Registration Nos. 2-11101
811-00242
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |
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Pre-Effective Amendment No. |
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Post-Effective Amendment No. 136 |
x |
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |
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Amendment No. 67 |
x |
(Check appropriate box or boxes.)
NATIXIS FUNDS TRUST II
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrants Telephone Number, including Area Code (617) 449-2810
Coleen Downs Dinneen, Esq.
Natixis Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
John M. Loder, Esq.
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check appropriate box):
¨ | immediately upon filing pursuant to paragraph (b) |
¨ | on (date) pursuant to paragraph (b) |
¨ | 60 days after filing pursuant to paragraph (a)(1) |
¨ | on (date) pursuant to paragraph (a)(1) |
x | 75 days after filing pursuant to paragraph (a)(2) |
¨ | on (date) pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
¨ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
[NATIXIS FUNDS LOGO]
Shares of the ASG Global Alternatives Fund are not currently offered for sale or available for purchase.
ASG Global Alternatives Fund
Whats Inside |
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Goals, Strategies & Risks |
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Fund Fees & Expenses |
7 | |
More About Risk |
9 | |
Management Team |
11 | |
Fund Services |
14 | |
Financial Performance |
34 |
Prospectus |
, 2008 |
ASG Global Alternatives Fund
AlphaSimplex Group, LLC
<Subadviser Logo>
<Adviser Logo>
The Securities and Exchange Commission has not approved or disapproved the Funds shares or determined whether this Prospectus is accurate or complete. Any representation to the contrary is a crime.
For general information on the Fund or any of its services and for assistance in opening an account, contact your financial representative or call Natixis Funds.
Natixis Funds |
P.O. Box 219579 |
Kansas City, MO 64121-9579 800-225-5478 www.funds.natixis.com |
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GOALS, STRATEGIES & RISKS | 3 | |
ASG GLOBAL ALTERNATIVES FUND | ||
FUND FEES & EXPENSES | 7 | |
FUND FEES & EXPENSES |
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MORE ABOUT RISK | 9 | |
MORE ABOUT RISK | ||
MANAGEMENT TEAM | 11 | |
MEET THE FUNDS INVESTMENT ADVISER AND SUBADVISER | ||
MEET THE FUNDS PORTFOLIO MANAGERS | 13 | |
FUND SERVICES | ||
INVESTING IN THE FUND | 14 | |
HOW SALES CHARGES ARE CALCULATED | 15 | |
COMPENSATION TO SECURITIES DEALERS | 18 | |
ITS EASY TO OPEN AN ACCOUNT | 19 | |
BUYING SHARES | ||
SELLING SHARES | ||
SELLING SHARES IN WRITING | 25 | |
EXCHANGING SHARES | 26 | |
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES | 26 | |
HOW FUND SHARES ARE PRICED | 29 | |
DIVIDENDS AND DISTRIBUTIONS | 30 | |
TAX CONSEQUENCES | 31 | |
ADDITIONAL INVESTOR SERVICES | 33 | |
FINANCIAL PERFORMANCE | ||
FINANCIAL PERFORMANCE | ||
GLOSSARY OF TERMS | 35 | |
GLOSSARY OF TERMS | 35 |
If you have any questions about any of the terms used in this Prospectus, please refer to the Glossary of Terms.
To learn more about the possible risks of investing in the Fund, please refer to the section More About Risk. This section details the risks of practices in which the Fund may engage. Please read this section carefully before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by the Federal Deposit Insurance Corporation or any other government agency, and are subject to investment risks, including possible loss of the principal invested.
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ASG Global Alternatives Fund
Adviser: | AlphaSimplex Group, LLC (AlphaSimplex or the Adviser) | |
Subadviser: | Reich & Tang Asset Management, LLC (Reich & Tang or the Subadviser) | |
Managers: | Adviser: Andrew Lo, Jeremiah Chafkin Subadviser: Robert Rickard | |
Category: | [ ] |
Ticker Symbol: | Class A | Class C |
Investment Goal
The Fund pursues an absolute return strategy that seeks to provide capital appreciation consistent with the return and risk characteristics of a diversified portfolio of hedge funds. The secondary goal of the Fund is to achieve these returns with less volatility than major equity indices. The investment goals are non-fundamental and may be changed without shareholder approval. The Fund will provide 60 days prior notice to shareholders before changing the investment goals.
Principal Investment Strategies
The Fund seeks to achieve long and short exposure to global equity, bond, currency and commodity markets through a wide range of derivative instruments and direct investments. Under normal market conditions, the Adviser typically will make extensive use of derivative instruments, in particular futures and forward contracts on global equity and fixed income securities, securities indices (including both broad- and narrow-based securities indices), currencies, commodities and other instruments. These investments are intended to provide the Fund with risk and return characteristics similar to those of a diversified portfolio of hedge funds.
In selecting investments for the Fund, the Adviser uses quantitative models to estimate the factor exposures that drive the aggregate returns of a diverse set of hedge funds tracked in certain commercially available databases selected by the Adviser (for example, exposures to the returns of U.S. stocks or various non-U.S. currencies), and seeks to construct the Funds portfolio to capture such exposures in the aggregate while adding value through dynamic factor selection and risk management. The Adviser will have great flexibility to allocate the Funds derivatives exposure among various securities, indices, currencies, commodities and other instruments, and the amount of the Funds assets that may be allocated to derivative strategies and among these various instruments is expected to vary over time. When buying and selling securities and other instruments for the Fund, and in determining the amount of assets to be allocated to the Money Market Portion (as defined below), the Adviser will also consider the following factors: (i) the Funds obligations under its various derivative positions, (ii) redemption requests, (iii) yield management, (iv) credit management and (v) volatility management. The Fund will not invest directly in hedge funds.
Under normal market conditions, a significant portion of the Funds assets will be invested in money market and other short-term, high quality securities managed by the Subadviser (the Money Market Portion). The Adviser will determine the percentage of the Funds assets that will be invested in the Money Market Portion at any time. The assets allocated to the Money Market Portion will be used primarily to finance the Funds investments in derivatives and similar instruments and, secondarily, to provide the Fund with incremental income. Although the Fund will invest a significant portion of its assets in money market instruments, the Fund is not a money market fund and the value of the Money Market Portion as well as the value of the Funds shares may decrease in value. The Fund is not subject to the portfolio quality, maturity and net asset value requirements applicable to money market funds, and the Fund will not seek to maintain a stable net asset value.
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The Subadviser will only invest the assets of the Money Market Portion in high quality securities which are denominated in U.S. dollars, and will select securities for investment based on various factors, including the securitys maturity and rating. The Subadviser will invest primarily in (i) short-term obligations issued or guaranteed by the United States Government, its agencies or instrumentalities (U.S. Government Obligations); (ii) securities issued by foreign governments, their political subdivisions or agencies or instrumentalities, (iii) certificates of deposit, time deposits and bankers acceptances issued by domestic banks, foreign branches of domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign branches of foreign banks; (iv) variable amount master demand notes; (v) participation interests in loans extended by banks to companies; (vi) commercial paper or similar debt obligations; and (vii) repurchase agreements.
The Fund may also:
| Invest directly in equity securities. |
| Invest in physical commodities (such as metals, fuels, or agricultural commodities) or related derivatives, including through a wholly-owned subsidiary organized under the laws of a non-U.S. jurisdiction. |
| Hold securities of foreign issuers traded over the counter or on foreign exchanges, including American Depositary Receipts, securities in emerging markets, futures traded on foreign exchanges and currency transactions. |
| Invest directly in a wide variety of fixed-income securities, including inflation-linked bonds and U.S. Treasury inflation-protected securities; zero-coupon securities; mortgage-related securities, including stripped mortgage-backed securities, adjustable-rate mortgage securities, mortgage-backed securities, and collateralized mortgage obligations; other asset-backed securities; and when-issued securities. |
| Engage in active and frequent trading of securities. Frequent trading may produce high transaction costs, which may lower the Funds return. |
As a temporary defensive measure, the Fund may hold any portion of its assets in cash and/or invest in money market instruments or high quality debt securities and take other defensive positions as the Adviser deems appropriate. The Fund may miss certain investment opportunities if it uses defensive strategies and thus may not achieve its investment goal.
Principal Investment Risks
The principal risks of investing in the Fund are described below. There are other circumstances (including non-principal risks that are not described here) which could prevent the Fund from achieving its investment goals. The Fund does not represent a complete investment program. The Funds net asset value may fluctuate substantially over time. You may lose money by investing in the Fund.
Because of the Funds extensive use of derivative instruments, the Fund will be subject to many of the risks below indirectly through its derivative transactions rather than directly through investment in the actual securities themselves. For example, to the extent the Fund enters into a futures contract on an equity index, the Fund will be subject to equity securities risk.
Credit risk: This is the risk that the issuer or the guarantor of a fixed-income security, or the counterparty to a derivatives or other transaction, will be unable or unwilling to make timely payments of interest or principal or to otherwise honor its obligations. Lower-rated fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to make timely principal and interest payments. Foreign securities may be subject to increased credit risk because of the potential difficulties of requiring foreign entities to honor their contractual commitments.
Commodity risk: This is the risk that exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of physical commodities or commodity-linked derivative instruments may be affected by changes in overall market movements, commodity price volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Currency risk: This is the risk that fluctuations in exchange rates between the U.S. dollar and foreign currencies may cause the value of the Funds investments to decline.
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Derivatives risk: Derivatives are financial contracts whose value depends upon or is derived from the value of an underlying asset, reference rate or index. Examples of derivatives include futures contracts, swaps and forward transactions. The Fund expects to make extensive use of derivative transactions, and anticipates that the majority of its returns will be attributable to its derivative transactions. Therefore, the performance of the Fund will depend to a great extent on the success of the Advisers derivative strategies. This use of derivatives for these purposes entails greater risk than using derivatives solely for hedging purposes. The Funds use of derivatives involves other risks, such as the credit risk relating to the other party to a derivative contract, the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate perfectly with relevant assets, rates or indices, and the risk that the Funds liquid assets may be insufficient to support its obligations under its derivatives positions.
Equity securities risk: You may lose money on your investment due to unpredictable drops in a stocks value or periods of below-average performance in a given stock or industry or in the stock market as a whole. Equity securities may include common stocks, preferred stocks, warrants, securities convertible into common or preferred stocks and other equity-like interests in an entity. Equity securities may take the form of stock in corporations, limited partnership interests or interests in limited liability companies, real estate investment trusts (REITs) or other trusts and other similar securities.
Foreign securities risk: This is the risk associated with investments in issuers located in foreign countries. The Funds investments in foreign securities may experience more rapid and extreme changes in value than investments in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of issuers and a small number of securities. In addition, foreign companies often are not subject to the same degree of regulation as U.S. companies. Reporting, accounting and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes or diplomatic developments can cause the value of the Funds non-U.S. investments to decline. In the event of nationalization, expropriation, or other confiscation, the Fund could lose its entire foreign investment.
Hedge Fund risk: Hedge funds are typically unregulated private investment pools available only to sophisticated investors. They are often illiquid and highly leveraged. Although the Fund will not invest directly in hedge funds, because the Funds investments are intended to provide exposure to the factors that drive hedge fund returns, an investment in the Fund will be subject to many of the same risks associated with an investment in a diversified portfolio of hedge funds. Therefore, the Funds performance may be lower than the returns of the broader stock market and the Funds net asset value may fluctuate substantially over time.
Index/Tracking Error risk: Although the Fund does not seek to track any particular index, the Fund seeks to analyze the factors that drive hedge fund returns, as determined by reference to one or more indices. These indices may not provide an accurate representation of hedge fund returns generally, and the Advisers strategy may not successfully identify or be able to replicate factors that drive returns. There is a risk that hedge fund return data provided by third party hedge fund index providers may be inaccurate or may not accurately reflect hedge fund returns due to survivorship bias, self-reporting bias or other biases. Even if an index does provide an accurate representation of hedge fund returns generally, the Funds performance may not match the returns of any such index during any period of time. For example, the Funds returns may differ from the returns of an index because of the inability of the Funds managers to replicate hedge fund returns (which are based on many different types of assets, including illiquid assets, that may not be available for investment by the Fund) using futures and forward contracts and because of differences in volatility between the Funds portfolio and the returns of the index. In addition, unlike an index, the Fund will be subject to a management fee and other Fund-level expenses. Therefore, the returns of the Fund may differ significantly from returns of hedge funds generally, or the returns of any particular index.
Interest rate risk: This is the risk that changes in interest rates will affect the value of the Funds investments in fixed-income securities, such as bonds, notes, asset-backed securities and other income-producing securities. Fixed-income securities are obligations of the issuer to make payments of principal and/or interest on future dates. Increases in interest rates may cause the value of the Funds investments to decline. Generally, the value of fixed-income securities, including short-term fixed-income securities, rises when prevailing interest rates fall and falls when interest rates rise. A significant change in interest rates could cause the Funds share price (and the value of your investment) to change.
Issuer risk: The value of the Funds investments may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuers goods and services.
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Liquidity risk: Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling these illiquid securities at an advantageous price or at the time desired. A lack of liquidity may also cause the value of investments to decline. Derivatives and securities that involve substantial interest rate or credit risk tend to involve greater liquidity risk. In addition, liquidity risk tends to increase to the extent the Fund invests in securities whose sale may be restricted by law or by contract, such as Rule 144A securities. Investment in derivatives may be especially illiquid when compared to other securities, especially during periods of market stress. Similarly, at certain times, the market for money market and similar instruments may become illiquid. At these times, it may be difficult to sell securities. Illiquid investments may also be difficult to value.
Management risk: Management risk is the risk that the Advisers or Subadvisers investment techniques could fail to achieve the Funds objective and could cause your investment in the Fund to lose value. The Fund is subject to management risk because the Fund is actively managed. The Adviser and Subadviser will apply their investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that such decisions will produce the desired results. For example, securities that the Adviser or Subadviser expect may appreciate in value may in fact decline. Similarly, in some cases derivative and other investment techniques may be unavailable or the Adviser or Subadviser may determine not to use them, even under market conditions where their use could have benefited the Fund.
Market risk: This is the risk that the value of the Funds investments will change as financial markets fluctuate and that prices overall may decline. The value of a companys securities may fall as a result of factors that directly relate to that company, such as decisions made by its management or lower demand for the companys products or services. A securitys value also may fall because of factors affecting not just the company, but companies in its industry or in a number of different industries, such as increases in production costs. In addition, the value of the Funds derivative investments may fall even when the value of the securities markets is rising. The value of a companys securities also may be affected by changes in financial market conditions, such as changes in interest rates or currency exchange rates.
Valuation risk: The risk that the Fund has valued certain securities at a higher price than the price at which they can be sold. This risk may be especially pronounced for investments, such as derivatives, which may be illiquid or which may become illiquid.
For additional information, see the section More About Risk.
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Evaluating the Funds Past Performance
Because the Fund is new and has not completed a full calendar year, information related to Fund performance, including a bar chart showing annual returns, has not been included in this Prospectus.
The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class C | |||
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
[ ]%1,2 | None | ||
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) 2 |
(3) | 1.00% | ||
Redemption fees |
None* | None* |
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
ASG Global Alternatives Fund | ||||||||
Class A | Class C | |||||||
Management fees |
[ | ] | [ | ] | ||||
Distribution and/or service (12b-1) fees |
[ | ] | [ | ]** | ||||
Other expenses5 |
[ | ] | [ | ] | ||||
Total annual fund operating expenses |
[ | ] | [ | ] | ||||
Less: |
Fee Reduction and/or Expense Reimbursement4 |
[ | ] | [ | ] | |||
Net Expenses |
[ | ] | [ | ] |
Example
This example***, which is based upon the expenses shown in the Annual Fund Operating Expenses table, is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The example assumes that:
| You invest $10,000 in the Fund for the time periods indicated; |
| Your investment has a 5% return each year; |
| The Funds operating expenses remain the same; and |
| All dividends and distributions are reinvested. |
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Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:
ASG Global Alternatives Fund | ||||||
Class A |
Class C | |||||
(6) | (7) | |||||
1 year |
[ ] | [ ] | [ ] | |||
3 years |
[ ] | [ ] | [ ] |
1 |
A reduced sales charge on Class A shares applies in some cases. See the section How Sales Charges Are Calculated within the section Fund Services. |
2 |
Does not apply to reinvested distributions. |
3 |
A 1.00% contingent deferred sales charge (CDSC) applies with respect to certain purchases of Class A shares greater than $1,000,000 redeemed within one year after purchase, but not to any other purchases or redemptions of Class A shares. See the section How Sales Charges Are Calculated within the section Fund Services. |
4 |
The Adviser has given a binding contractual undertaking to the Fund to limit the amount of the Funds total annual fund operating expenses, exclusive of brokerage expenses, Acquired Fund Fees and Expenses (as defined below), interest expense, taxes and extraordinary expenses, such as litigation and indemnification expenses, to [ ]% and [ ]% of the Funds average daily net assets for Classes A and C shares, respectively. This undertaking is in effect through , 2010 and may be terminated only with the consent of the Board of Trustees. However, the Board of Trustees does not intend to terminate this undertaking. The Funds Adviser will be permitted to recover, on a class by class basis, management fees reduced and/or expenses reimbursed it has borne through the undertakings described in this footnote to the extent that a class expenses in later periods fall below the annual rates set forth in the relevant undertaking. The Adviser may not recover any such reduced fees and expenses with respect to a class more than one year after the end of the fiscal year in which the fee/expense was deferred. |
5 |
Other expenses are based on estimated amounts for the current fiscal year and include expenses estimated to be indirectly borne by the Fund through investments in certain pooled investment vehicles (Acquired Fund Fees and Expenses) of less than 0.01% of the Funds average daily net assets. |
6 |
Assumes redemption at end of period. |
7 |
Assumes no redemption at end of period. |
* | Generally, a transaction fee will be charged for expedited payment of redemption proceeds of $5.50 for wire transfers or $20.50 for overnight delivery. These fees are subject to change. |
** | Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge permitted by the rules of the Financial Industry Regulatory Authority. |
*** | The examples do not reflect sales charges (loads) on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher. The examples are based on the Net Expenses for the one-year period and on Total Annual Fund Operating Expenses for the remaining years. |
A snapshot of the Funds investments will be found in the Funds annual and semiannual reports, when available. In addition, a list of the Funds full portfolio holdings, which is updated monthly after an aging period of at least 30 days, will be available on the Funds website at www.funds.natixis.com (click on Fund Information and then Portfolio Holdings). These holdings will remain accessible on the website until the Fund files its Form N-CSR or Form N-Q with the SEC for the period that includes the date of the information.
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The Fund has principal investment strategies that come with inherent risks. The principal risks of investing in a Fund are described in the Fund summary under Principal Investment Risks. The following is a list of non-principal risks to which the Fund may be subject because of its investment in various types of securities or engagement in various practices. Because of the Funds extensive use of derivative investments, the Fund will be subject to many of the risks below indirectly through its derivative transactions rather than directly through investment in the securities themselves.
Emerging markets risk The risk associated with investing in companies traded in developing securities markets, which may be smaller and have shorter operating histories than companies in developed markets. Emerging markets involve risks in addition to and greater than those generally associated with investing in developed foreign markets. The extent of economic development, political stability, market depth, infrastructure and capitalization, and regulatory oversight in emerging market economies is generally less than in more developed markets.
Exchange-traded funds risk ETFs are investment companies whose shares are bought and sold on a securities exchange. Generally, ETFs invest in a portfolio of securities designed to track a particular market segment or index. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When the Fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata share of the ETFs expenses. The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. In addition, because of ETF expenses, it may be more costly to own an ETF than it is to own the underlying securities directly.
Fixed-income securities rated below investment grade risk Fixed-income securities rated below investment grade, commonly known as junk bonds, may be considered speculative with respect to the issuers continuing ability to make principal and interest payments. The issuers of these securities may be in default or have a currently identifiable vulnerability to default on their payments of principal and interest, or may otherwise be subject to present elements of danger with respect to payments of principal or interest. Securities rated below investment grade may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher grade securities.
The secondary markets in which lower-rated securities are traded may be less liquid than the market for higher grade securities. A lack of liquidity in the secondary trading markets could adversely affect the price at which the Fund could sell a particular lower-rated security. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield securities generally.
Inflation/deflation risk Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the present value of future payments. Deflation risk is the risk that prices throughout the economy decline over time (the opposite of inflation). Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds portfolio.
Information risk The risk that key information about a security or other instrument is inaccurate or unavailable.
Leverage risk The risk associated with securities or practices (e.g., borrowing) that multiply small index or market movements into larger changes in value. Use of derivative instruments may involve leverage. When a derivative is used as a hedge against an offsetting position that the Fund also holds, any loss generated by the derivative should be substantially offset by gains on the hedged instrument, and vice versa. To the extent that the Fund uses a derivative for purposes other than as a hedge, or, if the Fund hedges imperfectly, the Fund is directly exposed to the risks of that derivative and any loss generated by the derivative will not be offset by a gain. Swaps and structured notes may be considered derivative and may be subject to this type of risk.
Mortgage-related securities risk Mortgage-related securities, such as Government National Mortgage Association (GNMA) certificates or securities issued by the Federal National Mortgage Association (Fannie Mae), differ from traditional fixed-income securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans generally may be prepaid at any
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time. As a result, if the Fund purchases these assets at a premium, a faster-than-expected prepayment rate will reduce yield to maturity, and a slower-than-expected prepayment rate will increase yield to maturity. If the Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will increase, and slower-than-expected prepayments will reduce, yield to maturity. Prepayments, and resulting amounts available for reinvestment by the Fund, are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates. Accelerated prepayments on securities purchased at a premium may result in a loss of principal if the premium has not been fully amortized at the time of prepayment. These securities will decrease in value as a result of increases in interest rates generally, and they are likely to appreciate less than other fixed-income securities when interest rates decline because of the risk of prepayments.
Opportunity risk The risk of missing out on an investment opportunity because the assets necessary to take advantage of it are invested in less profitable investments.
Political risk The risk of losses directly attributable to government or political actions.
Repurchase agreement risk Under a repurchase agreement, a fund purchases a security and obtains a simultaneous commitment from the seller (a bank or, to the extent permitted by the 1940 Act, a recognized securities dealer) to repurchase the security at an agreed upon price and date (usually seven days or less from the date of original purchase). The resale price is in excess of the purchase price and reflects an agreed upon market rate of interest unrelated to the coupon rate on the purchased security. Such transactions afford the Fund the opportunity to earn a return on its cash at minimal market risk. There is a risk that the seller may fail to repurchase the underlying security. In such event, the Fund would attempt to exercise rights with respect to the underlying security, including possible disposition in the market. However, the Fund may be subject to various delays and risks of loss, including possible declines in the value of the underlying security, possible reduced levels of income, inability to enforce rights and expenses involved in attempted enforcement. Repurchase agreements maturing in more than seven days may be considered illiquid securities.
U.S. Government securities risk Investments in certain U.S. Government securities may not be supported by the full faith and credit of the U.S. Government. Accordingly, no assurance can be given that the U.S. Government will provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, and it is possible that these issuers will not have the funds to meet their payment obligations in the future. In such a case, the Fund would have to look principally to the agency, instrumentality or sponsored enterprise issuing or guaranteeing the security for ultimate repayment, and the Fund may not be able to assert a claim against the U.S. Government itself in the event the agency, instrumentality or sponsored enterprise does not meet its commitment.
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Meet the Funds Investment Adviser and Subadviser
The Natixis Funds family (as defined below) currently includes [ ] mutual funds, including the Fund. The Natixis Funds family had combined assets of $[ ] billion as of , 2008. Natixis Funds are distributed through Natixis Distributors, L.P. (the Distributor). This Prospectus covers the ASG Global Alternatives Fund, which, along with the Natixis Income and Tax Free Income Funds, Natixis Diversified Portfolios, Natixis Equity Funds, Loomis Sayles Global Markets Fund, Loomis Sayles Growth Fund, Loomis Sayles Research Fund, Loomis Sayles Value Fund, Gateway Fund and Natixis Cash Management Trust Money Market Series (the Money Market Fund), constitute the Natixis Funds.
Adviser and Subadviser
AlphaSimplex Group, LLC, located at One Cambridge Center, Cambridge, Massachusetts 02142, serves as the adviser to the Fund. The Adviser is a subsidiary of Natixis Global Asset Management, L.P. (Natixis US), which is part of Natixis Global Asset Management, an international asset management group based in Paris, France. Natixis Global Asset Management is ultimately owned principally by three large French financial services entities: Natixis, an investment banking and financial services firm which is publicly traded on Euronext in Paris; the Caisse Nationale des Caisses dEpargne, a financial institution owned by French regional savings banks known as the Caisses dEpargne; and Banque Fédérale des Banques Populaires, a financial institution owned by regional cooperative banks known as the Banques Populaires. Natixis US has 14 principal subsidiary or affiliated asset management firms that collectively had over $291.4 billion in assets under management as of March 31, 2008. The Adviser was founded in 1999 and as of July 1, 2008, it serves as investment adviser or subadviser with respect to assets of $580 million (including notional assets covered by overlay strategies).
Reich & Tang Asset Management, LLC, located at 600 Fifth Avenue, New York, New York 10020, serves as the subadviser to the Fund and is also a subsidiary of Natixis U.S. The Subadvisers origins date back to 1970, and as of March 31, 2008, it serves as investment adviser or subadviser with respect to assets in excess of $18 billion.
A discussion of the factors considered by the Board of Trustees in approving the Funds investment advisory agreement and sub-advisory agreement will be included in the Funds initial shareholder report covering the period in which the approval occurred.
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Portfolio Trades
In placing portfolio trades, the Adviser and Subadviser may use brokerage firms that market the Funds shares or are affiliated with Natixis US and the Adviser. In placing trades, the Adviser and Subadviser will seek to obtain the best combination of price and execution, which involves a number of judgmental factors. Such portfolio trades are subject to applicable regulatory restrictions and related procedures adopted by the Board of Trustees.
Transactions with Other Investment Companies. Pursuant to Securities and Exchange Commission (SEC) exemptive relief, the Fund may be permitted to invest its daily cash balances in shares of money market and short-term bond funds advised by Natixis Advisors or its affiliates (Central Funds). The Central Funds currently include the Money Market Fund and Daily Income Fund. Daily Income Fund is advised by Reich & Tang, and the Money Market Fund is advised by Natixis Advisors and subadvised by Reich & Tang. Because Natixis Advisors, Reich & Tang and AlphaSimplex are each subsidiaries of Natixis US, the Funds and the Central Funds may be considered to be related companies comprising a group of investment companies under the 1940 Act. The Fund may also make investments in related investment companies to the extent permitted by SEC regulation.
Pursuant to such exemptive relief, the Fund may also borrow and lend money for temporary or emergency purposes directly to and from other funds through an interfund credit facility. In addition to the Fund and the Central Funds, series of the following mutual fund groups may also be able to participate in the facility: Natixis Funds Trust I (except the CGM Advisor Targeted Equity Fund series), Natixis Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV, Harris Associates Investment Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Gateway Trust. The advisers and subadvisers to these mutual funds currently include Natixis Advisors, Reich & Tang, Loomis, Sayles & Company, L.P., AEW Management and Advisors, L.P., AlphaSimplex, BlackRock Investment Management, LLC (BlackRock), Dreman Value Management, LLC (Dreman), Gateway Investment Advisers, LLC, Harris Associates L.P., Hansberger Global Investors, Inc. and Vaughan Nelson Investment Management, L.P. Each of these advisers and subadvisers (except for BlackRock and Dreman) are subsidiaries of Natixis US and are thus affiliated persons under the 1940 Act by reason of being under common control by Natixis US. In addition, because the Fund and other funds are advised by firms that are affiliated with one another, they may be considered to be related companies comprising a group of investment companies under the 1940 Act. The Central Funds will participate in the credit facility described above only as lenders. Participation in such an interfund lending program would be voluntary for both borrowing and lending funds, and the Fund would participate in an interfund lending program only if the Board of Trustees determined that doing so would benefit the Fund. Should the Fund participate in such an interfund lending program, the Board of Trustees would establish procedures for the operation of the program by the advisers or an affiliate. The Fund may engage in the transactions described above without further notice to shareholders.
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Meet the Funds Portfolio Managers
Adviser
Andrew W. Lo
Dr. Lo founded AlphaSimplex in 1999 and has served as the firms Chief Scientific Officer since that time. He is also Chairman of AlphaSimplexs Investment Committee and a member of AlphaSimplexs Risk Committee. Dr. Lo has been a co-portfolio manager of the Fund since September 2008. Dr. Lo is the Harris & Harris Group Professor at Massachusetts Institute of Technology (MIT) and Director of MITs Laboratory for Financial Engineering.
Jeremiah H. Chafkin
Mr. Chafkin has served as President of AlphaSimplex since 2007. He is also a member of AlphaSimplexs Investment Committee and Risk Committee. Mr. Chafkin has been a co-portfolio manager of the Fund since September 2008. From 2006 until November 2007, Mr. Chafkin was President and Chief Executive Officer of the U.S. division of Natixis Global Asset Management. Prior to that time, he headed investment advice and research for Charles Schwab & Co. and served as president of Charles Schwab Investment Management.
Subadviser
Robert S. Rickard
Mr. Rickard is a Senior Vice President of Reich & Tang, and head of Portfolio Management and Trading for the Reich & Tang Funds division, which specializes in cash management strategies. Mr. Rickard has been a co-portfolio manager of the Fund since September 2008. Mr. Rickard has focused on the management of short-term assets since joining Reich & Tangs investment staff in 1992. Mr. Rickard holds a Master of Business Administration degree in Finance from Pace University and a Bachelor of Science in Accounting from Siena College.
Please see the Funds Statement of Additional Information (SAI) for information on Portfolio Manager compensation, other accounts under management by the Portfolio Managers and the Portfolio Managers ownership of securities in the Fund.
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Fund Services
Choosing a Share Class
The Fund offers Class A and Class C shares to the public. Each class has different costs associated with buying, selling and holding Fund shares, which allows you to choose the class that best meets your needs. Which class is best for you depends upon the size of your investment and how long you intend to hold your shares. Class C shares and certain shareholder features may not be available to you if you hold your shares in a street name account. Your financial representative can help you decide which class of shares is most appropriate for you.
Class A Shares
| You pay a sales charge when you buy Class A shares. There are several ways to reduce this charge. See the section How Sales Charges Are Calculated. |
| You pay lower annual expenses than Class C shares, giving you the potential for higher returns per share. |
| You do not pay a sales charge on orders of $1 million or more, but you may pay a charge on redemptions if you redeem these shares within one year of purchase. |
Class C Shares
| You do not pay a sales charge when you buy Class C shares. All of your money goes to work for you right away. |
| You pay higher annual expenses than Class A shares. |
| You may pay a charge on redemptions if you sell your shares within one year of purchase. |
| Your Class C shares will not automatically convert into Class A shares. If you hold your shares for longer than eight years, youll pay higher expenses than shareholders of other classes. |
| Investors will not be permitted to purchase $1 million or more of Class C shares as a single investment per account. There may be certain exceptions to this restriction for omnibus and other nominee accounts. Investors may want to consider the lower operating expense of Class A shares in such instances. You may pay a charge on redemptions if you redeem Class A shares within one year of purchase. |
For information about the Funds expenses, see the section Fund Fees & Expenses in this Prospectus.
Certificates
Certificates will not be issued for any class of shares.
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Fund Services
How Sales Charges Are Calculated
Class A Shares
The price that you pay when you buy Class A shares (the offering price) is their net asset value plus a sales charge (sometimes called a front-end sales charge) which varies depending upon the size of your purchase:
Class A Sales Charges** | ||||
Your Investment |
As a % of offering price |
As a % of your investment | ||
[ ]% | [ ]% | |||
[ ]% | [ ]% | |||
[ ]% | [ ]% | |||
[ ]% | [ ]% | |||
[ ]% | [ ]% | |||
[ ]% | [ ]% |
Due to rounding, the actual sales charge for a particular transaction may be higher or lower than the rates listed above.
* |
For purchases of Class A shares of the Fund of $1 million or more, there is no front-end sales charge, but a CDSC of 1.00% may apply to redemptions of your shares within one year of the date of purchase. See the section How the CDSC is Applied to Your Shares. |
** |
Not imposed on shares that are purchased with reinvested dividends or other distributions. |
If you invest in Class A shares through a financial intermediary, it is the responsibility of the financial intermediary to ensure that you obtain the proper breakpoint discount. It will be necessary at the time of purchase to inform the Distributor and the financial intermediary of the existence of other accounts in which there are holdings eligible to be aggregated to meet sales load breakpoints. You may be required to provide certain records and information, such as account statements, with respect to all of your accounts which hold shares, including accounts with other financial intermediaries and your family members and other related party accounts, in order to verify your eligibility for a reduced sales charge. If the Distributor is not notified that you are eligible for a reduced sales charge, the Distributor will be unable to ensure that the reduction is applied to your account. Additional information concerning sales load breakpoints is available from your financial intermediary, by visiting the Funds website at www.funds.natixis.com (click on sales charges at the bottom of the home page) or in the Funds SAI.
Reducing Front-End Sales Charges
There are several ways you can lower your sales charge for Class A shares, including:
| Letter of Intent By signing a Letter of Intent, you may purchase Class A shares of any Natixis Fund over a 13-month period but pay sales charges as if you had purchased all shares at once. This program can save you money if you plan to invest $100,000 or more over 13 months. Purchases of Class C shares may be used toward meeting the letter of intent. |
| Cumulative Purchase Discount You may be entitled to a reduced sales charge if your total investment reaches a breakpoint for a reduced sales charge. The total investment is determined by adding the amount of your current purchase in a Fund, including the applicable sales charge, to the current public offering price of all series and classes of shares of the Natixis Funds held by you in one or more accounts. If your total investment exceeds a sales charge breakpoint in the table above, the lower sales charge applies to the entire amount of your current purchase in a Fund. |
| Combining Accounts This allows you to combine shares of multiple Natixis Funds and classes for purposes of calculating your sales charge. |
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Individual Accounts: You may elect to combine your purchase(s) and your total investment, as defined above, with the purchases and total investment of your spouse, parents, children, siblings, grandparents, grandchildren, in-laws (of those previously mentioned), individual fiduciary accounts, sole proprietorships, single trust estates and any other individuals acceptable to the Distributor.
Certain Retirement Plan Accounts: The Distributor may, in its discretion, combine the purchase(s) and total investment of all qualified participants in the same retirement plan for purposes of determining the availability of a reduced sales charge.
In most instances, individual accounts may not be linked with certain retirement plan accounts for the purposes of calculating sales charges. Savings Incentive Match Plan for Employees of Small Employers (SIMPLE IRA) contributions will automatically be linked with those of other participants in the same SIMPLE IRA Plan (Class A shares only). SIMPLE IRA accounts may not be linked with any other Natixis Fund account for rights of accumulation. Please refer to the SAI for more detailed information on combining accounts.
The above-listed ways to reduce front-end sales charges may not apply to the Money Market Fund unless shares are purchased through an exchange from another Natixis Fund.
Eliminating Front-End Sales Charges and CDSCs
Class A shares may be offered without front-end sales charges or a CDSC to the following individuals and institutions:
| Any government entity that is prohibited from paying a sales charge or commission to purchase mutual fund shares; |
| Selling brokers, sales representatives, registered investment advisers, financial planners or other intermediaries under arrangements with the Distributor; |
| Fund trustees, former trustees and other individuals who are affiliated with any Natixis Fund (including the Money Market Fund) (this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned); |
| Participants in certain retirement plans with at least $1 million or more in total plan assets or with 100 eligible employees; |
| Non-discretionary and non-retirement accounts of bank trust departments or trust companies only if they principally engage in banking or trust activities; |
| Clients of an adviser or subadviser to any Natixis Fund (including the Money Market Fund) with investments of $25,000 or more in the Natixis Funds; and |
| Clients of Natixis Advisors who invest in a Natixis Fund that does not offer Class Y shares. |
In order to receive Class A shares without a front-end sales charge or CDSC, you must notify the Fund of your eligibility at the time of purchase.
Repurchasing Fund Shares
You may apply proceeds from redeeming Class A shares of the Fund to repurchase Class A shares of any Natixis Fund without paying a front-end sales charge. To qualify, you must reinvest some or all of the proceeds within 120 days after your redemption and notify Natixis Funds in writing (directly or through your financial representative) at the time of reinvestment that you are taking advantage of this privilege. You may reinvest your proceeds by sending a new check for some or all of the redemption amount. Please note: for federal income tax purposes, a redemption is a sale that involves tax consequences, even if the proceeds are later reinvested. Please consult your tax adviser to discuss how a redemption would affect you.
If you repurchase Class A shares of $1 million or more within 30 days after you redeem such shares, the Distributor will rebate the amount of the CDSC charged on the redemption if the Fund is notified in writing at the time of the repurchase.
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Eliminating the CDSC
As long as the Distributor is notified at the time you sell, the CDSC for Class A shares will generally be eliminated in the following cases: (1) to make distributions from a retirement plan (a plan termination or total plan redemption may incur a CDSC); (2) to make payments through a systematic withdrawal plan; or (3) due to shareholder death or disability.
Please see the SAI for more information on eliminating or reducing front-end sales charges and CDSC.
Class C Shares
The offering price of Class C shares is their net asset value, without a front-end sales charge. Class C shares are subject to a CDSC of 1.00% on redemptions made within one year of the date of their acquisition. The holding period for determining the CDSC will continue to run after an exchange to Class C shares of another Natixis Fund (except the Money Market Fund).
Class C Contingent Deferred Sales Charges | ||
Year Since Purchase |
CDSC on Shares Being Sold | |
1st |
1.00% | |
thereafter |
0.00% |
Eliminating the CDSC
As long as the Distributor is notified at the time you sell, the CDSC for Class C shares will generally be eliminated in the following cases: (1) to make distributions from a retirement plan (a plan termination or total plan redemption may incur a CDSC); (2) to make payments through a systematic withdrawal plan; or (3) due to shareholder death or disability.
Please see the SAI for more information on eliminating or reducing front-end sales charges and CDSC.
How the CDSC is Applied to Your Shares
The CDSC is a sales charge you pay when you redeem certain Fund shares. The CDSC:
| is calculated based on the number of shares you are selling; |
| is based on either your original purchase price or the current net asset value of the shares being sold, whichever is lower; |
| is deducted from the proceeds of the redemption unless you request, at the time of the redemption, that it be deducted from the amount remaining in your account; and |
| applies to redemptions made through the anniversary date of their acquisition for years one through six, as applicable. |
A CDSC will not be charged on:
| increases in net asset value above the purchase price; or |
| shares you acquired by reinvesting your dividends or capital gains distributions. |
To keep your CDSC as low as possible, each time that you place a request to sell shares we will first sell any shares in your account that carry no CDSC. If there are not enough of these shares available to meet your request, we will sell the shares with the lowest CDSC.
Exchanges into Shares of the Money Market Fund
If you exchange Class C shares of the Fund into shares of the Money Market Fund, the holding period for purposes of determining the CDSC for Class C shares stops until you exchange back into shares of another Natixis Fund. If you choose to redeem those Money Market Fund shares, a CDSC may apply.
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Compensation to Securities Dealers
As part of its business strategies, the Fund pays securities dealers and other financial institutions (collectively, dealers) that sell its shares. This compensation originates from two sources: sales charges (front-end or deferred) and 12b-1 fees (comprising the annual service and/or distribution fees paid under a plan adopted pursuant to Rule 12b-1 under the 1940 Act). The sales charges, some or all of which may be paid to dealers, are discussed in the section How Sales Charges Are Calculated. The Funds Class A and Class C shares pay an annual service fee of 0.25% of the average daily net assets. Class C shares are subject to an annual distribution fee of 0.75% of their average daily net assets. Generally, the 12b-1 fees are paid to securities dealers on a quarterly basis. The Distributor retains the first year of such fees for Class C shares. Because these distribution fees and service fees are paid out of the Funds assets on an ongoing basis, over time these fees for Class C shares will increase the cost of your investment and may cost you more than paying the front-end sales charge and service fees on Class A shares.
The Distributor, the Adviser and their affiliates may, out of their own resources, make payments to dealers and other financial intermediaries that satisfy certain criteria established from time to time by the Distributor. Payments may vary based on sales, the amount of assets a dealers or intermediarys clients have invested in the Fund, and other factors. These payments may also take the form of sponsorship of informational meetings or payments for attendance by persons associated with a dealer or intermediary at informational meetings. The Distributor and its affiliates may also make payments for recordkeeping and other transfer agency-related services to dealers and intermediaries that sell Fund shares.
The payments described in this section, which may be significant to the dealers and the financial intermediaries, may create an incentive for a dealer or financial intermediary or their representatives to recommend or sell shares of a particular fund or share class over other mutual funds or share classes. Additionally, these payments may result in the Funds inclusion on a sales list, including a preferred or select sales list, or in other sales programs. These payments may create potential conflicts of interest between an investor and a dealer or other financial intermediary who is recommending a particular mutual fund over other mutual funds. Before investing, you should consult with your financial representative and review carefully any disclosure by the dealer or other financial intermediary as to what monies it receives from mutual fund advisers and distributors, as well as how your financial representative is compensated. Please see the SAI for additional information about payments made by the Distributor and its affiliates to dealers and intermediaries. Please also contact your dealer or financial intermediary for details about payments it may receive.
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Fund Services
To Open an Account with Natixis Funds:
1. Read this Prospectus carefully. Except to the extent otherwise permitted by the Distributor, the Fund will only accept accounts from U.S. citizens with a U.S. address or resident aliens with a U.S. address and a U.S. taxpayer identification number.
2. Determine how much you wish to invest. The following chart shows the investment minimums for various types of accounts:
Type of Account |
Minimum Initial Purchase |
Minimum Subsequent Purchase | ||||
Any account other than those listed below |
$ | 2,500 | $ | 100 | ||
For shareholders participating in Natixis Funds Investment Builder Program |
$ | 1,000 | $ | 50 | ||
For Traditional IRA, Roth IRA, Rollover IRA, SEP-IRA and Keogh plans using the Natixis Funds prototype document |
$ | 1,000 | $ | 100 | ||
Coverdell Education Savings Accounts |
$ | 500 | $ | 100 |
The Distributor, in its sole discretion, may lower investment minimums for accounts associated with wrap-fee programs sponsored by certain broker-dealers and investment advisers and for accounts associated with certain other defined contribution plans not using the Natixis Funds prototype document.
3. Complete the appropriate parts of the account application, carefully following the instructions. If you have any questions, please call your financial representative or Natixis Funds at 800-225-5478. For more information on Natixis Funds investment programs, refer to the section Additional Investor Services in this Prospectus.
4. Use the sections of this Prospectus that follow as your guide for purchasing shares.
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Minimum Balance Policy
The Fund, on an annual basis, may deduct a minimum balance fee of $20 for accounts that fall below the minimum amount required to establish an account, as described above. The minimum balance fee is assessed by the automatic redemption of shares in the account in an amount sufficient to pay the fee. The valuation of account balances and the deduction of the fee generally occur during September of each calendar year, although they may occur at another date in the year. The fee will not be deducted from Fund positions opened after June 30th of the calendar year in which the fee is assessed. Certain accounts using a Natixis Funds prototype document (including IRAs, Keogh plans, 403(b)(7) plans and Coverdell Education Savings Accounts) and accounts associated with defined contribution plans, are excepted from the minimum balance fee.
The Fund may also close an account and send the account holder the proceeds if the account falls below the minimum amount required to establish an account. The valuation of account balances and the liquidation itself generally occur during October of each calendar year, although they may occur at another date in the year. Any account opened after June 30th of a calendar year will not be subject to the liquidation for that calendar year. Certain accounts, such as accounts associated with wrap-fee programs or defined contribution plans are exempt from the liquidation. The determination of whether to deduct the minimum balance fee or close an account is made at the discretion of the Fund.
It is expected that accounts maintained by intermediaries through the National Securities Clearing Corporation will be liquidated rather than assessed a fee if the account balance falls below such minimum, and that directly registered accounts will be assessed a fee rather than be liquidated.
Self-Servicing Your Account
Buying or selling shares is easy with the services described below:
Natixis Funds Personal Access Line®
800-225-5478, press 1
Natixis Funds Web Site
www.funds.natixis.com
You have access to your account 24 hours a day by calling the Personal Access Line® from a touch-tone telephone or by visiting us online. Using these customer service options, you may:
| purchase, exchange or redeem shares in your existing accounts (certain restrictions may apply); |
| review your account balance, recent transactions, Fund prices and recent performance; |
| order duplicate account statements; and |
| obtain tax information. |
Please see the following pages for other ways to buy, exchange or sell your shares.
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Fund Services
Buying Shares
Opening an Account |
Adding to an Account | |||
Through Your Investment Dealer | ||||
Call your investment dealer for information about opening or adding to an account. Dealers may also charge you a processing or service fee in connection with the purchase of fund shares. | ||||
By Mail | ||||
Make out a check in U.S. dollars for the investment amount, payable to Natixis Funds. Third party checks, starter checks and credit card convenience checks will not be accepted. |
Make out a check in U.S. dollars for the investment amount, payable to Natixis Funds. Third party checks, starter checks and credit card convenience checks will not be accepted. | |||
[envelope icon] | Mail the check with your completed application to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579. |
Complete the investment slip from an account statement or include a letter specifying the Fund name, your class of shares, your account number and the registered account name(s). | ||
Shares purchased by check are redeemable although the Fund may withhold payment until the purchase check has cleared. See the section Selling Restrictions. |
Shares purchased by check are redeemable although the Fund may withhold payment until the purchase check has cleared. See the section Selling Restrictions. | |||
By Exchange (See the section Exchanging Shares for more details.) | ||||
[exchange icon] | Call your investment dealer or Natixis Funds at 800-225-5478 or visit www.funds.natixis.com to 1) obtain a current prospectus for the Fund into which you are exchanging and 2) request an exchange. |
Call your investment dealer or Natixis Funds at 800-225-5478 or visit www.funds.natixis.com to request an exchange. | ||
By Wire | ||||
[wire icon] | Opening an account by wire is not available. |
Visit www.funds.natixis.com to add shares to your account by wire. Instruct your bank to transfer funds to State Street Bank & Trust Company, ABA #011000028, and DDA #99011538. | ||
Specify the Fund name, your class of shares, your account number and the registered account name(s). Your bank may charge you for such a transfer. |
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Opening an Account |
Adding to an Account | |||
Through Automated Clearing House (ACH) | ||||
[ACH icon] | Although you cannot open an account through ACH, you may add this feature by selecting it on your account application. |
Call Natixis Funds at 800-225-5478 or visit www.funds.natixis.com to add shares to your account through ACH. | ||
Ask your bank or credit union whether it is a member of the ACH system. |
If you have not signed up for the ACH system, please call Natixis Funds or visit www.funds.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege. | |||
Shares purchased through ACH may not be available immediately for redemption. See the section Selling Restrictions. | ||||
Automatic Investing Through Investment Builder | ||||
[builder icon] | Although you cannot open an account through Investment Builder, you may add this feature by selecting it on your account application. |
If you have not signed up for Investment Builder, please call Natixis Funds at 800-225-5478 or visit www.funds.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege. | ||
Ask your bank or credit union whether it is a member of the ACH system. |
See the section Additional Investor Services. | |||
Shares purchased through Investment Builder may not be available immediately for redemption. See the section Selling Restrictions. |
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Fund Services
Selling Shares
To Sell Some or All of Your Shares
Certain restrictions may apply. Investments made by check, or through ACH or Investment Builder may not be available immediately for redemption. See the section Restrictions on Buying, Selling and Exchanging Shares.
Through Your Investment Dealer | ||
Call your investment dealer for information. Dealers may also charge you a processing or service fee in connection with the redemption of fund shares. | ||
By Mail | ||
Write a letter to request a redemption. Specify the name of your fund, class of shares, account number, the exact registered account name(s), the number of shares or the dollar amount to be redeemed and the method by which you wish to receive your proceeds. Additional materials may be required. See the section Selling Shares in Writing. | ||
[envelope icon] | The request must be signed by all of the owners of the shares and must include the capacity in which they are signing, if appropriate. | |
Mail your request by regular mail to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579 or by registered, express or certified mail to Natixis Funds, 330 West 9th Street, Kansas City, MO 64105-1514. | ||
Your proceeds (less any applicable CDSC) will be delivered by the method chosen in your letter. Proceeds delivered by mail will generally be mailed to you within three business days after the request is received in good order. See the section Selling Restrictions. | ||
By Exchange (See the section Exchanging Shares for more details.) | ||
Obtain a current prospectus for the fund into which you are exchanging by calling your investment dealer or Natixis Funds at 800-225-5478 or by visiting www.funds.natixis.com. | ||
[exchange icon] | Call Natixis Funds or visit www.funds.natixis.com to request an exchange. | |
By Wire | ||
Complete the Bank Information section on your account application. | ||
[wire icon] | Call Natixis Funds at 800-225-5478 or visit www.funds.natixis.com or indicate in your redemption request letter (see above) that you wish to have your proceeds wired to your bank. | |
Proceeds (less any applicable CDSC) will generally be wired on the next business day. A wire fee will be deducted from the proceeds. Your bank may charge you a fee to receive the wire. |
23
Through Automated Clearing House | ||
Ask your bank or credit union whether it is a member of the ACH system. | ||
Complete the Bank Information section on your account application. | ||
[ACH icon] | If you have not signed up for the ACH system on your application, please call Natixis Funds at 800-225-5478 or visit www.funds.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege. | |
Call Natixis Funds or visit www.funds.natixis.com to request an ACH redemption. | ||
Proceeds (less any applicable CDSC) will generally arrive at your bank within three business days. See the section Selling Restrictions. | ||
By Telephone | ||
[telephone icon] | Call Natixis Funds at 800-225-5478 to choose the method you wish to use to redeem your shares. You may receive your proceeds by mail, by wire or through ACH (see above). Subject to certain restrictions. See the section Selling Restrictions. | |
By Systematic Withdrawal Plan (See the section Additional Investor Services for more details.) | ||
Call Natixis Funds at 800-225-5478 or your financial representative for more information. | ||
[systematic icon] | Because withdrawal payments may have tax consequences, you should consult your tax adviser before establishing such a plan. |
24
Fund Services
If you wish to redeem your shares in writing, all owners of the shares must sign the redemption request in the exact names in which the shares are registered and indicate any special capacity in which they are signing. In certain situations, you will be required to make your request to sell shares in writing. In these instances, a letter of instruction signed by the authorized owner is necessary. In certain situations, we also may require a medallion signature guarantee or additional documentation.
A medallion signature guarantee protects you against fraudulent orders and is necessary if:
| your address of record or bank account information has been changed within the past 30 days; |
| you are selling more than $100,000 worth of shares and you are requesting the proceeds by check; |
| a proceeds check for any amount is either mailed to an address other than the address of record or not payable to the registered owner(s); or |
| the proceeds are sent by check, wire, or in some circumstances ACH to a bank account whose owner(s) do(es) not match the owner(s) of the fund account. |
A notary public cannot provide a medallion signature guarantee. The Fund will only accept medallion signature guarantees bearing the STAMP2000 Medallion imprint. A medallion signature guarantee can be obtained from one of the following sources:
| a financial representative or securities dealer; |
| a federal savings bank, cooperative, or other type of bank; |
| a savings and loan or other thrift institution, or a credit union; or |
| a securities exchange or clearing agency. |
In some situations additional documentation may be necessary. Please contact your financial representative or Natixis Funds regarding documentation requirements.
25
Fund Services
In general, you may exchange shares of your Fund for shares of the same class of another Natixis Fund or Loomis Sayles Fund that offers such class of shares, without paying a sales charge or a CDSC (see the sections Buying Shares and Selling Shares) subject to certain restrictions noted below. For exchanges into the Money Market Fund, the holding period for determining the CDSC, if applicable, for Class C shares will stop and will resume only when an exchange into an applicable Fund occurs. Once the Fund minimum is met, exchanges under the Automatic Exchange Plan must be made for at least $100. All exchanges are subject to the eligibility requirements of the fund into which you are exchanging and any other limits on sales of or exchanges into that fund. The exchange privilege may be exercised only in those states where shares of such funds may be legally sold. For federal income tax purposes, an exchange of fund shares for shares of another fund is generally treated as a sale on which gain or loss may be recognized. Subject to the applicable rules of the SEC, the Board of Trustees reserves the right to modify the exchange privilege at any time. Before requesting an exchange into any other fund, please read its prospectus carefully. You may be unable to hold your shares through the same financial intermediary if you engage in certain share exchanges. You should contact your financial intermediary for further details. Please refer to the SAI for more detailed information on exchanging Fund shares.
Restrictions on Buying, Selling and Exchanging Shares
Frequent purchases and redemptions of Fund shares by shareholders may present certain risks for other shareholders in the Fund. This includes the risk of diluting the value of Fund shares held by long-term shareholders, interfering with the efficient management of the Funds portfolio, and increasing brokerage and administrative costs. Funds investing in securities that require special valuation processes (such as foreign securities, high yield securities, or small cap securities) may also have increased exposure to these risks. The Fund discourages excessive, short-term trading that may be detrimental to the Fund and its shareholders. The Board of Trustees has adopted the following policies to address and discourage frequent purchases and redemptions of Fund shares.
The Fund reserves the right to suspend or change the terms of purchasing or exchanging shares. The Fund and the Distributor reserve the right to reject any purchase or exchange order for any reason, including if the transaction is deemed not to be in the best interests of the Funds other shareholders or possibly disruptive to the management of the Fund. A shareholder whose exchange order has been rejected may still redeem its shares by submitting a redemption request as described above under Selling Shares.
Limits on Frequent Trading. Without limiting the right of the Fund and the Distributor to reject any purchase or exchange order, the Fund and the Distributor may (but are not obligated to) restrict purchases and exchanges for the accounts of market timers. An account may be deemed to be one of a market timer if it makes two round trips in the Fund over a 90-day interval, as determined by the Fund. A round trip is a purchase (including a purchase by exchange) into the Fund followed by a redemption (including a redemption by exchange) of any amount out of the Fund. The above limits are applicable whether you hold shares directly with the Fund or indirectly through a financial intermediary, such as a broker, bank, investment adviser, recordkeeper for retirement plan participants, or other third party. The preceding is not an exclusive description of activities that the Fund and the Distributor may consider to be market timing.
Notwithstanding the above, certain financial intermediaries, such as retirement plan administrators, may monitor and restrict the frequency of purchase and redemption transactions in a manner different from that described above. The policies of these intermediaries may be more or less restrictive than the generally applicable policies described above. The Fund may choose to rely on a financial intermediarys restrictions on frequent trading in place of the Funds own restrictions if the Fund determines, in its discretion, that the financial intermediarys restrictions provide reasonable protection for the Fund from excessive short- term trading activity. Please contact your financial representative for additional information regarding their policies for limiting the frequent trading of Fund shares.
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This policy also does not apply with respect to shares purchased by a fund-of-funds or similar asset allocation program that rebalances its investments no more frequently than quarterly. To be eligible for this exemption, the fund-of-funds or asset allocation program must identify itself to and receive prior written approval from the Fund or the Distributor. The Fund and Distributor may request additional information to enable them to determine that the fund-of-funds or asset allocation program is not designed to and/or is not serving as a vehicle for disruptive short-term trading, which may include requests for (i) written assurances from the sponsor or investment manager of the fund-of-funds or asset allocation program that it enforces the Funds frequent trading policy on investors or another policy reasonably designed to deter disruptive short-term trading in Fund shares, and/or (ii) data regarding transactions by investors in the fund-of-funds or asset allocation program, for periods and on a frequency determined by the Fund and Distributor, so that the Fund can monitor compliance by such investors with the trading limitations of the Fund or of the fund-of-funds or asset allocation program.
Trade Activity Monitoring. Trading activity is monitored selectively on a daily basis in an effort to detect excessive short-term trading activities. If the Fund or the Distributor believes that a shareholder or financial intermediary has engaged in market timing or other excessive, short-term trading activity, it may, in its discretion, request that the shareholder or financial intermediary stop such activities or refuse to process purchases or exchanges in the accounts. In its discretion, the Fund or the Distributor may restrict or prohibit transactions by such identified shareholders or intermediaries. In making such judgments, the Fund and the Distributor seek to act in a manner that they believe is consistent with the best interests of all shareholders. The Fund and the Distributor also reserve the right to notify financial intermediaries of your trading activity.
Accounts Held by Financial Intermediaries. The ability of the Fund and the Distributor to monitor trades that are placed by omnibus or other nominee accounts is more limited in those instances in which the financial intermediary maintains the record of the Funds underlying beneficial owners. In general, the Fund and the Distributor will review trading activity at the omnibus account level. If the Fund and the Distributor detect suspicious activity, they may request and receive personal identifying information and transaction histories for some or all underlying shareholders (including plan participants) to determine whether such shareholders have engaged in market timing or other excessive, short-term trading activity. If the Fund believes that a shareholder has engaged in market timing or other excessive, short-term trading activity in violation of the Funds policies through an omnibus account, the Fund will attempt to limit transactions by the underlying shareholder which engaged in such trading, although it may be unable to do so. The Fund may also limit or prohibit additional purchases of Fund shares by an intermediary.
Investors should not assume the Fund will be able to detect or prevent all market timing or other trading practices that may disadvantage the Fund.
Purchase Restrictions
The Fund is required by federal regulations to obtain certain personal information from you and to use that information to verify your identity. The Fund may not be able to open your account if the requested information is not provided. The Fund reserves the right to refuse to open an account, close an account and redeem your shares at the then current price or take other such steps that the Fund deems necessary to comply with federal regulations if your identity cannot be verified.
Selling Restrictions
The table below describes restrictions placed on selling shares of the Fund described in this Prospectus. Please see the SAI for additional information regarding redemption payment policies:
Restriction | Situation | |
The Fund may suspend the right of redemption or postpone payment for more than 7 days: | When the NYSE is closed (other than a weekend/holiday) as permitted by the SEC | |
During an emergency as permitted by the SEC | ||
During any other period permitted by the SEC |
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The Fund reserves the right to suspend account services or refuse transaction requests: | With a notice of a dispute between registered owners or death of a registered owner | |
With suspicion/evidence of a fraudulent act | ||
The Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities in lieu of cash or may take up to 7 days to pay a redemption request in order to raise capital: | When it is detrimental for the Fund to make cash payments as determined in the sole discretion of the adviser or subadviser | |
The Fund may withhold redemption proceeds for 10 days from the purchase date: | When redemptions are made within 10 calendar days of purchase by check or ACH to allow the check or ACH transaction to clear |
Although most redemptions are made in cash, as described in the SAI, the Fund reserves the right to redeem shares in kind. If a shareholder receives a distribution in kind, the shareholder will bear the market risk associated with the distributed securities and would incur brokerage or other charges in converting the securities to cash.
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Fund Services
Net asset value is the price of one share of the Fund without a sales charge, and is calculated each business day using this formula:
Net Asset Value = | Total market value of securities + Cash and other assets Liabilities | |
Number of outstanding shares |
The net asset value of Fund shares is determined pursuant to policies and procedures approved by the Board of Trustees, as summarized below:
| A shares net asset value is determined at the close of regular trading on the NYSE on the days the NYSE is open for trading. This is normally 4:00 p.m. Eastern time. The Funds shares will not be priced on the days on which the NYSE is closed for trading. In addition, the Funds shares will not be priced on the holidays listed in the SAI. See the section Net Asset Value in the SAI for more details. |
| The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated (plus or minus applicable sales charges as described earlier in this Prospectus) after your order is received in good order.1 |
|
Requests received by the Fund after the NYSE closes will be processed based upon the net asset value determined at the close of regular trading on the next day that the NYSE is open. The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated after your order is received by the transfer agent in good order. If the transfer agent receives the order in good order by 4:00 p.m. Eastern time, the shareholder will receive that days net asset value. Under limited circumstances, the Distributor may enter into contractual agreements pursuant to which orders received by your investment dealer before the Fund determines its net asset value (normally 4:00 p.m. Eastern time) are processed at the net asset value determined on the day the order was received by your investment dealer. Please contact your investment dealer to determine whether it has entered into such a contractual agreement. If your investment dealer has not entered into such a contractual agreement, your order will be processed at the net asset value next determined after your investment dealer submits the order to the Fund. |
Generally, during times of substantial economic or market change, it may be difficult to place your order by phone. During these times, you may deliver your order in person to the Distributor or send your order by mail as described in the sections Buying Shares and Selling Shares.
Generally, Fund securities are valued as follows:
| Equity securities market price or as provided by a pricing service if market price is unavailable. |
| Debt securities (other than short-term obligations) based upon pricing service valuations, which determine valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. |
| Short-term obligations (purchased with an original or remaining maturity of 60 days or less) amortized cost (which approximates market value). |
| Options The Fund generally values index options at the average of the closing bid and asked quotations. |
| Futures unrealized gain or loss on the contract using current settlement price. When a settlement price is not used, futures contracts will be valued at their fair value as determined by or pursuant to procedures approved by the Board of Trustees. |
1 | Please see the "Buying Shares" section which provides additional information regarding who can receive a purchase order. |
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| Foreign Currency Forward Contracts the unrealized gains or losses on the contracts, as measured by the difference between the contractual forward foreign exchange rates and the forward rates. |
| All other securities fair market value as determined by the adviser or subadviser of the Fund pursuant to procedures approved by the Board of Trustees. |
As described above, if market prices are not readily available for a security, securities may not be priced on the basis of quotations from the primary market in which they are traded but rather may be priced by another method that the Board of Trustees believes is more likely to result in a price that reflects fair value (which is the amount that the Fund might reasonably expect to receive from a current sale of the security in the ordinary course of business). The Fund may also value securities at fair value or estimate their value pursuant to procedures approved by the Board of Trustees in other circumstances such as when extraordinary events occur after the close of the relevant market but prior to the close of the NYSE. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuers security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine the Funds net asset value may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.
The Fund will generally distribute most or all of its net investment income (other than capital gains) in the form of dividends. The Fund expects to distribute dividends annually. The Fund expects to distribute all net realized long- and short-term capital gains annually, after applying any available capital loss carryovers. To the extent permitted by law, the Board of Trustees may adopt a different schedule as long as payments are made at least annually.
Distributions will automatically be reinvested in shares of the same class of the distributing Fund at net asset value, unless you select one of the following alternatives:
| Participate in the Dividend Diversification Program, which allows you to have all dividends and distributions automatically invested at net asset value in shares of the same class of another Natixis Fund registered in your name. Certain investment minimums and restrictions may apply. For more information about this program, see the section Additional Investor Services. |
| Receive distributions from dividends and interest in cash while reinvesting distributions from capital gains in additional shares of the same class of the Fund, or in the same class of another Natixis Fund. |
| Receive all distributions in cash. |
For more information or to change your distribution option, contact Natixis Funds in writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a Natixis Fund held in a non-retirement plan account, you will receive a Form 1099 to help you report the prior calendar years distributions on your federal income tax return. This information will also be reported to the Internal Revenue Service. Be sure to keep this Form 1099 as a permanent record. A fee may be charged for any duplicate information requested.
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Except where noted, the discussion below addresses only the U.S. federal income tax consequences of an investment in the Fund and does not address any foreign, state or local tax consequences.
The Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code) necessary to qualify for treatment as a regulated investment company, and thus does not expect to pay any federal income tax on income and capital gains distributed to shareholders.
Taxation of Distributions from the Fund. For federal income tax purposes, distributions of investment income are generally taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long a shareholder has owned his or her shares. Distributions attributable to the excess of net long-term capital gains from the sale of investments the Fund owned for more than one year over net short-term capital losses and that are designated by the Fund as capital gain dividends (Capital Gain Dividends) will generally be taxable to a shareholder receiving such distributions as long-term capital gain. Distributions attributable to the excess of net short-term capital gains from the sale of investments that the Fund owned for one year or less over net long-term capital losses will be taxable as ordinary income.
For taxable years beginning before January 1, 2011, distributions of investment income designated by the Fund as derived from qualified dividend income will be taxed in the hands of individuals at the rates applicable to long-term capital gain, provided holding period and other requirements are met at both the shareholder and Fund levels. Income generated by investments in derivatives, fixed income securities and REITs is generally not eligible for treatment as qualified dividend income.
For taxable years beginning before January 1, 2011, long-term capital gain rates applicable to individuals have been temporarily reduced to, in general, 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets.
Dividends and distributions declared by the Fund in October, November or December of one year and paid in January of the next taxable year generally are taxable in the year in which the distributions are declared, rather than the calendar year in which the distributions are received.
Dividends derived from interest on securities issued by the U.S. government or its agencies or instrumentalities, if any, may be exempt from state and local income taxes. The Fund will advise shareholders annually of the proportion of the Funds dividends that are derived from such interest.
Fund distributions are taxable to you even if they are paid from income or gains earned by the Fund before your investment (and thus were included in the price you paid for your shares). Such distributions are likely to occur in respect of shares purchased at a time when the relevant Funds net asset value reflects gains that are either unrealized or realized but not distributed. Fund distributions paid to you are taxable whether you receive them in cash or reinvest them in additional shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt treatment under federal income tax laws generally will not be taxable.
Sales or Exchanges of Fund Shares. The redemption, sale or exchange of the Funds shares is a taxable event and will generally result in recognition of gain or loss. Gain or loss, if any, recognized on the redemption, sale, exchange or other disposition of the Funds shares will be taxed as a long-term capital gain or loss if the shares are capital assets in the shareholders hands and if the shareholder held the shares for more than one year.
Taxation of Certain Investments. The Funds investment in certain debt obligations, mortgage-backed securities, asset-backed securities and derivatives may cause the Fund to recognize taxable income in excess of the cash generated by such investments. Thus, the Fund could be required to liquidate investments, including at times when it may not be advantageous to do so, in order to satisfy the distribution requirements applicable to regulated investment companies under the Code.
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The Funds investments in foreign securities may be subject to foreign withholding and other taxes. In that case, the Funds yield on those securities would be decreased. Shareholders will not be entitled to claim a credit or deduction with respect to such foreign taxes incurred by the Fund. In addition, the Funds investments in certain foreign securities or in foreign currencies may be subject to special tax rules that accelerate or increase the recognition of income by the Fund, which may in turn affect the timing or amount of the Funds distributions to shareholders.
Non-U.S. Shareholders. In general, dividends (other than Capital Gain Dividends) paid to a shareholder that is not a U.S. person within the meaning of the Code are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate). Non-U.S. shareholders should consult their tax advisers about the precise tax consequences of an investment in the Fund.
Backup Withholding. The Fund is also required in certain circumstances to apply backup withholding on taxable dividends, redemption proceeds and certain other payments that are paid to any shareholder (including a shareholder who is neither a citizen nor a resident of the U.S.) who or which does not furnish the Fund certain information and certifications or who or which is otherwise subject to backup withholding. The backup withholding tax rate is 28% for amounts paid through 2010 and will be 31% for amounts paid after December 31, 2010. Backup withholding will not, however, be applied to payments that have been subject to the 30% withholding tax on shareholders who are neither citizens nor residents of the United States.
Please see the SAI for additional information on the federal income tax consequences of an investment in the Fund. You should consult your tax adviser for more information on your own situation, including possible federal, state, local, foreign or other applicable taxes.
32
Retirement Plans
Natixis Funds offer a range of retirement plans, including Coverdell Education Savings Accounts, IRAs, SEPs, 403(b) plans and other pension and profit sharing plans. Refer to the section entitled Its Easy to Open an Account for investment minimums. For more information about our Retirement Plans, call us at 800-225-5478.
Investment Builder Program
This is Natixis Funds automatic investment plan. Once you meet the fund minimum, you may authorize automatic monthly transfers of $50 or more per fund from your bank checking or savings account to purchase shares of one or more Natixis Funds. For instructions on how to join the Investment Builder Program, please refer to the section Buying Shares.
Dividend Diversification Program
This program allows you to have all dividends and any other distributions automatically invested in shares of the same class of another Natixis Fund or the Money Market Fund, subject to the eligibility requirements of that other fund and to state securities law requirements. Shares will be purchased at the selected funds net asset value without a front-end sales charge or CDSC on the dividend record date. Before establishing a Dividend Diversification Program into any other Natixis Fund or the Money Market Fund, please read its prospectus carefully.
Automatic Exchange Plan
Natixis Funds have an automatic exchange plan under which shares of a class of a Natixis Fund are automatically exchanged each month for shares of the same class of another Natixis Fund or the Money Market Fund. There is no fee for exchanges made under this plan, but there may be a sales charge in certain circumstances. Please see the section Exchanging Shares above and refer to the SAI for more information on the Automatic Exchange Plan.
Systematic Withdrawal Plan
This plan allows you to redeem shares and receive payments from your fund on a regular schedule. Redemption of shares that are part of the Systematic Withdrawal Plan is not subject to a CDSC. However, the amount or percentage you specify in the plan may not exceed, on an annualized basis, 10% of the value of your fund account based upon the value of your Fund account on the day you establish your plan. For information on establishing a Systematic Withdrawal Plan, please refer to the section Selling Shares.
Natixis Funds Personal Access Line®
This automated customer service system allows you to have access to your account 24 hours a day by calling 800-225-5478, and pressing 1. With a touch-tone telephone, you can obtain information about your current account balance, recent transactions, Fund prices and recent performance. You may also use Personal Access Line® to purchase, exchange or redeem shares in any of your existing accounts. Certain restrictions may apply.
Natixis Funds Web Site
Visit us at www.funds.natixis.com to review your account balance and recent transactions, to view daily prices and performance information or to order duplicate account statements and tax information. You may also go online to purchase, exchange or redeem shares in your existing accounts. Certain restrictions may apply.
33
Financial Performance
Because the Fund has no performance history as of the date of this Prospectus, a financial highlights table for the Fund has not been included in this Prospectus.
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Capital gain distributions Payments to the Funds shareholders of net profits earned from selling securities in the Funds portfolio. Capital gain distributions are usually paid once a year.
Derivative A financial instrument whose value and performance are based on the value and performance of another security or financial instrument.
Diversification The strategy of investing in a wide range of securities representing different market sectors to reduce the risk if an individual company or one sector suffers losses.
Inflation A general increase in prices coinciding with a fall in the real value of money, as measured by the Consumer Price Index.
Interest rate Rate of interest charged for the use of money, usually expressed at an annual rate.
Maturity The final date on which the payment of a debt instrument (e.g., bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds generally have maturities of up to 5 years; intermediate-term bonds between 5 and 15 years; and long-term bonds over 15 years.
Net assets The Funds assets minus its liabilities.
Net asset value (NAV) per share The market value of one share of the Fund on any given day without taking into account any front-end sales charge or CDSC. It is determined by dividing the Funds total net assets by the number of shares outstanding.
Volatility The general variability of a portfolios value resulting from price fluctuations of its investments. In most cases, the more diversified a portfolio is, the less volatile it will be.
Yield The rate at which the Fund earns income, expressed as a percentage. Mutual fund yield calculations are standardized, based upon a formula developed by the SEC.
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If you would like more information about the Fund, the
following documents will be available free upon request:
Annual and Semiannual Reports When available, will provide additional information about the Funds investments.
Each report will include a discussion of the market conditions and investment strategies
that significantly affected the Funds performance during its last fiscal year.
Statement of Additional Information (SAI) Provides more detailed information about
the Fund and its investment limitations and policies. The SAI has been filed
with the SEC and is incorporated into this Prospectus by reference.
To order a free copy of the Funds annual or semiannual report (when available), or its SAI, to request other information
about the Fund and to make shareholder inquiries generally, contact your financial representative,
visit the Funds website at www.funds.natixis.com or call the Fund at 800-225-5478.
Important Notice Regarding Delivery of Shareholder Documents:
In our continuing effort to reduce your funds expenses and the amount of mail that you receive from us, we will combine
mailings of prospectuses, annual or semiannual reports and proxy statements to your household.
If more than one family member in your household owns the same fund or funds described in a single prospectus, report or
proxy statement, you will receive one mailing unless you request otherwise. Additional copies of our prospectuses, reports or
proxy statements may be obtained at any time by calling 800-225-5478. If you are currently receiving multiple mailings to your
household and would like to receive only one mailing or if you wish to receive separate mailings for each member of your
household in the future, please call us at the telephone number listed above and we will resume separate mailings within 30
days of your request.
Your financial representative or Natixis Funds will also be happy to
answer your questions or to provide any additional information that you may require.
Information about the Fund, including its reports and SAI, can be reviewed and copied at the Public Reference Room of the
SEC in Washington, D.C. Text-only copies of the Funds reports and SAI are available free from the EDGAR Database on the
SECs Internet site at: www.sec.gov. Copies of this information may also be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the SECs Public Reference Section,
Washington, D.C. 20549-0102.
Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090.
Portfolio Holdings A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio
securities is available in the Funds SAI.
Natixis Distributors, L.P. (Natixis Distributors), and other firms selling shares of Natixis Funds are members of the
Financial Industry Regulatory Authority (FINRA). As a service to investors, FINRA has asked that we inform you of the
availability of a brochure on its Public Disclosure Program. The program provides access to information about securities
firms and their representatives. Investors may obtain a copy by contacting FINRA at 800-289-9999 or by visiting its website at
www.FINRA.org.
Natixis Distributors distributes the Natixis Funds and Loomis Sayles Funds. If you have a complaint concerning
Natixis Distributors or any of its representatives or associated persons, please direct it to Natixis Distributors, L.P., Attn:
Director of Compliance, 399 Boylston Street, Boston, MA 02116 or call us at 617-449-2828.
(Investment Company Act File No. 811-00242)
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[NATIXIS FUNDS LOGO]
Shares of the ASG Global Alternatives Fund are not currently offered for sale or available for purchase.
ASG Global Alternatives Fund
Whats Inside
Goals, Strategies & Risks |
3 | |
Fund Fees & Expenses |
7 | |
More About Risk |
9 | |
Management Team |
11 | |
Fund Services |
14 | |
Financial Performance |
26 |
Prospectus
, 2008
ASG Global Alternatives Fund
AlphaSimplex Group, LLC
<Subadviser Logo>
<Adviser Logo>
The Securities and Exchange Commission has not approved or disapproved the Funds shares or determined whether this Prospectus is accurate or complete. Any representation to the contrary is a crime.
For general information on the Fund or any of its services and for assistance in opening an account, contact your financial representative or call Natixis Funds.
Natixis Funds |
P.O. Box 219579 |
Kansas City, MO 64121-9579 |
800-225-5478 |
www.funds.natixis.com |
1
Table of Contents
GOALS, STRATEGIES & RISKS | 3 | |
ASG GLOBAL ALTERNATIVES FUND | ||
FUND FEES & EXPENSES | ||
FUND FEES & EXPENSES | 7 | |
MORE ABOUT RISK | 9 | |
MORE ABOUT RISK | ||
MANAGEMENT TEAM | 11 | |
MEET THE FUNDS INVESTMENT ADVISER & SUBADVISERS | ||
MEET THE FUNDS PORTFOLIO MANAGERS | 13 | |
FUND SERVICES | ||
ITS EASY TO OPEN AN ACCOUNT | 14 | |
BUYING SHARES | ||
SELLING SHARES | ||
SELLING SHARES IN WRITING | ||
EXCHANGING SHARES | 19 | |
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES | 19 | |
HOW FUND SHARES ARE PRICED | 21 | |
DIVIDENDS AND DISTRIBUTIONS | 22 | |
TAX CONSEQUENCES | 23 | |
COMPENSATION TO SECURITIES DEALERS | 25 | |
FINANCIAL PERFORMANCE | ||
FINANCIAL PERFORMANCE | ||
GLOSSARY OF TERMS | 27 | |
GLOSSARY OF TERMS |
If you have any questions about any of the terms used in this Prospectus, please refer to the Glossary of Terms.
To learn more about the possible risks of investing in the Fund, please refer to the section More About Risk. This section details the risks of practices in which the Fund may engage. Please read this section carefully before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by the Federal Deposit Insurance Corporation or any other government agency, and are subject to investment risks, including possible loss of the principal invested.
2
ASG Global Alternatives Fund
Adviser: | AlphaSimplex Group, LLC (AlphaSimplex or the Adviser) | |
Subadviser: | Reich & Tang Asset Management, LLC (Reich & Tang or the Subadviser) | |
Managers: | Adviser: Andrew Lo, Jeremiah Chafkin Subadviser: Robert Rickard | |
Category: | [ ] |
Ticker Symbol: | Institutional Class |
Investment Goal
The Fund pursues an absolute return strategy that seeks to provide capital appreciation consistent with the return and risk characteristics of a diversified portfolio of hedge funds. The secondary goal of the Fund is to achieve these returns with less volatility than major equity indices. The investment goals are non-fundamental and may be changed without shareholder approval. The Fund will provide 60 days prior notice to shareholders before changing the investment goals.
Principal Investment Strategies
The Fund seeks to achieve long and short exposure to global equity, bond, currency and commodity markets through a wide range of derivative instruments and direct investments. Under normal market conditions, the Adviser typically will make extensive use of derivative instruments, in particular futures and forward contracts on global equity and fixed income securities, securities indices (including both broad- and narrow-based securities indices), currencies, commodities and other instruments. These investments are intended to provide the Fund with risk and return characteristics similar to those of a diversified portfolio of hedge funds.
In selecting investments for the Fund, the Adviser uses quantitative models to estimate the factor exposures that drive the aggregate returns of a diverse set of hedge funds tracked in certain commercially available databases selected by the Adviser (for example, exposures to the returns of U.S. stocks or various non-U.S. currencies), and seeks to construct the Funds portfolio to capture such exposures in the aggregate while adding value through dynamic factor selection and risk management. The Adviser will have great flexibility to allocate the Funds derivatives exposure among various securities, indices, currencies, commodities and other instruments, and the amount of the Funds assets that may be allocated to derivative strategies and among these various instruments is expected to vary over time. When buying and selling securities and other instruments for the Fund, and in determining the amount of assets to be allocated to the Money Market Portion (as defined below), the Adviser will also consider the following factors: (i) the Funds obligations under its various derivative positions, (ii) redemption requests, (iii) yield management, (iv) credit management and (v) volatility management. The Fund will not invest directly in hedge funds.
Under normal market conditions, a significant portion of the Funds assets will be invested in money market and other short-term, high quality securities managed by the Subadviser (the Money Market Portion). The Adviser will determine the percentage of the Funds assets that will be invested in the Money Market Portion at any time. The assets allocated to the Money Market Portion will be used primarily to finance the Funds investments in derivatives and similar instruments and, secondarily, to provide the Fund with incremental income. Although the Fund will invest a significant portion of its assets in money market instruments, the Fund is not a money market fund and the value of the Money Market Portion as well as the value of the Funds shares may decrease in value. The Fund is not subject to the portfolio quality, maturity and net asset value requirements applicable to money market funds, and the Fund will not seek to maintain a stable net asset value.
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The Subadviser will only invest the assets of the Money Market Portion in high quality securities which are denominated in U.S. dollars, and will select securities for investment based on various factors, including the securitys maturity and rating. The Subadviser will invest primarily in (i) short-term obligations issued or guaranteed by the United States Government, its agencies or instrumentalities (U.S. Government Obligations); (ii) securities issued by foreign governments, their political subdivisions or agencies or instrumentalities, (iii) certificates of deposit, time deposits and bankers acceptances issued by domestic banks, foreign branches of domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign branches of foreign banks; (iv) variable amount master demand notes; (v) participation interests in loans extended by banks to companies; (vi) commercial paper or similar debt obligations; and (vii) repurchase agreements.
The Fund may also:
| Invest directly in equity securities. |
| Invest in physical commodities (such as metals, fuels, or agricultural commodities) or related derivatives, including through a wholly-owned subsidiary organized under the laws of a non-U.S. jurisdiction. |
| Hold securities of foreign issuers traded over the counter or on foreign exchanges, including American Depositary Receipts, securities in emerging markets, futures traded on foreign exchanges and currency transactions. |
| Invest directly in a wide variety of fixed-income securities, including inflation-linked bonds and U.S. Treasury inflation-protected securities; zero-coupon securities; mortgage-related securities, including stripped mortgage-backed securities, adjustable-rate mortgage securities, mortgage-backed securities and collateralized mortgage obligations; other asset-backed securities; and when-issued securities. |
| Engage in active and frequent trading of securities. Frequent trading may produce high transaction costs, which may lower the Funds return. |
As a temporary defensive measure, the Fund may hold any portion of its assets in cash and/or invest in money market instruments or high quality debt securities and take other defensive positions as the Adviser deems appropriate. The Fund may miss certain investment opportunities if it uses defensive strategies and thus may not achieve its investment goal.
Principal Investment Risks
The principal risks of investing in the Fund are described below. There are other circumstances (including non-principal risks that are not described here) which could prevent the Fund from achieving its investment goals. The Fund does not represent a complete investment program. The Funds net asset value may fluctuate substantially over time. You may lose money by investing in the Fund.
Because of the Funds extensive use of derivative instruments, the Fund will be subject to many of the risks below indirectly through its derivative transactions rather than directly through investment in the actual securities themselves. For example, to the extent the Fund enters into a futures contract on an equity index, the Fund will be subject to equity securities risk.
Credit risk: This is the risk that the issuer or the guarantor of a fixed-income security, or the counterparty to a derivatives or other transaction, will be unable or unwilling to make timely payments of interest or principal or to otherwise honor its obligations. Lower-rated fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to make timely principal and interest payments. Foreign securities may be subject to increased credit risk because of the potential difficulties of requiring foreign entities to honor their contractual commitments.
Commodity risk: This is the risk that exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities. The value of physical commodities or commodity-linked derivative instruments may be affected by changes in overall market movements, commodity price volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Currency risk: This is the risk that fluctuations in exchange rates between the U.S. dollar and foreign currencies may cause the value of the Funds investments to decline.
4
Derivatives risk: Derivatives are financial contracts whose value depends upon or is derived from the value of an underlying asset, reference rate or index. Examples of derivatives include futures contracts, swaps and forward transactions. The Fund expects to make extensive use of derivative transactions, and anticipates that the majority of its returns will be attributable to its derivative transactions. Therefore, the performance of the Fund will depend to a great extent on the success of the Advisers derivative strategies. This use of derivatives for these purposes entails greater risk than using derivatives solely for hedging purposes. The Funds use of derivatives involves other risks, such as the credit risk relating to the other party to a derivative contract, the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate perfectly with relevant assets, rates or indices, and the risk that the Funds liquid assets may be insufficient to support its obligations under its derivatives positions.
Equity securities risk: You may lose money on your investment due to unpredictable drops in a stocks value or periods of below-average performance in a given stock or industry or in the stock market as a whole. Equity securities may include common stocks, preferred stocks, warrants, securities convertible into common or preferred stocks and other equity-like interests in an entity. Equity securities may take the form of stock in corporations, limited partnership interests or interests in limited liability companies, real estate investment trusts (REITS) or other trusts and other similar securities.
Foreign securities risk: This is the risk associated with investments in issuers located in foreign countries. The Funds investments in foreign securities may experience more rapid and extreme changes in value than investments in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of issuers and a small number of securities. In addition, foreign companies often are not subject to the same degree of regulation as U.S. companies. Reporting, accounting and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. Nationalization, expropriation or confiscatory taxation, currency blockage, political changes or diplomatic developments can cause the value of the Funds non-U.S. investments to decline. In the event of nationalization, expropriation, or other confiscation, the Fund could lose its entire foreign investment.
Hedge Fund risk: Hedge funds are typically unregulated private investment pools available only to sophisticated investors. They are often illiquid and highly leveraged. Although the Fund will not invest directly in hedge funds, because the Funds investments are intended to provide exposure to the factors that drive hedge fund returns, an investment in the Fund will be subject to many of the same risks associated with an investment in a diversified portfolio of hedge funds. Therefore, the Funds performance may be lower than the returns of the broader stock market and the Funds net asset value may fluctuate substantially over time.
Index/Tracking Error risk: Although the Fund does not seek to track any particular index, the Fund seeks to analyze the factors that drive hedge fund returns, as determined by reference to one or more indices. These indices may not provide an accurate representation of hedge fund returns generally, and the Advisers strategy may not successfully identify or be able to replicate factors that drive returns. There is a risk that hedge fund return data provided by third party hedge fund index providers may be inaccurate or may not accurately reflect hedge fund returns due to survivorship bias, self-reporting bias or other biases. Even if an index does provide an accurate representation of hedge fund returns generally, the Funds performance may not match the returns of any such index during any period of time. For example, the Funds returns may differ from the returns of an index because of the inability of the Funds managers to replicate hedge fund returns (which are based on many different types of assets, including illiquid assets, that may not be available for investment by the Fund) using futures and forward contracts and because of differences in volatility between the Funds portfolio and the returns of the index. In addition, unlike an index, the Fund will be subject to a management fee and other Fund-level expenses. Therefore, the returns of the Fund may differ significantly from returns of hedge funds generally, or the returns of any particular index.
Interest rate risk: This is the risk that changes in interest rates will affect the value of the Funds investments in fixed-income securities, such as bonds, notes, asset-backed securities and other income-producing securities. Fixed-income securities are obligations of the issuer to make payments of principal and/or interest on future dates. Increases in interest rates may cause the value of the Funds investments to decline. Generally, the value of fixed-income securities, including short-term fixed-income securities, rises when prevailing interest rates fall and falls when interest rates rise. A significant change in interest rates could cause the Funds share price (and the value of your investment) to change.
Issuer risk: The value of the Funds investments may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuers goods and services.
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Liquidity risk: Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling these illiquid securities at an advantageous price or at the time desired. A lack of liquidity may also cause the value of investments to decline. Derivatives and securities that involve substantial interest rate or credit risk tend to involve greater liquidity risk. In addition, liquidity risk tends to increase to the extent the Fund invests in securities whose sale may be restricted by law or by contract, such as Rule 144A securities. Investment in derivatives may be especially illiquid when compared to other securities, especially during periods of market stress. Similarly, at certain times, the market for money market and similar instruments may become illiquid. At these times, it may be difficult to sell securities. Illiquid investments may also be difficult to value.
Management risk: Management risk is the risk that the Advisers or Subadvisers investment techniques could fail to achieve the Funds objective and could cause your investment in the Fund to lose value. The Fund is subject to management risk because the Fund is actively managed. The Adviser and Subadviser will apply their investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that such decisions will produce the desired results. For example, securities that the Adviser or Subadviser expect may appreciate in value may in fact decline. Similarly, in some cases derivative and other investment techniques may be unavailable or the Adviser or Subadviser may determine not to use them, even under market conditions where their use could have benefited the Fund.
Market risk: This is the risk that the value of the Funds investments will change as financial markets fluctuate and that prices overall may decline. The value of a companys securities may fall as a result of factors that directly relate to that company, such as decisions made by its management or lower demand for the companys products or services. A securitys value also may fall because of factors affecting not just the company, but companies in its industry or in a number of different industries, such as increases in production costs. In addition, the value of the Funds derivative investments may fall even when the value of the securities markets is rising. The value of a companys securities also may be affected by changes in financial market conditions, such as changes in interest rates or currency exchange rates.
Valuation risk: The risk that the Fund has valued certain securities at a higher price than the price at which they can be sold. This risk may be especially pronounced for investments, such as derivatives, which may be illiquid or which may become illiquid.
For additional information, see the section More About Risk.
6
Evaluating the Funds Past Performance
Because the Fund is new and has not completed a full calendar year, information related to Fund performance, including a bar chart showing annual returns, has not been included in this Prospectus.
The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Institutional Class | ||
Maximum sales charge (load) imposed on purchases |
None | |
Maximum deferred sales charge (load) |
None | |
Redemption fees |
None* |
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
ASG Global Alternatives Fund Institutional Class | ||||
Management fees |
[ ] | |||
Distribution and/or service (12b-1) fees |
[ ] | |||
Other expenses2 |
[ ] | |||
Total annual fund operating expenses |
[ ] | |||
Less: |
Fee Reduction and/or |
[ ] | ||
Expense Reimbursement1 |
||||
Net Expenses |
[ ] |
Example
This example**, which is based upon the expenses shown in the Annual Fund Operating Expenses table, is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The example assumes that:
| You invest $10,000 in the Fund for the time periods indicated; |
| Your investment has a 5% return each year; |
| The Funds operating expenses remain the same; and |
| All dividends and distributions are reinvested. |
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Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:
ASG Global Alternatives Fund Institutional Class | ||
1 year |
[ ] | |
3 years |
[ ] |
1 |
The Adviser has given a binding contractual undertaking to the Fund to limit the amount of the Funds total annual fund operating expenses, exclusive of brokerage expenses, Acquired Fund Fees and Expenses (as defined below), interest expense, taxes and extraordinary expenses, such as litigation and indemnification expenses, to [ ]% of the Funds average daily net assets for Institutional Class shares. This undertaking is in effect through , 2010 and may be terminated only with the consent of the Board of Trustees. However, the Board of Trustees does not intend to terminate this undertaking. The Funds Adviser will be permitted to recover, on a class by class basis, management fees reduced and/or expenses reimbursed it has borne through the undertaking described in this footnote to the extent that the Institutional Classs expenses in later periods fall below the annual rates set forth in the relevant undertaking. The Adviser may not recover any such reduced fees and expenses with respect to a class more than one year after the end of the fiscal year in which the fee/expense was deferred. |
2 |
Other expenses are based on estimated amounts for the current fiscal year and include expenses estimated to be indirectly borne by the Fund through investments in certain pooled investment vehicles (Acquired Fund Fees and Expenses) of less than 0.01% of the Funds average daily net assets. |
* | Generally, a transaction fee will be charged for expedited payment of redemption proceeds of $5.50 for wire transfers or $20.50 for overnight delivery. These fees are subject to change. |
** | The example is based on the Net Expenses for the one-year period and on Total Annual Fund Operating Expenses for the remaining years. |
A snapshot of the Funds investments will be found in the Funds annual and semiannual reports, when available. In addition, a list of the Funds full portfolio holdings, which is updated monthly after an aging period of at least 30 days, will be available on the Funds website at www.funds.natixis.com (click on Fund Information and then Portfolio Holdings). These holdings will remain accessible on the website until the Fund files its Form N-CSR or Form N-Q with the SEC for the period that includes the date of the information.
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The Fund has principal investment strategies that come with inherent risks. The principal risks of investing in a Fund are described in the Fund summary under Principal Investment Risks. The following is a list of non-principal risks to which the Fund may be subject because of its investment in various types of securities or engagement in various practices. Because of the Funds extensive use of derivative investments, the Fund will be subject to many of the risks below indirectly through its derivative transactions rather than directly through investment in the securities themselves.
Emerging markets risk The risk associated with investing in companies traded in developing securities markets, which may be smaller and have shorter operating histories than companies in developed markets. Emerging markets involve risks in addition to and greater than those generally associated with investing in developed foreign markets. The extent of economic development, political stability, market depth, infrastructure and capitalization, and regulatory oversight in emerging market economies is generally less than in more developed markets.
Exchange-traded funds risk ETFs are investment companies whose shares are bought and sold on a securities exchange. Generally, ETFs invest in a portfolio of securities designed to track a particular market segment or index. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When the Fund invests in an ETF, in addition to directly bearing expenses associated with its own operations, it will bear a pro rata share of the ETFs expenses. The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio of securities. In addition, because of ETF expenses, it may be more costly to own an ETF than it is to own the underlying securities directly.
Fixed-income securities rated below investment grade risk Fixed-income securities rated below investment grade, commonly known as junk bonds, may be considered speculative with respect to the issuers continuing ability to make principal and interest payments. The issuers of these securities may be in default or have a currently identifiable vulnerability to default on their payments of principal and interest, or may otherwise be subject to present elements of danger with respect to payments of principal or interest. Securities rated below investment grade may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher grade securities.
The secondary markets in which lower-rated securities are traded may be less liquid than the market for higher grade securities. A lack of liquidity in the secondary trading markets could adversely affect the price at which the Fund could sell a particular lower-rated security. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield securities generally.
Inflation/deflation risk Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the present value of future payments. Deflation risk is the risk that prices throughout the economy decline over time (the opposite of inflation). Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds portfolio.
Information risk The risk that key information about a security or other instrument is inaccurate or unavailable.
Leverage risk The risk associated with securities or practices (e.g., borrowing) that multiply small index or market movements into larger changes in value. Use of derivative instruments may involve leverage. When a derivative is used as a hedge against an offsetting position that the Fund also holds, any loss generated by the derivative should be substantially offset by gains on the hedged instrument, and vice versa. To the extent that the Fund uses a derivative for purposes other than as a hedge, or, if the Fund hedges imperfectly, the Fund is directly exposed to the risks of that derivative and any loss generated by the derivative will not be offset by a gain. Swaps and structured notes may be considered derivative and may be subject to this type of risk.
Mortgage-related securities risk Mortgage-related securities, such as Government National Mortgage Association (GNMA) certificates or securities issued by the Federal National Mortgage Association (Fannie Mae), differ from traditional fixed-income securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans generally may be prepaid at any
9
time. As a result, if the Fund purchases these assets at a premium, a faster-than-expected prepayment rate will reduce yield to maturity, and a slower-than-expected prepayment rate will increase yield to maturity. If the Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will increase, and slower-than-expected prepayments will reduce, yield to maturity. Prepayments, and resulting amounts available for reinvestment by the Fund, are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates. Accelerated prepayments on securities purchased at a premium may result in a loss of principal if the premium has not been fully amortized at the time of prepayment. These securities will decrease in value as a result of increases in interest rates generally, and they are likely to appreciate less than other fixed-income securities when interest rates decline because of the risk of prepayments.
Opportunity risk The risk of missing out on an investment opportunity because the assets necessary to take advantage of it are invested in less profitable investments.
Political risk The risk of losses directly attributable to government or political actions.
Repurchase agreement risk Under a repurchase agreement, a fund purchases a security and obtains a simultaneous commitment from the seller (a bank or, to the extent permitted by the 1940 Act, a recognized securities dealer) to repurchase the security at an agreed upon price and date (usually seven days or less from the date of original purchase). The resale price is in excess of the purchase price and reflects an agreed upon market rate of interest unrelated to the coupon rate on the purchased security. Such transactions afford the Fund the opportunity to earn a return on its cash at minimal market risk. There is a risk that the seller may fail to repurchase the underlying security. In such event, the Fund would attempt to exercise rights with respect to the underlying security, including possible disposition in the market. However, the Fund may be subject to various delays and risks of loss, including possible declines in the value of the underlying security, possible reduced levels of income, inability to enforce rights and expenses involved in attempted enforcement. Repurchase agreements maturing in more than seven days may be considered illiquid securities.
U.S. Government securities risk Investments in certain U.S. Government securities may not be supported by the full faith and credit of the U.S. Government. Accordingly, no assurance can be given that the U.S. Government will provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, and it is possible that these issuers will not have the funds to meet their payment obligations in the future. In such a case, the Fund would have to look principally to the agency, instrumentality or sponsored enterprise issuing or guaranteeing the security for ultimate repayment, and the Fund may not be able to assert a claim against the U.S. Government itself in the event the agency, instrumentality or sponsored enterprise does not meet its commitment.
10
Meet the Funds Investment Adviser and Subadviser
The Natixis Funds family (as defined below) currently includes [ ] mutual funds, including the Fund. The Natixis Funds family had combined assets of $[ ] billion as of , 2008. Natixis Funds are distributed through Natixis Distributors, L.P. (the Distributor). This Prospectus covers the ASG Global Alternatives Fund, which, along with the Natixis Income and Tax Free Income Funds, Natixis Diversified Portfolios, Natixis Equity Funds, Loomis Sayles Global Markets Fund, Loomis Sayles Growth Fund, Loomis Sayles Research Fund, Loomis Sayles Value Fund, Gateway Fund and Natixis Cash Management Trust Money Market Series (the Money Market Fund), constitute the Natixis Funds.
Adviser and Subadviser
AlphaSimplex Group, LLC, located at One Cambridge Center, Cambridge, Massachusetts 02142, serves as the adviser to the Fund. The Adviser is a subsidiary of Natixis Global Asset Management, L.P. (Natixis US), which is part of Natixis Global Asset Management, an international asset management group based in Paris, France. Natixis Global Asset Management is ultimately owned principally by three large French financial services entities: Natixis, an investment banking and financial services firm which is publicly traded on Euronext in Paris; the Caisse Nationale des Caisses dEpargne, a financial institution owned by French regional savings banks known as the Caisses dEpargne; and Banque Fédérale des Banques Populaires, a financial institution owned by regional cooperative banks known as the Banques Populaires. Natixis US has 14 principal subsidiary or affiliated asset management firms that collectively had over $291.4 billion in assets under management as of March 31, 2008. The Adviser was founded in 1999 and as of July 1, 2008, it serves as investment adviser or subadviser with respect to assets of $580 million (including notional assets covered by overlay strategies).
Reich & Tang Asset Management, LLC, located at 600 Fifth Avenue, New York, New York 10020, serves as the subadviser to the Fund and is also a subsidiary of Natixis U.S. The Subadvisers origins date back to 1970, and as of March 31, 2008, it serves as investment adviser or subadviser with respect to assets in excess of $18 billion.
A discussion of the factors considered by the Board of Trustees in approving the Funds investment advisory agreement and sub-advisory agreement will be included in the Funds initial shareholder report covering the period in which the approval occurred.
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Portfolio Trades
In placing portfolio trades, the Adviser and Subadviser may use brokerage firms that market the Funds shares or are affiliated with Natixis US and the Adviser. In placing trades, the Adviser and Subadviser will seek to obtain the best combination of price and execution, which involves a number of judgmental factors. Such portfolio trades are subject to applicable regulatory restrictions and related procedures adopted by the Board of Trustees.
Transactions with Other Investment Companies. Pursuant to Securities and Exchange Commission (SEC) exemptive relief, the Fund may be permitted to invest its daily cash balances in shares of money market and short-term bond funds advised by Natixis Advisors or its affiliates (Central Funds). The Central Funds currently include the Money Market Fund and Daily Income Fund. Daily Income Fund is advised by Reich & Tang, and the Money Market Fund is advised by Natixis Advisors and subadvised by Reich & Tang. Because Natixis Advisors, Reich & Tang and AlphaSimplex are each subsidiaries of Natixis US, the Funds and the Central Funds may be considered to be related companies comprising a group of investment companies under the 1940 Act. The Fund may also make investments in related investment companies to the extent permitted by SEC regulation.
Pursuant to such exemptive relief, the Fund may also borrow and lend money for temporary or emergency purposes directly to and from other funds through an interfund credit facility. In addition to the Fund and the Central Funds, series of the following mutual fund groups may also be able to participate in the facility: Natixis Funds Trust I (except the CGM Advisor Targeted Equity Fund series), Natixis Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV, Harris Associates Investment Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Gateway Trust. The advisers and subadvisers to these mutual funds currently include Natixis Advisors, Reich & Tang, Loomis, Sayles & Company, L.P., AEW Management and Advisors, L.P., AlphaSimplex, BlackRock Investment Management, LLC (BlackRock), Dreman Value Management, LLC (Dreman), Gateway Investment Advisers, LLC, Harris Associates L.P., Hansberger Global Investors, Inc. and Vaughan Nelson Investment Management, L.P. Each of these advisers and subadvisers (except for BlackRock and Dreman) are subsidiaries of Natixis US and are thus affiliated persons under the 1940 Act by reason of being under common control by Natixis US. In addition, because the Fund and other funds are advised by firms that are affiliated with one another, they may be considered to be related companies comprising a group of investment companies under the 1940 Act. The Central Funds will participate in the credit facility described above only as lenders. Participation in such an interfund lending program would be voluntary for both borrowing and lending funds, and the Fund would participate in an interfund lending program only if the Board of Trustees determined that doing so would benefit the Fund. Should the Fund participate in such an interfund lending program, the Board of Trustees would establish procedures for the operation of the program by the advisers or an affiliate. The Fund may engage in the transactions described above without further notice to shareholders.
12
Meet the Funds Portfolio Managers
Adviser
Andrew W. Lo
Dr. Lo founded AlphaSimplex in 1999 and has served as the firms Chief Scientific Officer since that time. He is also Chairman of AlphaSimplexs Investment Committee and a member of AlphaSimplexs Risk Committee. Dr. Lo has been a co-portfolio manager of the Fund since September 2008. Dr. Lo is the Harris & Harris Group Professor at Massachusetts Institute of Technology (MIT) and Director of MITs Laboratory for Financial Engineering.
Jeremiah H. Chafkin
Mr. Chafkin has served as President of AlphaSimplex since 2007. He is also a member of AlphaSimplexs Investment Committee and Risk Committee. Mr. Chafkin has been a co-portfolio manager of the Fund since September 2008. From 2006 until November 2007, Mr. Chafkin was President and Chief Executive Officer of the U.S. division of Natixis Global Asset Management. Prior to that time, he headed investment advice and research for Charles Schwab & Co. and served as president of Charles Schwab Investment Management.
Subadviser
Robert S. Rickard
Mr. Rickard is a Senior Vice President of Reich & Tang, and head of Portfolio Management and Trading for the Reich & Tang Funds division, which specializes in cash management strategies. Mr. Rickard has been a co-portfolio manager of the Fund since September 2008. Mr. Rickard has focused on the management of short-term assets since joining Reich & Tangs investment staff in 1992. Mr. Rickard holds a Master of Business Administration degree in Finance from Pace University and a Bachelor of Science in Accounting from Siena College.
Please see the Funds Statement of Additional Information (SAI) for information on Portfolio Manager compensation, other accounts under management by the Portfolio Managers and the Portfolio Managers ownership of securities in the Fund.
13
Fund Services
To Open an Account with Natixis Funds:
1. Read this Prospectus carefully. Except to the extent otherwise permitted by the Distributor, the Fund will only accept accounts from U.S. citizens with a U.S. address or resident aliens with a U.S. address and a U.S. taxpayer identification number.
2. Read the following eligibility and minimum investment requirements to determine if you may purchase Institutional Class shares:
Institutional Class shares of the Fund may be purchased by an institution, endowment, foundation, investment company, corporation, bank trust department or trust company investing for its own account or for trust accounts for which it has authority to make investment decisions, qualified defined benefit plans with assets of at least $50 million or through a financial intermediary by an individual with investable assets of at least $5 million. Institutional Class shares of the Fund require a minimum initial investment of $500,000 and minimum subsequent investment of $50,000.
Institutional Class shares are not available for purchase by individuals or insurance companies for variable annuity and variable life products, or through wrap fee programs, fee-based advisory programs, individual retirement accounts, employee-directed retirement plans or omnibus accounts at investment advisers, financial planners, broker-dealers or other financial intermediaries except as stated above.
At the discretion of the Adviser, employees and clients of the Adviser may purchase Institutional Class shares of the Fund subject to the minimum investment requirements. In addition, at the discretion of Natixis Advisors, employees and clients of Natixis Advisors and its affiliates may also purchase Institutional Class shares of the Fund subject to the stated minimums.
3. You should contact Natixis Funds at 800-225-5478 for an application or if you have any questions about purchasing Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing shares.
Certificates
Certificates will not be issued for any class of shares.
14
Fund Services
Buying Shares
Opening an Account | Adding to an Account | |||
Through Your Investment Dealer | ||||
Call your investment dealer for information about opening or adding to an account. Dealers may also charge you a processing or service fee in connection with the purchase of fund shares. | ||||
By Mail | ||||
Make out a check in U.S. dollars for the investment amount, payable to Natixis Funds. Third party checks, starter checks and credit card convenience checks will not be accepted. |
Make out a check in U.S. dollars for the investment amount, payable to Natixis Funds. Third party checks, starter checks and credit card convenience checks will not be accepted. | |||
[envelope icon] |
Mail the check with your completed application to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579.
Shares purchased by check are redeemable although the Fund may withhold payment until the purchase check has cleared. See the section Selling Restrictions. |
Complete the investment slip from an account statement or include a letter specifying the Fund name, your class of shares, your account number and the registered account name(s).
Shares purchased by check are redeemable although the Fund may withhold payment until the purchase check has cleared. See the section Selling Restrictions. | ||
By Wire | ||||
[wire icon] |
Mail your completed application to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579.
Call Natixis Funds to obtain an account number and wire transfer instructions. Your bank may charge you for such a transfer. |
Instruct your bank to transfer funds to State Street Bank & Trust Company, ABA # 011000028, and DDA # 99011538.
Specify the Fund name, your class of shares, your account number and the registered account name(s). Your bank may charge you for such a transfer. |
15
Opening an Account | Adding to an Account | |||
Through Automated Clearing House (ACH) | ||||
[ACH icon] | Although you cannot open an account through ACH, you may add this feature by selecting it on your account application.
Ask your bank or credit union whether it is a member of the ACH system. |
Call Natixis Funds at 800-225-5478 or visit www.funds.natixis.com to add shares to your account through ACH.
If you have not signed up for the ACH system, please call Natixis Funds or visit www.funds.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege.
Shares purchased through ACH may not be available immediately for redemption. See the section Selling Restrictions. |
16
Fund Services
Selling Shares
To Sell Some or All of Your Shares
Certain restrictions may apply. Investments made by check or through ACH may not be available immediately for redemption. See the section Restrictions on Buying and Selling Shares.
Through Your Investment Dealer | ||
Call your investment dealer for information. Dealers may also charge you a processing or service fee in connection with the redemption of fund shares. | ||
By Mail | ||
Write a letter to request a redemption. Specify the name of your fund, class of shares, account number, the exact registered account name(s), the number of shares or the dollar amount to be redeemed and the method by which you wish to receive your proceeds. Additional materials may be required. See the section Selling Shares in Writing. | ||
[envelope icon] |
The request must be signed by all of the owners of the shares and must include the capacity in which they are signing, if appropriate. | |
Mail your request by regular mail to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579 or by registered, express or certified mail to Natixis Funds, 330 West 9th Street, Kansas City, MO 64105-1514. | ||
Your proceeds will be delivered by the method chosen in your letter. Proceeds delivered by mail will generally be mailed to you within three business days after the request is received in good order. See the section Selling Restrictions. | ||
By Wire | ||
Complete the Bank Information section on your account application. | ||
[wire icon] |
Call Natixis Funds at 800-225-5478 or indicate in your redemption request letter (see above) that you wish to have your proceeds wired to your bank. | |
Proceeds will generally be wired on the next business day. A wire fee will be deducted from the proceeds. Your bank may charge you a fee to receive the wire. |
17
Through Automated Clearing House | ||
Ask your bank or credit union whether it is a member of the ACH system. | ||
Complete the Bank Information section on your account application. | ||
[ACH icon] |
If you have not signed up for the ACH system on your application, please call Natixis Funds at 800-225-5478 for a Service Options Form. A medallion signature guarantee may be required to add this privilege. | |
Call Natixis Funds to request an ACH redemption. | ||
Proceeds will generally arrive at your bank within three business days. See the section Selling Restrictions. | ||
By Telephone | ||
[telephone icon] |
Call Natixis Funds at 800-225-5478 to choose the method you wish to use to redeem your shares. You may receive your proceeds by mail, by wire or through ACH (see above). Subject to certain restrictions. See the section Selling Restrictions. |
Selling Shares in Writing
If you wish to redeem your shares in writing, all owners of the shares must sign the redemption request in the exact names in which the shares are registered and indicate any special capacity in which they are signing. In certain situations, you will be required to make your request to sell shares in writing. In these instances, a letter of instruction signed by the authorized owner is necessary. In certain situations, we also may require a medallion signature guarantee or additional documentation.
A medallion signature guarantee protects you against fraudulent orders and is necessary if:
| your address of record or bank account information has been changed within the past 30 days; |
| you are selling more than $100,000 worth of shares and you are requesting the proceeds by check; |
| a proceeds check for any amount is either mailed to an address other than the address of record or not payable to the registered owner(s); or |
| the proceeds are sent by check, wire, or in some circumstances ACH to a bank account whose owner(s) do(es) not match the owner(s) of the fund account. |
A notary public cannot provide a medallion signature guarantee. The Fund will only accept medallion signature guarantees bearing the STAMP2000 Medallion imprint. A medallion signature guarantee can be obtained from one of the following sources:
| a financial representative or securities dealer; |
| a federal savings bank, cooperative, or other type of bank; |
| a savings and loan or other thrift institution, or a credit union; or |
| a securities exchange or clearing agency. |
In some situations additional documentation may be necessary. Please contact your financial representative or Natixis Funds regarding documentation requirements.
18
Fund Services
Institutional Class shares of the Fund will not have exchange privileges with any other fund. Please refer to the SAI for more detailed information on exchanging Fund shares.
Restrictions on Buying, Selling and Exchanging Shares
Frequent purchases and redemptions of Fund shares by shareholders may present certain risks for other shareholders in the Fund. This includes the risk of diluting the value of Fund shares held by long-term shareholders, interfering with the efficient management of the Funds portfolio, and increasing brokerage and administrative costs. Funds investing in securities that require special valuation processes (such as foreign securities, high yield securities, or small cap securities) may also have increased exposure to these risks. The Fund discourages excessive, short-term trading that may be detrimental to the Fund and its shareholders. The Board of Trustees has adopted the following policies to address and discourage frequent purchases and redemptions of Fund shares.
The Fund reserves the right to suspend or change the terms of purchasing shares. The Fund and the Distributor reserve the right to reject any purchase or exchange order for any reason, including if the transaction is deemed not to be in the best interests of the Funds other shareholders or possibly disruptive to the management of the Fund. A shareholder whose exchange order has been rejected may still redeem its shares by submitting a redemption request as described above under Selling Shares.
Limits on Frequent Trading. Without limiting the right of the Fund and the Distributor to reject any purchase or exchange order, the Fund and the Distributor may (but are not obligated to) restrict purchases for the accounts of market timers. An account may be deemed to be one of a market timer if it makes two round trips in the Fund over a 90-day interval, as determined by the Fund. A round trip is a purchase into the Fund followed by a redemption of any amount out of the Fund. The above limits are applicable whether you hold shares directly with the Fund or indirectly through a financial intermediary, such as a broker, bank, investment adviser, recordkeeper for retirement plan participants, or other third party. The preceding is not an exclusive description of activities that the Fund and the Distributor may consider to be market timing.
Notwithstanding the above, certain financial intermediaries, such as retirement plan administrators, may monitor and restrict the frequency of purchase and redemption transactions in a manner different from that described above. The policies of these intermediaries may be more or less restrictive than the generally applicable policies described above. The Fund may choose to rely on a financial intermediarys restrictions on frequent trading in place of the Funds own restrictions if the Fund determines, in its discretion, that the financial intermediarys restrictions provide reasonable protection for the Fund from excessive short-term trading activity. Please contact your financial representative for additional information regarding their policies for limiting the frequent trading of Fund shares.
This policy also does not apply with respect to shares purchased by a fund-of-funds or similar asset allocation program that rebalances its investments no more frequently than quarterly. To be eligible for this exemption, the fund-of-funds or asset allocation program must identify itself to and receive prior written approval from the Fund or the Distributor. The Fund and Distributor may request additional information to enable them to determine that the fund-of-funds or asset allocation program is not designed to and/or is not serving as a vehicle for disruptive short-term trading, which may include requests for (i) written assurances from the sponsor or investment manager of the fund-of-funds or asset allocation program that it enforces the Funds frequent trading policy on investors or another policy reasonably designed to deter disruptive short-term trading in Fund shares, and/or (ii) data regarding transactions by investors in the fund-of-funds or asset allocation program, for periods and on a frequency determined by the Fund and Distributor, so that the Fund can monitor compliance by such investors with the trading limitations of the Fund or of the fund-of-funds or asset allocation program.
19
Trade Activity Monitoring. Trading activity is monitored selectively on a daily basis in an effort to detect excessive short-term trading activities. If the Fund or the Distributor believes that a shareholder or financial intermediary has engaged in market timing or other excessive, short-term trading activity, it may, in its discretion, request that the shareholder or financial intermediary stop such activities or refuse to process purchases or exchanges in the accounts. In its discretion, the Fund or the Distributor may restrict or prohibit transactions by such identified shareholders or intermediaries. In making such judgments, the Fund and the Distributor seek to act in a manner that they believe is consistent with the best interests of all shareholders. The Fund and the Distributor also reserve the right to notify financial intermediaries of your trading activity.
Accounts Held by Financial Intermediaries. The ability of the Fund and the Distributor to monitor trades that are placed by omnibus or other nominee accounts is more limited in those instances in which the financial intermediary maintains the record of the Funds underlying beneficial owners. In general, the Fund and the Distributor will review trading activity at the omnibus account level. If the Fund and the Distributor detect suspicious activity, they may request and receive personal identifying information and transaction histories for some or all underlying shareholders (including plan participants) to determine whether such shareholders have engaged in market timing or other excessive, short-term trading activity. If the Fund believes that a shareholder has engaged in market timing or other excessive, short-term trading activity in violation of the Funds policies through an omnibus account, the Fund will attempt to limit transactions by the underlying shareholder which engaged in such trading, although it may be unable to do so. The Fund may also limit or prohibit additional purchases of Fund shares by an intermediary.
Investors should not assume the Fund will be able to detect or prevent all market timing or other trading practices that may disadvantage the Fund.
Purchase Restrictions
The Fund is required by federal regulations to obtain certain personal information from you and to use that information to verify your identity. The Fund may not be able to open your account if the requested information is not provided. The Fund reserves the right to refuse to open an account, close an account and redeem your shares at the then current price or take other such steps that the Fund deems necessary to comply with federal regulations if your identity cannot be verified.
Selling Restrictions
The table below describes restrictions placed on selling shares of the Fund described in this Prospectus. Please see the SAI for additional information regarding redemption payment policies:
Restriction | Situation | |
The Fund may suspend the right of redemption or postpone payment for more than 7 days: | When the NYSE is closed (other than a weekend/holiday) as permitted by the SEC | |
During an emergency as permitted by the SEC | ||
During any other period permitted by the SEC | ||
The Fund reserves the right to suspend account services or refuse transaction requests: | With a notice of a dispute between registered owners or death of a registered owner
With suspicion/evidence of a fraudulent act | |
The Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities in lieu of cash or may take up to 7 days to pay a redemption request in order to raise capital: | When it is detrimental for the Fund to make cash payments as determined in the sole discretion of the adviser or subadviser | |
The Fund may withhold redemption proceeds for 10 days from the purchase date: | When redemptions are made within 10 calendar days of purchase by check or ACH to allow the check or ACH transaction to clear |
Although most redemptions are made in cash, as described in the SAI, the Fund reserves the right to redeem shares in kind. If a shareholder receives a distribution in kind, the shareholder will bear the market risk associated with the distributed securities and would incur brokerage or other charges in converting the securities to cash.
20
Fund Services
Net asset value is the price of one share of the Fund without a sales charge, and is calculated each business day using this formula:
Net Asset Value = | Total market value of securities + Cash and other assets Liabilities | |
Number of outstanding shares |
The net asset value of Fund shares is determined pursuant to policies and procedures approved by the Board of Trustees, as summarized below:
| A shares net asset value is determined at the close of regular trading on the NYSE on the days the NYSE is open for trading. This is normally 4:00 p.m. Eastern time. The Funds shares will not be priced on the days on which the NYSE is closed for trading. In addition, the Funds shares will not be priced on the holidays listed in the SAI. See the section Net Asset Value in the SAI for more details. |
|
The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated after your order is received in good order.1 |
|
Requests received by the Fund after the NYSE closes will be processed based upon the net asset value determined at the close of regular trading on the next day that the NYSE is open. The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated after your order is received by the transfer agent in good order. If the transfer agent receives the order in good order by 4:00 p.m. Eastern time, the shareholder will receive that days net asset value. Under limited circumstances, the Distributor may enter into contractual agreements pursuant to which orders received by your investment dealer before the Fund determines its net asset value (normally 4:00 p.m. Eastern time) are processed at the net asset value determined on the day the order was received by your investment dealer. Please contact your investment dealer to determine whether it has entered into such a contractual agreement. If your investment dealer has not entered into such a contractual agreement, your order will be processed at the net asset value next determined after your investment dealer submits the order to the Fund. |
Generally, during times of substantial economic or market change, it may be difficult to place your order by phone. During these times, you may deliver your order in person to the Distributor or send your order by mail as described in the sections Buying Shares and Selling Shares.
Generally, Fund securities are valued as follows:
| Equity securities market price or as provided by a pricing service if market price is unavailable. |
| Debt securities (other than short-term obligations) based upon pricing service valuations, which determine valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. |
| Short-term obligations (purchased with an original or remaining maturity of 60 days or less) amortized cost (which approximates market value). |
| Options The Fund generally values index options at the average of the closing bid and asked quotations. |
| Futures unrealized gain or loss on the contract using current settlement price. When a settlement price is not used, futures contracts will be valued at their fair value as determined by or pursuant to procedures approved by the Board of Trustees. |
1 | Please see the Buying Shares section which provides additional information regarding who can receive a purchase order. |
21
| Foreign Currency Forward Contracts the unrealized gains or losses on the contracts, as measured by the difference between the contractual forward foreign exchange rates and the forward rates. |
| All other securities fair market value as determined by the adviser or subadviser of the Fund pursuant to procedures approved by the Board of Trustees. |
As described above, if market prices are not readily available for a security, securities may not be priced on the basis of quotations from the primary market in which they are traded but rather may be priced by another method that the Board of Trustees believes is more likely to result in a price that reflects fair value (which is the amount that the Fund might reasonably expect to receive from a current sale of the security in the ordinary course of business). The Fund may also value securities at fair value or estimate their value pursuant to procedures approved by the Board of Trustees in other circumstances such as when extraordinary events occur after the close of the relevant market but prior to the close of the NYSE. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuers security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine the Funds net asset value may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.
The Fund will generally distribute most or all of its net investment income (other than capital gains) in the form of dividends. The Fund expects to distribute dividends annually. The Fund expects to distribute all net realized long- and short-term capital gains annually, after applying any available capital loss carryovers. To the extent permitted by law, the Board of Trustees may adopt a different schedule as long as payments are made at least annually.
Distributions will automatically be reinvested in shares of the same class of the distributing Fund at net asset value, unless you select one of the following alternatives:
| Receive distributions from dividends and interest in cash while reinvesting distributions from capital gains in additional shares of the same class of the Fund, or in the same class of another Natixis Fund. |
| Receive all distributions in cash. |
For more information or to change your distribution option, contact Natixis Funds in writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a Natixis Fund held in a non-retirement plan account, you will receive a Form 1099 to help you report the prior calendar years distributions on your federal income tax return. This information will also be reported to the Internal Revenue Service. Be sure to keep this Form 1099 as a permanent record. A fee may be charged for any duplicate information requested.
22
Except where noted, the discussion below addresses only the U.S. federal income tax consequences of an investment in the Fund and does not address any foreign, state or local tax consequences.
The Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code) necessary to qualify for treatment as a regulated investment company, and thus does not expect to pay any federal income tax on income and capital gains distributed to shareholders.
Taxation of Distributions from the Fund. For federal income tax purposes, distributions of investment income are generally taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long a shareholder has owned his or her shares. Distributions attributable to the excess of net long-term capital gains from the sale of investments the Fund owned for more than one year over net short-term capital losses and that are designated by the Fund as capital gain dividends (Capital Gain Dividends) will generally be taxable to a shareholder receiving such distributions as long-term capital gain. Distributions attributable to the excess of net short-term capital gains from the sale of investments that the Fund owned for one year or less over net long-term capital losses will be taxable as ordinary income.
For taxable years beginning before January 1, 2011, distributions of investment income designated by the Fund as derived from qualified dividend income will be taxed in the hands of individuals at the rates applicable to long-term capital gain, provided holding period and other requirements are met at both the shareholder and Fund levels. Income generated by investments in derivatives, fixed income securities and REITs is generally not eligible for treatment as qualified dividend income.
For taxable years beginning before January 1, 2011, long-term capital gain rates applicable to individuals have been temporarily reduced to, in general, 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets.
Dividends and distributions declared by the Fund in October, November or December of one year and paid in January of the next taxable year generally are taxable in the year in which the distributions are declared, rather than the calendar year in which the distributions are received.
Dividends derived from interest on securities issued by the U.S. government or its agencies or instrumentalities, if any, may be exempt from state and local income taxes. The Fund will advise shareholders annually of the proportion of the Funds dividends that are derived from such interest.
Fund distributions are taxable to you even if they are paid from income or gains earned by the Fund before your investment (and thus were included in the price you paid for your shares). Such distributions are likely to occur in respect of shares purchased at a time when the relevant Funds net asset value reflects gains that are either unrealized or realized but not distributed. Fund distributions paid to you are taxable whether you receive them in cash or reinvest them in additional shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt treatment under federal income tax laws generally will not be taxable.
Sales or Exchanges of Fund Shares. The redemption, sale or exchange of the Funds shares is a taxable event and will generally result in recognition of gain or loss. Gain or loss, if any, recognized on the redemption, sale, exchange or other disposition of the Funds shares will be taxed as a long-term capital gain or loss if the shares are capital assets in the shareholders hands and if the shareholder held the shares for more than one year.
Taxation of Certain Investments. The Funds investment in certain debt obligations, mortgage-backed securities, asset-backed securities and derivatives may cause the Fund to recognize taxable income in excess of the cash generated by such investments. Thus, the Fund could be required to liquidate investments, including at times when it may not be advantageous to do so, in order to satisfy the distribution requirements applicable to regulated investment companies under the Code.
The Funds investments in foreign securities may be subject to foreign withholding and other taxes. In that case, the Funds yield on those securities would be decreased. Shareholders will not be entitled to claim a credit or deduction with respect to such foreign taxes incurred by the Fund. In addition, the Funds investments in certain foreign securities or in foreign currencies may be subject to special tax rules that accelerate or increase the recognition of income by the Fund, which may in turn affect the timing or amount of the Funds distributions to shareholders.
23
Non-U.S. Shareholders. In general, dividends (other than Capital Gain Dividends) paid to a shareholder that is not a U.S. person within the meaning of the Code are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate). Non-U.S. shareholders should consult their tax advisers about the precise tax consequences of an investment in the Fund.
Backup Withholding. The Fund is also required in certain circumstances to apply backup withholding on taxable dividends, redemption proceeds and certain other payments that are paid to any shareholder (including a shareholder who is neither a citizen nor a resident of the U.S.) who or which does not furnish the Fund certain information and certifications or who or which is otherwise subject to backup withholding. The backup withholding tax rate is 28% for amounts paid through 2010 and will be 31% for amounts paid after December 31, 2010. Backup withholding will not, however, be applied to payments that have been subject to the 30% withholding tax on shareholders who are neither citizens nor residents of the United States.
Please see the SAI for additional information on the federal income tax consequences of an investment in the Fund. You should consult your tax adviser for more information on your own situation, including possible federal, state, local, foreign or other applicable taxes.
24
Compensation to Securities Dealers
The Distributor, the Adviser and their affiliates may, out of their own resources, make payments to dealers and other financial intermediaries that satisfy certain criteria established from time to time by the Distributor. Payments may vary based on sales, the amount of assets a dealers or intermediarys clients have invested in the Fund, and other factors. These payments may also take the form of sponsorship of informational meetings or payments for attendance by persons associated with a dealer or intermediary at informational meetings. The Distributor and its affiliates may also make payments for recordkeeping and other transfer agency-related services to dealers and intermediaries that sell Fund shares.
The payments described in this section, which may be significant to the dealers and the financial intermediaries, may create an incentive for a dealer or financial intermediary or their representatives to recommend or sell shares of a particular fund or share class over other mutual funds or share classes. Additionally, these payments may result in the Funds inclusion on a sales list, including a preferred or select sales list, or in other sales programs. Please see the SAI for additional information about payments made by the Distributor and its affiliates to dealers and intermediaries. Please also contact your dealer or financial intermediary for details about payments it may receive.
25
Financial Performance
Because the Fund has no performance history as of the date of this Prospectus, a financial highlights table for the Fund has not been included in this Prospectus.
26
Capital gain distributions Payments to the Funds shareholders of net profits earned from selling securities in the Funds portfolio. Capital gain distributions are usually paid once a year.
Derivative A financial instrument whose value and performance are based on the value and performance of another security or financial instrument.
Diversification The strategy of investing in a wide range of securities representing different market sectors to reduce the risk if an individual company or one sector suffers losses.
Inflation A general increase in prices coinciding with a fall in the real value of money, as measured by the Consumer Price Index.
Interest rate Rate of interest charged for the use of money, usually expressed at an annual rate.
Maturity The final date on which the payment of a debt instrument (e.g., bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds generally have maturities of up to 5 years; intermediate-term bonds between 5 and 15 years; and long-term bonds over 15 years.
Net assets The Funds assets minus its liabilities.
Net asset value (NAV) per share The market value of one share of the Fund on any given day without taking into account any front-end sales charge. It is determined by dividing the Funds total net assets by the number of shares outstanding.
Volatility The general variability of a portfolios value resulting from price fluctuations of its investments. In most cases, the more diversified a portfolio is, the less volatile it will be.
Yield The rate at which the Fund earns income, expressed as a percentage. Mutual fund yield calculations are standardized, based upon a formula developed by the SEC.
27
If you would like more information about the Fund, the
following documents will be available free upon request:
Annual and Semiannual Reports When available, will provide additional information about the Funds investments.
Each report will include a discussion of the market conditions and investment strategies
that significantly affected the Funds performance during its last fiscal year.
Statement of Additional Information (SAI) Provides more detailed information about
the Fund and its investment limitations and policies. The SAI has been filed
with the SEC and is incorporated into this Prospectus by reference.
To order a free copy of the Funds annual or semiannual report (when available), or its SAI, to request other information
about the Fund and to make shareholder inquiries generally, contact your financial representative,
visit the Funds website at www.funds.natixis.com or call the Fund at 800-225-5478.
Important Notice Regarding Delivery of Shareholder Documents:
In our continuing effort to reduce your funds expenses and the amount of mail that you receive from us, we will combine
mailings of prospectuses, annual or semiannual reports and proxy statements to your household.
If more than one family member in your household owns the same fund or funds described in a single prospectus, report or
proxy statement, you will receive one mailing unless you request otherwise. Additional copies of our prospectuses, reports or
proxy statements may be obtained at any time by calling 800-225-5478. If you are currently receiving multiple mailings to your
household and would like to receive only one mailing or if you wish to receive separate mailings for each member of your
household in the future, please call us at the telephone number listed above and we will resume separate mailings within 30
days of your request.
Your financial representative or Natixis Funds will also be happy to
answer your questions or to provide any additional information that you may require.
Information about the Fund, including its reports and SAI, can be reviewed and copied at the Public Reference Room of the
SEC in Washington, D.C. Text-only copies of the Funds reports and SAI are available free from the EDGAR Database on the
SECs Internet site at: www.sec.gov. Copies of this information may also be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the SECs Public Reference Section,
Washington, D.C. 20549-0102.
Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090.
Portfolio Holdings A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio
securities is available in the Funds SAI.
Natixis Distributors, L.P. (Natixis Distributors), and other firms selling shares of Natixis Funds are members of the
Financial Industry Regulatory Authority (FINRA). As a service to investors, FINRA has asked that we inform you of the
availability of a brochure on its Public Disclosure Program. The program provides access to information about securities
firms and their representatives. Investors may obtain a copy by contacting FINRA at 800-289-9999 or by visiting its website at www.FINRA.org.
Natixis Distributors distributes the Natixis Funds and Loomis Sayles Funds. If you have a complaint concerning
Natixis Distributors or any of its representatives or associated persons, please direct it to Natixis Distributors, L.P., Attn:
Director of Compliance, 399 Boylston Street, Boston, MA 02116 or call us at 617-449-2828.
(Investment Company Act File No. 811-00242)
28
STATEMENT OF ADDITIONAL INFORMATION
, 2008
NATIXIS FUNDS TRUST II
ASG GLOBAL ALTERNATIVES FUND
This Statement of Additional Information (the Statement) contains specific information which may be useful to investors but which is not included in the prospectuses of the ASG Global Alternatives Fund (the Fund), a series of Natixis Funds Trust II (the Trust). This Statement is divided into two parts, Part I and Part II. This Statement is not a prospectus and is only authorized for distribution only when accompanied or preceded by the Funds Class A and C prospectus or the Funds Institutional Class prospectus, each dated , 2008 (the Prospectus or Prospectuses), as from time to time revised or supplemented. This Statement should be read together with the Prospectuses. Investors may obtain the Prospectuses without charge from Natixis Distributors, L.P. (the Distributor), Prospectus Fulfillment Desk, 399 Boylston Street, Boston, Massachusetts 02116, by calling Natixis Funds at 800-225-5478 or by visiting the Funds website at www.funds.natixis.com.
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2
PART I OF STATEMENT OF ADDITIONAL INFORMATION
The following is a description of restrictions on the investments to be made by the Fund. These restrictions are fundamental policies that may not be changed without the vote of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended (the 1940 Act)). The percentages set forth below and the percentage limitations set forth in the Prospectuses apply at the time of the purchase of a security and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of a purchase of such security.
The Fund may not:
(1) | Purchase any security (other than U.S. government securities) if, as a result, 25% or more of the Funds total assets (taken at current value) would be invested in any one industry, except that the Fund will invest at least 25% of its assets in securities and other obligations of issuers in the banking industry. For purposes of this restriction, telephone, gas and electric public utilities are each regarded as separate industries and finance companies whose financing activities are related primarily to the activities of their parent companies are classified in the industry of their parents. For purposes of this restriction, securities and other obligations of issuers in the banking industry are considered to be one industry, and asset-backed securities are not considered to be bank obligations. |
(2) | Make short sales of securities or maintain a short position, except that the Fund may make any short sales or maintain any short positions where the short sales or short positions would not constitute senior securities under the 1940 Act. |
(3) | Borrow money, except to the extent permitted under the 1940 Act. |
(4) | Make loans, except that the Fund may purchase or hold debt instruments in accordance with its investment objectives and policies, provided however, this restriction does not apply to repurchase agreements or loans of portfolio securities. |
(5) | Act as an underwriter of securities of other issuers except that, in the disposition of portfolio securities, it may be deemed to be an underwriter under the federal securities laws. |
(6) | Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. |
(7) | Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act. |
The Fund may:
(8) | Purchase and sell commodities to the maximum extent permitted by applicable law. |
Restrictions (2) and (7) shall be interpreted based upon no-action letters and other pronouncements of the staff of the Securities and Exchange Commission (SEC). With respect to restriction (3), the 1940 Act limits a funds ability to borrow money on a non-temporary basis if such borrowings constitute senior securities. In addition to temporary borrowing, a fund may borrow from any bank, provided that immediately after any such borrowing there is an asset coverage of at least 300% for all borrowings by a fund and provided further, that in the event that such asset coverage shall at any time fall below 300%, a fund shall, within three days (not including Sundays and holidays) thereafter or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowing shall be at least 300%. The Fund may also borrow money or engage in economically similar transactions if those transactions do not constitute senior securities under the 1940 Act.
Under current pronouncements, certain positions (e.g., reverse repurchase agreements) are excluded from the definition of senior security so long as the Fund maintains adequate cover, segregation of assets or otherwise.
3
Similarly, a short sale will not be considered a senior security if a fund takes certain steps contemplated by SEC staff pronouncements, such as ensuring the short sale transaction is adequately covered. In addition, it is contrary to the Funds present policy, which may be changed without shareholder vote, to purchase any illiquid security, including any securities whose disposition is restricted under federal securities laws and securities that are not readily marketable, if, as a result, more than 15% of the Funds net assets (based on current value) would then be invested in such securities. The staff of the SEC is presently of the view that repurchase agreements maturing in more than seven days are subject to this restriction. Until that position is revised, modified or rescinded, the Fund will conduct its operations in a manner consistent with this view. This limitation on investment in illiquid securities does not apply to certain restricted securities, including securities issued pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act) and certain commercial paper, that the Adviser or Subadviser has determined to be liquid under procedures approved by the Board of Trustees. The Fund will take prompt and reasonable action to reduce its illiquid securities holdings if more than 15% of the Funds net assets are invested in such securities.
ADVISORY FEES
Pursuant to an investment advisory agreement, AlphaSimplex Group, LLC (AlphaSimplex or the Adviser) has agreed to manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the Board of Trustees of the Trust. For the services described in the advisory agreement, the Fund has agreed to pay the Adviser an advisory fee at the annual rate set forth in the following table, reduced by the amount of any subadvisory fees payable directly by the Fund to the Subadviser pursuant to the subadvisory agreement.
Fund |
Advisory fee payable by Fund to Adviser (as a % of average daily net assets of the Fund) | |
ASG Global Alternatives Fund |
[ ]% of the first $[ ] billion | |
[ ]% of amounts in excess of $[ ] billion |
The Adviser has given a binding undertaking to the Fund to reduce the advisory fee and, if necessary, to bear certain expenses related to operating the Fund in order to limit its expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes and organizational and extraordinary expenses, to an annual rate of [ ]%, [ ]% and [ ]% of the average daily net assets of Class A, Class C and Institutional Class shares, respectively. The undertaking is in effect until , and is reevaluated on an annual basis.
The Fund is newly formed and has not incurred any advisory fees as of the date of this Statement.
SUBADVISORY FEES
The advisory agreement between AlphaSimplex and the Fund provides that the Adviser may delegate its responsibilities thereunder to other parties. Pursuant to a separate subadvisory agreement, the Adviser has delegated some of its portfolio management responsibilities to a subadviser, Reich & Tang Asset Management, LLC (Reich & Tang or the Subadviser), which would manage the portion of the Funds assets that will be invested in money market and other short-term, high quality securities (the Money Market Portion). For the services described in the subadvisory agreement, the Fund has agreed to pay Subadviser a subadvisory fee at the annual rate set forth in the following table:
Fund |
Subadvisory fee payable to Adviser (as a % of average daily net assets of the Fund) | |
ASG Global Alternatives Fund |
[ ]% of the first $[ ] billion | |
[ ]% of amounts in excess of $[ ] billion |
The Fund is newly formed and has not incurred any subadvisory fees as of the date of this Statement.
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BROKERAGE COMMISSIONS
The Fund is newly formed and thus has not incurred any brokerage commissions as of the date of this Statement.
For a description of how transactions in portfolio securities are effected and how the Adviser selects brokers, see the section entitled Portfolio Transactions and Brokerage.
SALES CHARGES AND 12B-1 FEES
As explained in Part II of this Statement, the Class A and Class C shares of the Fund pay the Distributor fees under plans adopted pursuant to Rule 12b-1 under the 1940 Act (the Plans). The Fund is newly formed and thus has not paid any Rule 12b-1 fees as of the date of this Statement. Compensation payable under the Plans may be paid regardless of the Distributors expenses. The anticipated benefits to the Fund of the Plans include the ability to attract and maintain assets.
The Fund is newly formed and thus, to the Funds knowledge, there are no persons who own of record or beneficially 5% or more of the outstanding shares of the Fund.
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PART II OF STATEMENT OF ADDITIONAL INFORMATION
Natixis Funds Trust II is registered with the Securities and Exchange Commission (the SEC) as an open-end management investment company and is organized as a Massachusetts business trust under the laws of Massachusetts pursuant to a Declaration of Trust dated May 6, 1931, as last amended and restated on June 2, 2005, and consisted of a single Fund (now the Harris Associates Large Cap Value Fund) until January 1989, when the Trust was reorganized as a series company as described in Section 18(f)(2) of the 1940 Act. Each series of the Trust is diversified. The name of the Trust has changed several times since its organization as noted below:
Name of Trust |
Date | |
Investment Trust of Boston | May 1931 to November 1988 | |
Investment Trust of Boston Funds | December 1988 to April 1992 | |
TNE Funds Trust | April 1992 to March 1994 | |
New England Funds Trust II | April 1994 to January 2000 | |
Nvest Funds Trust II | January 2000 to April 2001 | |
CDC Nvest Funds Trust II | May 2001 to April 2005 | |
IXIS Advisor Funds Trust II | April 2005 to August 2007 | |
Natixis Funds Trust II | August 2007 to present |
INVESTMENT STRATEGIES AND RISKS
Investment Strategies
The following is a list of certain investment strategies, including particular types of securities or instruments or specific practices that may be used by the Adviser in managing the Fund. Because of the Funds extensive use of derivative instruments, the Fund will be subject to many of the risks below indirectly through its derivative transactions rather than directly through investment in the actual securities themselves. For example, to the extent the Fund enters into a futures contract on an equity index, the Fund will be subject to equity securities risk. The Funds principal strategies are described in the Prospectuses. This Statement describes some of the non-principal strategies the Fund may use, in addition to providing additional information, including related risks, about its principal strategies.
The list of securities or other instruments under each category below is not intended to be an exclusive list of securities for investment and unless a strategy, practice or security is specifically prohibited by the investment restrictions listed in the Prospectuses, under Investment Restrictions in Part I of this Statement, or under applicable law, the Fund may engage in strategies and invest in securities and instruments in addition to those listed below. The Adviser may invest in a general category listed below and where applicable with particular emphasis on a certain type of security but investment is not limited to the categories listed below or the securities specifically enumerated under each category. The Adviser may invest in any security that falls under the specific category including securities that are not listed below. The Subadviser will invest the Funds Money Market Portion only in money market and similar short-term instruments. The Prospectuses and/or this Statement will be updated if the Fund begins to engage in investment practices that are not described in the Prospectuses and/or this Statement.
Adjustable Rate Mortgage Security (ARM)
An ARM, like a traditional mortgage security, is an interest in a pool of mortgage loans that provides investors with payments consisting of both principal and interest, as mortgage loans in the underlying mortgage pool are paid off by the borrowers. ARMs have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on changes in market interest rates or changes in the issuers creditworthiness. Since the interest rates are reset only periodically,
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changes in the interest rate on ARMs may lag behind changes in prevailing market interest rates. Also, some ARMs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods. Because of the resetting of interest rates, ARMs are less likely than non-adjustable rate securities of comparable quality and maturity to increase significantly in value when market interest rates fall. In addition, the Fund will not benefit from increases in interest rates to the extent that interest rates rise to the point where they cause the current coupon of the underlying ARM to exceed a cap rate for a particular mortgage.
Asset-Backed Securities
The securitization techniques used to develop mortgage securities are also being applied to a broad range of other assets. Mortgage-backed securities are a type of asset-backed security. Through the use of trusts and special purpose vehicles, assets, such as automobile and credit card receivables, are being securitized in pass-through structures similar to mortgage pass-through structures or in a pay-through structure similar to a collateralized mortgage obligation structure (described below). Generally, the issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities is of shorter maturity than mortgage loans. Instruments backed by pools of receivables are similar to mortgage-backed securities in that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are prepaid, the Fund will ordinarily reinvest the prepaid amounts in securities, the yields of which reflect interest rates prevailing at the time. Therefore, the Funds ability to maintain a portfolio that includes high-yielding asset-backed securities will be adversely affected to the extent that prepayments of principal must be reinvested in securities that have lower yields than the prepaid obligations. Moreover, prepayments of securities purchased at a premium could result in a realized loss. In addition, the value of some mortgage-backed or asset-backed securities in which the Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Adviser to forecast interest rates and other economic factors correctly. The market for mortgage-backed and asset-backed securities has recently experienced high volatility and a lack of liquidity. As a result, the value of many of these securities has significantly declined. There can be no assurance that these markets will become more liquid or less volatile, and it is possible that the value of these securities could decline further.
Investments in Banks
The Fund may invest in certificates of deposit (certificates representing the obligation of a bank to repay funds deposited with it for a specified period of time), time deposits (non-negotiable deposits maintained in a bank for a specified period of time up to seven days at a stated interest rate), bankers acceptances (credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer) and other securities and instruments issued by domestic banks, foreign branches of domestic banks, foreign subsidiaries of domestic banks, and domestic and foreign branches of foreign banks. Banks are also expected to serve as counterparties on some of the Funds derivative contracts.
Investments by the Money Market Portion in obligations of domestic banks, foreign branches of domestic banks and foreign subsidiaries of domestic banks generally will be limited to banks having total assets in excess of $1 billion or the equivalent in other currencies. Investments by the Money Market Portion in obligations of domestic and foreign branches of foreign banks generally will be limited to dollar denominated obligations of such banks which at the time of investment have more than $5 billion, or the equivalent in other currencies, in total assets. The Money Market Portion will only invest in either securities which have been rated (or whose issuers have been rated) in the two highest short-term rating categories by nationally recognized statistical rating organizations, or are unrated securities but which have been determined by the Subadviser to be of comparable quality. The total assets of a bank will not be the sole factor determining the Subadvisers investment decisions.
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The Fund may also purchase U.S. dollar-denominated obligations issued by foreign branches of domestic banks or foreign branches of foreign banks (Eurodollar obligations) and domestic branches of foreign banks (Yankee dollar obligations).
Eurodollar and other foreign obligations involve special investment risks, including the possibility that (i) liquidity could be impaired because of future political and economic developments, (ii) the obligations may be less marketable than comparable domestic obligations of domestic issuers, (iii) a foreign jurisdiction might impose withholding taxes on interest income payable on those obligations, (iv) deposits may be seized or nationalized, (v) foreign governmental restrictions such as exchange controls may be adopted which might adversely affect the payment of principal and interest on those obligations, (vi) the selection of foreign obligations may be more difficult because there may be less information publicly available concerning foreign issuers, (vii) there may be difficulties in enforcing a judgment against a foreign issuer or (viii) the accounting, auditing and financial reporting standards, practices and requirements applicable to foreign issuers may differ from those applicable to domestic issuers. In addition, foreign banks are not subject to examination by U.S. Government agencies or instrumentalities.
The restrictions in this section will not apply to any investments that are not part of the Money Market Portion. For example, these restrictions will not limit which banks may serve as counterparties for the Funds derivative instruments.
Bank Loans and Loan Participations
The Fund may invest in bank loans, which include senior secured and unsecured floating rate loans made by banks and other financial institutions to corporate customers. Typically, these loans hold the most senior position in a borrowers capital structure, may be secured by the borrowers assets and have interest rates that reset frequently. These loans generally will not be rated investment-grade by the rating agencies. Economic downturns generally lead to higher non-payment and default rates and a senior loan could lose a substantial part of its value prior to a default. However, as compared to junk bonds, senior floating rate loans are typically senior in the capital structure and are often secured by collateral of the borrower. The Funds investments in loans are subject to credit risk, and even secured bank loans may not be adequately collateralized. The interest rates of bank loans reset frequently, and thus bank loans are subject to interest rate risk. Most bank loans, like most investment-grade bonds, are not traded on any national securities exchange. Bank loans generally have less liquidity than investment-grade bonds and there may be less public information available about them. The Fund may participate in the primary syndicate for a loan or it may also purchase loans from other lenders (sometimes referred to as loan assignments). The Fund may also acquire a participation interest in another lenders portion of the senior loan. In such a case, the Fund would not have a debtor-creditor relationship with the borrower, but would have a contractual relationship with, and be exposed to, the credit of the participating bank.
Collateralized Mortgage Obligations (CMOs)
The Fund may invest in CMOs. CMOs are securities backed by a portfolio of mortgages or mortgage securities held under indentures. The underlying mortgages or mortgage securities are issued or guaranteed by the U.S. government or an agency or instrumentality thereof. The issuers obligation to make interest and principal payments is secured by the underlying portfolio of mortgages or mortgage securities. CMOs are issued with a number of classes or series which have different maturities and which may represent interests in some or all of the interest or principal on the underlying collateral or a combination thereof. CMOs of different classes are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. In the event of sufficient early prepayments on such mortgages, the class or series of CMO first to mature generally will be retired prior to its maturity. Thus, the early retirement of a particular class or series of CMO held by the Fund would have the same effect as the prepayment of mortgages underlying a mortgage pass-through security. CMOs and other asset-backed and mortgage-backed securities may be considered derivative securities. CMOs involve risks similar to those described under Mortgage-Related Securities below.
Commodities General
Commodities are assets that have tangible properties, such as oil, metals, livestock or agricultural products. Historically, commodity investments have had a relatively high correlation with changes in inflation and a relatively low correlation to stock and bond returns. Commodity-related securities and other instruments provide exposure, which may include long and/or short exposure, to the investment returns of physical commodities that trade in commodities markets, without investing directly in physical commodities. The Fund may invest in commodity-related securities and other instruments, such as structured notes, swap agreements, options, futures and options on futures, that derive value from the price movement of commodities, or some other readily measurable economic variable dependent upon changes in the value of commodities or the commodities markets. However, the ability of the Fund to invest directly in commodities and certain commodity-related securities is subject to significant limitations in order to enable the Fund to maintain its status as a regulated investment company under the Internal Revenue Code of 1986, as amended (the Code).
The value of commodity-related instruments may be affected by changes in overall market movements, volatility of the underlying benchmark, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The value of commodity-related instruments will rise or fall in response to changes in the underlying commodity or related index. Investments in commodity-related instruments may be subject to greater volatility than non-commodity based investments. A highly liquid secondary market may not exist for certain commodity-related
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instruments, and there can be no assurance that one will develop. Commodity-related instruments are also subject to credit and interest rate risks that in general affect the values of debt securities. The Fund may lose money on its commodity investments.
Commodities Wholly-Owned Subsidiary
The Fund may establish and invest in a wholly-owned non-U.S. subsidiary to gain indirect exposure to the investment returns of the commodities markets within the limitations of the federal tax law requirements applicable to regulated investment companies. The subsidiary would invest principally in commodity futures, options and possibly swap contracts, as well as certain fixed-income investments intended to serve as margin or collateral for the subsidiarys derivatives positions. The subsidiary must, however, comply with the 1940 Act asset coverage requirements with respect to its investments in commodity-related securities that apply to the Funds transactions in these instruments. By investing in such a subsidiary, the Fund will be exposed to the risks associated with the subsidiarys commodity-related securities instruments.
Convertible Securities
The Fund may invest in convertible securities. Convertible securities include corporate bonds, notes or preferred stocks of U.S. or foreign issuers that can be converted into (exchanged for) common stocks or other equity securities. Convertible securities also include other securities, such as warrants, that provide an opportunity for equity participation. Since convertible securities may be converted into equity securities, their values will normally vary in some proportion with those of the underlying equity securities. Convertible securities usually provide a higher yield than the underlying equity, however, so that the price decline of a convertible security may sometimes be less substantial than that of the underlying equity security. Convertible securities are generally subject to the same risks as non-convertible fixed-income securities, but usually provide a lower yield than comparable fixed-income securities. Many convertible securities are relatively illiquid.
Debt Securities
The Fund may invest in debt securities. Debt securities are used by issuers to borrow money. The issuer usually pays a fixed, variable or floating rate of interest and must repay the amount borrowed at the maturity of the security. Some debt securities, such as zero-coupon securities, do not pay interest but are sold at a discount from their face values. Debt securities include corporate bonds, government securities and mortgage and other asset-backed securities. Debt securities include a broad array of short-, medium- and long-term obligations issued by the U.S. or foreign governments, government or international agencies and instrumentalities, and corporate issuers of various types. Some debt securities represent uncollateralized obligations of their issuers; in other cases, the securities may be backed by specific assets (such as mortgages or other receivables) that have been set aside as collateral for the issuers obligation. Debt securities generally involve an obligation of the issuer to pay interest or dividends on either a current basis or at the maturity of the securities, as well as the obligation to repay the principal amount of the security at maturity.
Debt securities are subject to market risk and credit risk. Credit risk relates to the ability of the issuer to make payments of principal and interest and includes the risk of default. Sometimes, an issuer may make these payments from money raised through a variety of sources, including, with respect to issuers of municipal securities, (i) the issuers general taxing power, (ii) a specific type of tax, such as a property tax, or (iii) a particular facility or project such as a highway. The ability of an issuer to make these payments could be affected by general economic conditions, issues specific to the issuer, litigation, legislation or other political events, the bankruptcy of the issuer, war, natural disasters, terrorism or other major events. U.S. government securities are not generally perceived to involve credit risks to the same extent as investments in other types of fixed-income securities; as a result, the yields available from U.S. government securities are generally lower than the yields available from corporate debt securities. Market risk is the risk that the value of the security will fall because of changes in market rates of interest. Generally, the value of debt securities falls when market rates of interest are rising. Some debt securities also involve prepayment or call risk. This is the risk that the issuer will repay the Fund the principal on the security before it is due, thus depriving the Fund of a favorable stream of future interest payments.
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Because interest rates vary, it is impossible to predict the income of the Fund that invests in debt securities for any particular period. Fluctuations in the value of the Funds investments in debt securities will cause the Funds net asset value to increase or decrease.
Derivative Instruments
The Fund may use a number of derivative instruments as part of its investment strategy. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. The Adviser may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by the Fund will succeed. In addition, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the Funds use of derivatives will be successful. The Adviser will cover its obligations under its derivative contracts by segregating or otherwise designating high quality money market and similar short-term instruments against the value of its net obligations under these positions (less any margin on deposit with the applicable broker) or by entering into offsetting positions. Examples of derivative instruments that the Fund may use include (but are not limited to) futures contracts, options contracts, swap transactions and forward currency contracts.
Futures Contracts
Futures transactions involve the Funds buying or selling futures contracts. A futures contract is an agreement between two parties to buy and sell a particular security or commodity or group or index of securities or commodities for a specified price on a specified future date. A futures contract creates an obligation by the seller to deliver and the buyer to take delivery of the type of instrument or cash (depending on whether the contract calls for physical delivery or cash settlement) at the time and in the amount specified in the contract. In the case of futures on an index, the seller and buyer agree to settle in cash, at a future date, based on the difference in value of the contract between the date it is opened and the settlement date. The value of each contract is equal to the value of the index from time to time multiplied by a specified dollar amount. For example, S&P 500 Index futures trade in contracts equal to $250 multiplied by the S&P 500 Index.
When a trader, such as the Fund, enters into a futures contract, it is required to deposit with (or for the benefit of) its broker as initial margin an amount of cash or short-term high-quality securities (such as U.S. Treasury bills or high-quality tax exempt bonds acceptable to the broker) equal to approximately 2% to 5% of the delivery or settlement price of the contract (depending on applicable exchange rules). Initial margin is held to secure the performance of the holder of the futures contract. As the value of the contract changes, the value of futures contract positions increases or declines. At the end of each trading day, the amount of such increase and decline is received and paid respectively by and to the holders of these positions. The amount received or paid is known as variation margin. If the Fund has a long position in a futures contract it will designate on the Funds records or establish a segregated account with the Funds custodian cash or liquid securities eligible for purchase by the Fund equal to its daily marked to market net obligation under the contract (less any margin on deposit). For short positions in futures contracts, the Fund will designate on the Funds records or establish a segregated account with the custodian with cash or liquid securities eligible for purchase by the Fund that, when added to the amounts deposited as margin, equal its daily marked to market net obligation under the futures contracts.
Gain or loss on a futures position is equal to the net variation margin received or paid over the time the position is held, plus or minus the amount received or paid when the position is closed, minus brokerage commissions.
Although many futures contracts call for the delivery (or acceptance) of the specified instrument, futures are usually closed out before the settlement date through the purchase (or sale) of a comparable contract. If the price of the sale of the futures contract by the Fund is less than the price of the offsetting purchase, the Fund will realize a loss. A futures sale is closed by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity and with the same delivery date. Similarly, the closing out of a futures purchase is closed by the purchaser selling an offsetting futures contract.
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Options and Warrants
Options transactions may involve the Funds buying or writing (selling) options on securities, securities indices, or currencies. The Fund may engage in these transactions either to enhance investment return or to hedge against changes in the value of other assets that it owns or intends to acquire.
Options can generally be classified as either call or put options. There are two parties to a typical options transaction: the writer and the buyer. A call option gives the buyer the right to buy a security or other asset (such as an amount of currency or a futures contract) from, and a put option gives the buyer the right to sell a security or other asset to, the option writer at a specified price, on or before a specified date. The buyer of an option pays a premium when purchasing the option, which reduces the return on the underlying security or other asset if the option is exercised, and results in a loss if the option expires unexercised. The writer of an option receives a premium from writing an option, which may increase its return if the option expires or is closed out at a profit. An American style option allows exercise of the option at any time during the term of the option. A European style option allows an option to be exercised only at a specific time or times, such as the end of its term. Options may be traded on or off an established securities exchange.
If the holder of an option wishes to terminate its position, it may seek to effect a closing sale transaction by selling an option identical to the option previously purchased. The effect of the purchase is that the previous option position will be canceled. The Fund will realize a profit from closing out an option if the price received for selling the offsetting position is more than the premium paid to purchase the option; the Fund will realize a loss from closing out an option transaction if the price received for selling the offsetting option is less than the premium paid to purchase the option. Since premiums on options having an exercise price close to the value of the underlying securities or futures contracts usually have a time value component (i.e., a value that diminishes as the time within which the option can be exercised grows shorter), the value of an options contract may change as a result of the lapse of time even though the value of the futures contract or security underlying the option (and of the security or other asset deliverable under the futures contract) has not changed.
As an alternative to purchasing call and put options on index futures, the Fund may purchase or sell call or put options on the underlying indices themselves. Such options would be used in a manner similar to the use of options on index futures.
Options on Foreign Currencies
The Fund may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized, as described in the Prospectus. In addition, options on foreign currencies may be used to hedge against adverse changes in foreign currency conversion rates. For example, a decline in the U.S. dollar value of a foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of the portfolio securities, the Fund may buy put options on the foreign currency. If the value of the currency declines, the Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, the Fund could sustain losses on transactions in foreign currency options that would require the Fund to forego a portion or all of the benefits of advantageous changes in those rates.
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The Fund may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar due to adverse fluctuations in exchange rates, the Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the decline expected by the Fund occurs, the option will most likely not be exercised and the diminution in value of portfolio securities be offset at least in part by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency which, if rates move in the manner projected by the Fund, will expire unexercised and allow the Fund to hedge the increased cost up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss, which may not be fully offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may lose all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.
Options on Indices
The Fund may invest in options on indices. Put and call options on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When the Fund writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from the Fund an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call times a specified multiple (multiplier), which determines the total dollar value for each point of such difference. When the Fund buys a call on an index, it pays a premium and has the same rights as to such call as are indicated above. When the Fund buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon the Funds exercise of the put, to deliver to the Fund an amount of cash equal to the difference between the exercise price of the option and the value of the index, times a multiplier, similar to that described above for calls. When the Fund writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require the Fund to deliver to it an amount of cash equal to the difference between the closing level of the index and exercise price times the multiplier if the closing level is less than the exercise price.
Exchange-traded and OTC Options
The Fund may purchase or write both exchange-traded and over-the counter (OTC) options. OTC options differ from exchange-traded options in that they are two-party contracts, with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options.
An exchange-traded option may be closed out only on an exchange that generally provides a liquid secondary market for an option of the same series. If a liquid secondary market for an exchange-traded option does not exist, it might not be possible to effect a closing transaction with respect to a particular option, with the result that the Fund would have to exercise the option in order to consummate the transaction. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions, or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation or other clearing organization may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
An over-the-counter option (an option not traded on an established exchange) may be closed out only by agreement with the other party to the original option transaction. With over-the-counter options, the Fund is at risk that the other party to the transaction will default on its obligations or will not permit the Fund to terminate the transaction
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before its scheduled maturity. While the Fund will seek to enter into over-the-counter options only with dealers who agree to or are expected to be capable of entering into closing transactions with the Fund, there can be no assurance that the Fund will be able to liquidate an over-the-counter option at a favorable price at any time prior to its expiration. Over-the-counter options are not subject to the protections afforded purchasers of listed options by the Options Clearing Corporation or other clearing organizations.
Index Warrants
The Fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices (index warrants). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at a time when, in the case of a call warrant, the exercise price is more than the value of the underlying index, or in the case of a put warrant, the exercise price is less than the value of the underlying index. If the Fund were not to exercise an index warrant prior to its expiration, then the Fund would lose the amount of the purchase price paid by it for the warrant. The Fund will normally use index warrants in a manner similar to its use of options on securities indices.
Forward Contracts
As described under Foreign Currency Transactions below, the Fund may invest in forward contracts. The Fund expects that its forward contracts will primarily be forward currency contracts. Forward contracts are transactions involving the Funds obligation to purchase or sell a specific currency at a future date at a specified price. Forward contracts will be used by the Fund to implement the investment strategies described in the Prospectus. For example, forward contracts may be used when the Adviser anticipates that particular foreign currencies will appreciate or depreciate in value or to take advantage of the expected relationships between various currencies, regardless of whether securities denominated in such currencies are not then held in the Funds investment portfolio. Forward contracts may also be used by the Fund for hedging purposes to protect against uncertainty in the level of future foreign currency exchange rates, such as when the Fund anticipates purchasing or selling a foreign security. This technique would allow the Fund to lock in the U.S. dollar price of the investment. Forward contracts also may be used to attempt to protect the value of the Funds existing holdings of foreign securities. There may be, however, imperfect correlation between the Funds foreign securities holdings and the forward contracts entered into with respect to such holdings. The cost to the Fund of engaging in forward contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. As described above, the Adviser will cover its obligations under forward contracts by segregating or otherwise designating high quality money market and similar short-term instruments against the value of its net obligations under these positions (less any margin on deposit with the applicable broker) or by entering into offsetting positions.
Swap Transactions
A swap transaction involves an agreement (typically with a bank, a brokerage firm or other financial institution as counterparty) to exchange two streams of payments (for example, an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal). The Fund may enter into interest rate, currency, index and total return swap transactions. The Fund may enter into interest rate or currency swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, to gain exposure to one or more securities, currencies, commodities, or interest rates, to protect against currency fluctuations, to manage duration, or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest (for example, an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal). A currency swap is an agreement to exchange cash flows on a notional amount based on changes in the
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relative values of the specified currencies. An index swap is an agreement to make or receive payments based on the different returns that would be achieved if a notional amount were invested in a specified basket of securities (such as the S&P 500 Index) or in some other investment (such as U.S. Treasury securities). A total return swap is an agreement to make payments of the total return from a specified asset or instrument (or a basket of such instruments) during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another specified asset or instrument. Alternately, a total return swap can be structured so that one party will make payments to the other party if the value of the relevant asset or instrument increases, but receive payments from the other party if the value of that asset or instrument decreases.
The Fund may also enter into options on swaps and credit default swap contracts. The Fund may engage in swap options for hedging purposes or to manage and mitigate credit and interest rate risk. The Fund may write (sell) and purchase put and call swap options. The use of swap options involves risks, including, among others, (i) changes in the market value of securities held by the Fund, and of swap options relating to those securities may not be proportionate, (ii) there may not be a liquid market to sell a swap option, which could result in difficulty closing a position, (iii) swap options can magnify the extent of losses incurred due to changes in the market value of the securities to which they relate and (iv) counterparty risk. In a credit default swap, the Fund makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party (e.g., an emerging country) on its obligation. However, if the third party does not default, the Fund loses its investment and recovers nothing. Credit default swaps involve risk because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally only generate income in the event of an actual default by an issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). The Fund may also enter into a credit default swap, where the Fund guarantees a specified return in the event of a default by a third party in exchange for a stream of payments from another party. In this case, the Fund would bear the risk of default by the issuer of the underlying obligation. Credit default swaps may be entered into with respect to a particular security, a basket of securities or an index.
In addition, the Fund may invest in publicly or privately issued interests in investment pools whose underlying assets are credit default, credit-linked, interest rate, currency exchange, equity-linked or other types of swap contracts and related underlying securities or securities loan agreements. The pools investment results may be designed to correspond generally to the performance of a specified securities index or basket of securities, sometimes a single security. These types of pools are often used to gain exposure to multiple securities with a smaller investment than would be required to invest directly in the individual securities. They may also be used to gain exposure to foreign securities markets without investing in the foreign securities themselves or the relevant foreign market. To the extent that the Fund invests in pools of swaps and related underlying securities or securities loan agreements whose return corresponds to the performance of a foreign securities index or one or more foreign securities, investing in such pools will involve risks similar to the risks of investing in foreign securities. See Foreign Securities below. In addition to the risks associated with investing in swaps generally, the Fund bears the risks and costs generally associated with investing in pooled investment vehicles, such as paying the fees and expenses of the pool and the risk that the pool or the operator of the pool may default on its obligations to the holder of interests in the pool, such as the Fund. Interests in privately offered investment pools of swaps may be considered illiquid or deemed liquid, subject to the Funds restrictions on investments in illiquid securities.
The Fund will maintain at all times in a segregated account with its custodian or designated on the Funds records cash or liquid securities eligible to be purchased by the Fund in amounts sufficient to satisfy its net obligations under swap contracts. Because swap agreements are not exchange-traded, but are private contracts into which the Fund and a swap counterparty enter as principals, the Fund may experience a loss or delay in recovering assets if the counterparty defaults on its obligations. To the extent that the Fund invests in swaps whose return corresponds to the performance of a foreign security or a foreign securities index, such swap transaction will involve risks similar to the risks of investing in foreign securities generally. See Foreign Securities below.
Risks of Derivative Instruments
The use of derivative instruments, including the futures contracts, options and warrants, forward currency contracts and swap transactions described above, involves risks. One risk arises because of the imperfect correlation between movements in the price of derivatives contracts and movements in the price of the securities that are the subject of
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the hedge. The Funds derivative strategies will not be fully effective unless the Fund can compensate for such imperfect correlation. There is no assurance that the Fund will be able to effect such compensation. Use of derivatives for other than hedging purposes may be considered a speculative activity, involving greater risks than are involved in hedging.
The correlation between the price movement of the derivatives contract and the hedged security may be distorted due to differences in the nature of the relevant markets. If the price of the futures contract moves more than the price of the hedged security, the Fund would experience either a loss or a gain on the derivative that is not completely offset by movements in the price of the hedged securities. For example, in an attempt to compensate for imperfect price movement correlations, the Fund may purchase or sell futures contracts in a greater dollar amount than the hedged securities if the price movement volatility of the hedged securities is historically greater than the volatility of the futures contract. Conversely, the Fund may purchase or sell futures contracts if the volatility of the price of hedged securities is historically less than that of the futures contracts.
The price of index futures may not correlate perfectly with movement in the relevant index due to certain market distortions. One such distortion stems from the fact that all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationship between the index and futures markets. Another market distortion results from the deposit requirements in the futures market being less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than does the securities market. A third distortion is caused by the fact that trading hours for foreign stock index futures may not correspond perfectly to hours of trading on the foreign exchange to which a particular foreign stock index futures contract relates. This may result in a disparity between the price of index futures and the value of the relevant index due to the lack of continuous arbitrage between the index futures price and the value of the underlying index. Finally, hedging transactions using stock indices involve the risk that movements in the price of the index may not correlate with price movements of the particular portfolio securities being hedged.
Price movement correlation in derivative transactions also may be distorted by the illiquidity of the futures and options markets and the participation of speculators in such markets. If an insufficient number of contracts are traded, commercial users may not deal in futures contracts or options because they do not want to assume the risk that they may not be able to close out their positions within a reasonable amount of time. In such instances, futures and options market prices may be driven by different forces than those driving the market in the underlying securities, and price spreads between these markets may widen. The participation of speculators in the market enhances its liquidity. Nonetheless, speculators trading spreads between futures markets may create temporary price distortions unrelated to the market in the underlying securities.
Positions in futures contracts and options on futures contracts may be established or closed out only on an exchange or board of trade. There is no assurance that a liquid market on an exchange or board of trade will exist for any particular contract or at any particular time. The liquidity of markets in futures contracts and options on futures contracts may be adversely affected by daily price fluctuation limits established by commodity exchanges which limit the amount of fluctuation in a futures or options price during a single trading day. Once the daily limit has been reached in a contract, no trades may be entered into at a price beyond the limit, which may prevent the liquidation of open futures or options positions. Prices have in the past exceeded the daily limit on a number of consecutive trading days. If there is not a liquid market at a particular time, it may not be possible to close a futures or options position at such time, and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, if futures or options are used to hedge portfolio securities, an increase in the price of the securities, if any, may partially or completely offset losses on the futures contract.
Income earned by the Fund from its options activities will be treated as capital gain and, if not offset by net recognized capital losses incurred by the Fund, will be distributed to shareholders in taxable distributions. Although gain from options transactions may hedge against a decline in the value of the Funds portfolio securities, that gain, to the extent not offset by losses, will be distributed in light of certain tax considerations and will constitute a distribution of that portion of the value preserved against decline.
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The value of options purchased by the Fund and futures contracts held by the Fund may fluctuate based on a variety of market and economic factors. In some cases, the fluctuations may offset (or be offset by) changes in the value of securities or derivatives held in the Funds portfolio. All transactions in options and futures involve the possible risk of loss to the Fund of all or a significant part of the value of its investment. In some cases, the risk of loss may exceed the amount of the Funds investment. When the Fund writes a call option or sells a futures contract without holding the underlying securities, currencies, or futures contracts, its potential loss is unlimited. The Fund will be required, however, to segregate or designate on its records liquid assets in amounts sufficient at all times to satisfy its net obligations under options and futures contracts.
The risks of the Funds use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the Fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the Funds ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do.
The successful use of derivatives will usually depend on the Advisers ability to forecast securities market, currency, or other financial market movements correctly. The Funds ability to hedge against adverse changes in the value of securities held in its portfolio through options and futures also depends on the degree of correlation between changes in the value of futures or options positions and changes in the values of the portfolio securities. The successful use of futures and exchange-traded options and certain Fund contracts also depends on the availability of a liquid secondary market to enable the Fund to close its positions on a timely basis. There can be no assurance that such a market will exist at any particular time. In the case of options that are not traded on an exchange (over-the-counter options), the Fund is at risk that the other party to the transaction will default on its obligations, or will not permit the Fund to terminate the transaction before its scheduled maturity.
The derivatives markets of foreign countries are small compared to those of the United States and consequently are characterized in most cases by less liquidity than U.S. markets. In addition, foreign markets may be subject to less detailed reporting requirements and regulatory controls than U.S. markets. Furthermore, investments in options in foreign markets are subject to many of the same risks as other foreign investments. See Foreign Securities below.
Forward contracts are subject to many of the same risks as options, warrants and futures contracts described above. As described under Foreign Currency Transactions below, forward contracts may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. In addition, the effect of changes in the dollar value of a foreign currency on the dollar value of the Funds assets and on the net investment income available for distribution may be favorable or unfavorable. The Fund may incur costs in connection with conversions between various currencies, and the Fund will be subject to increased illiquidity and counterparty risk because forward contracts are not traded on an exchange and often are not standardized. The Fund may also be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars. See Foreign Currency Transactions.
Depositary Receipts
The Fund may invest in foreign equity securities by purchasing depositary receipts. Depositary receipts are instruments issued by a bank that represent an interest in equity securities held by arrangement with the bank. Depositary receipts can be either sponsored or unsponsored. Sponsored depositary receipts are issued by banks in cooperation with the issuer of the underlying equity securities. Unsponsored depositary receipts are arranged without involvement by the issuer of the underlying equity securities and, therefore, less information about the issuer of the underlying equity securities may be available and price may be more volatile than sponsored depositary receipts. American Depositary Receipts (ADRs) are depositary receipts that are bought and sold in the United States and are typically issued by a U.S. bank or trust company which evidence ownership of underlying securities by a foreign corporation.
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All depositary receipts, including those denominated in U.S. dollars, will be subject to foreign currency exchange risk. The effect of changes in the dollar value of a foreign currency on the dollar value of the Funds assets and on the net investment income available for distribution may be favorable or unfavorable. The Fund may incur costs in connection with conversions between various currencies. In addition, the Fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars.
Because the Fund may invest in depository receipts, changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. If the Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on the Fund than a fund that is not over-weighted in that region.
Emerging Markets
Investments in foreign securities may include investments in emerging or developing countries, whose economies or securities markets are not yet highly developed. Special considerations associated with these investments (in addition to the considerations regarding foreign investments generally) may include, among others, greater political uncertainties, an economys dependence on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, very limited numbers of potential buyers for such securities, less developed custodial and deposit systems and delays and disruptions in securities settlement procedures.
In determining whether to invest in securities of foreign issuers, the Adviser may consider the likely effects of foreign taxes on the net yield available to the Fund and its shareholders. Compliance with foreign tax laws may reduce the Funds net income available for distribution to shareholders.
Equity Securities
Equity securities are securities that represent an ownership interest (or the right to acquire such an interest) in a company and include common and preferred stocks and securities exercisable for, or convertible into, common or preferred stocks (such as warrants, convertible debt securities and convertible preferred stock), and other equity like interests in an entity. Equity securities may take the form of stock in a corporation, limited partnership interests, interests in limited liability companies, depositary receipts, real estate investment trusts (REITs), other investment companies or other trusts and other similar securities. Common stocks represent an equity or ownership interest in an issuer. Preferred stocks represent an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common stock in the payment of dividends. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over holders of preferred stock, whose claims take precedence over the claims of those who own common stock.
While offering greater potential for long-term growth, equity securities generally are more volatile and more risky than some other forms of investment, particularly debt securities. Therefore, the value of your investment in the Fund that invests in equity securities may sometimes decrease. The Fund may invest in equity securities of companies with relatively small market capitalizations. Securities of such companies may be more volatile than the securities of larger, more established companies and the broad equity market indices. The Funds investments may include securities traded over-the-counter as well as those traded on a securities exchange. Some securities, particularly over-the-counter securities may be more difficult to sell under some market conditions.
Exchange-Traded Funds
The Fund may invest in shares of exchange-traded funds (ETFs). An ETF is an investment company that is registered under the 1940 Act that holds a portfolio of securities designed to track the performance of a particular
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index. ETFs sell and redeem their shares at net asset value in large blocks (typically 50,000 of its shares) called creation units. Shares representing fractional interests in these creation units are listed for trading on national securities exchanges and can be purchased and sold in the secondary market in lots of any size at any time during the trading day. ETFs sometimes also refer to non-registered investment companies that invest directly in commodities or other assets (e.g., gold bullion).
Investments in ETFs involve certain inherent risks generally associated with investments in a broadly-based portfolio of securities including risks that the general level of stock prices may decline, thereby adversely affecting the value of each unit of the ETF or other instrument. In addition, an ETF may not fully replicate the performance of its benchmark index because of the temporary unavailability of certain index securities in the secondary market or discrepancies between the ETF and the index with respect to the weighting of securities or number of stocks held. ETFs that invest in other assets are subject to the risks associated with directly investing in those assets.
Because ETFs and pools that issue similar instruments bear various fees and expenses, the Funds investment in these instruments will involve certain indirect costs, as well as transaction costs, such as brokerage commissions. The Adviser may consider the expenses associated with an investment in determining whether to invest in an ETF. See Investment Companies below for information about investments in investment companies generally.
Fixed-Income Securities
Fixed-income securities pay a specified rate of interest or dividends, or a rate that is adjusted periodically by reference to some specified index or market rate. Fixed-income securities include securities issued by federal, state, local, and foreign governments and related agencies, and by a wide range of private or corporate issuers. Fixed-income securities include, among others, bonds, debentures, notes, bills, and commercial paper. Because interest rates vary, it is impossible to predict the income of the Fund for any particular period. In addition, the prices of fixed-income securities generally vary inversely with changes in interest rates. Prices of fixed-income securities may also be affected by items related to a particular issue or to the debt markets generally. The net asset value of the Funds shares will vary as a result of changes in the value of the securities in the Funds portfolio.
Investment Grade Fixed-Income Securities. To be considered investment grade quality, at least one of the three major rating agencies (Fitch Investor Services, Inc. (Fitch), Moodys Investors Service, Inc. (Moodys) or Standard & Poors Rating Group (S&P)) must have rated the security in one of its top four rating categories at the time the Fund acquires the security or, if the security is unrated, the Adviser must have determined it to be of comparable quality.
Lower Quality Fixed-Income Securities. Lower quality fixed-income securities (commonly referred to as junk bonds) are below investment grade quality. To be considered below investment grade quality, none of the major rating agencies must have rated the security in one of its top four rating categories at the time the Fund acquires the security or, if the security is unrated, the Adviser must have determined it to be of comparable quality.
Lower quality fixed-income securities are subject to greater credit risk and market risk than higher quality fixed-income securities. Lower quality fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to make timely principal and interest payments. If the Fund invests in lower quality fixed-income securities, the Funds achievement of its objective may be more dependent on the Advisers own credit analysis than is the case with funds that invest in higher quality fixed-income securities. The market for lower quality fixed-income securities may be more severely affected than some other financial markets by economic recession or substantial interest rate increases, by changing public perceptions of this market, or by legislation that limits the ability of certain categories of financial institutions to invest in these securities. In addition, the secondary market may be less liquid for lower quality fixed-income securities. This lack of liquidity at certain times may affect the values of these securities and may make the evaluation and sale of these securities more difficult. Lower quality fixed-income securities may be in poor standing or in default and typically have speculative characteristics.
The Fund may continue to hold fixed-income securities that are downgraded in quality subsequent to their purchase if the Adviser believes it would be advantageous to do so.
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Foreign Currency Transactions
The Fund may engage in foreign currency transactions for both hedging and investment purposes. In addition, certain of the Funds investments will be denominated in foreign currencies or traded in securities markets in which settlements are made in foreign currencies. Any income on such investments is generally paid to the Fund in foreign currencies. The value of these foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of the Funds portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of the Funds income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of the Funds assets and on the net investment income available for distribution may be favorable or unfavorable.
The Fund may incur costs in connection with conversions between various currencies. In addition, the Fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars.
To protect against a change in the foreign currency exchange rate between the date on which the Fund contracts to purchase or sell a security and the settlement date for the purchase or sale, to gain exposure to one or more foreign currencies or to lock in the equivalent of a dividend or interest payment in another currency, the Fund might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing spot rate.
If conditions warrant, the Fund may also enter into forward contracts with banks or broker-dealers to purchase or sell foreign currencies at a future date, as described above under Derivative Instruments. The Fund will maintain cash or other liquid assets eligible for purchase by the Fund either designated on the Funds records or in a segregated account with the custodian in an amount at least equal to the lesser of (i) the difference between the current value of the Funds liquid holdings that settle in the relevant currency and the Funds outstanding obligations under currency forward contracts, or (ii) the current amount, if any, that would be required to be paid to enter into an offsetting forward currency contract which would have the effect of closing out the original forward contract. The Funds use of currency transactions may be limited by tax considerations. The Adviser may decide not to engage in currency transactions, and there is no assurance that any currency strategy used by the Fund will succeed. In addition, suitable currency transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in these transactions when they would be beneficial. The Fund may also purchase or sell foreign currency futures contracts traded on futures exchanges. Foreign currency futures contract transactions involve risks similar to those of other futures transactions. See Derivative Instruments above.
Transactions in foreign currencies, foreign currency denominated debt and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
Because the Fund may invest in foreign securities and foreign currencies, changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. If the Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on the Fund than a fund that is not over-weighted in that region.
Foreign Securities
The Fund may invest in foreign securities. In addition to the risks associated with investing in securities generally, such investments present additional risks not typically associated with investments in comparable securities of U.S. issuers. The non-U.S. securities in which the Fund may invest, all or a portion of which may be non-U.S. dollar denominated, may include, among other investments: (a) debt obligations issued or guaranteed by non-U.S. national, provincial, state, municipal or other governments or by their agencies or instrumentalities, including Brady Bonds; (b) debt obligations of supranational entities; (c) debt obligations of the U.S. government issued in non-dollar securities; (d) debt obligations and other fixed-income securities of foreign corporate issuers; and (e) non-U.S. dollar denominated securities of U.S. corporate issuers.
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There may be less information publicly available about a foreign corporate or government issuer than about a U.S. issuer, and foreign corporate issuers are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions and securities custody costs are often higher than those in the United States, and judgments against foreign entities may be more difficult to obtain and enforce. With respect to certain foreign countries, there is a possibility of governmental expropriation of assets, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in those countries. The receipt of interest on foreign government securities may depend on the availability of tax or other revenues to satisfy the issuers obligations.
Since most foreign securities are denominated in foreign currencies or traded primarily in securities markets in which settlements are made in foreign currencies, the value of these investments and the net investment income available for distribution to shareholders of the Fund may be affected favorably or unfavorably by changes in currency exchange rates or exchange control regulations. To the extent the Fund may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of the Funds assets and the Funds income available for distribution.
Although the Funds income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars. Therefore, if the value of a currency relative to the U.S. dollar declines after the Funds income has been earned in that currency, translated into U.S. dollars and declared as a dividend, but before payment of such dividend, the Fund could be required to liquidate portfolio securities to pay such dividend. Similarly, if the value of a currency relative to the U.S. dollar declines between the time the Fund incurs expenses or other obligations in U.S. dollars and the time such expenses or obligations are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in such currency of such expenses at the time they were incurred.
In addition, because the Fund may invest in foreign securities traded primarily on markets that close prior to the time each Fund determines its net asset value (NAV), the risks posed by frequent trading may have a greater potential to dilute the value of Fund shares held by long-term shareholders than a fund investing in U.S. securities. In instances where a significant event that affects the value of one or more foreign securities held by the Fund takes place after the close of the primary foreign market, but before the time that the Fund determines its NAV, certain investors may seek to take advantage of the fact that there will be a delay in the adjustment of the market price for a security caused by this event until the foreign market reopens (sometimes referred to as price or time zone arbitrage). Shareholders who attempt this type of arbitrage may dilute the value of the Funds shares by virtue of their transaction, if those prices reflect the fair value of the foreign securities. Although the Fund has procedures designed to determine the fair value of foreign securities for purposes of calculating its NAV when such an event has occurred, fair value pricing, because it involves judgments which are inherently subjective, may not always eliminate the risk of price arbitrage. For more information on how the Fund uses fair value pricing, see Net Asset Value.
Illiquid Securities
The Fund may purchase illiquid securities. Illiquid securities are those that are not readily resalable, which may include securities whose disposition is restricted by federal securities laws. Investment in restricted or other illiquid securities involves the risk that the Fund may be unable to sell such a security at the desired time. Also, the Fund may incur expenses, losses or delays in the process of registering restricted securities prior to resale.
The Fund may purchase Rule 144A securities, which are privately offered securities that can be resold only to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Fund may also purchase commercial paper issued under Section 4(2) of the Securities Act. Investing in Rule 144A securities and Section 4(2) commercial paper could have the effect of increasing the level of the Funds illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. Rule 144A securities and Section 4(2) commercial paper are treated as illiquid, unless the Adviser has determined, under guidelines established by the Trusts Board of Trustees, that the particular issue is liquid.
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Initial Public Offerings
The Fund may purchase securities of companies that are offered pursuant to an initial public offering (IPO). An IPO is a companys first offering of stock to the public in the primary market, typically to raise additional capital. The Fund may purchase a hot IPO (also known as a hot issue), which is an IPO that is oversubscribed and, as a result, is an investment opportunity of limited availability. As a consequence, the price at which these IPO shares open in the secondary market may be significantly higher than the original IPO price. IPO securities tend to involve greater risk due, in part, to public perception and the lack of publicly available information and trading history. There is the possibility of losses resulting from the difference between the issue price and potential diminished value of the stock once traded in the secondary market. The Funds investment in IPO securities may have a significant impact on the Funds performance and may result in significant capital gains. The availability of IPOs may be limited so that the Fund does not get the full allocation desired.
Investment Companies
The Fund may invest in other investment companies, including ETFs as discussed above. Investment companies are essentially pools of securities. Investing in other investment companies involves substantially the same risks as investing directly in the underlying securities, but may involve additional expenses at the investment company level, such as investment advisory fees and operating expenses. In some cases, investing in an investment company may involve the payment of a premium over the value of the assets held in that investment companys portfolio. As an investor in another investment company, the Fund will bear its ratable share of the investment companys expenses, including advisory fees, and the Funds shareholders will bear such expenses indirectly, in addition to similar fees and expenses of the Fund. Despite the possibility of greater fees and expenses, the Adviser will invest if it believes investment in other investment companies provide attractive return opportunities. In addition, it may be more efficient for the Fund to gain exposure to particular market segments by investing in shares of one or more investment companies.
Inflation-Linked and Inflation-Indexed Securities
The Fund may invest in inflation-linked bonds. The principal amount of these bonds increases with increases in the price index used as a reference for the bonds. In addition, the amounts payable as coupon interest payments increase when the price index increases because the interest amount is calculated by multiplying the principal (as adjusted) by a fixed coupon rate.
Although inflation-indexed bonds protect their holders from long-term inflationary trends, short-term increases in inflation may result in a decline in value. The values of inflation-linked bonds generally fluctuate in response to changes to real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a rate faster than nominal interest rates, real interest rates might decline, leading to an increase in value of the inflation-linked bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in the value of inflation-linked bonds. If inflation is lower than expected during a period the Fund holds inflation-linked bonds, the Fund may earn less on such bonds than on a conventional bond. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in inflation-linked bonds may not be protected to the extent that the increase is not reflected in the price index used as a reference for the bonds. There can be no assurance that the price index used for an inflation-linked bond will accurately measure the real rate of inflation in the prices of goods and services. Inflation-linked and inflation-indexed securities include Treasury Inflation-Protected Securities issued by the U.S. government (see U.S. Government Securities for additional information), but also may include securities issued by state, local and non-U.S. governments and corporations and supranational entities.
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Mortgage Dollar Rolls
The Fund may enter into mortgage dollar rolls. A dollar roll involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. The Fund will designate on its records or segregate with its custodian bank assets determined to be liquid in an amount sufficient to meet its obligations under the transactions. A dollar roll involves potential risks of loss that are different from those related to the securities underlying the transactions. The Fund may be required to purchase securities at a higher price than may otherwise be available on the open market. Since the counterparty in the transaction is required to deliver a similar, but not identical, security to the Fund, the security that the Fund is required to buy under the dollar roll may be worth less than an identical security. There is no assurance that the Funds use of the cash that it receives from a dollar roll will provide a return that exceeds borrowing costs.
Money Market Instruments
The Fund will invest in money market instruments, which are high-quality, short-term securities. The Fund expects that the assets invested by the Subadviser will be invested principally in short-term money market obligations with maturities of 397 days or less, including bank certificates of deposit, time deposits, bankers acceptances, high quality commercial paper, loan participation interests, securities issued or guaranteed by the U.S. Government, state agencies or instrumentalities, and repurchase agreements calling for resale in 397 days or less backed by the foregoing securities. The maturities of variable rate demand instruments held in the Funds portfolio will be deemed to be the longer of the period required before the Fund is entitled to receive payment of the principal amount of the instrument through demand, or the period remaining until the next interest rate adjustment, although the stated maturities may be in excess of 397 days. Money market instruments maturing in less than one year may yield less than obligations of comparable quality having longer maturities. The Funds money market investments at the time of purchase (other than U.S. Government securities (defined below) and repurchase agreements relating thereto) generally will be rated at the time of purchase in the two highest short-term rating categories as rated by a major credit agency or, if unrated, will be of comparable quality as determined by the Subadviser. The Fund may invest in instruments of lesser quality and does not have any minimum credit quality restriction.
Although changes in interest rates can change the market value of a security, the Fund expects those changes to be minimal with respect to these securities. The Funds money market investments may be issued by U.S. banks, foreign banks (including their U.S. branches) or foreign branches and subsidiaries of U.S. banks. Obligations of foreign banks may be subject to foreign economic, political and legal risks. Such risks include foreign economic and political developments, foreign governmental restrictions that may adversely affect payment of principal and interest on the obligations, foreign withholding and other taxes on interest income, difficulties in obtaining and enforcing a judgment against a foreign obligor, exchange control regulations (including currency blockage), and the expropriation or nationalization of assets or deposits. Foreign branches of U.S. banks and foreign banks are not necessarily subject to the same or similar regulatory requirements that apply to domestic banks. For instance, such branches and banks may not be subject to the types of requirements imposed on domestic banks with respect to mandatory reserves, loan limitations, examinations, accounting, auditing, record keeping and the public availability of information. Obligations of such branches or banks will be purchased only when the Subadviser believes the risks are minimal.
The Fund may invest in U.S. government securities that include all securities issued or guaranteed by the U.S. government or its agencies, authorities or instrumentalities (U.S. Government securities). Some U.S. government securities are backed by the full faith and credit of the United States, some are supported by the discretionary authority of the U.S. Government to purchase the issuers obligations (e.g., obligations of the Federal National Mortgage Association), some by the right of the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home Loan Banks), while still others are supported only by the credit of the issuer itself (e.g., obligations of the Student Loan Marketing Association). U.S. Government securities that are not backed by the full faith and credit of the United States are considered riskier than those that are.
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The Fund, consistent with its investment objective, attempts to maximize yields by engaging in portfolio trading and by buying and selling portfolio investments in anticipation of, or in response to, changing economic and money market conditions and trends. The Fund also seeks to take advantage of what are believed to be temporary disparities in the yields of the different segments or among particular instruments within the same segment of the market. These policies, as well as the relatively short maturity of obligations to be purchased by the Fund, may result in frequent changes in the portfolio composition of the Fund. There are usually no brokerage commissions paid by the Fund in connection with the purchase of securities of the type in which it invests. See Portfolio Transactions and Brokerage and Investment Restrictions.
Although the Fund will invest in money market instruments, it is not a money market fund and therefore is not subject to the portfolio quality, maturity and net asset value requirements applicable to money market funds. The Fund will not seek to maintain a stable net asset value. The Fund also will not be required to comply with the rating restrictions applicable to money market funds, and will not necessarily sell an investment in cases where a securitys rating has been downgraded. Considerations of liquidity, safety and preservation of capital may preclude the Fund from investing in money market instruments paying the highest available yield at a particular time. In addition, the Funds ability to trade money market securities may be constrained by the collateral and asset coverage requirements related to the Funds other investments. As a result, the Fund may need to buy or sell money market instruments at inopportune times. In addition, even though money market instruments are generally considered to be high quality and a low risk investment, recently a number of issuers of money market and money market type instruments have experience financial difficulties, leading in some cases to rating downgrades and decreases in the value of their securities.
Mortgage-Related Securities
The Fund may invest in mortgage-related securities, such as adjustable-rate mortgage securities, mortgage-backed securities, CMOs, and Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA) certificates, which differ from traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans generally may be prepaid at any time. As a result, if the Fund purchases these assets at a premium, a faster-than-expected prepayment rate will tend to reduce yield to maturity, and a slower-than-expected prepayment rate may have the opposite effect of increasing yield to maturity. If the Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will tend to increase, and slower-than-expected prepayments tend to reduce, yield to maturity. Prepayments, and resulting amounts available for reinvestment by the Fund, are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates. Accelerated prepayments on securities purchased at a premium may result in a loss of principal if the premium has not been fully amortized at the time of prepayment. Although these securities will decrease in value as a result of increases in interest rates generally, they are likely to appreciate less than other fixed-income securities when interest rates decline because of the risk of prepayments. In addition, an increase in interest rates would also increase the inherent volatility of the Fund by increasing the average life of the Funds portfolio securities.
The risk of non-payment is greater for mortgage-related securities that are backed by mortgage pools that contain subprime loans (loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans), but a level of risk exists for all loans. Market factors adversely affecting mortgage loan repayments may include a general economic turndown, high unemployment, a general slowdown in the real estate market, a drop in the market prices of real estate, or an increase in interest rates resulting in higher mortgage payments by holders of adjustable rate mortgages. The market for mortgage-related securities has recently experienced high volatility and a lack of liquidity. As a result, the value of many of these securities has significantly declined. There can be no assurance that these markets will become more liquid or less volatile, and it is possible that the value of these securities could decline further.
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Pay-in-Kind Securities
The Fund may invest in pay-in-kind securities. Pay-in-kind securities pay dividends or interest in the form of additional securities of the issuer, rather than in cash. These securities are usually issued and traded at a discount from their face amounts. The amount of the discount varies depending on various factors, such as the time remaining until maturity of the securities, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. The market prices of pay-in-kind securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than are other types of securities having similar maturities and credit quality.
Real Estate Investment Trusts (REITs)
The Fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate-related loans. REITs involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified, and are subject to heavy cash flow dependency, risks of default by borrowers, and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax-free pass-through of income under the Code and failing to maintain their exemptions from registration under the 1940 Act.
REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.
The Funds investment in a REIT may require the Fund to accrue and distribute income not yet received or may result in the Fund making distributions that constitute a return of capital to Fund shareholders for federal income tax purposes. In addition, distributions by the Fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.
Real Estate Securities
The Fund may invest in securities of companies in the real estate industry, including REITs, and is, therefore, subject to the special risks associated with the real estate market and the real estate industry in general. Companies in the real estate industry are considered to be those that (i) have principal activity involving the development, ownership, construction, management or sale of real estate; (ii) have significant real estate holdings, such as hospitality companies, supermarkets and mining, lumber and paper companies; and/or (iii) provide products or services related to the real estate industry, such as financial institutions that make and/or service mortgage loans and manufacturers or distributors of building supplies. Securities of companies in the real estate industry are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws.
Repurchase Agreements
The Fund may enter into repurchase agreements, by which the Fund purchases a security and obtains a simultaneous commitment from the seller to repurchase the security at an agreed-upon price and date. The resale price is in excess of the purchase price and reflects an agreed-upon market interest rate unrelated to the coupon rate on the purchased security. Repurchase agreements are economically similar to collateralized loans by the Fund. Such transactions afford the Fund the opportunity to earn a return on temporarily available cash at relatively low market risk. The Fund does not have percentage limitations on how much of its total assets may be invested in repurchase agreements. In addition to using repurchase agreements as a principal investment strategy in connection with the Money Market Portion of the Fund, the Fund may also use repurchase agreements for cash management and temporary defensive purposes. While the underlying security may be a bill, certificate of indebtedness, note or bond issued by an agency, authority or instrumentality of the U.S. government, the obligation of the seller is not guaranteed by the U.S. government and there is a risk that the seller may fail to repurchase the underlying security. In such event, the Fund would attempt to exercise rights with respect to the underlying security, including possible
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disposition in the market. However, the Fund may be subject to various delays and risks of loss, including (i) possible declines in the value of the underlying security during the period while the Fund seeks to enforce its rights thereto, (ii) possible reduced levels of income and lack of access to income during this period and (iii) inability to enforce rights and the expenses involved in the attempted enforcement.
Reverse Repurchase Agreements and Other Borrowings
The Fund may enter into reverse repurchase agreements. Under positions of the SEC, a mutual fund may engage in reverse repurchase agreements without such transactions constituting senior securities so long as such transactions are covered by the segregation of assets or otherwise. In a reverse repurchase agreement the Fund transfers possession of a portfolio instrument to another person, such as a financial institution, broker or dealer, in return for cash, and agrees that on a stipulated date in the future the Fund will repurchase the portfolio instrument by remitting the original consideration plus interest at an agreed-upon rate. The ability to use reverse repurchase agreements may enable, but does not ensure the ability of, the Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous. The Fund does not currently intend to enter into reverse repurchase agreements or otherwise borrow money for purposes of adding leverage to its investment portfolio. When effecting reverse repurchase agreements, assets of the Fund in a dollar amount sufficient to make payment of the obligations to be purchased are segregated on the Funds records at the trade date and maintained until the transaction is settled. Reverse repurchase agreements are economically similar to secured borrowings by the Fund.
Under current positions of the SEC and its staff, the Fund can engage in reverse repurchase agreements without them constituting senior securities so long as the Fund has covered its obligations through the segregation of assets or otherwise. This would allow the Fund to borrow up to 50% of its assets (including amounts received under the reverse repurchase agreements) using reverse repurchase agreements.
Rule 144A Securities and Section 4(2) Commercial Paper
Rule 144A securities are privately offered securities that can be resold only to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Fund may also purchase commercial paper issued under Section 4(2) of the Securities Act or similar debt obligations. Commercial paper is generally considered to be short-term unsecured debt of corporations. Investing in Rule 144A securities and Section 4(2) commercial paper could have the effect of increasing the level of the Funds illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. Rule 144A securities and Section 4(2) commercial paper are treated as illiquid unless the adviser has determined, under guidelines established by the Board of Trustees, that the particular issue is liquid.
Securities Lending
Securities lending involves the Fund lending its portfolio securities to brokers, dealers or other financial institutions under contracts calling for the deposit by the borrower with the Funds custodian of each cash collateral equal to at least the market value of the securities loaned, marked to market on a daily basis. The Fund will continue to benefit from payments in lieu of interest or dividends on the securities loaned and will also receive interest through investment of the cash collateral in short-term liquid investments. No loans will be made if, as a result, the aggregate amount of such loans outstanding at any time would exceed 33-1/3% of the Funds assets (taken at current value). Any voting rights, or rights to consent, relating to securities loaned pass to the borrower. However, if a material event affecting the investment occurs, such loans may be called so that the securities may be voted by the Fund. The Fund pays various fees in connection with such loans, including fees to the parties arranging the loans, shipping fees and custodial or placement fees.
Securities loans must be fully collateralized at all times, but involve some credit risk to the Fund if the borrower defaults on its obligation and the Fund is delayed or prevented from recovering the collateral. In addition, under the terms of a securities lending agency agreement, any investment of cash collateral is generally at the sole risk of the Fund. Any income or gains and losses from investing and reinvesting any cash collateral delivered by a borrower pursuant to a loan are generally at the Funds risk, and to the extent any such losses reduce the amount of cash below the amount required to be returned to the borrower upon the termination of any loan, the Fund may be required by the securities lending agent to pay or cause to be paid to such borrower an amount equal to such shortfall in cash.
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Short-Term Trading
The Fund may, consistent with its investment objectives, engage in portfolio trading in anticipation of, or in response to, changing economic or market conditions and trends. These policies may result in higher turnover rates in the Funds portfolio, which may produce higher transaction costs and a higher level of taxable capital gains. Portfolio turnover considerations will not limit the advisers investment discretion in managing the Funds assets. The Fund anticipates that its portfolio turnover rates will vary significantly from time to time depending on the volatility of economic and market conditions.
Step-Coupon Securities
The Fund may invest in step-coupon securities. Step-coupon securities trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. Market values of these types of securities generally fluctuate in response to changes in interest rates to a greater degree than conventional interest-paying securities of comparable term and quality. Under many market conditions, investments in such securities may be illiquid, making it difficult for the Fund to dispose of them or determine their current value.
Stripped Securities
The Fund may invest in stripped securities, which are usually structured with two or more classes that receive different proportions of the interest and principal distribution on a pool of U.S. government or foreign government securities or mortgage assets. In some cases, one class will receive all of the interest (the interest-only or IO class), while the other class will receive all of the principal (the principal-only or PO class). Stripped securities commonly have greater market volatility than other types of fixed-income securities. In the case of stripped mortgage securities, if the underlying mortgage assets experience greater than anticipated payments of principal, the Fund may fail to recoup fully its investments in IOs. The staff of the SEC has indicated that it views stripped mortgage securities as illiquid unless the securities are issued by the U.S. government or its agencies and are backed by fixed-rate mortgages. The Fund intends to abide by the staffs position. Stripped securities may be considered derivative securities.
Structured Notes
The Fund may invest in a broad category of instruments known as structured notes. These instruments are debt obligations issued by industrial corporations, financial institutions or governmental or international agencies. Traditional debt obligations typically obligate the issuer to repay the principal plus a specified rate of interest. Structured notes, by contrast, obligate the issuer to pay amounts of principal or interest that are determined by reference to changes in some external factor or factors, or the principal and interest rate may vary from the stated rate because of changes in these factors. For example, the issuers obligations could be determined by reference to changes in the value of a commodity (such as gold or oil) or commodity index, a foreign currency, an index of securities (such as the S&P 500 Index) or an interest rate (such as the U.S. Treasury bill rate). In some cases, the issuers obligations are determined by reference to changes over time in the difference (or spread) between two or more external factors (such as the U.S. prime lending rate and the total return of the stock market in a particular country, as measured by a stock index). In some cases, the issuers obligations may fluctuate inversely with changes in an external factor or factors (for example, if the U.S. prime lending rate goes up, the issuers interest payment obligations are reduced). In some cases, the issuers obligations may be determined by some multiple of the change in an external factor or factors (for example, three times the change in the U.S. Treasury bill rate). In some cases, the issuers obligations remain fixed (as with a traditional debt instrument) so long as an external factor or factors do not change by more than the specified amount (for example, if the value of a stock index does not exceed some specified maximum), but if the external factor or factors change by more than the specified amount, the issuers obligations may be sharply reduced.
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Structured notes can serve many different purposes in the management of the Fund. For example, they can be used to increase the Funds exposure to changes in the value of assets that the Fund would not ordinarily purchase directly (such as commodities or stocks traded in a market that is not open to U.S. investors). They can also be used to hedge the risks associated with other investments the Fund holds. For example, if a structured note has an interest rate that fluctuates inversely with general changes in a countrys stock market index, the value of the structured note would generally move in the opposite direction to the value of holdings of stocks in that market, thus moderating the effect of stock market movements on the value of the Funds portfolio as a whole.
Structured notes involve special risks. As with any debt obligation, structured notes involve the risk that the issuer will become insolvent or otherwise default on its payment obligations. This risk is in addition to the risk that the issuers obligations (and thus the value of the Funds investment) will be reduced because of adverse changes in the external factor or factors to which the obligations are linked. The value of structured notes will in many cases be more volatile (that is, will change more rapidly or severely) than the value of traditional debt instruments. Volatility will be especially high if the issuers obligations are determined by reference to some multiple of the change in the external factor or factors. Many structured notes have limited or no liquidity, so that the Fund would be unable to dispose of the investment prior to maturity. As with all investments, successful use of structured notes depends in significant part on the accuracy of the advisers analysis of the issuers creditworthiness and financial prospects, and of the Advisers forecast as to changes in relevant economic and financial market conditions and factors. In instances where the issuer of a structured note is a foreign entity, the usual risks associated with investments in foreign securities (described above) apply. Structured notes may be considered derivative securities.
Supranational Entities
The Fund may invest in obligations of supranational entities. A supranational entity is an entity designated or supported by national governments to promote economic reconstruction, development or trade amongst nations. Examples of supranational entities include the International Bank for Reconstruction and Development (also known as the World Bank) and the European Investment Bank. Obligations of supranational entities are subject to the risk that the governments on whose support the entity depends for its financial backing or repayment may be unable or unwilling to provide that support. Obligations of a supranational entity that are denominated in foreign currencies will also be subject to the risks associated with investments in foreign currencies, as described below under Foreign Currency Transactions.
U.S. Government Securities
The Fund may invest in some or all of the following U.S. government securities:
U.S. Treasury Bills-Direct obligations of the U.S. Treasury that are issued in maturities of one year or less. No interest is paid on Treasury bills; instead, they are issued at a discount and repaid at full face value when they mature. They are backed by the full faith and credit of the U.S. government.
U.S. Treasury Notes and Bonds-Direct obligations of the U.S. Treasury issued in maturities that vary between one and 30 years, with interest normally payable every six months. These obligations are backed by the full faith and credit of the U.S. government.
Treasury Inflation-Protected Securities (TIPS)-Fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. The interest rate on TIPS is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal value that has been adjusted for inflation. Although repayment of the original bond principal upon maturity is guaranteed, the market value of TIPS is not guaranteed, and will fluctuate.
Ginnie Maes-Debt securities issued by a mortgage banker or other mortgagee which represent an interest in a pool of mortgages insured by the Federal Housing Administration or the Rural Housing Service or guaranteed by the Veterans Administration. The GNMA guarantees the timely payment of principal and interest when such payments are due, whether or not these amounts are collected by the issuer of these certificates on the underlying mortgages. It
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is generally understood that a guarantee by GNMA is backed by the full faith and credit of the United States. Mortgages included in single family or multi-family residential mortgage pools backing an issue of Ginnie Maes have a maximum maturity of 30 years. Scheduled payments of principal and interest are made to the registered holders of Ginnie Maes (such as the Fund) each month. Unscheduled prepayments may be made by homeowners, or as a result of a default. Prepayments are passed through to the registered holder (such as the Fund, which reinvests any prepayments) of Ginnie Maes along with regular monthly payments of principal and interest.
Fannie Maes-The FNMA is a government-sponsored corporation owned entirely by private stockholders that purchases residential mortgages from a list of approved seller/servicers. Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government.
Freddie Macs-The Federal Home Loan Mortgage Corporation (FHLMC) is a corporate instrumentality of the U.S. government. Freddie Macs are participation certificates issued by FHLMC that represent an interest in residential mortgages from FHLMCs National Portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal. Freddie Macs are not backed by the full faith and credit of the U.S. government.
The Fund may also invest in other issues of the U.S. Treasury, including certificates of indebtedness and issues of certain agencies and instrumentalities. Some of these securities are supported by the full faith and credit of the United States, others are supported by the right of the issuer to borrow from the U.S. Treasury, and others are supported only by the credit of the agency or instrumentality.
U.S. government securities are not generally perceived to involve credit risks to the same extent as investments in other types of fixed-income securities, although, as a result, the yields available from U.S. government securities are generally lower than the yields available from corporate fixed-income securities. Like other debt securities, however, the values of U.S. government securities change as interest rates fluctuate. Fluctuations in the value of portfolio securities will not affect interest income on existing portfolio securities but will be reflected in the Funds net asset value. Since the magnitude of these fluctuations will generally be greater at times when the Funds average maturity is longer, under certain market conditions the Fund may, for temporary defensive purposes, accept lower current income from short-term investments rather than investing in higher yielding long-term securities. Securities such as Fannie Maes and Freddie Macs are guaranteed as to the payment of principal and interest by the relevant entity (e.g., FNMA or FHLMC) but are not backed by the full faith and credit of the U.S. government. An event affecting the guaranteeing entity could adversely affect the payment of principal or interest or both on the security, and therefore, these types of securities should be considered to be riskier than U.S. government securities. FNMA and FHLMC have each been the subject of investigations by federal regulators over certain accounting matters. Such investigations, and any resulting restatements of financial statements, may adversely affect the guaranteeing entity and, as a result, the payment of principal or interest on these types of securities.
See Mortgage-Related Securities above for additional information on these securities.
The values of TIPS generally fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of TIPS. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of TIPS. If inflation is lower than expected during the period the Fund holds TIPS, the Fund may earn less on the TIPS than on a conventional bond. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in TIPS may not be protected to the extent that the increase is not reflected in the bonds inflation measure. There can be no assurance that the inflation index for TIPS will accurately measure the real rate of inflation in the prices of goods and services.
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Variable Amount Master Demand Notes
The Fund may invest in variable amount master demand notes. Variable amount master demand notes are unsecured demand notes that permit the investment of fluctuating amounts of money at variable rates of interest pursuant to arrangements with issuers who have been rated in the highest short-term rating category by nationally recognized statistical rating organizations, or which have been determined by the Subadviser to be of comparable quality. The interest rate on a variable amount master demand note is periodically adjusted according to a prescribed formula. Although currently there is no established secondary market in master demand notes, the payee may demand payment of the principal and interest upon notice not exceeding five business days or seven calendar days.
Warrants and Rights
The Fund may invest in warrants and rights. A warrant is an instrument that gives the holder a right to purchase a given number of shares of a particular security at a specified price until a stated expiration date. Buying a warrant generally can provide a greater potential for profit or loss than an investment of equivalent amounts in the underlying common stock. The market value of a warrant does not necessarily move with the value of the underlying securities. If a holder does not sell the warrant, it risks the loss of its entire investment if the market price of the underlying security does not, before the expiration date, exceed the exercise price of the warrant. Investment in warrants is a speculative activity. Warrants pay no dividends and confer no rights (other than the right to purchase the underlying securities) with respect to the assets of the issuer. A right is a privilege granted to existing shareholders of a corporation to subscribe for shares of a new issue of common stock before it is issued. Rights normally have a short life, usually two to four weeks, are freely transferable and entitle the holder to buy the new common stock at a lower price than the public offering price.
When-Issued, Delayed Delivery and Forward Commitment Securities
To reduce the risk of changes in interest rates and securities prices, the Fund may purchase securities on a forward commitment or when-issued or delayed delivery basis, which means delivery and payment take place a number of days after the date of the commitment to purchase. The payment obligation and the interest rate receivable with respect to such purchase are fixed when the Fund enters into the commitment, but the Fund does not make payment until it receives delivery from the counterparty. The Adviser will commit to purchase such securities only with the intention of actually acquiring the securities, but the Adviser may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a forward commitment or when-issued or delayed delivery basis are subject to changes in value, generally changing in the same way, i.e., appreciating when interest rates decline and depreciating when interest rates rise, based upon the publics perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities so purchased may expose the Fund to risks because they may experience such fluctuations prior to their actual delivery. Purchasing securities on a when-issued or delayed delivery basis can involve the additional risk that the yield available in the market when the delivery takes place actually may be higher than that obtained in the transaction itself. Purchasing securities on a forward commitment or when-issued or delayed delivery basis when the Adviser is fully or almost fully invested may result in greater potential fluctuation in the value of the Funds net assets. In addition, there is a risk that securities purchased on a when-issued or delayed delivery basis may not be delivered and that the purchaser of securities sold by the Adviser on a forward commitment basis will not honor its purchase obligation. In such cases, the Fund may incur a loss.
Zero-Coupon Securities
The Fund may invest in zero-coupon securities. Zero-coupon securities are debt obligations that do not entitle the holder to any periodic payments of interest either for the entire life of the obligation or for an initial period after the issuance of the obligations. These securities are issued and traded at a discount from their face amounts. The amount of the discount varies depending on such factors as the time remaining until maturity of the securities, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. The market prices of zero-coupon securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than are other types of securities having similar maturities and credit quality. In order to satisfy a requirement for qualification as a regulated investment company under the Code, the Fund must distribute each year at least 90% of its net investment income, including the original
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issue discount accrued on zero-coupon securities. Because the Fund will not, on a current basis, receive cash payments from the issuer of a zero-coupon security in respect of accrued original issue discount, in some years the Fund may have to distribute cash obtained from other sources in order to satisfy the 90% distribution requirement under the Code. Such cash might be obtained from selling other portfolio holdings of the Fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for the Fund to sell such securities at such time.
The Fund is operated by persons who have claimed an exclusion form the definition of a commodity pool operator under the Commodity Exchange Act (the CEA) and, therefore, are not subject to registration or regulation as a pool operator under the CEA.
The Fund has the flexibility to respond promptly to changes in market and economic conditions. In the interest of preserving shareholders capital, the Adviser may employ a temporary defensive strategy if it determines such a strategy to be warranted. Pursuant to such a defensive strategy, the Fund temporarily may hold cash (U.S. dollars) and/or invest up to 100% of its assets in U.S. government securities, certificates of deposit, commercial paper, bankers acceptances, and/or repurchase agreements. It is impossible to predict whether, when or for how long the Fund will employ defensive strategies. The use of defensive strategies may prevent the Fund from achieving its goal.
In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, the Fund may temporarily hold cash (U.S. dollars) and may invest any portion of its assets in money market instruments.
The Funds portfolio turnover rate for a fiscal year is calculated by dividing the lesser of purchases or sales of portfolio securities, for the fiscal year by the monthly average of the value of the portfolio securities owned by the Fund during the fiscal year in each case excluding securities having maturity dates at acquisition of one year or less. High portfolio turnover involves correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Fund, thereby decreasing the Funds total return. It is impossible to predict with certainty whether future portfolio turnover rates will be higher or lower than those experienced during past periods. The Funds portfolio turnover rate disclosed in its financial statements may not necessarily reflect all of the Funds trading in derivatives. Because of this, the Funds turnover rate may appear relatively low even when its actual trading in derivatives (and the associated costs) is relatively active and frequent.
The rate of portfolio turnover will depend upon market and other conditions, and it will not be a limiting factor when the Adviser believes that portfolio changes are appropriate.
PORTFOLIO HOLDINGS INFORMATION
The Funds Board of Trustees has adopted policies to limit the disclosure of confidential portfolio holdings information and to ensure equal access to such information, except in certain circumstances as approved by the Board of Trustees. These policies are summarized below. Generally, portfolio holdings information will not be disclosed until it is first posted on the Funds website at www.funds.natixis.com. Generally, full portfolio holdings information will not be posted until it is aged for at least 30 days. Any holdings information that is released must clearly indicate the date of the information, and must state that due to active management, the Fund may or may not still invest in the securities listed. Portfolio characteristics, such as industry/sector breakdown, current yield, quality breakdown, duration, average price-earnings ratio and other similar information may be provided on a current basis. However, portfolio characteristics do not include references to specific portfolio holdings.
The Board of Trustees has approved exceptions to the general policy on the sharing of portfolio holdings information as in the best interests of the Fund:
(1) | Disclosure of portfolio holdings posted on the Funds website provided that information is shared no sooner than the next day following the day on which the information is posted; |
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(2) | Disclosure to firms offering industry-wide services, provided that the firm has agreed in writing to maintain the confidentiality of the Funds portfolio holdings. Entities that receive information pursuant to this exception include Lipper (monthly disclosure of full portfolio holdings, provided 5 days after month-end); and FactSet (daily disclosure of full portfolio holdings, provided the next business day); |
(3) | Disclosure (subject to a written confidentiality provision) to Broadridge Financial Solutions, Inc. as part of the proxy voting record keeping services provided to the Fund, and to vendors that provide proxy services, including proxy voting administration and research services, to the Adviser and Subadviser of the Fund (portfolio holdings of issuers as of record date for shareholder meetings); |
(4) | Disclosure to employees of the Adviser, Subadviser, principal underwriter, administrator, custodian, fund accounting agent, independent registered public accountants, fund counsel and Independent Trustees counsel, as well as to broker dealers executing portfolio transactions for the Fund, provided that such disclosure is made for bona fide business purposes; and |
(5) | Other disclosures made for non-investment purposes, but only if approved in writing in advance by an officer of the Fund. Such exceptions will be reported to the Board of Trustees. |
With respect to items (2) through (4) above, disclosure is made pursuant to procedures that have been approved by the Board of Trustees, and may be made by employees of the Adviser, Subadviser, administrator or custodian. With respect to (5) above, approval will be granted only when the officer determines that the Fund has a legitimate business reason for sharing the portfolio holdings information and the recipients are subject to a duty of confidentiality, including a duty not to trade on the information. Although the Trust may enter into written confidentiality agreements, in other circumstances, such as those described in (4) above, the obligation to keep information confidential may be based on common law, professional or statutory duties of confidentiality. Common law, professional or statutory duties of confidentiality, including the duty not to trade on the information, may not be as clearly delineated and may be more difficult to enforce than contractual duties. The Funds officers determine on a case by case basis whether it is appropriate for the Fund to rely on such common law, professional or statutory duties. The Funds Board of Trustees exercises oversight of the disclosure of portfolio holdings by, among other things, receiving and reviewing reports from the Funds chief compliance officer regarding any material issues concerning the Funds disclosure of portfolio holdings or from officers of the Fund in connection with proposed new exceptions or new disclosures pursuant to item (5) above. Notwithstanding the above, there is no assurance that the Funds policies on the sharing of portfolio holdings information will protect the Fund from the potential misuse of holdings by individuals or firms in possession of that information.
In addition, any disclosures of portfolio holdings information by the Fund or the Adviser must be consistent with the anti-fraud provisions of the federal securities laws, the Funds and the Advisers fiduciary duty to shareholders, and the Funds code of ethics. The Funds policies expressly prohibit the sharing of portfolio holdings information if the Fund, the Adviser, or any other affiliated party receives compensation or other consideration in connection with such arrangement. The term consideration includes any agreement to maintain assets in the Fund or in other funds or accounts managed by the Adviser and/or Subadviser or by any affiliated person of the Adviser and/or Subadviser.
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The Fund is governed by a Board of Trustees, which is responsible for generally overseeing the conduct of Fund business and for protecting the interests of shareholders. The trustees meet periodically throughout the year to oversee the Funds activities, review contractual arrangements with companies that provide services to the Fund and review the Funds performance.
Trustees and Officers
Under the Trusts Declaration of Trust, no annual or regular meetings of shareholders are required. As a result, the Trustees will continue in office until resignation, retirement, death or removal. Trustee vacancies normally are filled by vote of the remaining Trustees. If at any time less than a majority of the Trustees in office has been elected by the shareholders, the Trustees must call a shareholder meeting for the purpose of electing Trustees.
The table below provides certain information regarding the trustees and officers of the Trust. For purposes of this table and for purposes of this Statement, the term Independent Trustee means those trustees who are not interested persons, as defined in the 1940 Act, of the Trust. In certain circumstances, Trustees are also required to have no direct or indirect financial interest in the approval of a matter being voted on in order to be considered independent for the purposes of the requisite approval. For purposes of this Statement, the term Interested Trustee means those trustees who are interested persons of the Trust. Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116.
Name and Year of Birth |
Position Held with Term of Office* |
Principal Occupation(s) During Past 5 Years** |
Number of Portfolios in | |||
INDEPENDENT TRUSTEES |
||||||
Graham T. Allison, Jr. (1940) |
Trustee since 1984
Contract Review and Governance Committee Member |
Douglas Dillon Professor and Director of the Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University | 41 Director, Taubman Centers, Inc. (real estate investment trust) | |||
Charles D. Baker (1956) |
Trustee since 2005
Contract Review and Governance Committee Member |
President and Chief Executive Officer, Harvard Pilgrim Health Care (health plan) | 41 None | |||
Edward A. Benjamin (1938) |
Trustee since 2002
Chairman of the Contract Review and Governance Committee |
Retired | 41 None |
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Name and Year of Birth |
Position Held with Term of Office* |
Principal Occupation(s) During Past 5 Years** |
Number of Portfolios in | |||
Daniel M. Cain (1945) |
Trustee since 1996
Chairman of the Audit Committee |
President and Chief Executive Officer, Cain Brothers & Company, Incorporated (investment banking) | 41 Director, Sheridan Healthcare Inc. (physician practice management) | |||
Kenneth A. Drucker (1945) |
Trustee since July 2008
Contract Review and Governance Committee Member |
Formerly, Treasurer, Sequa Corp. (manufacturing) | 41 Director, M Fund, Inc. (registered investment company) | |||
Jonathan P. Mason (1958) |
Trustee since 2007
Audit Committee Member |
Chief Financial Officer, Cabot Corp. (specialty chemicals); formerly, Vice President and Treasurer, International Paper Company; formerly, Chief Financial Officer, Carter Holt Harvey (forest products) | 41 None | |||
Sandra O. Moose (1942) |
Chairperson of the Board since November 2005
Trustee since 1982
Ex officio member of the Audit Committee and Contract Review and Governance Committee |
President, Strategic Advisory Services (management consulting); formerly, Senior Vice President and Director, The Boston Consulting Group, Inc. (management consulting) | 41 Director, Verizon Communications; Director, Rohm and Haas Company (specialty chemicals); Director, AES Corporation (International Power Company) | |||
Cynthia L. Walker (1956) |
Trustee since 2005
Audit Committee Member |
Deputy Dean for Finance and Administration, Yale University School of Medicine; formerly Executive Dean for Administration Harvard Medical School and formerly, Dean of Finance and CFO, Harvard Medical School | 41 None |
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Name and Year of Birth |
Position Held with Term of Office* |
Principal Occupation(s) During Past 5 Years** |
Number of Portfolios in | |||
INTERESTED TRUSTEES |
||||||
Robert J. Blanding1 (1947) 555 California Street San Francisco, CA 94104 |
Trustee since 2002 | President, Chairman, Director, and Chief Executive Officer, Loomis, Sayles & Company, L.P.; President and Chief Executive Officer, Loomis Sayles Funds I; Chief Executive Officer, Loomis Sayles Funds II | 41 None | |||
John T. Hailer2 (1960) |
Trustee since 2000 | President and Chief Executive Officer, U.S. and Asia Natixis Global Asset Management, L.P.; formerly, President and Chief Executive Officer, Natixis Asset Management Advisors, L.P. and Natixis Distributors, L.P.; formerly, Executive Vice President, Loomis Sayles Funds I; formerly President, Loomis Sayles Funds II; formerly, President and Chief Executive Officer, Natixis Cash Management Trust, Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV and Gateway Trust | 41 None |
* | Each Trustee serves until retirement, resignation or removal from the Board of Trustees. The current retirement age is 72. The position of Chairperson of the Board is appointed for a two-year term. Ms. Moose was re-appointed to serve an additional two year term as the Chairperson of the Board of Trustees on September 14, 2007. |
** | Each person listed above, except as noted, holds the same position(s) with the other funds in the fund complex (the Fund Complex). The Fund Complex includes all series of Gateway Trust, Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV and Natixis Cash Management Trust (collectively, the Natixis Funds Trusts), Loomis Sayles Funds I and Loomis Sayles Funds II (collectively, the Loomis Sayles Funds Trusts) and Hansberger International Series. Previous positions during the past five years with Natixis Distributors, L.P., Natixis Asset Management Advisors, L.P. (Natixis Advisers), or Loomis, Sayles & Company, L.P. (Loomis Sayles) are omitted if not materially different from a Trustees or officers current position with such entity. |
1 |
Mr. Blanding is deemed an interested person of the trusts because he holds the following positions with affiliated persons of the Trust: President, Chairman, Director and Chief Executive Officer of Loomis Sayles. |
2 |
Mr. Hailer is deemed an interested person of the Trust because he holds the following positions with affiliated persons of the Trust: President and Chief Executive Officer of Natixis Distribution Corporation and Natixis Global Associates, L.P. |
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Name and Year of Birth |
Position(s) Held with the Trust |
Term of Office and Length of Time Served |
Principal Occupation(s) During Past 5 Years | |||
OFFICERS OF THE TRUST |
||||||
David L. Giunta (1965) |
President and Chief Executive Officer | Since March 2008 | President and Chief Executive Officer, Natixis Asset Management Advisors, L.P., Natixis Distributors, L.P. and Natixis Global Associates U.S.; formerly President, Fidelity Charitable Gift Fund | |||
Coleen Downs Dinneen (1960) |
Secretary, Clerk and Chief Legal Officer | Since September 2004 | Executive Vice President, General Counsel, Secretary and Clerk (formerly, Senior Vice President, General Counsel, Secretary and Clerk), Natixis Distribution Corporation, Natixis Distributors, L.P. and Natixis Asset Management Advisors, L.P. | |||
Michael C. Kardok (1959) |
Treasurer, Principal Financial and Accounting Officer | Since October 2004 | Senior Vice President, Natixis Asset Management Advisors, L.P. and Natixis Distributors, L.P.; formerly, Senior Director, PFPC Inc. | |||
Robert Krantz (1964) |
Executive Vice President | Since September 2007 | Executive Vice President, Natixis Distributors, L.P. and Natixis Asset Management Advisors, L.P. | |||
Russell L. Kane (1969) |
Chief Compliance Officer; Assistant Secretary; Anti-Money Laundering Officer |
Chief Compliance Officer, since May 2006; Assistant Secretary since June 2004; Anti-Money Laundering Officer since April 2007 | Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distributors, L.P. and Natixis Asset Management Advisors, L.P.; Vice President, Associate General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation; formerly, Senior Counsel, Columbia Management Group |
* | Each officer of the Trust serves for an indefinite term in accordance with the trusts current By-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified. |
** | Each person listed above holds the same position(s) with the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger International Series. Previous positions during the past five years with the Distributor, Natixis Advisors, or Loomis Sayles are omitted if not materially different from a trustees or officers current position with such entity. |
Standing Board Committees
The trustees have delegated certain authority to the two standing committees of the Trust, the Audit Committee and Contract Review and Governance Committee. The Contract Review and Governance Committee of the Trust consists solely of Independent Trustees and considers matters relating to advisory, subadvisory and distribution arrangements, potential conflicts of interest between the Adviser and the Trust, and governance matters relating to the Trust. During the period from January 1, 2007 to December 31, 2007, this Committee held five meetings.
The Contract Review and Governance Committee also makes nominations for independent trustee membership on the Board of Trustees when necessary and considers recommendations from shareholders of the Fund that are submitted in accordance with the procedures by which shareholders may communicate with the Board of Trustees. Pursuant to those procedures, shareholders must submit a recommendation for nomination in a signed writing
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addressed to the attention of the Board of Trustees, c/o Secretary of the Fund, Natixis Asset Management Advisors, L.P. 399 Boylston Street, Boston, MA 02116. This written communication must (i) be signed by the shareholder, (ii) include the name and address of the shareholder, (iii) state that the communication relates to the ASG Global Alternatives Fund, and (iv) identify the account number, class and number of shares held by the shareholder as of a recent date or the intermediary through which the shares are held. The recommendation must contain sufficient background information concerning the trustee candidate to enable a proper judgment to be made as to the candidates qualifications, which may include (i) the nominees knowledge of the mutual fund industry; (ii) any experience possessed by the nominee as a director or senior officer of other public companies; (iii) the nominees educational background; (iv) the nominees reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the nominee, and the extent to which such expertise would complement the Boards existing mix of skills and qualifications; (vi) the nominees perceived ability to contribute to the ongoing functions of the Board, including the nominees ability and commitment to attend meetings regularly and work collaboratively with other members of the Board; (vii) the nominees ability to qualify as an Independent Trustee for purposes of applicable regulations; and (viii) such other factors as the appropriate Board Committee may request in light of the existing composition of the Board and any anticipated vacancies or other transitions. The recommendation must be received in a timely manner (and in any event no later than the date specified for receipt of shareholder proposals in any applicable proxy statement with respect to the Fund). A recommendation for trustee nomination shall be kept on file and considered by the Board for six (6) months from the date of receipt, after which the recommendation shall be considered stale and discarded.
The Audit Committee of the Trust consists solely of Independent Trustees and considers matters relating to the scope and results of the Trusts audits and serves as a forum in which the independent registered public accounting firm can raise any issues or problems identified in the audit with the Board of Trustees. This Committee also reviews and monitors compliance with stated investment objectives and policies, SEC and Treasury regulations as well as operational issues relating to the transfer agent and custodian. During the period from January 1 to December 31, 2007, this Committee held five meetings.
The current membership of each committee is as follows:
Audit Committee |
Contract Review and Governance Committee | |
Daniel M. Cain - Chairman |
Edward A. Benjamin - Chairman | |
Jonathan P. Mason |
Graham T. Allison, Jr. | |
Cynthia L. Walker |
Charles D. Baker | |
Kenneth A. Drucker |
As chairperson of the Board of Trustees, Ms. Moose is an ex officio member of both Committees.
Fund Securities Owned by the Trustees
As of December 31, 2007, the Fund had not commenced operations.
As of December 31, 2007, the trustees had the following ownership in the funds in the Fund Complex:
Independent Trustees
Aggregate Dollar Range of Fund Shares in Funds Overseen by Trustee in the Fund Complex* | ||
Graham T. Allison, Jr.** |
E | |
Charles D. Baker |
C | |
Edward A. Benjamin** |
E | |
Daniel M. Cain** |
E | |
Kenneth A. Drucker*** |
A | |
Jonathan P. Mason**** |
C | |
Sandra O. Moose** |
E | |
Cynthia L. Walker |
E |
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* | A. None |
B. $1 - 10,000
C. $10,001 - $50,000
D. $50,001 - $100,000
E. over $100,000
** | Amounts include economic value of notional investments held through the deferred compensation plan. |
*** | Mr. Drucker became a trustee effective July 1, 2008. |
**** | Mr. Mason became a trustee effective April 1, 2007. |
Interested Trustees
Aggregate Dollar Range of Fund Shares in Funds Overseen by Trustee in the Fund Complex* | ||
Robert J. Blanding |
E | |
John T. Hailer |
E |
* | A. None |
B. $1 - 10,000
C. $10,001 - $50,000
D. $50,001 - $100,000
E. Over $100,000
Trustee Fees
The Trust pays no compensation to its officers or to its trustees who are Interested Trustees.
The Chairperson of the Board receives a retainer fee at the annual rate of $200,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that she attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $65,000. Each Independent Trustee also receives a meeting attendance fee of $7,500 for each meeting of the Board of Trustees that he or she attends in person and $750 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, each committee chairman receives an additional retainer fee at the annual rate of $10,000. Each Contract Review and Governance Committee member is compensated $5,000 for each Committee meeting that he or she attends in person and $500 for each committee meeting that he or she attends telephonically. Each Audit Committee member is compensated $6,250 for each Committee meeting that he or she attends in person and $3,125 for each meeting he or she attends telephonically. These fees are allocated among the Trust and the mutual fund portfolios in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger International Series based on a formula that takes into account, among other factors, the relative net assets of each mutual fund portfolio.
The table below shows the amounts received by the trustees for serving as a trustee of the Trust, and also for serving as trustees of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger International Series. The table also sets forth, as applicable, pension or retirement benefits accrued as part of fund expenses, as well as estimated annual retirement benefits:
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Aggregate Compensation from the Trust* |
Pension or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated Annual Benefits Upon Retirement |
Total Compensation from the Fund Complex** | |||||||||
INDEPENDENT TRUSTEES |
||||||||||||
Graham T. Allison, Jr. |
$ | 2,837 | $ | 0 | $ | 0 | $ | 100,750 | ||||
Charles D. Baker |
$ | 2,622 | $ | 0 | $ | 0 | $ | 92,700 | ||||
Edward A. Benjamin |
$ | 3,113 | $ | 0 | $ | 0 | $ | 111,000 | ||||
Daniel M. Cain |
$ | 3,007 | $ | 0 | $ | 0 | $ | 111,200 | ||||
Kenneth A. Drucker*** |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Jonathan P. Mason**** |
$ | 1,867 | $ | 0 | $ | 0 | $ | 68,250 | ||||
Sandra O. Moose |
$ | 2,029 | $ | 0 | $ | 0 | $ | 200,000 | ||||
Cynthia L. Walker |
$ | 2,731 | $ | 0 | $ | 0 | $ | 100,950 | ||||
INTERESTED TRUSTEES |
||||||||||||
John T. Hailer |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Robert J. Blanding |
$ | 0 | $ | 0 | $ | 0 | $ | 0 |
* | For the fiscal year ended December 31, 2007. Amounts include payments deferred by the trustees for the fiscal year ended December 31, 2007. The total amount of deferred compensation accrued for the Trust as of December 31, 2007 for the trustees is as follows: Allison ($187,415), Baker ($8,111), Benjamin ($41,351), Cain ($73,196), Mason ($2,655) and Walker ($16,102). |
** | Total compensation reflects amounts paid for service as a trustee to the Natixis Funds Trusts, the Loomis Sayles Funds Trusts and Hansberger International Series for the relevant fiscal years. |
*** | Mr. Drucker became a trustee of the Natixis Funds Trust, the Loomis Sayles Funds Trust and Hansberger International Series on July 1, 2008. |
**** | Mr. Mason became a trustee of the Natixis Funds Trusts and the Loomis Sayles Funds Trusts on April 1, 2007. |
The Natixis Funds Trusts and Loomis Sayles Funds Trusts do not provide pension or retirement benefits to Trustees, but have adopted a deferred payment arrangement under which each Trustee may elect not to receive fees from the funds on a current basis but to receive in a subsequent period an amount equal to the value that such fees would have been if they had been invested in a fund or funds selected by the Trustee on the normal payment date for such fees.
Code of Ethics
The Fund, the Adviser, the Subadviser and the Distributor each have adopted a code of ethics under Rule 17j-1 of the 1940 Act. These codes of ethics permit the personnel of these entities to invest in securities, including securities that the Fund may purchase or hold. The codes of ethics are on public file with, and are available from, the SEC.
Proxy Voting Policies
The Board of Trustees of the Fund has adopted the Proxy Voting Policy and Guidelines (the Guidelines) for the voting of proxies for securities held by the Fund. Under the Guidelines, decisions regarding the voting of proxies are to be made solely in the interest of the Fund and its shareholders. Reich & Tang is responsible for voting proxies with respect to securities in the Money Market Portion of the Funds portfolio and the Adviser is responsible for voting securities other than those in the Money Market Portion of the Funds portfolio. Each of Reich & Tang and the Adviser is responsible for maintaining certain records and reporting to the Audit Committee of the Trust in connection with the voting of proxies.
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The Adviser believes that proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. However, the Adviser expects that the securities in which it will invest on behalf of the Fund (e.g., futures and forwards) will not have voting rights, and therefore, the Adviser does not expect to vote proxies for securities held by the Fund. If the Adviser does vote proxies with respect to the Funds investments, it will vote in a manner that is consistent with what it believes to be the best interests of the Fund.
Reich & Tang has adopted Proxy Voting Policies and Procedures that are designed to ensure that Reich & Tang votes proxies in the best interests of its clients. These policies and procedures also require that Reich & Tang identify and address any conflicts of interest between the firm and its clients. If a material conflict of interest exists, then Reich & Tang will determine whether voting in accordance with the guidelines set forth in the policies and procedures is in the best interests of the clients and, if not, it will take other appropriate action. Reich & Tang generally votes in favor of routine corporate housekeeping proposals, including the election of directors (where no corporate governance issues are implicated), and against proposals that primarily benefit management. Generally, Reich & Tang will vote against proposals that make it more difficult to replace members of a board of directors.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12-month period ending June 30, 2009 will be available without charge (i) through the Funds website, www.funds.natixis.com and (ii) on the SECs website at www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
Information About the Organization and Ownership of the Adviser and Subadviser
AlphaSimplex Group, LLC, located at One Cambridge Center, Cambridge, Massachusetts 02142, serves as investment adviser to the Fund. The Adviser, a Delaware limited liability company founded in 1999, served as investment manager, adviser, or sub-adviser with respect to assets of $580 million (including notional assets covered by overlay strategies) as of July 1, 2008. The Adviser currently acts as investment manager or sub-adviser of one registered investment company and two privately-offered funds. AlphaSimplex, a registered investment adviser, is a subsidiary of Natixis Global Asset Management, L.P. (Natixis US) which is part of Natixis Global Asset Management, an international asset management group based in Paris, France. Natixis Global Asset Management is ultimately owned principally by three large French financial service entities: Natixis, an investment banking and financial services firm which is publicly traded on Euronext in Paris; the Caisse dEpargne, a financial institution owned by French regional savings banks known as Caisse dEpargne; and Banque Federale des Banques Populaires, a financial institution owned by regional cooperative banks known as Banque Populaires. Natixis US has 14 principal subsidiary or affiliated asset management firms that collectively had over $[ ] billion in assets under management as of , 2008.
Reich & Tang Asset Management, LLC, located at 600 Fifth Avenue, New York, New York 10020, serves as subadviser to the Fund. The Subadviser, a Delaware limited liability company founded in 1970, served as investment manager, adviser, or sub-adviser with respect to assets aggregating in excess of $17.8 billion as of March 31, 2008, and currently acts as investment manager or sub-adviser of eighteen registered investment companies of which it acts as administrator for twelve, and advises pension trusts, profit-sharing trusts and endowments. Reich & Tang, a registered investment adviser, is also a subsidiary of Natixis US.
Advisory and Subadvisory Agreements
The Funds advisory agreement with the Adviser provides that the Adviser will furnish or pay the expenses of the Fund for office space, facilities and equipment, services of executive and other personnel of the Trust and certain
39
administrative services. The Adviser may delegate certain administrative services to its affiliates. The Adviser is responsible for obtaining and evaluating such economic, statistical and financial data and information and performing such additional research as is necessary to manage the Funds assets in accordance with its investment objectives and policies.
The Fund pays all expenses not borne by the Adviser or Subadviser including, but not limited to, the charges and expenses of the Funds custodian and transfer agent, independent registered public accountants and legal counsel for the Fund and the Trusts Independent Trustees, 12b-1 fees, all brokerage commissions and transfer taxes in connection with portfolio transactions, all taxes and filing fees, the fees and expenses for registration or qualification of its shares under federal and state securities laws, all expenses of shareholders and trustees meetings and of preparing, printing and mailing reports to shareholders and the compensation of trustees who are not directors, officers or employees of the Adviser, or its affiliates, other than affiliated registered investment companies. Certain expenses may be allocated differently among the Funds Class A and Class C shares, on the one hand, and Institutional Class shares on the other hand. (See Description of the Trust)
The Funds advisory agreement and subadvisory agreement provide that they will continue in effect for two years from the date of execution and thereafter from year to year if their respective continuance is approved at least annually (i) by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Fund and (ii) by vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval.
The Funds advisory agreement and subadvisory agreement may be terminated without penalty by vote of the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund, upon 60 days written notice, or by the Adviser upon 90 days written notice, and each terminates automatically in the event of its assignment (as defined in the 1940 Act). The subadvisory agreement also may be terminated by the subadviser upon 90 days notice, and automatically terminates upon termination of the advisory agreement.
The advisory agreement and subadvisory agreement provide that the Adviser or Subadviser shall not be subject to any liability in connection with the performance of their respective services thereunder in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of their obligations and duties.
The Adviser oversees the portfolio management services provided to the Fund by the Subadviser. Subject to the review of the Board of Trustees, the Adviser monitors the Subadviser to assure that the Subadviser is managing the applicable portion of the Funds assets consistently with the Funds investment objective and restrictions and applicable laws and guidelines, including, but not limited to, compliance with the diversification requirements set forth in the 1940 Act and Subchapter M of the Code. In addition, the Adviser also provides the Fund with administrative services which include, among other things, day-to-day administration of matters related to the Funds existence, maintenance of its records, preparation of reports and assistance in the preparation of the Funds registration statement under federal and state laws. The Adviser will provide, or cause the Funds custodian to provide, information to the Subadviser regarding the composition of assets of the Fund and the assets to be invested and reinvested by the Subadviser. The Adviser does not determine which securities will be purchased or sold for the Fund with respect to the Money Market Portion of the Funds portfolio, which the Subadviser oversees.
The Adviser may terminate any subadvisory agreement without shareholder approval. In such case, the Adviser will either enter into an agreement with another subadviser to manage the Fund or allocate the segments or disciplines assets among the other segments or disciplines of the Fund.
Distribution Agreements and Rule 12b-1 Plans
Under a separate agreement with the Fund, the Distributor serves as the principal distributor of each class of shares of the Fund. The Distributors principal business address is 399 Boylston Street, Boston, Massachusetts 02116. Under these agreements (the Distribution Agreements), the Distributor conducts a continuous offering and is not obligated to sell a specific number of shares. The Distributor bears the cost of making information about the Fund available through advertising and other means and the cost of printing and mailing Prospectuses to persons other than shareholders. The Fund pays the cost of registering and qualifying its shares under state and federal securities laws and distributing Prospectuses to existing shareholders.
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The Distributor is compensated under each agreement through receipt of the sales charges on Class A and Class C shares described below under Net Asset Value and is paid by the Fund the service and distribution fees described in the Prospectus. The Distributor may, at its discretion, reallow the entire sales charge imposed on the sale of Class A and Class C shares of the Fund to investment dealers from time to time. The SEC is of the view that dealers receiving all or substantially all of the sales charge may be deemed underwriters of the Funds shares.
The Fund has adopted Rule 12b-1 plans (the Plans) for its Class A and Class C shares which, among other things, permit it to pay the Distributor monthly fees out of its net assets. These fees consist of a service fee and a distribution fee. Any such fees that are paid by a distributor to securities dealers are known as trail commissions. Pursuant to Rule 12b-1 under the 1940 Act, each Plan was approved by the shareholders of the Fund, and (together with the related Distribution Agreement) by the Board of Trustees, including a majority of the Independent Trustees of the Trust.
Under the Plans, the Fund pays the Distributor a monthly service fee at an annual rate not to exceed 0.25% of the Funds average daily net assets attributable to the Class A and Class C shares. In the case of Class C shares, the Distributor retains the first years service fee of 0.25% assessed against such shares. For Class A and, after the first year, for Class C shares, the Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Funds shares, on a quarterly basis, unless other arrangements are made between the Distributor and the securities dealer, for providing personal services to investors in shares of the Fund and/or the maintenance of shareholder accounts. This service fee will accrue to securities dealers of record immediately with respect to reinvested income dividends and capital gain distributions of the Funds Class A shares.
The service fee on Class A shares may be paid only to reimburse the Distributor for expenses of providing personal services to investors, including, but not limited to, (i) expenses (including overhead expenses) of the Distributor for providing personal services to investors in connection with the maintenance of shareholder accounts and (ii) payments made by the Distributor to any securities dealer or other organization (including, but not limited to, any affiliate of the Distributor) with which the Distributor has entered into a written agreement for this purpose, for providing personal services to investors and/or the maintenance of shareholder accounts, which payments to any such organization may be in amounts in excess of the cost incurred by such organization in connection therewith.
The Funds Class C shares also pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average net assets of the Funds Class C shares. The Distributor retains the 0.75% distribution fee assessed against Class C shares during the first year of investment. After the first year for Class C shares, the Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Funds shares, as distribution fees in connection with the sale of the Funds shares on a quarterly basis, unless other arrangements are made between the Distributor and the securities dealer. As stated in the Prospectus, investors will not be permitted to purchase $1,000,000 or more of Class C shares as a single investment per account.
Each Plan may be terminated by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding voting securities of the relevant class of shares of the Fund. Each Plan may be amended by vote of the relevant trustees, including a majority of the relevant Independent Trustees, cast in person at a meeting called for that purpose. Any change in any Plan that would materially increase the fees payable thereunder by the relevant class of shares of the Fund requires approval by a vote of the holders of a majority of such shares outstanding. The Trusts trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. For so long as a Plan is in effect, selection and nomination of those trustees who are Independent Trustees of the Trust shall be committed to the discretion of such Trustees.
Fees paid by Class A or Class C shares of the Fund may indirectly support sales and servicing efforts relating to shares of the other series of the Natixis Funds Trusts or the Loomis Sayles Funds Trusts. In reporting its expenses to the trustees, the Distributor itemizes expenses that relate to the distribution and/or servicing of a single funds shares, and allocates other expenses among the relevant funds based on their relative net assets. Expenses allocated to each fund are further allocated among its classes of shares annually based on the relative sales of each class, except for any expenses that relate only to the sale or servicing of a single class.
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The Distributor has entered into selling agreements with investment dealers, including affiliates of the Distributor, for the sale of the Funds shares. As described in more detail below, the Distributor, the Adviser and their affiliates may, at their expense, pay additional amounts to dealers who have selling agreements with the Distributor. Institutional Class shares of the Fund may be offered by registered representatives of certain affiliates who are also employees of Natixis US and may receive compensation from the Adviser with respect to sales of Institutional Class shares.
The Distribution Agreement may be terminated at any time on 60 days notice to the Distributor without payment of any penalty, by either vote of a majority of the outstanding voting securities or by vote of a majority of the Independent Trustees. The Distribution Agreement may be terminated at any time on 90 days written notice to the Trust, without payment of any penalty.
The Distribution Agreement and the Plans will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees cast in person at a meeting called for that purpose and (ii) by the vote of the Board of Trustees or by a vote of a majority of the outstanding securities of the Fund (or the relevant class, in the case of the Plans).
With the exception of the Distributor, its affiliated companies and those Trustees that are not Independent Trustees, no interested person of the Trust or any trustee of the Trust had any direct or indirect financial interest in the operation of the Plans or any related agreement. Benefits to the Fund and their shareholders resulting from the Plans are believed to include (1) enhanced shareholder service, (2) asset retention and (3) enhanced portfolio management opportunities and bargaining position with third party service providers and economies of scale arising from having asset levels higher than they would be if the Plans were not in place.
The Distributor also acts as principal distributor for Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II (except Class J shares of the Loomis Sayles Investment Grade Bond Fund), Gateway Trust and Hansberger International Series. The address of the Distributor is 399 Boylston Street, Boston, Massachusetts 02116.
The portion of the various fees and expenses for Class A and Class C shares that are paid (reallowed) to securities dealers are shown below.
Class A
Investment |
Maximum Sales Charge Paid by Investors (% of offering price) |
Maximum Reallowance or Commission (% of offering price) |
Maximum First Year Service Fee (% of net investment) |
Maximum First Year Compensation (% of offering price) |
||||||||
Less than $50,000 |
5.75 | % | 5.00 | % | 0.25 | % | 5.25 | % | ||||
$50,000 - $99,999 |
4.50 | % | 4.00 | % | 0.25 | % | 4.25 | % | ||||
$100,000 - $249,999 |
3.50 | % | 3.00 | % | 0.25 | % | 3.25 | % | ||||
$250,000 - $499,999 |
2.50 | % | 2.15 | % | 0.25 | % | 2.40 | % | ||||
$500,000 - $999,999 |
2.00 | % | 1.70 | % | 0.25 | % | 1.95 | % | ||||
Investments of $1 million or more |
||||||||||||
First $3 million |
None | 1.00 | %(1) | 0.25 | % | 1.25 | % | |||||
Excess over $3 million |
None | 0.50 | %(1) | 0.25 | % | 0.75 | % | |||||
Investments with no Sales Charge (2) |
None | 0.00 | % | 0.25 | % | 0.25 | % |
(1) | These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. |
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(2) | Refers to any investments made by investors not subject to a sales charge as described in the Prospectus for Class A and Class C shares under the section How Sales Charges Are Calculated. |
Class C
Class C service fees are payable regardless of the amount of the Distributors related expenses. The portion of the various fees and expenses for Class C shares of the Fund that are paid to securities dealers are shown below:
Investment |
Maximum Front End Sales Charge Paid by Investors (% of offering price) |
Maximum Reallowance or Commission (% of offering price) |
Maximum First Year Service Fee (% of net investment) |
Maximum First Year Compensation (% of offering price) |
|||||||
All amounts for Class C |
none | 1.00 | % | 0.00 | % | 1.00 | % |
As described in the Prospectus, each purchase or sale of shares is effected at the net asset value next determined after an order is received, less any applicable sales charge. The sales charge is allocated between the investment dealer and the Distributor, as indicated in the tables above. The Distributor receives the contingent deferred sales charge (the CDSC). Proceeds from the CDSC on Class A and C shares are paid to the Distributor and are used by the Distributor to defray the expenses for services the Distributor provides the Trust. The Distributor may, at its discretion, pay (reallow) the entire sales charge imposed on the sale of Class A shares to investment dealers from time to time.
For new amounts invested at net asset value by an eligible governmental authority, the Distributor may, at its expense, pay investment dealers a commission of 0.025% of the average daily net assets of an account at the end of each calendar quarter for up to one year. These commissions are not payable if the purchase represents the reinvestment of redemption proceeds from any other Natixis Fund or if the account is registered in street name.
The Distributor, the Adviser and their affiliates may out of their own resources make additional payments to dealers who sell shares of the Fund. These payments may include: (i) full reallowance of the sales charge of Class A shares, (ii) additional compensation with respect to the sale and/or servicing of Class A and C shares, (iii) payments based upon various factors, as described below, and (iv) financial assistance programs to firms who sell or arrange for the sale of Fund shares including, but not limited to, remuneration for: the firms internal sales contests and incentive programs, marketing and sales fees, expenses related to advertising or promotional activity and events, and shareholder record keeping, sub-transfer agency or miscellaneous administrative services. Payment for travel, lodging and related expenses may be provided for attendance at Fund seminars and conferences, e.g., due diligence meetings held for training and educational purposes. The payment of these concessions and any other compensation offered will conform with state and federal laws and the rules of any self-regulatory organization, such as the Financial Industry Regulatory Authority (FINRA). The participation of such firms in financial assistance programs is at the discretion of the firm and the Distributor. The payments described in (iii) above may be based on sales (generally ranging from 0.05% to 0.35% of gross sales) and/or the amount of assets a dealers clients have invested in the funds (at annual rates generally ranging from 0.05% to 0.25% of the value of the clients shares). The actual payment rates to a dealer will depend upon how the particular arrangement is structured (e.g., solely asset based fees, solely sales based fees or a combination of both) and other factors such as the length of time assets have remained invested in the Fund, redemption rates and the willingness of the dealer to provide access to its representatives for educational and marketing purposes. The payments to dealers described in this paragraph and elsewhere in this Statement, which may be significant to the dealers, may create an incentive for a dealer or its representatives to recommend or sell shares of the Fund or particular shares class over other mutual funds or share classes. Additionally, these payments may result in the Funds inclusion on a sales list, including a preferred or select sales list, or in other sales programs. Investors should contact their dealers for details about the payment the dealers may receive.
Dealers may charge their customers a processing fee or service fee in connection with the purchase or redemption of fund shares. The amount and applicability of such a fee is determined and disclosed to its customers by its
43
individual dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in the Funds Prospectuses and this Statement. Customers will be provided with specific information about any processing or service fees charged by their dealer.
OTHER ARRANGEMENTS
Administrative Services
Natixis Asset Management Advisors, L.P. (Natixis Advisors) performs certain accounting and administrative services for the Fund, pursuant to an Administrative Services Agreement, as amended from time to time (the Administrative Agreement). Under the Administrative Agreement, Natixis Advisors provides the following services to the Fund: (i) personnel that perform bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Fund, (ii) services required in connection with the preparation of registration statements and prospectuses, registration of shares in various states, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance, (iii) the various registrations and filings required by various regulatory authorities and (iv) consultation and legal advice on Fund related matters.
Custodial Arrangements State Street Bank and Trust Company (State Street Bank), One Lincoln Street, Boston, Massachusetts 02111, serves as the custodian for the Trust. As such, State Street Bank holds in safekeeping certificated securities and cash belonging to the Fund and, in such capacity, is the registered owner of securities in book-entry form belonging to the Fund. Upon instruction, State Street Bank receives and delivers cash and securities of the Fund in connection with Fund transactions and collects all dividends and other distributions made with respect to Fund portfolio securities. State Street Bank also maintains certain accounts and records of the Trust and calculates the total net asset value, total net income and net asset value per share of the Fund on a daily basis.
Transfer Agency Services Pursuant to contract between the Trust, on behalf of the Fund, and Boston Financial Data Services, Inc. (Boston Financial), whose principal business address is Two Heritage Drive, Quincy, Massachusetts 02171, Boston Financial acts as shareholder servicing and transfer agent for the Fund and is responsible for services in connection with the establishment, maintenance and recording of shareholder accounts, including all related tax and other reporting requirements and the implementation of investment and redemption arrangements offered in connection with the sale of the Funds shares.
The Fund may also pay dealers whose clients invest in the Fund fees for sub-transfer agency and other similar services. As indicated above, the Distributor, the Adviser and their affiliates may also make payments for sub-transfer agency and similar services.
Independent Registered Public Accounting Firm The Trusts independent registered public accounting firm is . The independent registered public accounting firm assists in the review of federal and state income tax returns, consults with the Trust as to matters of accounting and federal and state income taxation, and will conduct an annual audit of the Funds financial statements.
Counsel to the Fund Ropes & Gray LLP, located at One International Place, Boston, Massachusetts 02110, serves as counsel to the Fund.
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PORTFOLIO MANAGEMENT INFORMATION
PORTFOLIO MANAGERS MANAGEMENT OF OTHER ACCOUNTS
As of May 1, 2008, Dr. Andrew Lo, Jeremiah Chafkin and Robert S. Rickard (the Portfolio Managers) managed other accounts in addition to managing the Fund. The following table provides information on the other accounts managed by each Portfolio Manager.
Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | ||||||||||||||||||||||
Other Accounts Managed |
Advisory fee is based on performance |
Other Accounts Managed |
Advisory fee is based on performance |
Other Accounts Managed |
Advisory fee is based on performance | |||||||||||||||||||
Name of Portfolio Manager |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets | ||||||||||||
AlphaSimplex |
||||||||||||||||||||||||
Andrew Lo |
1 | $400,000,000 | 0 | 0 | 1 | $145,512,218 | 1 | $145,512,218 | 0 | 0 | 0 | 0 | ||||||||||||
Jeremiah Chafkin |
1 | $400,000,000 | 0 | 0 | 1 | $145,512,218 | 1 | $145,512,218 | 0 | 0 | 0 | 0 | ||||||||||||
Reich & Tang |
||||||||||||||||||||||||
Robert S. Rickard |
11 | [ ] | 0 | 0 | 3 | [ ] | 0 | 0 | 1 | [ ] | 0 | 0 |
Material Conflicts of Interest
Conflicts of interest may arise in the allocation of investment opportunities and the allocation of aggregated orders among the Fund and other accounts managed by a Portfolio Manager. A Portfolio Manager potentially could give favorable treatment to some accounts for a variety of reasons, including favoring larger accounts, accounts that pay higher fees, accounts that pay performance-based fees, accounts of affiliated companies and accounts in which the portfolio manager has an interest. Such favorable treatment could lead to more favorable investment opportunities or allocations for some accounts. The goal of the Adviser is to meet its fiduciary obligation with respect to all clients. The Adviser and Subadviser have adopted policies and procedures to mitigate the effects of these conflicts. For more information on how the Adviser and Subadviser allocate investment opportunities between the Fund and their other clients, see the section Allocation of Investment Opportunity Among the Fund and Other Investors Managed by the Adviser and Subadviser in this Statement. Conflicts of interest also may arise to the extent a Portfolio Manager has a short position in one client account but holds a long position in other accounts.
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Portfolio Managers Compensation
All AlphaSimplex investment professionals, including portfolio managers, may receive compensation in three ways: salary, year-end bonuses, and supplemental bonuses. The bonus amounts are decided by the AlphaSimplex Compensation Committee. As a retention tool, AlphaSimplex has implemented a three-year deferral of 30% of bonus amounts for senior professionals.
Mr. Rickards compensation includes the following: (i) base salary, (ii) incentive bonus, and (iii) unit appreciation rights (UARs). Mr. Rickard receives a fixed annual base salary. Base salary amounts are determined by the compensation committee of the Subadviser (the Compensation Committee) based upon a number of factors including, each portfolio managers experience, overall performance, responsibilities and the competitive market place. Mr. Rickard receives a cash-based annual incentive bonus that is determined solely at the discretion of the Subadviser and approved by the Compensation Committee. The incentive bonus is calculated as a percentage of the base salary. Mr. Rickard receives UARs under the Subadvisers parent companys long-term incentive plan (LTIP). A UAR is a hypothetical equity interest in Natixis US. The value of a UAR will generally rise based on the financial performance of Natixis US. The number of UARs granted is determined by the Compensation Committee of the Subadviser on an annual basis. Mr. Rickard participates in the LTIP on the same terms as non-portfolio manager employees and the number of UARs granted to each of the portfolio managers is not directly related to investment performance.
Portfolio Managers Ownership of Fund Shares
The Fund is newly formed and, as of the date of this Statement, none of the Portfolio Managers owned any shares of the Fund. There are various reasons why a Portfolio Manager may not own shares of the Fund in the future. One reason is that the Funds investment objectives and strategies may not match those of the Portfolio Managers personal investment objective. Also, the Portfolio Manager may invest in other funds or pooled investment vehicles or separate accounts managed by the Portfolio Manager in a similar style to the Fund. Administrative reasons (such as facilitating compliance with the advisers code of ethics) also may explain why a Portfolio Manager has chosen not to invest in the Fund.
Allocation of Investment Opportunity Among the Fund and Other Investors Managed by the Adviser and Subadviser; Cross Relationships of Officers and Trustees
The Adviser manages other accounts using investment strategies that may or may not be similar to that of the Fund. A conflict of interest may exist in connection with the Advisers management of the Fund, on the one hand, and the Advisers management of other accounts, on the other hand. The Adviser makes investment decisions for each account based on the clients investment objectives, policies, practices, cash flows, and other relevant investment considerations. Consequently, the Adviser may purchase or sell securities or other instruments for one account and not for another account, and the performance of securities or other instruments purchased for one account may vary from the performance of securities or other instruments purchased for other accounts. Another conflict of interest may arise because accounts other than the Fund may have fee structures, such as performance-based fees, that differ from that of the Fund. In addition, a potential conflict of interest may arise as a result of the portfolio managers day-to-day management of the Fund. Because of their roles in managing the Fund, the Advisers portfolio managers know the size, timing and possible market impact of Fund trades and this information could in theory be used to the detriment of the Fund. The Adviser has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and to address conflicts of interest relating to the management of multiple accounts. Finally, the Adviser has adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts. The implementation of these procedures is monitored by the Advisers Chief Compliance Officer.
Certain officers and employees of the Subadviser have responsibility for portfolio management of other advisory accounts and clients of the Subadviser (including other registered investment companies and accounts of affiliates of Reich & Tang) that may invest in securities in which the Fund also invests. If the Subadviser determines that an investment purchase or sale opportunity is appropriate and desirable for more than one advisory account, purchase and sale orders may be executed separately or may be combined and, to the extent practicable, allocated by Reich & Tang to the participating accounts. Where advisory accounts have competing interests in a limited investment
46
opportunity, the Subadviser will allocate investment opportunities based on a number of considerations, including cash availability and/or liquidity requirements, including time the competing accounts have had funds available for investment or have had securities available for sale, investment objectives and restrictions, an accounts participation in other opportunities, tax considerations and relative size of portfolio holdings of the same or comparable securities. It is Reich & Tangs policy to allocate over a period of time, to the extent practicable, investment opportunities to each client on a fair and equitable basis relative to its other clients. The Trustees are of the view that the benefits of retaining Reich & Tang as subadviser to the Fund outweigh the disadvantages, if any, that may result from participating in such transactions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of equity securities, the Adviser or Subadviser selects only brokers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates that, when combined with the quality of the foregoing services, will produce the best price and execution for the transaction. This does not necessarily mean that the lowest available brokerage commission, if any, will be paid. However, the commissions charged are believed to be competitive with generally prevailing rates. The Adviser or Subadviser will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions, if any, paid on transactions by reference to such data. In making such evaluation, factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. The Adviser or Subadviser may place orders for the Fund which, combined with orders for the Advisers/Subadvisers other clients, may impact the price of the relevant security. This could cause the Fund to obtain a worse price on the transaction than would otherwise be the case if the orders were placed in smaller amounts or spread out over a longer period of time.
Subject to the overriding objective of obtaining the best possible execution of orders, the Adviser or Subadviser may allocate brokerage transactions to affiliated brokers. Any such transactions will comply with Rule 17e-1 under the 1940 Act. In order for the affiliated broker to effect portfolio transactions for the Fund, the commissions, fees or other remuneration received by the affiliated broker must be reasonable and fair compared to the commissions, fees and other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period. Furthermore, the Trusts Board of Trustees, including a majority of the Independent Trustees, have adopted procedures that are reasonably designed to provide that any commissions, fees or other remuneration paid to an affiliated broker are consistent with the foregoing standard.
Transactions on stock and option exchanges involve the payment of negotiated brokerage commissions. In the case of securities traded in the over-the-counter market, there is generally no stated commission but the price usually includes an undisclosed commission or mark-up.
AlphaSimplex
In arranging for the purchase and sale of clients portfolio securities, the Adviser takes numerous factors into consideration. These include any legal restrictions, such as those imposed under the securities laws and the Employee Retirement Income Security Act of 1974, and any client-imposed restrictions. Within these constraints, the Adviser will employ or deal with members of the securities exchanges and other brokers and dealers as may in its judgment implement the policy of seeking best execution (i.e., prompt and reliable execution at the most favorable prices obtainable under the prevailing market conditions) of portfolio transactions. It is not the Advisers current practice to enter into soft dollar arrangements but the Adviser does consider all services when executing transactions with a broker. As such, the Adviser may utilize research and other products that provide lawful and appropriate assistance to the Adviser in carrying out its investment-making responsibilities, as permitted under the safe harbor of Section 28(e) of the Securities and Exchange Act of 1934. As long as it is lawful and appropriate to do so, the Adviser may use this research and data in its investment advisory capacities with other clients. Clients may obtain other services from brokers in connection with investment transactions with brokers. Such services will be limited to services that would otherwise be a client expense.
47
In determining the abilities of a broker or dealer to obtain best execution of portfolio transactions, while the lowest price may be one factor, the Adviser will consider all relevant factors, including the execution capabilities required by the transactions; the ability and willingness of the broker or dealer to facilitate the accounts portfolio transactions by participating therein for its own account; the importance to the account of speed, efficiency, and confidentiality; the brokers or dealers apparent familiarity with sources from or to whom particular securities might be purchased or sold; the reputation and perceived soundness of the broker or dealer; as well as other matters relevant to the selection of a broker or dealer for portfolio transactions for any account. The Adviser will not adhere to any rigid formula in making the selection of the applicable broker or dealer for portfolio transactions, but will weigh a combination of the preceding factors.
The Adviser has no duty or obligation to seek in advance competitive bidding for the most favorable commission rate applicable to any particular portfolio transaction or to select any broker on the basis of its purported or posted commission rate, but will endeavor to be aware of the current level of the charges of eligible brokers and to minimize the expense incurred for effecting portfolio transactions to the extent consistent with the interests and policies of the accounts. Although the Adviser generally seeks competitive commission rates, it will not necessarily pay the lowest commission or commission equivalent. Transactions may involve specialized services on the part of the broker or dealer involved and thereby entail higher commissions or their equivalents than would be the case with other transactions requiring more routine services.
Certain customers of the Adviser may also be customers of broker-dealers through which the Adviser may utilize executing and/or clearing brokerage services. Although the Adviser may execute or clear through these broker-dealers, the Adviser is under no obligation to do so.
Portfolio transactions for each client account are generally completed independently, except when the Adviser is in the position of buying or selling the same security for a number of its clients under the same conditions (e.g., limit prices) at approximately the same time. Because of market fluctuations, the prices obtained on such transactions within a single day may vary substantially. In such a case, some clients would receive the benefit of the more-favorable prices which others would not. In order to more equitably allocate the effects of such market fluctuations, the Adviser has adopted the following aggregation procedures. For purposes of aggregating client orders for futures contracts and forward contracts for all clients, each client that participates in an aggregated order will participate in that order based on the price received and the inception date of the clients account. The account with the oldest inception date will always receive the highest fill prices and the account with the most recent inception date will receive the lowest fill prices. Any advantages the oldest accounts may receive on the sell orders are theoretically offset by the disadvantages on the buy orders. For purposes of aggregating client orders for all other securities for all clients, each client that participates in an aggregated order will participate at the average price for all the Advisers transactions in that security on a given business day and transaction costs will be shared pro rata based on each clients participation in the transaction. If the aggregated order is partially filled, it will be allocated among clients pro rata.
Reich & Tang
With respect to the portion of the Funds assets managed by Reich & Tang, the purchases and sales of portfolio securities are usually principal transactions. Portfolio securities are generally purchased directly from the issuer, from banks and financial institutions or from an underwriter or market maker for the securities. There are usually no brokerage commissions paid for such purchases and the Fund does not currently anticipate paying brokerage commissions. Should the Fund pay a brokerage commission on a particular transaction, the Fund would seek to effect the transaction at the most favorable available combination of best execution and lowest commission. Purchases from underwriters of portfolio securities include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers include the spread between the bid and ask price.
No portfolio transactions are executed with Reich & Tang, or its affiliates acting as principal. In addition, the Fund will not buy bankers acceptances, certificates of deposit or commercial paper from Reich & Tang or its affiliates.
Reich & Tang does not earn soft dollars when trading in fixed income securities. When trading equity securities, Reich & Tang may earn soft dollars through its regular trading. Reich & Tangs receipt of brokerage and research products may be a factor in their selection of a broker or dealer to execute transactions for the Fund where Reich & Tang believes that the broker or dealer will provide the best execution of the transactions. Such brokerage and research services may be paid for with Reich & Tangs own assets or may, in connection with transactions in securities effected for client accounts for which Reich & Tang exercises investment discretion, be paid for with client commissions.
The frequency of transactions and their allocation to various dealers is determined by Reich & Tang in its best judgment and in a manner deemed to be in the best interest of shareholders of the Fund. The primary consideration is prompt execution of orders in an effective manner at the most favorable price.
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Investment decisions for the Fund will be made independently from those for any other accounts or investment companies that may be or become managed by Reich & Tang or its affiliates. If, however, the Fund and other investment companies or accounts managed by Reich & Tang are contemporaneously engaged in the purchase or sale of the same security, the transactions may be averaged as to price and allocated equitably to each account. In some cases, this policy might adversely affect the price paid or received by the Fund or the size of the position obtainable for the Fund. In addition, when purchases or sales of the same security for the Fund and for other investment companies managed by Reich & Tang occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantages available to large denomination purchasers or sellers.
General
Subject to procedures adopted by the Board of Trustees of the Trust, the Funds brokerage transactions may be executed by brokers that are affiliated with Natixis US or the Adviser or Subadviser. Any such transactions will comply with Rule 17e-1 under the 1940 Act, or other applicable restrictions as permitted by the SEC pursuant to exemptive relief or otherwise.
Under the 1940 Act, persons affiliated with the Trust are prohibited from dealing with the Fund as a principal in the purchase and sale of securities. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principals for their own accounts, affiliated persons of the Trust may not serve as the Funds dealer in connection with such transactions. However, the Trust has obtained exemptive relief from the SEC permitting segments of the Funds to enter into principal transactions with affiliates of the Subadviser to other segments of the Fund (but not affiliates of the Subadviser to such segment or of Natixis Advisors and its affiliates).
To the extent permitted by applicable law, and in all instances subject to the foregoing policy of best execution, the Adviser may allocate brokerage transactions to broker-dealers (including affiliates of the Distributor) that have entered into arrangements in which the broker-dealer allocates a portion of the commissions paid by the Fund toward the reduction of the Funds expenses.
It is expected that the portfolio transactions in fixed-income securities will generally be with issuers or dealers on a net basis without a stated commission. Securities firms may receive brokerage commissions on transactions involving options, futures and options on futures and the purchase and sale of underlying securities upon exercise of options. The brokerage commissions associated with buying and selling options may be proportionately higher than those associated with general securities transactions.
The Declaration of Trust of Natixis Funds Trust II permits the Trustees to issue an unlimited number of full and fractional shares of each series. Each share of the Fund represents an equal proportionate interest in the Fund with each other share of the Fund and is entitled to a proportionate interest in the dividends and distributions from the Fund. The Declaration of Trust further permits the Trusts Board of Trustees to divide the shares of each series into any number of separate classes, each having such rights and preferences relative to other classes of the same series as the Board of Trustees may determine. When you invest in the Fund, you acquire freely transferable shares of beneficial interest that entitle you to receive dividends as determined by the Trusts Board of Trustees and to cast a vote for each share you own at shareholder meetings. The shares of the Fund do not have any preemptive rights. Upon termination of the Fund, whether pursuant to liquidation of the Trust or otherwise, shareholders of each class of the Fund are entitled to share pro rata in the net assets attributable to that class of shares of the Fund available for distribution to shareholders. The Declaration of Trust also permits the Board of Trustees to charge shareholders directly for custodial, transfer agency and servicing expenses.
The shares of the Fund are divided into three classes: Class A, Class C and Institutional Class. The Funds Class A and Class C shares are not currently available for purchase. As described in its Prospectus, Institutional Class shares are available for purchase only by certain eligible investors and have higher minimum purchase requirements than Class A and Class C shares. All expenses of the Fund (including advisory fees but excluding class specific expenses such as transfer agency fees (Other Expenses)) are borne by its Class A and Class C and Institutional Class shares on a pro rata basis, except for 12b-1 fees, which are borne only by Class A and Class C and may be charged at a
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separate rate to each such class. Other Expenses of Class A and Class C are borne by such classes on a pro rata basis, but Other Expenses relating to the Institutional Class shares may be allocated separately to the Institutional Class shares. The multiple class structure could be terminated should certain IRS rulings or SEC regulatory positions be rescinded or modified.
The assets received by each class of the Fund for the issue or sale of its shares and all income, earnings, profits, losses and proceeds therefrom, subject only to the rights of the creditors, are allocated to, and constitute the underlying assets of, that class of the Fund. The underlying assets of each class of the Fund are segregated and are charged with the expenses with respect to that class of the Fund and with a share of the general expenses of the Fund and Trust. Any general expenses of the Trust that are not readily identifiable as belonging to a particular class of the Fund are allocated by or under the direction of the trustees in such manner as the trustees determine to be fair and equitable. While the expenses of the Trust are allocated to the separate books of account of each series of the Trust, certain expenses may be legally chargeable against the assets of all of the series in a Trust.
The Declaration of Trust also permits the Trusts Board of Trustees, without shareholder approval, to subdivide the Fund or series or class of shares into various sub-series or sub-classes with such dividend preferences and other rights as the trustees may designate. The Trusts Board of Trustees may also, without shareholder approval, establish one or more additional series or classes or, with shareholder approval, merge two or more existing series or classes. Shareholders investments in such an additional or merged series would be evidenced by a separate series of shares (i.e., a new fund).
The Declaration of Trust provides for the perpetual existence of the Trust. The Trust or Fund, however, may be terminated at any time by vote of at least two-thirds of the outstanding shares of the Fund. Similarly, any class within the Fund may be terminated by vote of at least two-thirds of the outstanding shares of such class. The Declaration of Trust further provides that the Board of Trustees may also without shareholder approval terminate the Trust or Fund upon written notice to its shareholders.
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All classes of shares of the Fund have identical voting rights, except that each class of shares has exclusive voting rights on any matter submitted to shareholders that relates solely to that class, and has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. On any matters submitted to a vote of shareholders, all shares of the Trust then entitled to vote shall, except as otherwise provided in the By-Laws, be voted in the aggregate as a single class without regard to series or class of shares, except 1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more series or class of shares materially differently, shares shall be voted by individual series or class and 2) when the matter affects only the interest of one or more series or classes, only shareholders of such series or classes shall be entitled to vote thereon. Consistent with the current position of the SEC, shareholders of all series and classes vote together, irrespective of series or class, on the election of trustees and the selection of the Trusts independent registered public accounting firm, but shareholders of each series vote separately on most other matters requiring shareholder approval, such as certain changes in investment policies of that series or the approval of the investment advisory and subadvisory agreement relating to that series, and shareholders of each class within a series vote separately as to the Rule 12b-1 plan (if any) relating to that class.
There will normally be no meetings of shareholders for the purpose of electing trustees except that, in accordance with the 1940 Act, (i) the Trust will hold a shareholders meeting for the election of trustees at such time as less than a majority of the trustees holding office have been elected by shareholders, and (ii) if there is a vacancy on the Board of Trustees, such vacancy may be filled only by a vote of the shareholders unless, after filling such vacancy by other means, at least two-thirds of the trustees holding office shall have been elected by the shareholders. In addition, trustees may be removed from office by a written consent signed by the holders of two-thirds of the outstanding shares and filed with the Trusts custodian or by a vote of the holders of two-thirds of the outstanding shares at a meeting duly called for that purpose.
Upon written request by a minimum of ten holders of shares having held their shares for a minimum of six months and having a net asset value of at least $25,000 or constituting at least 1% of the outstanding shares, whichever is less, stating that such shareholders wish to communicate with the other shareholders for the purpose of obtaining the signatures necessary to demand a meeting to consider removal of a trustee, the Trust has undertaken to provide a list of shareholders or to disseminate appropriate materials (at the expense of the requesting shareholders).
Except as set forth above, the trustees shall continue to hold office and may appoint successor trustees. Shareholder voting rights are not cumulative.
The affirmative vote of a majority of shares of the Trust voted (assuming a quorum is present in person or by proxy) is required to amend the Declaration of Trust if such amendment (1) affects the power of shareholders to vote,
(2) amends the section of the Declaration of Trust governing amendments, (3) is one for which a vote is required by law or by the Trusts registration statement or (4) is submitted to the shareholders by the trustees. If one or more new series of the Trust is established and designated by the trustees, the shareholders having beneficial interests in the Fund shall not be entitled to vote on matters exclusively affecting such new series, such matters including, without limitation, the adoption of or any change in the investment objectives, policies or restrictions of the new series and the approval of the investment advisory contracts of the new series. Similarly, the shareholders of the new series shall not be entitled to vote on any such matters as they affect the Fund.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees. The Declaration of Trust provides for indemnification out of the Funds property for all loss and expense of any shareholder held personally liable for the obligations of the Fund by reason of owning shares of the Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote since it is limited to circumstances in which the disclaimer is inoperative and the Fund itself would be unable to meet its obligations.
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The Declaration of Trust further provides that the Board of Trustees will not be liable for errors of judgment or mistakes of fact or law. However, nothing in the Declaration of Trust protects a trustee against any liability to which the trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The By-Laws of the Trust provide for indemnification by the Trust of trustees and officers of the Trust, except with respect to any matter as to which any such person did not act in good faith in the reasonable belief that his or her action was in the best interests of the Trust. Such persons may not be indemnified against any liability to the Trust or the Trusts shareholders to whom he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
The procedures for purchasing shares of the Fund are summarized in the Prospectuses. All purchases made by check should be in U.S. dollars and made payable to Natixis Funds.
Shares may also be purchased either in writing, by phone, by wire, by electronic funds transfer using Automated Clearing House (ACH), or by exchange, as described in the Prospectuses, or through firms that are members of FINRA and that have selling agreements with the Distributor. For purchase of Fund shares by mail, the trade date is the day of receipt of the check in good order by the transfer agent so long as it is received by the close of regular trading of the New York Stock Exchange (the NYSE) on a day when the NYSE is open. For purchases through the ACH system, the shareholders bank or credit union must be a member of the ACH system and the shareholder must have approved banking information on file. With respect to shares purchased by wire or through the ACH system, shareholders should bear in mind that the transactions may take two or more days to complete. Banks may charge a fee for transmitting funds by wire.
You may also use Natixis Funds Personal Access Line® (800-225-5478, press 1) or the ASG Global Alternatives Fund website (www.funds.natixis.com) to purchase Fund shares (except for Institutional Class shares). For more information, see the section Shareholder Services in this Statement.
At the discretion of the Distributor, bank trust departments or trust companies may also be eligible for investment in Institutional Class shares at a reduced minimum, subject to certain conditions including a requirement to meet the minimum investment balance within a specified time period. Please contact the Distributor at 800-225-5478 for more information.
Shareholders of the Fund may be permitted to open an account without an initial investment and then wire funds into the account once established. These shareholders will still be subject to the investment minimums as detailed in the Prospectuses of the Fund.
The procedure for redemption of shares of the Fund is summarized in the Prospectuses. As described in the Prospectuses, a CDSC may be imposed on certain redemptions of Class A and Class C shares, and a redemption fee may be charged on redemptions and exchanges of the Fund. For purposes of the CDSC, an exchange of shares from one fund to another fund is not considered a redemption or a purchase. For federal tax purposes, however, such an exchange is considered a sale and a purchase and, therefore, would be considered a taxable event on which you may recognize a gain or loss. In determining whether a CDSC is applicable to a redemption of Class A or Class C shares, the calculation will be determined in the manner that results in the lowest rate being charged. The charge will not be applied to dollar amounts representing an increase in the net asset value of shares since the time of purchase or reinvested distributions associated with such shares. Unless you request otherwise at the time of redemption, the CDSC is deducted from the redemption, not the amount remaining in the account.
The Fund will only accept Medallion signature guarantees bearing the STAMP 2000 Medallion imprint. However, a Medallion signature guarantee may not be required if the proceeds of the redemption do not exceed $100,000 and the proceeds check is made payable to the registered owner(s) and mailed to the record address, or if the proceeds are going to a bank on file. Please contact the Fund at 800-225-5478 with any questions regarding when a Medallion signature guarantee is required.
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If you select the telephone redemption service in the manner described in the next paragraph, shares of the Fund may be redeemed by calling toll free 800-225-5478. A wire fee may be deducted from the proceeds if you elect to receive the funds wired to your bank on record. Telephone redemption requests must be received by the close of regular trading on the NYSE. Requests made after that time or on a day when the NYSE is not open for business will receive the next business days closing price. The proceeds of a telephone withdrawal will normally be sent within three business days following receipt of a proper redemption request.
In order to redeem shares by telephone, a shareholder must select this service using the Service Options Form, which is available at www.funds.natixis.com or from your investment dealer if the service was not previously added to the account. When selecting the service, a shareholder may have withdrawal proceeds sent to his or her bank, in which case the shareholder must designate a bank account on his or her application or Service Options Form to which the redemption proceeds should be sent as well as provide a check marked VOID and/or a deposit slip that includes the routing number of his or her bank. Any change in the bank account so designated may be made by furnishing to Boston Financial or your investment dealer a completed Service Options Form, which may require a medallion signature guarantee. Telephone redemptions by ACH or wire may only be made if the designated bank is a member of the Federal Reserve System or has a correspondent bank that is a member of the System. If the account is with a savings bank, it must have only one correspondent bank that is a member of the System. The Fund, the Distributor, Boston Financial (the transfer agent) and State Street Bank (the Funds custodian) are not responsible for the authenticity of withdrawal instructions received by telephone, although they will apply established verification procedures. Boston Financial, as agreed to with the Fund, will employ reasonable procedures to confirm that your telephone instructions are genuine, and if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. Such verification procedures include, but are not limited to, requiring a form of personal identification prior to acting on an investors telephone instructions and recording an investors instructions.
Shares purchased by check or through ACH may not be available immediately for redemption to the extent the check or ACH transaction has not cleared. The Fund may withhold redemption proceeds for 10 days when redemptions are made within 10 calendar days of purchase by check or through ACH.
The redemption price will be the net asset value per share (less any applicable CDSC) next determined after the redemption request and any necessary special documentation are received by State Street Bank or your investment dealer in proper form. Payment normally will be made by State Street Bank on behalf of the Fund within seven days thereafter. However, in the event of a request to redeem shares for which the Fund has not yet received good payment, the Fund reserves the right to withhold payments of redemption proceeds if the purchase of shares was made by a check which was deposited within ten calendar days prior to the redemption request (unless the Fund is aware that the check has cleared).
The CDSC may be waived on redemptions made from IRA accounts due to attainment of age 591/2 for IRA shareholders who established accounts prior to January 3, 1995. The CDSC may also be waived on redemptions made from IRA accounts due to death, disability, return of excess contribution, required minimum distributions at age 701/2 (waivers apply only to amounts necessary to meet the required minimum amount based on assets held within the Fund), certain withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually of the value of the account, and redemptions made from the account to pay custodial fees. The CDSC may also be waived on redemptions within one year following the death of (i) the sole shareholder of an individual account, (ii) a joint tenant where the surviving joint tenant is the deceaseds spouse, or (iii) the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfer to Minors Act or other custodial account. If the account is transferred to an account registered in the name of the deceaseds estate, the CDSC will be waived on any redemption occurring within one year of death. If the account is transferred to a new registration and then a redemption is requested, the applicable CDSC will be charged. If shares are not redeemed within one year of the death, they will remain subject to the applicable CDSC when redeemed from the transferees account.
The CDSC may be waived on redemptions made from 403(b)(7) custodial accounts due to attainment of age 59 1/2 for shareholders who established custodial accounts prior to January 3, 1995. The CDSC may also be waived on redemptions made from 403(b)(7) custodial accounts due to death or disability.
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The CDSC may also be waived on redemptions necessary to pay plan participants or beneficiaries from qualified retirement plans under Section 401 of the Code, including profit sharing plans, money purchase plans, 401(k) and custodial accounts under Section 403(b)(7) of the Code. Distributions necessary to pay plan participants and beneficiaries include payment made due to death, disability, separation from service, normal or early retirement as defined in the plan document, loans from the plan and hardship withdrawals, return of excess contributions, required minimum distributions at age 70 1/2 (waivers only apply to amounts necessary to meet the required minimum amount), certain withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually of the value of your account, and redemptions made from qualified retirement accounts or Section 403(b)(7) custodial accounts necessary to pay custodial fees.
A CDSC will apply in the event of plan level transfers, including transfers due to changes in investment where assets are transferred outside of Natixis Funds, including IRA and 403(b)(7) participant-directed transfers of assets to other custodians (except for the reasons given above) or qualified transfers of assets due to trustee-directed movement of plan assets due to merger, acquisition or addition of additional funds to the plan.
In order to redeem shares electronically through the ACH system, a shareholders bank or credit union must be a member of the ACH system and the shareholder must have a completed, approved ACH application on file. In addition, the telephone request must be received no later than the close of the NYSE. Upon receipt of the required information, the appropriate number of shares will be redeemed and the monies forwarded to the bank designated on the shareholders application through the ACH system. The redemption will be processed the day the telephone call is made and the monies generally will arrive at the shareholders bank within three business days. The availability of these monies will depend on the individual banks rules.
The Fund will normally redeem shares for cash; however, the Fund reserves the right to pay the redemption price wholly or partly in kind, if the Trusts Board of Trustees determines it to be advisable and in the interest of the remaining shareholders of the Fund. The redemptions in kind will be selected by the Adviser in light of the Funds objective and will not generally represent a pro rata distribution of each security held in the Funds portfolio. If portfolio securities are distributed in lieu of cash, the shareholder will normally incur brokerage commissions upon subsequent disposition of any such securities. However, the Fund has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is obligated to redeem shares solely in cash for any shareholder during any 90-day period up to the lesser of $250,000 or 1% of the total net asset value of the Fund at the beginning of such period.
The Fund does not currently impose any redemption charge other than the CDSC imposed by the Distributor, and the redemption fee imposed on the Fund, both as described in the Prospectuses. The Board of Trustees reserves the right to impose additional charges at any time. A redemption constitutes a sale of shares for federal income tax purposes on which the investor may realize a long- or short-term capital gain or loss. See also Taxes, below.
As noted in the Prospectuses, the Fund reserves the right to suspend account services or refuse transaction requests if the Fund receives notice of a dispute between registered owners or of the death of a registered owner or the Fund suspects a fraudulent act. If the Fund refuses a transaction request because it receives notice of a dispute, the transaction will be processed at the net asset value next determined after the Fund receives notice that the dispute has been settled or a court order has been entered adjudicating the dispute. If the Fund determines that its suspicion of fraud or belief that a dispute existed was mistaken, the transaction will be processed as of the net asset value next determined after the transaction request was first received in good order.
Reinstatement Privilege (Class A shares only)
The Prospectus describes redeeming shareholders reinstatement privileges for Class A shares. Written notice and the investment check from persons wishing to exercise this reinstatement privilege, must be received by your investment dealer or the Fund within 120 days after the date of the redemption. The reinstatement or exchange will be made at net asset value next determined after receipt of the notice and the investment check and will be limited to the amount of the redemption proceeds.
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Even though an account is reinstated, the redemption will constitute a sale for federal income tax purposes. Investors who reinstate their accounts by purchasing shares of the Fund should consult with their tax advisers with respect to the effect of the wash sale rule if a loss is realized at the time of the redemption.
Open Accounts
A shareholders investment is automatically credited to an open account maintained for the shareholder by Boston Financial. Following each additional investment or redemption from the account initiated by an investor (with the exception of systematic investment plans), a shareholder will receive a confirmation statement disclosing the current balance of shares owned and the details of recent transactions in the account. After the close of each calendar year, Boston Financial will send each shareholder a statement providing account information which may include federal tax information on dividends and distributions paid to the shareholder during the year. This statement should be retained as a permanent record. Boston Financial may charge a fee for providing duplicate information.
The open account system provides for full and fractional shares expressed to three decimal places and, by making the issuance and delivery of stock certificates unnecessary, eliminates problems of handling and safekeeping, and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed certificates. Certificates will not be issued for any class of shares.
The costs of maintaining the open account system are paid by the Fund and no direct charges are made to shareholders. Although the Fund has no present intention of making such direct charges to shareholders, it reserves the right to do so. Shareholders will receive prior notice before any such charges are made.
Minimum Balance Policy
The Funds minimum balance policy is described in the Prospectus. Although determination of whether to deduct the minimum balance fee or close an account is made at the discretion of the Fund, as described in the Prospectus, the Fund will not deduct the minimum balance fee from an account and close that same account for falling below the minimum balance in the same year.
Automatic Investment Plans (Class A and Class C Shares)
Subject to the Funds investor eligibility requirements, investors may automatically invest in additional shares of the Fund on a monthly basis by authorizing the Fund to draft from an investors bank account. The draft is executed under the Investment Builder Program, a program designed to facilitate such periodic payments and are forwarded to Boston Financial for investment in the Fund. A plan may be opened with an initial investment of $1,000 or more and thereafter regular monthly checks of $50 or more will be drawn on the investors account. The reduced minimum initial investment pursuant to an automatic investment plan is referred to in the Prospectus. An Investment Builder application must be completed to open an automatic investment plan and may be obtained by calling the Fund at 800-225-5478 or your investment dealer or by visiting the Funds website at www.funds.natixis.com.
This program is voluntary and may be terminated at any time by Boston Financial upon notice to existing plan participants. The Investment Builder Program plan may be discontinued at any time by the investor upon written notice to Boston Financial, which must be received at least five business days prior to any payment date. The plan may be discontinued by State Street Bank at any time without prior notice if any check is not paid upon presentation; or by written notice to the shareholder at least thirty days prior to any payment date. The Fund is under no obligation to notify shareholders as to the nonpayment of any check.
Retirement Plans and Other Plans Offering Tax Benefits (Classes A and C Shares)
The federal tax laws provide for a variety of retirement plans offering tax benefits. These plans may be funded with shares of the Fund or with certain other investments. The plans include H.R. 10 (Keogh) plans for self-employed
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individuals and partnerships, individual retirement accounts (IRAs), corporate pension trust and profit sharing plans, including 401(k) plans, and retirement plans for public school systems and certain tax exempt organizations, i.e., 403(b)(7) plans.
The minimum initial investment available to retirement plans and other plans offering tax benefits is referred to in the Prospectuses. For these plans, initial investments in the Fund must be at least $1,000 for IRAs and Keogh plans using the Natixis Funds prototype document and $500 for Coverdell Education Savings Accounts and at least $100 for any subsequent investments. Plan documents and further information can be obtained from the Distributor.
Certain retirement plans may also be eligible to purchase Institutional Class shares. See the Prospectus relating to Institutional Class shares.
Systematic Withdrawal Plans (Class A and Class C Shares)
An investor owning Fund shares having a value of $10,000 or more at the current public offering price may establish a Systematic Withdrawal Plan (Plan) providing for periodic payments of a fixed or variable amount. An investor may terminate the plan at any time. A form for use in establishing such a plan is available from the servicing agent or your investment dealer. Withdrawals may be paid to a person other than the shareholder if a Medallion signature guarantee is provided. Please consult your investment dealer or the Fund.
A shareholder under a Plan may elect to receive payments monthly, quarterly, semiannually or annually for a fixed amount of not less than $50 or a variable amount based on (1) the market value of a certain number of shares redeemed for each payment, (2) a specified percentage of the accounts market value or (3) for Natixis sponsored IRA accounts only, a specified number of years for liquidating the account (e.g., a 20-year program of 240 monthly payments would be liquidated at a monthly rate of 1/240, 1/239, 1/238, etc.). The initial payment under a variable payment option may be $50 or more.
In the case of shares subject to a CDSC, the amount or percentage you specify may not, on an annualized basis, exceed 10% of the value as of the time you make the election, of your account with the Fund with respect to which you are electing the Plan. No CDSC applies to redemptions pursuant to the Plan. A redemption fee may apply.
All shares under the Plan must be held in an open (uncertificated) account. Income dividends and capital gain distributions will be reinvested (without a sales charge in the case of Class A shares) at net asset value determined on the record date.
Since withdrawal payments represent proceeds from the liquidation of shares, withdrawals may reduce and possibly exhaust the value of the account, particularly in the event of a decline in net asset value. Accordingly, a shareholder should consider whether a Plan and the specified amounts to be withdrawn are appropriate under the circumstances. The Fund and the Distributor make no recommendations or representations in this regard. It may be appropriate for a shareholder to consult a tax adviser before establishing such a plan. See Redemptions above and Taxes below for certain information as to federal income taxes.
It may be disadvantageous for a shareholder to purchase on a regular basis additional Fund shares with a sales charge while redeeming shares under a Plan. Accordingly, the Fund and the Distributor do not recommend additional investments in Class A shares by a shareholder who has a withdrawal plan in effect and who would be subject to a sales load on such additional investments. Natixis Funds may modify or terminate this program at any time.
Because of statutory restrictions this Plan is not available to pension or profit-sharing plans, IRAs or 403(b)(7) plans that have State Street Bank as trustee.
Dividend Diversification Program
You may also establish a Dividend Diversification Program, which allows you to have all dividends and any other distributions automatically invested in shares of the same class of another Natixis Fund, subject to the investor eligibility requirements of that Natixis Fund and to state securities law requirements. Shares will be purchased at the
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Natixis Funds net asset value (without a sales charge or CDSC) on the dividend record date. A dividend diversification account must be registered to the same shareholder(s) as the Fund account and, if a new account in the purchased Natixis Fund is being established, the purchased Natixis Funds minimum investment requirements must be met. Before establishing a Dividend Diversification Program into any Natixis Fund, you must obtain and carefully read a copy of that Funds Prospectuses.
Exchange Privilege
A shareholder may exchange Class A and C shares of the Fund for shares of the same class of a Natixis Fund, Loomis Sayles Fund or Natixis Cash Management Trust Money Market Series (the Money Market Fund) that offers that class (subject to the investor eligibility requirements, if any, of the fund into which the exchange is being made and any other limits on the sales of or exchanges into that fund) on the basis of relative net asset values at the time of the exchange without any sales charge. If you own Institutional Class shares, you may not exchange those shares for shares of any other fund. An exchange of shares in one fund for shares of another fund is a taxable event on which gain or loss may be recognized. In certain limited circumstances, the Distributor may waive the requirement that shareholders pay the difference between any sales charge already paid on their shares and the higher sales charge of the fund into which they are exchanging at the time of the exchange. When an exchange is made from the Class A or Class C shares of the Fund to the same class of shares of another fund, the shares received by the shareholder in the exchange will have the same age characteristics as the shares exchanged. The age of the shares determines the expiration of the CDSC. As stated above, if you own Class A or Class C shares, you may also elect to exchange your shares of the Fund for shares of the same class of the Money Market Fund. On all exchanges of Class A or Class C shares subject to a CDSC, the exchange stops the aging period relating to the CDSC. The aging period resumes only when an exchange is made back into Class A and Class C shares of a fund. Shareholders may also exchange their shares in the Money Market Fund for shares of the same class of any other fund listed below, subject to those funds eligibility requirements and sales charges. These options are summarized in the Funds Prospectuses. An exchange may be effected, provided that neither the registered name nor address of the accounts is different and provided that a certificate representing the shares being exchanged has not been issued to the shareholder, by (1) a telephone request to the Fund at 800-225-5478 or (2) a written exchange request to the ASG Global Alternatives Fund, P.O. Box 219579, Kansas City, MO 64121-9579. You must acknowledge receipt of a current Prospectus for the Fund before an exchange for the Fund can be effected. The minimum amount for an exchange is the minimum amount to open an account or the total net asset value of your account, whichever is less. If you own Institutional Class shares, you may not exchange those shares for shares of any other fund.
All exchanges are subject to the eligibility requirements of the fund into which you are exchanging and any other limits on sales of or exchanges into that fund. The exchange privilege may be exercised only in those states where shares of such funds may be legally sold. The Fund reserves the right to suspend or change the terms of exchanging shares. Each fund, including the Fund, and the Distributor reserve the right to refuse or limit any exchange order for any reason, including if the transaction is deemed not to be in the best interests of a funds other shareholders or possibly disruptive to the management of a fund.
Agents, general agents, directors and senior officers of New England Financial and its insurance company subsidiaries may, at the discretion of New England Financial, elect to exchange Class A shares of any series of the trusts acquired in connection with deferred compensation plans offered by New England Financial for Institutional Class shares of any series of the trusts which offers Institutional Class shares, except for the Fund. To obtain a Prospectus and more information about Institutional Class shares, please call the Distributor toll free at 800-225-5478.
Before requesting an exchange into any Natixis Fund, the Money Market Fund, or Loomis Sayles Fund, please read its Prospectus carefully. Subject to the applicable rules of the SEC, the Board of Trustees reserves the right to modify the exchange privilege at any time. Except as otherwise permitted by SEC rule, shareholders will receive at least 60 days advance notice of any material change to the exchange privilege.
Automatic Exchange Plan (Class A and Class C Shares)
As described in the Prospectus following the caption Additional Investor Services of the Fund, a shareholder may establish an Automatic Exchange Plan under which shares of the Fund are automatically exchanged each month for
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shares of the same class of one or more of the other funds. Registration on all accounts must be identical. The two dates each month on which exchanges may be made are the 15th and 28th (or the first business day thereafter if either the 15th or the 28th is not a business day) until the account is exhausted or until Boston Financial is notified in writing to terminate the plan. Exchanges may be made in amounts of $100 or more. The Service Options Form may be used to establish an Automatic Exchange Plan and is available from Boston Financial or your financial representative.
Restrictions on Buying, Selling and Exchanging Shares
As stated in the Funds Prospectus, the Fund and the Distributor reserve the right to reject any purchase or exchange order for any reason. When a purchase or exchange order is rejected, the Fund or the Distributor will send notice to the prospective investor or the investors financial intermediary promptly after receipt of the rejected order.
Broker Trading Privileges
The Distributor may, from time to time, enter into agreements with one or more brokers or other intermediaries to accept purchase and redemption orders for Fund shares until the close of regular trading on the NYSE (normally, 4:00 p.m. Eastern time on each day that the NYSE is open for trading); such purchase and redemption orders will be deemed to have been received by the Fund when the authorized broker or intermediary accepts such orders; and such orders will be priced using that Funds net asset value next computed after the orders are placed with and accepted by such brokers or intermediaries. Any purchase and redemption orders received by a broker or intermediary under these agreements will be transmitted daily to the Fund no later than the time specified in such agreement; but, in any event, no later than 9:30 a.m. following the day that such purchase or redemption orders are received by the broker or intermediary.
Transcript Requests
Transcripts of account transactions will be provided, for a fee, at the shareholders request. Transcript requests for years prior to 2004 will be charged $20 per fund per account for each year requested. Transcript requests for 2004 through the current year will be charged $10 per fund per account for each year requested.
Self-Servicing Your Account with Natixis Funds Personal Access Line® and Web Site
Natixis Funds shareholders may access account information, including share balances and recent account activity online, by visiting our website at www.funds.natixis.com. Transactions may also be processed online for certain accounts (restrictions may apply). Such transactions include purchases, redemptions and exchanges, and shareholders are automatically eligible for these features. Natixis Funds has taken measures to ensure the security of shareholder accounts, including the encryption of data and the use of personal identification (PIN) numbers. In addition, you may restrict these privileges from your account by calling the Fund at 800-225-5478, or writing to us at P.O. Box 219579, Kansas City, MO 64121-9579. More information regarding these features may be found on our website at www.funds.natixis.com.
Investor activities through these mediums are subject to the terms and conditions outlined in the following Natixis Funds Online and Telephonic Customer Agreement. This agreement is also posted on our Web site. The initiation of any activity through the Natixis Funds Personal Access Line® or Web site at www.funds.natixis.com by an investor shall indicate agreement with the following terms and conditions:
Natixis Funds Online and Telephonic Customer Agreement
NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS AND CONDITIONS.
The accuracy, completeness and timeliness of all mutual fund information provided is the sole responsibility of the mutual fund company that provides the information. No party that provides a connection between this Web site and a mutual fund or its transfer agency system can verify or ensure the receipt of any information transmitted to or from a mutual fund or its transfer agent, or the acceptance by, or completion of any transaction with, a mutual fund.
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The online acknowledgments or other messages that appear on your screen for transactions entered do not mean that the transactions have been received, accepted or rejected by the mutual fund. These acknowledgments are only an indication that the transactional information entered by you has either been transmitted to the mutual fund, or that it cannot be transmitted. It is the responsibility of the mutual fund to confirm to you that it has received the information and accepted or rejected a transaction. It is the responsibility of the mutual fund to deliver to you a current Prospectus, confirmation statement and any other documents or information required by applicable law.
NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION FROM THE FUND COMPANY.
You are responsible for reviewing all mutual fund account statements received by you in the mail in order to verify the accuracy of all mutual fund account information provided in the statement and transactions entered through this site. You are also responsible for promptly notifying the mutual fund of any errors or inaccuracies relating to information contained in, or omitted from, your mutual fund account statements, including errors or inaccuracies arising from the transactions conducted through this site.
TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH IN THE PROSPECTUSES OF THE FUND.
THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH THE NATIXIS FUNDS PERSONAL ACCESS LINE®
You are responsible for the confidentiality and use of your personal identification numbers, account numbers, social security numbers and any other personal information required to access the site or transmit telephonically. Any individual that possesses the information required to pass through all security measures will be presumed to be you. All transactions submitted by an individual presumed to be you will be solely your responsibility.
You agree that Natixis Funds does not have the responsibility to inquire as to the legitimacy or propriety of any instructions received from you or any person believed to be you, and is not responsible or liable for any losses that may occur from acting on such instructions.
Natixis Funds is not responsible for incorrect data received via the Internet or telephonically from you or any person believed to be you. Transactions submitted over the Internet and telephonically are solely your responsibility and Natixis Funds makes no warranty as to the correctness, completeness, or the accuracy of any transmission. Similarly, Natixis Funds bears no responsibility for the performance of any computer hardware, software, or the performance of any ancillary equipment and services such as telephone lines, modems, or Internet service providers.
The processing of transactions over this site or telephonically will involve the transmission of personal data including social security numbers, account numbers and personal identification numbers. While Natixis Funds has taken reasonable security precautions including data encryption designed to protect the integrity of data transmitted to and from the areas of our Web site that relate to the processing of transactions, we disclaim any liability for the interception of such data.
You agree to immediately notify Natixis Funds if any of the following occurs:
1. You do not receive confirmation of a transaction submitted via the Internet or telephonically within five (5) business days.
2. You receive confirmation of a transaction of which you have no knowledge and was not initiated or authorized by you.
3. You transmit a transaction for which you do not receive a confirmation number.
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4. You have reason to believe that others may have gained access to your personal identification number (PIN) or other personal data.
5. You notice an unexplained discrepancy in account balances or other changes to your account, including address changes, and banking instructions on any confirmations or statements.
Any costs incurred in connection with the use of the Natixis Funds Personal Access Line® or the Natixis Funds Internet site including telephone line costs and Internet service provider costs are solely your responsibility. Similarly, Natixis Funds makes no warranties concerning the availability of Internet services or network availability.
Natixis Funds reserves the right to suspend, terminate or modify the Internet capabilities offered to shareholders without notice.
YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS BY NOTIFYING NATIXIS FUNDS OF YOUR DESIRE TO DO SO.
Written notifications to Natixis Funds should be sent to:
Natixis Funds
P. O. Box 219579
Kansas City, MO 64121-9579
Notification may also be made by calling 800-225-5478 during normal business hours.
The method for determining the public offering price and net asset value per share is summarized in the Prospectuses.
The total net asset value or NAV of each class of shares of the Fund (the excess of the assets of the Fund attributable to such class over the liabilities attributable to such class) is determined at the close of regular trading (normally 4:00 p.m. Eastern time) on each day that the NYSE is open for trading. The Fund does not expect to price its shares on the following holidays: New Years Day, Martin Luther King Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Equity securities, including closed-end investment companies and exchange traded funds, for which market quotations are readily available, are valued at market value, as reported by pricing services recommended by the investment adviser and approved by the Board of Trustees. Such pricing services generally use the securitys last sale price on the exchange or market where primarily traded or, if there is no reported sale during the day, the closing bid price. Securities traded on the NASDAQ Global Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the NASDAQ Official Closing Price (NOCP), or if lacking an NOCP, at the most recent bid quotation on the applicable NASDAQ market. Debt securities (other than short-term obligations purchased with an original or remaining maturity of sixty days or less) are generally valued on the basis of evaluated bids furnished to the Fund by a pricing service recommended by the investment adviser and approved by the Board of Trustees, which service determines valuations for normal, institutional size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Broker-dealer bid quotations may also be used to value debt and equity securities where a pricing service does not price a security or where a pricing service does not provide a reliable price for the security. In instances where broker-dealer bid quotations are not available, certain securities held by the Fund may be valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. Short-term obligations purchased with an original or remaining maturity of sixty days or less are valued at amortized cost, which approximates market value. Index options are generally valued at the average of the closing bid and asked quotations. Under normal market conditions, the Fund will generally consider the value of index options determined at the close of trading on the Chicago Board Options Exchange (the CBOE) (normally 4:15 p.m. Eastern time) to be the value at the close of
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the NYSE (normally 4:00 p.m. Eastern time). However, if under the Funds valuation procedures a significant change in the value of the S&P 500 futures contracts is considered to have occurred between the close of the NYSE and the close of the CBOE, the Fund will consider the closing price on the CBOE to not reflect the value of the index options at the close of the NYSE. In such circumstances the options will be fair valued by or pursuant to procedures approved by the Board of Trustees. Securities for which current market quotations are not readily available and all other assets are valued at fair value as determined in good faith by the Board of Trustees, although the actual calculations may be made by persons acting pursuant to the direction of the Board. Futures are valued based on the unrealized gain or loss on the contract using current settlement price. When a settlement price is not used, futures contracts will be valued at their fair value as determined by or pursuant to procedures approved by the Board of Trustees. Foreign currency forward contracts will be valued based on the unrealized gain or loss on the contracts, as measured by the difference between the contractual forward foreign exchange rates and the forward rates.
Generally, trading in foreign government securities and other fixed income securities, as well as trading in equity securities in markets outside the United States, is substantially completed each day at various times prior to the close of the NYSE. Securities traded on a foreign exchange will be valued at their market price on the non-U.S. exchange except for securities traded on the London Stock Exchange (British Equities). British Equities will be valued at the official close of the London Stock Exchange. The value of other securities principally traded outside the United States will be computed as of the completion of substantial trading for the day on the markets on which such securities principally trade. Securities principally traded outside the United States will generally be valued several hours before the close of regular trading on the NYSE, generally 4:00 p.m. Eastern time, when the Fund computes the net asset value of its shares. Occasionally, events affecting the value of securities principally traded outside the United States may occur between the completion of substantial trading of such securities for the day and the close of the NYSE, which events will not be reflected in the computation of the Funds net asset value. If, in the determination of the Board of Trustees or persons acting pursuant to procedures approved by the Board, events materially affecting the value of the Funds securities occur during such period, then these securities may be fair valued at the time the Fund determines its net asset value by or pursuant to procedures approved by the Board of Trustees. When fair valuing its securities, the Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities market activity and/or significant events that occur after the close of the local market and before the time the Funds net asset value is calculated.
Securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Funds investment adviser pursuant to procedures approved by the Board of Trustees. Because of fair value pricing, securities may not be priced on the basis of quotations from the primary market in which they are traded but rather may be priced by another method that the Board of Trustees believes is more likely to result in a price that reflects fair value. The Fund may also value securities at fair value or estimate their value pursuant to procedures approved by the Board of Trustees in other circumstances such as when extraordinary events occur after the close of the relevant market but prior to the close of the NYSE. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuers security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets).
Trading in some of the portfolio securities of the Fund takes place in various markets outside the United States on days and at times other than when the NYSE is open for trading. Therefore, the calculation of the Funds net asset value does not take place at the same time as the prices of many of its portfolio securities are determined, and the value of the Funds portfolio may change on days when the Fund is not open for business and its shares may not be purchased or redeemed.
The per share net asset value of a class of the Funds shares is computed by dividing the number of shares outstanding into the total net asset value attributable to such class. The public offering price of a Class A share of the Fund is the net asset value per share next-determined after a properly completed purchase order is accepted by Boston Financial or State Street Bank, plus a sales charge as set forth in the Funds Prospectus. The public offering price of Class C or Institutional Shares of the Fund is the next-determined net asset value.
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The following special purchase plans are summarized in the Prospectuses and are described in greater detail below. Investors should note that in many cases, the broker, and not the Fund, is responsible for ensuring that the investor receives current discounts.
If you invest in Class A shares through a financial intermediary, it is the responsibility of the financial intermediary to ensure you obtain the proper breakpoint discount. In order to reduce your sales charge, it will be necessary at the time of purchase to inform the Distributor and your financial intermediary, in writing, of the existence of other accounts in which there are holdings eligible to be aggregated to meet sales load breakpoints. If the Distributor is not notified that you are eligible for a reduced sales charge, the Distributor will be unable to ensure that the reduction is applied to the investors account.
You may be required to provide certain records and information, such as account statements, with respect to all of your accounts which hold Fund shares, including accounts with other financial intermediaries, and your family members and other related parties accounts, in order to verify your eligibility for the reduced sales charge.
Cumulative Purchase Discount. The Fund shareholder may make an initial or an additional purchase of Class A Shares and be entitled to a discount on the sales charge payable on that purchase. This discount will be available if the shareholders total investment in the Fund reaches the breakpoint for a reduced sales charge in the table under How Sales Charges Are CalculatedClass A Shares in the Class A Prospectus. The total investment is determined by adding the amount of the additional purchase, including sales charge, to the current public offering price of all series and classes of Shares of the Fund held by the shareholder in one or more accounts. If the total investment exceeds the breakpoint, the lower sales charge applies to the entire additional investment even though some portion of that additional investment is below the breakpoint to which a reduced sales charge applies. For example, if a shareholder who already owns Shares of the Fund or a Natixis Fund with a value at the current public offering price of $30,000 makes an additional purchase of $20,000 of Class A Shares of the Fund or a Natixis Fund, the reduced sales charge of 4.50% of the public offering price will apply to the entire amount of the additional investment.
Letter of Intent
A Letter of Intent (a Letter), which can be effected at any time, is a privilege available to investors that reduces the sales charge on investments in Class A shares. Ordinarily, reduced sales charges are available for single purchases of Class A shares only when they reach certain breakpoints (e.g., $25,000, $100,000, etc.). By signing a Letter, a shareholder indicates an intention to invest enough money in Class A shares within 13 months to reach a breakpoint. If the shareholders intended aggregate purchases of all series and classes of the Trust over a defined 13-month period will be large enough to qualify for a reduced sales charge, the shareholder may invest the smaller individual amounts at the public offering price calculated using the sales load applicable to the 13-month aggregate investment.
A Letter is a non-binding commitment, the amount of which may be increased, decreased or canceled at any time. The effective date of a Letter is the date it is received in good order by the Funds transfer agency.
A reduced sales charge is available for aggregate purchases of all series and classes of shares of the Trust pursuant to a written Letter effected within 90 days after any purchase. In the event the account was established prior to 90 days before the effective date of the Letter, the account will be credited with the Rights of Accumulation (ROA) towards the breakpoint level that will be reached upon the completion of the 13 months purchases. The ROA credit is the value of all shares held as of the effective dates of the Letter based on the public offering price computed on such date.
The cumulative purchase discount, described above, permits the aggregate value at the current public offering price of Class A shares of any accounts with the Trust held by a shareholder to be added to the dollar amount of the intended investment under a Letter, provided the shareholder lists them on the account application.
The Funds transfer agent will hold in escrow shares with a value at the current public offering price of 5% of the aggregate amount of the intended investment. The amount in escrow will be released when the commitment stated
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in the Letter is completed. If the shareholder does not purchase shares in the amount indicated in the Letter, the shareholder agrees to remit to the Funds transfer agent the difference between the sales charge actually paid and that which would have been paid had the Letter not been in effect, and authorizes the Funds transfer agent to redeem escrowed shares in the amount necessary to make up the difference in sales charges. Reinvested dividends and distributions are not included in determining whether the Letter has been completed.
Combining Accounts
For purposes of determining the sales charge applicable to a given purchase, a shareholder may elect to combine the purchase and the shareholders total investment (calculated at the current public offering price) in all series and classes of the Fund and Natixis Funds (excluding the Money Market Fund), unless the shares were purchased through an exchange with another Natixis Fund) with the purchases and total investment of the shareholders spouse, parents, children, siblings, grandparents, grandchildren, and in-laws of those previously mentioned single trust estates, individual fiduciary accounts and sole proprietorships or any other group of individuals acceptable to the Distributor. If the combined value of the purchases and total investments exceeds a sales charge breakpoint as disclosed in the Prospectuses, the lower sales charge applies to the entire amount of the purchase, even though some portion of that investment is below the breakpoint to which a reduced sales charge applies.
For certain retirement plans, the Distributor may, in its discretion, combine the purchases and total investment of all qualified participants in the same retirement plan for purposes of determining the availability of a reduced sales charge.
Purchases and total investments of individuals may not be combined with purchases and total investments of the retirement plan accounts described in the preceding paragraph for the purpose of determining the availability of a reduced sales charge. Only the purchases and total investments in tax-qualified retirement plans or other employee benefit plans in which the shareholder is the sole participant may be combined with individual accounts for purposes of determining the availability of a reduced sales charge.
Combining with Other Series and Classes of the Natixis Funds. A shareholders total investment for purposes of the cumulative purchase discount includes the value at the current public offering price of any shares of series and classes of the Trusts that the shareholder owns (which excludes shares of the Money Market Fund unless such shares were purchased by exchanging shares of any other Natixis Fund). Shares owned by persons described in the first paragraph under Combining Accounts above may also be included.
Clients of Natixis Advisors and the Adviser
Investment advisory clients of Natixis Advisors and the Adviser may invest in Institutional Class shares of the Fund below minimums stated in the prospectuses. No front-end sales charge or CDSC applies to investments of $25,000 or more in Class A shares of the Fund by (1) clients of an adviser to any series of the Trust; any director, officer or partner of a client of an adviser to any series of the Trust; or the spouse, parents, children, siblings, in-laws, grandparents or grandchildren of the foregoing; (2) any individual who is a participant in a Keogh or IRA Plan under a prototype of an adviser to any series of the Trust if at least one participant in the plan qualifies under category (1) above; and (3) an individual who invests through an IRA and is a participant in an employee benefit plan that is a client of an adviser to any series of the Trust. Any investor eligible for this arrangement should so indicate in writing at the time of the purchase.
Eligible Governmental Authorities
There is no sales charge or CDSC related to investments in Class A shares by any state, county or city or any instrumentality, department, authority or agency thereof that has determined that the Fund is a legally permissible investment and that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment company.
Investment Advisory Accounts
Class A shares of the Fund may be purchased at net asset value by investment advisers, financial planners or other
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intermediaries who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services; clients of such investment advisers, financial planners or other intermediaries who place trades for their own accounts if the accounts are linked to the master account of such investment adviser, financial planner or other intermediary on the books and records of the broker or agent; and retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Sections 401(a), 403(b), 401(k) and 457 of the Code and rabbi trusts. Investors may be charged a fee if they effect transactions through a broker or agent.
Certain Broker-Dealers and Financial Services Organizations
Class A shares of the Fund also may be purchased at net asset value through certain broker-dealers and/or financial services organizations without any transaction fee. Such organizations may also receive compensation paid by the Adviser, or their affiliates out of their own assets (as described above under Distribution Agreements and Rule 12b-1 Plans), and/or be paid indirectly by the Fund in the form of servicing, distribution or transfer agent fees.
Certain Retirement Plans
Class A shares of the Fund are available at net asset value for investments by participant-directed 401(a) and 401(k) plans that have $1 million or more in total plan assets or 100 or more eligible employees or by retirement plans whose third party administrator or dealer has entered into a service agreement with the Distributor and which may be subject to certain operational and minimum size requirements specified from time to time by the Distributor. The Distributor may pay compensation to such third party administrators or dealers. This compensation may be paid indirectly by the Fund in the form of service and/or distribution fees.
Bank Trust Departments or Trust Companies
Class A shares of the Fund are available at net asset value for investments by non-discretionary and non-retirement accounts of bank trust departments or trust companies, but are unavailable if the trust department or institution is part of an organization not principally engaged in banking or trust activities.
The reduction or elimination of the sales charges in connection with special purchase plans described above reflects the absence or reduction of expenses associated with such sales.
Distributions
As described in the Prospectuses, it is the policy of the Fund to pay its shareholders, as dividends, all or substantially all of its net investment income and to distribute annually all of its net realized long-term capital gains, if any, after offsetting any capital loss carryovers.
Ordinary income dividends and capital gain distributions are payable on the ex-dividend date in full and fractional shares of the relevant class of the Fund based upon the net asset value determined as of the close of the NYSE on the record date for each dividend or distribution. Shareholders, however, may elect to receive their ordinary income dividends or capital gain distributions, or both, in cash. The election may be made at any time by submitting a written request directly to the Fund. In order for a change to be in effect for any dividend or distribution, it must be received by the Fund on or before the record date for such dividend or distribution.
If you elect to receive your dividends in cash and the dividend checks sent to you are returned undeliverable to the Fund or remain uncashed for six months, your cash election will automatically be changed and your future dividends will be reinvested. No interest will accrue on amounts represented by uncashed dividend or redemption checks.
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As required by federal law, federal tax information will be furnished to each shareholder for each calendar year on or before January 31st of the succeeding year.
Taxation of the Fund
The Fund intends to elect to be treated and qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify, the Fund must, among other things, (i) derive at least 90% of its gross income for each taxable year from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (b) net income derived from interests in qualified publicly traded partnerships (as defined below); (ii) diversify its holdings so that at the end of each fiscal quarter, (a) at least 50% of the value of its total assets consists of cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited generally, with respect to any one issuer, to no more than 5% of the value of the Funds total assets and 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Funds total assets is invested (1) in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades or businesses, or (2) in the securities of one or more qualified publicly traded partnerships (as defined below); and (iii) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year.
In general, for purposes of the 90% of gross income requirement described in (i) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership that would be qualifying income if realized by the regulated investment company. However, 100% of the net income derived from an interest in a qualified publicly traded partnership (a QPTP) (defined as a partnership (a) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, (b) that derives at least 90% of its income from passive income sources defined in Code Section 7704(d), and (c) that derives less than 90% of its income from the qualifying income described in section (i)(a) above will be treated as qualifying income. In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a QPTP.
The 90% of gross income requirement described in (i) above will significantly limit the ability of the Fund to invest directly in commodities and certain commodity-related securities. If, however, the Fund were to establish and invest in a wholly-owned non-U.S. subsidiary that would in turn make commodity and commodity-related investments, it is expected that income from the non-U.S. subsidiary would constitute qualifying income for purposes of the 90% of gross income requirement. There is a risk, however, that the Internal Revenue Service could prevail in asserting that some or all of the income derived from the Funds investment in the wholly-owned subsidiary should not be treated as qualifying income or that the wholly-owned subsidiary is itself subject to U.S. federal income tax on returns from its investments.
For purposes of the diversification requirements set forth in (ii) above, the term outstanding voting securities of such issuer will include the equity securities of a qualified publicly traded partnership. Also for purposes of meeting the diversification requirement in (ii) above, in the case of the Funds investments in loan participation interests, the Fund shall treat both the intermediary and the issuer of the underlying loan as an issuer.
Assuming that it qualifies for treatment as a regulated investment company, the Fund will not be subject to federal income tax on income distributed to its shareholders in a timely manner in the form of dividends (including Capital Gain Dividends, defined below). If the Fund were to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.
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As noted above, the Fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction). If the Fund does retain any investment company taxable income, it will be subject to tax at regular corporate rates on the amount retained. The Fund also intends to distribute annually all of its net capital gain. If the Fund does retain any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who (i) will be required to include in income for federal income tax purposes, as long-term capital gains, their shares of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the Fund on such undistributed amount against their federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included in the shareholders gross income and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. In determining its net capital gain for Capital Gain Dividend purposes, a regulated investment company generally must treat any net capital loss or any net long-term capital loss incurred after October 31 as if it had been incurred in the succeeding year. Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain, to elect to treat all or part of any net capital loss, any net long-term capital loss or any foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.
A nondeductible excise tax at the rate of 4% will be imposed on the excess, if any, of the Funds required distribution over its actual distributions in any calendar year. Generally, the required distribution is 98% of the Funds ordinary income for the calendar year plus 98% of its capital gain net income recognized during the one-year period ending on October 31st (or December 31st if the Fund is so permitted to elect and so elects) plus undistributed amounts from prior years. For these purposes, the Fund will be treated as having distributed any amount for which it is subject to income tax. The Fund intends generally to make distributions sufficient to avoid imposition of the excise tax, although there can be no assurance that it will be able to do so.
Taxation of Fund Distributions
For federal income tax purposes, distributions of investment income are generally taxable as ordinary income to the extent of the Funds earnings and profits. Taxes on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long a shareholder has owned his or her shares. Distributions attributable to the excess of net long-term capital gains from the sale of investments the Fund owned for more than one year over net short-term capital losses and that are designated by the Fund as capital gain dividends (Capital Gain Dividends) will generally be taxable to a shareholder receiving such distributions as long-term capital gain. Distributions attributable to the excess of net short-term capital gains from the sale of investments that the Fund owned for one year or less over net long-term capital losses will be taxable as ordinary income.
Distributions are taxable to shareholders even if they are paid from income or gains earned by the Fund before a shareholders investment (and thus were included in the price the shareholder paid for his or her shares). Distributions are taxable whether shareholders receive them in cash or in additional shares. Distributions declared and payable by the Fund during October, November or December to shareholders of record on a date in any such month and paid by the Fund during the following January generally will be treated for federal tax purposes as paid by the Fund and received by shareholders on December 31st of the year in which declared rather than the calendar year in which they were received.
Long-term capital gain rates applicable to individuals have been temporarily reduced in general to 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets - for taxable years beginning before January 1, 2011.
For taxable years beginning before January 1, 2011, qualified dividend income received by an individual will be taxed at the rates applicable to long-term capital gain. In order for some portion of the dividends received by the Fund shareholder to be qualified dividend income, the Fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the Funds shares. A dividend will not be treated as qualified dividend income (at either the Fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which
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such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment income for purposes of the limitation on deductibility of investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the U.S. (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the U.S.) or (b) treated as a passive foreign investment company (PFIC). Income derived from investments in fixed-income securities and REITs generally is not eligible for treatment as qualified dividend income.
In general, distributions of investment income designated by the Fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to the Funds shares. In any event, if the aggregate qualified dividends received by the Fund during any taxable year are 95% or more of its gross income (excluding net long-term capital gain over net short-term capital loss), then 100% of the Funds dividends (other than properly designated Capital Gain Dividends) will be eligible to be treated as qualified dividend income.
Dividends of net investment income received by corporate shareholders of the Fund will qualify for the 70% dividends received deduction generally available to corporations to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. A dividend received by the Fund will not be treated as a qualifying dividend (1) if the stock on which the dividend is paid is considered to be debt-financed (generally, acquired with borrowed funds), (2) if it has been received with respect to any share of stock that the Fund has held for less than 46 days (91 days in the case of certain preferred stock) during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (during the 181-day period beginning 90 days before such date in the case of certain preferred stock) or (3) to the extent that the Fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the dividends received deduction may be disallowed or reduced (1) if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the Fund or (2) by application of the Code.
If the Fund makes a distribution in excess of its current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of a shareholders tax basis in his or her shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a shareholders basis in his or her shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of such shares.
Sale, Exchange or Redemption of Shares
The sale, exchange or redemption of Fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of Fund shares will generally be treated as short-term capital gain or loss. However, any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of Fund shares will be disallowed if other substantially identical shares of the Fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
Passive Foreign Investment Companies
Equity investments by the Fund in certain PFICs could potentially subject the Fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on proceeds received from the disposition of shares in the company. This tax cannot be eliminated by making distributions to Fund shareholders. However, the Fund may elect to avoid the imposition of that tax. For example, the Fund may elect to treat a PFIC as a
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qualified electing fund (a QEF election), in which case the Fund will be required to include its share of the companys income and net capital gains annually, regardless of whether it receives any distribution from the company. The Fund also may make an election to mark the gains (and to a limited extent losses) in such holdings to the market as though it had sold and repurchased its holdings in those PFICs on the last day of the Funds taxable year. Such gains and losses are treated as ordinary income and loss. The QEF and mark-to-market elections may accelerate the recognition of income (without the receipt of cash) and increase the amount required to be distributed by the Fund to avoid taxation. Making either of these elections therefore may require the Fund to liquidate other investments (including when it is not advantageous to do so) to meet its distribution requirement, which also may accelerate the recognition of gain and affect the Funds total return. Dividends paid by PFICs will not be eligible to be treated as qualified dividend income.
Foreign Taxation
Income received by the Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. Shareholders will not be entitled to claim a credit or deduction with respect to such foreign taxes incurred by the Fund.
Tax Implications of Certain Fund Investments
Foreign Currency Transactions. The Funds transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
Securities Loans. Securities loans may or may not be structured in a manner to preserve qualified dividend income treatment on dividends paid with respect to the securities lent. The Fund may receive substitute payments (instead of the dividend) that will not be eligible for treatment as qualified dividend income, taxable at the rate applicable to long-term capital gains.
Options, Futures, Forward Contracts, Swap Agreements and Related Instruments. To the extent such investments are permissible for the Fund, the Funds transactions in options, futures contracts, forward contracts, straddles, swaps, options on swaps and foreign currencies, and hedging transactions will be subject to special tax rules (including mark-to-market, constructive sale, swap agreements, straddle, wash sale and short sale rules), the effect of which may be to accelerate income to the Fund, to defer losses to the Fund, to cause adjustments in the holding periods of the Funds securities, to convert long-term capital gains into short-term capital gains and to convert short-term capital losses into long-term capital losses. In addition, certain derivatives give rise to ordinary income and loss. These rules, therefore, could affect the amount, timing and character of distributions to shareholders. The Fund will monitor its transactions, will make appropriate tax elections and will make appropriate entries in its books and records in order to mitigate the effect of these rules.
To the extent such investments are permissible, certain of the Funds transactions in derivative instruments (including its transactions, if any, in connection with the Funds hedging activities and transactions in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the Funds book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the Funds remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter, as a return of capital to the extent of the recipient basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset. If the Funds book income is less than taxable income, the Fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment.
Certain Investments in REITs. The Fund may invest in REITs. Investments in REIT equity securities may require the Fund to accrue and distribute income not yet received. To generate sufficient cash to make the requisite distributions, the Fund may be required to sell securities in its portfolio (including when it is not advantageous to do so) that it otherwise would have continued to hold. The Funds investments in REIT equity securities may at other
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times result in the Funds receipt of cash in excess of the REITs earnings; if the Fund distributes these amounts, these distributions could constitute a return of capital to Fund shareholders for federal income tax purposes. Dividends received by the Fund from a REIT generally will not constitute qualified dividend income.
The Fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits (REMICs), are themselves taxable mortgage pools (TMPs), or invest in TMPs. Under a notice recently issued by the IRS and Treasury regulations that have yet to be issued but may apply retroactively, a portion of the Funds income from a REIT that is attributable to the REITs residual interest in a REMIC or a TMP (referred to in the Code as an excess inclusion) will be subject to federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company will generally be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual interest directly.
In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income (UBTI) to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. See Tax-Exempt Shareholders below for a discussion of the special tax consequences that may result where a tax-exempt entity invests in a regulated investment company that recognizes excess inclusion income. The Fund does not intend to invest in REITs in which a substantial portion of the assets will consist of residual interests in REMICs.
Certain Fixed Income and Derivative Instruments. Certain of the Funds investments, including investments in asset-backed securities, mortgage-related securities, debt obligations issued or purchased at a discount, payment-in-kind securities, inflation-indexed bonds, and certain derivative instruments, may create taxable income in excess of the cash they generate. In such cases, the Fund may be required to sell assets (including when it is not advantageous to do so) to generate the cash necessary to distribute as dividends to its shareholders all of its income and gains and therefore to eliminate any tax liability at the Fund level. The Fund may realize gains or losses from such liquidations. In the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than they would in the absence of such transactions.
Issuer Deductibility of Interest. A portion of the interest paid or accrued on certain high yield discount obligations in which the Fund may invest may not (and interest paid on debt obligations, if any, that are considered for tax purposes to be payable in the equity of the issuer or a related party will not) be deductible to the issuer. This may affect the cash flow of the issuer. If a portion of the interest paid or accrued on certain high yield discount obligations is not deductible, that portion will be treated as a dividend for purposes of the corporate dividends received deduction. In such cases, if the issuer of the high yield discount obligations is a domestic corporation, dividend payments by the Fund may be eligible for the dividends received deduction to the extent of the deemed dividend portion of such accrued interest.
Higher-Risk Securities. The Fund may invest in lower-quality fixed income securities, including debt obligations of issuers not currently paying interest or who are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the Fund when, and if it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
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Tax-Exempt Shareholders
Under current law, a regulated investment company generally serves to block (that is, prevent the attribution to shareholders of) UBTI from being realized by its tax-exempt shareholders. Nonetheless, a tax-exempt shareholder (other than a charitable remainder trust) may realize UBTI by virtue of its investments in the Fund if shares in the Fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code section 514(b).
A tax-exempt shareholder may also recognize UBTI if the Fund recognizes excess inclusion income derived from direct or indirect investments in residual interests in REMICs or TMPs if the amount of such income recognized by the Fund exceeds the Funds investment company taxable income (after taking into account deductions for dividends paid by the Fund). Furthermore, any investment in residual interests of a CMO that has elected to be treated as a REMIC can create complex tax consequences, especially if the Fund has state or local governments or other tax-exempt organizations as shareholders.
Special tax consequences apply where charitable remainder trusts invest in regulated investment companies that invest directly or indirectly in residual interests in REMICs or in TMPs. Under legislation enacted in December 2006, if a charitable remainder trust (defined in Section 664 of the Code) (a CRT) realizes any UBTI for a taxable year, a 100% excise tax is imposed on such UBTI. Under IRS guidance issued in November 2006, a CRT will not recognize UBTI as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the Fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. To the extent permitted under the 1940 Act, the Fund may elect to specially allocate any such tax to the applicable CRT (or other shareholder), and thus reduce such shareholders distributions for the year by the amount of the tax that relates to such shareholders interest in the Fund. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear.
Backup Withholding
The Fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable distributions and redemption proceeds paid to any individual shareholder who fails to properly furnish the Fund with a correct taxpayer identification number (TIN), who has under-reported dividend or interest income, or who fails to certify to the Fund that he or she is not subject to such withholding. The backup withholding tax rate is 28% for amounts paid through 2010. The backup withholding tax rate will be 31% for amounts paid after December 31, 2010.
Non-U.S. Shareholders
In general, dividends (other than Capital Gain Dividends) paid by the Fund to a shareholder that is not a U.S. person within the meaning of the Code (a Foreign Person) are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) even if they are funded by income or gains (such as portfolio interest, short-term capital gains, or foreign-source dividend and interest income) that, if paid to a Foreign Person directly, would not be subject to withholding.
Special rules apply to distributions to a Foreign Person from a fund that is either a U.S. real property holding corporation (USRPHC) or would be a USRPHC but for the operation of certain exceptions to the definition thereof. Additionally, special rules apply to the sale of shares in a fund that is a USRPHC. Very generally, a USRPHC is a domestic corporation that holds U.S. real property interests (USRPIs) USRPIs are defined as any interest in U.S. real property or any equity interest in a USRPHC the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporations USRPIs, interests in real property located outside the United States and other assets. A fund that holds (directly or indirectly) significant interests in REITs may be a USRPHC. The Fund currently does not anticipate that it will meet the definition of a USRPHC. The special rules
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discussed below will also apply to distributions from a fund that would be a USRPHC absent exclusions from USRPI treatment for interests in domestically controlled REITs and not-greater-than-5% interests in publicly traded classes of stock in REITs.
In the case of a fund that would be a USRPHC but for the exceptions from the definition of USRPIs (described above), amounts the fund receives from REITs derived from gains realized from USRPIs will retain their character as gains realized from USRPIs in the hands of the funds foreign shareholders (under current law, any direct USRPI gain the Fund recognizes does not retain its character as USRPI gain in the hands of foreign shareholders of the Fund, although this may change if certain legislation is enacted). In the hands of a Foreign Person that holds (or has held in the prior year) more than a 5% interest in the fund, such amounts will be treated as gains effectively connected with the conduct of a U.S. trade or business, and subject to tax at graduated rates. Moreover, such foreign shareholders will be required to file a U.S. income tax return for the year in which the gain was recognized and the fund will be required to withhold 35% of the amount of such distribution. In the case of all other Foreign Persons (i.e., those with a 5% or smaller interest in the fund), the USRPI distribution will be treated as ordinary income, and the fund must withhold 30% (or a lower applicable treaty rate) of the amount of the distribution paid to such foreign shareholder. Foreign Persons of such funds are also subject to wash sale rules to prevent the avoidance of the tax-filing and -payment obligations discussed above through the sale and repurchase of fund shares.
In addition, a fund that is a USRPHC must withhold 10% of the amount realized in a redemption by a greater-than-5% foreign shareholder, and that shareholder must file a U.S. income tax return for the year of the disposition of the USRPI and pay any additional tax due on the gain. Before January 1, 2008, no withholding was generally required with respect to amounts paid in redemption of shares of a fund that was a USRPHC and was also domestically controlled. It is possible that Congress will extend this exemption from withholding to the current or future years, but no such legislation has been enacted as of the date of this Statement of Additional Information.
If a beneficial holder who is a Foreign Person has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend generally will be subject to U.S. federal net income taxation at regular income tax rates.
Under U.S. federal tax law, a beneficial holder of shares who is a Foreign Person is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the Fund or on Capital Gain Dividends unless (i) such gain or Capital Gain Dividend is effectively connected with the conduct of a trade or business carried on by such holder within the United States, or (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or the receipt of the Capital Gain Dividend and certain other conditions are met. If a shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax on net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the U.S.
Other Tax Matters
Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax adviser to determine the suitability of shares of the Fund as an investment through such plans and the precise effect of an investment on their particular tax situation.
Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisers regarding specific questions as to federal, state, local and, where applicable, foreign taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Fund, including the certification and filing requirements imposed on foreign investors in order to qualify for exemption from the backup withholding tax rates described above (or a reduced rate of withholding provided by treaty).
If a shareholder recognizes a loss with respect to the Funds shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not
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excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and related regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and regulations. The Code and regulations are subject to change by legislative or administrative actions, possibly with retroactive effect.
Yield and Total Return
The Fund may advertise the yield and total return of each class of its shares. The Funds yield and total return will vary from time to time depending upon market conditions, the composition of its portfolio and operating expenses of the Trust allocated to the Fund. These factors, possible differences in the methods used in calculating yield and total return and the tax exempt status of distributions should be considered when comparing the Funds yield and total return to yields and total returns published for other investment companies and other investment vehicles. Yield and total return should also be considered relative to changes in the value of the Funds shares and to the relative risks associated with the investment objectives and policies of the Fund. Yields and total returns do not take into account any applicable sales charges or CDSC. Yield and total return may be stated with or without giving effect to any expense limitations in effect for the Fund. For those funds that present yields and total returns reflecting an expense limitation or waiver, its yield would have been lower if no limitation or waiver were in effect. Yields and total returns will generally be higher for Class A shares than for Class C shares, because of the higher levels of expenses borne by the Class C shares. Because of its lower operating expenses, Institutional Class shares of the Fund can be expected to achieve a higher yield and total return than the same Funds Class A and Class C shares.
The Fund may also present one or more distribution rates for each class in its sales literature. These rates will be determined by annualizing the classs distributions from net investment income and net short-term capital gain over a recent 12-month, 3-month or 30-day period and dividing that amount by the maximum offering price or the net asset value. If the net asset value, rather than the maximum offering price, is used to calculate the distribution rate, the rate will be higher.
At any time in the future, yields and total return may be higher or lower than past yields and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that share prices, expressed as the net asset values per share, will vary just as yield will vary. An investors focus on the yield of the Fund to the exclusion of the consideration of the share price of the Fund may result in the investors misunderstanding the total return he or she may derive from the Fund.
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Because the Fund has no performance history as of the date of this Statement, financial statements have not been included.
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Registration Nos. 2-11101
811-00242
NATIXIS FUNDS TRUST II
PART C
OTHER INFORMATION
Item 23. | Exhibits |
(a) | Articles of Incorporation. | |||||
(1) | The Registrants Fourth Amended and Restated Agreement and Declaration of Trust dated June 2, 2005 (the Agreement and Declaration) is incorporated by reference to exhibit (a)(1) to post-effective amendment (PEA) No. 128 to the initial registration statement (Registration Statement) filed on January 30, 2006. | |||||
(2) | Amendment No. 1 dated June 1, 2007 to the Agreement and Declaration is incorporated by reference to exhibit (a)(2) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(b) | By-Laws. | |||||
(1) | The Registrants Amended and Restated By-Laws dated June 2, 2005 (the By-Laws) are incorporated by reference to exhibit (b)(1) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(c) | Instruments Defining Rights of Security Holders. | |||||
(1) | Rights of shareholders as described in Article III, Section 6 of the Registrants Agreement and Declaration is incorporated by reference to exhibit (c) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(d) | Investment Advisory Contracts. | |||||
(1) | (i) | Advisory Agreement dated October 30, 2000 between the Registrant, on behalf of Harris Associates Large Cap Value Fund, and Natixis Asset Management Advisors, L.P. (formerly IXIS Asset Management Advisors, L.P.) (Natixis Advisors) is incorporated by reference to exhibit (d)(1)(i) to PEA No. 114 to the Registration Statement filed on February 27, 2001. | ||||
(ii) | Advisory Agreement dated September 1, 2003 between the Registrant, on behalf of Loomis Sayles Massachusetts Tax Free Income Fund, and Loomis, Sayles & Company, L.P. (Loomis Sayles) is incorporated by reference to exhibit (d)(1)(ii) to PEA No. 120 to the Registration Statement filed on November 28, 2003. | |||||
(iii) | Form of Advisory Agreement between the Registrant, on behalf of Delafield Select Fund, and Reich & Tang Asset Management, LLC (Reich & Tang) is incorporated by reference to exhibit (d)(1)(iii) to PEA No. 135 to the Registration Statement filed on June 24, 2008. | |||||
(iv) | Advisory Agreement between the Registrant, on behalf of ASG Global Alternatives Fund, and AlphaSimplex Group, LLC (AlphaSimplex) to be filed by Amendment. | |||||
(2) | (i) | Sub-advisory Agreement dated October 29, 2002 among Registrant, on behalf of Harris Associates Large Cap Value Fund, Natixis Advisors, and Harris Associates L.P. (Harris Associates) is incorporated by reference to exhibit (d)(2)(i) to PEA No. 119 to the Registration Statement filed on April 29, 2003. |
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(ii) | Amendment No.1 dated July 1, 2005 to Sub-advisory Agreement dated October 29, 2002 among Registrant, on behalf of Harris Large Cap Value Fund, Natixis Advisors, and Harris Associates is incorporated by reference to exhibit (d)(2)(ii) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(iii) | Sub-Advisory Agreement among Registrant, on behalf of ASG Global Alternatives Fund, AlphaSimplex and Reich & Tang to be filed by Amendment. | |||||
(e) | Underwriting Contracts. | |||||
(1) | Distribution Agreement dated March 3, 2003 between Registrant, on behalf of Harris Associates Large Cap Value Fund, and Natixis Distributors, L.P. (formerly IXIS Asset Management Distributors, L.P.) (Natixis Distributors) is incorporated by reference to exhibit (e)(1) to PEA No. 119 to the Registration Statement filed on April 29, 2003. | |||||
(2) | Distribution Agreement dated March 3, 2003 between Registrant, on behalf of Loomis Sayles Massachusetts Tax Free Income Fund, and Natixis Distributors is incorporated by reference to exhibit (e)(3) to PEA No. 119 to the Registration Statement filed on April 29, 2003. | |||||
(3) | Form of Distribution Agreement between Registrant, on behalf of Delafield Select Fund, and Natixis Distributors is incorporated by reference to exhibit (e)(3) to PEA No. 135 to the Registration Statement filed on June 24, 2008. | |||||
(4) | Form of Dealer Agreement used by Natixis Distributors is incorporated by reference to exhibit (e)(3) to PEA No. 134 to the Registration Statement filed on April 29, 2008. | |||||
(5) | Distribution Agreement between Registrant, on behalf of ASG Global Alternatives Fund, and Natixis Distributors to be filed by Amendment. | |||||
(f) | Bonus or Profit Sharing Contracts. | |||||
Not applicable. | ||||||
(g) | Custodian Agreements. | |||||
(1) | Custodian Contract dated September 1, 2005 among Registrant, on behalf of its respective series, Natixis Funds Trust I (formerly IXIS Advisor Funds Trust I), Natixis Funds Trust III (formerly IXIS Advisor Funds Trust III), Natixis Funds Trust IV (formerly IXIS Advisor Funds Trust IV), Natixis Cash Management Trust (formerly IXIS Advisor Cash Management Trust), Loomis Sayles Funds I, Loomis Sayles Funds II and State Street Bank and Trust Company (State Street) is incorporated by reference to exhibit (g)(1) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(2) | Amendment No. 1 dated September 15, 2006 to Master Custody Agreement dated September 1, 2005 among the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street is incorporated by reference to exhibit (g)(2) to PEA No. 130 filed on January 26, 2007. |
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(h) | Other Material Contracts. | |||||
(1) | (i) | Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Boston Financial Data Services, Inc. (Boston Financial) is incorporated by reference to exhibit (h)(1)(i) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | ||||
(ii) | Revised Appendix A dated July 17, 2006 to the Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, and Boston Financial is incorporated by reference to exhibit (h)(1)(ii) to PEA No. 130 filed on January 26, 2007. | |||||
(2) | (i) | Administrative Services Agreement dated January 3, 2005 between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to PEA No. 125 to the Registration Statement filed on January 28, 2005. | ||||
(ii) | First Amendment dated November 1, 2005 to the Administrative Services Agreement between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to exhibit (h)(2)(ii) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(iii) | Second Amendment dated January 1, 2006 to Administrative Services Agreement between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to exhibit (h)(2)(iii) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(iv) | Third Amendment dated July 1, 2007 to Administrative Services Agreement between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to exhibit (h)(2)(iv) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(v) | Fourth Amendment dated September 17, 2007 to the Administrative Services Agreement between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to exhibit (h)(2)(v) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(vi) | Fifth Amendment dated February 1, 2008 to the Administrative Services Agreement between the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis Advisors is incorporated by reference to exhibit (h)(2)(vi) to PEA No. 132 to the Registration Statement filed on January 28, 2008. |
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(vii) | Sixth Amendment dated February 19, 2008 to the Administrative Services Agreement between the Registrant on behalf of its series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, Hansberger International Series and Natixis Advisors is incorporated by reference to exhibit (h)(2)(vii) to PEA No. 134 to the Registration Statement filed on April 29, 2008. | |||||
(3) | Securities Lending Authorization Agreement dated September 1, 2005 among the Registrant, on behalf of its respective series, Natixis Funds Trust I, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, and State Street is incorporated by reference to exhibit (h)(3)(i) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(4) | Natixis Advisors Fee Waiver/Expense Reimbursement Undertakings dated April 30, 2008 between Natixis Advisors and the Registrant, on behalf of Harris Associates Large Cap Value Fund is incorporated by reference to exhibit (h)(4) to PEA No. 134 to the Registration Statement filed on April 29, 2008. | |||||
(5) | (i) | Loomis Sayles Fee Waiver/Expense Reimbursement Undertakings dated January 31, 2008 between Loomis Sayles and the Registrant, on behalf of Loomis Sayles Massachusetts Tax Free Income Fund is incorporated by reference to exhibit (h)(5)(i) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | ||||
(ii) | Natixis Advisors Fee Waiver/Expense Reimbursement Undertakings dated January 31, 2008 between Natixis Advisors and the Registrant on behalf of Loomis Sayles Massachusetts Tax Free Income Fund is incorporated by reference to exhibit (h)(5)(ii) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(6) | Reliance Agreement for Exchange Privileges dated September 30, 2003 by and among Natixis Funds Trust IV, Natixis Funds Trust I, Registrant, Natixis Funds Trust III, Natixis Cash Management Trust, Loomis Sayles Funds I and Loomis Sayles Funds II is incorporated by reference to exhibit (h)(6) to PEA No. 120 to the Registration Statement filed on November 28, 2003. | |||||
(7) | Advisory Administration Agreement dated September 1, 2003 between Registrant, with respect to Loomis Sayles Massachusetts Tax Free Income Fund, and Natixis Advisors is incorporated by reference to exhibit (h)(7) to PEA No. 120 to the Registration Statement filed on November 28, 2003. | |||||
(8) | Administrative Services Fee Waiver dated October 1, 2007 between Natixis Advisors and the Registrant, on behalf of Loomis Sayles Massachusetts Tax Free Income Fund and Harris Associates Large Cap Value Fund is incorporated by reference to exhibit (h)(8) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(i) | Legal Opinion. | |||||
(1) | Opinion and Consent of Counsel dated January 3, 1989 with respect to the Registrants Harris Associates Large Cap Value Fund and Loomis Sayles Massachusetts Tax Free Income Fund is incorporated by reference to exhibit 10(a) to PEA No. 106 to the Registration Statement filed on April 18, 1997. | |||||
(2) | Opinion and Consent of Counsel dated September 10, 1993 with respect to offering multiple classes of shares for all series of the Registrant is incorporated by reference to exhibit 10(d) to PEA No. 106 to this Registration Statement filed on April 18, 1997. |
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(j) | Other Opinions. | |||||
Not applicable. | ||||||
(k) | Omitted Financial Statements. | |||||
Not applicable. | ||||||
(l) | Initial Capital Agreements. | |||||
Not applicable. | ||||||
(m) | Rule 12b-1 Plan. | |||||
(1) | (a) | Rule 12b-1 Plan for Class A shares of Harris Associates Large Cap Value Fund is incorporated by reference to exhibit (m)(1)(a) to PEA No. 115 to the Registration Statement filed on April 30, 2001. | ||||
(b) | Rule 12b-1 Plan for Class B shares of Harris Associates Large Cap Value Fund is incorporated by reference to exhibit (m)(1)(b) to PEA No. 119 to the Registration Statement filed on April 29, 2003. | |||||
(c) | Rule 12b-1 Plan for Class C shares of Harris Associates Large Cap Value Fund is incorporated by reference to exhibit (m)(1)(c) to PEA No. 115 to the Registration Statement filed on April 30, 2001. | |||||
(2) | (a) | Amended and Restated Rule 12b-1 Plan dated July 1, 2004 for Class A shares of Loomis Sayles Massachusetts Tax Free Income Fund is incorporated by reference to exhibit (m)(2)(a) to PEA No. 124 to the Registration Statement filed on December 2, 2004. | ||||
(b) | Rule 12b-1 Plan for Class B shares of Loomis Sayles Massachusetts Tax Free Income Fund is incorporated by reference to exhibit (m)(3)(b) to PEA No. 119 to the Registration Statement filed on April 29, 2003. | |||||
(3) | (a) | Form of Rule 12b-1 Plan for Class A shares of Delafield Select Fund is incorporated by reference to exhibit (m)(3)(a) to PEA No. 135 to the Registration Statement filed on June 24, 2008. | ||||
(b) | Form of Rule 12b-1 Plan for Class C shares of Delafield Select Fund is incorporated by reference to exhibit (m)(3)(b) to PEA No. 135 to the Registration Statement filed on June 24, 2008. | |||||
(4) | (a) | Rule 12b-1 Plan for Class A shares of ASG Global Alternatives Fund to be filed by Amendment. | ||||
(b) | Rule 12b-1 Plan for Class C shares of ASG Global Alternatives Fund to be filed by Amendment. | |||||
(n) | Rule 18f-3 Plan. | |||||
Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended, effective September 2007, is incorporated by reference to exhibit (n) to PEA No. 132 to the Registration Statement filed on January 28, 2008. |
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(p) | Code of Ethics. | |||||
(1) | Code of Ethics dated September 14, 2007 for Registrant is incorporated by reference to exhibit (p)(1) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(2) | Code of Ethics dated October 1, 2007 for Natixis Advisors and Natixis Distributors is incorporated by reference to exhibit (p)(2) to PEA No. 132 to the Registration Statement filed on January 28, 2008. | |||||
(3) | Code of Ethics dated September 30, 2005 as amended August 13, 2007 for Harris Associates is incorporated by reference to exhibit (p)(3) to PEA No. 134 to the Registration Statement filed on April 29, 2008. | |||||
(4) | Code of Ethics dated January 14, 2000 as amended October 25, 2007 for Loomis Sayles is incorporated by reference to exhibit (p)(4) to PEA No. 134 to the Registration Statement filed on April 29, 2008. | |||||
(5) | Code of Ethics for AlphaSimplex to be filed by Amendment. | |||||
(6) | Code of Ethics for Reich & Tang to be filed by Amendment. | |||||
(q) | Powers of Attorney. | |||||
(1) | Powers of Attorney for Graham T. Allison, Jr., Daniel M. Cain, John T. Hailer, Edward Benjamin, Robert Blanding and Sandra O. Moose dated October 18, 2004 designating John M. Loder, Coleen Downs Dinneen, Russell Kane and Michael Kardok as attorneys to sign for each Trustee is incorporated by reference to exhibit (q)(1) to PEA No. 124 to the Registration Statement filed on December 2, 2004. | |||||
(2) | Powers of Attorney for Charles D. Baker and Cynthia L. Walker are incorporated by reference to exhibit (q)(2) to PEA No. 128 to the Registration Statement filed on January 30, 2006. | |||||
(3) | Power of Attorney for Jonathan P. Mason is incorporated by reference to exhibit (q)(3) to PEA No. 131 to the Registration Statement filed on April 27, 2007. | |||||
(4) | Power of Attorney for Kenneth A. Drucker is filed herewith. |
Item 24. | Persons Controlled by or under Common Control with the Registrant. |
The Registrant is not aware of any person controlled or under common control with any of its series. As of April 3, 2008, there were no persons that owned 25% or more of the outstanding voting securities of the Registrant.
Item 25. | Indemnification. |
Under Article 5 of the Registrants By-laws, any past or present Trustee or officer of the Registrant (hereinafter referred to as a Covered Person) shall be indemnified to the fullest extent permitted by law against all liability and all expenses reasonably incurred by him or her in connection with any claim, action, suit or proceeding to which he or she may be a party or otherwise involved by reason of his or her being or having been a Covered Person. That provision does not authorize indemnification when it is determined that such Covered Person would otherwise be liable to the Registrant or its shareholders by reason of
6
willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. This description is modified in its entirety by the provision of Article 5 of the Registrants By-laws incorporated by reference to exhibit (b)(1)to PEA No. 128 to the Registration Statement filed on January 30, 2006.
The Distribution Agreements, the Custodian Agreement, the Transfer Agency and Service Agreement and the Administrative Services Agreement (the Agreements) contained herein and in various post-effective amendments and incorporated herein by reference, provide for indemnification. The general effect of these provisions is to indemnify entities contracting with the Registrant against liability and expenses in certain circumstances. This description is modified in its entirety by the provisions of the Agreements as contained in this Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in connection with the successful defense of any claim, action, suit or proceeding) is asserted against the Registrant by such Trustee, officer or controlling person in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The Registrant and its Trustees, officers and employees are insured, under a policy of insurance maintained by the Registrant in conjunction with Natixis Global Asset Management, L.P. (formerly IXIS Asset Management US Group, L.P.) and its affiliates, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such Trustees or officers. The policy expressly excludes coverage for any Trustee or officer for any claim arising out of any fraudulent act or omission, any dishonest act or omission or any criminal act or omission of the Trustee or officer.
Item 26. | Business and Other Connections of Investment Adviser. |
(a) | Natixis Advisors, a wholly-owned subsidiary of Natixis Global Asset Management, L.P., serves as investment adviser to Harris Associates Large Cap Value Fund. Natixis Advisors was organized in 1995. |
The list required by this Item 26 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Natixis Advisors during the past two years is incorporated by reference to schedules A, C and D of Form ADV filed by Natixis Advisors pursuant to the Investment Advisers Act of 1940, as amended, (the Advisers Act) (SEC file No. 801-48408; IARD/CRD No. 106800).
(b) | Harris Associates serves as a subadviser to the Registrants Harris Associates Large Cap Value Fund. Harris Associates serves as investment adviser to mutual funds, individuals, trusts, retirement plans, endowments and foundations, and manages several private partnerships, and is a registered commodity trading adviser and commodity pool operator. |
The list required by this Item 26 regarding any other business, profession or employment of a substantial nature engaged in by officers and partners of Harris Associates during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by Harris Associates pursuant to the Advisers Act (SEC File No. 801-50333; IARD/CRD No. 106960).
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(c) | Loomis Sayles, the adviser of the Registrants Loomis Sayles Massachusetts Tax Free Income Fund, provides investment advice to a number of other registered investment companies and to other organizations and individuals. |
The list required by this Item 26 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Loomis Sayles during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by Loomis Sayles pursuant to the Advisers Act (SEC file No. 801-170; IARD/CRD No. 105377).
(d) | Reich & Tang, a subsidiary of Natixis Global Asset Management, L.P., serves as the investment adviser to Delafield Select Fund and currently is manager or sub-adviser of 18 registered investment companies, of which it acts as administrator for nine, and advises institutions, foundations, private funds, and high-net worth individuals. |
The list required by this Item 26 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Reich & Tang during the past two years is incorporated herein by reference to schedules A, B and D of Form ADV filed by Reich & Tang pursuant to the Advisers Act (SEC file No. 801-47230, IARD/CRD No. 106186).
(e) | AlphaSimplex, a subsidiary of Natixis Global Asset Management, L.P., serves as the investment adviser to ASG Global Alternatives Fund and currently is manager or sub-adviser of additional registered investment companies and privately-offered funds. |
The list required by this Item 26 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of AlphaSimplex during the past two years is incorporated herein by reference to schedules A, B and D of Form ADV filed by AlphaSimplex pursuant to the Advisers Act (SEC file No. 801-62448, IARD/CRD No. 128356).
Item 27. | Principal Underwriters. |
(a) | Natixis Distributors, L.P., the Registrants principal underwriter, also serves as principal underwriter for: |
Natixis Funds Trust I
Natixis Funds Trust III
Natixis Funds Trust IV
Natixis Cash Management Trust
Loomis Sayles Funds I
Loomis Sayles Funds II
Delafield Fund, Inc.
Hansberger International Series
Gateway Trust
(b) | The general partner and officers of the Registrants principal underwriter, Natixis Distributors, L.P., and their addresses are as follows: |
8
Name |
Positions and Offices with Principal Underwriter |
Positions and Offices with Registrant | ||
Natixis Distribution Corporation | General Partner | None | ||
David L. Giunta | President and Chief Executive Officer | President and Chief Executive Officer | ||
Robert Krantz | Executive Vice President | Executive Vice President | ||
Coleen Downs Dinneen | Executive Vice President, General Counsel, Secretary and Clerk | Secretary, Clerk and Chief Legal Officer | ||
Russell Kane | Senior Vice President, Deputy General Counsel, Assistant Secretary, Assistant Clerk and Chief Compliance Officer for Mutual Funds | Chief Compliance Officer, Anti-Money Laundering Officer and Assistant Secretary | ||
Michael Kardok | Senior Vice President | Treasurer, Principal Financial and Accounting Officer | ||
Diane Whelan | Executive Vice President and Chief Information Officer | None | ||
Beatriz Pina Smith | Executive Vice President, Treasurer and Chief Financial Officer | None | ||
Anthony Loureiro | Senior Vice President, Chief Compliance Officer-Broker/Dealer and Anti-Money Laundering Compliance Officer | None | ||
Marilyn Rosh | Vice President and Controller | None | ||
Sharon Wratchford | Executive Vice President | None | ||
Matthew Coldren | Executive Vice President | None | ||
Peter Martin | Executive Vice President | None | ||
Caren Leedom | Executive Vice President | None | ||
Matt Raynor | Executive Vice President | None | ||
David Allison | Senior Vice President | None | ||
Marla McDougall | Senior Vice President | None | ||
James Cove | Senior Vice President | None | ||
Maureen ONeill | Senior Vice President | None | ||
Susannah Wardly | Senior Vice President | None | ||
William Butcher | Senior Vice President | None | ||
John Bearce | Senior Vice President | None | ||
David Goodsell | Senior Vice President | None |
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Dan Lynch | Senior Vice President | None | ||
Dana Hartwell | Senior Vice President | None | ||
Mark Doyle | Senior Vice President | None | ||
Robert Hussey | Senior Vice President | None | ||
David Lafferty | Senior Vice President | None | ||
Elizabeth Puls-Burns | Senior Vice President | None | ||
Ian MacDuff | Senior Vice President | None | ||
David Vallon | Senior Vice President | None | ||
Faith Yando | Senior Vice President | None |
The principal business address of all the above persons or entities is 399 Boylston Street, Boston, MA 02116.
(c) | Not applicable. |
Item 28. | Location of Accounts and Records |
The following companies, in the aggregate, maintain possession of the documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules thereunder:
(a) | For all series of Registrant: | |||
(i) | Natixis Funds Trust II | |||
399 Boylston Street | ||||
Boston, Massachusetts 02116 | ||||
(ii) | Natixis Distributors, L.P. | |||
399 Boylston Street | ||||
Boston, Massachusetts 02116 | ||||
(iii) | Natixis Asset Management Advisors, L.P. | |||
399 Boylston Street | ||||
Boston, Massachusetts 02116 | ||||
(iv) | State Street Bank and Trust Company | |||
225 Franklin Street | ||||
Boston, Massachusetts 02110 | ||||
(v) | Boston Financial Data Services, Inc. | |||
2 Heritage Drive, 4th Floor | ||||
North Quincy, Massachusetts 02171 | ||||
(b) | For the series of the Registrant managed by Harris Associates L.P.: | |||
Harris Associates L.P. | ||||
Two North LaSalle Street | ||||
Chicago, Illinois 60602 |
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(c) | For the series of the Registrant managed by Loomis, Sayles & Company, L.P.: | |||
Loomis, Sayles & Company, L.P. | ||||
One Financial Center | ||||
Boston, Massachusetts 02111 | ||||
(d) | For the series of the Registrant managed by Reich & Tang Asset Management, LLC: Reich & Tang Asset Management, LLC 600 Fifth Avenue New York, New York 10020 | |||
(e) | For the series of the Registrant managed by AlphaSimplex Group, LLC: AlphaSimplex Group, LLC One Cambridge Center Cambridge, Massachusetts 02142 |
Item 29. | Management Services. |
None.
Item 30. | Undertakings. |
(a) | The Registrant undertakes to provide the annual report of any of its series to any person who receives a prospectus for such series and who requests the annual report. |
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NATIXIS FUNDS TRUST II
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Post-Effective Amendment No. 136 to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and the Commonwealth of Massachusetts on the 17th day of July, 2008.
NATIXIS FUNDS TRUST II | ||
By: | /s/ David L. Giunta | |
David L. Giunta | ||
President |
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date | ||
/s/ David L. Giunta |
||||
David L. Giunta | President | July 17, 2008 | ||
/s/ Michael C. Kardok |
||||
Michael C. Kardok | Treasurer | July 17, 2008 | ||
/s/ Graham T. Allison, Jr.* |
||||
Graham T. Allison, Jr. | Trustee | July 17, 2008 | ||
/s/ Charles D. Baker * |
||||
Charles D. Baker | Trustee | July 17, 2008 | ||
/s/ Edward A. Benjamin * |
||||
Edward A. Benjamin | Trustee | July 17, 2008 | ||
/s/ Robert J. Blanding * |
||||
Robert J. Blanding | Trustee | July 17, 2008 | ||
/s/ Daniel M. Cain * |
||||
Daniel M. Cain | Trustee | July 17, 2008 | ||
/s/ Kenneth A. Drucker * |
||||
Kenneth A. Drucker | Trustee | July 17, 2008 | ||
/s/ John T. Hailer * |
||||
John T. Hailer | Trustee | July 17, 2008 | ||
/s/ Jonathan P. Mason* |
||||
Jonathan P. Mason | Trustee | July 17, 2008 | ||
/s/ Sandra O. Moose* |
||||
Sandra O. Moose | Trustee, Chairperson of the Board | July 17, 2008 | ||
/s/ Cynthia L. Walker* |
||||
Cynthia L. Walker | Trustee | July 17, 2008 |
*By: | /s/ Coleen Downs Dinneen | |
Coleen Downs Dinneen | ||
Attorney-In-Fact**/***/****/***** | ||
July 17, 2008 |
** | Powers of Attorney are incorporated by reference to Exhibit (q) to Post-Effective Amendment No. 37 to the Registrants Registration Statement filed on December 2, 2004. | |
*** | Powers of Attorney for Charles D. Baker and Cynthia L. Walker are incorporated by reference to Exhibit (q)(2) to Post-Effective Amendment No. 39 to the Registrants Registration Statement as filed on December 2, 2005. | |
**** | Power of Attorney for Jonathan P. Mason is incorporated by reference to Exhibit (q)(3) to Post-Effective Amendment No. 45 to the Registrants Registration Statement as filed on May 30, 2007. | |
***** | Power of Attorney for Kenneth A. Drucker is filed herewith. |
Natixis Funds Trust II
Exhibit Index
Exhibits for Item 23 of Form N-1A
Exhibit |
Exhibit Description | |
(q)(4) |
Power of Attorney for Kenneth A. Drucker |
Exhibit (q)(4)
NATIXIS FUNDS TRUST I
NATIXIS FUNDS TRUST II
NATIXIS FUNDS TRUST III
NATIXIS FUNDS TRUST IV
NATIXIS CASH MANAGEMENT TRUST
LOOMIS SAYLES FUNDS I
LOOMIS SAYLES FUNDS II
HANSBERGER INTERNATIONAL SERIES
GATEWAY TRUST
POWER OF ATTORNEY
Effective July 1, 2008, I, the undersigned, hereby constitute John M. Loder, Coleen Downs Dinneen, Russell Kane and Michael Kardok, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me, and in my name in the capacity indicated below, any and all registration statements and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time investment companies of which I am now or hereafter will be a Director or Trustee and to register the shares of such companies and generally to do all such things in my name and on my behalf to enable such registered investment companies to comply with the provisions of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission, hereby ratifying and confirming my signature as it may be signed by my said attorneys and any and all registration statements and amendments thereto.
Witness my hand on the 17th day of June, 2008.
/s/ Kenneth A. Drucker |
Kenneth A. Drucker Trustee |
NATIXIS FUNDS TRUST II
July 17, 2008
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: | Natixis Funds Trust II |
Post-Effective Amendment No. 136
(File Nos.: 2-11101 and 811-00242)
Dear Sir or Madam:
On behalf of Natixis Funds Trust II (the Registrant), transmitted for filing is Post-Effective Amendment No. 136 (the Amendment) to the Registrants registration statement on Form N-1A. The enclosed Amendment is being filed pursuant to Rule 485(a) under the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and Rule 101(a)(1)(i) of Regulation S-T.
The Registrant is filing the Amendment to add a new series, ASG Global Alternatives Fund. The Amendment does not relate to any other series of the Registrant. It is anticipated that the Amendment will become effective on September 30, 2008.
Please direct any questions or comments on the enclosed materials to me at (617) 449-2818.
Very truly yours, |
/s/ John DelPrete |
John DelPrete |
Assistant Secretary |