Legal Proceedings

On or about February 14, 2020, Marc S. Kirschner, as
Trustee for NWHI Litigation Trust ("Litigation Trustee")
and Wilmington Savings Fund Society, FSB, as indenture
Trustee ("Indenture Trustee") for several series of notes
issued by Nine West Holdings, Inc. ("Nine West"), filed
separate complaints (docket nos. 20-cv-01129 and
20-cv-01136, respectively ) in the United States District
Court for the Northern District of Illinois against a group of
defendants including the FlexShares Morningstar US Market
Factor Tilt Index Fund that had invested in The Jones Group
Inc. ("Jones Group"). The claims in these actions stem from
a series of merger transactions ("Transactions") entered into
by Jones Group, Nine West and others in 2014 that allegedly
rendered Jones Group insolvent. The matters in these proceedings
were transferred from the United States District
Court for the Northern District of Illinois to the United
States District Court for the Southern District of New York
to centralize the litigation, and were assigned to the Honorable
Jed S. Rakoff for coordinated or consolidated pretrial
proceedings. The FlexShares Morningstar US Market Factor
Tilt Index Fund allegedly received $224,910 as a result of the
Transactions. The Litigation Trustee and Indenture Trustee
seek to clawback these proceeds for the benefit of the Trust
and the noteholders, respectively, on the basis that they were
alleged fraudulent conveyances. On June 29, 2020, the former
public shareholder defendants, including FlexShares
Morningstar US Market Factor Tilt Index Fund, filed a
motion to dismiss on the basis that the payments allegedly
made to them in connection with the Transactions were
shielded from the fraudulent conveyance claims under Section
546(e) of the Bankruptcy Code. On August 27, 2020, all
fraudulent conveyance claims against the former public
shareholder defendants were dismissed. Plaintiffs appealed
from that decision before the U.S. Court of Appeals for the
Second Circuit. On November 27, 2023, the Second Circuit
affirmed the District Court's decision insofar as it dismissed
all fraudulent conveyance claims against the public shareholder
defendants, agreeing with the District Court that the
payments made to the public shareholders in connection
with the leveraged buyout were safe harbored under Bankruptcy
Code Section 546(e). The decision of the Second
Circuit remains subject to potential further appeals. The
Fund intends to continue to vigorously defend itself against
this action.