a retirement plan record-keeper. |
• | Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEPs, Simple IRAs, SARSEPs or Keogh plans. |
• | Shares purchased through an Ameriprise Financial investment advisory program (if an advisory or similar share class for such investment advisory program is not available). |
• | Shares purchased by third party investment advisors on behalf of their advisory clients through Ameriprise Financial’s platform (if an advisory or similar share class for such investment advisory program is not available). |
• | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same Fund (but not any other fund within the same fund family). |
• | Shares exchanged from Class C shares of the same fund in the month of or following the 10-year anniversary of the purchase date. |
• | Employees and registered representatives of Ameriprise Financial or its affiliates and their immediate family members. |
• | Shares purchased by or through qualified accounts (including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit plans) that are held by a covered family member, defined by Ameriprise as an Ameriprise Financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant (mother, father, grandmother, grandfather, great grandmother, great grandfather), advisor’s lineal descendant (son, daughter, step son, step daughter, grandson, granddaughter, great grandson, great granddaughter) or any spouse of a covered family member who is a lineal descendant. |
• | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e. Ameriprise Rights of Reinstatement). |
• | Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions. |
• | Employees and registered representatives of D.A. Davidson or its affiliates and their family members as designated by D.A. Davidson. |
• | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as Rights of Reinstatement). |
• | A shareholder in a Fund’s Class C Shares will have their shares exchanged at net asset value to Class A Shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the exchange is consistent with D.A. Davidson’s policies and procedures. |
• | Death or disability of the shareholder. |
• | Shares sold as part of a systematic withdrawal plan as described in the fund’s prospectus. |
• | Return of excess contributions from an IRA Account. |
• | Shares sold as part of a required minimum distribution for IRA or other qualifying retirement accounts as described in the fund’s prospectus. |
• | Shares acquired through a right of reinstatement. |
• | Breakpoints as described in this prospectus. |
• | Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at D.A. Davidson. Eligible fund family assets not held at D.A. Davidson may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor about such assets. |
• | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at D.A. Davidson may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
• | The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except any money market funds and retirement plan share classes) of the J.P. Morgan Funds held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations ("pricing groups"). This includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the rights of accumulation calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. |
• | ROA is determined by calculating the higher of cost or market value (current shares x NAV). |
• | Through a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to make over a 13‐month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13‐month period to calculate the front‐end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13‐month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying his or her financial advisor of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not covered under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if LOI is not met. |
• | Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate's life if the associate retires from Edward Jones in good‐standing. |
• | Shares purchased in an Edward Jones fee‐based program. |
• | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment. |
• | Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in a non‐ |
retirement account. |
• | Shares exchanged into Class A Shares from another share class so long as the exchange is into the same fFund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in a Fund’s prospectus. |
• | Exchanges from Class C Shares to Class A Shares of the same Fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones. |
• | The death or disability of the shareholder |
• | Systematic withdrawals with up to 10% per year of the account value |
• | Return of excess contributions from an Individual Retirement Account (IRA) |
• | Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations |
• | Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones |
• | Shares exchanged in an Edward Jones fee‐based program. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable |
• | Shares acquired through NAV reinstatement |
• | $250 initial purchase minimum |
• | $50 subsequent purchase minimum |
• | Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy: |
• | A fee‐based account held on an Edward Jones platform |
• | A 529 account held on an Edward Jones platform |
• | An account with an active systematic investment plan or letter of intent (LOI) |
• | At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder's holdings in a Fund to Class A Shares. |
• | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same Fund (but not any other Fund within the fund family). |
• | Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
• | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
• | Shares purchased through Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
• | Shares acquired through a right of reinstatement. |
• | Class C Shares that are no longer subject to a contingent deferred sales charge and are exchanged into Class A Shares of the same Fund pursuant to Janney’s policies and procedures. |
• | Shares sold upon the death or disability of the shareholder. |
• | Shares sold as part of a systematic withdrawal plan as described in a Fund’s Prospectus. |
• | Shares purchased in connection with a return of excess contributions from an IRA account. |
• | Shares sold as part of a required minimum distribution for IRA and other retirement accounts as described in a Fund’s Prospectus. |
• | Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
• | Shares acquired through a right of reinstatement. |
• | Shares exchanged into the same share class of a different Fund within the fund family. |
• | Breakpoints as described in a Fund’s Prospectus. |
• | Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
• | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
• | Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEPs, Simple IRAs, SARSEPs or Keogh plans. |
• | Morgan Stanley employees and employee-related accounts according to Morgan Stanley’s account linking rules. |
• | Shares purchased through reinvestment of dividends and capital gains distributions when purchasing shares of the same fund. |
• | Shares purchased through a Morgan Stanley self-directed brokerage account. |
• | Class C (i.e., level-load) shares that are no longer subject to a contingent deferred sales charge and are exchanged into Class A shares of the same fund pursuant to Morgan Stanley Wealth Management’s share class conversion program. |
• | Shares purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90 days following the redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares were subject to a front-end or deferred sales charge. |
• | Shares purchased in an investment advisory program. |
• | Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions. |
• | Employees and registered representatives of Raymond James or its affiliates and their family members as designated by Raymond James. |
• | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement). |
• | A shareholder in a Fund’s Class C Shares will have their shares converted at net asset value to Class A Shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of Raymond James. |
• | Death or disability of the shareholder. |
• | Shares sold as part of a systematic withdrawal plan as described in the Funds’ prospectus. |
• | Return of excess contributions from an IRA Account. |
• | Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Funds’ prospectus. |
• | Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James. |
• | Shares acquired through a right of reinstatement. |
• | Breakpoints as described in this prospectus. |
• | Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Raymond James. Eligible fund family assets not held at Raymond James may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor about such assets. |
• | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Raymond James may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
Table of Contents
Class A/*; Class C/*; Class I/*
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Instrument | Part
II Section Reference |
Adjustable Rate Mortgage Loans (“ARMs”): Loans in a mortgage pool which provide for a fixed initial mortgage interest rate for a specified period of time, after which the rate may be subject to periodic adjustments. | Mortgage-Related Securities |
Asset-Backed Securities: Securities secured by company receivables, home equity loans, truck and auto loans, leases, credit card receivables and other securities backed by other types of receivables or other assets. | Asset-Backed Securities |
Auction Rate Securities: Auction rate municipal securities and auction rate preferred securities issued by closed-end investment companies. | Auction Rate Securities |
Bank Obligations: Bankers’ acceptances, certificates of deposit and time deposits. Bankers’ acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Maturities are generally six months or less. Certificates of deposit are negotiable certificates issued by a bank for a specified period of time and earning a specified return. Time deposits are non-negotiable receipts issued by a bank in exchange for the deposit of funds. | Bank Obligations |
Borrowings: A Fund may borrow for temporary purposes and may cause a Fund to liquidate portfolio positions when it would not be advantageous to do so. A Fund must maintain continuous asset coverage of 300% of the amount borrowed, with the exception for borrowings not in excess of 5% of a Fund’s total assets made for temporary administrative purposes. | Miscellaneous Investment Strategies and Risks |
Call and Put Options: A call option gives the buyer the right to buy, and obligates the seller of the option to sell, a security at a specified price at a future date. A put option gives the buyer the right to sell, and obligates the seller of the option to buy, a security at a specified price at a future date. A Fund will sell only covered call and secured put options. | Options and Futures Transactions |
Commercial Paper: Secured and unsecured short-term promissory notes issued by corporations and other entities. Maturities generally vary from a few days to nine months. | Commercial Paper |
Commodity-Linked Derivatives: Instruments whose value derives from the price of a commodity, including commodity futures and commodity options. | Miscellaneous Investment Strategies and Risks |
Commodity-Related Pooled Investment Vehicles: Ownership interests in grantor trusts and other pooled investment vehicles, including commodity pools, that hold tangible assets such as gold, silver and other commodities or invest in commodities futures. Grantor trusts are typically traded on an exchange and include iShares Silver Trust and SPDR Gold ETF. | Commodity-Related Pooled Investment Vehicles |
Common Stock: Shares of ownership of a company. | Equity Securities, Warrants and Rights |
Common Stock Warrants and Rights: Securities, typically issued with preferred stock or bonds, that give the holder the right to buy a proportionate amount of common stock at a specified price. | Equity Securities, Warrants and Rights |
Convertible Securities: Bonds or preferred stock that can convert to common stock including contingent convertible securities. | Convertible Securities |
Corporate Debt Securities: May include bonds and other debt securities of domestic and foreign issuers, including obligations of industrial, utility, banking and other corporate issuers. | Debt Instruments |
Instrument | Part
II Section Reference |
Credit Default Swaps (“CDSs”): A swap agreement between two parties pursuant to which one party pays the other a fixed periodic coupon for the specified life of the agreement. The other party makes no payment unless a credit event, relating to a predetermined reference asset, occurs. If such an event occurs, the party, and the swap will terminate. | Swaps and Related Swap Products |
Emerging Market Securities: Securities issued by issuers or governments in countries with emerging economies or securities markets which may be undergoing significant evolution and rapid development. | Foreign Investments (including Foreign Currencies) |
Exchange Traded Funds (“ETFs”): Ownership interest in unit investment trusts, depositary receipts, and other pooled investment vehicles that hold a portfolio of securities or stocks designed to track the price performance and dividend yield of a particular broad-based, sector or international index. ETFs include a wide range of investments. | Investment Company Securities and Exchange Traded Funds |
Foreign Currency Transactions: Strategies used to hedge against interest rate and currency risks, for other risk management purposes or to increase income or gain to a Fund. These strategies may consist of use of any of the following: options on currencies, currency futures, options on such futures, forward foreign currency transactions (including non-deliverable forwards (“NDFs”)), forward rate agreements and currency swaps, caps and floors. | Foreign Investments (including Foreign currencies) |
Foreign Investments: Equity and debt securities (e.g., bonds and commercial paper) of foreign entities and obligations of foreign branches of U.S. banks and foreign banks. Foreign securities may also include American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), European Depositary Receipts (“EDRs”) and American Depositary Securities. | Foreign Investments (including Foreign Currencies) |
High Yield/High Risk Securities/Junk Bonds: Securities that are generally rated below investment grade by the primary rating agencies or that are unrated but deemed by a Fund’s adviser to be of comparable quality. | Debt Instruments |
Inflation-Linked Debt Securities: Includes fixed and floating rate debt securities of varying maturities issued by the U.S. government as well as securities issued by other entities such as corporations, foreign governments and foreign issuers. | Debt Instruments |
Initial Public Offerings (“IPO”): A transaction in which a previously private company makes its first sale of stock to the public. | Equity Securities, Warrants and Rights |
Interfund Lending: Involves lending money and borrowing money for temporary purposes through a credit facility. | Miscellaneous Investment Strategies and Risks |
Inverse Floating Rate Instruments: Leveraged variable debt instruments with interest rates that reset in the opposite direction from the market rate of interest to which the inverse floater is indexed | Inverse Floaters and Interest Rate Caps |
Master Limited Partnerships: Limited partnerships that are publicly traded on a securities exchange. | Miscellaneous Investment Strategies and Risks |
Mortgages (Directly Held): Debt instruments secured by real property. | Mortgage- Related Securities |
Mortgage-Backed Securities: Debt obligations secured by real estate loans, such as collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities (“CMBSs”) and other asset-backed structures. | Mortgage-Related Securities |
Municipal Securities: Securities issued by a state or political subdivision to obtain funds for various public purposes. Municipal securities include, among others, private activity bonds and industrial development bonds, as well as general obligation notes, tax anticipation notes, bond anticipation notes, revenue anticipation notes, other short-term tax-exempt obligations, municipal leases, obligations of municipal housing authorities and single-family revenue bonds. | Municipal Securities |
New Financial Products: New options and futures contracts and other financial products continue to be developed and a Fund may invest in such options, contracts and products. | Miscellaneous Investment Strategies and Risks |
Instrument | Part
II Section Reference |
Obligations of Supranational Agencies: Obligations which are chartered to promote economic development and are supported by various governments and governmental agencies. | Foreign Investments (including Foreign Currencies) |
Options and Futures Transactions: A Fund may purchase and sell (a) exchange traded and over the counter put and call options on securities, indexes of securities and futures contracts on securities and indexes of securities, interest rate futures contracts and interest rate swaps and (b) futures contracts on securities and indexes of securities. | Options and Futures Transactions |
Preferred Stock: A class of stock that generally pays a dividend at a specified rate and has preference over common stock in the payment of dividends and in liquidation. | Equity Securities, Warrants and Rights |
Private Placements, Restricted Securities and Other Unregistered Securities: Securities not registered under the Securities Act of 1933, such as privately placed commercial paper and Rule 144A securities. | Miscellaneous Investment Strategies and Risks |
Real Estate Investment Trusts (“REITs”): Pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interest. | Real Estate Investment Trusts |
Repurchase Agreements: The purchase of a security and the simultaneous commitment to return the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. | Repurchase Agreements |
Reverse Repurchase Agreements: The sale of a security and the simultaneous commitment to buy the security back at an agreed upon price on an agreed upon date. This is treated as a borrowing by a Fund. | Reverse Repurchase Agreements |
Securities Lending: The lending of up to 33 1⁄3% of a Fund’s total assets. In return, a Fund will receive cash, other securities, and/or letters of credit as collateral. | Securities Lending |
Stripped Mortgage-Backed Securities: Derivative multi-class mortgage securities which are usually structured with two classes of shares that receive different proportions of the interest and principal from a pool of mortgage assets. These include Interest- Only (“IO”) and Principal-Only (“PO”) securities issued outside a Real Estate Mortgage Investment Conduit (“REMIC”) or CMO structure. | Mortgage-Related Securities |
Structured Investments: A security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. | Structured Investments |
Swaps and Related Swap Products: Swaps involve an exchange of obligations by two parties. Caps and floors entitle a purchaser to a principal amount from the seller of the cap or floor to the extent that a specified index exceeds or falls below a predetermined interest rate or amount. A Fund may enter into these transactions to manage its exposure to changing interest rates and other factors. | Swaps and Related Swap Products |
Temporary Defensive Positions: To respond to unusual circumstances a Fund may invest in cash and cash equivalents for temporary defensive purposes. | Miscellaneous Investment Strategies and Risks |
U.S. Government Agency Securities: Securities issued by agencies and instrumentalities of the U.S. government. These include all types of securities issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), including funding notes, subordinated benchmark notes, CMOs and REMICs. | Mortgage-Related Securities |
Instrument | Part
II Section Reference |
U.S. Government Obligations: May include direct obligations of the U.S. Treasury, including Treasury bills, notes and bonds, all of which are backed as to principal and interest payments by the full faith and credit of the United States, and separately traded principal and interest component parts of such obligations that are transferable through the Federal book-entry system known as Separate Trading of Registered Interest and Principal of Securities (“STRIPS”) and Coupons Under Book–Entry Safekeeping (“CUBES”). | U.S. Government Obligations |
Variable and Floating Rate Instruments: Obligations with interest rates which are reset daily, weekly, quarterly or some other frequency and which may be payable to a Fund on demand or at the expiration of a specified term. | Debt Instruments |
Zero-Coupon, Pay-in-Kind and Deferred Payment Securities: Zero-coupon securities are securities that are sold at a discount to par value and on which interest payments are not made during the life of the security. Pay-in-kind securities are securities that have interest payable by delivery of additional securities. Deferred payment securities are zero-coupon debt securities which convert on a specified date to interest bearing debt securities. | Debt Instruments |
Committee | Fiscal
Year Ended 10/31/19 | |
Audit and Valuation Committee | 4 | |
Compliance Committee | 4 | |
Governance Committee | 4 | |
Equity Committee | 5 | |
Fixed Income Committee | 5 | |
Money Market and Alternative Products Committee | 5 |
Name of Trustee | Ownership
of Macro Opportunities Fund |
Aggregate
Dollar Range of Equity Securities in All Registered Investment Companies Overseen by the Trustee in the Family of Investment Companies(1)(2) | |||||
Independent Trustees | |||||||
John F. Finn | None | Over $100,000 | |||||
Stephen P. Fisher | None | Over
$100,000 | |||||
Kathleen M. Gallagher | None | Over
$100,000 | |||||
Dennis P. Harrington | None | Over $100,000 | |||||
Frankie D. Hughes | None | Over $100,000 | |||||
Raymond Kanner | None | Over $100,000 | |||||
Peter C. Marshall | None | Over $100,000 | |||||
Mary E. Martinez | None | Over $100,000 | |||||
Marilyn McCoy | None | Over $100,000 | |||||
Mitchell M. Merin | None | Over $100,000 | |||||
Dr. Robert A. Oden, Jr. | None | Over $100,000 | |||||
Marian U. Pardo | None | Over $100,000 |
(1) | A Family of Investment Companies means any two or more registered investment companies that share the same investment adviser or principal underwriter and hold themselves out to investors as related companies for purposes of investment and investor services. The Family of Investment Companies for which the Board of Trustees currently serves includes ten registered investment companies (127 J.P. Morgan Funds). |
(2) | For Mses. Gallagher and McCoy and Messrs. Finn, Fisher, Harrington, Kanner, Marshall and Oden, these amounts include deferred compensation balances, as of 12/31/19, through participation in the J.P. Morgan Funds’ Deferred Compensation Plan for Eligible Trustees. For a more complete discussion, see the “Trustee Compensation” section in Part II of this SAI. |
Name of Trustee |
Macro Opportunities Fund |
Total
Compensation Paid From Fund Complex1 |
||||
Independent Trustees | ||||||
John F. Finn | None | $425,000 | ||||
Stephen P. Fisher | None | 375,000 2 | ||||
Kathleen M. Gallagher | None | 375,000 3 | ||||
Dr. Matthew Goldstein4 | None | 600,000 | ||||
Dennis P. Harrington | None | 425,000 5 |
Name of Trustee |
Macro Opportunities Fund |
Total
Compensation Paid From Fund Complex1 |
||||
Frankie D. Hughes | None | $375,000 | ||||
Raymond Kanner | None | 375,000 2 | ||||
Peter C. Marshall | None | 375,000 3 | ||||
Mary E. Martinez | None | 425,000 | ||||
Marilyn McCoy | None | 375,000 2 | ||||
Mitchell M. Merin | None | 425,000 | ||||
Dr. Robert A. Oden, Jr. | None | 375,000 | ||||
Marian U. Pardo | None | 425,000 |
1 | A Fund Complex means two or more registered investment companies that (i) hold themselves out to investors as related companies for purposes of investment and investor services or (ii) have a common investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any of the other registered investment companies. The J.P. Morgan Funds Complex for which the Board of Trustees currently serves includes eleven registered investment companies (127 Funds). |
2 | Includes $375,000 of Deferred Compensation. |
3 | Includes $112,500 of Deferred Compensation. |
4 | Dr. Goldstein retired as a Trustee of the Trusts, effective 12/31/19. |
5 | Includes $425,000 of Deferred Compensation. |
Non-Performance Based Fee Advisory Accounts | |||||||||||
Registered
Investment Companies |
Other
Pooled Investment Vehicles |
Other Accounts | |||||||||
Number
of Accounts |
Total
Assets ($thousand) |
Number
of Accounts |
Total
Assets ($thousand) |
Number
of Accounts |
Total
Assets ($thousand) | ||||||
Shrenick Shah | 0 | $0 | 6 | $8,433,400,252 | 0 | $0 | |||||
Benoit Lanctot | 0 | 0 | 6 | 8,433,400,252 | 0 | 0 | |||||
Josh Berelowitz | 0 | 0 | 6 | 8,433,400,252 | 0 | 0 |
Performance Based Fee Advisory Accounts | |||||||||||
Registered
Investment Companies |
Other
Pooled Investment Vehicles |
Other Accounts | |||||||||
Number
of Accounts |
Total
Assets ($thousand) |
Number
of Accounts |
Total
Assets ($thousand) |
Number
of Accounts |
Total
Assets ($thousand) | ||||||
Shrenick Shah | 0 | $0 | 0 | $0 | 0 | $0 | |||||
Benoit Lanctot | 0 | 0 | 0 | 0 | 0 | 0 | |||||
Josh Berelowitz | 0 | 0 | 0 | 0 | 0 | 0 |
* | The total value and number of accounts managed by a portfolio manager may include sub-accounts of asset allocation, multi-managed and other accounts. |
Macro Opportunities Fund | ICE BofAML US 3 Month Treasury Bills |
Class A, Class C and Class I | Up to 0.25% |
Amount of Purchases | Finders’ Fees | |
$1,000,000 – $3,999,999* | 1.00% | |
$4,000,000 – $9,999,999 | 0.75% | |
$10,000,000 – $49,999,999 | 0.50% | |
$50,000,000 or more | 0.25% |
* | If the total sale of Class A Shares of Funds that have Finders’ Fees (“Qualifying Funds”) is $1,000,000 or more but the amount of the sale applicable to the Fund is less than $1,000,000, the Financial Intermediary will receive a Finder’s Fee equal to 1.00% of the sale of the Class A Shares of the Fund. The Finders’ Fee Schedule for sales of the other Qualifying Funds can be found in the Statement of Additional Information for such Qualifying Funds. |
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A-1 |
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B-1 |
1. | bridges; |
2. | highways; |
3. | roads; |
4. | schools; |
5. | waterworks and sewer systems; and |
6. | other utilities. |
1. | refunding outstanding obligations; |
2. | obtaining funds for general operating expenses; and |
3. | obtaining funds to lend to other public institutions and facilities. |
1. | water, sewage and solid waste facilities; |
2. | qualified residential rental projects; |
3. | certain local electric, gas and other heating or cooling facilities; |
4. | qualified hazardous waste facilities; |
5. | high-speed intercity rail facilities; |
6. | governmentally-owned airports, docks and wharves and mass transportation facilities; |
7. | qualified mortgages; |
8. | student loan and redevelopment bonds; and |
9. | bonds used for certain organizations exempt from Federal income taxation. |
1. | privately operated housing facilities; |
2. | sports facilities; |
3. | industrial parks; |
4. | convention or trade show facilities; |
5. | airport, mass transit, port or parking facilities; |
6. | air or water pollution control facilities; |
7. | sewage or solid waste disposal facilities; and |
8. | facilities for water supply. |
1. | Short-term tax-exempt General Obligations Notes; |
2. | Tax Anticipation Notes; |
3. | Bond Anticipation Notes; |
4. | Revenue Anticipation Notes; |
5. | Project Notes; and |
6. | Other forms of short-term tax-exempt loans. |
1. | general money market conditions; |
2. | coupon rate; |
3. | the financial condition of the issuer; |
4. | general conditions of the municipal bond market; |
5. | the size of a particular offering; |
6. | the maturity of the obligations; and |
7. | the rating of the issue. |
• | the interest on the bonds may become taxable, possibly retroactively from the date of issuance; |
• | the value of the bonds may be reduced; |
• | you and other Shareholders may be subject to unanticipated tax liabilities; |
• | a Fund may be required to sell the bonds at the reduced value; |
• | it may be an event of default under the applicable mortgage; |
• | the holder may be permitted to accelerate payment of the bond; and |
• | the issuer may be required to redeem the bond. |
• | limited financial resources; |
• | infrequent or limited trading; and |
• | more abrupt or erratic price movements than larger company securities. |
(a) | derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gain from the sale or other disposition of stock, securities, or foreign currencies, or other income (including, but not limited to, gain from options, swaps, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies and (ii) net income derived from interests in “qualified publicly traded partnerships” (“QPTPs,” defined below); |
(b) | diversify its holdings so that, at the end of each quarter of the Fund’s taxable year, (i) at least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and 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 not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the Fund’s total assets is invested (x) in the securities (other than cash or cash items, or securities issued by the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more QPTPs. In the case of a Fund’s investments in loan participations, the Fund shall treat both the financial intermediary and the issuer of the underlying loan as an issuer for the purposes of meeting this diversification requirement; and |
(c) | distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code, without regard to the deduction for dividends paid — generally, taxable ordinary income and any excess of net short-term capital gain over net long-term capital loss) and net tax-exempt interest income, for such taxable year. |
Name
(Year of Birth; Positions with the Funds since) |
Principal
Occupation During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Trustee(1) |
Other
Directorships Held During the Past 5 Years | |||
John
F. Finn (1947); Chair since 2020; Trustee of the Trusts since 2005; Trustee of heritage One Group Mutual Funds since 1998. |
Chairman, Gardner, Inc. (supply chain management company serving industrial and consumer markets) (serving in various roles 1974–present). | 127 | Director,
Greif, Inc. (GEF) (industrial package products and services) (2007–present); Trustee, Columbus Association for the Performing Arts (1988– present); Director, Cardinal Health, Inc. (CAH) (1994–2014). |
Name
(Year of Birth; Positions with the Funds since) |
Principal
Occupation During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Trustee(1) |
Other
Directorships Held During the Past 5 Years | |||
Stephen
P. Fisher (1959); Trustee of the Trusts since 2018. |
Retired; Chairman and Chief Executive Officer, NYLIFE Distributors LLC (registered broker-dealer) (serving in various roles 2008-2013); Chairman, NYLIM Service Company LLC (transfer agent) (2008-2017); New York Life Investment Management LLC (registered investment adviser) (serving in various roles 2005-2017); Chairman, IndexIQ Advisors LLC (registered investment adviser for ETFs) (2014-2017); President, MainStay VP Funds Trust (2007-2017), MainStay DefinedTerm Municipal Opportunities Fund (2011-2017) and MainStay Funds Trust (2007-2017) (registered investment companies). | 127 | Honors Program Advisory Board Member, The Zicklin School of Business, Baruch College, The City University of New York (2017-present). | |||
Kathleen
M. Gallagher (1958); Trustee of the Trusts since 2018. |
Retired; Chief Investment Officer – Benefit Plans, Ford Motor Company (serving in various roles 1985-2016). | 127 | Non-Executive Director, Legal & General Investment Management (Holdings) (2018-present); Non-Executive Director, Legal & General Investment Management America (financial services and insurance) (2017-present); Advisory Board Member, Global Fiduciary Solutions, State Street Global Advisors (2017-present); Member, Client Advisory Council, Financial Engines, LLC (registered investment adviser) (2011-2016); Director, Ford Pension Funds Investment Management Ltd. (2007-2016). |
Name
(Year of Birth; Positions with the Funds since) |
Principal
Occupation During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Trustee(1) |
Other
Directorships Held During the Past 5 Years | |||
Dennis
P. Harrington (1950); Trustee of the Trusts since 2017. |
Retired;
Partner, Deloitte LLP (serving in various roles 1984– 2012). |
127 | None. | |||
Frankie
D. Hughes (1952); Trustee of the Trusts since 2008. |
President,
Ashland Hughes Properties (property management) (2014–present); President and Chief Investment Officer, Hughes Capital Management, Inc. (fixed income asset management) (1993– 2014). |
127 | None. | |||
Raymond
Kanner (1953); Trustee of the Trusts since 2017. |
Retired; Managing Director and Chief Investment Officer, IBM Retirement Funds (2007–2016). | 127 | Advisory
Board Member, Los Angeles Capital (2018-present); Advisory Board Member, State Street Global Advisors Global Fiduciary Solutions Board (2017-present); Acting Executive Director, Committee on Investment of Employee Benefit Assets (CIEBA)
(2016-2017); Advisory Board Member, Betterment for Business (robo advisor) (2016– 2017); Advisory Board Member, BlueStar Indexes (index creator) (2013–2017); Director, Emerging Markets Growth Fund (registered investment company) (1997-2016); Member, Russell Index Client Advisory Board (2001– 2015). | |||
Peter
C. Marshall (1942); Trustee of the Trusts since 2005; Trustee of heritage One Group Mutual Funds since 1985. |
Self-employed
business consultant (2002– present). |
127 | None. |
Name
(Year of Birth; Positions with the Funds since) |
Principal
Occupation During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Trustee(1) |
Other
Directorships Held During the Past 5 Years | |||
Mary
E. Martinez (1960); Trustee of the Trusts since 2013. |
Associate,
Special Properties, a Christie’s International Real Estate Affiliate (2010– present); Managing Director, Bank of America (asset management) (2007– 2008); Chief Operating Officer, U.S. Trust Asset Management, U.S. Trust Company (asset management) (2003–2007); President, Excelsior Funds (registered investment companies) (2004–2005). |
127 | None. | |||
Marilyn
McCoy (1948); Trustee of the Trusts since 2005; Trustee of heritage One Group Mutual Funds since 1999. |
Vice
President, Administration and Planning, Northwestern University (1985– present). |
127 | None. | |||
Mitchell
M. Merin (1953); Trustee of the Trusts since 2013. |
Retired; President and Chief Operating Officer, Morgan Stanley Investment Management, Member Morgan Stanley & Co. Management Committee (serving in various roles 1981-2006). | 127 | Director, Sun Life Financial (SLF) (financial services and insurance) (2007–2013). | |||
Dr.
Robert A. Oden, Jr. (1946); Trustee of the Trusts since 2005; Trustee of heritage One Group Mutual Funds since 1997. |
Retired; President, Carleton College (2002–2010); President, Kenyon College (1995–2002). | 127 | Trustee
and Vice Chair, Trout Unlimited (2017-present); Trustee, American Museum of Fly Fishing (2013– present); Vice Chair, Dartmouth-Hitchcock Medical Center (2011– present); Trustee, American University in Cairo (1999–2014). |
Name
(Year of Birth; Positions with the Funds since) |
Principal
Occupation During Past 5 Years |
Number
of Funds in Fund Complex Overseen by Trustee(1) |
Other
Directorships Held During the Past 5 Years | |||
Marian
U. Pardo (1946); Trustee of the Trusts since 2013. |
Managing
Director and Founder, Virtual Capital Management LLC (investment consulting) (2007– present); Managing Director, Credit Suisse Asset Management (portfolio manager) (2003–2006). |
127 | President and Member, Board of Governors, Columbus Citizens Foundation (not-for-profit supporting philanthropic and cultural programs) (2006–present). |
(1) | A Fund Complex means two or more registered investment companies that hold themselves out to investors as related companies for purposes of investment and investor services or have a common investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any of the other registered investment companies. The J.P. Morgan Funds Complex for which the Board of Trustees serves currently includes ten registered investment companies (127 J.P. Morgan Funds). |
1 | J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc. |
Name of Committee | Members | Committee Chair | ||
Audit and Valuation Committee | Mr.
Harrington Ms. Gallagher Mr. Kanner |
Mr. Harrington | ||
Compliance Committee | Ms.
Pardo Mr. Fisher Ms. Hughes Mr. Marshall |
Ms. Pardo | ||
Governance Committee | Mr.
Finn Ms. Martinez Ms. McCoy Mr. Merin Dr. Oden |
Mr. Finn | ||
Equity Committee | Mr.
Kanner Mr. Fisher Mr. Harrington Ms, Hughes |
Mr. Kanner | ||
Fixed Income Committee | Mr.
Merin Ms. Gallagher Dr. Oden Ms. Pardo |
Mr. Merin | ||
Money
Market and Alternative Products Committee |
Ms.
Martinez Mr. Marshall Ms. McCoy |
Ms. Martinez |
Name
(Year of Birth), Positions Held with the Trusts (Since) |
Principal Occupations During Past 5 Years | |
Brian S. Shlissel (1964), President and Principal Executive Officer (2016) | Managing Director and Chief Administrative Officer for J.P. Morgan pooled vehicles, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) (from 2014 to present); Managing Director and Head of Mutual Fund Services, Allianz Global Investors; President and Chief Executive Officer, Allianz Global Investors Mutual Funds and PIMCO Closed-End Funds (from 1999 to 2014) | |
Timothy J. Clemens (1975), Treasurer and Principal Financial Officer (2018) | Executive Director, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since February 2016; Vice President, JPMorgan Funds Management, Inc. from October 2013 to January 2016; Chief Financial Officer and Head of Valuation, Aberdeen Asset Management PLC (previously Artio Global Management) from 2009 to September 2013. | |
Gregory S. Samuels (1980), Secretary (2019)* (formerly Assistant Secretary since 2010) | Executive Director and Assistant General Counsel, JPMorgan Chase since February 2014; formerly Vice President and Assistant General Counsel, JPMorgan Chase from 2010. | |
Stephen M. Ungerman (1953), Chief Compliance Officer (2005) | Managing Director, JPMorgan Chase & Co.; Mr. Ungerman has been with JPMorgan Chase & Co. since 2000. | |
Elizabeth A. Davin (1964), Assistant Secretary (2005)** | Executive Director and Assistant General Counsel, JPMorgan Chase since February 2012; formerly Vice President and Assistant General Counsel, JPMorgan Chase from 2005 until February 2012; Senior Counsel, JPMorgan Chase (formerly Bank One Corporation) from 2004 to 2005. | |
Jessica K. Ditullio (1962), Assistant Secretary (2005)** | Executive Director and Assistant General Counsel. Ms. Ditullio has been with JPMorgan Chase (formerly Bank One Corporation) since 1990. | |
Anthony Geron (1971), Assistant Secretary (2018)* | Vice President and Assistant General Counsel, JPMorgan Chase since September 2018; Lead Director and Counsel, AXA Equitable Life Insurance Company from 2015 to 2018 and Senior Director and Counsel, AXA Equitable Life Insurance Company from 2014 to 2015; Associate, Willkie Farr & Gallagher (law firm) from 2007 to 2014. | |
Carmine Lekstutis (1980), Assistant Secretary (2011)* | Executive Director and Assistant General Counsel, JPMorgan Chase since February 2015; formerly Vice President and Assistant General Counsel, JPMorgan Chase from 2011 to February 2015. | |
Keri
E. Riemer (1976), Assistant Secretary (2019)* |
Executive Director and Assistant General Counsel, JPMorgan Chase since February 2019; Counsel, Seward & Kissel LLP (2016-2019); Associate, Seward & Kissel LLP (2011-2016). |
Name
(Year of Birth), Positions Held with the Trusts (Since) |
Principal Occupations During Past 5 Years | |
Zachary
E. Vonnegut-Gabovitch (1986), Assistant Secretary (2017)* |
Vice President and Assistant General Counsel, JPMorgan Chase since September 2016; Associate, Morgan, Lewis & Bockius (law firm) from 2012 to 2016. | |
Michael M. D’Ambrosio (1969), Assistant Treasurer (2012) | Managing Director, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since May 2014; formerly Executive Director, J.P. Morgan Investment Management Inc. from 2012 to May 2014. | |
Lauren
Paino (1973), Assistant Treasurer (2014)* |
Executive Director, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since August 2013; formerly Director, Credit Suisse Asset Management from 2000 to 2013. | |
Joseph Parascondola (1963), Assistant Treasurer (2011)* | Vice President, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since August 2006. | |
Jeffrey D. House (1972), Assistant Treasurer (2017)** | Vice President, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since July 2006. | |
Gillian I. Sands (1969), Assistant Treasurer (2012)* | Vice President, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) from September 2012; Assistant Treasurer, Wells Fargo Funds Management (from 2007 to 2009). | |
Shannon Gaines (1977), Assistant Treasurer (2018)** | Vice President, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since January 2014. | |
Aleksandr Fleytekh (1972), Assistant Treasurer (2019)* | Vice President, J.P. Morgan Investment Management Inc. (formerly JPMorgan Funds Management, Inc.) since February 2012. |
* | The contact address for the officer is 4 New York Plaza, New York, NY 10004. |
** | The contact address for the officer is 1111 Polaris Parkway, Columbus, OH 43240 |
1 | The affiliates of JPMIM that act as Adviser or Sub-Adviser to a Fund – J.P. Morgan Private Investments Inc.—will also face some or all of the conflicts of interest described in this section. References to JPMIM should be read to apply to these other advisers for a Fund advised or sub-advised by such other adviser. |
1 | JPMorgan Funds Management, Inc. (“JPMFM”), the former Administrator, was merged with and into JPMIM effective April 1, 2016. |
Money Market Funds: | ||
Tier One | First $250 billion | 0.0013% |
Tier Two | Over $250 billion | 0.0010% |
Complex Assets1 Funds: | ||
Tier One | First $75 billion | 0.00425% |
Tier Two | Next $25 billion | 0.0040% |
Tier Three | Over $100 billion | 0.0035% |
Non-Complex Assets Funds: | ||
Tier One | First $75 billion | 0.0025% |
Tier Two | Next $25 billion | 0.0020% |
Tier Three | Over $100 billion | 0.0015% |
Other Fees: | ||
Fund of Funds (for a Fund of Funds that invests in J.P. Morgan Funds only) | $17,500 2 | |
Additional Share Classes (this additional class expense applies after the fifth class) | $ 2,000 | |
Daily Market-based Net Asset Value Calculation for Money Market Funds | $15,000 per Fund | |
Hourly Net Asset Value Calculation for Money Market Funds | $5,000 per Fund | |
Floating NAV Support for Money Market Funds | $100,000 per Fund |
1 | “Complex Assets Funds” are Funds whose strategy “routinely” employs one or more of the following instrument types: Bank Loans, Exchange Traded Derivatives or CFD/Portfolio Swaps. The Funds’ classification as either “Complex” or “Non-Complex” will be reviewed on at least an annual basis. Fund of Funds are excluded by both “Complex Assets Funds” and “Non-Complex Assets Funds.” |
2 | Fund of Funds are not subject to the asset based fees described above. |
Annual
Minimums: (except for certain Funds of Funds which are subject to the fee described above) |
|
Money Market Funds | $15,000 per Fund |
All Other Funds | $20,000 per Fund |
• | $15 or $45 per proxy (depending on the country where the issuer is located) for its service which helps facilitate the voting of proxies throughout the world. For securities in the U.S. market, this fee is waived if the Adviser votes the proxies directly; |
• | $2,000 per year for account maintenance for each custody collateral control account; |
• | $2.25 or $15 for income or redemption processing (depending on whether the security is held book entry or physically); and |
• | $2.50 to $53.50 for each cash payment or receipt transaction. |
Money Market Funds1: | ||
Tier One | First $250 billion | 0.0013% |
Tier Two | Over $250 billion | 0.0010% |
All Funds except Money Market Funds: | ||
Tier One | Up to $100 billion | 0.00375% |
Tier Two | $100 billion to $175 billion | 0.0030% |
Tier Three | Over $175 billion | 0.0020% |
Other Fees: | ||
Additional Share Classes (this additional class expense applies after the tenth class) | $2,000 per Class | |
Daily Market-based Net Asset Value Calculation for Money Market Funds | $15,000 per Fund | |
Hourly Net Asset Value Calculation for Money Market Funds | $5,000 per Fund | |
Floating NAV Support for Money Market Funds | $85,000 per Fund |
1 | A cap on fund accounting fees for each Money Market Fund will be set at $1,400,000 per year. This cap may be reviewed annually for possible adjustment. |
Annual Minimums: | |
Money Market Funds | $15,000 per Fund |
All Other Funds | $20,000 per Fund |
1. | Academy Securities, Inc. |
2. | American Veterans Group, PBC |
3. | Ameriprise Financial Services, Inc. |
4. | Apex Clearing Corporation |
5. | Arlington Trust Company Inc. |
6. | AXA Advisors, LLC |
7. | BB&T Securities, LLC |
8. | Bellator Asset Management LLC (fka Drexel Hamilton Asset Management LLC) |
9. | BofA Securities (fka Merrill Lynch, Pierce, Fenner, & Smith) |
10. | Broadridge Business Process Outsourcing LLC |
11. | Cadaret Grant & Co Inc. |
12. | Cambridge Investment Research |
13. | Cetera Advisor Networks LLC |
14. | Cetera Advisors LLC |
15. | Cetera Financial Specialists LLC |
16. | Cetera Investment Services LLC |
17. | Charles Schwab & Co Inc |
18. | Citco Securities Inc. |
19. | Citigroup Global Markets, Inc. |
20. | Comerica Securities, Inc. |
21. | Commonfund Securities, Inc. |
22. | Commonwealth Equity Services, Inc. (dba Commonwealth Financial Network) |
23. | Credit Suisse Securities (USA) LLC |
24. | DA Davidson & Co |
25. | Deutsche Bank Securities Inc. |
26. | Edward D Jones & Co LP |
27. | Envestnet Asset Management, Inc. |
28. | E*Trade Securities LLC |
29. | Fidelity Brokerage Services/National Financial Services LLC/FMR LLC |
30. | Fifth Third Securities, Inc. |
31. | First Allied Securities, Inc. |
32. | First Command Financial Planning |
33. | Fi-Tek LLC |
34. | FSC Securities Corp.\Royal Alliance Associates\SagePoint Financial, Inc.\Woodbury Financial Services, Inc. |
35. | GWFS Equities, Inc. |
36. | HazelTree Fund Services, Inc. |
37. | Hilltop Securities Inc. |
38. | Huntington Investment Company |
39. | Ingalls & Snyder, LLC |
40. | Institutional Bond Network, LLC |
41. | Institutional Cash Distributors, LLC |
42. | Investacorp, Inc.\Securities America Inc.\Triad Advisors Inc. |
43. | J.P. Morgan Clearing Corp |
44. | J.P. Morgan Securities LLC |
45. | Janney Montgomery Scott LLC |
46. | Ladenburg Thalmann Advisor Network LLC |
47. | Lincoln Financial Advisors Corp |
48. | Lincoln Financial Distributors, Inc. |
49. | Lincoln Financial Securities Corporation |
50. | Lincoln Investment Planning, LLC |
51. | Lord Securities Corporation d/b/a TMF Group New York, LLC |
52. | LPL Financial LLC |
53. | Merrill Lynch, Pierce, Fenner & Smith Inc. |
54. | Mischler Financial Group, Inc |
55. | MML Investor Services, LLC |
56. | Moreton Capital Markets, LLC |
57. | Morgan Stanley Smith Barney LLC |
58. | New York Life Investments |
59. | NFP Advisor Services, LLC |
60. | Northwestern Mutual Investment Services LLC |
61. | Oppenheimer & Co., Inc. |
62. | Pershing LLC |
63. | PFS Investments, Inc. |
64. | PNC Capital Markets LLC |
65. | PNC Investments LLC |
66. | Raymond James & Associates, Inc.\Raymond James Financial Services, Inc. |
67. | RBC Capital Markets, LLC |
68. | Robert W. Baird & Co. Incorporated |
69. | Santander Securities Corporation |
70. | Silicon Valley Bank |
71. | State Street Global Markets, LLC |
72. | Stifel Nicholaus & Co Inc. |
73. | Summit Brokerage Services, Inc. |
74. | SVB Asset Management/U.S. Bank, N.A. |
75. | TD Ameritrade |
76. | Texas Capital Bank, NA |
77. | Transamerica Capital Inc. |
78. | U.S. Bancorp Investments Inc. |
79. | UBS Financial Services |
80. | Voya Financial Advisors, Inc. |
81. | Wedbush Securities, Inc. |
82. | Wells Fargo Clearing Services, LLC |
83. | Wells Fargo Advisors Financial Network, LLC |
84. | Wells Fargo Securities LLC |
• | Corporate governance procedures differ among the countries. Because of time constraints and local customs, it is not always possible for the Adviser to receive and review all proxy materials in connection with each item submitted for a vote. Many proxy statements are in foreign languages. Proxy materials are generally mailed by the issuer to the sub-custodian which holds the securities for the client in the country where the portfolio company is organized, and there may not be sufficient time for such materials to be transmitted to the Adviser in time for a vote to be cast. In some countries, proxy statements are not mailed at all, and in some locations, the deadline for voting is two to four days after the initial announcement that a vote is to be solicited and it may not always be possible to obtain sufficient information to make an informed decision in good time to vote. |
• | Certain markets require that shares being tendered for voting purposes are temporarily immobilized from trading until after the shareholder meeting has taken place. Elsewhere, notably emerging markets, it may not always be possible to obtain sufficient information to make an informed decision in good time to vote. Some markets require a local representative to be hired in order to attend the meeting and vote in person on our behalf, which can result in considerable cost. The Adviser also considers the cost of voting in light of the expected benefit of the vote. In certain instances, it may sometimes be in the Fund’s best interests to intentionally refrain from voting in certain overseas markets from time to time. |
• | Where proxy issues concern corporate governance, takeover defense measures, compensation plans, capital structure changes and so forth, the Adviser pays particular attention to management’s arguments for promoting the prospective change. The Adviser’s sole criterion in determining its voting stance is whether such changes will be to the economic benefit of the beneficial owners of the shares. |
• | The Adviser is in favor of a unitary board structure of the type found in the United Kingdom as opposed to tiered board structures. Thus, the Adviser will generally vote to encourage the gradual phasing out of tiered board structures, in favor of unitary boards. However, since tiered boards are still very prevalent in markets outside of the United Kingdom, local market practice will always be taken into account. |
• | The Adviser will use its voting powers to encourage appropriate levels of board independence, taking into account local market practice. |
• | The Adviser will usually vote against discharging the board from responsibility in cases of pending litigation, or if there is evidence of wrongdoing for which the board must be held accountable. |
• | The Adviser will vote in favor of increases in capital which enhance a company’s long-term prospects. The Adviser will also vote in favor of the partial suspension of preemptive rights if they are for purely technical reasons (e.g., rights offers which may not be legally offered to shareholders |
in certain jurisdictions). However, the Adviser will vote against increases in capital which would allow the company to adopt “poison pill” takeover defense tactics, or where the increase in authorized capital would dilute shareholder value in the long term. | |
• | The Adviser will vote in favor of proposals which will enhance a company’s long-term prospects. The Adviser will vote against an increase in bank borrowing powers which would result in the company reaching an unacceptable level of financial leverage, where such borrowing is expressly intended as part of a takeover defense, or where there is a material reduction in shareholder value. |
• | The Adviser will generally vote against anti-takeover devices. |
• | The Adviser considers social or enviornmental issues on a case-by-case basis, keeping in mind at all times the best long-term/economic interests of its clients. |
• | The Adviser considers votes on director nominees on a case-by-case basis. Votes generally will be withheld from directors who: (a) attend less than 75% of board and committee meetings without a valid excuse; (b) adopt or renew a poison pill without shareholder approval; (c) are affiliated directors who serve on audit, compensation or nominating committees or are affiliated directors and the full board serves on such committees or the company does not have such committees; (d) ignore a shareholder proposal that is approved by a majority of either the shares outstanding or the votes cast based on a review over a consecutive two year time frame; (e) are insiders and affiliated outsiders on boards that are not at least majority independent; or (f) are CEOs of publicly-traded companies who serve on more than three public boards or serve on more than four public company boards. In addition, votes are generally withheld for directors who serve on committees in certain cases. For example, the Adviser generally withholds votes from audit committee members in circumstances in which there is evidence that there exists material weaknesses in the company’s internal controls. Votes generally are also withheld from directors when there is a demonstrated history of poor performance or inadequate risk oversight or when the board adopts changes to the company’s governing documents without shareholder approval if the changes materially diminish shareholder rights. Votes generally will be withheld from Board chair, lead independent directors, or government committee chairs of publicly traded companies where employees have departed for significant violation of code of conduct without claw back of compensation. |
• | The Adviser votes proposals to classify boards on a case-by-case basis, but normally will vote in favor of such proposal if the issuer’s governing documents contain each of eight enumerated safeguards (for example, a majority of the board is composed of independent directors and the nominating committee is composed solely of such directors). |
• | The Adviser also considers management poison pill proposals on a case-by-case basis, looking for shareholder-friendly provisions before voting in favor. |
• | The Adviser votes against proposals for a super-majority vote to approve a merger. |
• | The Adviser considers proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan on a case-by-case basis, taking into account such factors as the extent of dilution and whether the transaction will result in a change in control. |
• | The Adviser considers vote proposals with respect to compensation plans on a case-by-case basis. The analysis of compensation plans focuses primarily on the transfer of shareholder wealth (the dollar cost of pay plans to shareholders) and includes an analysis of the structure of the plan and pay practices of other companies in the relevant industry and peer companies. Other matters included in the analysis are the amount of the company’s outstanding stock to be reserved for the award of stock options, whether the exercise price of an option is less than the stock’s fair market value at the date of the grant of the options, and whether the plan provides for the exchange of outstanding options for new ones at lower exercise prices. |
• | The Adviser also considers on a case-by-case basis proposals to change an issuer’s state of incorporation, mergers and acquisitions and other corporate restructuring proposals and certain social issue proposals. |
• | The Adviser generally votes for management proposals which seek shareholder approval to make the state of incorporation the exclusive forum for disputes if the company is a Delaware corporation; otherwise, the Adviser votes on a case by case basis. |
• | The Adviser supports board refreshment, independence, and a diverse skill set for directors. As a matter of principle, we expect our investee companies to be committed to diversity and inclusiveness in their general recruitment policies as we believe such diversity contributes to the effectiveness of boards. The Adviser will utilize its voting power to bring about change where Boards are lagging in gender and racial and/or ethnic diversity. |
• | The Adviser generally encourages a level of reporting on environmental matters that is not unduly costly or burdensome and which does not place the company at a competitive disadvantage, but which provides meaningful information to enable shareholders to evaluate the impact of the company’s environmental policies and practices on its financial performance. In general, the Adviser supports management disclosure practices that are overall consistent with the goals and objective expressed above. Proposals with respect to companies that have been involved in controversies, fines or litigation are expected to be subject to heightened review and consideration. |
• | In evaluating how to vote environmental proposals, key considerations may include, but are not limited to, issuer considerations such as asset profile of the company, including whether it is exposed to potentially secularly potentially declining demand for the company’s products or services due to environmental considerations; cash deployments; cost structure of the company, including its position on the cost curve, expected impact of future carbon tax and exposure to high fixed operating costs; corporate behavior of the company; demonstrated capabilities of the company, its strategic planning process, and past performance; current level of disclosure of the company and consistency of disclosure across its industry; and whether the company incorporates environmental or social issues in a risk assessment or risk reporting framework. The Adviser may also consider whether peers have received similar proposals and if so, were the responses transparent and insightful; would adoption of the proposal inform and educate shareholders; and have companies that adopted the proposal provided insightful and meaningful information that would allow shareholders to evaluate the long-term risks and performance of the company; does the proposal require disclosure that is already addressed by existing and proposed mandated regulatory requirements or formal guidance at the local, state, or national level or the company’s existing disclosure practices; and does the proposal create the potential for unintended consequences such as a competitive disadvantage. |
• | With regard to social issues, among other factors, the Adviser considers the company’s labor practices, supply chain, how the company supports and monitors those issues, what types of disclosure the company and its peers currently provide, and whether the proposal would result in a competitive disadvantage for the company. |
• | The Adviser reviews Say on Pay proposals on a case by case basis with additional review of proposals where the issuer’s previous year’s proposal received a low level of support. |
• | Routine corporate matters including: |
• | Selection of directors |
• | Appointment of auditors |
• | An increase in authorized shares where needed for clearly defined business purposes |
• | Follow management recommendations on “social” issues |
• | Indemnification of directors and/or officers where such indemnification includes “negligence and gross negligence” in the performance of their fiduciary duties |
• | Super-majority voting requirements |
• | Anti-takeover proposals which restrict shareholder authority |
• | An increase in authorized shares of more than 25% without a stated business purpose |
• | Changes in corporate charter that do not have a clearly stated business purpose |
• | Provisions for multi-tiered voting rights |
• | Authorizations of “blank check” preferred stock or other capital stock without a stated business purpose |
• | “Shareholder rights” provisions which tend to diminish rather than enhance shareholder power |
• | “Anti-greenmail” provisions which also restrict shareholder authority |
• | Staggered boards of directors |
• | Corporate combinations and divestments |
• | Shareholder proposals |
• | Profit sharing and stock options plans |
• | Send a list of the securities held in client accounts to ISS. |
• | Download proxy statements. |
1. | Terminated Account: Once a client account has been terminated with us in accordance with its investment advisory agreement, we will not vote any proxies received after the termination. |
2. | Limited Value: If we determine that the value of a client’s economic interest or the value of the portfolio holding is indeterminable or insignificant, we may abstain from voting a proxy or alternatively, vote proxies in accordance with ISS recommendations with minimal review of the proxies. We also will not vote proxies received for securities no longer held by the client’s account. |
3. | Unmanaged Assets. If a client account contains securities that we do not actively manage, but that are maintained in the account at the client’s request (designated as “Unmanaged Assets”), we will abstain from voting on such securities unless the client directs us in writing to take action with respect to a particular matter. |
4. | Securities Lending Programs: When securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion. However, where we determine that a proxy vote (or other shareholder action) is materially important to the client’s account, we may recall the security for purposes of voting. |
i. | Copies of proxy policies and procedures. |
ii. | A copy of each proxy statement that Fuller & Thaler receives regarding client securities. Alternatively, Fuller & Thaler may rely on ISS to make and retain a copy of a proxy statement on Fuller & Thaler’s behalf (provided that Fuller & Thaler has obtained an undertaking from ISS to provide a copy of the proxy statement promptly upon request) or may rely on obtaining a copy of a proxy statement from the Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. |
iii. | A record of each vote cast by Fuller & Thaler on behalf of a client. Alternatively, Fuller& Thaler may rely on a third party to make and retain a record of the vote cast on Fuller & Thaler's behalf (provided that Fuller & Thaler has obtained an undertaking from ISS to provide a copy of the record promptly upon request). |
iv. | A copy of any document created by Fuller & Thaler that was material to making a decision on how to vote proxies on behalf of a client or that memorializes the basis for that decision. |
v. | A copy of each written client request for information on how Fuller & Thaler voted proxies on behalf of the client, and a copy of any written response by Fuller & Thaler to any (written or oral) client request for information on how Fuller & Thaler voted proxies on behalf of the requesting client. |
• | adhering to this policy which includes voting proxies consistently with these guidelines; |
• | notifying the Chief Compliance Officer of any conflicts of interest; |
• | providing the Portfolio Administrator with a copy of any document that was material to making a voting decision or that memorializes the basis for a decision, if any was created; |
• | recommending any policy or procedure changes to the Director of Trading Operations and Chief Compliance Officer. |
(a) | trading on the Exchange is broadly restricted by the applicable rules and regulations of the SEC; |
(b) | the Exchange is closed for other than customary weekend and holiday closing; |
(c) | the SEC has by order permitted such suspension; or |
(d) | the SEC has declared a market emergency. |
• | Beginning November 14, 2017, Class C Share positions will convert to Class A Shares after 10 years, calculated from the first day of the month of purchase and processed on the tenth business day of the anniversary month. |
• | If the Class C Shares are held in an account with a third party broker of record are transferred to an account with the Distributor after April 21, 2017, those Class C Shares will be converted to Class A Shares on the tenth business day of the month following the transfer. |
• | Class C Shares of the Funds (excluding the Money Market Funds) automatically convert to Class A Shares (and thus are then subject to the lower expenses borne by Class A Shares) after the period of time specified in the applicable Prospectuses has elapsed since the date of purchase (the “CDSC Period”), together with the pro-rata portion of all Class C Shares representing dividends and other distributions paid in additional Class C Shares attributable to the Class C Shares then converting. The conversion of Class C Shares will be effected at the relative net asset value per share of the two classes on the tenth business day of the month following the tenth anniversary of the original purchase or such other applicable yearly anniversary. At the time of the conversion, the net asset value per share of the Class A Shares may be higher or lower than the net asset value per share of the Class C Shares; as a result, depending on the relative net asset value per share, a shareholder may receive fewer or more Class A Shares than the number of Class C Shares converted. |
• | Class C Shares of the Money Market Funds automatically convert to Morgan Shares (and thus are then subject to the lower expenses borne by Morgan Shares) after the CDSC Period, together with the pro-rata portion of all Class C Shares representing dividends and other distributions paid in additional Class C Shares attributable to the Class C Shares then converting. The conversion of Class C Shares will be effected at the relative net asset value per share of the two classes on the tenth business day of the month following the tenth anniversary of the original purchase or such other applicable yearly anniversary. At the time of the conversion, the net asset value per share of the Morgan Shares may be higher or lower than the net asset value per share of the Class C Shares; as a result, depending on the relative net asset value per share, a shareholder may receive fewer or more Morgan Shares than the number of Class C Shares converted. |
A-1 | A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. 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. |
B | A short-term obligation rated ‘B’ is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. |
C | A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. |
D | A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the due date, unless S&P Global Ratings believes that such payments will be made with any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it subject to a distressed exchange offer. |
• | Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions. |
• | Preliminary ratings may be assigned to obligations that will likely be issued upon the obligor’s emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans, documentation and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or post-bankruptcy issuer as well as attributes of the anticipated obligation(s). |
• | Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in S&P’s opinion, documentation is close to final. Preliminary ratings may also be assigned to these entities’ obligations. |
• | Preliminary ratings may be assigned when a previously unrated entity is undergoing a well-formulated restructuring, recapitalization, significant financing or other transformative event, generally at the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, S&P would likely withdraw these preliminary ratings. |
• | A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating. |
F1 | HIGHEST SHORT-TERM CREDIT QUALITY. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. |
F2 | GOOD SHORT-TERM CREDIT QUALITY. Good intrinsic capacity for timely payment of financial commitments. |
F3 | FAIR SHORT-TERM CREDIT QUALITY. The intrinsic capacity for timely payment of financial commitments is adequate. |
B | SPECULATIVE SHORT-TERM CREDIT QUALITY. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions. |
C | HIGH SHORT-TERM DEFAULT RISK. Default is a real possibility. |
RD | RESTRICTED DEFAULT. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only. |
D | DEFAULT. Indicates a broad-based default event for an entity, or the default of a short-term obligation. |
• | The ratings do not predict a specific percentage of default likelihood or failure likelihood over any given time period. |
• | The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change. |
• | The ratings do not opine on the liquidity of the issuer’s securities or stock. |
• | The ratings do not opine on the possible loss severity on an obligation should an issuer (or an obligation with respect to structured finance transactions) default, except in the following two cases: |
• | Ratings assigned to individual obligations of issuers in corporate finance, banks, non-bank financial institutions, insurance and covered bonds. |
• | In limited circumstances for U.S. public finance obligations where Chapter 9 of the Bankruptcy Code provides reliably superior prospects for ultimate recovery to local government obligations that benefit from a statutory lien on revenues or during the pendency of a bankruptcy proceeding under the Code if there is sufficient visibility on potential recovery prospects. |
• | The ratings do not opine on the suitability of an issuer as a counterparty to trade credit. |
• | The ratings do not opine on any quality related to an issuer’s business, operational or financial profile other than the agency‘s opinion on its relative vulnerability to default or in the case of bank Viability Ratings on its relative vulnerability to failure. For the avoidance of doubt, not all defaults will be considered a default for rating purposes. Typically, a default relates to a liability payable to an unaffiliated, outside investor. |
• | The ratings do not opine on any quality related to a transaction’s profile other than the agency’s opinion on the relative vulnerability to default of an issuer and/or of each rated tranche or security. |
• | The ratings do not predict a specific percentage of extraordinary support likelihood over any given period. |
• | In the case of bank Support Ratings and Support Rating Floors, the ratings do not opine on any quality related to an issuer’s business, operational or financial profile other than the agency’s opinion on its relative likelihood of receiving external extraordinary support. |
• | The ratings do not opine on the suitability of any security for investment or any other purposes. |
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. |
R-1 (high) | Highest credit quality. The capacity for the payment of short-term financial obligations as they fall due is exceptionally high. Unlikely to be adversely affected by future events. |
R-1 (middle) | Superior credit quality. The capacity for the payment of short-term financial obligations as they fall due is very high. Differs from R-1 (high) by a relatively modest degree. Unlikely to be significantly vulnerable to future events. |
R-1 (low) | Good credit quality. The capacity for the payment of short-term financial obligations as they fall due is substantial. Overall strength is not as favorable as higher rating categories. May be vulnerable to future events, but qualifying negative factors are considered manageable. |
R-2 (high) | Upper end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events. |
R-2 (middle) | Adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events or may be exposed to other factors that could reduce credit quality. |
R-2 (low) | Lower end of adequate credit quality. The capacity for the payment of short-term financial obligations as they fall due is acceptable. May be vulnerable to future events. A number of challenges are present that could affect the issuer’s ability to meet such obligations. |
R-3 | Lowest end of adequate credit quality. There is a capacity for the payment of short-term financial obligations as they fall due. May be vulnerable to future events and the certainty of meeting such obligations could be impacted by a variety of developments. |
R-4 | Speculative credit quality. The capacity for the payment of short-term financial obligations as they fall due is uncertain. |
R-5 | Highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet short-term financial obligations as they fall due. |
D | When the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is a failure to satisfy and obligation after the exhaustion of grace periods, a downgrade to D may occur. DBRS may also use SD (Selective Default) in cases where only some securities are impacted, such as the case of a “distressed exchange.” |
• | 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, and the promise we impute; and |
• | 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. |
AAA | An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitments on the obligation is extremely strong. |
AA | An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitments on the obligation is very strong. |
A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. |
BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments on the obligation. |
BB | 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 commitments on the obligation. |
B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation. |
CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial 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 commitments on the obligation. |
CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P expects default to be a virtual certainty, regardless of the anticipated time to default. |
C | An obligation rated ‘C; is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared with obligations that are rated higher. |
D | An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the due date, unless S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D” rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to ‘D’ if it is subject to a distressed exchange offer. |
AAA | HIGHEST CREDIT QUALITY. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. |
AA | VERY HIGH CREDIT QUALITY. ‘AA’ ratings denote expectations of very low default 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 default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business economic conditions than is the case for higher ratings. |
BBB | GOOD CREDIT QUALITY. ‘BBB’ ratings indicate that expectations of default 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 default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments. |
B | HIGHLY SPECULATIVE. ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. |
CCC | SUBSTANTIAL CREDIT RISK. Default is a real possibility. |
CC | VERY HIGH LEVELS OF CREDIT RISK. Default of some kind appears probable. |
C | NEAR DEFAULT. A default or default-like process has begun, or the issuer is in standstill, or for a closed funding vehicle, payment capacity is irrevocably impaired. Conditions that are indicative of a ‘C’ category rating for an issuer include: |
•
the issuer has entered into a grace or cure period following non-payment of a material financial obligation; • the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; or • the formal announcement by the issuer or their agent of a distressed debt exchange; • a closed financing vehicle where payment capacity is irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the transaction, but where no payment default is imminent. | |
RD | RESTRICTED DEFAULT. ‘RD’ ratings indicate an issuer that in Fitch’s opinion has experienced: |
•
an uncured payment default or distressed debt exchange on a bond, loan or other material financial obligation, but • has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and • has not otherwise ceased operating. This would include: • the selective payment default on a specific class or currency of debt; • the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation; • the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; • ordinary execution of a distressed debt exchange on one or more material financial obligations. | |
D | DEFAULT. ‘D’ ratings indicate an issuer that in Fitch Ratings’ opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business. |
Aaa | Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk. |
Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. |
A | Obligations rated A are considered upper-medium grade and are subject to low credit risk. |
Baa | Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. |
Ba | Obligations rated Ba are judged to be speculative and are subject to substantial credit risk. |
B | Obligations rated B are considered speculative and are subject to high credit risk. |
Caa | Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk. |
Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. |
C | Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest. |
AAA | Highest credit quality. The capacity for the payment of financial obligations is exceptionally high and unlikely to be adversely affected by future events. |
AA | Superior credit quality. The capacity for the payment of financial obligations is considered high. Credit quality differs from AAA only to a small degree. Unlikely to be significantly vulnerable to future events. |
A | Good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser credit quality than AA. May be vulnerable to future events, but qualifying negative factors are considered manageable. |
BBB | Adequate credit quality. The capacity for the payment of financial obligations is considered acceptable. May be vulnerable to future events. |
BB | Speculative, non-investment grade credit quality. The capacity for the payment of financial obligations is uncertain. Vulnerable to future events. |
B | Highly speculative credit quality. There is a high level of uncertainty as to the capacity to meet financial obligations. |
CCC/CC/C | Very highly speculative credit quality. In danger of defaulting on financial obligations. There is little difference between these three categories, although CC and C ratings are normally applied to obligations that are seen as highly likely to default, or subordinated to obligations rated in the CCC to B range. Obligations in respect of which default has not technically taken place but is considered inevitable may be rated in the C category. |
D | When the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is a failure to satisfy an obligation after the exhaustion of grace periods, a downgrade to D may occur. DBRS may also use SD (Selective Default) in cases where only some securities are impacted, such as the case of a “distressed exchange.” |
AAA | An insurer rated ‘AAA’ has extremely strong financial security characteristics. ‘AAA’ is the highest insurer financial strength rating assigned by S&P. |
AA | An insurer rated ‘AA’ has very strong financial security characteristics, differing only slightly from those rated higher. |
A | An insurer rated ‘A’ has strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings. |
BBB | An insurer rated ‘BBB’ has good financial security characteristics, but is more likely to be affected by adverse business conditions than are higher-rated insurers. |
BB | An insurer rated ‘BB’ has marginal financial security characteristics. Positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments. |
B | An insurer rated ‘B’ has weak financial security characteristics. Adverse business conditions will likely impair its ability to meet financial commitments. |
CCC | An insurer rated ‘CCC’ has very weak financial security characteristics, and is dependent on favorable business conditions to meet financial commitments. |
CC | An insurer rated ‘CC’ has extremely weak financial security characteristics and is likely not to meet some of its financial commitments. |
R | An insurer rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations. |
SD or D | An
insurer rated ‘SD’ (selective default) or ‘D” is in default on one or more of its insurance policy obligations but is not under regulatory supervision that would involve a rating of ‘R’. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on a policy obligation are at risk. A ‘D’ rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay substantially all of its obligations in full in accordance with the policy terms. An ‘SD’ rating is assigned when S&P Global Ratings believes that the insurer has selectively defaulted on a specific class of policies but it will continue to meet its payment obligations on other classes of obligations. An ‘SD’ includes the completion of a distressed exchange offer. Claim denials due to lack of coverage or other legally permitted defenses are not considered defaults. |
AAA | EXCEPTIONALLY STRONG. ‘AAA’ IFS Ratings denote the lowest expectation of ceased or interrupted payments. They are assigned only in the case of exceptionally strong capacity to meet policyholder and contract obligations. This capacity is highly unlikely to be adversely affected by foreseeable events. |
AA | VERY STRONG. ‘AA’ IFS Ratings denote a very low expectation of ceased or interrupted payments. They indicate very strong capacity to meet policyholder and contract obligations. This capacity is not significantly vulnerable to foreseeable events. |
A | STRONG. ‘A’ IFS Ratings denote a low expectation of ceased or interrupted payments. They indicate strong capacity to meet policyholder and contract obligations. This capacity may, nonetheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. |
BBB | GOOD. ‘BBB’ IFS Ratings indicate that there is currently a low expectation of ceased or interrupted payments. The capacity to meet policyholder and contract obligations on a timely basis is considered adequate, but adverse changes in circumstances and economic conditions are more likely to impact this capacity. |
BB | MODERATELY WEAK. ‘BB’ IFS Ratings indicate that there is an elevated vulnerability to ceased or interrupted payments, particularly as the result of adverse economic or market changes over time. However, business or financial alternatives may be available to allow for policyholder and contract obligations to be met in a timely manner. |
B | WEAK. ‘B’ IFS Ratings indicate two possible conditions. If obligations are still being met on a timely basis, there is significant risk that ceased or interrupted payments could occur in the future, but a limited margin of safety remains. Capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment, and favorable market conditions. Alternatively, a ‘B’ IFS Rating is assigned to obligations that have experienced ceased or interrupted payments, but with the potential for extremely high recoveries. Such obligations would possess a recovery assessment of ‘RR1’ (Outstanding). |
CCC | VERY WEAK. ‘CCC’ IFS Ratings indicate two possible conditions. If obligations are still being met on a timely basis, there is a real possibility that ceased or interrupted payments could occur in the future. Capacity for continued timely payments is solely reliant upon a sustained, favorable business and economic environment, and favorable market conditions. Alternatively, a ‘CCC’ IFS Rating is assigned to obligations that have experienced ceased or interrupted payments, and with the potential for average to superior recoveries. Such obligations would possess a recovery assessment of ‘RR2’ (Superior), ‘RR3’ (Good), and ‘RR4’ (Average). |
CC | EXTREMELY WEAK. ‘CC’ IFS Ratings indicate two possible conditions. If obligations are still being met on a timely basis, it is probable that ceased or interrupted payments will occur in the future. Alternatively, a ‘CC’ IFS Rating is assigned to obligations that have experienced ceased or interrupted payments, with the potential for average to below-average recoveries. Such obligations would possess a recovery assessment of ‘RR4’ (Average) or ‘RR5’ (Below Average). |
C | DISTRESSED. ‘C’ IFS Ratings indicate two possible conditions. If obligations are still being met on a timely basis, ceased or interrupted payments are imminent. Alternatively, a ‘C’ IFS Rating is assigned to obligations that have experienced ceased or interrupted payments, and with the potential for below average to poor recoveries. Such obligations would possess a recovery assessment of ‘RR5’ (Below Average) or ‘RR6’ (Poor). |
F1 | Insurers are viewed as having a strong capacity to meet their near-term obligations. When an insurer rated in this rating category is designated with a (+) sign, it is viewed as having a very strong capacity to meet near-term obligations. |
F2 | Insurers are viewed as having a good capacity to meet their near-term obligations. |
F3 | Insurers are viewed as having an adequate capacity to meet their near-term obligations. |
B | Insurers are viewed as having a weak capacity to meet their near-term obligations. |
C | Insurers are viewed as having a very weak capacity to meet their near-term obligations. |
RR1 | OUTSTANDING RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR1’ rated securities have characteristics consistent with securities historically recovering 91%–100% of current principal and related interest. |
RR2 | SUPERIOR RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR2’ rated securities have characteristics consistent with securities historically recovering 71%–90% of current principal and related interest. |
RR3 | GOOD RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR3’ rated securities have characteristics consistent with securities historically recovering 51%–70% of current principal and related interest. |
RR4 | AVERAGE RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR4’ rated securities have characteristics consistent with securities historically recovering 31%–50% of current principal and related interest. |
RR5 | BELOW
AVERAGE RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR5’ rated securities have characteristics consistent with securities historically recovering 11%– 30% of current principal and related interest. |
RR6 | POOR RECOVERY PROSPECTS GIVEN DEFAULT. ‘RR6’ rated securities have characteristics consistent with securities historically recovering 0%–10% of current principal and related interest. |
• | The ratings do not predict a specific percentage of recovery should a default occur. |
• | The ratings do not opine on the market value of any issuer’s securities or stock, or the likelihood that this value may change. |
• | The ratings do not opine on the liquidity of the issuer’s securities or stock. |
• | The ratings do not opine on any quality related to an issuer or transaction’s profile other than the agency’s opinion on the relative loss severity of the rated obligation should the obligation default. |
• | Recovery Ratings, in particular, reflect a fundamental analysis of the underlying relationship between financial claims on an entity or transaction and potential sources to meet those claims. The size of such sources and claims is subject to a wide variety of dynamic factors outside the agency’s analysis that will influence actual recovery rates. |
• | Out-of-court settlements are not contemplated by Fitch’s Recovery Ratings, other than in broad concession payments for some classes of junior-ranking bonds in some specific scenarios. In reality, out-of-court settlements will be influenced heavily by creditor composition and local political and economic imperatives, and Fitch does not attempt to factor these into its Recovery Ratings. |
• | Creditor composition is outside the scope of Recovery Ratings. Concentration of creditors at a certain level of the capital structure, common ownership of claims at different levels in a capital structure or even differing entry prices of investors within a creditor class can have a profound effect on actual recovery rates. |
• | Information flows for companies close to default can become erratic, which may reduce Fitch’s visibility on its Recovery Ratings. |
• | Enterprise valuations play a key role in the allocation of recoveries across credit classes. Recovery Ratings assume cash-flow multiples or advance rates, which are driven by subjective forecasts of Fitch analysts of post-restructuring cash flow, achievable exit multiples and appropriate advance rates. All these parameters are subject to volatility before and during the restructuring process. |
• | Recovery rates are strongly influenced by legal decisions. Potential legal decisions are not factored into Fitch’s Recovery Ratings. |
Aaa | Insurance companies rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk. |
Aa | Insurance companies rated Aa are judged to be of high quality and are subject to very low credit risk. |
A | Insurance companies rated A are judged to be of upper-medium grade and are subject to low credit risk. |
Baa | Insurance companies rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. |
Ba | Insurance companies rated Ba are judged to be speculative and are subject to substantial credit risk. |
B | Insurance companies rated B are considered speculative and are subject to high credit risk. |
Caa | Insurance companies rated Caa are judged to be speculative of poor standing and are subject to very high credit risk. |
Ca | Insurance companies rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. |
C | Insurance companies rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest. |
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 Prim-3 have an acceptable ability to repay short-term obligations. |
P-4 | Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. |
• | 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. |
SP-1 | Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. |
SP-2 | Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. |
SP-3 | Speculative capacity to pay principal and interest. |
D | ‘D’ is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions. |
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 so 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. |
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. |
Pfd-1 | Preferred shares rated Pfd-1 are of superior credit quality, and are supported by entities with strong earnings and balance sheet characteristics. Pfd-1 securities generally correspond with companies whose senior bonds are rated in the AAA or AA categories. As is the case with all rating categories, the relationship between senior debt ratings and preferred share ratings should be understood as one where the senior debt rating effectively sets a ceiling for the preferred shares issued by the entity. However, there are cases where the preferred share rating could be lower than the normal relationship with the issuer’s senior debt rating. |
Pfd-2 | Preferred shares rated Pfd-2 are of satisfactory credit quality. Protection of dividends and principal is still substantial, but earnings, the balance sheet and coverage ratios are not as strong as Pfd-1 rated companies. Generally, Pfd-2 ratings correspond with companies whose senior bonds are rated in the “A” category. |
Pfd-3 | Preferred shares rated Pfd-3 are of adequate credit quality. While protection of dividends and principal is still considered acceptable, the issuing entity is more susceptible to adverse changes in financial and economic conditions, and there may be other adverse conditions present which detract from debt protection. Pfd-3 ratings generally correspond with companies whose senior bonds are rated in the higher end of the BBB category. |
Pfd-4 | Preferred shares rated Pfd-4 are speculative, where the degree of protection afforded to dividends and principal is uncertain, particularly during periods of economic adversity. Companies with preferred shares rated Pfd-4 generally coincide with entities that have senior bond ratings ranging from the lower end of the BBB category through the BB category. |
Pfd-5 | Preferred shares rated Pfd-5 are highly speculative and the ability of the entity to maintain timely dividend and principal payments in the future is highly uncertain. Entities with a Pfd-5 rating generally have senior bond ratings of B or lower. Preferred shares rated Pfd-5 often have characteristics that, if not remedied, may lead to default. |
D | When the issuer has filed under any applicable bankruptcy, insolvency or winding up statute or there is failure to satisfy an obligation after the exhaustion of grace periods, a downgrade to D may occur. DBRS may also use SD (Selective Default) in cases where only some securities are impacted, such as in the case of a “distressed exchange.” |
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