UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number: 811-23222
HARTFORD FUNDS EXCHANGE-TRADED TRUST
(Exact name of registrant as specified in charter)
690 Lee Road, Wayne, Pennsylvania 19087
(Address of Principal Executive Offices) (Zip Code)
Thomas R. Phillips, Esquire
Hartford Funds Management Company, LLC
690 Lee Road
Wayne, Pennsylvania 19087
(Name and Address of Agent for Service)
Copy to:
John V. O’Hanlon, Esquire
Dechert LLP
One International Place, 40th Floor
100 Oliver Street
Boston, Massachusetts 02110-2605
Registrant’s telephone number, including area code: (610) 386-4068
Date of fiscal year end: October 31
Date of reporting period: October 31, 2023
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) |
|
President
Hartford Funds
1 | S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks. Indices are unmanaged and not available for direct investment. Past performance does not guarantee future results. |
2 | The Consumer Price Index (CPI) in the United States is defined by the Bureau of Labor Statistics as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. |
October 31, 2023 (Unaudited)
Inception 10/13/2023 Sub-advised by Wellington Management Company LLP | Investment objective – The Fund seeks long-term capital appreciation. |
Average Annual Total Returns | |||
for the Periods Ended 10/31/2023 | |||
1 Year | 5 Years | 10 Years | |
Hartford Quality Value ETF (NAV Return) | -2.60% | 7.49% | 7.23% |
Russell 1000 Value Index | 0.13% | 6.60% | 7.60% |
2 |
October 31, 2023 (Unaudited)
Manager Discussion
3 |
October 31, 2023 (Unaudited)
Composition by Sector(1) | |
as of 10/31/2023 | |
Sector | Percentage of Net Assets |
Equity Securities | |
Communication Services | 7.1% |
Consumer Discretionary | 4.1 |
Consumer Staples | 8.9 |
Energy | 9.1 |
Financials | 18.1 |
Health Care | 16.1 |
Industrials | 9.8 |
Information Technology | 10.6 |
Materials | 4.2 |
Real Estate | 4.1 |
Utilities | 5.8 |
Total | 97.9% |
Other Assets & Liabilities | 2.1 |
Total | 100.0% |
(1) | A sector may be comprised of several industries. For Fund compliance purposes, the Fund may not use the same classification system. These sector classifications are used for financial reporting purposes. |
4 |
Russell 1000 Value Index (reflects no deduction for fees, expenses or taxes) is designed to measure the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index is designed to measure the performance of the 1,000 largest companies in the Russell 3000 Index based on their market capitalization and current index membership. |
5 |
Actual Return | Hypothetical (5% return before expenses) | ||||||||||||
Beginning Account Value May 1, 2023 | Ending Account Value October 31, 2023 | Expenses Paid During the Period May 1, 2023 through October 31, 2023 | Beginning Account Value May 1, 2023 | Ending Account Value October 31, 2023 | Expenses Paid During the Period May 1, 2023 through October 31, 2023 | Annualized expense ratio | |||||||
Hartford Quality Value ETF (1) | $ 1,000.00 | $ 993.30 | $ 2.26 | $ 1,000.00 | $ 1,022.94 | $ 2.29 | 0.45% | ||||||
(1) During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. All information and references to periods prior to the close of business on October 13, 2023 refers to the Predecessor Fund. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
6 |
October 31, 2023
Shares or Principal Amount | Market Value† | ||
COMMON STOCKS - 97.9% | |||
Banks - 7.8% | |||
94,916 | Bank of America Corp. | $ 2,500,087 | |
39,395 | Bank of Nova Scotia | 1,594,316 | |
35,954 | JP Morgan Chase & Co. | 4,999,763 | |
11,459 | PNC Financial Services Group, Inc. | 1,311,712 | |
54,997 | Wells Fargo & Co. | 2,187,231 | |
12,593,109 | |||
Capital Goods - 7.1% | |||
10,791 | Curtiss-Wright Corp. | 2,145,359 | |
13,216 | Honeywell International, Inc. | 2,421,964 | |
39,705 | Johnson Controls International PLC | 1,946,339 | |
4,430 | Lockheed Martin Corp. | 2,014,055 | |
27,650 | Westinghouse Air Brake Technologies Corp. | 2,931,453 | |
11,459,170 | |||
Consumer Discretionary Distribution & Retail - 3.4% | |||
38,874 | LKQ Corp. | 1,707,346 | |
7,416 | Lowe's Cos., Inc. | 1,413,267 | |
27,981 | TJX Cos., Inc. | 2,464,287 | |
5,584,900 | |||
Consumer Services - 0.7% | |||
43,967 | Aramark | 1,184,031 | |
Consumer Staples Distribution & Retail - 1.9% | |||
25,463 | Sysco Corp. | 1,693,035 | |
8,095 | Walmart, Inc. | 1,322,804 | |
3,015,839 | |||
Energy - 9.1% | |||
31,215 | Chevron Corp. | 4,548,962 | |
32,580 | EOG Resources, Inc. | 4,113,225 | |
62,608 | TotalEnergies SE ADR | 4,169,693 | |
53,856 | Williams Cos., Inc. | 1,852,646 | |
14,684,526 | |||
Equity Real Estate Investment Trusts (REITs) - 4.1% | |||
11,614 | American Tower Corp. REIT | 2,069,499 | |
99,442 | Host Hotels & Resorts, Inc. REIT | 1,539,362 | |
5,807 | Public Storage REIT | 1,386,189 | |
61,668 | VICI Properties, Inc. REIT | 1,720,537 | |
6,715,587 | |||
Financial Services - 3.3% | |||
19,236 | American Express Co. | 2,809,033 | |
20,362 | Charles Schwab Corp. | 1,059,639 | |
21,705 | Morgan Stanley | 1,537,148 | |
5,405,820 | |||
Food, Beverage & Tobacco - 4.9% | |||
30,419 | Keurig Dr Pepper, Inc. | 922,608 | |
30,033 | Mondelez International, Inc. Class A | 1,988,485 | |
42,400 | Philip Morris International, Inc. | 3,780,384 | |
25,764 | Tyson Foods, Inc. Class A | 1,194,162 | |
7,885,639 | |||
Health Care Equipment & Services - 8.4% | |||
11,305 | Becton Dickinson & Co. | 2,857,678 | |
7,175 | Elevance Health, Inc. | 3,229,396 | |
41,664 | Medtronic PLC | 2,939,812 | |
8,504 | UnitedHealth Group, Inc. | 4,554,402 | |
13,581,288 | |||
Household & Personal Products - 2.1% | |||
32,633 | Kenvue, Inc. | 606,974 | |
57,705 | Unilever PLC ADR | 2,732,331 | |
3,339,305 |
Shares or Principal Amount | Market Value† | ||
COMMON STOCKS - 97.9% - (continued) | |||
Insurance - 7.0% | |||
33,448 | American International Group, Inc. | $ 2,050,697 | |
15,493 | Chubb Ltd. | 3,325,107 | |
13,395 | Marsh & McLennan Cos., Inc. | 2,540,362 | |
14,872 | MetLife, Inc. | 892,469 | |
37,479 | Principal Financial Group, Inc. | 2,536,579 | |
11,345,214 | |||
Materials - 4.2% | |||
34,428 | BHP Group Ltd. ADR | 1,964,462 | |
19,720 | Celanese Corp. Class A | 2,258,137 | |
29,368 | FMC Corp. | 1,562,378 | |
8,851 | PPG Industries, Inc. | 1,086,637 | |
6,871,614 | |||
Media & Entertainment - 6.4% | |||
25,205 | Alphabet, Inc. Class A* | 3,127,436 | |
81,420 | Comcast Corp. Class A | 3,361,832 | |
26,601 | Omnicom Group, Inc. | 1,992,681 | |
22,459 | Walt Disney Co.* | 1,832,430 | |
10,314,379 | |||
Pharmaceuticals, Biotechnology & Life Sciences - 7.7% | |||
48,426 | AstraZeneca PLC ADR | 3,061,976 | |
33,764 | Merck & Co., Inc. | 3,467,562 | |
22,836 | Novartis AG ADR | 2,136,993 | |
122,289 | Pfizer, Inc. | 3,737,152 | |
12,403,683 | |||
Semiconductors & Semiconductor Equipment - 5.0% | |||
1,431 | Broadcom, Inc. | 1,204,000 | |
76,303 | Intel Corp. | 2,785,060 | |
18,944 | Micron Technology, Inc. | 1,266,785 | |
11,689 | QUALCOMM, Inc. | 1,273,984 | |
10,954 | Texas Instruments, Inc. | 1,555,578 | |
8,085,407 | |||
Software & Services - 3.6% | |||
9,261 | Accenture PLC Class A | 2,751,350 | |
46,891 | Cognizant Technology Solutions Corp. Class A | 3,023,063 | |
5,774,413 | |||
Technology Hardware & Equipment - 2.0% | |||
61,923 | Cisco Systems, Inc. | 3,228,046 | |
Telecommunication Services - 0.7% | |||
31,207 | Verizon Communications, Inc. | 1,096,302 | |
Transportation - 2.7% | |||
49,737 | Knight-Swift Transportation Holdings, Inc. | 2,431,642 | |
85,905 | Southwest Airlines Co. | 1,909,668 | |
4,341,310 | |||
Utilities - 5.8% | |||
25,614 | American Electric Power Co., Inc. | 1,934,881 | |
23,453 | Atmos Energy Corp. | 2,524,950 | |
28,030 | Duke Energy Corp. | 2,491,587 | |
35,774 | Sempra | 2,505,253 | |
9,456,671 | |||
Total Common Stocks (cost $134,163,677) | $ 158,366,253 | ||
Total Investments (cost $134,163,677) | 97.9% | $ 158,366,253 | |
Other Assets and Liabilities | 2.1% | 3,414,259 | |
Total Net Assets | 100.0% | $ 161,780,512 |
7 |
October 31, 2023
Note: | Percentage of investments as shown is the ratio of the total market value to total net assets. |
Prices of foreign equities that are principally traded on certain foreign markets will generally be adjusted daily pursuant to a fair value pricing service approved by Hartford Funds Management Company, LLC in order to reflect an adjustment for factors occurring after the close of certain foreign markets but before the close of the New York Stock Exchange. | |
Equity industry classifications used in this report are the Global Industry Classification Standard, which was developed by and is the exclusive property and service mark of MSCI, Inc. and Standard & Poor’s. |
* | Non-income producing. |
† | See Significant Accounting Policies of accompanying Notes to Financial Statements regarding valuation of investments. |
Description | Total | Level 1 | Level 2 | Level 3(1) | ||||
Assets | ||||||||
Common Stocks | ||||||||
Banks | $ 12,593,109 | $ 12,593,109 | $ — | $ — | ||||
Capital Goods | 11,459,170 | 11,459,170 | — | — | ||||
Consumer Discretionary Distribution & Retail | 5,584,900 | 5,584,900 | — | — | ||||
Consumer Services | 1,184,031 | 1,184,031 | — | — | ||||
Consumer Staples Distribution & Retail | 3,015,839 | 3,015,839 | — | — | ||||
Energy | 14,684,526 | 14,684,526 | — | — | ||||
Equity Real Estate Investment Trusts (REITs) | 6,715,587 | 6,715,587 | — | — | ||||
Financial Services | 5,405,820 | 5,405,820 | — | — | ||||
Food, Beverage & Tobacco | 7,885,639 | 7,885,639 | — | — | ||||
Health Care Equipment & Services | 13,581,288 | 13,581,288 | — | — | ||||
Household & Personal Products | 3,339,305 | 3,339,305 | — | — | ||||
Insurance | 11,345,214 | 11,345,214 | — | — | ||||
Materials | 6,871,614 | 6,871,614 | — | — | ||||
Media & Entertainment | 10,314,379 | 10,314,379 | — | — | ||||
Pharmaceuticals, Biotechnology & Life Sciences | 12,403,683 | 12,403,683 | — | — | ||||
Semiconductors & Semiconductor Equipment | 8,085,407 | 8,085,407 | — | — | ||||
Software & Services | 5,774,413 | 5,774,413 | — | — | ||||
Technology Hardware & Equipment | 3,228,046 | 3,228,046 | — | — | ||||
Telecommunication Services | 1,096,302 | 1,096,302 | — | — | ||||
Transportation | 4,341,310 | 4,341,310 | — | — | ||||
Utilities | 9,456,671 | 9,456,671 | — | — | ||||
Total | $ 158,366,253 | $ 158,366,253 | $ — | $ — |
(1) | For the year ended October 31, 2023, there were no transfers in and out of Level 3. |
8 |
Other Abbreviations: | |
ADR | American Depositary Receipt |
REIT | Real Estate Investment Trust |
9 |
October 31, 2023
Hartford Quality Value ETF(1) | |
Assets: | |
Investments in securities, at market value | $ 158,366,253 |
Cash | 3,346,877 |
Receivables: | |
Investment securities sold | 1,059,251 |
Dividends and interest | 188,653 |
Tax reclaims | 53,818 |
Total assets | 163,014,852 |
Liabilities: | |
Payables: | |
Investment securities purchased | 636,201 |
Fund shares redeemed | 528,031 |
Investment management fees | 70,108 |
Total liabilities | 1,234,340 |
Net assets | $ 161,780,512 |
Summary of Net Assets: | |
Paid-in-capital | $ 133,577,488 |
Distributable earnings (loss) | 28,203,024 |
Net assets | 161,780,512 |
Net asset value per share | 21.12 |
Shares issued and outstanding | 7,659,257 |
Cost of investments | $ 134,163,677 |
(1) | During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. All information and references to periods prior to the close of business on October 13, 2023 refers to the Predecessor Fund. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
10 |
For the Year Ended October 31, 2023
Hartford Quality Value ETF(1) | |
Investment Income: | |
Dividends | $ 6,366,454 |
Interest | 164,776 |
Less: Foreign tax withheld | (118,592) |
Total investment income, net | 6,412,638 |
Expenses: | |
Investment management fees | 1,058,985 |
Transfer agent fees | 312,808 |
Distribution fees | 444,180 |
Custodian fees | 2,340 |
Registration and filing fees | 154,512 |
Accounting services fees | 45,119 |
Board of Directors' fees | 5,845 |
Audit and tax fees | 4,722 |
Other expenses | 36,292 |
Total expenses (before waivers, reimbursements and fees paid indirectly) | 2,064,803 |
Expense waivers | (33,965) |
Distribution fee reimbursements | (165,413) |
Commission recapture | (1,484) |
Total waivers, reimbursements and fees paid indirectly | (200,862) |
Total expenses | 1,863,941 |
Net Investment Income (Loss) | 4,548,697 |
Net Realized Gain (Loss) on Investments and Foreign Currency Transactions on: | |
Investments | 1,553,793 (2) |
Other foreign currency transactions | 37 |
Net Realized Gain (Loss) on Investments and Foreign Currency Transactions | 1,553,830 |
Net Changes in Unrealized Appreciation (Depreciation) of Investments of: | |
Investments | (10,410,498) |
Net Changes in Unrealized Appreciation (Depreciation) of Investments | (10,410,498) |
Net Gain (Loss) on Investments, Other Financial Instruments and Foreign Currency Transactions | (8,856,668) |
Net Increase (Decrease) in Net Assets Resulting from Operations | $ (4,307,971) |
(1) | During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. All information and references to periods prior to the close of business on October 13, 2023 refers to the Predecessor Fund. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
(2) | Includes realized gains/(losses) as a result of in-kind redemptions (See Note 9 in Notes to Financial Statements). |
11 |
Hartford Quality Value ETF(1) | |||
For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | ||
Operations: | |||
Net investment income (loss) | $ 4,548,697 | $ 3,955,583 | |
Net realized gain (loss) on investments and foreign currency transactions | 1,553,830 | 11,495,589 | |
Net changes in unrealized appreciation (depreciation) of investments | (10,410,498) | (26,414,806) | |
Net Increase (Decrease) in Net Assets Resulting from Operations | (4,307,971) | (10,963,634) | |
Distributions to Shareholders | (15,608,432) | (14,316,058) | |
Capital Share Transactions (See Note 10 in the Notes to Financial Statements):(2) | |||
Sold | 179,997,849 | 57,551,280 | |
Issued on reinvestment of distributions | 15,400,431 | 14,094,650 | |
Redeemed | (258,575,478) | (33,771,339) | |
Net increase (decrease) from capital share transactions | (63,177,198) | 37,874,591 | |
Net Increase (Decrease) in Net Assets | (83,093,601) | 12,594,899 | |
Net Assets: | |||
Beginning of period | 244,874,113 | 232,279,214 | |
End of period | $ 161,780,512 | $ 244,874,113 |
(1) | During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. All information and references to periods prior to the close of business on October 13, 2023 refers to the Predecessor Fund. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
(2) | Reflects reorganization from Hartford Quality Value Fund on October 13, 2023. See Note 1. |
12 |
—Selected Per-Share Data(1)— | —Ratios and Supplemental Data — | ||||||||||||||||||||||||||||
Net Asset Value at Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Other Capital | Dividends from Net Investment Income | Distributions from Capital Gains | Total Dividends and Distributions | Net Asset Value at End of Period | Total Return(2) | Net Assets at End of Period (000s) | Ratio of Expenses to Average Net Assets Before Adjust- ments(3) | Ratio of Expenses to Average Net Assets After Adjust- ments(3) | Ratio of Net Investment Income (Loss) to Average Net Assets | Portfolio Turnover(4) | |||||||||||||||
Hartford Quality Value ETF(5) | |||||||||||||||||||||||||||||
For the Year Ended October 31, 2023 | |||||||||||||||||||||||||||||
$ 23.22 | $ 0.38 | $ (0.89) | $ (0.51) | $ — | $ (0.47) | $ (1.12) | $ (1.59) | $ 21.12 | (2.60)% | $ 161,781 | 0.51% | 0.46% | 1.75% | 30% | |||||||||||||||
For the Year Ended October 31, 2022 | |||||||||||||||||||||||||||||
$ 25.84 | $ 0.49 | $ (1.39) | $ (0.90) | $ — | $ (0.47) | $ (1.25) | $ (1.72) | $ 23.22 | (3.78)% | $ 12,495 | 0.55% | 0.46% | 2.07% | 24% | |||||||||||||||
For the Year Ended October 31, 2021 | |||||||||||||||||||||||||||||
$ 18.31 | $ 0.45 | $ 7.62 | $ 8.07 | $ — | $ (0.54) | $ — | $ (0.54) | $ 25.84 | 44.84% | $ 12,182 | 0.56% | 0.46% | 1.92% | 21% | |||||||||||||||
For the Year Ended October 31, 2020 | |||||||||||||||||||||||||||||
$ 20.83 | $ 0.50 | $ (1.82) | $ (1.32) | $ — | $ (0.61) | $ (0.59) | $ (1.20) | $ 18.31 | (6.94)% | $ 8,975 | 0.58% | 0.46% | 2.64% | 26% | |||||||||||||||
For the Year Ended October 31, 2019 | |||||||||||||||||||||||||||||
$ 19.77 | $ 0.48 | $ 1.92 | $ 2.40 | $ — | $ (0.36) | $ (0.98) | $ (1.34) | $ 20.83 | 13.58% | $ 11,040 | 0.55% | 0.46% | 2.52% | 23% |
FINANCIAL HIGHLIGHTS FOOTNOTES | |
(1) | Information presented relates to a share outstanding throughout the indicated period. Net investment income (loss) per share amounts are calculated based on average shares outstanding unless otherwise noted. |
(2) | Total return is calculated assuming a hypothetical purchase of beneficial shares on the opening of the first day at the net asset value and a sale on the closing of the last day at the net asset value of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at net asset value at the end of the distribution day. |
(3) | Adjustments include waivers and reimbursements, if applicable. Ratios do not include fees paid indirectly (see Expenses in the accompanying Notes to Financial Statements). |
(4) | Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions. |
(5) | During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. As a result, the financial highlight information reflects that of the Predecessor Fund's Class F for all the periods up through the Reorganization. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
13 |
October 31, 2023
1. | Organization: |
Hartford Funds Exchange-Traded Trust (the "Trust") is an open-end registered management investment company comprised of nine operational series as of October 31, 2023. Financial statements for the Hartford Quality Value ETF ("Quality Value ETF" or the "Fund") are included in this report. | |
The Fund acquired all the assets and liabilities of the Hartford Quality Value Fund (the "Predecessor Fund") pursuant to an Agreement and Plan of Reorganization as of the close of business on October 13, 2023 (the “Reorganization”). Prior to October 13, 2023, the financial statements of the Fund reflect the historical results of the Predecessor Fund. All information and references to periods prior to the close of business on October 13, 2023, refer to the Predecessor Fund. Following the Reorganization, the Predecessor Fund’s performance and financial history were adopted by the new Fund. | |
Hartford Funds Management Company, LLC (the "Investment Manager" or "HFMC") paid for the costs incurred by the Fund and Predecessor Fund associated with the Reorganization (including the legal costs associated with the Reorganization), including any brokerage fees and expenses incurred by the Funds related to the disposition and acquisition of assets as part of the Reorganization. Brokerage fees and expenses related to the disposition and acquisition of Assets (including any disposition to raise cash to pay redemption proceeds) that are incurred in the ordinary course of business were not covered by HFMC. The Fund is expected to have a lower net expense ratio than the net expense ratio of each share class of the Predecessor Fund after taking into consideration fees waived and/or expenses reimbursed pursuant to an expense limitation agreement between the Investment Manager and the Predecessor Fund. In addition, the Fund is expected to have lower gross expenses, before giving effect to fee waivers and/or expense reimbursements, than any class of shares of the Predecessor Fund. | |
The Fund has the same investment objective, investment strategy, and fundamental investment policies as the Predecessor Fund. There are no material differences in the accounting, valuation and tax policies of the Predecessor Fund as compared to those of the Fund. The Reorganization did not result in a material change to the Fund’s portfolio holdings. | |
The Fund is an actively managed, exchange-traded fund ("ETF") that trades on an exchange like other publicly traded securities. Shares of the Fund are listed and traded on Cboe BZX Exchange, Inc ("Cboe BZX"). Shares of the Fund may be purchased or redeemed directly from the Fund in Creation Units at net asset value ("NAV") only by certain large institutional investors ("Authorized Participants") who have entered into agreements with ALPS Distributors, Inc. ("ALPS" or the "Distributor"), the Fund's Distributor. | |
The Trust was organized as a Delaware statutory trust on September 20, 2010 and is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The shares of the Fund are registered under the Securities Act of 1933, as amended (the "Securities Act"). The Fund is a diversified open-end management investment company. The Fund applies specialized accounting and reporting standards under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946 "Financial Services – Investment Companies." |
2. | Significant Accounting Policies: |
The following is a summary of significant accounting policies of the Fund used in the preparation of its financial statements, which are in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"). The preparation of financial statements in accordance with U.S. GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
a) | Determination of Net Asset Value – The NAV of the Fund's shares is determined as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (normally 4:00 p.m. Eastern Time) (the "NYSE Close") on each day that the Exchange is open ("Valuation Date"). If the Exchange is closed due to weather or other extraordinary circumstances on a day it would typically be open for business, the Fund may treat such day as a typical business day and accept creation and redemption orders from Authorized Participants and calculate the Fund’s NAV in accordance with applicable law. The NAV for the shares of the Fund is determined by dividing the value of the Fund’s net assets attributable to the shares by the number of shares outstanding. Information that becomes known to the Fund after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the NAV determined earlier that day. |
b) | Investment Valuation and Fair Value Measurements – For purposes of calculating the NAV per share of the Fund, portfolio securities and other assets held in the Fund’s portfolio for which market prices are readily available are valued at market value. Market value is generally determined on the basis of official close price or last reported trade price. If no trades were reported, market value is based on prices obtained from a quotation reporting system, established market makers (including evaluated prices), or independent pricing services. Pricing vendors may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data, credit quality information, general market conditions, news, and other factors and assumptions. |
14 |
October 31, 2023
With respect to the Fund's investments that do not have readily available market prices, the Trust's Board of Trustees (the "Board") has designated HFMC as its valuation designee to perform fair valuations pursuant to Rule 2a-5 under the 1940 Act (the "Valuation Designee"). | |
If market prices are not readily available or deemed unreliable, the Valuation Designee determines the fair value of the security or other instrument in good faith under policies and procedures approved by and under the supervision of the Board ("Valuation Procedures"). | |
The Valuation Designee has delegated the day-to-day responsibility for implementing the Valuation Procedures to the Valuation Committee (the "Valuation Committee"). The Valuation Committee will consider all available relevant factors in determining an investment’s fair value. The Valuation Designee reports fair value matters to the Audit Committee of the Board. | |
Securities and other instruments that are primarily traded on foreign markets may trade on days that are not business days of the Fund. The value of the foreign securities or other instruments in which the Fund invests may change on days when a shareholder will not be able to purchase, sell or redeem shares of the Fund. | |
Fixed income investments (other than short-term obligations) and non-exchange traded derivatives held by the Fund are normally valued at prices supplied by independent pricing services in accordance with the Valuation Procedures. Short-term investments maturing in 60 days or less are generally valued at amortized cost, which approximates fair value. | |
Exchange-traded derivatives, such as options, futures and options on futures, are valued at the last sale price determined by the exchange where such instruments principally trade as of the close of such exchange ("Exchange Close"). If a last sale price is not available, the value will be the mean of the most recently quoted bid and ask prices as of the Exchange Close. If a mean of the bid and ask prices cannot be calculated for the day, the value will be the most recently quoted bid price as of the Exchange Close. Over-the-counter derivatives are normally valued based on prices supplied by independent pricing services in accordance with the Valuation Procedures. | |
Investments valued in currencies other than U.S. dollars are converted to U.S. dollars using the prevailing spot currency exchange rates obtained from independent pricing services for calculation of the NAV. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities or other instruments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the Exchange is closed and the market value may change on days when an investor is not able to purchase, sell or redeem shares of the Fund. | |
Foreign currency contracts represent agreements to exchange currencies on specific future dates at predetermined rates. Foreign currency contracts are valued using foreign currency exchange rates and forward rates as provided by an independent pricing service on the Valuation Date. | |
Shares of investment companies listed and traded on an exchange are valued in the same manner as any exchange-listed equity security. Investments in investment companies that are not listed or traded on an exchange ("Non-Traded Funds"), if any, are valued at the respective NAV of each Non-Traded Fund on the Valuation Date. Such Non-Traded Funds and listed investment companies may use fair value pricing as disclosed in their prospectuses. | |
Financial instruments for which prices are not available from an independent pricing service may be valued using quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with the Valuation Procedures. | |
U.S. GAAP defines fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. The U.S. GAAP fair value measurement standards require disclosure of a fair value hierarchy for each major category of assets and liabilities. Various inputs are used in determining the fair value of the Fund’s investments. These inputs are summarized into three broad hierarchy levels. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are: |
• | Level 1 – Quoted prices in active markets for identical investments. Level 1 may include exchange-traded instruments, such as domestic equities, some foreign equities, options, futures, mutual funds, exchange-traded funds, rights and warrants. |
• | Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar investments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 2 may include debt investments that are traded less frequently than exchange traded instruments and which are valued using independent pricing services; senior floating rate interests, which are valued using an aggregate of dealer bids; short-term investments, which are valued at amortized cost; and swaps, which are valued based upon the terms of each swap contract. |
• | Level 3 – Significant unobservable inputs that are supported by limited or no market activity. Level 3 may include financial instruments whose values are determined using indicative market quotes or require significant management judgment or estimation. These unobservable valuation inputs may include estimates for current yields, maturity/duration, prepayment speed, and indicative market quotes for comparable investments along with other assumptions relating to credit quality, collateral value, complexity of the investment |
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October 31, 2023
structure, general market conditions and liquidity. This category may include investments where trading has been halted or there are certain restrictions on trading. While these investments are priced using unobservable inputs, the valuation of these investments reflects the best available data and management believes the prices are a reasonable representation of exit price. |
c) | Investment Transactions and Investment Income – Investment transactions are recorded as of the trade date (the date the order to buy or sell is executed) for financial reporting purposes. Investments purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses are determined on the basis of identified cost. Income tax-related interest and penalties, if incurred, are recorded as income tax expense. |
Dividend income from domestic securities is accrued on the ex-dividend date. In general, dividend income from foreign securities is recorded on the ex-date; however, dividend notifications in certain foreign jurisdictions may not be available in a timely manner and as a result, the Fund will record the dividend as soon as the relevant details (i.e., rate per share, payment date, shareholders of record, etc.) are publicly available. Interest income, including amortization of premium, accretion of discounts, inflation adjustments and additional principal received in-kind in lieu of cash, is accrued on a daily basis. | |
Please refer to Note 7 for Securities Lending information. | |
d) | Taxes – The Fund may be subject to taxes imposed on realized gains on securities of certain foreign countries in which the Fund invests. The Fund may also be subject to taxes withheld on foreign dividends and interest from securities in which the Fund invests. The amount of any foreign taxes withheld and foreign tax expense is included on the accompanying Statement of Operations as a reduction to net investment income or net realized or unrealized gain (loss) on investments in these securities, if applicable. |
e) | Foreign Currency Transactions – Assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates in effect on the Valuation Date. Purchases and sales of investments, income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. |
The Fund does not isolate that portion of portfolio investment valuation resulting from fluctuations in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of investments held. Exchange rate fluctuations are included with the net realized and unrealized gain or loss on investments in the accompanying financial statements. | |
Net realized foreign exchange gains or losses arise from sales of foreign currencies and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates. |
f) | Dividend Distributions to Shareholders – Dividends are declared pursuant to a policy adopted by the Board. Dividends and/or distributions to shareholders are recorded on ex-date. The policy for the Fund is to pay dividends from net investment income and realized gains, if any, at least once a year. Dividends may be declared and paid more frequently or at any other times to comply with the distribution requirements of the Internal Revenue Code. |
Income dividends and capital gains distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP with respect to character and timing (see Federal Income Taxes: Distributions and Components of Distributable Earnings and Reclassification of Capital Accounts notes). |
3. | Securities and Other Investments: |
a) | Restricted Securities – The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if applicable, is included at the end of the Fund's Schedule of Investments. |
b) | Repurchase Agreements – A repurchase agreement is an agreement between two parties whereby one party sells the other a security at a specified price with a commitment to repurchase the security later at an agreed-upon price, date and interest payment. The Fund is |
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October 31, 2023
permitted to enter into fully collateralized repurchase agreements. The Trust's Board has delegated to the sub-adviser, as applicable, the responsibility of evaluating the creditworthiness of the banks and securities dealers with which the Fund will engage in repurchase agreements. The sub-adviser will monitor such transactions to ensure that the value of underlying collateral will be at least equal to the total amount of the repurchase obligation as required by the valuation provision of the repurchase agreement, including the accrued interest. Repurchase agreements carry the risk that the market value of the securities declines below the repurchase price. The Fund could also lose money if it is unable to recover the securities and the value of any collateral held. In the event the borrower commences bankruptcy proceedings, a court may characterize the transaction as a loan. If the Fund has not perfected a security interest in the underlying collateral, the Fund may be required to return the underlying collateral to the borrower’s estate and be treated as an unsecured creditor. As an unsecured creditor, the Fund could lose some or all of the principal and interest involved in the transaction. See the Fund's Schedule of Investments, if applicable, for repurchase agreements as of October 31, 2023. |
4. | Principal Risks: |
The Fund’s investments expose it to various types of risks associated with financial instruments and the markets. The Fund may be exposed to the risks described below. The Fund's prospectus provides details of its principal risks. | |
The market values of equity securities, such as common stocks and preferred stocks, or equity related derivative investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The market value of equity securities may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities. The extent of the Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s Schedule of Investments. | |
A widespread health crisis, such as a global pandemic, could cause substantial market volatility, exchange trading suspensions or restrictions and closures of securities exchanges and businesses, impact the ability to complete redemptions, and adversely impact Fund performance. The outbreak of COVID-19, a respiratory disease caused by a novel coronavirus, negatively affected the worldwide economy, created supply chain disruptions and labor shortages, and impacted the financial health of individual companies and the market in significant and unforeseen ways. The future impact of COVID-19, if any, remains unclear. The effects to public health, business and market conditions resulting from COVID-19 pandemic have had, and may continue to have, a significant negative impact on the performance of the Fund’s investments, including exacerbating other pre-existing political, social and economic risks. | |
The banking sector has recently been subject to increased market volatility. As a result, the Fund’s investments in the banking sector may be subject to increased volatility risk. | |
Investing in the securities of non-U.S. issuers, whether directly or indirectly, involves certain considerations and risks not typically associated with securities of U.S. issuers. Such risks include, but are not limited to: generally less liquid and less efficient securities markets; generally greater price volatility; exchange rate fluctuations; imposition of restrictions on the expatriation of funds or other protectionist measures; less publicly available information about issuers; the imposition of withholding or other taxes; higher transaction and custody costs; settlement delays and risk of loss attendant in settlement procedures; difficulties in enforcing contractual obligations; less regulation of securities markets; different accounting, disclosure and reporting requirements; more substantial governmental involvement in the economy; higher inflation rates; and greater social, economic and political uncertainties. Non-U.S. issuers may also be affected by political, social, economic or diplomatic developments in a foreign country or region or the U.S. (including the imposition of sanctions, tariffs, or other governmental restrictions). These risks are heightened for investments in issuers from countries with less developed markets. | |
Securities lending involves the risk that the Fund may lose money because the borrower of the loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of a decline in the value of the collateral provided for the loaned securities or a decline in the value of any investments made with cash collateral. These events could also trigger adverse tax consequences for the Fund that lends its holdings. | |
5. | Federal Income Taxes: |
a) | The Fund intends to continue to qualify as a Regulated Investment Company ("RIC") under Subchapter M of the Internal Revenue Code ("IRC") by distributing substantially all of its taxable net investment income and net realized capital gains to its shareholders each year. The Fund has distributed substantially all of its income and capital gains in prior years, if applicable, and intends to distribute substantially all of its income and capital gains during the calendar year ending December 31, 2023. Accordingly, no provision for federal income or excise taxes has been made in the accompanying financial statements. Distributions from short-term capital gains are treated as ordinary income distributions for federal income tax purposes. |
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October 31, 2023
b) | Net Investment Income (Loss), Net Realized Gains (Losses) and Distributions – Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sale adjustments, foreign currency gains and losses, Real Estate Investment Trusts ("REITs"), and partnerships. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. |
c) | Distributions and Components of Distributable Earnings – The tax character of distributions paid by the Fund for the years ended October 31, 2023 and October 31, 2022 are as follows (as adjusted for dividends payable, if applicable): |
For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||
Ordinary Income | Long-Term Capital Gains(1) | Ordinary Income | Long-Term Capital Gains(1) | |||
$ 3,920,496 | $ 11,687,936 | $ 3,291,556 | $ 11,024,502 | |||
(1) | The Fund designates these distributions as long-term capital gains dividends pursuant to IRC Sec 852(b)(3)(c). |
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Unrealized Appreciation (Depreciation) on Investments | Total Accumulated Earnings (Deficit) | |||
$ 4,586,901 | $ 289,081 | $ 23,327,042 | $ 28,203,024 |
d) | Reclassification of Capital Accounts – The Fund may record reclassifications in its capital accounts. These reclassifications have no impact on the total net assets of the Fund. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting for such items as earnings and profits distributed to shareholders on the redemption of shares and redemption in-kind transactions. Adjustments are made to reflect the impact these items have on the current and future earnings distributions to shareholders. Therefore, the source of the Fund's distributions may be shown in the accompanying Statement of Changes in Net Assets as from distributable earnings or from capital depending on the type of book and tax differences that exist. For the year ended October 31, 2023, the Fund recorded reclassifications to increase (decrease) the accounts listed below: |
Paid-in-Capital | Distributable Earnings (Loss) | |
$ 1,465,972 | $ (1,465,972) |
e) | Capital Loss Carryforward – Under the Regulated Investment Company Modernization Act of 2010, funds are permitted to carry forward capital losses for an unlimited period. |
f) | Tax Basis of Investments – The aggregate cost of investments for federal income tax purposes at October 31, 2023 is different from book purposes primarily due to wash sale deferrals. The net unrealized appreciation/(depreciation) on investments for tax purposes, which consists of gross unrealized appreciation and depreciation was also different from book purposes primarily due to wash sale loss deferrals. Both the cost and unrealized appreciation and depreciation for federal income tax purposes are disclosed below: |
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||
$ 135,039,211 | $ 30,978,856 | $ (7,651,814) | $ 23,327,042 |
g) | Accounting for Uncertainty in Income Taxes – Pursuant to provisions set forth by U.S. GAAP, HFMC reviews the Fund’s tax positions for all open tax years. As of October 31, 2023, HFMC had reviewed the open tax years and concluded that there was no reason to record a liability for net unrecognized tax obligations relating to uncertain income tax positions. The Fund files U.S. tax returns. Although the statute of limitations for examining the Fund’s U.S. tax returns remains open for three years, no examination is currently in progress. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any interest or penalties. HFMC is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax obligations will significantly change in the next twelve months. |
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October 31, 2023
6. | Expenses: |
a) | Investment Management Agreement – HFMC serves as the Fund’s investment manager. The Trust, on behalf of the Fund, has entered into an Investment Management Agreement with HFMC. HFMC is an indirect subsidiary of The Hartford Financial Services Group, Inc. ("The Hartford"). HFMC has overall investment supervisory responsibility for the Fund. In addition, HFMC provides administrative personnel, services, equipment, facilities and office space for proper operation of the Fund. HFMC has contracted with Wellington Management Company LLP ("Wellington Management") under a sub-advisory agreement pursuant to which Wellington Management performs the daily investment of the assets of the Fund in accordance with the Fund's investment objective and policies. The Fund pays a fee to HFMC, a portion of which may be used to compensate Wellington. |
Under the Investment Management Agreement, the Investment Manager agrees to pay all expenses of the Trust, except (i) interest and taxes; (ii) brokerage expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions or in connection with creation and redemption transactions; (iii) legal fees or expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith; (iv) extraordinary expenses; (v) distribution fees and expenses paid by the Trust under any distribution plan that may be adopted pursuant to Rule 12b-1 under the 1940 Act; (vi) acquired fund fees and expenses; and (vii) the management fee payable to the Investment Manager under the Investment Management Agreement. The payment or assumption by the Investment Manager of any expense of the Trust that the Investment Manager is not required by the Investment Management Agreement to pay or assume shall not obligate the Investment Manager to pay or assume the same or any similar expense of the Trust on any subsequent occasion. | |
The schedule below reflects the rates of compensation paid to HFMC for investment management services rendered as of October 31, 2023; the rates are accrued daily and paid monthly based on the Fund’s average daily net assets, at the following annual rates: | |
Management Fee Rates |
0.45% (1) |
(1) | Prior to the Reorganization, HFMC contractually agreed to reimburse expenses of the Predecessor Fund to the extent necessary to limit total annual fund operating expenses to 0.46% for Class F Shares. The initial effective management fee rate for the first twelve months of the Fund’s operations after giving effect to the Conversion is expected to be 0.45%. |
b) | Accounting Services Agreement – Prior to the Reorganization, HFMC provided the Predecessor Fund with accounting services pursuant to a fund accounting agreement. HFMC has delegated certain accounting and administrative service functions to State Street Bank and Trust Company ("State Street"). In consideration of services rendered and expenses assumed pursuant to the fund accounting agreement, the Fund paid HFMC a fee. The fund accounting fee for the Predecessor Fund was equal to the greater of: (A) the sum of (i) the sub-accounting fee payable by HFMC with respect to the Predecessor Fund; (ii) the fee payable for tax preparation services for the Predecessor Fund; and (iii) the amount of expenses that HFMC allocates for providing the fund accounting services to the Predecessor Fund; plus a target profit margin; or (B) $40,000 per year; provided, however, that to the extent the annual amount of the fund accounting fee exceeds 0.02% of the Predecessor Fund’s average net assets (calculated during its current fiscal year), HFMC shall waive such portion of the fund accounting fee. The Fund did not pay any accounting fees for the period from October 13, 2023 through October 31, 2023. |
c) | Fees Paid Indirectly – The Fund has entered into agreements with State Street Global Markets, LLC and Russell Implementation Services, Inc, to partially recapture non-discounted trade commissions. Such rebates are used to pay a portion of the Fund’s expenses. For the year ended October 31, 2023, the amount is included in the Statement of Operations. |
The ratio of expenses to average net assets in the accompanying financial highlights excludes the reduction in expenses related to fees paid indirectly. The annualized expense ratio after waivers reflecting the reduction for fees paid indirectly for the period is as follows: 0.45%. |
d) | Distribution Plans - The Fund has not adopted a Rule 12b-1 Distribution and Service Plan in accordance with Rule 12b-1 under the 1940 Act. |
For the year ended October 31, 2023, the pre-Reorganization amounts are reflected as "Distribution fee reimbursements" on the Statement of Operations. The Fund did not pay any Rule 12b-1 fees post-Reorganization. |
e) | Other Related Party Transactions – Certain officers of the Trust are trustees and/or officers of HFMC and/or The Hartford or its subsidiaries. For the fiscal period pre-Reorganization, the Predecessor Fund incurred Chief Compliance Officer's ("CCO") compensation of $534. For the period post-Reorganization, as part of the Fund's Investment Management Agreement, HFMC pays any CCO compensation on behalf of the Fund. |
f) | Hartford Administrative Services Company ("HASCO"), an indirect subsidiary of The Hartford, provided transfer agent services to the Predecessor Fund. The Predecessor Fund paid HASCO a transfer agency fee payable monthly based on the lesser of (i) the costs of providing or overseeing transfer agency services provided to each share class of such fund plus a target profit margin or fees payable by HASCO to SS&C GIDS, Inc. ("SS&C", formerly known as DST Asset Manager Solutions, Inc.) (and any other designated sub-agent) |
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October 31, 2023
according to the agreed-upon fee schedule under the sub-transfer agency agreement between HASCO and SS&C (or between HASCO and any other designated sub-agent, as applicable); (ii) sub-transfer agency fees payable by HASCO to financial intermediaries, according to the agreed-upon terms between HASCO and the financial intermediaries, provided that such payments are within certain limits approved by the applicable Company’s Board of Directors; (iii) certain expenses that HASCO’s parent company, Hartford Funds Management Group, Inc., allocates to HASCO that relate to HASCO’s transfer agency services provided to the Fund; and (iv) a target profit margin. The Predecessor Fund Class F specified amount (as a percentage of average daily net assets) was 0.0004%. State Street Bank and Trust Company serves as the fund's Transfer Agent. The Fund did not pay State Street any transfer agency fees for the period October 13, 2023 through October 31, 2023. |
7. | Securities Lending: |
The Trust has entered into a securities lending agency agreement ("lending agreement") with Citibank, N.A. ("Citibank"). The Fund may lend portfolio securities to certain borrowers in U.S. and non-U.S. markets in an amount not to exceed one-third (33 1/3%) of the value of its total assets. The Fund may lend portfolio securities, provided that the borrower provides collateral that is maintained in an amount at least equal to the current market value of the securities loaned. Cash collateral is invested for the benefit of the Fund by the Fund’s lending agent pursuant to collateral investment guidelines. The collateral is marked to market daily, in an amount at least equal to the current market value of the securities loaned. The contractual maturities of the securities lending transactions are considered overnight and continuous. | |
The Fund is subject to certain risks while its securities are on loan, including the following: (i) the risk that the borrower defaults on the loan and the collateral is inadequate to cover the Fund’s loss; (ii) the risk that the earnings on the collateral invested are not sufficient to pay fees incurred in connection with the loan; (iii) the Fund could lose money in the event of a decline in the value of the collateral provided for loaned securities or a decline in the value of any investments made with cash collateral; (iv) the risk that the borrower may use the loaned securities to cover a short sale, which may in turn place downward pressure on the market prices of the loaned securities; (v) the risk that return of loaned securities could be delayed and interfere with portfolio management decisions; (vi) the risk that any efforts to restrict or recall the securities for purposes of voting may not be effective; and (vii) operational risks (i.e., the risk of losses resulting from problems in the settlement and accounting process especially so in certain international markets). These events could also trigger adverse tax consequences for the Fund. | |
The Fund retains loan fees and the interest on cash collateral investments but is required to pay the borrower a rebate for the use of cash collateral. In cases where the lent security is of high value to borrowers, there may be a negative rebate (i.e., a net payment from the borrower to the Fund). Upon termination of a loan, the Fund is required to return to the borrower an amount equal to the cash collateral, plus any rebate owed to the borrowers. | |
The net income earned on the securities lending (after payment of rebates and Citibank’s fee) is included on the Statement of Operations as Investment Income from securities lending. The Fund also receives payments from the borrower during the period of the loan, equivalent to dividends and interest earned on the securities loaned, which are recorded as Investment Income from dividends or interest, respectively, on the Statement of Operations. |
8. | Custodian and Transfer Agent: |
State Street Bank and Trust Company ("State Street") serves as Custodian for the Fund pursuant to a custodian agreement ("Custodian Agreement") dated December 31, 2014, as amended from time to time. As Custodian, State Street holds the Fund’s assets, calculates the net asset value of the shares and calculates net income and realized capital gains or losses. State Street serves as Transfer Agent of the Fund pursuant to a transfer agency and service agreement ("Transfer Agency and Service Agreement") dated February 13, 2018, as amended from time to time. As Transfer Agent, State Street maintains the records of each Authorized Participant’s ownership of the Fund and processes the purchases and redemptions of Creation Units. | |
For the services provided under the Custodian Agreement and Transfer Agency and Service Agreement, HFMC, and not the Fund, compensates State Street pursuant to the Fund's unitary management fee structure. |
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9. | Investment Transactions: |
For the year ended October 31, 2023, the cost of purchases and proceeds from sales of investment securities (excluding short-term investments) were as follows: | |
Cost of Purchases Excluding U.S. Government Obligations | Sales Proceeds Excluding U.S. Government Obligations | Total Cost of Purchases | Total Sales Proceeds | |||
$68,032,357 | $141,012,812 | $68,032,357 | $141,012,812 |
Cost of Purchases | Sales Proceeds | Realized Gain/(Loss) | ||
$ — | $ 511,467 | $ 127,201 | ||
10. | Share Transactions: |
The Fund will issue and redeem shares at NAV only with certain Authorized Participants in large increments known as "Creation Units." Purchases of Creation Units are made by tendering a basket of designated securities to the Fund and redemption proceeds are paid with a basket of securities from the Fund with a balancing cash component to equate the market value of the basket securities delivered or redeemed to the NAV per Creation Unit on the transaction date. Cash may be substituted in an amount equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery. The Fund’s shares are available in smaller increments to individual investors in the secondary market at market prices and may be subject to commissions. Authorized Participants may be required to pay a transaction fee when purchasing and redeeming Creation Units of the Fund. The transaction fee is used to defray the costs associated with the issuance and redemption of Creation Units, and, if any, is recorded as Other Capital on the Statement of Changes in Net Assets. | |
Purchase or redemption of Creation Units is only available to an Authorized Participant. An Authorized Participant is either (1) a "Participating Party" (i.e., a broker-dealer or other participant in the clearing process of the Continuous Net Settlement System of the NSCC) ("Clearing Process"), or (2) a participant of DTC ("DTC Participant"), and, in each case, must have executed an agreement ("Participation Agreement") with the Distributor with respect to creations and redemptions of Creation Units, and is recorded as Other Capital on the Statement of Changes in Net Assets. | |
Shares of the Fund are listed and traded throughout the day on Cboe BZX. Shares of the Fund are publicly traded. Retail investors may purchase or sell shares in the secondary market (not from the Fund) through a broker or dealer. Investors purchasing or selling shares in the secondary market may pay a commission, market premium or discount or other transaction charge, to a broker or dealer, as well as some or all of the spread between the bid and the offered price for each purchase or sale transaction. Unless imposed by a broker or dealer, there is no minimum dollar amount upon purchase and no minimum number of shares that must be purchased in the secondary market. Because transactions in the secondary market occur at market prices, an investor may pay more than NAV upon purchase of shares and may receive less than the Fund’s NAV upon sale of shares. | |
Because the Fund is structured as an ETF, individual shares may only be purchased and sold on a listing exchange through a broker-dealer. The price of shares is based on market price, and because ETF shares trade at market prices rather than at NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem Creation Units to Authorized Participants who have entered into agreements with the Distributor. The Fund generally will issue or redeem Creation Units in return for a designated basket of securities (and an amount of cash) that the Fund specifies each day. The Fund do not impose any restrictions on the frequency of purchases and redemptions; however, the Fund reserves the right to reject or limit purchases at any time. | |
The following information is for the years ended October 31, 2023 and October 31, 2022: | |
For the Year Ended October 31, 2023(1) | For the Year Ended October 31, 2022(1) | ||||||
Shares | Amount | Shares | Amount | ||||
Shares Sold(2) | 7,278,138 | $ 156,946,712 | 114,445 | $ 2,665,943 | |||
Shares Issued for Reinvested Dividends(2) | 37,745 | 858,432 | 32,704 | 807,378 | |||
Shares Redeemed(2) | (7,878,908) | (170,802,378) | (80,617) | (1,931,633) | |||
Reorganization (see Note 1) | 7,684,257 | 166,507,716 | — | — | |||
Net Increase (Decrease)(2) | 7,121,232 | 153,510,482 | 66,532 | 1,541,688 |
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October 31, 2023
For the Year Ended October 31, 2023(1) | For the Year Ended October 31, 2022(1) | ||||||
Shares | Amount | Shares | Amount | ||||
Class A | |||||||
Shares Sold | 314,497 | $ 7,284,449 | 653,948 | $ 15,932,127 | |||
Shares Issued for Reinvested Dividends | 458,294 | 10,659,453 | 446,698 | 11,224,276 | |||
Shares Redeemed | (8,103,051) | (179,821,950) | (938,757) | (22,808,241) | |||
Net Increase (Decrease) | (7,330,260) | (161,878,048) | 161,889 | 4,348,162 | |||
Class C | |||||||
Shares Sold | 97,617 | $ 1,876,188 | 76,667 | $ 1,602,569 | |||
Shares Issued for Reinvested Dividends | 15,597 | 302,177 | 10,099 | 212,267 | |||
Shares Redeemed | (286,977) | (5,349,607) | (65,853) | (1,348,407) | |||
Net Increase (Decrease) | (173,763) | (3,171,242) | 20,913 | 466,429 | |||
Class I | |||||||
Shares Sold | 388,347 | $ 8,732,221 | 710,040 | $ 16,923,232 | |||
Shares Issued for Reinvested Dividends | 87,476 | 2,001,361 | 55,812 | 1,383,295 | |||
Shares Redeemed | (1,787,994) | (39,221,923) | (230,905) | (5,313,610) | |||
Net Increase (Decrease) | (1,312,171) | (28,488,341) | 534,947 | 12,992,917 | |||
Class R3 | |||||||
Shares Sold | 2,736 | $ 63,393 | 3,836 | $ 94,890 | |||
Shares Issued for Reinvested Dividends | 2,297 | 54,524 | 2,505 | 64,011 | |||
Shares Redeemed | (44,059) | (999,179) | (8,433) | (208,983) | |||
Net Increase (Decrease) | (39,026) | (881,262) | (2,092) | (50,082) | |||
Class R4 | |||||||
Shares Sold | 31,094 | $ 738,003 | 46,621 | $ 1,142,022 | |||
Shares Issued for Reinvested Dividends | 13,177 | 316,133 | 10,678 | 276,389 | |||
Shares Redeemed | (254,050) | (5,787,791) | (24,211) | (629,358) | |||
Net Increase (Decrease) | (209,779) | (4,733,655) | 33,088 | 789,053 | |||
Class R5 | |||||||
Shares Sold | 603 | $ 15,289 | 15,997 | $ 412,528 | |||
Shares Issued for Reinvested Dividends | 910 | 22,057 | 763 | 19,958 | |||
Shares Redeemed | (15,180) | (350,957) | (14,814) | (364,859) | |||
Net Increase (Decrease) | (13,667) | (313,611) | 1,946 | 67,627 | |||
Class R6 | |||||||
Shares Sold | 156,960 | $ 3,721,449 | 512,657 | $ 13,564,294 | |||
Shares Issued for Reinvested Dividends | 32,143 | 780,498 | 627 | 16,459 | |||
Shares Redeemed | (667,871) | (15,451,489) | (43,904) | (1,076,263) | |||
Net Increase (Decrease) | (478,768) | (10,949,542) | 469,380 | 12,504,490 | |||
Class Y | |||||||
Shares Sold | 25,536 | $ 620,145 | 210,023 | $ 5,213,675 | |||
Shares Issued for Reinvested Dividends | 16,684 | 405,796 | 3,465 | 90,617 | |||
Shares Redeemed | (316,362) | (7,297,920) | (3,483) | (89,985) | |||
Net Increase (Decrease) | (274,142) | (6,271,979) | 210,005 | 5,214,307 | |||
Total Net Increase (Decrease) | (2,710,344) | $ (63,177,198) | 1,496,608 | $ 37,874,591 |
(1) | During fiscal year 2023, the Fund converted from a mutual fund to an ETF pursuant to an Agreement and Plan of Reorganization. All information and references to periods prior to the close of business on October 13, 2023 refers to the Predecessor Fund. See Note 1 in the Notes to Financial Statements for additional information about the Reorganization. |
(2) | Includes Class F Shares of the Predecessor Fund prior to the Reorganization and the Quality Value ETF post Reorganization. |
11. | Indemnifications: |
Under the Trust’s organizational documents, the Trust shall indemnify its officers and trustees to the full extent required or permitted under the applicable laws of the State of Delaware and federal securities laws. In addition, the Trust, on behalf of the Fund, may enter into contracts that contain a variety of indemnifications. The Trust’s maximum exposure under these arrangements is unknown. However, as of the date of these financial statements, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. |
22 |
October 31, 2023
12. | Regulatory Update: |
The SEC adopted rule and form amendments that will change the format and content of the Fund's annual and semi-annual reports. Certain information, including the financial statements, will not appear in the Fund's new tailored shareholder reports but will be available online, delivered free of charge upon request, and filed on a semi-annual basis on Form N-CSR. The rule and form amendments have a compliance date of July 24, 2024. At this time, Management is evaluating the impact of these rule and form amendment changes. |
13. | Subsequent Events: |
Management has evaluated all subsequent transactions and events through the date on which these financial statements were issued and has determined that no additional items require disclosure in these financial statements. |
23 |
24 |
• | the operation of the LRM Program (and related policies and procedures utilized in connection with management of the Fund’s liquidity risk); |
• | an assessment of the adequacy and effectiveness of the LRM Program’s (and related policies and procedures’) implementation; |
• | the operation, and assessment of the adequacy and effectiveness, of the Fund’s HLIM; |
• | whether the third-party liquidity vendor’s (“LRM Program Vendor”) processes for determining preliminary liquidity classifications, including the particular methodologies or factors used and metrics analyzed by the LRM Program Vendor, are sufficient under the Liquidity Rule and appropriate in light of the Fund’s specific circumstances; and |
• | any material changes to the LRM Program. |
25 |
NAME, YEAR OF BIRTH AND ADDRESS(1) | POSITION HELD WITH THE COMPANY | TERM OF OFFICE(2) AND LENGTH OF TIME SERVED | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX(3) OVERSEEN BY TRUSTEE | OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES AND OTHER REGISTERED INVESTMENT COMPANIES HELD BY TRUSTEE | |||||
NON-INTERESTED TRUSTEES | ||||||||||
HILARY E. ACKERMANN (1956) | Trustee | Since 2017 | Ms. Ackermann served as Chief Risk Officer at Goldman Sachs Bank USA from October 2008 to November 2011. | 81 | Ms. Ackermann served as a Director of Dynegy, Inc. from October 2012 until its acquisition by Vistra Energy Corporation ("Vistra") in 2018, and since that time she has served as a Director of Vistra. | |||||
ROBIN C. BEERY (1967) | Trustee | Since 2016 | Ms. Beery has served as a consultant to ArrowMark Partners (an alternative asset manager) since March of 2015 and since November 2018 has been employed by ArrowMark Partners as a Senior Advisor. Previously, she was Executive Vice President, Head of Distribution, for Janus Capital Group, and Chief Executive Officer and President of the Janus Mutual Funds (a global asset manager) from September 2009 to August 2014. | 81 | Ms. Beery serves as an independent Director of UMB Financial Corporation (January 2015 to present), has chaired the Compensation Committee since April 2017, and has been a member of the Compensation Committee and the Risk Committee since January 2015. | |||||
DERRICK D. CEPHAS (1952) | Trustee | Since 2020 | Mr. Cephas currently serves as Of Counsel to Squire Patton Boggs LLP, an international law firm with 45 offices in 20 countries. Until his retirement in October 2020, Mr. Cephas was a Partner of Weil, Gotshal & Manges LLP, an international law firm headquartered in New York, where he served as the Head of the Financial Institutions Practice (April 2011 to October 2020). | 81 | Mr. Cephas currently serves as a Director of Claros Mortgage Trust, Inc., a real estate investment trust and is a member of the Compensation Committee and the Nominating and Governance Committee. | |||||
CHRISTINE R. DETRICK (1958) | Trustee and Chair of the Board | Trustee since 2017; Chair of the Board since 2021 | From 2002 until 2012, Ms. Detrick was a Senior Partner, Leader of the Financial Services Practice, and a Senior Advisor at Bain & Company (“Bain”). Before joining Bain, she served in various senior management roles for other financial services firms and was a consultant at McKinsey and Company. | 81 | Ms. Detrick currently serves as a Director of Charles River Associates (May 2020 to present); currently serves as a Director of Capital One Financial Corporation (since November 2021); and currently serves as a Director of Altus Power, Inc (since December 2021). | |||||
JOHN J. GAUTHIER (1961) | Trustee | Since 2022 | Mr. Gauthier currently is the Principal Owner of JJG Advisory, LLC, an investment consulting firm, and Co-Founder and Principal Owner of Talcott Capital Partners (a placement agent for investment managers serving insurance companies). From 2008 to 2018, Mr. Gauthier served as a Senior Vice President (2008-2010), Executive Vice President (2010-2012), and President (2012-2018) of Allied World Financial Services (a global provider of property, casualty and specialty insurance and reinsurance solutions). | 81 | Mr. Gauthier serves as a Director of Reinsurance Group of America, Inc. (from 2018 to present) and chairs the Investment Committee and is a member of the Audit and Risk Committees. | |||||
ANDREW A. JOHNSON (1962) | Trustee | Since 2020 | Mr. Johnson currently serves as a Diversity and Inclusion Advisor at Neuberger Berman, a private, global investment management firm. Prior to his current role, Mr. Johnson served as Chief Investment Officer and Head of Global Investment Grade Fixed Income at Neuberger Berman (January 2009 to December 2018). | 81 | Mr. Johnson currently serves as a Director of AGNC Investment Corp., a real estate investment trust. | |||||
PAUL L. ROSENBERG (1953) | Trustee | Since 2020 | Mr. Rosenberg is a Partner of The Bridgespan Group, a global nonprofit consulting firm that is a social impact advisor to nonprofits, non-governmental organizations, philanthropists and institutional investors (October 2007 to present). | 81 | None |
26 |
NAME, YEAR OF BIRTH AND ADDRESS(1) | POSITION HELD WITH THE COMPANY | TERM OF OFFICE(2) AND LENGTH OF TIME SERVED | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX(3) OVERSEEN BY TRUSTEE | OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES AND OTHER REGISTERED INVESTMENT COMPANIES HELD BY TRUSTEE | |||||
DAVID SUNG (1953) | Trustee | Since 2016 | Mr. Sung was a Partner at Ernst & Young LLP from October 1995 to July 2014. | 81 | Mr. Sung serves as a Trustee of Ironwood Institutional Multi-Strategy Fund, LLC and Ironwood Multi-Strategy Fund, LLC (October 2015 to present). | |||||
OFFICERS AND INTERESTED TRUSTEE | ||||||||||
JAMES E. DAVEY(4) (1964) | Trustee, President and Chief Executive Officer | Trustee since 2017; President and Chief Executive Officer since 2017 | Mr. Davey serves as Executive Vice President of The Hartford Financial Services Group, Inc. Mr. Davey has served in various positions within The Hartford and its subsidiaries and joined The Hartford in 2002. Additionally, Mr. Davey serves as Director, Chairman, President, and Senior Managing Director for Hartford Funds Management Group, Inc. ("HFMG"). Mr. Davey also serves as President, Manager, Chairman of the Board, and Senior Managing Director for Hartford Funds Management Company, LLC (“HFMC”); Manager, Chairman of the Board, and President of Lattice Strategies LLC (“Lattice”); Chairman of the Board, Manager, and Senior Managing Director of Hartford Funds Distributors, LLC (“HFD”); and Chairman of the Board, President and Senior Managing Director of Hartford Administrative Services Company (“HASCO”), each of which is an affiliate of HFMG. | 81 | None | |||||
AMY N. FURLONG (1979) | Vice President | Since 2018 | Ms. Furlong serves as Vice President and Assistant Treasurer of HFMC (since September 2019). From 2018 through March 15, 2021, Ms. Furlong served as the Treasurer of the Trust and resumed her position as Treasurer from January 9, 2023 through September 10, 2023. Ms. Furlong has served in various positions within The Hartford and its subsidiaries in connection with the operation of the Hartford Funds. Ms. Furlong joined The Hartford in 2004. | N/A | N/A | |||||
WALTER F. GARGER (1965) | Vice President and Chief Legal Officer | Since 2016 | Mr. Garger serves as Secretary, Managing Director and General Counsel of HFMG, HFMC, HFD, and HASCO (since 2013). Mr. Garger also serves as Secretary and General Counsel of Lattice (since July 2016). Mr. Garger has served in various positions within The Hartford and its subsidiaries in connection with the operation of the Hartford Funds. Mr. Garger joined The Hartford in 1995. | N/A | N/A | |||||
THEODORE J. LUCAS (1966) | Vice President | Since 2017 | Mr. Lucas serves as Executive Vice President of HFMG (since July 2016) and as Executive Vice President of Lattice (since June 2017). Previously, Mr. Lucas served as Managing Partner of Lattice (2003 to 2016). | N/A | N/A | |||||
JOSEPH G. MELCHER (1973) | Vice President, Chief Compliance Officer and AML Compliance Officer | Vice President and Chief Compliance Officer since 2016; AML Compliance Officer since August 1, 2022 | Mr. Melcher serves as Executive Vice President of HFMG and HASCO (since December 2013). Mr. Melcher also serves as Executive Vice President (since December 2013) and Chief Compliance Officer (since December 2012) of HFMC, serves as Executive Vice President and Chief Compliance Officer of Lattice (since July 2016), serves as Executive Vice President of HFD (since December 2013), and has served as President and Chief Executive Officer of HFD (from April 2018 to June 2019). | N/A | N/A | |||||
VERNON J. MEYER (1964) | Vice President | Since 2016 | Mr. Meyer serves as Managing Director and Chief Investment Officer of HFMC and Managing Director of HFMG (since 2013). Mr. Meyer also serves as Senior Vice President-Investments of Lattice (since March 2019). Mr. Meyer has served in various positions within The Hartford and its subsidiaries in connection with the operation of the Hartford Funds. Mr. Meyer joined The Hartford in 2004. | N/A | N/A |
27 |
NAME, YEAR OF BIRTH AND ADDRESS(1) | POSITION HELD WITH THE COMPANY | TERM OF OFFICE(2) AND LENGTH OF TIME SERVED | PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS | NUMBER OF PORTFOLIOS IN FUND COMPLEX(3) OVERSEEN BY TRUSTEE | OTHER DIRECTORSHIPS FOR PUBLIC COMPANIES AND OTHER REGISTERED INVESTMENT COMPANIES HELD BY TRUSTEE | |||||
ALICE A. PELLEGRINO (1960) | Vice President and Assistant Secretary | Since 2016 | Ms. Pellegrino is Deputy General Counsel for HFMG (since April 2022) and currently serves as Vice President of HFMG (since December 2013). Ms. Pellegrino also serves as Vice President and Assistant Secretary of Lattice (since June 2017). Ms. Pellegrino has served in various positions within The Hartford and its subsidiaries in connection with the operation of the Hartford Funds. Ms. Pellegrino joined The Hartford in 2007. | N/A | N/A | |||||
ANKIT PURI (1984) | Vice President and Treasurer | Effective September 11, 2023 | Effective September 11, 2023, Mr. Puri serves as Vice President and Treasurer of the Trust. Prior to joining HFMC in 2023, Mr. Puri was a Fund Accounting Director, Investment Management Services, at SEI Investments (July 2021 through August 2023), an Associate Director, Fund Accounting Policy at The Vanguard Group (September 2020 to June 2021), and served in various positions at Ernst & Young LLP (October 2014 through September 2020). | N/A | N/A | |||||
THOMAS R. PHILLIPS (1960) | Vice President and Secretary | Since 2017 | Mr. Phillips is Deputy General Counsel for HFMG and currently serves as a Senior Vice President (since June 2021) and Assistant Secretary (since June 2017) for HFMG. Mr. Phillips also serves as Vice President of HFMC (since June 2021). Prior to joining HFMG in 2017, Mr. Phillips was a Director and Chief Legal Officer of Saturna Capital Corporation from 2014–2016. Prior to that, Mr. Phillips was a Partner and Deputy General Counsel of Lord, Abbett & Co. LLC. | N/A | N/A |
(1) | The address for each officer and Trustee is c/o Hartford Funds 690 Lee Road, Wayne, Pennsylvania 19087. |
(2) | Term of Office: Each Trustee holds an indefinite term until the Trustee's retirement, which must be no later than December 31 of the year in which the Trustee turns 75 years of age, or the Trustee's resignation, removal, or death prior to the Trustee's retirement. Each Fund officer generally serves until his or her resignation, removal, or death. |
(3) | The portfolios of the “Fund Complex” are the Hartford Schroders Private Opportunities Fund and the operational series of The Hartford Mutual Funds, Inc., The Hartford Mutual Funds II, Inc., Hartford Series Fund, Inc., Hartford HLS Series Fund II, Inc., Lattice Strategies Trust, and Hartford Funds Exchange-Traded Trust. |
(4) | “Interested person,” as defined in the 1940 Act, of the Trust because of the person’s affiliation with, or equity ownership of, HFMC, HFD or affiliated companies. |
28 |
29 |
30 |
31 |
32 |
33 |
a) | management; |
b) | use; and |
c) | protection; |
a) | service your Transactions with us; and |
b) | support our business functions. |
a) | You; |
b) | your Transactions with us; and |
c) | third parties such as a consumer-reporting agency. |
a) | your name; |
b) | your address; |
c) | your income; |
d) | your payment; or |
e) | your credit history; |
a) | our insurance companies; |
b) | our employee agents; |
c) | our brokerage firms; and |
d) | our administrators. |
a) | market our products; or |
b) | market our services; |
a) | independent agents; |
b) | brokerage firms; |
c) | insurance companies; |
d) | administrators; and |
e) | service providers; |
a) | taking surveys; |
b) | marketing our products or services; or |
c) | offering financial products or services under a joint agreement |
a) | cookies; |
b) | pixel tagging; or |
c) | other technologies; |
a) | “opt-out;” or |
b) | “opt-in;” |
a) | your authorization; or |
b) | as otherwise allowed or required by law. |
a) | underwriting policies; |
b) | paying claims; |
c) | developing new products; or |
d) | advising customers of our products and services. |
a) | the confidentiality; and |
b) | the integrity of; |
a) | secured files; |
b) | user authentication; |
c) | encryption; |
d) | firewall technology; and |
e) | the use of detection software. |
a) | identify information to be protected; |
b) | provide an adequate level of protection for that data; and |
c) | grant access to protected data only to those people who must use |
a) | credit history; |
b) | income; |
c) | financial benefits; or |
d) | policy or claim information. |
a) | your medical records; or |
b) | information about your illness, disability or injury. |
a) | Personal Financial Information; and |
b) | Personal Health Information. |
a) | your Application; |
b) | your request for us to pay a claim; and |
c) | your request for us to take an action on your account. |
a) | asking about; |
b) | applying for; or |
c) | obtaining; |
(b) | Not applicable. |
Item 2. Code of Ethics.
The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. A copy of the code of ethics is filed herewith.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the registrant (the “Board”) has designated David Sung as an Audit Committee Financial Expert. Mr. Sung is considered by the Board to be an independent trustee.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees: The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
$21,783 for the fiscal year ended October 31, 2023; $228,165 for the fiscal year ended July 31, 2023.
| ||
(b) | Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were:
$17,000 for the fiscal year ended October 31, 2023; $0 for the fiscal year ended July 31, 2023. Audit-related services are principally in connection with consents for the registration statements relating to the Fund reorganization.
| |||
(c) | Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were:
$4,314 for the fiscal year ended October 31, 2023; $64,750 for the fiscal year ended July 31, 2023. Tax-related services are principally in connection with, but not limited to, general tax compliance services and excise tax review.
|
| (d) | All Other Fees: The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were:
$51 for the fiscal year ended October 31, 2023; $635 for the fiscal year ended July 31, 2023. These fees were principally in connection with, but not limited to, general audit related products and services and an accounting research tool subscription.
| ||
(e) | (1) The Pre-Approval Policies and Procedures (the “Policy”) adopted by the Audit Committee of the registrant (also, the “Fund”) sets forth the procedures pursuant to which services performed by the independent registered public accounting firm for the registrant may be pre-approved. The following summarizes the pre-approval requirements under the Policy.
a. The Audit Committee must pre-approve all audit services and non-audit services that the independent registered public accounting firm provides to the Fund.
b. The Audit Committee must pre-approve any engagement of the independent registered public accounting firm to provide non-audit services to any Service Affiliate (which is defined to include any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Fund) during the period of the independent registered public accounting firm’s engagement to provide audit services to the Fund, if the non-audit services to the Service Affiliate directly impact the Fund’s operations and financial reporting.
c. The Audit Committee, from time to time, may designate one or more of its members who are Independent Directors (each a “Designated Member”) to consider, on the Audit Committee’s behalf, any non-audit services, whether to the Fund or to any Service Affiliate, that have not been pre-approved by the Audit Committee. The Designated Member also shall review, on the Audit Committee’s behalf, any proposed material change in the nature or extent of any non-audit services previously approved. In considering any requested non-audit services or proposed material change in such services, the Designated Member shall not authorize services which would exceed $50,000 in fees for such services.
d. The independent registered public accounting firm may not provide specified prohibited non-audit services set forth in the Policy to the Fund, the Fund’s investment adviser, the Service Affiliates or any other member of the investment company complex. | |||
(e) | (2) One hundred percent of the services described in items 4(b) through 4(d) were approved in accordance with the Audit Committee’s Pre-Approval Policy. As a result, none of such services was approved pursuant to paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X.
| |||
(f) | Less than 50% of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the year ended October 31, 2023, were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
| |||
| (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that |
provides ongoing services to the registrant for each of the last two fiscal years of the registrant were:
The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant: $21,365 for the fiscal year ended October 31, 2023; $65,385 for the fiscal year ended July 31, 2023.
The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser was $121,199 for the fiscal year ended October 31, 2023 and $121,199 for the fiscal year ended July 31, 2023.
| ||||
(h) | The registrant’s audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| |||
(i) | Not applicable.
| |||
(j) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
| (a) | The Registrant has an audit committee that was established by the Board of Trustees of the Registrant in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The members of the Registrant’s Audit Committee are Hilary E. Ackermann, Derrick D. Cephas, Paul L. Rosenberg, and David Sung. | ||
(b) | Not applicable.
|
Item 6. Investments.
| (a) | The Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the annual report filed under Item 1 of this form. | ||
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are generally effective to provide reasonable assurance, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
| ||
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | |||
(a)(2) | ||||
(a)(3) | Not applicable. | |||
(a)(4) | Not applicable. | |||
(b) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HARTFORD FUNDS EXCHANGE-TRADED TRUST
| ||||||
Date: January 2, 2024 | By: | /s/ James E. Davey | ||||
James E. Davey | ||||||
President and Chief Executive Officer
| ||||||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| ||||||
Date: January 2, 2024 | By: | /s/ James E. Davey | ||||
James E. Davey | ||||||
President and Chief Executive Officer
| ||||||
Date: January 2, 2024 | By: | /s/ Ankit Puri | ||||
Ankit Puri | ||||||
Treasurer | ||||||
(Principal Financial Officer and Principal Accounting Officer) |