Prospectus
May 1, 2019
|
Class A |
Class C |
Class N |
Class T* |
Class Y |
Admin Class |
Loomis Sayles High Income Fund |
NEFHX |
NEHCX |
LSHNX |
NEHTX |
NEHYX |
|
Loomis Sayles Investment Grade Bond Fund |
LIGRX |
LGBCX |
LGBNX |
LIGTX |
LSIIX |
LIGAX |
Loomis Sayles Multi-Asset Income Fund |
IIDPX |
CIDPX |
LMINX |
LMUTX |
YIDPX |
|
Mirova Global Green Bond Fund |
MGGAX |
|
MGGNX |
|
MGGYX |
|
Mirova Global Sustainable Equity Fund |
ESGMX |
ESGCX |
ESGNX |
ETSGX |
ESGYX |
|
Mirova International Sustainable Equity Fund |
MRVAX |
|
MRVNX |
|
MRVYX |
|
Natixis Oakmark Fund |
NEFOX |
NECOX |
NOANX |
NOKTX |
NEOYX |
|
Natixis Oakmark International Fund |
NOIAX |
NOICX |
NIONX |
NIOTX |
NOIYX |
|
Natixis U.S. Equity Opportunities Fund |
NEFSX |
NECCX |
NESNX |
NUSTX |
NESYX |
|
Vaughan Nelson Small Cap Value Fund |
NEFJX |
NEJCX |
VSCNX |
NEJTX |
NEJYX |
|
Vaughan Nelson Value Opportunity Fund |
VNVAX |
VNVCX |
VNVNX |
VNVTX |
VNVYX |
|
* | Class T shares of the Funds are not currently available for purchase. |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you wish to continue receiving paper copies of your shareholder reports after January 1, 2021, you can inform the Fund at any time by calling 1-800-225-5478. If you hold your account with a financial intermediary and you wish to continue receiving paper copies after January 1, 2021, you should call your financial intermediary directly. Paper copies are provided free of charge, and your election to receive reports in paper will apply to all funds held with the Natixis Funds complex. If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You currently may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically at www.icsdelivery.com/natixisfunds.
The Securities and Exchange Commission (“SEC”) has not approved or disapproved any Fund’s shares or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a crime.
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.
Fund Summary
Loomis Sayles High Income Fund
Investment Goal
The Fund seeks high current income plus the opportunity for capital appreciation to produce a high total return.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
4.25% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.60% |
0.60% |
0.60% |
0.60% |
0.60% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses |
0.42% |
0.42% |
0.29% |
0.42%1 |
0.42% |
Total annual fund operating expenses |
1.27% |
2.02% |
0.89% |
1.27% |
1.02% |
Fee waiver and/or expense reimbursement2,3 |
0.22% |
0.22% |
0.14% |
0.22% |
0.22% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.05% |
1.80% |
0.75% |
1.05% |
0.80% |
1 | Other expenses are estimated for the current fiscal year. |
2 | Loomis, Sayles & Company, L.P. (“Loomis Sayles” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.05%, 1.80%, 0.75%, 1.05% and 0.80% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
3 | Natixis Advisors, L.P. has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
1
Fund Summary
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the dates noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
528 |
$ |
790 |
$ |
1,072 |
$ |
1,875 |
Class C |
$ |
283 |
$ |
612 |
$ |
1,068 |
$ |
2,330 |
Class N |
$ |
77 |
$ |
270 |
$ |
479 |
$ |
1,083 |
Class T |
$ |
354 |
$ |
622 |
$ |
909 |
$ |
1,727 |
Class Y |
$ |
82 |
$ |
303 |
$ |
542 |
$ |
1,228 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
183 |
$ |
612 |
$ |
1,068 |
$ |
2,330 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal period ended December 31, 2018 and for the prior fiscal year ended September 30, 2018, the Fund’s portfolio turnover rates were 17% and 55%, respectively, of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal market conditions, the Fund will invest at least 80% of its assets in below investment grade fixed-income securities (commonly known as “junk bonds”). Below investment grade fixed-income securities are rated below investment grade quality (i.e., none of the three major ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investors Services, Inc. (“Fitch”) or S&P Global Ratings (“S&P”)), have rated the securities in one of its top four rating categories) or, if the security is unrated, are determined by the Adviser to be of comparable quality. There is no minimum rating for the securities in which the Fund may invest. The Fund may invest up to 30% of its assets in U.S. dollar-denominated foreign fixed-income securities, including those in emerging markets. Although certain securities purchased by the Fund may be issued by domestic companies incorporated outside of the United States, the Adviser does not consider these securities to be foreign if the issuer is included in the U.S. fixed-income indices published by Bloomberg Barclays.
The Adviser performs its own extensive credit analysis to determine the creditworthiness and potential for capital appreciation of a security. The Fund’s management minimizes both market timing and interest rate forecasting. Instead, it uses a strategy based on gaining a thorough understanding of industry and company dynamics as well as individual security characteristics such as issuer debt and debt maturity schedules, earnings prospects, responsiveness to changes in interest rates, experience and perceived strength of management, borrowing requirements and liquidation value, market price in relation to cash flow, interest and dividends.
In deciding which securities to buy and sell, the Adviser will consider, among other things, the financial strength of the issuer, current interest rates, current valuations, the Adviser’s expectations regarding future changes in interest rates and comparisons of the level of risk associated with particular investments with the Adviser’s expectations concerning the potential return of those investments.
In selecting investments for the Fund, the Adviser utilizes the skills of its in-house team of more than 30 research analysts to cover a broad universe of industries, companies and markets. The Fund’s portfolio managers take advantage of these extensive resources to identify securities that meet the Fund’s investment criteria. The Adviser employs a selection strategy that focuses on a value-driven, bottom-up approach to identify securities that provide an opportunity for both generous yields and capital appreciation. The Adviser analyzes an individual company’s potential for positive financial news to determine if it has growth potential. Examples of positive financial news include an upward turn in the business cycle, improvement in cash flows, rising profits or the awarding of new contracts. The Adviser emphasizes in-depth credit analysis, appreciation potential and diversification in its bond selection. Each bond is evaluated to assess the ability of its issuer to pay interest and, ultimately, principal (which helps the Fund generate an ongoing flow of income). The Adviser also assesses a bond’s relation to market conditions within its industry and favors bonds whose prices may benefit from positive business developments. The Adviser seeks to diversify the Fund’s holdings to reduce the inherent risk in below investment grade fixed-income securities.
In connection with its principal investment strategies, the Fund may also invest in structured notes, collateralized loan obligations, zero-coupon securities, pay-in-kind securities, convertible securities, securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”), and futures,
2
Fund Summary
forward contracts and swaps (including credit default swaps) for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Below Investment Grade Fixed-Income Securities Risk: The Fund’s investments in below investment grade fixed-income securities, also known as “junk bonds,” may be subject to greater risks than other fixed-income securities, including being subject to greater levels of interest rate risk, credit/counterparty risk (including a greater risk of default) and liquidity risk. The ability of the issuer to make principal and interest payments is predominantly speculative for below investment grade fixed-income securities.
Convertible Securities Risk
Convertible securities have investment characteristics of both equity and debt securities. Investments in convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk and credit risk. Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to many of the same risks as investing in common stock. The Fund may also be forced to convert a convertible security at an inopportune time, which may decrease the Fund’s return.
Credit/Counterparty Risk: Credit/counterparty risk 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. The Fund will be subject to credit risks with respect to the counterparties of its derivatives transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with over-the-counter (“OTC”) derivatives transactions, such as foreign currency transactions. As a result, in instances when the Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its counterparties will not perform their obligations under the transactions and that the Fund will sustain losses or be unable to realize gains.
Derivatives Risk: Derivative instruments (such as those in which the Fund may invest, including futures, forward contracts, structured notes and swaps (including credit default swaps)) are subject to changes in the value of the underlying assets or indices on which such instruments are based. There is no guarantee that the use of derivatives will be effective or that suitable transactions will be available. Even a small investment in derivatives may give rise to leverage risk and can have a significant impact on the Fund’s exposure to securities markets values, interest rates or currency exchange rates. It is possible that the Fund’s liquid assets may be insufficient to support its obligations under its derivatives positions. The use of derivatives for other than hedging purposes may be considered a speculative activity, and involves greater risks than are involved in hedging. The use of derivatives may cause the Fund to incur losses greater than those that would have occurred had derivatives not been used. The Fund’s use of derivatives, such as futures, forward contracts, structured notes and swaps (including credit default swaps) involves other risks, such as the credit risk relating to the other party to a derivative contract (which is greater for forward currency contracts, swaps and other OTC derivatives), the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate as expected with changes in the value of relevant assets, rates or indices, liquidity risk, allocation risk and the risk of losing more than the initial margin required to initiate derivatives positions. There is also the risk that the Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The Fund’s derivative counterparties may experience financial difficulties or otherwise be unwilling or unable to honor their obligations, possibly resulting in losses to the Fund.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Interest Rate Risk: Interest rate risk is the risk that the value of the Fund’s investments will fall if interest rates rise. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Interest rate risk generally is greater for funds that invest in fixed-income securities with relatively longer durations than for funds that invest in fixed-income securities with shorter durations. The value of zero-coupon and pay-in-kind bonds may be more sensitive to fluctuations in interest rates than other fixed-income securities. In addition, an economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce the Fund’s ability to sell them, negatively impacting the performance of the Fund. Potential future changes in government monetary policy may affect the level of interest rates, and the current historically low interest rate environment, combined with the Federal Reserve Board’s conclusion of its quantitative easing program and recent increases in interest rates, increases the likelihood of interest rates rising in the future.
Leverage Risk: Use of derivative instruments may involve leverage. Leverage is the risk associated with securities or practices that multiply small index, market or asset-price movements into larger changes in value. The use of leverage increases the impact of gains and losses on the fund’s returns, and may lead to significant losses if investments are not successful.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may
3
Fund Summary
increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to significant liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Mortgage-Related and Asset-Backed Securities Risk: In addition to the risks associated with investments in fixed-income securities generally (for example, credit, liquidity and valuation risk), mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities as well as prepayment risk, the risk that the securities may be prepaid and result in the reinvestment of the prepaid amounts in securities with lower yields than the prepaid obligations. Conversely, there is a risk that a rise in interest rates will extend the life of a mortgage-related or asset-backed security beyond the expected prepayment time, typically reducing the security’s value, which is called extension risk. The Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. The Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
Risk/Return Bar Chart and Table
The bar chart and table shown below provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year and life-of-class periods (as applicable) compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: Second Quarter 2009, 16.46% |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-3.21% |
3.31% |
9.70% |
- |
Return After Taxes on Distributions |
-5.07% |
1.16% |
6.87% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-1.80% |
1.63% |
6.72% |
- |
Class A - Return Before Taxes |
-7.51% |
2.12% |
8.96% |
|
Class C - Return Before Taxes |
-5.33% |
2.25% |
8.59% |
- |
Class N - Return Before Taxes |
-3.15% |
- |
- |
2.91% |
Class T - Return Before Taxes |
-5.84% |
2.53% |
9.15% |
- |
Bloomberg Barclays U.S. Corporate High-Yield Bond Index |
-2.08% |
3.83% |
11.12% |
3.40% |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the
4
Fund Summary
other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares. Prior to February 1, 2019, Total Returns in the bar chart and Return After Taxes on Distributions and Return After Taxes on Distributions and Sale of Fund Shares in the table were presented for Class A shares; such returns are now presented for Class Y shares, the largest share class in the Natixis Fund Complex.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period.The after-tax returns are shown for only one class of the Fund. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Loomis, Sayles & Company, L.P.
Portfolio Managers
Matthew J. Eagan, CFA®, Executive Vice President of the Adviser, has served as co-portfolio manager of the Fund since 2002.
Brian P. Kennedy, Vice President of the Adviser, has served as co-portfolio manager of the Fund since 2018.
Elaine M. Stokes, Executive Vice President of the Adviser, served as associate portfolio manager of the Fund from 2007 to 2012 and has served as co-portfolio manager of the Fund since 2012.
Todd P. Vandam, CFA®, Vice President of the Adviser, has served as co-portfolio manager of the Fund since 2018.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
5
Fund Summary
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
6
Fund Summary
Loomis Sayles Investment Grade Bond Fund
Investment Goal
The Fund seeks high total investment return through a combination of current income and capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Admin Class |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
4.25% |
None |
None |
2.50% |
None |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Admin Class |
Management fees |
0.40% |
0.40% |
0.40% |
0.40% |
0.40% |
0.40% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
0.25% |
Other expenses |
0.17% |
0.17% |
0.08% |
0.17%1 |
0.17% |
0.42%2 |
Total annual fund operating expenses |
0.82% |
1.57% |
0.48% |
0.82% |
0.57% |
1.07% |
Fee waiver and/or expense reimbursement3 |
0.04% |
0.04% |
0.00% |
0.04% |
0.04% |
0.04% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
0.78% |
1.53% |
0.48% |
0.78% |
0.53% |
1.03% |
1 | Other expenses are estimated for the current fiscal year. |
2 | Other expenses include an administrative services fee of 0.25% for Admin Class shares. |
3 | Loomis, Sayles & Company, L.P. (“Loomis Sayles” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 0.78%, 1.53%, 0.48%, 0.78%, 0.53% and 1.03% of the Fund’s average daily net assets for Class A, C, N, T, Y and Admin Class shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T, Y and Admin Class shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the examples for Class A, Class C, Class T, Class Y and Admin Class are based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the dates noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
7
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
501 |
$ |
672 |
$ |
857 |
$ |
1,392 |
Class C |
$ |
256 |
$ |
492 |
$ |
851 |
$ |
1,864 |
Class N |
$ |
49 |
$ |
154 |
$ |
269 |
$ |
604 |
Class T |
$ |
328 |
$ |
501 |
$ |
690 |
$ |
1,235 |
Class Y |
$ |
54 |
$ |
179 |
$ |
314 |
$ |
710 |
Admin Class |
$ |
105 |
$ |
336 |
$ |
586 |
$ |
1,302 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
156 |
$ |
492 |
$ |
851 |
$ |
1,864 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal period ended December 31, 2018 and for the prior fiscal year ended September 30, 2018, the Fund’s portfolio turnover rates were 39% and 3%, respectively, of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in investment grade fixed-income securities (for example, bonds and other investments that the Adviser believes have similar economic characteristics, such as notes, debentures and loans). “Investment grade” securities are those securities that are rated in one of the top four categories at the time of purchase by at least one of the three major rating agencies — Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investor Services, Inc. (“Fitch”) or S&P Global Ratings (“S&P”) or, if unrated, are determined by the Adviser to be of comparable quality. Although the Fund invests primarily in investment grade fixed-income securities, it may invest up to 15% of its assets in below investment grade fixed-income securities (also known as “junk bonds”). There is no minimum rating for the securities in which the Fund may invest. The Fund may invest in fixed-income securities of any maturity.
In deciding which securities to buy and sell, the Adviser will consider, among other things, the financial strength of the issuer, current interest rates, current valuations, the Adviser’s expectations regarding future changes in interest rates and comparisons of the level of risk associated with particular investments with the Adviser’s expectations concerning the potential return of those investments.
Three themes typically drive the Fund’s investment approach. First, the Adviser generally seeks fixed-income securities of issuers whose credit profiles it believes are improving. Second, the Fund may invest significantly in securities the prices of which the Adviser believes are more sensitive to events related to the underlying issuer than to changes in general interest rates or overall market default rates. The Adviser believes that the Fund may generate positive returns by having a portion of the Fund’s assets invested in non-market-related securities, rather than by relying primarily on changes in interest rates to produce returns for the Fund. Third, the Adviser analyzes different sectors of the economy and differences in the yields (“spreads”) of various fixed-income securities in an effort to find securities that it believes may produce attractive returns for the Fund in comparison to their risk. The Adviser generally prefers securities that are protected against calls (early redemption by the issuer).
In connection with its principal investment strategies, the Fund may invest up to 30% of its assets in U.S. dollar-denominated foreign securities, including emerging markets securities. The Fund may also invest in U.S. dollar-denominated obligations of supranational entities without limit (e.g., the World Bank). Although certain securities purchased by the Fund may be issued by domestic companies incorporated outside of the United States, the Adviser does not consider these securities to be foreign if the issuer is included in the U.S. fixed-income indices published by Bloomberg Barclays. The Fund may also invest in corporate securities, U.S. government securities, commercial paper, zero-coupon securities, collateralized loan obligations, mortgage-backed securities, including mortgage dollar rolls, stripped mortgage-backed securities and collateralized mortgage obligations and other asset-backed securities, when-issued securities, convertible securities, securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”) and structured notes. The Fund may also invest in futures, forward contracts and swaps (including credit default swaps) for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Below Investment Grade Fixed-Income Securities Risk: The Fund’s investments in below investment grade fixed-income securities, also known as “junk bonds,” may be subject to greater risks than other fixed-income securities, including being subject to greater levels of interest rate risk,
8
Fund Summary
credit/counterparty risk (including a greater risk of default) and liquidity risk. The ability of the issuer to make principal and interest payments is predominantly speculative for below investment grade fixed-income securities.
Credit/Counterparty Risk: Credit/counterparty risk is the risk that the issuer or 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. The Fund will be subject to credit risks with respect to the counterparties of its derivatives transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with over-the-counter (“OTC”) derivatives transactions, such as foreign currency transactions. As a result, in instances when the Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its counterparties will not perform their obligations under the transactions and that the Fund will sustain losses or be unable to realize gains.
Derivatives Risk: Derivative instruments (such as those in which the Fund may invest, including forward currency contracts, structured notes and swap transactions (including credit default swaps)) are subject to changes in the value of the underlying assets or indices on which such instruments are based. There is no guarantee that the use of derivatives will be effective or that suitable transactions will be available. Even a small investment in derivatives may give rise to leverage risk and can have a significant impact on the Fund’s exposure to securities markets values, interest rates or currency exchange rates. It is possible that the Fund’s liquid assets may be insufficient to support its obligations under its derivatives positions. The use of derivatives for other than hedging purposes may be considered a speculative activity, and involves greater risks than are involved in hedging. The use of derivatives may cause the Fund to incur losses greater than those that would have occurred had derivatives not been used. The Fund’s use of derivatives, such as forward currency contracts, structured notes and swap transactions (including credit default swaps), involves other risks, such as the credit risk relating to the other party to a derivative contract (which is greater for forward currency contracts, swaps, and other OTC derivatives), the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate as expected with changes in the value of relevant assets, rates or indices, liquidity risk, allocation risk and the risk of losing more than the initial margin required to initiate derivatives positions. There is also the risk that the Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The Fund’s derivative counterparties may experience financial difficulties or otherwise be unwilling or unable to honor their obligations, possibly resulting in losses to the Fund.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Interest Rate Risk: Interest rate risk is the risk that the value of the Fund’s investments will fall if interest rates rise. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Interest rate risk generally is greater for funds that invest in fixed-income securities with relatively longer durations than for funds that invest in fixed-income securities with shorter durations. The value of zero-coupon securities and securities with longer maturities are generally more sensitive to fluctuations in interest rates than other fixed-income securities. In addition, an economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce the Fund’s ability to sell them, negatively impacting the performance of the Fund. Potential future changes in government monetary policy may affect the level of interest rates, and the current historically low interest rate environment, combined with the Federal Reserve Board’s conclusion of its quantitative easing program and recent increases in interest rates, increases the likelihood of interest rates rising in the future.
Leverage Risk: Use of derivative instruments may involve leverage. Leverage is the risk associated with securities or practices that multiply small index, market or asset-price movements into larger changes in value. The use of leverage increases the impact of gains and losses on the fund’s returns, and may lead to significant losses if investments are not successful.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to significant liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Mortgage-Related and Asset-Backed Securities Risk: In addition to the risks associated with investments in fixed-income securities generally (for example, credit, liquidity and valuation risk), mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities as well as prepayment risk, the risk that the securities may be prepaid and result in the reinvestment of the prepaid amounts in securities with
9
Fund Summary
lower yields than the prepaid obligations. Conversely, there is a risk that a rise in interest rates will extend the life of a mortgage-related or asset-backed security beyond the expected prepayment time, typically reducing the security’s value, which is called extension risk. The Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. The Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
Risk/Return Bar Chart and Table
The bar chart and table shown below provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year and life-of-class periods (as applicable) compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: Second Quarter 2009, 12.65% |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-0.32% |
2.41% |
6.69% |
- |
Return After Taxes on Distributions |
-1.09% |
0.84% |
4.72% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-0.09% |
1.29% |
4.61% |
- |
Class A - Return Before Taxes |
-4.86% |
1.27% |
5.96% |
- |
Class C - Return Before Taxes |
-2.34% |
1.39% |
5.63% |
- |
Class N - Return Before Taxes |
-0.35% |
2.52% |
- |
2.23% |
Class T - Return Before Taxes |
-3.10% |
1.65% |
6.15% |
- |
Admin Class - Return Before Taxes |
-0.72% |
1.94% |
6.15%1 |
- |
Bloomberg Barclays U.S. Government/Credit Bond Index |
-0.42% |
2.53% |
3.46% |
1.89% |
1 | Prior to the inception of Admin Class shares (February 1, 2010), performance is that of Class A shares, restated to reflect the higher net expenses of Admin Class shares. |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period.The after-tax returns are shown for only one class of the Fund. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
10
Fund Summary
Management
Investment Adviser
Loomis, Sayles & Company, L.P.
Portfolio Managers
Matthew J. Eagan, CFA®, Executive Vice President of the Adviser, served as associate portfolio manager of the Fund from 2006 to 2012 and has served as co-portfolio manager of the Fund since 2012.
Brian P. Kennedy, Vice President of the Adviser, has served as co-portfolio manager of the Fund since 2013.
Elaine M. Stokes, Executive Vice President of the Adviser, served as an associate portfolio manager of the Fund from 2006 to 2012 and has served as co-portfolio manager of the Fund since 2012.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Admin Class Shares
Admin Class shares of the Fund are intended primarily for Certain Retirement Plans held in an omnibus fashion and are not available for purchase by individual investors. There are no initial or subsequent investment minimums for these shares.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
11
Fund Summary
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
12
Fund Summary
Loomis Sayles Multi-Asset Income Fund
Investment Goal
The Fund seeks current income with a secondary objective of capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
4.25% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.55% |
0.55% |
0.55% |
0.55% |
0.55% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses1 |
0.29% |
0.29% |
0.78% |
0.29%2 |
0.29% |
Acquired fund fees and expenses3 |
0.05% |
0.05% |
0.05% |
0.05% |
0.05% |
Total annual fund operating expenses |
1.14% |
1.89% |
1.38% |
1.14% |
0.89% |
Fee waiver and/or expense reimbursement4,5 |
0.14% |
0.14% |
0.68% |
0.14% |
0.14% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.00% |
1.75% |
0.70% |
1.00% |
0.75% |
1 | Other expenses have been restated to reflect current custodian fees for the Fund effective October 1, 2018. |
2 | Other expenses are estimated for the current fiscal year. |
3 | The expense information shown in the table above differs from the expense information disclosed in the Fund’s financial highlights table because the financial highlights table reflects the operating expenses of the Fund and does not include acquired fund fees and expenses. |
4 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 0.95%, 1.70%, 0.65%, 0.95% and 0.70% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
5 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
13
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
523 |
$ |
759 |
$ |
1,013 |
$ |
1,740 |
Class C |
$ |
278 |
$ |
580 |
$ |
1,008 |
$ |
2,200 |
Class N |
$ |
72 |
$ |
370 |
$ |
690 |
$ |
1,598 |
Class T |
$ |
349 |
$ |
590 |
$ |
849 |
$ |
1,589 |
Class Y |
$ |
77 |
$ |
270 |
$ |
479 |
$ |
1,083 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
178 |
$ |
580 |
$ |
1,008 |
$ |
2,200 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 282% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
The Fund intends to pursue its investment goal by utilizing a flexible investment approach that allocates investments across a broad range of income-producing securities, while employing risk management strategies to mitigate downside risk. The Fund may invest in equity securities (including common stocks, preferred stocks, depositary receipts, warrants, securities convertible into common or preferred stocks and real estate investment trusts (“REITS”)). The Fund may also invest up to 25% of its assets in publicly traded master limited partnerships (“MLPs”). The Fund may invest in fixed-income securities (including exchange-traded notes, structured notes, corporate debt, foreign and U.S. government and agency fixed-income securities, bank loans, adjustable floating rate loans and other floating rate debt instruments issued by U.S. and non-U.S. corporations and other business entities and convertible debt securities). The Fund may invest in below investment grade fixed-income securities (commonly known as “junk bonds”). Below investment grade fixed-income securities are rated below investment grade quality (i.e., none of the three major ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investors Services, Inc. (“Fitch”) or Standard and Poor’s Ratings Group (“S&P”)), have rated the securities in one of its top four rating categories) or, if unrated, are determined by Loomis Sayles & Company, L.P. (“Loomis Sayles” or the “Subadviser”) to be of comparable quality. There is no minimum rating for the fixed-income securities in which the Fund may invest. The Fund may invest in securities of any maturity or market capitalization. The Fund may invest in foreign securities including those in emerging markets.
The Fund may shift its assets among various types of income-producing securities based upon the Subadviser’s evaluation of changing market conditions, yield expectations and security-specific opportunities. Changes to the Fund’s asset allocations are based on several criteria, including global market cycles, global economic regimes and the relative attractiveness of particular asset categories. Under normal market conditions, the Fund will typically invest between 20% and 80% of its assets in fixed-income securities and between 30% and 70% in equity securities. However, the Fund is not required to allocate its investments among asset classes in any fixed proportion and may invest up to 100% of its assets in either equity securities or fixed-income securities. A sudden change in market conditions could cause the Subadviser to substantially change the allocation of the Fund’s assets over a relatively short period of time.
In selecting individual investments for the Fund, the Subadviser considers factors including, but not limited to, economic and business cycles as well as top-down sector valuations and fundamental, bottom-up security valuations. In deciding which equity securities to buy and sell, the Subadviser seeks to identify securities that it believes are, among other things, attractively valued based on the Subadviser’s estimate of what a security is actually worth, with additional consideration given to income-producing securities. The Subadviser may utilize quantitative screening methods based on fundamental factors to identify issuers which may pay or grow dividends.
In deciding which fixed-income securities to buy and sell, the Subadviser may consider a number of factors including, but not limited to, diverging business cycles among countries and regions, the stability and volatility of a country’s bond markets, the financial strength of the issuer, current interest rates, the Subadviser’s expectations regarding general trends in interest rates and currency considerations. The Subadviser will also consider how purchasing or selling a security would impact the overall portfolio’s risk profile (for example, its sensitivity to currency risk, interest rate risk and sector-specific risk) and potential return (income and capital gains).
When constructing the Fund’s portfolio the Subadviser will use risk management tools in an effort to manage risk on an ongoing basis. These tools include the use of models that evaluate risk correlation to various market factors or asset classes, scenario analysis to measure the impact of certain market events and measuring the volatility of certain sectors and securities to understand the level of risk being contributed by these sectors and securities. The portfolio management team expects to actively evaluate each investment idea and to decide to buy or sell an investment based upon: (i) its return potential; (ii) its level of risk; and (iii) its fit within the team’s overall macro strategy, with the goal of continually optimizing the Fund’s portfolio.
14
Fund Summary
The Fund may also:
Invest in collateralized loan obligations and mortgage-related and asset-backed securities
Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). Rule 144A securities are privately offered securities and can be resold only to certain qualified institutional buyers.
Engage in over-the-counter (“OTC”) options, swap contracts (including credit default swaps) and currency transactions as well as futures transactions and other derivatives for hedging and investment purposes. The Fund may take both long and short positions in derivatives.
Engage in active and frequent trading of securities and other instruments. Effects of frequent trading may include high transaction costs, which may lower the Fund’s returns, and realization of short-term capital gains, distributions of which are taxable to shareholders who are individuals as ordinary income. Trading costs and tax effects associated with frequent trading may adversely affect the Fund’s performance.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Allocation Risk: The Fund’s investment performance depends on how its assets are allocated. The allocation, as set forth above, may not be optimal in every market condition. You could lose money on your investment in the Fund as a result of this allocation.
Below Investment Grade Fixed-Income Securities Risk: The Fund’s investments in below investment grade fixed-income securities, also known as “junk bonds,” may be subject to greater risks than other fixed-income securities, including being subject to greater levels of interest rate risk, credit/counterparty risk (including a greater risk of default) and liquidity risk. The ability of the issuer to make principal and interest payments is predominantly speculative for below investment grade fixed-income securities.
Credit/Counterparty Risk: Credit/counterparty risk is the risk that the issuer or 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. The Fund will be subject to credit risks with respect to the counterparties of its derivatives transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with OTC derivatives transactions, such as foreign currency transactions. As a result, in instances when the Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its counterparties will not perform their obligations under the transactions and that the Fund will sustain losses or be unable to realize gains.
Derivatives Risk: Derivative instruments (such as those in which the Fund may invest, including options, foreign currency transactions, futures transactions and swap transactions) are subject to changes in the value of the underlying assets or indices on which such instruments are based. There is no guarantee that the use of derivatives will be effective or that suitable transactions will be available. Even a small investment in derivatives may give rise to leverage risk and can have a significant impact on the Fund’s exposure to securities market values, interest rates or currency exchange rates. It is possible that the Fund’s liquid assets may be insufficient to support its obligations under its derivatives positions. The use of derivatives for other than hedging purposes may be considered a speculative activity, and involves greater risks than are involved in hedging. The use of derivatives may cause the Fund to incur losses greater than those that would have occurred had derivatives not been used. The Fund’s use of derivatives such as options, futures, swaps and foreign currency transactions involves other risks, such as the credit risk relating to the other party to a derivative contract (which is greater for forward currency contracts, swaps and other OTC traded derivatives), the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate as expected with changes in the value of relevant assets, rates or indices, liquidity risk, allocation risk and the risk of losing more than the initial margin required to initiate derivatives positions. There is also the risk that the Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The Fund’s derivative counterparties may experience financial difficulties or otherwise be unwilling or unable to honor their obligations, possibly resulting in losses to the Fund.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Interest Rate Risk: Interest rate risk is the risk that the value of the Fund’s investments will fall if interest rates rise. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Interest rate risk generally is greater for funds that invest in fixed-income securities with relatively longer durations than for funds that invest in fixed-income securities with shorter durations. In addition, an economic downturn or period of rising interest rates could adversely affect the markets for these securities and reduce the Fund’s ability to sell them, negatively impacting the performance of the Fund. Potential future changes in government monetary policy may affect the level of interest rates, and the current historically low interest rate environment increases the likelihood of interest rates rising in the future.
15
Fund Summary
Large Investor Risk: Ownership of shares of the Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. Redemptions by a large investor can affect the performance of the Fund, may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase the Fund’s expenses.
Leverage Risk: Use of derivative instruments may involve leverage. Leverage is the risk associated with securities or practices that multiply small index, market or asset-price movements into larger changes in value. The use of leverage increases the impact of gains and losses on the fund’s returns, and may lead to significant losses if investments are not successful.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to greater liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Master Limited Partnership Risk: Investments in MLPs involve risks in addition to the risks associated with investments in securities with similar characteristics, such as common stock of a corporation. Holders of common interests in MLPs typically have limited control and limited rights to vote on matters affecting the MLP. Conflicts of interest may also exist between an MLP’s common interest holders and its general partner or managing member, including those arising from incentive distribution payments. Many interests in MLPs are subject to restrictions on resale and may therefore be less liquid than other investments, which may subject MLP interests to more abrupt or erratic price movements and may increase the difficulty of disposing of such interests at favorable times and prices. The Fund may gain exposure to MLPs through derivatives, including exchange-traded notes (“ETNs”) and swaps, exposing the Fund to the risks of investing in derivatives generally. MLPs often own interests in energy infrastructure properties, including pipelines, or engage in activities related to the energy sector. Accordingly, to the extent the Fund invests in MLPs, it will likely be exposed to risks related to investments in the energy sector. In addition, if an MLP fails to meet the current legal requirements for treatment as a partnership, or if there are changes to the tax laws, an MLP could be treated as a corporation for U.S. federal income tax purposes, obligating the MLP to pay tax at the entity level and significantly reducing the income to the Fund from an investment in an MLP. The Fund’s pursuit of its investment strategy will potentially be limited by the Fund’s intention to qualify for the special tax treatment accorded a registered investment company and its shareholders and could adversely affect the Fund.
Mortgage-Related and Asset-Backed Securities Risk: In addition to the risks associated with investments in fixed-income securities generally (for example, credit, liquidity and valuation risk), mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities as well as prepayment risk, the risk that the securities may be prepaid and result in the reinvestment of the prepaid amounts in securities with lower yields than the prepaid obligations. Conversely, there is a risk that a rise in interest rates will extend the life of a mortgage-related or asset-backed security beyond the expected prepayment time, typically reducing the security’s value, which is called extension risk. The Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. The Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk: Compared to large-capitalization companies, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. As a result, it may be relatively more difficult for the Fund to buy and sell securities of small- and mid-capitalization companies.
Risk/Return Bar Chart and Table
The bar chart and table shown below provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year and life-of-class periods (as applicable) compare to those
16
Fund Summary
of a broad measure of market performance. The S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class A Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class A - Return Before Taxes |
-13.12% |
3.59% |
9.08% |
- |
Return After Taxes on Distributions |
-14.94% |
1.92% |
7.66% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-7.17% |
2.37% |
6.96% |
- |
Class C - Return Before Taxes |
-10.81% |
3.72% |
8.73% |
- |
Class N - Return Before Taxes |
-9.02% |
- |
- |
4.45% |
Class T - Return Before Taxes |
-11.53% |
3.97% |
9.29% |
- |
Class Y - Return Before Taxes |
-9.13% |
4.68% |
9.67%1 |
- |
Bloomberg Barclays U.S. Aggregate Bond Index |
0.01% |
2.52% |
3.48% |
1.88% |
S&P 500® Index |
-4.38% |
8.49% |
13.12% |
9.70% |
1 | Prior to the inception of Class Y shares (12/3/12), performance is that of Class A shares and reflects the higher net expenses of that share class. |
Prior to the stock market close August 31, 2015, the Fund had multiple subadvisers. The performance results shown above for the periods prior to the stock market close August 31, 2015 reflect results achieved by those subadvisers using different investment strategies.
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
17
Fund Summary
Subadviser
Loomis, Sayles & Company, L.P. (“Loomis Sayles”)
Portfolio Managers
Thomas Fahey, Vice President of Loomis Sayles, has served as a co-manager of the Fund since 2015.
Kevin P. Kearns, Vice President of Loomis Sayles, has served as a co-manager of the Fund since 2012.
Maura T. Murphy, CFA®, Vice President of Loomis Sayles, has served as a co-manager of the Fund since 2012.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
18
Fund Summary
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund (this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
19
Fund Summary
Investment Goal
The Fund seeks to provide total return, through a combination of capital appreciation and current income, by investing in green bonds.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class N |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
4.25% |
None |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
None |
None |
Redemption fees |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class N |
Class Y |
Management fees |
0.55% |
0.55% |
0.55% |
Distribution and/or service (12b-1) fees |
0.25% |
0.00% |
0.00% |
Other expenses |
0.95% |
0.57% |
0.84% |
Total annual fund operating expenses |
1.75% |
1.12% |
1.39% |
Fee waiver and/or expense reimbursement1 |
0.79% |
0.46% |
0.68% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
0.96% |
0.66% |
0.71% |
1 | Mirova US LLC (“Mirova US” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 0.95%, 0.65% and 0.70% of the Fund’s average daily net assets for Class A, N and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Adviser will be permitted to recover, on a class-by-class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitation for Class A, N and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
519 |
$ |
879 |
$ |
1,263 |
$ |
2,337 |
Class N |
$ |
67 |
$ |
310 |
$ |
572 |
$ |
1,322 |
Class Y |
$ |
73 |
$ |
373 |
$ |
696 |
$ |
1,610 |
20
Fund Summary
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 46% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its net assets (plus any borrowings made for investment purposes) in “green bonds.” “Green bonds” are bonds and notes all of the proceeds of which are used to finance projects which the Adviser believes will have a positive environmental impact. The Fund invests in securities of issuers located in no fewer than three countries, which may include the U.S. Under normal circumstances, the Fund will invest at least 40% of its assets in securities of issuers located outside the U.S. and the Fund may invest up to 20% of its assets in securities of issuers located in emerging markets. The Adviser considers an issuer to be located outside the U.S. if its head office is located outside the U.S. Emerging markets are economies that the Adviser believes are not generally recognized to be fully developed markets, as measured by gross national income, financial market infrastructure, market capitalization and/or other factors. The Fund may invest up to 20% of its assets, at the time of purchase, in securities rated below investment grade (i.e., none of the three major ratings agencies (Moody’s Investors Services, Inc., Fitch Investor Services, Inc. or S&P Global Ratings) have rated the securities in one of their top four ratings categories) (commonly known as “junk bonds”), or, if unrated, securities determined by the Adviser to be of comparable quality. The Fund may invest in bonds of any maturity and expects that under normal circumstances the modified duration of its portfolio will range between 0 and 10. This flexibility is intended to allow the portfolio managers to reposition the fund to take advantage of significant interest rate movements. Performance is expected to derive primarily from security selection and duration is not expected to be a major source of excess return relative to the benchmark.
The Fund primarily invests in fixed-income securities issued by companies, banks, supranational entities, development banks, agencies, regions and governments. In deciding which securities to buy and sell, the Adviser selects securities based on their financial valuation profile and an analysis of the global environmental, social and governance (“ESG”) impact of the issuer or the projects funded with the securities. Following the evaluation of a security, the portfolio managers value the security based, among other factors, on what they believe is a fair spread for the issue relative to comparable government securities, as well as historical and expected default and recovery rates. The portfolio managers will re-evaluate and possibly sell a security if there is a deterioration of its ESG quality and/or financial rating, among other reasons.
Green bonds are usually issued to finance specific projects intended to generate an environmental benefit while offering potential market return in the same manner as other “conventional” fixed income securities. Beyond fundamental security analysis, the Adviser independently analyzes each green bond it selects for the Fund along the following lines:
| Use of Proceeds: legal documentation specifies that proceeds will be used to finance or refinance projects with a positive environmental impact, such as projects relating to climate change, preservation of resources, pollution prevention or mitigation and biodiversity. |
| Impact on Sustainable Opportunity: quality of the environmental impact of the project is analyzed. Four evaluation levels have been defined with respect to the positive environmental impact: High, Significant, Low or No, and Negative. Only issues that the Adviser believes will have a High or Significant positive environmental impact can qualify. |
| Risk Evaluation: an analysis of the general practices of the issuer and of the management of the environmental and social risks during the life cycle of the projects. |
| Reporting: issuer should provide regular reports on the use of proceeds. This reporting will also be used to reevaluate all other aspects of the Adviser’s analysis as described above. |
The Adviser monitors developments in the global green bond market and may revise the above criteria in the future.
In connection with its principal investment strategies, the Fund may also invest in securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”), municipal securities, mortgage-related and asset-backed securities, debt-linked and equity-linked securities, hybrid instruments and futures, forwards and foreign currency transactions for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments. The Adviser generally attempts to hedge the Fund’s foreign currency risk, though there is no guarantee its attempts to hedge all foreign currency risk will be successful.
The Fund is non-diversified, which means that it may invest a greater percentage of its assets in a particular issuer and may invest in fewer issuers. Because the Fund may invest in the securities of a limited number of issuers, an investment in the Fund may involve a higher degree of risk than would be present in a diversified portfolio.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
21
Fund Summary
Below Investment Grade Fixed-Income Securities Risk: The Fund’s investments in below investment grade fixed-income securities, also known as “junk bonds,” may be subject to greater risks than other fixed-income securities, including being subject to greater levels of interest rate risk, credit/counterparty risk (including a greater risk of default) and liquidity risk. The ability of the issuer to make principal and interest payments is predominantly speculative for below investment grade fixed-income securities.
Credit/Counterparty Risk: Credit/counterparty risk is the risk that the issuer or 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. The Fund will be subject to credit risks with respect to the counterparties of its derivatives transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with over-the-counter (“OTC”) derivatives transactions, such as foreign currency transactions. As a result, in instances when the Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its counterparties will not perform their obligations under the transactions and that the Fund will sustain losses or be unable to realize gains.
Currency Risk: Fluctuations in the exchange rates between different currencies may negatively affect an investment. The Fund may be subject to currency risk because it may invest in currency-related instruments and may invest in securities or other instruments denominated in, or that generate income denominated in, foreign currencies. The Fund may elect not to hedge currency risk, or may hedge such risk imperfectly, which may cause the Fund to incur losses that would not have been incurred had the risk been hedged.
Derivatives Risk: Derivative instruments (such as those in which the Fund may invest, including futures, forward contracts and forward currency transactions) are subject to changes in the value of the underlying assets or indices on which such instruments are based. There is no guarantee that the use of derivatives will be effective or that suitable transactions will be available. Even a small investment in derivatives may give rise to leverage risk and can have a significant impact on the Fund’s exposure to commodities markets, securities market values, interest rates or currency exchange rates. It is possible that the Fund’s liquid assets may be insufficient to support its obligations under its derivatives positions. The use of derivatives for other than hedging purposes may be considered a speculative activity, and involves greater risks than are involved in hedging. The use of derivatives may cause the Fund to incur losses greater than those that would have occurred had derivatives not been used. The Fund’s use of derivatives, such as futures, forward contracts and foreign currency transactions, involves other risks, such as the credit risk relating to the other party to a derivative contract (which is greater for over-the-counter (“OTC”) derivatives), the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate as expected with changes in the value of relevant assets, rates or indices, liquidity risk, allocation risk and the risk of losing more than the initial margin required to initiate derivatives positions. There is also the risk that the Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The Fund’s derivative counterparties may experience financial difficulties or otherwise be unwilling or unable to honor their obligations, possibly resulting in losses to the Fund.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Interest Rate Risk: Interest rate risk is the risk that the value of the Fund’s investments will fall if interest rates rise. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Interest rate risk generally is greater for funds that invest in fixed-income securities with relatively longer durations than for funds that invest in fixed-income securities with shorter durations. In addition, an economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce the Fund’s ability to sell them, negatively impacting the performance of the Fund. Potential future changes in government monetary policy may affect the level of interest rates, and the current historically low interest rate environment, combined with the Federal Reserve Board’s conclusion of its quantitative easing program and recent increases in interest rates, increases the likelihood of interest rates rising in the future.
Large Investor Risk: Ownership of shares of the Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. Redemptions by a large investor can affect the performance of the Fund, may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase the Fund’s expenses.
Leverage Risk: Use of derivative instruments may involve leverage. Leverage is the risk associated with securities or practices that multiply small index, market or asset-price movements into larger changes in value. The use of leverage increases the impact of gains and losses on the fund’s returns, and may lead to significant losses if investments are not successful.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time
22
Fund Summary
and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to greater liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Mortgage-Related and Asset-Backed Securities Risk: In addition to the risks associated with investments in fixed-income securities generally (for example, credit, liquidity and valuation risk), mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities as well as prepayment risk, the risk that the securities may be prepaid and result in the reinvestment of the prepaid amounts in securities with lower yields than the prepaid obligations. Conversely, there is a risk that a rise in interest rates will extend the life of a mortgage-related or asset-backed security beyond the expected prepayment time, typically reducing the security’s value, which is called extension risk. The Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. The Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.
Non-Diversification Risk: Compared with other mutual funds, the Fund may invest a greater percentage of its assets in a particular issuer and may invest in fewer issuers. Therefore, the Fund may have more risk because changes in the value of a single security or the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund’s net asset value.
Sustainable Investment Style Risk: Because the Fund focuses on bonds whose purpose is to finance projects with a positive environmental impact, its universe of investments may be smaller than that of other funds and therefore the Fund may underperform the market as a whole if such investments underperform the market. The Fund may forgo opportunities to gain exposure to certain attractive companies, industries, sectors or countries and it may choose to sell a security when it might otherwise be disadvantageous to do so. In addition, certain green bonds may be dependent on government incentives and subsidies and lack of political support for the financing of projects with a positive environmental impact could negatively impact the performance of the Fund.
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year and life-of-fund periods compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: Fourth Quarter 2018, 0.93% |
Average Annual Total Returns |
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Life of Fund |
Class Y - Return Before Taxes |
0.89% |
1.39% |
Return After Taxes on Distributions |
-0.51% |
0.16% |
Return After Taxes on Distributions and Sale of Fund Shares |
0.52% |
0.53% |
Class A - Return Before Taxes |
-3.62% |
-1.20% |
23
Fund Summary
Average Annual Total Returns |
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Life of Fund |
Class N - Return Before Taxes |
0.93% |
1.47% |
Bloomberg Barclays MSCI Green Bond Index |
2.07% |
2.77% |
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Mirova US LLC (“Mirova US”) (formerly a division within Ostrum Asset Management U.S., LLC)
Portfolio Managers
Marc Briand, has served as portfolio manager of the Fund since 2017.
Charles Portier, has served as portfolio manager of the Fund since 2018.
Each portfolio manager is an employee of Mirova, the parent company of Mirova US, and provides portfolio management through a personnel-sharing arrangement between Mirova and Mirova US.
Purchase and Sale of Fund Shares
Class A Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
24
Fund Summary
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
25
Fund Summary
Mirova Global Sustainable Equity Fund
Investment Goal
The Fund seeks long-term capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.80% |
0.80% |
0.80% |
0.80% |
0.80% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses1 |
0.33% |
0.33% |
0.27% |
0.33%2 |
0.34% |
Total annual fund operating expenses |
1.38% |
2.13% |
1.07% |
1.38% |
1.14% |
Fee waiver and/or expense reimbursement3,4 |
0.18% |
0.18% |
0.15% |
0.18% |
0.19% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.20% |
1.95% |
0.92% |
1.20% |
0.95% |
1 | Other expenses have been restated to reflect current custodian fees for the Fund effective October 1, 2018. |
2 | Other expenses are estimated for the current fiscal year. |
3 | Mirova US LLC (“Mirova US” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.20%, 1.95%, 0.90%, 1.20% and 0.95% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Adviser will be permitted to recover, on a class-by-class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitation for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
4 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
26
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
690 |
$ |
970 |
$ |
1,271 |
$ |
2,122 |
Class C |
$ |
298 |
$ |
650 |
$ |
1,128 |
$ |
2,448 |
Class N |
$ |
94 |
$ |
325 |
$ |
576 |
$ |
1,292 |
Class T |
$ |
369 |
$ |
659 |
$ |
970 |
$ |
1,851 |
Class Y |
$ |
97 |
$ |
343 |
$ |
609 |
$ |
1,369 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
198 |
$ |
650 |
$ |
1,128 |
$ |
2,448 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 20% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its assets in equity securities, which may include common stocks, preferred stocks, depositary receipts and real estate investment trusts (“REITS”). The Fund invests in securities of companies located in no fewer than three countries, which may include the U.S. Under normal circumstances, the Fund will invest at least 40% of its assets in securities of companies located outside the U.S. and the Fund may invest up to 25% of its assets in securities of companies located in emerging markets. Emerging markets are economies that the Adviser believes are not generally recognized to be fully developed markets, as measured by gross national income, financial market infrastructure, market capitalization and/or other factors. The Fund may invest in growth and value companies of any size and may also invest in initial public offerings.
The Adviser applies a thematic approach to investment idea generation, investing in securities of companies that it believes offer solutions to the major transitions that our world is going through. These transitions include (i) demographics, such as an aging population, (ii) environmental issues, such as water scarcity, (iii) technological advances, such as cloud computing, and (iv) governance changes, such as the growing importance of corporate responsibility. From this large universe of solution providers, the Adviser applies detailed fundamental research to select companies that it believes are well managed, are expected to benefit from strong, sustainable competitive advantages, and have demonstrated a solid financial structure while avoiding irresponsible risks. The Adviser seeks to invest in securities that are trading at significant discounts to what the Adviser believes are their intrinsic values. Furthermore, the Adviser seeks to invest in companies with a positive impact on the United Nations’ Sustainable Development Goals (the “SDGs”), while avoiding companies whose activities or products have a negative impact on or create a risk to achieving the SDGs. The Adviser believes that this approach will result in a portfolio with a better environmental and social profile than the broad equities market.
The Adviser may sell a security due a deterioration in the company’s fundamental quality, a change in thematic exposure or impact relative to the SDGs, a controversy alert such as one relating to human rights, or if the Adviser believes the security has little potential for price appreciation or there is greater relative value in other securities in the Fund’s investment universe.
27
Fund Summary
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Currency Risk: Fluctuations in the exchange rates between different currencies may negatively affect an investment. The Fund may be subject to currency risk because it may invest in securities or other instruments denominated in, or that generate income denominated in, foreign currencies. The Fund may elect not to hedge currency risk, or may hedge such risk imperfectly, which may cause the Fund to incur losses that would not have been incurred had the risk been hedged.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Growth stocks are generally more sensitive to market movements than other types of stocks primarily because their stock prices are based heavily on future expectations. If the Adviser’s assessment of the prospects for a company’s growth is wrong, or if the Adviser’s judgment of how other investors will value the company’s growth is wrong, then the price of the company’s stock may fall or not approach the value that the Adviser has placed on it. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Large Investor Risk: Ownership of shares of the Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. Redemptions by a large investor can affect the performance of the Fund, may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase the Fund’s expenses.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk: Compared to large-capitalization companies, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. As a result, it may be relatively more difficult for the Fund to buy and sell securities of small- and mid-capitalization companies.
Sustainable Investment Style Risk: Because the Fund focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (“ESG”) practices, its universe of investments may be smaller than that of other funds and therefore the Fund may underperform the market as a whole if such investments underperform the market. The Fund may forgo opportunities to gain exposure to certain companies, industries, sectors or countries and it may choose to sell a security when it might otherwise be disadvantageous to do so.
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, life-of-fund, and life-of-class periods compare to those of a broad measure of
28
Fund Summary
market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Life of Fund |
Life of Class N |
Class Y - Return Before Taxes |
-6.32% |
7.37% |
- |
Return After Taxes on Distributions |
-7.27% |
6.85% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-3.07% |
5.70% |
- |
Class A - Return Before Taxes |
-11.92% |
4.85% |
- |
Class C - Return Before Taxes |
-8.09% |
6.33% |
- |
Class N - Return Before Taxes |
-6.26% |
- |
4.50% |
Class T - Return Before Taxes |
-8.90% |
6.13% |
- |
MSCI World Index (Net) |
-8.71% |
7.03% |
1.95% |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Mirova US LLC (“Mirova US”) (formerly a division within Ostrum Asset Management U.S., LLC)
Portfolio Managers
Jens Peers, CFA®, has served as co-portfolio manager of the Fund since 2016.
Hua Cheng, CFA®, PhD, has served as co-portfolio manager of the Fund since 2016.
Amber Fairbanks, CFA®, has served as co-portfolio manager of the Fund since 2018.
29
Fund Summary
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the
30
Fund Summary
Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
31
Fund Summary
Mirova International Sustainable Equity Fund
Investment Goal
The Fund seeks long-term capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class N |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
None |
None |
Redemption fees |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class N |
Class Y |
Management fees |
0.80% |
0.80% |
0.80% |
Distribution and/or service (12b-1) fees |
0.25% |
0.00% |
0.00% |
Other expenses1 |
0.94% |
0.84% |
0.94% |
Total annual fund operating expenses |
1.99% |
1.64% |
1.74% |
Fee waiver and/or expense reimbursement2 |
0.79% |
0.74% |
0.79% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.20% |
0.90% |
0.95% |
1 | Other expenses are estimated for the current fiscal year. |
2 | Mirova US LLC (“Mirova US” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.20%, 0.90% and 0.95% of the Fund’s average daily net assets for Class A, N and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Adviser will be permitted to recover, on a class-by-class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitation for Class A, N and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
690 |
$ |
1,091 |
$ |
1,517 |
$ |
2,699 |
Class N |
$ |
92 |
$ |
445 |
$ |
822 |
$ |
1,881 |
Class Y |
$ |
97 |
$ |
471 |
$ |
870 |
$ |
1,986 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.
32
Fund Summary
Investments, Risks and Performance
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its assets in equity securities, which may include common stocks, preferred stocks, depositary receipts and real estate investment trusts (“REITS”). The Fund invests in securities of companies located in no fewer than three countries outside the U.S. Under normal circumstances, the Fund will invest at least 65% of its assets in securities of companies located outside the U.S. and the Fund may invest up to 25% of its assets in securities of companies located in emerging markets (which generally encompasses markets that are not included in the MSCI World Developed Markets Index). The Fund may invest in growth and value companies of any size and may also invest in initial public offerings (“IPOs”).
The Adviser applies a thematic approach to investment idea generation, investing in securities of companies that it believes offer solutions to the major transitions that our world is going through. These transitions include (i) demographics, such as an aging population, (ii) environmental issues, such as water scarcity, (iii) technological advances, such as cloud computing, and (iv) governance changes, such as the growing importance of corporate responsibility. From this large universe of solution providers, the Adviser applies detailed fundamental research to select companies that it believes are well managed, are expected to benefit from strong, sustainable competitive advantages, and have demonstrated a solid financial structure while avoiding irresponsible risks. The Adviser seeks to invest in securities that are trading at significant discounts to what the Adviser believes are their intrinsic values. Furthermore, the Adviser seeks to invest in companies with a positive impact on the United Nations’ Sustainable Development Goals (the “SDGs”), while avoiding companies whose activities or products have a negative impact on or create a risk to achieving the SDGs. The Adviser believes that this approach will result in a portfolio with a better environmental and social profile than the broad equities market.
The Adviser may sell a security due a deterioration in the company’s fundamental quality, a change in thematic exposure or impact relative to the SDGs, a controversy alert such as one relating to human rights, or if the Adviser believes the security has little potential for price appreciation or there is greater relative value in other securities in the Fund’s investment universe.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Currency Risk: Fluctuations in the exchange rates between different currencies may negatively affect an investment. The Fund may be subject to currency risk because it may invest in securities or other instruments denominated in, or that generate income denominated in, foreign currencies. The Fund will not hedge currency risk, which may cause the Fund to incur losses that would not have been incurred had the risk been hedged.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Growth stocks are generally more sensitive to market movements than other types of stocks primarily because their stock prices are based heavily on future expectations. If the Adviser’s assessment of the prospects for a company’s growth is wrong, or if the Adviser’s judgment of how other investors will value the company’s growth is wrong, then the price of the company’s stock may fall or not approach the value that the Adviser has placed on it. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock. Securities of real estate-related companies and REITs in which the Fund may invest may be considered equity securities, thus subjecting the Fund to the risks of investing in equity securities generally.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Large Investor Risk: Ownership of shares of the Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. Redemptions by a large investor can affect the performance of the Fund, may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase the Fund’s expenses.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
33
Fund Summary
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk: Compared to large-capitalization companies, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. As a result, it may be relatively more difficult for the Fund to buy and sell securities of small- and mid-capitalization companies.
Sustainable Investment Style Risk: Because the Fund focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (“ESG”) practices, its universe of investments may be smaller than that of other funds and therefore the Fund may underperform the market as a whole if such investments underperform the market. The Fund may forgo opportunities to gain exposure to certain companies, industries, sectors or countries and it may choose to sell a security when it might otherwise be disadvantageous to do so.
Risk/Return Bar Chart and Table
Because the Fund has not yet 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 performance information provided by the Fund in the future will give some indication of the risks of an investment in the Fund by showing changes in the Fund’s performance from year to year and by showing how the Fund’s average annual returns compare against those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
Management
Investment Adviser
Mirova US LLC (“Mirova US”) (formerly a division within Ostrum Asset Management U.S., LLC)
Portfolio Managers
Jens Peers, CFA®, has served as co-portfolio manager of the Fund since 2018.
Hua Cheng, CFA®, PhD, has served as co-portfolio manager of the Fund since 2018.
Amber Fairbanks, CFA®, has served as a co-portfolio manager of the Fund since 2018.
Purchase and Sale of Fund Shares
Class A Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
34
Fund Summary
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
35
Fund Summary
Investment Goal
The Fund seeks long-term capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.68% |
0.68% |
0.68% |
0.68% |
0.68% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses |
0.20% |
0.20% |
3.11% |
0.20%1 |
0.20% |
Total annual fund operating expenses |
1.13% |
1.88% |
3.79% |
1.13% |
0.88% |
Fee waiver and/or expense reimbursement2,3 |
0.00% |
0.00% |
3.04% |
0.00% |
0.00% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.13% |
1.88% |
0.75% |
1.13% |
0.88% |
1 | Other expenses are estimated for the current fiscal year. |
2 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.30%, 2.05%, 1.00%, 1.30% and 1.05% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
3 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example for Class N is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
36
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
684 |
$ |
913 |
$ |
1,161 |
$ |
1,871 |
Class C |
$ |
291 |
$ |
591 |
$ |
1,016 |
$ |
2,201 |
Class N |
$ |
77 |
$ |
876 |
$ |
1,696 |
$ |
3,832 |
Class T |
$ |
362 |
$ |
600 |
$ |
857 |
$ |
1,590 |
Class Y |
$ |
90 |
$ |
281 |
$ |
488 |
$ |
1,084 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
191 |
$ |
591 |
$ |
1,016 |
$ |
2,201 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 39% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal market conditions, the Fund primarily invests in common stocks of U.S. companies. The Fund generally invests in securities of larger capitalization companies in any industry. Harris Associates L.P. (“Harris Associates”) uses a value investment philosophy in selecting equity securities, including common stocks. This value investment philosophy is based upon the belief that, over time, a company’s stock price converges with the company’s intrinsic value. By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objectives.
Harris Associates uses this value investment philosophy to identify companies that it believes have discounted stock prices compared to what Harris Associates believes are the companies’ intrinsic values. In assessing such companies, Harris Associates looks for the following characteristics, although not all of the companies selected will have these attributes: (1) free cash flows and intelligent investment of excess cash; (2) earnings that are growing and are reasonably predictable; and (3) high level of company management ownership.
Once Harris Associates identifies a stock that it believes is selling at a significant discount to Harris Associates’ estimate of intrinsic value and that the issuer has one or more of the additional qualities mentioned above, Harris Associates generally will consider buying that security for the Fund. Harris Associates usually sells a security when the price approaches its estimated value or the issuer’s fundamentals change. Harris Associates monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. The Fund’s portfolio typically holds 30 to 60 stocks.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Focused Investment Risk: Because the Fund may invest in a small number of industries or securities, it may have more risk because the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund’s net asset value.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
37
Fund Summary
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year, and life-of-class periods compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-12.76% |
5.86% |
13.29% |
- |
Return After Taxes on Distributions |
-14.75% |
4.05% |
12.17% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-6.10% |
4.43% |
11.08% |
- |
Class A - Return Before Taxes |
-18.02% |
4.34% |
12.33% |
- |
Class C - Return Before Taxes |
-14.40% |
4.80% |
12.16% |
- |
Class N - Return Before Taxes |
-12.60% |
- |
- |
0.55% |
Class T - Return Before Taxes |
-15.17% |
5.06% |
12.72% |
- |
S&P 500® Index |
-4.38% |
8.49% |
13.12% |
5.03% |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
Subadviser
Harris Associates L.P. (“Harris Associates”)
38
Fund Summary
Portfolio Managers
William C. Nygren, CFA®, Vice President, Chief Investment Officer, U.S. Equity and portfolio manager of Harris Associates, has served as co-manager of the Fund since 2014.
Kevin G. Grant, CFA®, Co-Chairman, portfolio manager and analyst of Harris Associates, has served as co-manager of the Fund since 2014.
M. Colin Hudson, CFA®, Vice President, portfolio manager and analyst of Harris Associates, has served as co-manager of the Fund since 2014.
Michael J. Mangan, CFA®, CPA, portfolio manager of Harris Associates, served as co-manager of the Fund from 2002 until February 2014 and since August 2014.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
39
Fund Summary
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
40
Fund Summary
Natixis Oakmark International Fund
Investment Goal
The Fund seeks long-term capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.85% |
0.85% |
0.85% |
0.85% |
0.85% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses1 |
0.20% |
0.21% |
0.16% |
0.20%2 |
0.21% |
Total annual fund operating expenses |
1.30% |
2.06% |
1.01% |
1.30% |
1.06% |
Fee waiver and/or expense reimbursement3,4 |
0.00% |
0.00% |
0.03% |
0.00% |
0.00% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.30% |
2.06% |
0.98% |
1.30% |
1.06% |
1 | Other expenses have been restated to reflect current custodian fees for the Fund effective October 1, 2018. |
2 | Other expenses are estimated for the current fiscal year. |
3 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.45%, 2.20%, 1.15%, 1.45% and 1.20% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
4 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example for Class N is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
41
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
700 |
$ |
963 |
$ |
1,247 |
$ |
2,053 |
Class C |
$ |
309 |
$ |
646 |
$ |
1,108 |
$ |
2,390 |
Class N |
$ |
100 |
$ |
319 |
$ |
555 |
$ |
1,234 |
Class T |
$ |
379 |
$ |
652 |
$ |
945 |
$ |
1,779 |
Class Y |
$ |
108 |
$ |
337 |
$ |
585 |
$ |
1,294 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
209 |
$ |
646 |
$ |
1,108 |
$ |
2,390 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 50% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
The Fund invests primarily in a diversified portfolio of common stocks of non-U.S. companies. The Fund may invest in non-U.S. markets throughout the world, including emerging markets. Ordinarily, the Fund will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund’s non-U.S. investments. Although the Fund invests primarily in common stocks of non-U.S. companies it may also invest in the securities of U.S. companies. The Fund may invest in the securities of small-, mid- and large-capitalization companies.
The Fund’s subadviser, Harris Associates L.P. (“Harris Associates”), uses a value investment philosophy in selecting equity securities, such as common stocks, preferred stocks, warrants, and securities convertible into common stocks and preferred stocks. This value investment philosophy is based upon the belief that, over time, a company’s stock price converges with Harris Associates’ estimate of its intrinsic value. By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objective.
Harris Associates uses this value investment philosophy to identify companies that have discounted stock prices compared to what Harris Associates believes are the companies’ intrinsic values. In assessing such companies, Harris Associates looks for the following characteristics, although not all of the companies selected will have these attributes: (1) free cash flows and intelligent investment of excess cash; (2) earnings that are growing and are reasonably predictable; and (3) high level of company management ownership.
Once Harris Associates identifies a stock that it believes is selling at a significant discount to Harris Associates’ estimated intrinsic value and that the issuer has one or more of the additional qualities mentioned above, Harris Associates generally will consider buying that security for the Fund. Harris Associates usually sells a security when the price approaches its estimated value or the issuer’s fundamentals change. Harris Associates monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. The Fund’s portfolio typically holds 30 to 65 stocks.
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Currency Risk: Fluctuations in the exchange rates between different currencies may negatively affect an investment. The Fund may be subject to currency risk because it may invest in currency-related instruments and may invest in securities or other instruments denominated in, or that generate income denominated in, foreign currencies. The Fund may elect not to hedge currency risk, or may hedge such risk imperfectly, which may cause the Fund to incur losses that would not have been incurred had the risk been hedged.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth
42
Fund Summary
stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Focused Investment Risk: Because the Fund may invest in a small number of industries or securities, it may have more risk because the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund’s net asset value.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Large Investor Risk: Ownership of shares of the Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. Redemptions by a large investor can affect the performance of the Fund, may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase the Fund’s expenses.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, life-of-fund, and life-of-class periods compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class A Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Life of Fund |
Life of Class Y/N |
Class A - Return Before Taxes |
-28.51% |
-2.28% |
3.08% |
- |
Return After Taxes on Distributions |
-29.02% |
-2.72% |
2.74% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-16.11% |
-1.51% |
2.61% |
- |
Class C - Return Before Taxes |
-25.47% |
-1.86% |
3.07% |
- |
Class N - Return Before Taxes |
-23.94% |
- |
- |
-8.70% |
Class T - Return Before Taxes |
-26.05% |
-1.61% |
3.51% |
- |
Class Y - Return Before Taxes1 |
-23.93% |
-1.03% |
- |
-8.77% |
MSCI World ex USA Index (Net) |
-14.09% |
0.34% |
3.08% |
-1.47% |
1 | Prior to the inception of Class Y shares (5/1/17), performance is that of Class A shares and reflects the higher net expenses of that share class. |
43
Fund Summary
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year and 5-year periods exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
Subadviser
Harris Associates L.P. (“Harris Associates”)
Portfolio Managers
David G. Herro, CFA®, Deputy Chairman, Chief Investment Officer of International Equity and portfolio manager of Harris Associates, has served as co-portfolio manager of the Fund since 2010.
Michael L. Manelli, CFA®, Vice President, portfolio manager, and analyst of Harris Associates, has served as co-portfolio manager of the Fund since 2016.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
44
Fund Summary
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
45
Fund Summary
Natixis U.S. Equity Opportunities Fund
Investment Goal
The Fund seeks long-term growth of capital.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.75% |
0.75% |
0.75% |
0.75% |
0.75% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses |
0.16% |
0.16% |
12.60% |
0.16%1 |
0.16% |
Total annual fund operating expenses |
1.16% |
1.91% |
13.35% |
1.16% |
0.91% |
Fee waiver and/or expense reimbursement2,3 |
0.00% |
0.00% |
12.59% |
0.00% |
0.00% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.16% |
1.91% |
0.76% |
1.16% |
0.91% |
1 | Other expenses are estimated for the current fiscal year. |
2 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.20%, 1.95%, 0.90%, 1.20% and 0.95% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
3 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example for Class N is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
46
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
686 |
$ |
922 |
$ |
1,177 |
$ |
1,903 |
Class C |
$ |
294 |
$ |
600 |
$ |
1,032 |
$ |
2,233 |
Class N |
$ |
78 |
$ |
2,633 |
$ |
4,780 |
$ |
8,762 |
Class T |
$ |
365 |
$ |
609 |
$ |
872 |
$ |
1,624 |
Class Y |
$ |
93 |
$ |
290 |
$ |
504 |
$ |
1,120 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
194 |
$ |
600 |
$ |
1,032 |
$ |
2,233 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 23% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
The Fund ordinarily invests at least 80% of its net assets (plus any borrowings made for investment purposes) in equity securities, including common stocks and preferred stocks. Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in securities of U.S. issuers. The Fund’s approach to equity investing combines the styles of two subadvisers in selecting securities for each of the Fund’s segments. The segments and their subadvisers are listed below.
| Harris Associates - Large Cap Value segment - Under normal circumstances, the Large Cap Value segment of the Fund managed by Harris Associates L.P. (“Harris Associates”) will invest primarily in the common stocks of larger- capitalization companies that Harris Associates believes are trading at a substantial discount to the company’s “intrinsic value.” By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objectives. Harris Associates usually sells a security when the price approaches its estimated value and monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. In determining whether an issuer is a U.S. or foreign issuer for the Harris Associates – Large Cap Value segment, Harris Associates considers various factors, including its country of domicile, the primary stock exchange on which it trades, the location from which the majority of its revenue comes, and its reporting currency. |
| Loomis Sayles - All Cap Growth segment - Under normal circumstances, the All Cap Growth segment of the Fund, managed by Loomis, Sayles & Company, L.P. (“Loomis Sayles”), will invest primarily in equity securities, including common stocks, preferred stocks, convertible securities and warrants. This segment may invest in companies of any size. The segment normally invests across a wide range of sectors and industries. The segment’s portfolio manager employs a growth style of equity management that emphasizes companies with sustainable competitive advantages, long-term structural growth drivers, attractive cash flow returns on invested capital, and management teams focused on creating long-term value for shareholders. The segment’s portfolio manager aims to invest in companies when they trade at a significant discount to the estimate of intrinsic value. The segment will consider selling a portfolio investment when the portfolio manager believes an unfavorable structural change occurs within a given business or the markets in which it operates, a critical underlying investment assumption is flawed, when a more attractive reward-to-risk opportunity becomes available, when the portfolio manager believes the current price fully reflects intrinsic value, or for other investment reasons which the portfolio manager deems appropriate. Although certain equity securities purchased by the Loomis Sayles – All Cap Growth segment of the Fund may be issued by domestic companies incorporated outside of the United States, Loomis Sayles does not consider these securities to be foreign if they are included in the U.S. equity indices published by S&P Global Ratings or Russell Investments or if the security’s country of risk defined by Bloomberg is the United States. |
Subject to the allocation policy adopted by the Fund’s Board of Trustees, Natixis Advisors, L.P. (“Natixis Advisors”) generally allocates capital invested in the Fund equally (i.e., 50%) between its two segments. Under the allocation policy, Natixis Advisors may also allocate capital away from or towards each segment from time to time and may reallocate capital between the segments. Each subadviser manages its segment of the Fund’s assets in accordance with its distinct investment style and strategy.
The Fund may also:
| Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). |
| Invest in convertible preferred stock and convertible debt securities. |
| Invest in real estate investment trusts (“REITs”). |
47
Fund Summary
| Invest in fixed-income securities, including U.S. government bonds and below-investment grade fixed-income securities (commonly known as “junk bonds”). |
| Hold securities of foreign issuers traded over-the-counter or on foreign exchanges, including securities in emerging markets and related currency hedging transactions. |
| Invest in equity securities of Canadian issuers. |
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Allocation Risk: The Fund’s investment performance depends on how its assets are allocated. The allocation, as set forth above, may not be optimal in every market condition. You could lose money on your investment in the Fund as a result of this allocation.
Credit Risk: Credit risk 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.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Growth stocks are generally more sensitive to market movements than other types of stocks primarily because their stock prices are based heavily on future expectations. If the subadviser’s assessment of the prospects for a company’s growth is wrong, or if the subadviser’s judgment of how other investors will value the company’s growth is wrong, then the price of the company’s stock may fall or not approach the value that the subadviser has placed on it. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to greater liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk: Compared to large-capitalization companies, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. As a result, it may be relatively more difficult for the Fund to buy and sell securities of small- and mid-capitalization companies.
48
Fund Summary
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year, and life-of-class periods compare to those of two broad measures of market performance. The Russell 1000® Index is an unmanaged index that measures the performance of the large-capitalization segment of the U.S. equity universe. A subset of the Russell 3000® Index, it includes approximately 1,000 of the largest stocks based on a combination of market capitalization and current index membership. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-6.24% |
9.85% |
15.39% |
- |
Return After Taxes on Distributions |
-8.28% |
7.39% |
13.75% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-2.28% |
7.28% |
12.70% |
- |
Class A - Return Before Taxes |
-11.85% |
8.28% |
14.43% |
- |
Class C - Return Before Taxes |
-7.97% |
8.76% |
14.25% |
- |
Class N - Return Before Taxes |
-6.11% |
- |
- |
5.67% |
Class T - Return Before Taxes |
-8.82% |
9.02% |
14.81% |
- |
S&P 500® Index |
-4.38% |
8.49% |
13.12% |
5.03% |
Russell 1000® Index |
-4.78% |
8.21% |
13.28% |
4.68% |
The Fund uses multiple subadvisers. The performance results shown above reflect results achieved by previous subadvisers using different investment strategies.
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
49
Fund Summary
Subadvisers
Harris Associates L.P. (“Harris Associates”)
Loomis, Sayles & Company, L.P.
Portfolio Managers
Harris Associates
William C. Nygren, CFA®, Vice President, Chief Investment Officer, U.S. Equity and portfolio manager of Harris Associates, has served as co-manager of the Harris Associates Large Cap Value segment of the Fund since 2014.
Kevin G. Grant, CFA®, Co-Chairman, portfolio manager and analyst of Harris Associates, has served as co-manager of the Harris Associates Large Cap Value segment of the Fund since 2014.
M. Colin Hudson, CFA®, Vice President, portfolio manager and analyst of Harris Associates, has served as co-manager of the Harris Associates Large Cap Value segment of the Fund since 2014.
Michael J. Mangan, CFA®, CPA, portfolio manager of Harris Associates, served as co-manager of the Harris Associates Large Cap Value segment of the Fund from 2005 until February 2014 and since August 2014.
Loomis Sayles
Aziz V. Hamzaogullari, CFA®, Chief Investment Officer and founder of the Growth Equities Strategies Team at Loomis Sayles, has served as a manager of the Fund since 2011 and of the Loomis Sayles All Cap Growth segment of the Fund since 2014.
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
50
Fund Summary
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
51
Fund Summary
Vaughan Nelson Small Cap Value Fund
Investment Goal
The Fund seeks capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.90% |
0.90% |
0.90% |
0.90% |
0.90% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses |
0.23% |
0.22% |
14.27% |
0.23%1 |
0.22% |
Acquired fund fees and expenses2 |
0.12% |
0.12% |
0.12% |
0.12% |
0.12% |
Total annual fund operating expenses |
1.50% |
2.24% |
15.29% |
1.50% |
1.24% |
Fee waiver and/or expense reimbursement3,4 |
0.00% |
0.00% |
14.21% |
0.00% |
0.00% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.50% |
2.24% |
1.08% |
1.50% |
1.24% |
1 | Other expenses are estimated for the current fiscal year. |
2 | The expense information shown in the table above differs from the expense information disclosed in the Fund’s financial highlights table because the financial highlights table reflects the operating expenses of the Fund and does not include acquired fund fees and expenses. |
3 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.45%, 2.20%, 1.15%, 1.45% and 1.20% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, substitute dividend expenses on securities sold short, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
4 | Natixis Advisors, L.P. (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example for Class N is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
52
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
719 |
$ |
1,022 |
$ |
1,346 |
$ |
2,263 |
Class C |
$ |
327 |
$ |
700 |
$ |
1,200 |
$ |
2,575 |
Class N |
$ |
110 |
$ |
2,969 |
$ |
5,270 |
$ |
9,245 |
Class T |
$ |
399 |
$ |
712 |
$ |
1,048 |
$ |
1,996 |
Class Y |
$ |
126 |
$ |
393 |
$ |
681 |
$ |
1,500 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
227 |
$ |
700 |
$ |
1,200 |
$ |
2,575 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 70% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
The Fund normally will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in the equity securities, including common stocks and preferred stocks, of “small-capitalization companies.” Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, real estate investment trusts (“REITs”) or other trusts and other similar securities representing direct or indirect ownership interests in business organizations. Currently, the Fund defines a small-capitalization company to be one whose market capitalization, at the time of purchase, either falls within the capitalization range of the Russell 2000® Value Index or is $3.5 billion or less. While the market capitalization range for the Russell 2000® Value Index fluctuates, at December 31, 2018, it was $23.9 million to $5.3 billion. The Fund may, however, invest in companies with large-capitalizations. When opportunities present themselves, the Fund may establish short positions in specific equity securities or indices. The Fund may establish short positions in specific equity securities or indices where the subadviser believes the intrinsic value is materially below the current market value, including where a company is competitively disadvantaged or has deteriorating end markets, or in times of economic or cyclical slowdowns and recessions, or rising corporate interest rates.
Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”) invests in small-capitalization companies with a focus on those companies meeting Vaughan Nelson’s return expectations. Vaughan Nelson uses a bottom-up value oriented investment process in constructing the Fund’s portfolio. Vaughan Nelson seeks companies with the following characteristics, although not all of the companies selected will have these attributes:
| Companies earning a positive return on capital with stable-to-improving returns. |
| Companies valued at a discount to their asset value. |
| Companies with an attractive and sustainable dividend level. |
In selecting investments for the Fund, Vaughan Nelson generally employs the following strategies:
| Value-driven investment philosophy that selects stocks selling at a relatively low value based on discounted cash flow models. Vaughan Nelson selects companies that it believes are out of favor or misunderstood. |
| Vaughan Nelson starts with an investment universe of 5,000 securities. Vaughan Nelson then uses value-driven screens to create a research universe of companies with market capitalizations of at least $100 million. |
| Vaughan Nelson uses fundamental analysis to construct a portfolio of 60 to 80 securities that, in the opinion of Vaughan Nelson, is made up of quality companies with the potential to provide significant increases in share price over a three year period. |
| Vaughan Nelson will generally sell a security when it reaches Vaughan Nelson’s price target or when the issuer shows a change in financial condition, competitive pressures, poor management decisions or internal or external forces reducing future expected returns from those expected at the time of investment. |
The Fund may also:
| Invest in convertible preferred stock and convertible debt securities. |
| Invest in foreign securities, including emerging market securities. |
| Invest in REITs. |
| Invest in securities offered in initial public offerings (“IPOs”). |
53
Fund Summary
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Convertible Securities Risk: Convertible securities have investment characteristics of both equity and debt securities. Investments in convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk and credit risk. Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to many of the same risks as investing in common stock. The Fund may also be forced to convert a convertible security at an inopportune time, which may decrease the Fund’s return.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock. Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, REITs or other trusts and other similar securities representing direct or indirect ownership interests in business organizations.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Short Sale Risk: Short sales can increase the volatility of the Fund and may lower the Fund’s return or result in losses, which potentially may be unlimited. If the Fund is unable to borrow securities in connection with a short sale at an advantageous time or price, the Fund may be limited in its ability to pursue its short sale strategy or may incur losses. The use of short sales also exposes the Fund to leverage risk.
Small-Capitalization Companies Risk: Small-capitalization companies are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of larger companies. Stocks of small-capitalization companies may therefore be more vulnerable to adverse developments than those of larger companies.
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, ten-year and life-of-class periods (as applicable) compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
54
Fund Summary
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
Total Returns for Class Y Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-14.61% |
3.64% |
11.44% |
- |
Return After Taxes on Distributions |
-19.30% |
0.09% |
8.07% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-5.87% |
2.66% |
9.06% |
- |
Class A - Return Before Taxes |
-19.73% |
2.16% |
10.50% |
- |
Class C - Return Before Taxes |
-16.06% |
2.59% |
10.32% |
|
Class N - Return Before Taxes |
-14.48% |
- |
- |
-5.09% |
Class T - Return Before Taxes |
-16.97% |
2.86% |
10.87% |
- |
Russell 2000® Value Index |
-12.86% |
3.61% |
10.40% |
-4.06% |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
Subadviser
Vaughan Nelson Investment Management, L.P.
Portfolio Managers
Stephen Davis, CFA®, Portfolio Manager of Vaughan Nelson, has served as co-manager of the Fund since 2019.
Chris D. Wallis, CFA®, Chief Executive Officer and Senior Portfolio Manager of Vaughan Nelson, has served as co-manager of the Fund since 2004.
55
Fund Summary
Purchase and Sale of Fund Shares
The Vaughan Nelson Small Cap Value Fund is closed to new investors; however, in its sole discretion, Vaughan Nelson may permit an investor in another Vaughan Nelson-managed fund or product that follows the same investment strategy as the Fund to transfer assets from that fund or product into the Fund. Natixis Advisors may determine to reopen the Fund for investment at any time without notice to shareholders. For more information please see the section “How To Purchase Shares” in the Prospectus.
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
56
Fund Summary
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO
64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the
Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
57
Fund Summary
Vaughan Nelson Value Opportunity Fund
Investment Goal
The Fund seeks long-term capital appreciation.
Fund Fees & Expenses
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the Natixis Fund Complex. More information about these and other discounts is available from your financial professional and in the section “How Sales Charges Are Calculated” on page 83 of the Prospectus, in Appendix A to the Prospectus and on page 138 in the section “Reduced Sales Charges” of the Statement of Additional Information (“SAI”).
Shareholder Fees
(fees paid directly from your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
5.75% |
None |
None |
2.50% |
None |
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
None* |
1.00% |
None |
None |
None |
Redemption fees |
None |
None |
None |
None |
None |
* | A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment) |
Class A |
Class C |
Class N |
Class T |
Class Y |
Management fees |
0.80% |
0.80% |
0.80% |
0.80% |
0.80% |
Distribution and/or service (12b-1) fees |
0.25% |
1.00% |
0.00% |
0.25% |
0.00% |
Other expenses |
0.19% |
0.18% |
0.08% |
0.19%1 |
0.19% |
Acquired fund fees and expenses2 |
0.21% |
0.21% |
0.21% |
0.21% |
0.21% |
Total annual fund operating expenses |
1.45% |
2.19% |
1.09% |
1.45% |
1.20% |
Fee waiver and/or expense reimbursement3 |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
1.45% |
2.19% |
1.09% |
1.45% |
1.20% |
1 | Other expenses are estimated for the current fiscal year. |
2 | The expense information shown in the table above differs from the expense information disclosed in the Fund’s financial highlights table because the financial highlights table reflects the operating expenses of the Fund and does not include acquired fund fees and expenses. |
3 | The Fund’s investment adviser has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.40%, 2.15%, 1.10%, 1.40% and 1.15% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below the applicable expense limitations for Class A, C, N, T and Y shares. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. |
Example
This example 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 and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
58
Fund Summary
If shares are redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class A |
$ |
714 |
$ |
1,007 |
$ |
1,322 |
$ |
2,210 |
Class C |
$ |
322 |
$ |
685 |
$ |
1,175 |
$ |
2,524 |
Class N |
$ |
111 |
$ |
347 |
$ |
601 |
$ |
1,329 |
Class T |
$ |
394 |
$ |
697 |
$ |
1,022 |
$ |
1,942 |
Class Y |
$ |
122 |
$ |
381 |
$ |
660 |
$ |
1,455 |
If shares are not redeemed: |
1 year |
3 years |
5 years |
10 years | ||||
Class C |
$ |
222 |
$ |
685 |
$ |
1,175 |
$ |
2,524 |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes for you if your Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During its most recently ended fiscal year, the Fund’s portfolio turnover rate was 44% of the average value of its portfolio.
Investments, Risks and Performance
Principal Investment Strategies
Under normal market conditions, the Fund will invest primarily in companies that, at the time of purchase, have market capitalizations either within the capitalization range of the Russell Midcap® Value Index, an unmanaged index that measures the performance of companies with lower price-to-book ratios and lower forecasted growth values within the broader Russell Midcap® Index, or of $15 billion or less. While the market capitalization range for the Russell Midcap® Value Index fluctuates, at December 31, 2018, it was $472.5 million to $33.6 billion. However, the Fund does not have any market capitalization limits and may invest in companies with smaller or larger capitalizations. Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, real estate investment trusts (“REITs”) or other trusts and similar securities representing direct or indirect ownership interests in business organizations.
Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”) invests in medium-capitalization companies with a focus on those companies meeting Vaughan Nelson’s return expectations. Vaughan Nelson uses a bottom-up value oriented investment process in constructing the Fund’s portfolio. Vaughan Nelson seeks companies with the following characteristics, although not all of the companies selected will have these attributes:
| Companies earning a positive return on capital with stable-to-improving returns. |
| Companies valued at a discount to their asset value. |
| Companies with an attractive and sustainable dividend level. |
In selecting investments for the Fund, Vaughan Nelson generally employs the following strategies:
| Vaughan Nelson employs a value-driven investment philosophy that selects stocks selling at a relatively low value based on business fundamentals, economic margin analysis and discounted cash flow models. Vaughan Nelson selects companies that it believes are out of favor or misunderstood. |
| Vaughan Nelson narrows the investment universe by using value-driven screens to create a research universe of companies with market capitalizations between $1 billion and $20 billion. |
| Vaughan Nelson uses fundamental analysis to construct a portfolio that, in the opinion of Vaughan Nelson, is made up of quality companies with the potential to provide significant increases in share price over a three year period. |
| Vaughan Nelson will generally sell a security when it reaches Vaughan Nelson’s price target or when the issuer shows a change in financial condition, competitive pressures, poor management decisions or internal or external forces reducing future expected returns from those expected at the time of investment. |
The Fund may also:
| Invest in convertible preferred stock and convertible debt securities. |
| Invest in foreign securities, including emerging markets securities. |
| Invest in other investment companies, to the extent permitted by the Investment Company Act of 1940. |
| Invest in REITs. |
| Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). |
59
Fund Summary
Principal Investment Risks
The principal risks of investing in the Fund are summarized below. The Fund does not represent a complete investment program. You may lose money by investing in the Fund.
Emerging Markets Risk: In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Equity Securities Risk: The value of the Fund’s investments in equity securities could be subject to unpredictable declines in the value of individual securities and periods of below-average performance in individual securities or in the equity market as a whole. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Rule 144A securities may be less liquid than other equity securities. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock. Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, REITs or other trusts and other similar securities representing direct or indirect ownership interests in business organizations.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit/counterparty and information risks. The Fund’s investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks. Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity.
Investments in Other Investment Companies Risk: The Fund will indirectly bear the management, service and other fees of any other investment companies, including exchange-traded funds, in which it invests in addition to its own expenses.
Liquidity Risk: Liquidity risk is the risk that the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in the Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to greater liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Liquidity issues may also make it difficult to value the Fund’s investments.
Management Risk: A strategy used by the Fund’s portfolio managers may fail to produce the intended result.
Market/Issuer Risk: The market value of the Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of the Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
REITs Risk: Investments in the real estate industry, including REITs, are particularly sensitive to economic downturns and are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or mortgage loans held by the REIT. REITs are also subject to default and prepayment risk. Many REITs are highly leveraged, increasing their risk. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk: Compared to large-capitalization companies, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources. Stocks of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. As a result, it may be relatively more difficult for the Fund to buy and sell securities of small- and mid-capitalization companies.
Risk/Return Bar Chart and Table
The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s average annual returns for the one-year, five-year, life-of-fund and life-of-class periods (as applicable) compare to those of a broad measure of market performance. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance information is available online at im.natixis.com and/or by calling the Fund toll-free at 800-225-5478.
The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund’s shares. A sales charge will reduce your return.
60
Fund Summary
Total Returns for Class Y Shares
|
Highest Quarterly Return: |
Average Annual Total Returns |
|
|
|
|
(for the periods ended December 31, 2018) |
Past 1 Year |
Past 5 Years |
Past 10 Years |
Life of Class N |
Class Y - Return Before Taxes |
-15.85% |
1.66% |
10.62% |
- |
Return After Taxes on Distributions |
-17.62% |
0.46% |
9.61% |
- |
Return After Taxes on Distributions and Sale of Fund Shares |
-8.08% |
1.29% |
8.75% |
- |
Class A - Return Before Taxes |
-20.92% |
0.20% |
9.68% |
- |
Class C - Return Before Taxes |
-17.47% |
0.64% |
9.52% |
- |
Class N - Return Before Taxes |
-15.78% |
1.73% |
- |
5.56% |
Class T - Return Before Taxes |
-18.20% |
0.88% |
10.06% |
- |
Russell MidCap® Value Index |
-12.29% |
5.44% |
13.03% |
7.74% |
The Fund did not have Class T shares outstanding during the periods shown above. The returns of Class T shares would have been substantially similar to the returns of the Fund’s other share classes because they would have been invested in the same portfolio of securities and would only differ to the extent the other share classes did not have the same expenses. Performance of Class T shares shown above is that of Class A shares, which have the same expenses as Class T shares, restated to reflect the different sales load applicable to Class T shares.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-advantaged arrangements, such as 401(k) plans, qualified plans, education savings accounts, such as 529 plans, or individual retirement accounts. The after-tax returns are shown for only one class of the Fund. The Return After Taxes on Distributions and Sale of Fund Shares for the 1-year period exceeds the Return Before Taxes due to an assumed tax benefit from losses on a sale of Fund shares at the end of the measurement period. After-tax returns for the other classes of the Fund will vary. Index performance reflects no deduction for fees, expenses or taxes.
Management
Investment Adviser
Natixis Advisors, L.P. (“Natixis Advisors”)
Subadviser
Vaughan Nelson Investment Management, L.P.
Portfolio Managers
Dennis G. Alff, CFA®, Senior Portfolio Manager of Vaughan Nelson, has served as co-manager of the Fund since 2008.
Chad D. Fargason, Senior Portfolio Manager of Vaughan Nelson, has served as co-manager of the Fund since 2013.
Chris D. Wallis, CFA®, Chief Executive Officer and Senior Portfolio Manager of Vaughan Nelson, has served as co-manager of the Fund since 2008.
61
Fund Summary
Purchase and Sale of Fund Shares
Class A and C Shares
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 |
$ |
50 |
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 (direct accounts, not held through intermediary) |
$ |
1,000 |
$ |
50 |
Coverdell Education Savings Accounts using the Natixis Funds’ prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
50 |
There is no initial or subsequent investment minimum for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Class N Shares
Class N shares of the Fund are subject to a $1,000,000 initial investment minimum. There is no initial investment minimum for Certain Retirement Plans and funds of funds that are distributed by Natixis Distribution, L.P. (the “Distributor”). Sub-accounts held within an omnibus account, where the omnibus account has at least $1,000,000, are not required to meet the investment minimum. There is no subsequent investment minimum for these shares. In its sole discretion, the Distributor may waive the investment minimum requirement for accounts as to which the Distributor reasonably believes will have enough assets to exceed the investment minimum requirement within a relatively short period of time following the establishment date of such accounts in Class N. If, after two years, an account’s value does not exceed the investment minimum requirement, the Distributor and the Fund reserve the right to redeem such account.
Class T Shares
Class T shares of the Fund are not currently available for purchase.
Class T shares of the Fund may only be purchased by investors who are investing through an authorized third party, such as a broker-dealer or other financial intermediary, that has entered into a selling agreement with Natixis Distribution, L.P. Investors may not hold Class T shares directly with the Fund. Class T shares are subject to a minimum initial investment of $2,500 and a minimum subsequent investment of $50. Not all financial intermediaries make Class T shares available to their clients.
Class Y Shares
Class Y shares of the Fund are generally subject to a minimum initial investment of $100,000 and a minimum subsequent investment of $50, except there is no minimum initial or subsequent investment for:
Fee Based Programs (such as wrap accounts) where an advisory fee is paid to the broker-dealer or other financial intermediary. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees.
Certain Retirement Plans. Please consult your retirement plan administrator to determine if your retirement plan is subject to additional or different
conditions or fees.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Clients of a Registered Investment Adviser where the Registered Investment Adviser receives an advisory, management or consulting fee.
Fund Trustees, former Fund trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund
(this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned) and Natixis affiliate employee benefit plans.
At the discretion of Natixis Advisors, L.P., clients of Natixis Advisors, L.P. and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Due to operational limitations at your financial intermediary, certain fee based programs, retirement plans, individual retirement
accounts and accounts of registered investment advisers may be subject to the investment minimums described
above.
The Fund’s shares are available for purchase and are redeemable on any business day through your
investment dealer, directly from the Fund by writing to the
62
Fund Summary
Fund at Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579, by exchange, by wire, by internet at im.natixis.com (certain restrictions may apply), through the Automated Clearing House system, or, in the case of redemptions, by telephone at 800-225-5478 or by the Systematic Withdrawal Plan.
Tax Information
Fund distributions are generally taxable to you as ordinary income or capital gains, except for distributions to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax law generally. Investments in such tax-advantaged plans will generally be taxed only upon withdrawal of monies from the tax-advantaged arrangement.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
63
Investment Goals, Strategies and Risks
More About Goals and Strategies
Loomis Sayles High Income Fund
Investment Goal
The Fund seeks high current income plus the opportunity for capital appreciation to produce a high total return. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal market conditions, the Fund will invest at least 80% of its assets in below investment grade fixed-income securities (commonly known as “junk bonds”). Below investment grade fixed-income securities are rated below investment grade quality (i.e., none of the three major ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investors Services, Inc. (“Fitch”) or S&P Global Ratings (“S&P”)), have rated the securities in one of its top four rating categories) or, if the security is unrated, are determined by the Adviser to be of comparable quality. There is no minimum rating for the securities in which the Fund may invest. The Fund may invest up to 30% of its assets in U.S. dollar-denominated foreign fixed-income securities, including those in emerging markets. Although certain securities purchased by the Fund may be issued by domestic companies incorporated outside of the United States, the Adviser does not consider these securities to be foreign if the issuer is included in the U.S. fixed-income indices published by Bloomberg Barclays.
The Adviser performs its own extensive credit analysis to determine the creditworthiness and potential for capital appreciation of a security. The Fund’s management minimizes both market timing and interest rate forecasting. Instead, it uses a strategy based on gaining a thorough understanding of industry and company dynamics as well as individual security characteristics such as issuer debt and debt maturity schedules, earnings prospects, responsiveness to changes in interest rates, experience and perceived strength of management, borrowing requirements and liquidation value, market price in relation to cash flow, interest and dividends.
In deciding which securities to buy and sell, the Adviser will consider, among other things, the financial strength of the issuer, current interest rates, current valuations, the Adviser’s expectations regarding future changes in interest rates and comparisons of the level of risk associated with particular investments with the Adviser’s expectations concerning the potential return of those investments.
In selecting investments for the Fund, the Adviser utilizes the skills of its in-house team of more than 30 research analysts to cover a broad universe of industries, companies and markets. The Fund’s portfolio managers take advantage of these extensive resources to identify securities that meet the Fund’s investment criteria. The Adviser employs a selection strategy that focuses on a value-driven, bottom-up approach to identify securities that provide an opportunity for both generous yields and capital appreciation. The Adviser analyzes an individual company’s potential for positive financial news to determine if it has growth potential. Examples of positive financial news include an upward turn in the business cycle, improvement in cash flows, rising profits or the awarding of new contracts. The Adviser emphasizes in-depth credit analysis, appreciation potential and diversification in its bond selection. Each bond is evaluated to assess the ability of its issuer to pay interest and, ultimately, principal (which helps the Fund generate an ongoing flow of income). The Adviser also assesses a bond’s relation to market conditions within its industry and favors bonds whose prices may benefit from positive business developments. The Adviser seeks to diversify the Fund’s holdings to reduce the inherent risk in below investment grade fixed-income securities.
In connection with its principal investment strategies, the Fund may also invest in structured notes, collateralized loan obligations, zero-coupon securities, pay-in-kind securities, convertible securities, securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”), and futures, forward contracts and swaps (including credit default swaps) for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments.
Loomis Sayles Investment Grade Bond Fund
Investment Goal
The Fund seeks high total investment return through a combination of current income and capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in investment grade fixed-income securities (for example, bonds and other investments that the Adviser believes have similar economic characteristics, such as notes, debentures and loans). “Investment grade” securities are those securities that are rated in one of the top four categories at the time of purchase by at least one of the three major rating agencies — Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investor Services, Inc. (“Fitch”) or S&P Global Ratings (“S&P”) or, if unrated, are determined by the Adviser to be of comparable quality. Although the Fund invests primarily in investment grade fixed-income securities, it may invest up to 15% of its assets in below investment grade fixed-income securities (also known as “junk bonds”). There is no minimum rating for the securities in which the Fund may invest. The Fund may invest in fixed-income securities of any maturity.
64
Investment Goals, Strategies and Risks
In deciding which securities to buy and sell, the Adviser will consider, among other things, the financial strength of the issuer, current interest rates, current valuations, the Adviser’s expectations regarding future changes in interest rates and comparisons of the level of risk associated with particular investments with the Adviser’s expectations concerning the potential return of those investments.
Three themes typically drive the Fund’s investment approach. First, the Adviser generally seeks fixed-income securities of issuers whose credit profiles it believes are improving. Second, the Fund may invest significantly in securities the prices of which the Adviser believes are more sensitive to events related to the underlying issuer than to changes in general interest rates or overall market default rates. The Adviser believes that the Fund may generate positive returns by having a portion of the Fund’s assets invested in non-market-related securities, rather than by relying primarily on changes in interest rates to produce returns for the Fund. Third, the Adviser analyzes different sectors of the economy and differences in the yields (“spreads”) of various fixed-income securities in an effort to find securities that it believes may produce attractive returns for the Fund in comparison to their risk. The Adviser generally prefers securities that are protected against calls (early redemption by the issuer).
In connection with its principal investment strategies, the Fund may invest up to 30% of its assets in U.S. dollar-denominated foreign securities, including emerging markets securities. The Fund may also invest in U.S. dollar-denominated obligations of supranational entities without limit (e.g., the World Bank). Although certain securities purchased by the Fund may be issued by domestic companies incorporated outside of the United States, the Adviser does not consider these securities to be foreign if the issuer is included in the U.S. fixed-income indices published by Bloomberg Barclays. The Fund may also invest in corporate securities, U.S. government securities, commercial paper, zero-coupon securities, collateralized loan obligations, mortgage-backed securities, including mortgage dollar rolls, stripped mortgage-backed securities and collateralized mortgage obligations and other asset-backed securities, when-issued securities, convertible securities, securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”) and structured notes. The Fund may also invest in futures, forward contracts and swaps (including credit default swaps) for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments.
In accordance with applicable SEC requirements, the Fund will notify shareholders prior to any change to the 80% policy discussed above taking effect.
Loomis Sayles Multi-Asset Income Fund
Investment Goal
The Fund seeks current income with a secondary objective of capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
The Fund intends to pursue its investment goal by utilizing a flexible investment approach that allocates investments across a broad range of income-producing securities, while employing risk management strategies to mitigate downside risk. The Fund may invest in equity securities (including common stocks, preferred stocks, depositary receipts, warrants, securities convertible into common or preferred stocks and real estate investment trusts (“REITS”)). The Fund may also invest up to 25% of its assets in publicly traded master limited partnerships (“MLPs”). The Fund may invest in fixed-income securities (including exchange-traded notes, structured notes, corporate debt, foreign and U.S. government and agency fixed-income securities, bank loans, adjustable floating rate loans and other floating rate debt instruments issued by U.S. and non-U.S. corporations and other business entities and convertible debt securities). The Fund may invest in below investment grade fixed-income securities (commonly known as “junk bonds”). Below investment grade fixed-income securities are rated below investment grade quality (i.e., none of the three major ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Fitch Investors Services, Inc. (“Fitch”) or Standard and Poor’s Ratings Group (“S&P”)), have rated the securities in one of its top four rating categories) or, if unrated, are determined by Loomis Sayles & Company, L.P. (“Loomis Sayles” or the “Subadviser”) to be of comparable quality. There is no minimum rating for the fixed-income securities in which the Fund may invest. The Fund may invest in securities of any maturity or market capitalization. The Fund may invest in foreign securities including those in emerging markets.
The Fund may shift its assets among various types of income-producing securities based upon the Subadviser’s evaluation of changing market conditions, yield expectations and security-specific opportunities. Changes to the Fund’s asset allocations are based on several criteria, including global market cycles, global economic regimes and the relative attractiveness of particular asset categories. Under normal market conditions, the Fund will typically invest between 20% and 80% of its assets in fixed-income securities and between 30% and 70% in equity securities. However, the Fund is not required to allocate its investments among asset classes in any fixed proportion and may invest up to 100% of its assets in either equity securities or fixed-income securities. A sudden change in market conditions could cause the Subadviser to substantially change the allocation of the Fund’s assets over a relatively short period of time.
In selecting individual investments for the Fund, the Subadviser considers factors including, but not limited to, economic and business cycles as well as top-down sector valuations and fundamental, bottom-up security valuations. In deciding which equity securities to buy and sell, the Subadviser seeks to identify securities that it believes are, among other things, attractively valued based on the Subadviser’s estimate of what a security is actually worth, with additional consideration given to income-producing securities. The Subadviser may utilize quantitative screening methods based on fundamental factors to identify issuers which may pay or grow dividends.
In deciding which fixed-income securities to buy and sell, the Subadviser may consider a number of factors including, but not limited to, diverging business cycles among countries and regions, the stability and volatility of a country’s bond markets, the financial strength of the issuer, current interest rates, the Subadviser’s expectations regarding general trends in interest rates and currency considerations. The Subadviser will also consider how purchasing or selling
65
Investment Goals, Strategies and Risks
a security would impact the overall portfolio’s risk profile (for example, its sensitivity to currency risk, interest rate risk and sector-specific risk) and potential return (income and capital gains).
When constructing the Fund’s portfolio the Subadviser will use risk management tools in an effort to manage risk on an ongoing basis. These tools include the use of models that evaluate risk correlation to various market factors or asset classes, scenario analysis to measure the impact of certain market events and measuring the volatility of certain sectors and securities to understand the level of risk being contributed by these sectors and securities. The portfolio management team expects to actively evaluate each investment idea and to decide to buy or sell an investment based upon: (i) its return potential; (ii) its level of risk; and (iii) its fit within the team’s overall macro strategy, with the goal of continually optimizing the Fund’s portfolio.
The Fund may also:
Invest in collateralized loan obligations and mortgage-related and asset-backed securities
Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). Rule 144A securities are privately offered securities and can be resold only to certain qualified institutional buyers.
Engage in over-the-counter (“OTC”) options, swap contracts (including credit default swaps) and currency transactions as well as futures transactions and other derivatives for hedging and investment purposes. The Fund may take both long and short positions in derivatives.
Engage in active and frequent trading of securities and other instruments. Effects of frequent trading may include high transaction costs, which may lower the Fund’s returns, and realization of short-term capital gains, distributions of which are taxable to shareholders who are individuals as ordinary income. Trading costs and tax effects associated with frequent trading may adversely affect the Fund’s performance.
Investment Goal
The Fund seeks to provide total return, through a combination of capital appreciation and current income, by investing in green bonds. The investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its net assets (plus any borrowings made for investment purposes) in “green bonds.” “Green bonds” are bonds and notes all of the proceeds of which are used to finance projects which the Adviser believes will have a positive environmental impact. The Fund invests in securities of issuers located in no fewer than three countries, which may include the U.S. Under normal circumstances, the Fund will invest at least 40% of its assets in securities of issuers located outside the U.S. and the Fund may invest up to 20% of its assets in securities of issuers located in emerging markets. The Adviser considers an issuer to be located outside the U.S. if its head office is located outside the U.S. Emerging markets are economies that the Adviser believes are not generally recognized to be fully developed markets, as measured by gross national income, financial market infrastructure, market capitalization and/or other factors. The Fund may invest up to 20% of its assets, at the time of purchase, in securities rated below investment grade (i.e., none of the three major ratings agencies (Moody’s Investors Services, Inc., Fitch Investor Services, Inc. or S&P Global Ratings) have rated the securities in one of their top four ratings categories) (commonly known as “junk bonds”), or, if unrated, securities determined by the Adviser to be of comparable quality. The Fund may invest in bonds of any maturity and expects that under normal circumstances the modified duration of its portfolio will range between 0 and 10. This flexibility is intended to allow the portfolio managers to reposition the fund to take advantage of significant interest rate movements. Performance is expected to derive primarily from security selection and duration is not expected to be a major source of excess return relative to the benchmark.
The Fund primarily invests in fixed-income securities issued by companies, banks, supranational entities, development banks, agencies, regions and governments. In deciding which securities to buy and sell, the Adviser selects securities based on their financial valuation profile and an analysis of the global environmental, social and governance (“ESG”) impact of the issuer or the projects funded with the securities. Following the evaluation of a security, the portfolio managers value the security based, among other factors, on what they believe is a fair spread for the issue relative to comparable government securities, as well as historical and expected default and recovery rates. The portfolio managers will re-evaluate and possibly sell a security if there is a deterioration of its ESG quality and/or financial rating, among other reasons.
Green bonds are usually issued to finance specific projects intended to generate an environmental benefit while offering potential market return in the same manner as other “conventional” fixed income securities. Beyond fundamental security analysis, the Adviser independently analyzes each green bond it selects for the Fund along the following lines:
| Use of Proceeds: legal documentation specifies that proceeds will be used to finance or refinance projects with a positive environmental impact, such as projects relating to climate change, preservation of resources, pollution prevention or mitigation and biodiversity. |
| Impact on Sustainable Opportunity: quality of the environmental impact of the project is analyzed. Four evaluation levels have been defined with respect to the positive environmental impact: High, Significant, Low or No, and Negative. Only issues that the Adviser believes will have a High or Significant positive environmental impact can qualify. |
| Risk Evaluation: an analysis of the general practices of the issuer and of the management of the environmental and social risks during the life cycle of the projects. |
66
Investment Goals, Strategies and Risks
| Reporting: issuer should provide regular reports on the use of proceeds. This reporting will also be used to reevaluate all other aspects of the Adviser’s analysis as described above. |
The Adviser monitors developments in the global green bond market and may revise the above criteria in the future.
In connection with its principal investment strategies, the Fund may also invest in securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”), municipal securities, mortgage-related and asset-backed securities, debt-linked and equity-linked securities, hybrid instruments and futures, forwards and foreign currency transactions for hedging and investment purposes. Except as provided above or as required by applicable law, the Fund is not limited in the percentage of its assets that it may invest in these instruments. The Adviser generally attempts to hedge the Fund’s foreign currency risk, though there is no guarantee its attempts to hedge all foreign currency risk will be successful.
The Fund is non-diversified, which means that it may invest a greater percentage of its assets in a particular issuer and may invest in fewer issuers. Because the Fund may invest in the securities of a limited number of issuers, an investment in the Fund may involve a higher degree of risk than would be present in a diversified portfolio.
Mirova Global Sustainable Equity Fund
Investment Goal
The Fund seeks long-term capital appreciation. The investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its assets in equity securities, which may include common stocks, preferred stocks, depositary receipts and real estate investment trusts (“REITS”). The Fund invests in securities of companies located in no fewer than three countries, which may include the U.S. Under normal circumstances, the Fund will invest at least 40% of its assets in securities of companies located outside the U.S. and the Fund may invest up to 25% of its assets in securities of companies located in emerging markets. Emerging markets are economies that the Adviser believes are not generally recognized to be fully developed markets, as measured by gross national income, financial market infrastructure, market capitalization and/or other factors. The Fund may invest in growth and value companies of any size and may also invest in initial public offerings.
The Adviser applies a thematic approach to investment idea generation, investing in securities of companies that it believes offer solutions to the major transitions that our world is going through. These transitions include (i) demographics, such as an aging population, (ii) environmental issues, such as water scarcity, (iii) technological advances, such as cloud computing, and (iv) governance changes, such as the growing importance of corporate responsibility. From this large universe of solution providers, the Adviser applies detailed fundamental research to select companies that it believes are well managed, are expected to benefit from strong, sustainable competitive advantages, and have demonstrated a solid financial structure while avoiding irresponsible risks. The Adviser seeks to invest in securities that are trading at significant discounts to what the Adviser believes are their intrinsic values. Furthermore, the Adviser seeks to invest in companies with a positive impact on the United Nations’ Sustainable Development Goals (the “SDGs”), while avoiding companies whose activities or products have a negative impact on or create a risk to achieving the SDGs. The Adviser believes that this approach will result in a portfolio with a better environmental and social profile than the broad equities market.
The Adviser may sell a security due a deterioration in the company’s fundamental quality, a change in thematic exposure or impact relative to the SDGs, a controversy alert such as one relating to human rights, or if the Adviser believes the security has little potential for price appreciation or there is greater relative value in other securities in the Fund’s investment universe.
Mirova International Sustainable Equity Fund
Investment Goal
The Fund seeks long-term capital appreciation. The investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal circumstances, the Fund invests at least 80% of its assets in equity securities, which may include common stocks, preferred stocks, depositary receipts and real estate investment trusts (“REITS”). The Fund invests in securities of companies located in no fewer than three countries outside the U.S. Under normal circumstances, the Fund will invest at least 65% of its assets in securities of companies located outside the U.S. and the Fund may invest up to 25% of its assets in securities of companies located in emerging markets (which generally encompasses markets that are not included in the MSCI World Developed Markets Index). The Fund may invest in growth and value companies of any size and may also invest in initial public offerings (“IPOs”).
The Adviser applies a thematic approach to investment idea generation, investing in securities of companies that it believes offer solutions to the major transitions that our world is going through. These transitions include (i) demographics, such as an aging population, (ii) environmental issues, such as water scarcity, (iii) technological advances, such as cloud computing, and (iv) governance changes, such as the growing importance of corporate responsibility. From this large universe of solution providers, the Adviser applies detailed fundamental research to select companies that it believes are well managed, are
67
Investment Goals, Strategies and Risks
expected to benefit from strong, sustainable competitive advantages, and have demonstrated a solid financial structure while avoiding irresponsible risks. The Adviser seeks to invest in securities that are trading at significant discounts to what the Adviser believes are their intrinsic values. Furthermore, the Adviser seeks to invest in companies with a positive impact on the United Nations’ Sustainable Development Goals (the “SDGs”), while avoiding companies whose activities or products have a negative impact on or create a risk to achieving the SDGs. The Adviser believes that this approach will result in a portfolio with a better environmental and social profile than the broad equities market.
The Adviser may sell a security due a deterioration in the company’s fundamental quality, a change in thematic exposure or impact relative to the SDGs, a controversy alert such as one relating to human rights, or if the Adviser believes the security has little potential for price appreciation or there is greater relative value in other securities in the Fund’s investment universe.
Investment Goal
The Fund seeks long-term capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal market conditions, the Fund primarily invests in common stocks of U.S. companies. The Fund generally invests in securities of larger capitalization companies in any industry. Harris Associates L.P. (“Harris Associates”) uses a value investment philosophy in selecting equity securities, including common stocks. This value investment philosophy is based upon the belief that, over time, a company’s stock price converges with the company’s intrinsic value. By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objectives.
Harris Associates uses this value investment philosophy to identify companies that it believes have discounted stock prices compared to what Harris Associates believes are the companies’ intrinsic values. In assessing such companies, Harris Associates looks for the following characteristics, although not all of the companies selected will have these attributes: (1) free cash flows and intelligent investment of excess cash; (2) earnings that are growing and are reasonably predictable; and (3) high level of company management ownership.
Once Harris Associates identifies a stock that it believes is selling at a significant discount to Harris Associates’ estimate of intrinsic value and that the issuer has one or more of the additional qualities mentioned above, Harris Associates generally will consider buying that security for the Fund. Harris Associates usually sells a security when the price approaches its estimated value or the issuer’s fundamentals change. Harris Associates monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. The Fund’s portfolio typically holds 30 to 60 stocks.
Natixis Oakmark International Fund
Investment Goal
The Fund seeks long-term capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
The Fund invests primarily in a diversified portfolio of common stocks of non-U.S. companies. The Fund may invest in non-U.S. markets throughout the world, including emerging markets. Ordinarily, the Fund will invest in the securities of at least five countries outside the U.S. There are no geographic limits on the Fund’s non-U.S. investments. Although the Fund invests primarily in common stocks of non-U.S. companies it may also invest in the securities of U.S. companies. The Fund may invest in the securities of small-, mid- and large-capitalization companies.
The Fund’s subadviser, Harris Associates L.P. (“Harris Associates”), uses a value investment philosophy in selecting equity securities, such as common stocks, preferred stocks, warrants, and securities convertible into common stocks and preferred stocks. This value investment philosophy is based upon the belief that, over time, a company’s stock price converges with Harris Associates’ estimate of its intrinsic value. By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objective.
Harris Associates uses this value investment philosophy to identify companies that have discounted stock prices compared to what Harris Associates believes are the companies’ intrinsic values. In assessing such companies, Harris Associates looks for the following characteristics, although not all of the companies selected will have these attributes: (1) free cash flows and intelligent investment of excess cash; (2) earnings that are growing and are reasonably predictable; and (3) high level of company management ownership.
Once Harris Associates identifies a stock that it believes is selling at a significant discount to Harris Associates’ estimated intrinsic value and that the issuer has one or more of the additional qualities mentioned above, Harris Associates generally will consider buying that security for the Fund. Harris Associates usually sells a security when the price approaches its estimated value or the issuer’s fundamentals change. Harris Associates monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. The Fund’s portfolio typically holds 30 to 65 stocks.
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Natixis U.S. Equity Opportunities Fund
Investment Goal
The Fund seeks long-term growth of capital. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
The Fund ordinarily invests at least 80% of its net assets (plus any borrowings made for investment purposes) in equity securities, including common stocks and preferred stocks. Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in securities of U.S. issuers. The Fund’s approach to equity investing combines the styles of two subadvisers in selecting securities for each of the Fund’s segments. The segments and their subadvisers are listed below.
| Harris Associates - Large Cap Value segment - Under normal circumstances, the Large Cap Value segment of the Fund managed by Harris Associates L.P. (“Harris Associates”) will invest primarily in the common stocks of larger- capitalization companies that Harris Associates believes are trading at a substantial discount to the company’s “intrinsic value.” By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objectives. Harris Associates usually sells a security when the price approaches its estimated value and monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals. In determining whether an issuer is a U.S. or foreign issuer for the Harris Associates – Large Cap Value segment, Harris Associates considers various factors, including its country of domicile, the primary stock exchange on which it trades, the location from which the majority of its revenue comes, and its reporting currency. |
| Loomis Sayles - All Cap Growth segment - Under normal circumstances, the All Cap Growth segment of the Fund, managed by Loomis, Sayles & Company, L.P. (“Loomis Sayles”), will invest primarily in equity securities, including common stocks, preferred stocks, convertible securities and warrants. This segment may invest in companies of any size. The segment normally invests across a wide range of sectors and industries. The segment’s portfolio manager employs a growth style of equity management that emphasizes companies with sustainable competitive advantages, long-term structural growth drivers, attractive cash flow returns on invested capital, and management teams focused on creating long-term value for shareholders. The segment’s portfolio manager aims to invest in companies when they trade at a significant discount to the estimate of intrinsic value. The segment will consider selling a portfolio investment when the portfolio manager believes an unfavorable structural change occurs within a given business or the markets in which it operates, a critical underlying investment assumption is flawed, when a more attractive reward-to-risk opportunity becomes available, when the portfolio manager believes the current price fully reflects intrinsic value, or for other investment reasons which the portfolio manager deems appropriate. Although certain equity securities purchased by the Loomis Sayles – All Cap Growth segment of the Fund may be issued by domestic companies incorporated outside of the United States, Loomis Sayles does not consider these securities to be foreign if they are included in the U.S. equity indices published by S&P Global Ratings or Russell Investments or if the security’s country of risk defined by Bloomberg is the United States. |
Subject to the allocation policy adopted by the Fund’s Board of Trustees, Natixis Advisors, L.P. (“Natixis Advisors”) generally allocates capital invested in the Fund equally (i.e., 50%) between its two segments. Under the allocation policy, Natixis Advisors may also allocate capital away from or towards each segment from time to time and may reallocate capital between the segments. Each subadviser manages its segment of the Fund’s assets in accordance with its distinct investment style and strategy.
The Fund may also:
| Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). |
| Invest in convertible preferred stock and convertible debt securities. |
| Invest in real estate investment trusts (“REITs”). |
| Invest in fixed-income securities, including U.S. government bonds and below-investment grade fixed-income securities (commonly known as “junk bonds”). |
| Hold securities of foreign issuers traded over-the-counter or on foreign exchanges, including securities in emerging markets and related currency hedging transactions. |
| Invest in equity securities of Canadian issuers. |
Natixis U.S. Equity Opportunities Fund -
More on Investment Strategies
The Fund’s portfolio is divided into two different segments managed by the two subadvisers set forth below. These subadvisers pursue the Fund’s overall goal by employing the strategies and techniques described below.
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Harris Associates - Large Cap Value segment
Under normal circumstances, the Large Cap Value segment of the Fund managed by Harris Associates will invest primarily in the common stocks of larger- capitalization companies that Harris Associates believes are trading at a substantial discount to the company’s “intrinsic value.” By “intrinsic value,” Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below what Harris Associates believes is a company’s intrinsic value presents the best opportunity to achieve the Fund’s investment objectives. Harris Associates usually sells a security when the price approaches its estimated value and monitors each holding and adjusts its price targets as warranted to reflect changes in the issuer’s fundamentals.
Loomis Sayles - All Cap Growth segment
Under normal circumstances, the All Cap Growth segment of the Fund, managed by Loomis Sayles, will invest primarily in equity securities, including common stocks, preferred stocks, convertible securities and warrants. This segment may invest in companies of any size. The segment normally invests across a wide range of sectors and industries. The segment’s portfolio manager employs a growth style of equity management that emphasizes companies with sustainable competitive advantages, long-term structural growth drivers and attractive cash flow returns on invested capital and management teams focused on creating long-term value for shareholders. The segment’s portfolio manager aims to invest in companies when they trade at a significant discount to the estimate of intrinsic value. The segment will consider selling a portfolio investment when the portfolio manager believes an unfavorable structural change occurs within a given business or the markets in which it operates, a critical underlying investment assumption is flawed, when a more attractive reward-to-risk opportunity becomes available, when the portfolio manager believes the current price fully reflects intrinsic value, or for other investment reasons which the portfolio manager deems appropriate.
Vaughan Nelson Small Cap Value Fund
Investment Goal
The Fund seeks capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
The Fund normally will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in the equity securities, including common stocks and preferred stocks, of “small-capitalization companies.” Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, real estate investment trusts (“REITs”) or other trusts and other similar securities representing direct or indirect ownership interests in business organizations. Currently, the Fund defines a small-capitalization company to be one whose market capitalization, at the time of purchase, either falls within the capitalization range of the Russell 2000® Value Index or is $3.5 billion or less. While the market capitalization range for the Russell 2000® Value Index fluctuates, at December 31, 2018, it was $23.9 million to $5.3 billion. The Fund may, however, invest in companies with large-capitalizations. When opportunities present themselves, the Fund may establish short positions in specific equity securities or indices. The Fund may establish short positions in specific equity securities or indices where the subadviser believes the intrinsic value is materially below the current market value, including where a company is competitively disadvantaged or has deteriorating end markets, or in times of economic or cyclical slowdowns and recessions, or rising corporate interest rates.
Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”) invests in small-capitalization companies with a focus on those companies meeting Vaughan Nelson’s return expectations. Vaughan Nelson uses a bottom-up value oriented investment process in constructing the Fund’s portfolio. Vaughan Nelson seeks companies with the following characteristics, although not all of the companies selected will have these attributes:
| Companies earning a positive return on capital with stable-to-improving returns. |
| Companies valued at a discount to their asset value. |
| Companies with an attractive and sustainable dividend level. |
In selecting investments for the Fund, Vaughan Nelson generally employs the following strategies:
| Value-driven investment philosophy that selects stocks selling at a relatively low value based on discounted cash flow models. Vaughan Nelson selects companies that it believes are out of favor or misunderstood. |
| Vaughan Nelson starts with an investment universe of 5,000 securities. Vaughan Nelson then uses value-driven screens to create a research universe of companies with market capitalizations of at least $100 million. |
| Vaughan Nelson uses fundamental analysis to construct a portfolio of 60 to 80 securities that, in the opinion of Vaughan Nelson, is made up of quality companies with the potential to provide significant increases in share price over a three year period. |
| Vaughan Nelson will generally sell a security when it reaches Vaughan Nelson’s price target or when the issuer shows a change in financial condition, competitive pressures, poor management decisions or internal or external forces reducing future expected returns from those expected at the time of investment. |
The Fund may also:
| Invest in convertible preferred stock and convertible debt securities. |
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| Invest in foreign securities, including emerging market securities. |
| Invest in REITs. |
| Invest in securities offered in initial public offerings (“IPOs”). |
Vaughan Nelson Value Opportunity Fund
Investment Goal
The Fund seeks long-term capital appreciation. The Fund’s investment goal may be changed without shareholder approval. The Fund will provide 60 days’ prior written notice to shareholders before changing the investment goal.
Principal Investment Strategies
Under normal market conditions, the Fund will invest primarily in companies that, at the time of purchase, have market capitalizations either within the capitalization range of the Russell Midcap® Value Index, an unmanaged index that measures the performance of companies with lower price-to-book ratios and lower forecasted growth values within the broader Russell Midcap® Index, or of $15 billion or less. While the market capitalization range for the Russell Midcap® Value Index fluctuates, at December 31, 2018, it was $472.5 million to $33.6 billion. However, the Fund does not have any market capitalization limits and may invest in companies with smaller or larger capitalizations. Equity securities may take the form of stock in corporations, limited partnership interests, interests in limited liability companies, real estate investment trusts (“REITs”) or other trusts and similar securities representing direct or indirect ownership interests in business organizations.
Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”) invests in medium-capitalization companies with a focus on those companies meeting Vaughan Nelson’s return expectations. Vaughan Nelson uses a bottom-up value oriented investment process in constructing the Fund’s portfolio. Vaughan Nelson seeks companies with the following characteristics, although not all of the companies selected will have these attributes:
| Companies earning a positive return on capital with stable-to-improving returns. |
| Companies valued at a discount to their asset value. |
| Companies with an attractive and sustainable dividend level. |
In selecting investments for the Fund, Vaughan Nelson generally employs the following strategies:
| Vaughan Nelson employs a value-driven investment philosophy that selects stocks selling at a relatively low value based on business fundamentals, economic margin analysis and discounted cash flow models. Vaughan Nelson selects companies that it believes are out of favor or misunderstood. |
| Vaughan Nelson narrows the investment universe by using value-driven screens to create a research universe of companies with market capitalizations between $1 billion and $20 billion. |
| Vaughan Nelson uses fundamental analysis to construct a portfolio that, in the opinion of Vaughan Nelson, is made up of quality companies with the potential to provide significant increases in share price over a three year period. |
| Vaughan Nelson will generally sell a security when it reaches Vaughan Nelson’s price target or when the issuer shows a change in financial condition, competitive pressures, poor management decisions or internal or external forces reducing future expected returns from those expected at the time of investment. |
The Fund may also:
| Invest in convertible preferred stock and convertible debt securities. |
| Invest in foreign securities, including emerging markets securities. |
| Invest in other investment companies, to the extent permitted by the Investment Company Act of 1940. |
| Invest in REITs. |
| Invest in securities offered in initial public offerings (“IPOs”) and securities issued pursuant to Rule 144A under the Securities Act of 1933 (“Rule 144A securities”). |
Temporary Defensive Measures
Temporary defensive measures may be used by a Fund during adverse economic, market, political or other conditions. In this event, a Fund may hold any portion of its assets in cash (U.S. dollars, foreign currencies or multinational currency units) and/or invest in money market instruments or high-quality debt securities as it deems appropriate. A Fund may miss certain investment opportunities if it uses defensive strategies and thus may not achieve its investment goal.
Percentage Investment Limitations
The percentage limitations set forth in this Prospectus and the SAI apply at the time an investment is made and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment.
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Portfolio Holdings
A description of each Fund’s policies and procedures with respect to the disclosure of each Fund’s portfolio securities
is available in the section “Portfolio Holdings Information” in the SAI.
A “snapshot” of each Fund’s investments may be found in its annual and semiannual reports. In addition, a list of each Fund’s full portfolio holdings, which is updated monthly after an aging period of at least 30 days (15 days for Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund and 10 business days after quarter-end for Natixis Oakmark Fund, Natixis Oakmark International Fund and Natixis U.S. Equity Opportunities Fund), is available on the Funds’ website at im.natixis.com/us/fund-documents. These holdings will remain accessible on the website until each Fund files its respective Form N-CSR or Form N-PORT with the SEC for the period that includes the date of the information. In addition, a list of each Fund’s (excluding Natixis Oakmark Fund, Natixis Oakmark International Fund, and Natixis U.S. Equity Opportunities Fund) top 10 holdings as of the month-end is generally available within 7 business days after the month-end on the Fund’s website at im.natixis.com/holdings (click fund name).
Cybersecurity and Technology
The Funds, their service providers, and other market participants increasingly depend on complex information technology and communications systems, which are subject to a number of different threats and risks that could adversely affect the Funds and their shareholders. These risks include, among others, theft, misuse, and improper release of confidential or highly sensitive information relating to the Funds and their shareholders, as well as compromises or failures to systems, networks, devices and applications relating to the operations of the Funds and their service providers. Power outages, natural disasters, equipment malfunctions and processing errors that threaten these systems, as well as market events that occur at a pace that overloads these systems, may also disrupt business operations or impact critical data. Cybersecurity and other operational and technology issues may result in financial losses to the Funds and their shareholders, impede business transactions, violate privacy and other laws, subject the Funds to certain regulatory penalties and reputational damage, and increase compliance costs and expenses. Although the Funds have developed processes, risk management systems and business continuity plans designed to reduce these risks, the Funds do not directly control the cybersecurity defenses, operational and technology plans and systems of their service providers, financial intermediaries and companies in which they invest or with which they do business. The Funds and their shareholders could be negatively impacted as a result. Similar types of cybersecurity risks also are present for issuers of securities in which the Funds invest, which could result in material adverse consequences for such issuers, and may cause the Funds’ investment in such securities to lose value.
This section provides more information on principal risks that may affect a Fund’s portfolio, as well as information on additional risks a Fund may be subject to because of its investments or practices. In seeking to achieve their investment goals, the Funds may also invest in various types of securities and engage in various investment practices which are not a principal focus of the Funds and therefore are not described in this Prospectus. These securities and investment practices and their associated risks are discussed in the Funds’ SAI, which is available without charge upon request (see back cover).
Allocation Risk
A Fund’s investment performance depends on how its assets are allocated. The allocation may not be optimal in every market condition. You could lose money on your investment in the Fund as a result of this allocation.
Below Investment Grade Fixed-Income Securities Risk
Below investment grade fixed-income securities, also known as “junk bonds,” are rated below investment grade quality and may be considered speculative with respect to the issuer’s continuing ability to make principal and interest payments. To be considered rated below investment grade quality, a security must not have been rated by any of the three major rating agencies (Moody’s Investors Service, Inc., Fitch Investor Services, Inc. or S&P Global Ratings) in one of their respective top four rating categories at the time a Fund acquires the security or, if the security is unrated, the portfolio managers have determined it to be of comparable quality. Analysis of the creditworthiness of issuers of below investment grade fixed-income securities may be more complex than for issuers of higher-quality debt securities, and a Fund’s ability to achieve its investment objectives may, to the extent the Fund invests in below investment grade fixed-income securities, be more dependent upon the portfolio managers’ credit analysis than would be the case if the Fund were investing in higher-quality securities. 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 present elements of danger with respect to payments of principal or interest. Below investment grade fixed-income securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-grade securities. Yields on below investment grade fixed-income securities will fluctuate. If the issuer of below investment grade fixed-income securities defaults, a Fund may incur additional expenses to seek recovery.
The secondary markets in which below investment-grade 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 below investment-grade security when necessary to meet liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the issuer, and could adversely affect and cause large fluctuations in the net asset value (“NAV”) of a Fund’s shares. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield securities generally. It is reasonable to expect that any adverse economic conditions could disrupt the market for below
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investment-grade securities, have an adverse impact on the value of such securities and adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon. New laws and proposed new laws may adversely impact the market for below investment-grade fixed-income securities.
Convertible Securities Risk
Convertible securities have investment characteristics of both equity and debt securities. Investments in convertible securities are subject to the usual risks associated with debt instruments, such as interest rate risk and credit risk. Convertible securities also react to changes in the value of the common stock into which they convert, and are thus subject to many of the same risks as investing in common stock. The Fund may also be forced to convert a convertible security at an inopportune time, which may decrease the Fund’s return.
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. Below investment-grade 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.
Credit/Counterparty Risk
Credit/counterparty risk is the risk that the issuer or 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. A Fund will be subject to credit/counterparty risk with respect to the counterparties of its derivatives transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with OTC derivatives transactions, such as foreign currency transactions. As a result, in instances when a Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its counterparties will not perform their obligations under the transactions and that the Fund will sustain losses or be unable to realize gains. Additionally, when a Fund enters into cleared derivatives transactions, the Fund will be subject to the credit risk of the clearing house and clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivatives transactions.
Currency Risk
Fluctuations in the exchange rates between different currencies may negatively affect an investment. A Fund may be subject to currency risk because it may invest in currency-related instruments and/or securities or other instruments denominated in, or that generate income denominated in, foreign currencies. The market for some or all currencies may from time to time have low trading volume and become illiquid, which may prevent a Fund from effecting a position or from promptly liquidating unfavorable positions in such markets, thus subjecting the Fund to substantial losses. A Fund may elect not to hedge currency risk, or may hedge such risk imperfectly, which may cause the Fund to incur losses that would not have been incurred had the risk been hedged.
Derivatives Risk
As described herein and in the SAI, the use of derivative instruments involves special risks. Derivatives are financial contracts whose value depends upon or is derived from the value of an underlying asset, reference rate or index. There is no guarantee that the use of derivatives will be effective or that suitable transactions will be available. Even a small investment in derivatives may give rise to leverage risk and can have a significant impact on a Fund’s exposure to securities market values, interest rates or currency exchange rates. It is possible that a Fund’s liquid assets may be insufficient to support its obligations under its derivatives position. A Fund’s use of derivatives, such as futures and forward contracts, involves other risks, such as the credit/counterparty risk relating to a broker, futures commission merchant or other party to a derivative contract (which is greater for OTC derivatives), the risk of difficulties in pricing and valuation, the risk that changes in the value of a derivative may not correlate as expected with relevant assets, rates or indices, liquidity risk and the risk of losing more than the initial margin required to initiate derivatives positions. There is also the risk that a Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The use of derivatives may cause a Fund to incur losses greater than those which would have occurred had derivatives not been used. Losses resulting from the use of derivatives will reduce a Fund’s net asset value, and possibly income. It is possible that a Fund’s liquid assets may be insufficient to support its obligations under its derivatives positions. To the extent that a Fund uses a derivative for purposes other than as a hedge, or if a 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. When used, derivatives may affect the amount, timing or character of distributions payable to, and thus taxes payable by, shareholders. Similarly, for accounting and performance reporting purposes, income and gain characteristics may be different than if the Fund held the underlying securities or other assets directly.
Emerging Markets Risk
In addition to the risks of investing in foreign investments generally, emerging markets investments are subject to greater risks arising from political or economic instability, nationalization or confiscatory taxation, currency exchange restrictions, sanctions by the U.S. government and an issuer’s unwillingness or inability to make principal or interest payments on its obligations. Emerging markets companies may be smaller and have shorter operating histories than companies in developed markets.
Economic and Political Risks. Emerging market countries often experience instability in their political and economic structures and have less market depth, infrastructure, capitalization and regulatory oversight than more developed markets. Government actions could have a significant impact on the economic conditions in such countries, which in turn would affect the value and liquidity of the assets of a Fund invested in emerging market securities. Specific risks
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that could decrease a Fund’s return include seizure of a company’s assets, restrictions imposed on payments as a result of blockages on foreign currency exchanges and unanticipated social or political occurrences.
The ability of the government of an emerging market country to make timely payments on its debt obligations will depend on many factors, including the extent of its reserves, fluctuations in interest rates and access to international credit and investments. A country that has non-diversified exports or relies on certain key imports will be subject to greater fluctuations in the pricing of those commodities. Failure to generate sufficient earnings from foreign trade will make it difficult for an emerging market country to service its foreign debt.
Companies trading in developing securities markets are generally smaller and have shorter operating histories than companies trading in developed markets. Foreign investors may be required to register the proceeds of sales. Settlement of securities transactions in emerging markets may be subject to risk of loss and may be delayed more often than transactions settled in the United States. Disruptions resulting from social and political factors may cause the securities markets to close. If extended closings were to occur, the liquidity and value of a Fund’s assets invested in corporate debt obligations of emerging market companies would decline.
Investment Controls; Repatriation. Foreign investment in emerging market country debt securities is restricted or controlled to varying degrees. These restrictions may at times limit or preclude foreign investment in certain emerging market country debt securities. Certain emerging market countries require government approval of investments by foreign persons, limit the amount of investments by foreign persons in a particular issuer, limit investments by foreign persons only to a specific class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of the countries and/or impose additional taxes or controls on foreign investors or currency transactions. Certain emerging market countries may also restrict investment opportunities in issuers in industries deemed important to national interests.
Emerging market countries may require governmental approval for the repatriation of investment income, capital or proceeds of sale of securities by foreign investors. In addition, if a deterioration occurs in an emerging market country’s balance of payments, the country could impose temporary restrictions on foreign capital remittances. A Fund could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to a Fund of any restrictions on investments. Investing in local markets in emerging market countries may require a Fund to adopt special procedures, seek local governmental approvals or take other actions, each of which may involve additional costs to a Fund.
Equity Securities Risk
The value of your investment in a Fund is based on the market value (or price) of the securities the Fund holds. You may lose money on your investment due to unpredictable declines in the value of individual securities and/or periods of below-average performance in individual securities, industries or in the equity market as a whole. This may impact a Fund’s performance and may result in higher portfolio turnover, which may increase the tax liability to taxable shareholders and the expenses incurred by the Fund. The market value of a security can change daily due to political, economic and other events that affect the securities markets generally, as well as those that affect particular companies or governments. These price movements, sometimes called volatility, will vary depending on the types of securities a Fund owns and the markets in which they trade. Historically, the equity markets have moved in cycles, and the value of a Fund’s equity securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response to such trends and developments. Securities issued in initial public offerings tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. Rule 144A securities may be less liquid than other equity securities. Small-capitalization and emerging growth companies may be subject to more abrupt price movements, limited markets and less liquidity than larger, more established companies, which could adversely affect the value of the Fund’s portfolio.Growth stocks are generally more sensitive to market movements than other types of stocks primarily because their stock prices are based heavily on future expectations. If the Adviser’s assessment of the prospects for a company’s growth is wrong, or if the Adviser’s judgment of how other investors will value the company’s growth is wrong, then the price of the company’s stock may fall or not approach the value that the Adviser has placed on it. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks also present the risk that their lower valuations fairly reflect their business prospects and that investors will not agree that the stocks represent favorable investment opportunities, and they may fall out of favor with investors and underperform growth stocks during any given period. Common stocks represent an equity or ownership interest in an issuer. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s bonds generally take precedence over the claims of those who own preferred stock or common stock.
Focused Investment Risk
Because a Fund may invest in a small number of industries or securities, it may have more risk because the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund’s net asset value.
Foreign Securities Risk
Foreign securities risk is the risk associated with investments in issuers located in foreign countries. A Fund’s investments in foreign securities may experience more rapid and extreme changes in value than investments in securities of U.S. issuers. 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. Many countries, including developed nations and emerging markets, are faced with concerns about high government debt levels, credit rating downgrades, the future of the euro as a common currency, possible government debt restructuring and related issues, all of which may cause the value of a Fund’s non-U.S. investments to decline. Nationalization, expropriation or confiscatory taxation, currency blockage, the imposition of sanctions by the U.S. government,
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political changes or diplomatic developments may also cause the value of a Fund’s non-U.S. investments to decline. When imposed, foreign withholding or other taxes reduce a Fund’s return on foreign securities. In the event of nationalization, expropriation or other confiscation, a Fund could lose its entire foreign investment. Investments in emerging markets may be subject to these risks to a greater extent than those in more developed markets and securities of developed market companies that conduct substantial business in emerging markets may also be subject to greater risk. These risks also apply to securities of foreign issuers traded in the United States or through depositary receipt programs such as American Depositary Receipts. To the extent a Fund invests a significant portion of its assets in a specific geographic region, the Fund may have more exposure to regional political, economic, environmental, credit/counterparty and information risks. In addition, foreign securities may be subject to increased credit/counterparty risk because of the potential difficulties of requiring foreign entities to honor their contractual commitments.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will affect the value of a Fund’s investments in fixed-income securities, such as bonds, notes, asset-backed securities and other income-producing securities and derivatives. 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 a Fund’s investments to decline. In addition, the value of certain derivatives (such as interest rate futures) is related to changes in interest rates and the value may suffer significant decline as a result of interest rate changes. A prolonged period of low interest rates may cause a Fund to have a low or negative yield, potentially reducing the value of your investment. 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. Interest rate risk generally is greater for funds that invest in fixed-income securities with relatively longer durations than for funds that invest in fixed-income securities with shorter durations. A significant change in interest rates could cause a Fund’s share price (and the value of your investment) to change. Potential future changes in government monetary policy may affect the level of interest rates, and the current historically low interest rate environment, combined with the Federal Reserve Board’s conclusion of its quantitative easing program and recent increases in interest rates, increases the likelihood of interest rates rising in the future.
Investments in Other Investment Companies Risk
A Fund will indirectly bear the management, service and other fees of any other investment companies, including ETFs, in which it invests in addition to its own expenses. A Fund is also indirectly exposed to the same risks as the underlying funds in proportion to the allocation of the Fund’s assets among the underlying funds. In addition, investments in ETFs have unique characteristics, including, but not limited to, the expense structure and additional expenses associated with investing in ETFs.
Large Investor Risk
Ownership of shares of a Fund may be concentrated in one or a few large investors. Such investors may redeem shares in large quantities or on a frequent basis. If a large investor redeems a portion or all of its investment in a Fund or redeems frequently, the Fund may be forced to sell investments at unfavorable times or prices, which can affect the performance of the Fund and may increase realized capital gains, including short-term capital gains taxable as ordinary income. In addition, such transactions may accelerate the realization of taxable income to shareholders if a Fund’s sales of investments result in gains, and also may increase transaction costs. These transactions potentially limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). Such transactions may also increase a Fund’s expenses or could result in a Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratios.
Leverage Risk
Use of derivative instruments may involve leverage. Leverage is the risk associated with securities or practices that multiply small index, market or asset-price movements into larger changes in value. Leverage magnifies the potential for gain and the risk of loss. As a result, a relatively small decline in the value of the underlying investments could result in a relatively large loss. The use of leverage will increase the impact of gains and losses on a Fund’s returns, and may lead to significant losses if investments are not successful.
Liquidity Risk
Liquidity risk is the risk that a Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects. Decreases in the number of financial institutions willing to make markets in a Fund’s investments or in their capacity or willingness to transact may increase the Fund’s exposure to this risk. Events that may lead to increased redemptions, such as market disruptions or increases in interest rates, may also negatively impact the liquidity of a Fund’s investments when it needs to dispose of them. If a Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Securities acquired in a private placement, such as Rule 144A securities, are generally subject to significant liquidity risk because they are subject to strict restrictions on resale and there may be no liquid secondary market or ready purchaser for such securities. Non-exchange traded derivatives are generally subject to significant liquidity risk as well. Liquidity issues may also make it difficult to value a Fund’s investments. In some cases, especially during periods of market turmoil, a redemption may dilute the interest of the remaining shareholders.
Management Risk
Management risk is the risk that the portfolio managers’ investment techniques could fail to achieve a Fund’s objective and could cause your investment in a Fund to lose value. Each Fund is subject to management risk because each Fund is actively managed. The portfolio managers will apply their investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that such decisions will produce the desired
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Investment Goals, Strategies and Risks
results. For example, securities that the portfolio managers expect to appreciate in value may, in fact, decline. Similarly, in some cases, derivative and other investment techniques may be unavailable or the portfolio managers may determine not to use them, even under market conditions where their use could have benefited the Funds.
Market/Issuer Risk
The market value of a Fund’s investments will move up and down, sometimes rapidly and unpredictably, based upon overall market and economic conditions, as well as a number of reasons that directly relate to the issuers of a Fund’s investments, such as management performance, financial condition and demand for the issuers’ goods and services.
Master Limited Partnership Risk
Investments in MLPs involve risks in addition to the risks associated with investments in securities with similar characteristics, such as common stock of a corporation. Holders of common interests in MLPs typically have limited control and limited rights to vote on matters affecting the MLP. Conflicts of interest may also exist between an MLP’s common interest holders and its general partner or managing member, including those arising from incentive distribution payments. Many interests in MLPs are subject to restrictions on resale and may therefore be less liquid than other investments, which may subject MLP interests to more abrupt or erratic price movements and may increase the difficulty of disposing of such interests at favorable times and prices. The Loomis Sayles Multi-Asset Income Fund may gain exposure to MLPs through derivatives, including exchange-traded notes (“ETNs”) and swaps, exposing the Fund to the risks of investing in derivatives generally. MLPs often own interests in energy infrastructure properties, including pipelines, or engage in activities related to the energy sector. Accordingly, to the extent the Fund invests in MLPs, it will likely be exposed to risks related to investments in the energy sector. In addition, if an MLP fails to meet the current legal requirements for treatment as a partnership, or if there are changes to the tax laws, an MLP could be treated as a corporation for U.S. federal income tax purposes, obligating the MLP to pay tax at the entity level and significantly reducing the income to the Fund from an investment in an MLP.
Mortgage-Related and Asset-Backed Securities Risk
In addition to the risks associated with investments in fixed-income securities generally (for example, credit, liquidity and valuation risk), mortgage-related and asset-backed securities are subject to the risks of the mortgages and assets underlying the securities as well as prepayment risk, the risk that the securities may be prepaid and result in the reinvestment of the prepaid amounts in securities with lower yields than the prepaid obligations. Conversely, there is a risk that a rise in interest rates will extend the life of a mortgage-related or asset-backed security beyond the expected prepayment time, typically reducing the security’s value, which is called extension risk. A Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. The value of some mortgage-related securities and other asset-backed securities in which a Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of a Fund to successfully utilize these instruments may depend in part upon the ability of the Fund’s adviser or subadviser to forecast interest rates and other economic factors correctly. Market factors adversely affecting mortgage loan repayments may include a general economic downturn, 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. A Fund’s investments in other asset-backed securities are subject to risks similar to those associated with the servicing of those assets. These types of securities may also decline for reasons associated with the underlying collateral.
Non-Diversification Risk
Compared with diversified mutual funds, a non-diversified Fund may invest a greater percentage of its assets in a particular issuer and may invest in fewer issuers. Therefore, a non-diversified Fund may have more risk because changes in the value of a single security or the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund’s net asset value.
REITs Risk
The performance of a Fund that invests in REITs may be dependent in part on the performance of the real estate market and the real estate industry in general. The real estate industry is particularly sensitive to economic downturns. Securities of companies in the real estate industry, including REITs, are sensitive to factors such as changes in real estate values, property taxes and tax laws, 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 also may be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or the mortgage loans held by the REIT. REITs also are subject to default and prepayment risk. REITs are dependent upon cash flow from their investments to repay financing costs and also on the ability of the REITs’ managers. A Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund.
Small- and Mid-Capitalization Companies Risk
Compared to companies with large market capitalization, small- and mid-capitalization companies are more likely to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Securities of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of large-capitalization companies. Securities of small- and mid-capitalization companies may therefore be more vulnerable to adverse developments than those of large-capitalization companies. As a result, it may be relatively more difficult for a Fund to buy and sell securities of small- and mid-capitalization companies.
Small-Capitalization Companies Risk
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Investment Goals, Strategies and Risks
Compared to companies with medium or large market capitalization, small-capitalization companies are more likely to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Securities of these companies often trade less frequently and in limited volume and their prices may fluctuate more than stocks of medium- or large-capitalization companies. Securities of small-capitalization companies may therefore be more vulnerable to adverse developments than those of medium- or large-capitalization companies. As a result, it may be relatively more difficult for a Fund to buy and sell securities of small-capitalization companies.
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Management Team
Meet the Funds’ Investment Advisers and Subadvisers
The Natixis Funds family currently includes 39 mutual funds (the “Natixis Funds”). The Natixis Funds family had combined assets of $49.3 billion as of December 31, 2018. Natixis Funds are distributed through Natixis Distribution, L.P. (the “Distributor”).
Advisers
Natixis Advisors, L.P. (“Natixis Advisors”), located at 888 Boylston Street, Suite 800, Boston, Massachusetts 02199-8197, serves as the adviser to the Loomis Sayles Multi-Asset Income Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, Natixis U.S. Equity Opportunities Fund, Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund. Natixis Advisors oversees, evaluates, and monitors the subadvisory services provided to the Loomis Sayles Multi-Asset Income Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, Natixis U.S. Equity Opportunities Fund, Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund. It also provides general business management and administration to the Loomis Sayles Multi-Asset Income Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, Natixis U.S. Equity Opportunities Fund, Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund. Natixis Advisors does not determine what investments will be purchased or sold by the Funds. The advisers and subadvisers listed below make the investment decisions for their respective Funds.
The combined advisory and subadvisory fees paid by the Funds during the fiscal year ended December 31, 2018 as a percentage of each Fund’s average daily net assets were 0.39% for the Loomis Sayles Multi-Asset Income Fund (after waiver), 0.68% for the Natixis Oakmark Fund, 0.85% for the Natixis Oakmark International Fund, 0.75% for the Natixis U.S. Equity Opportunities Fund, 0.90% for the Vaughan Nelson Small Cap Value Fund and 0.80% for the Vaughan Nelson Value Opportunity Fund.
Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111, serves as the adviser to the Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund. Founded in 1926, Loomis Sayles is one of the oldest investment advisory firms in the United States with over $249.7 billion in assets under management as of December 31, 2018. Loomis Sayles has an extensive internal research staff. Loomis Sayles makes investment decisions for each of these Funds. Loomis Sayles also serves as a subadviser to the Natixis U.S. Equity Opportunities Fund and Loomis Sayles Multi-Asset Income Fund (see below).
The aggregate advisory fees paid by the Funds during the fiscal year ended December 31, 2018, as a percentage of each Fund’s average daily net assets, was 0.38% for the Loomis Sayles High Income Fund (after waiver) and 0.37% for the Loomis Sayles Investment Grade Bond Fund (after waiver).
Mirova US, located at 888 Boylston Street, Suite 500, Boston, Massachusetts 02199-8197, serves as the adviser to the Mirova Global Green Bond Fund, Mirova Global Sustainable Equity Fund and Mirova International Sustainable Equity Fund. Mirova US was formed in 2014 and specializes in globally diversified portfolio management. As of December 31, 2018, Mirova US, when it was still the Mirova US division within Ostrum Asset Management U.S., LLC, had $547 million in assets under management. Mirova US has entered into a personnel-sharing arrangement with its Paris-based affiliate, Mirova, which is part of Natixis Investment Managers. With assets under management of $11.5 billion as of December 31, 2018, Mirova ranks among the leading European ESG asset managers. Pursuant to this arrangement, certain employees of Mirova, as a “participating affiliate,” serve as “associated persons” of Mirova US and, in this capacity, are subject to the oversight of Mirova US and its Chief Compliance Officer. These associated persons will, on behalf of Mirova US, provide discretionary investment management services (including acting as portfolio managers), research and related services to the Funds in accordance with the investment objectives, policies and limitations set forth in the prospectus and SAI. Unlike Mirova US, Mirova is not registered as an investment adviser with the Securities and Exchange Commission (the “SEC”). The personnel-sharing arrangement is based on no-action letters of the staff of the SEC that permit SEC-registered investment advisers to rely on and use the resources of advisory affiliates, subject to certain conditions.
The aggregate advisory fee paid by the Funds during the fiscal year ended December 31, 2018 as a percentage of each Fund’s average daily net assets were 0.07% for the Mirova Global Green Bond Fund (after waiver) and 0.70% for the Mirova Global Sustainable Equity Fund (after waiver).
The aggregate advisory fee to be paid by the Mirova International Sustainable Equity Fund as a percentage of the Fund’s average daily net assets is 0.80%.
Subadvisers
Each Subadviser has full investment discretion and makes all determinations with respect to the investment of the assets of a Fund or a segment of the Fund, subject to the general supervision of the Fund’s adviser and the Board of Trustees.
Harris Associates, located at 111 S. Wacker Drive, Suite 4600, Chicago, Illinois 60606, serves as subadviser to the Natixis Oakmark Fund, Natixis Oakmark International Fund and a segment of the Natixis U.S. Equity Opportunities Fund. Harris Associates, managed $107.5 billion in assets as of December 31, 2018, and, together with its predecessor, has managed investments since 1976. It also manages investments for other mutual funds as well as assets of individuals, trusts, retirement plans, endowments, foundations, and several private partnerships.
Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111, serves as a subadviser to the Natixis U.S. Equity Opportunities Fund and Loomis Sayles Multi-Asset Income Fund. Founded in 1926, Loomis Sayles is one of the oldest investment advisory firms in the United States with over $249.7 billion in assets under management as of December 31, 2018. Loomis Sayles is well known for its professional research staff, which is one of the largest in the industry.
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Management Team
Vaughan Nelson, located at 600 Travis Street, Suite 6300, Houston, Texas 77002, serves as subadviser to the Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund. Originally founded in 1970, Vaughan Nelson focuses primarily on managing equity and fixed-income funds for clients who consist of foundations, university endowments, corporate retirement plans and family/individual funds. As of December 31, 2018, Vaughan Nelson had $11.4 billion in assets under management.
Subadvisory Agreements
Natixis Advisors and the Natixis Funds have received an exemptive order from the SEC (the “Order”), which permits Natixis Advisors, subject to approval by the Board of Trustees but without shareholder approval, to hire or terminate, and to modify any existing or future subadvisory agreement with, subadvisers that are not affiliated with Natixis Advisors as well as subadvisers that are indirect or direct wholly-owned subsidiaries of Natixis Advisors or of another company that, indirectly or directly, wholly owns Natixis Advisors. Before any Natixis Fund can begin to rely on the exemptions described above, a majority of the shareholders of the Fund must approve the Fund’s ability to rely on the Order. Shareholders of certain Natixis Funds have already approved the Fund’s operation under the manager-of-managers structure contemplated by the Order. If a new subadviser is hired for a Fund, shareholders will receive information about the new subadviser within 90 days of the change.
A discussion of the factors considered by the Funds’ Board of Trustees in approving the Funds’ investment advisory and subadvisory contracts is available in the Funds’ financial reports for the six months ended June 30, 2018 for the Loomis Sayles Multi-Asset Income Fund, Mirova Global Green Bond Fund, Mirova Global Sustainable Equity Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, Natixis U.S. Equity Opportunities Fund, Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund, for the six months ended September 30, 2018 for the Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund and for the period ended December 31, 2018 for the Mirova International Sustainable Equity Fund.
Portfolio Trades
In placing portfolio trades, a Fund’s adviser or subadviser may use brokerage firms that market the Funds’ shares or are affiliated with Natixis US, Natixis Advisors or any adviser or subadviser. In placing trades, any adviser or subadviser will seek to obtain the best combination of price and execution, which involves a number of subjective factors. Such portfolio trades are subject to applicable regulatory restrictions and related procedures adopted by the Board of Trustees.
Meet the Funds’ Portfolio Managers
The following persons have had primary responsibility for the day-to-day management of the indicated Fund’s portfolio since the dates stated below.
Harris Associates
William C. Nygren, CFA — William C. Nygren has co-managed the Natixis Oakmark Fund since 2014 and the Harris Associates segment of Natixis U.S. Equity Opportunities Fund since 2014. Mr. Nygren, Vice President, Chief Investment Officer, U.S. Equity and portfolio manager of Harris Associates, joined the firm in 1983. Mr. Nygren received a B.S. from the University of Minnesota and an M.S. from the University of Wisconsin-Madison. Mr. Nygren holds the designation of Chartered Financial Analyst and has over 37 years of investment experience.
Kevin G. Grant, CFA — Kevin G. Grant has co-managed the Natixis Oakmark Fund since 2014 and the Harris Associates segment of Natixis U.S. Equity Opportunities Fund since 2014. Mr. Grant, co-Chairman, portfolio manager and analyst of Harris Associates, joined the firm in 1988. Mr. Grant received a B.S. from the University of Wisconsin-Madison and an M.B.A. from the Loyola University-Chicago. Mr. Grant holds the designation of Chartered Financial Analyst and has over 27 years of investment experience.
David G. Herro, CFA — David G. Herro has co-managed the Natixis Oakmark International Fund since 2010. Mr. Herro, Deputy Chairman, Chief Investment Officer of International Equities and portfolio manager of Harris Associates, joined the firm in 1992 as a portfolio manager and analyst. Mr. Herro holds an M.A. in Economics from the University of Wisconsin-Milwaukee and a B.S. in Business and Economics from the University of Wisconsin-Platteville. Mr. Herro holds the designation of Chartered Financial Analyst and has over 33 years of investment experience.
M. Colin Hudson, CFA — M. Colin Hudson has co-managed the Natixis Oakmark Fund since 2014 and the Harris Associates segment of Natixis U.S. Equity Opportunities Fund since 2014. Mr. Hudson, Vice President, portfolio manager and analyst of Harris Associates, joined the firm in 2005. Mr. Hudson received a B.A. from DePauw University, and an M.S. and an M.B.A. from Indiana University. Mr. Hudson holds the designation of Chartered Financial Analyst and has over 20 years of investment experience.
Michael L. Manelli, CFA — Michael L. Manelli has co-managed the Natixis Oakmark International Fund since 2016. Mr. Manelli, Vice President, portfolio manager, and analyst of Harris Associates, joined the firm in 2005 as an international analyst. Mr. Manelli holds a B.B.A. from the University of Iowa. Mr. Manelli holds the designation of Chartered Financial Analyst and has over 18 years of investment experience.
Michael J. Mangan, CFA – Michael J. Mangan co-managed the Natixis Oakmark Fund from 2002 until February 2014 and since August 2014 and the Harris Associates segment of Natixis U.S. Equity Opportunities Fund from 2005 until February 2014 and since August 2014. Mr. Mangan, a portfolio manager of Harris Associates joined the firm in 1997. Mr. Mangan received a B.B.A. from the University of Iowa and an M.B.A. from Northwestern University. Mr. Mangan is a CPA, holds the designation of Chartered Financial Analyst and has over 30 years of investment experience.
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Management Team
Loomis Sayles
Matthew J. Eagan, CFA — Matthew J. Eagan served as co-portfolio manager of the Loomis Sayles High Income Fund from 2002 and served as an associate portfolio manager of the Loomis Sayles Investment Grade Bond Fund from 2006. In 2012 his title changed to co-portfolio manager of the Loomis Sayles Investment Grade Bond Fund. Mr. Eagan, Executive Vice President of Loomis Sayles, began his investment career in 1989 and joined Loomis Sayles in 1997. Mr. Eagan received a B.A. from Northeastern University and an M.B.A. from Boston University. He holds the designation of Chartered Financial Analyst®. Mr. Eagan has over 28 years of investment experience.
Thomas Fahey — Thomas Fahey has served as a co-portfolio manager of the Loomis Sayles Multi-Asset Income Fund since 2015. Mr. Fahey, Vice President of Loomis Sayles, has over 23 years of investment industry experience and joined Loomis Sayles in 2010. Previously, Mr. Fahey was a senior portfolio manager and global bond strategist at Standish Mellon Asset Management. Mr. Fahey earned a B.A. from St. Francis Xavier University in Nova Scotia and an M.A. from Concordia University in Quebec.
Aziz V. Hamzaogullari, CFA — Aziz V. Hamzaogullari is the chief investment officer and founder of the Growth Equity Strategies Team at Loomis Sayles. He has managed a segment of the Natixis U.S. Equity Opportunities Fund since 2011 and the All Cap Growth segment of the Fund since 2014. Mr. Hamzaogullari joined Loomis Sayles in 2010 from Evergreen Investments, where he was a senior portfolio manager and founder of Evergreen’s Berkeley Street Growth Equity team. Mr. Hamzaogullari received a B.S. in management from Bilkent University in Turkey and an M.B.A. from George Washington University. He holds the designation of Chartered Financial Analyst® and has over 25 years of investment industry experience.
Kevin P. Kearns — Kevin P. Kearns has served as co-portfolio manager of the Loomis Sayles Multi-Asset Income Fund since 2012. Mr. Kearns, Vice President of Loomis Sayles, began his investment career in 1986 and joined Loomis Sayles in 2007. Prior to joining Loomis Sayles, he was the director of derivatives, quantitative analysis and risk management at Boldwater Capital Management. Mr. Kearns received a B.S. from Bridgewater State College and an M.B.A. from Bryant College. Mr. Kearns has over 32 years of investment experience.
Brian P. Kennedy — Brian P. Kennedy has served as co-portfolio manager of the Loomis Sayles Investment Grade Bond Fund since 2013 and has served as co-portfolio manager of the Loomis Sayles High Income Fund since 2018. Mr. Kennedy, Vice President of Loomis Sayles, began his investment career in 1990 and joined Loomis Sayles in 1994 as a structured finance and government bond trader. He moved over to credit trading in 2001, where he traded high yield bonds and initiated Loomis Sayles’ trading of bank loans. Mr. Kennedy was promoted to product manager in 2009. He received a B.S. from Providence College, an M.B.A. from Babson College and has over 28 years of investment experience.
Maura T. Murphy, CFA — Maura T. Murphy has served as co-portfolio manager of the Loomis Sayles Multi-Asset Income Fund since 2012. Ms. Murphy, Vice President of Loomis Sayles, began her investment career in 2003 upon joining Loomis Sayles as a quantitative analyst. Ms. Murphy received her B.A. from the College of the Holy Cross and an M.B.A. from the Carroll School of Management at Boston College. She holds the designation of Chartered Financial Analyst®and has over 15 years of investment experience.
Elaine M. Stokes — Elaine M. Stokes served as associate portfolio manager of the Loomis Sayles Investment Grade Bond Fund from 2006 and the Loomis Sayles High Income Fund from 2007. In 2012, her title changed to co-portfolio manager for each Fund. Ms. Stokes, Executive Vice President of Loomis Sayles, began her investment career in 1987 and joined Loomis Sayles in 1988. She received a B.S. from St. Michael’s College and has over 31 years of investment experience.
Todd P. Vandam, CFA — Todd P. Vandam has served as co-portfolio manager of the Loomis Sayles High Income Fund since 2018. Mr. Vandam, Vice President of Loomis Sayles, began his investment career and joined Loomis Sayles in 1994. Mr. Vandam received a B.A. from Brown University. He holds the designation of Chartered Financial Analyst® and has over 25 years of investment experience.
Mirova US
Marc Briand — Marc Briand has served as portfolio manager of the Mirova Global Green Bond Fund since its inception in 2017. Mr. Briand is a portfolio manager with Mirova, which he joined in 2013. Prior to joining Mirova, he was responsible for aggregate strategy management at Ostrum Asset Management (“Ostrum AM”) from 2007 to 2013. Mr. Briand is a graduate of the French business school Institut Supérieur de Gestion in Paris and has over 30 years of investment experience.
Amber Fairbanks, CFA® — Amber Fairbanks has served as co-portfolio manager of the Mirova Global Sustainable Equity Fund and of the Mirova International Sustainable Equity Fund since 2018. Ms. Fairbanks is a Portfolio Manager with Mirova US, which she joined in 2018. Prior to joining Mirova US, she was a portfolio manager at Zevin Asset Management. Ms. Fairbanks holds a master’s degree in business administration from the Carroll Graduate School of Management, Boston College, with a concentration in finance. She holds the designation of Chartered Financial Analyst® and has over 18 years of investment experience.
Jens Peers, CFA® — Jens Peers has served as co-portfolio manager of the Mirova Global Sustainable Equity Fund since its inception in 2016 and the Mirova International Sustainable Equity Fund since 2018. Mr. Peers is Chief Executive Officer and Chief Investment Officer of Mirova US and Global Chief Investment Officer with Mirova, which he joined in 2013. Prior to joining Mirova, he was Head of Portfolio Management – Environmental Strategies for Kleinwort Benson Investors in Dublin, Ireland from 2003 to 2013. Mr. Peers holds a master’s degree in applied economics from the University of Antwerp, Belgium. He holds the designation of Chartered Financial Analyst®, is a CEFA (Certified European Financial Analyst of the BVFA-ABAF - Belgian Association of Financial Analysts) and has over 20 years of investment experience.
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Management Team
Hua Cheng, CFA®, PhD — Hua Cheng has served as co-portfolio manager of the Mirova Global Sustainable Equity Fund since its inception in 2016 and the Mirova International Sustainable Equity Fund since 2018. Dr. Cheng is a Portfolio Manager with Mirova US, which he joined in 2018. Prior to joining Mirova US, he was a portfolio manager with Mirova, which he joined in 2014. Prior to joining Mirova, Dr. Cheng was portfolio manager at Vega Investment Managers from 2007 to 2014. Dr. Cheng holds a Ph.D. in Financial Economics from the University Paris Dauphine (France). He holds the designation of Chartered Financial Analyst® and has over 13 years of investment experience.
Charles Portier — Charles Portier has served as portfolio manager of the Mirova Global Green Bond Fund since 2018. Mr. Portier is a portfolio manager at Mirova, which he joined in 2016. Prior to joining Mirova, he was a portfolio manager assistant in the fixed income multi-strategies team at Ostrum AM from 2008 to 2016. Mr. Portier holds a master’s degree in econometrics from the French University of la Sorbonne in Paris and has over 11 years of investment experience.
Mr. Briand and Mr. Portier are employees of Mirova, the parent company of Mirova US, and provide portfolio management through a personnel-sharing arrangement between Mirova and Mirova US.
Vaughan Nelson
Dennis G. Alff, CFA — Dennis G. Alff has co-managed the Vaughan Nelson Value Opportunity Fund since 2008. Mr. Alff, a Senior Portfolio Manager of Vaughan Nelson, joined the firm in 2006. Mr. Alff received a B.S. from the United States Military Academy and an M.B.A. from Harvard Business School. Mr. Alff holds the designation of Chartered Financial Analyst® and has over 22 years of investment management and research experience.
Stephen Davis, CFA — Stephen Davis has co-managed the Vaughan Nelson Small Cap Value Fund since 2019. Mr. Davis, a Portfolio Manager of Vaughan Nelson, joined the firm in 2010. Mr. Davis received a B.A. from Rice University. Mr. Davis holds the designation of Chartered Financial Analyst® and has over 14 years of investment management and research experience.
Chad D. Fargason – Chad D. Fargason has co-managed the Vaughan Nelson Value Opportunity Fund since 2013. Dr. Fargason, Senior Portfolio Manager of Vaughan Nelson, joined the firm in 2013. Prior to joining the firm Dr. Fargason was a Director at KKR & Co. Dr. Fargason received a Ph.D. from Duke University, M.A. from Duke University and a B.A. from Rice University. Dr. Fargason has over 19 years investment management and research experience.
Chris D. Wallis, CFA — Chris D. Wallis has co-managed Vaughan Nelson Small Cap Value Fund and Vaughan Nelson Value Opportunity Fund since 2004 and 2008, respectively. Mr. Wallis, Chief Executive Officer and a Senior Portfolio Manager of Vaughan Nelson, joined the firm in 1999. Mr. Wallis received a B.B.A. from Baylor University and an M.B.A. from Harvard Business School. Mr. Wallis holds the designation of Chartered Financial Analyst® and has over 27 years of investment/financial analysis and accounting experience.
Please see the SAI for information on portfolio manager compensation, other accounts under management by the portfolio managers and the portfolio managers’ ownership of securities in the Funds.
The Funds enter into contractual arrangements with various parties, including, among others, the Advisers, the Distributor and the Funds’ custodian and transfer agent, who provide services to the Funds. Shareholders are not parties to, or intended to be third-party beneficiaries of, any of those contractual arrangements, and those contractual arrangements are not intended to create in any individual shareholder or group of shareholders any right to enforce such arrangements against the service providers or to seek any remedy thereunder against the service providers, either directly or on behalf of the Funds.
This Prospectus provides information concerning the Funds that you should consider in determining whether to purchase shares of the Funds. None of this Prospectus, the SAI or any contract that is an exhibit to the Funds’ registration statement, is intended to, nor does it, give rise to an agreement or contract between the Funds and any investor, or give rise to any contract or other rights in any individual shareholder, group of shareholders or other person other than any rights conferred explicitly by applicable federal or state securities laws that may not be waived.
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Fund Services
Investing in the Funds
Choosing a Share Class
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. The Vaughan Nelson Small Cap Value Fund is currently closed to new investors; however, in its sole discretion, Vaughan Nelson may permit an investor in another Vaughan Nelson-managed fund or product that follows the same investment strategy as the Fund to transfer assets from the fund or product into the Fund. Which class is best for you depends upon a number of factors, including the size of your investment and how long you intend to hold your shares. Certain share classes and certain shareholder features may not be available to you if you hold your shares through a financial intermediary. Your financial representative can help you decide which class of shares is most appropriate for you.The Funds may engage financial intermediaries to receive, purchase, exchange and sell orders on their behalf. Accounts established directly with the Funds will be serviced by the Funds’ transfer agent. The Funds, the Funds’ transfer agent and the Distributor do not provide investment advice.
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 and Admin Class shares, giving you the potential for higher returns per share. However, where front-end sales charges are applicable, returns are earned on a smaller amount of your investment. |
| You pay higher expenses than Class N and Class Y shares. |
| You do not pay a sales charge if your total investment reaches $1 million or more, but you may pay a charge on redemptions if you redeem these shares within 18 months 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, Class N, Class T, Class Y and Admin Class shares. |
| You may pay a sales charge on redemptions if you sell your Class C shares within one year of purchase. |
| 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 18 months of purchase. |
| Effective June 1, 2018, except as noted below, Class C shares automatically convert to Class A shares after 10 years. Please see the section “Exchanging or Converting Shares” for details regarding a conversion of shares. Generally, to be eligible to have your Class C shares automatically converted to Class A shares, the Fund or the financial intermediary through which you purchased your shares will need to have records verifying that your Class C shares have been held for 10 years. Due to operational limitations at your financial intermediary, your ability to have your Class C shares automatically converted to Class A shares may be limited. Group retirement plans of certain financial intermediaries who hold Class C shares with the Fund in an omnibus account do not track participant level aging of shares and therefore these shares will not be eligible for an automatic conversion. Certain intermediaries may convert your Class C shares to Class A shares in accordance with a conversion schedule that may differ from the one described above. Please consult your financial representative for more information. |
Class N Shares
| You have a minimum initial investment of $1,000,000. There are several ways to waive this minimum. See the section “Purchase and Sale of Fund Shares.” |
| You do not pay a sales charge when you buy Class N shares. All of your money goes to work for you right away. |
| You do not pay a sales charge on redemptions. |
| You pay lower annual expenses than Class A, Class C, Class T, Class Y and Admin Class shares, giving you the potential for higher returns per share. |
Class T Shares
| Class T shares of the Funds are not currently available for purchase. |
| The shares are available to a limited type of investor. See the section “Purchase and Sale of Fund Shares.” |
| You pay a sales charge when you buy Class T shares. This charge is reduced for purchases of $250,000 or more. See the section “How Sales Charges Are Calculated.” |
| You pay lower annual expenses than Class C and Admin Class shares, giving you the potential for higher returns per share. However, where front-end sales charges are applicable, returns are earned on a smaller amount of your investment. |
| You pay higher expenses than Class N and Class Y shares. |
Class Y Shares
| You have a minimum initial investment of $100,000. There are several ways to waive this minimum. See the section “Purchase and Sale of Fund Shares.” |
| You do not pay a sales charge when you buy Class Y shares. All of your money goes to work for you right away. |
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| You do not pay a sales charge on redemptions. |
| You pay lower annual expenses than Class A, Class C, Class T and Admin Class shares, giving you the potential for higher returns per share. |
| You pay higher annual expenses than Class N shares. |
Admin Class Shares
| The shares are available to a limited type of investor. See the section “Purchase and Sale of Fund Shares.” |
| You have no minimum initial investment. |
| You do not pay a sales charge when you buy Admin Class shares. All of your money goes to work for you right away. |
| You do not pay a sales charge on redemptions. |
| You pay lower annual expenses than Class C shares, giving you the potential for higher returns per share. |
| You pay higher annual expenses than Class A, Class N, Class T and Class Y shares. |
For information about a Fund’s expenses, see the section “Fund Fees & Expenses” in each Fund Summary.
How Sales Charges Are Calculated
Class A Shares
The price that you pay when you buy Class A shares (the “offering price”) is their NAV plus a sales charge (sometimes called a “front-end sales charge”), which varies depending upon the size of your purchase:
Class A Sales Charges* |
|
| ||||
|
All Funds Except Loomis Sayles High Income Fund, Loomis Sayles Investment Grade Bond Fund, Loomis Sayles Multi-Asset Income Fund and Mirova Global Green Bond Fund |
|
|
Loomis Sayles High Income Fund, Loomis Sayles Investment Grade Bond Fund, Loomis Sayles Multi-Asset Income Fund and Mirova Global Green Bond Fund | ||
Your Investment |
As a % of offering price |
As a % of your investment |
|
Your Investment |
As a % of offering price |
As a % of your investment |
Less than $50,000 |
5.75% |
6.10% |
|
Less than $100,000 |
4.25% |
4.44% |
$50,000-$99,999 |
4.50% |
4.71% |
|
$100,000-$249,999 |
3.50% |
3.63% |
$100,000-$249,999 |
3.50% |
3.63% |
|
$250,000-$499,999 |
2.50% |
2.56% |
$250,000-$499,999 |
2.50% |
2.56% |
|
$500,000-$999,999 |
2.00% |
2.04% |
$500,000-$999,999 |
2.00% |
2.04% |
|
$1,000,000 or more** |
0.00% |
0.00% |
$1,000,000 or more** |
0.00% |
0.00% |
|
Due to rounding, the actual sales charge for a particular transaction may be higher or lower than the rates listed above. |
* | Not imposed on shares that are purchased with reinvested dividends or other distributions. |
** | 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 18 months of the date of purchase. See the section “How the CDSC is Applied to Your Shares.” |
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. At the time of purchase you must 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 of the Fund. You may be required to provide certain records and information, such as account statements, with respect to all of your accounts that 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 Fund’s website at im.natixis.com (click on “Sales Charges” at the bottom of the home page) or in the 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 $50,000 or more (or $100,000 or more for Loomis Sayles Multi-Asset Income Fund or Mirova Global Green Bond Fund) within 13 months. |
| 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 (excluding Class T shares) of the Natixis Funds held by you in one or more accounts. Certain shares held through Loomis Sayles Distributors, L.P. may not be eligible for this privilege. 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. |
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| Combining Accounts — This allows you to combine shares of multiple Natixis Funds and classes for purposes of calculating your sales charge. |
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 retirement accounts, sole proprietorships, single trust estates and any other individuals acceptable to the
Distributor. Retirement Plan Accounts: The Distributor may, at 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 (“SIMPLE IRA”) contributions will automatically be linked with those of other participants in the same SIMPLE IRA Plan (Class A shares only) using the Natixis Funds prototype document. 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. |
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:
| Clients of a financial intermediary that has entered into an agreement with the Distributor and has been approved by the Distributor to offer Fund shares to self-directed investment brokerage accounts that may or may not charge a transaction fee; |
| Any government entity that is prohibited from paying a sales charge or commission to purchase mutual fund shares; |
| All employees of financial intermediaries under arrangements with the Distributor (this also applies to spouses and children under the age of 21 of those mentioned); |
| Fund trustees, former trustees, employees of affiliates of the Natixis Funds and other individuals who are affiliated with any Natixis Fund (this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned); |
| Certain Retirement Plans. The availability of this pricing may depend upon the policies and procedures of your specific financial intermediary; consult your financial adviser; |
| Non-discretionary and non-retirement accounts of bank trust departments or trust companies, but only if they principally engage in banking or trust activities; |
| Fee Based Programs of certain broker-dealers, the advisers or the Distributor. Please consult your financial representative to determine if your fee based program is subject to additional or different conditions or fees; and |
| Registered Investment Advisers investing on behalf of clients in exchange for an advisory, management or consulting fee. |
In order to receive Class A shares without a front-end sales charge or a CDSC, you must notify the appropriate Fund of your eligibility at the time of purchase. Due to operational limitations at your financial intermediary, a sales charge or a CDSC may be assessed; please consult your financial representative.
The availability of certain sales charge waivers and discounts will depend on whether you purchase your shares directly from a Fund or through a financial intermediary. Intermediaries may have different policies and procedures regarding the availability of front-end sales load waivers or CDSC waivers, which are discussed below. In all instances, it is the purchaser’s responsibility to notify a Fund or the purchaser’s financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers and discounts not available through a particular intermediary, shareholders will have to purchase Fund shares directly from the Fund or through another intermediary to receive these waivers or discounts. Please see Appendix A to this Prospectus for information regarding eligibility for load waivers and discounts available through specific financial intermediaries, which may differ from those disclosed elsewhere in this Prospectus or in the SAI.
Repurchasing Fund Shares
You may apply proceeds from redeeming Class A shares of a 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 returning your original redemption check or sending a new check for some or all of the redemption amount. Please note: for U.S. federal income tax purposes, a redemption generally is treated as 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.
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 Certain Retirement Plans (to pay plan participants or beneficiaries due to death, disability, separation from service, normal or early retirement, loans from the plan, hardship withdrawals, return of excess contributions, or required minimum distributions at age 70 1/2 (an individual participant’s voluntary distribution or a total plan termination or total plan redemption may incur a CDSC); (2) to make payments through a systematic withdrawal plan; (3) due to shareholder death or disability; (4) to return excess IRA contributions; or (5) to make required minimum distributions at age 70 ½ (applies only to the amount necessary to meet the required minimum distributions).
Due to operational limitations at your financial intermediary, a CDSC may be assessed, notwithstanding the exemptions above; please
consult your financial
representative. Please see the SAI for more information on eliminating or reducing front-end
sales charges and the CDSC.
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Class C Shares
The offering price of Class C shares is their NAV 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.
Class C Contingent Deferred Sales Charges
Year Since Purchase |
CDSC on Shares Being Sold |
1st |
1.00% |
Thereafter |
0.00% |
Eliminating the CDSC
The availability of certain CDSC waivers will depend on whether you purchase your shares directly from the Fund or through a financial intermediary. Intermediaries may have different policies and procedures regarding the availability of CDSC waivers, which are discussed below. In all instances, it is the purchaser’s responsibility to notify a Fund or the purchaser’s financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers not available through a particular intermediary, shareholders will have to purchase Fund shares directly from the Fund or through another intermediary to receive these waivers or discounts. Please see Appendix A to this Prospectus for information regarding eligibility for CDSC discounts available through specific financial intermediaries, which may differ from those disclosed elsewhere in this Prospectus or in the SAI.
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 Certain Retirement Plans (to pay plan participants or beneficiaries due to death, disability, separation from service, normal or early retirement, loans from the plan, hardship withdrawals, return of excess contributions, or required minimum distributions at age 70 1/2 (an individual participant’s voluntary distribution or a total plan termination or total plan redemption may incur a CDSC); (2) to make payments through a systematic withdrawal plan; (3) due to shareholder death or disability; (4) to return excess IRA contributions; or (5) to make required minimum distributions at age 70 ½ (applies only to the amount necessary to meet the required minimum distributions).
Due to operational limitations at your financial intermediary, a CDSC may be assessed, notwithstanding the exemptions above; please consult your financial representative. Please see the SAI for more information on eliminating or reducing front-end sales charges and the 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; |
| Calculation is based on either your original purchase price or the current NAV of the shares being sold, whichever is lower in order to minimize your CDSC; |
| 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 within the time frame shown above for each class. |
A CDSC will not be charged on:
| Increases in NAV above the purchase price; |
| Shares you acquired by reinvesting your dividends or capital gains distributions; or |
| Exchanges. However, the original purchase date of the shares from which the exchange is made determines if the newly acquired shares are subject to the CDSC when they are sold. |
To minimize the amount of the CDSC you may pay when you redeem shares, the relevant Fund will first redeem shares acquired through reinvested dividends and capital gain distributions. Shares will be sold in the order in which they were purchased (earliest to latest).
Class N, Class Y and Admin Class Shares
The offering price of Class N, Class Y and Admin Class shares is their NAV without a front-end load sales charge. No CDSC applies when you redeem your shares. You must meet eligibility criteria in order to invest in Class N, Class Y or Admin Class shares.
Class T Shares
The offering price of Class T shares is their NAV plus a front-end sales charge, which varies depending upon the size of your purchase.
Class T Sales Charges*,** |
|
|
Your Investment |
As a % of offering price |
As a % of your investment |
Less than $250,000 |
2.50% |
2.56% |
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Class T Sales Charges*,** |
|
|
Your Investment |
As a % of offering price |
As a % of your investment |
$250,000 – $499,999 |
2.00% |
2.04% |
$500,000 – $999,999 |
1.50% |
1.52% |
$1,000,000 or more |
1.00% |
1.01% |
* | Due to rounding, the actual sales charge for a particular transaction may be higher or lower than the rates listed above. |
** | Not imposed on shares that are purchased with reinvested dividends or other distributions. |
Compensation to Securities Dealers
As part of their business strategies, each Fund pays securities dealers and other financial institutions (collectively,
“dealers”) that sell their 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” and dealer commissions are disclosed in the SAI. Class A, Class C, Class T and Admin
Class shares pay an annual service fee each of 0.25% of their respective average daily net assets.The Admin Class of
Loomis Sayles Investment Grade Bond Fund also pays a 12b-1 fee of 0.25% of its average daily net assets. Admin Class
shares may pay an administrative services fee at an annual rate of up to 0.25% of the average daily net assets
attributable to Admin Class shares to the Distributor and/or securities dealers or financial intermediaries for providing personal service and account maintenance for their customers who hold these shares. 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, but may
be paid on other schedules. The SAI includes additional information about the payment of some or all of such fees to
dealers. Because these distribution fees and service (12b-1) fees are paid out of each Fund’s assets on an
ongoing basis, over time these fees for Class C and Admin Class 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 or Class T shares. Similarly,
over time the fees for Class A, Class C and Class T shares will increase the cost of your investment and will cost you
more than an investment in Class N or Class Y shares.
In addition, each Fund may make payments to financial
intermediaries that provide shareholder services to shareholders whose shares are held of record in omnibus, other
group accounts (for example, 401(k) plans) or accounts traded through registered securities clearing agents to compensate those intermediaries for services they provide to such shareholders, including, but not limited to, sub-accounting, sub-transfer agency,
similar shareholder or participant recordkeeping, shareholder or participant reporting, or shareholder or participant
transaction processing (“recordkeeping and processing-related services”). The actual payments, and the
services provided, vary from firm to firm. These fees are paid by each Fund (with the exception of Class N shares,
which do not bear such expenses) in light of the fact that other costs may be avoided by each Fund where the
intermediary, not each Fund’s service provider, provides services to Fund shareholders.
The Distributor, a Fund’s Adviser and each of their respective affiliates may, out of their own resources, which generally
come directly or indirectly from fees paid by the Funds, make payments to certain 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 dealer’s or intermediary’s clients have invested in the Funds, and other factors. These payments may also take the form of sponsorship of seminars or 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 processing-related services to financial intermediaries that sell Fund shares; such
payments will not be made with respect to Class N shares. These payments may be in addition to payments made by each
Fund for similar services.
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 receiving certain marketing or servicing advantages that are not
generally available to mutual funds that do not make such payments, including placement on a sales list, including a
preferred or select sales list, or in other sales programs. These payments, which are in addition to any amounts you
may pay your dealer or other financial intermediary, 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 funds and their 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.
Each Fund is generally available for purchase in the United States, Puerto Rico, Guam and the U.S. Virgin Islands. The Funds will only accept investments from U.S. citizens with a U.S. address (including an APO or FPO address) or resident aliens with a U.S. address (including an APO or FPO address) and a U.S. taxpayer identification number. U.S. citizens living abroad are not allowed to purchase shares in the Funds. Admin Class shares are offered exclusively
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through intermediaries (who will be the record owner of such shares), are intended primarily for Certain Retirement Plans held in omnibus fashion, and are not available for purchase by individual investors. Class N and Class T shares are not eligible to be exchanged or purchased through the website or through the Natixis Funds Automated Voice Response System.
Each Fund sells its shares at the NAV next calculated after the Fund receives a properly completed investment order. The Fund generally must receive your properly completed order before the close of regular trading on the New York Stock Exchange (“NYSE”) for your shares to be bought or sold at the Fund’s NAV on that day.
All purchases made by check should be in U.S. dollars and made payable to Natixis Funds. Third party checks, travelers checks, starter checks and credit card convenience checks will not be accepted, except that third party checks under $10,000 may be accepted. You may return an uncashed redemption check from your account to be repurchased back into your account. Upon redemption of an investment by check or by periodic account investment, redemption proceeds may be withheld until the check has cleared or the shares have been in your account for 10 days.
A Fund may periodically close to new purchases of shares or refuse any order to buy shares if the Fund determines that doing so would be in the best interests of the Fund and its shareholders. See the section “Restrictions on Buying, Selling and Exchanging Shares.”
The Vaughan Nelson Small Cap Value Fund was closed to new investors effective July 31, 2009. The Fund remains open to existing
shareholders, including currently funded defined contribution, defined benefit and all other employee benefit plans
and their participants (including new participants in such plans). The Fund may not be added to any employee benefit
platforms. Qualified plans that held shares in the Fund prior to October 16, 2009 may continue to invest in the Fund.
In its sole discretion, Vaughan Nelson may permit an investor in another Vaughan Nelson-managed fund or product that follows the same investment strategy as the Fund to transfer assets from that fund or product into the Fund.
Independent investment advisers, as well as registered representatives using broker-dealers for existing accounts in the Vaughan
Nelson Small Cap Value Fund, are allowed to add assets for their existing client accounts only. Clients of independent
investment advisers and registered representatives who did not have an existing account in the Vaughan Nelson Small
Cap Value Fund prior to July 31, 2009 are not permitted to open new accounts.
The ability of the transfer agent
to monitor new accounts in the Vaughan Nelson Small Cap Value Fund that are opened through omnibus or other nominee
accounts is limited. In general, the Vaughan Nelson Small Cap Value Fund looks to the financial intermediaries to
prevent new accounts from being opened within omnibus accounts. There are no assurances that the financial
intermediaries will properly monitor all new accounts.
The Funds are not available to new SIMPLE IRA plans using the Natixis Funds’ Prototype document.
You can buy shares of each Fund in several ways:
The Funds may engage financial intermediaries to receive purchase, exchange and sell orders on their behalf. Accounts established directly with the Funds will be serviced by the Funds’ transfer agent. The Funds, the Funds’ transfer agent and the Distributor do not provide investment advice.
Through a financial adviser (certain restrictions may apply). Your financial adviser will be responsible for furnishing all necessary documents to Natixis Funds. Your financial adviser may charge you for these services. Your financial adviser must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV.
Through a broker-dealer (certain restrictions may apply). You may purchase shares of the Funds through a broker-dealer that has been approved by the Distributor. Your broker-dealer may charge you a fee for effecting such transactions. Your broker-dealer must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV.
Directly from the Fund. Natixis Funds’ transfer agent must receive your purchase request in proper form before the close of regular trading on the NYSE in order for you to receive that day’s NAV.
You can purchase shares directly from each Fund in several ways:
By mail. You can buy shares of each Fund by submitting a completed application form, which is available online at www.im.natixis.com or by calling Natixis Funds at 800-225-5478, along with a check payable to Natixis Funds for the amount of your purchase to:
Regular Mail
Natixis Funds
P.O. Box 219579
Kansas City, MO 64121-9579
Overnight Mail
Natixis Funds
330 West 9th Street
Kansas City, MO 64105-1514
After your account has been established, you may send subsequent investments directly to Natixis Funds at the above addresses. Please include either the investment slip from your account statement or a letter specifying the Fund name, your account number and your name, address and telephone number.
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By wire. You also may wire subsequent investments. Call Natixis Funds at 800-225-5478 to obtain wire transfer instructions. At the time of the wire transfer, you will need to include the Fund name, your class of shares, your account number and the registered account owner name(s). Your bank may charge you for such a transfer.
By telephone. You can make subsequent investments by calling Natixis Funds at 800-225-5478.
By exchange. You may purchase shares of a Fund by exchange of shares of the same class of another Fund by sending a signed letter of instruction to Natixis Funds, by calling Natixis Funds at 800-225-5478 or by accessing your account online at www.im.natixis.com.
Through Automated Clearing House (“ACH”). Before you can purchase shares of Natixis Funds through ACH, you must provide specific instructions to Natixis Funds in writing (see STAMP2000 Medallion Signature Guarantee below). You may purchase shares of a Fund through ACH by either calling Natixis Funds at 800-225-5478 or by accessing your account online at www.im.natixis.com.
By internet. If you have established a Personal Identification Number (“PIN”) and you have established the electronic transfer privilege, you can make subsequent investments through your online account at www.im.natixis.com. If you have not established a PIN, but you have established the electronic transfer privilege, go to www.im.natixis.com, click on “Account Access,” and follow the instructions.
Through systematic investing. You can make regular investments of $50 or more per month through automatic deductions from your bank checking or savings account. If you did not establish the electronic transfer privilege on your application, you may add the privilege by obtaining a Service Options Form through your financial adviser, by calling Natixis Funds at 800-225-5478 or by visiting www.im.natixis.com. A medallion signature guarantee may be required to add this option.
Minimum Investment Requirements for each fund and share class are described in the section “Purchase and Sale of Fund Shares.”
Minimum Balance Policy
In order to address the relatively higher costs of servicing smaller fund positions, on an annual basis each Fund may close an account and send the account holder the proceeds if the account falls below $500. The valuation of account balances for this purpose and liquidation itself generally occur during October of each calendar year, although they may occur at another date in the year.
Certain accounts, such as accounts using the Natixis Funds’ prototype document (including IRAs, Keogh Plans, 403(b)(7) plans and Coverdell Education Savings Accounts), accounts associated with fee-based programs (such as wrap programs), trust networked accounts, accounts initially funded within six months of the liquidation date, certain retirement accounts, or accounts that fall below the minimum as a result of an automatic conversion of Class C to Class A shares, are excepted from the liquidation.
Due to operational limitations, the Funds’ ability to apply the Minimum Balance Policy to shareholder accounts held through an intermediary in an omnibus fashion may be limited. The Funds may work with these intermediaries to enforce the Minimum Balance Policy on these accounts as can best be applied per the timing and constraints of the intermediaries’ account recordkeeping systems.
Certain Retirement Plans
Natixis Funds defines “Certain Retirement Plans” as it relates to load waivers, share class eligibility, and account minimums as follows:
Certain Retirement Plans includes 401(k) plans, 457 plans, 401(a) plans (including profit-sharing and money purchase pension plans), 403(b) and 403(b)(7) plans, defined benefit plans, non-qualified deferred compensation plans, Taft Hartley multi-employer plans and retiree health benefit plans. The accounts must be plan level omnibus accounts to qualify.
Certain Retirement Plans does not include individual retirement plan accounts such as IRAs, SIMPLE, SEP, SARSEP, Roth IRA, etc. Any retirement plan accounts registered in the name of a participant would not qualify.
You can redeem shares of each Fund directly from the Fund on any day on which the NYSE is open for business. The information below details the various ways you can redeem shares of a Fund. Except as noted below and in the “Selling Restrictions” section of this Prospectus, each Fund typically expects to pay out redemption proceeds on the next business day after a redemption request is received in good order. The information below also notes certain fees that may be charged by a Fund, its agents, your bank or your financial representative in connection to your redemption request. The Funds do not currently impose any redemption charge other than the contingent deferred sales charge (CDSC) imposed by the Funds’ distributor, as described in the “How Sales Charges Are Calculated” section of this Prospectus. The Funds’ Board of Trustees reserves the right to impose additional charges at any time.
Each Fund may fund a redemption request from various sources, including sales of portfolio securities, holdings of cash or cash equivalents, and borrowings from banks (including overdrafts from the Fund’s custodian bank and/or under the Fund’s line of credit, which is shared across certain other Natixis Funds and Loomis Sayles Funds). Each Fund typically will redeem shares for cash; however, as described in more detail below, each Fund reserves the right to pay the redemption price wholly or partly in-kind (i.e., in portfolio securities rather than cash), if the Fund’s Adviser determines it to be advisable and in the best interest of shareholders. 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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Because large redemptions are likely to require liquidation by a Fund of portfolio holdings, payment for large redemptions may be delayed for up to seven days to provide for orderly liquidation of such holdings. Under unusual circumstances, the Funds may suspend redemptions or postpone payment for more than seven days as permitted by the SEC.
Redemptions totaling more than $100,000 from a single fund/account cannot be processed on the same day unless the proceeds of the redemption are sent via pre-established banking information on the account. Please see the section “STAMP2000 Medallion Signature Guarantee” for details.
Generally, a transaction fee will be charged for expedited payment of redemption proceeds of $5.50 for wire transfers, $50 for international wire transfers or $20.50 for overnight delivery. These fees are subject to change.
Redemptions through your financial adviser. Your financial adviser must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV. Your financial adviser will be responsible for furnishing all necessary documents to Natixis Funds on a timely basis and may charge you for his or her services.
Redemptions through your broker-dealer. You may redeem shares of the Funds through a broker-dealer that has been approved by the Distributor, which can be contacted at 888 Boylston Street, Suite 800, Boston, MA 02199-8197. Your broker-dealer may charge you a fee for effecting such transaction. Your broker-dealer must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV. Your redemptions generally will be wired to your broker-dealer on the first business day after your request is received in good order.
Redemptions directly to the Funds. Natixis Funds’ transfer agent must receive your redemption request in proper form before the close of regular trading on the NYSE in order for you to receive that day’s NAV. Your redemptions generally will be sent to you on the first business day after your request is received in good order, although it may take longer.
You may make redemptions directly from each Fund in several ways:
By mail. Send a signed letter of instruction that includes the name of the Fund, the exact name(s) in which the shares are registered, any special capacity in which you are signing (such as trustee or custodian or on behalf of a partnership, corporation, or other entity), your address, telephone number, account number and the number of shares or dollar amount to be redeemed to the following address:
Regular Mail
Natixis Funds
P.O. Box 219579
Kansas City, MO 64121-9579
Overnight Mail
Natixis Funds
330 West 9th Street
Kansas City, MO 64105-1514
All owners of shares must sign the written request in the exact names in which the shares are registered. The owners should indicate any special capacity in which they are signing (such as trustee or custodian or on behalf of a partnership, corporation or other entity).
By exchange. You may sell some or all of your shares of a Fund and use the proceeds to buy shares of the same class of another sending a signed letter of instruction to Natixis Funds, by calling Natixis Funds at 800-225-5478 or by accessing your account online at www.im.natixis.com.
By internet. If you have established a Personal Identification Number (“PIN”) and you have established the electronic transfer privilege, you can redeem shares through your online account at www.im.natixis.com. If you have not established a PIN but you have established the electronic transfer privilege, go to www.im.natixis.com, click on “Account Access,” and follow the instructions.
By telephone. You may redeem shares by calling Natixis Funds at 800-225-5478. Proceeds from telephone redemption requests (less any applicable fees) can be wired to your bank account, sent electronically by ACH to your bank account or sent by check in the name of the registered owner(s) to the address of record. A wire fee will be deducted from your proceeds. Your bank may charge you a fee to receive the wire.
The telephone redemption privilege may be modified or terminated by the Funds without notice.
You may redeem by telephone to have a check sent to the address of record for the maximum amount of $100,000 per day from a single fund/account. For your protection, telephone or internet redemption requests will not be permitted if Natixis Funds has been notified of an address change or bank account information change for your account within the preceding 30 days. Unless you indicate otherwise on your account application, Natixis Funds will be authorized to accept redemption and transfer instructions by telephone. If you prefer, you can decline telephone redemption and transfer privileges.
Systematic Withdrawal Plan. If the value of your account is $10,000 or more, you can have periodic redemptions automatically paid to you or to someone you designate. Please call 800-225-5478 for more information or to set up a systematic withdrawal plan or visit www.im.natixis.com to obtain a Service Options Form.
In-Kind. Shares normally will be redeemed for cash upon receipt of a redemption request in good order, although each Fund reserves the right to pay the redemption price wholly or partly in-kind if the Fund’s Adviser or Subadviser(s) determines it to be advisable and in the best interest of shareholders. For example, a Fund may pay a redemption in-kind under stressed market conditions or if the redemption amount is large.
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You may also request an in-kind redemption of your shares by calling Natixis Funds at 800-225-5478. In-kind redemptions typically take several weeks to effectuate following a redemption request given the operational steps necessary to coordinate with the redeeming shareholder’s custodian. Typically, the redemption date is mutually-agreed upon by the Fund and the redeeming shareholder. A Fund is not required to pay a redemption in-kind even if requested and may in its discretion pay the redemption proceeds in cash.
Redemptions in-kind will generally, but not necessarily, result in a pro rata distribution of each security held in a Fund’s portfolio. 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.
By wire. Before Natixis Funds can wire redemption proceeds (less any applicable fees) to your bank account, you must provide specific wire instructions to Natixis Funds in writing (see “STAMP2000 Medallion Signature Guarantee” below). A wire fee will be deducted from the proceeds of each wire.
By ACH. Before Natixis Funds can send redemptions through ACH, you must provide specific wiring instructions to Natixis Funds in writing (see “STAMP2000 Medallion Signature Guarantee” below). For ACH redemptions, proceeds will generally arrive at your bank within three business days.
STAMP2000 Medallion Signature Guarantee. You must have your signature guaranteed by a bank, broker-dealer or other financial institution that can issue a STAMP2000 Medallion Signature Guarantee for the following types of redemptions:
| If you are selling more than $100,000 per day from a single fund/account and you are requesting the proceeds by check (this does not apply to IRA transfer of assets to new custodian). |
| If you are requesting that the proceeds check (of any amount) be made out to someone other than the registered owner(s) or sent to an address other than the address of record. |
| If the account registration or bank account information has changed within the past 30 days. |
| If you are instructing us to send the proceeds by check, wire or ACH to a bank not already active on the fund account. |
The Funds will only accept STAMP2000 Medallion Signature Guarantees bearing the STAMP2000 Medallion imprint. The surety amount of the STAMP2000 medallion imprint must meet or exceed the amount on the request. Please note that a notary public cannot provide a STAMP2000 Medallion Signature Guarantee. This signature guarantee requirement may be waived by Natixis Funds in certain cases.
Exchanging or Converting Shares
In general, you may exchange shares of each Fund (excluding Class T shares) for shares of the same class of another Natixis Fund that offers such class of shares, without paying a sales charge or a CDSC, if applicable (see the sections “How to Purchase Shares” and “How to Redeem Shares”) subject to restrictions noted below. Class T shares of the Funds do not have exchange privileges. The exchange must be for at least the minimum to open an account (or the total NAV of your account, whichever is less), or, once the fund minimum is met, exchanges under the Automatic Exchange Plan must be made for at least $50 (see the section “Additional Investor Services”). 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 U.S. 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. Class N shares are not eligible to be exchanged through the website or through the Natixis Funds Automated Voice Response System.
In certain circumstances, you may convert shares of your Fund from your current share class into another share class in the same Fund. A conversion is subject to the eligibility requirements of the share class of your Fund that you are converting into including investment minimum requirements. The conversion from one class of shares to another will be based on the respective NAVs of the separate share classes on the trade date for the conversion. Effective June 1, 2018, except as noted below, Class C shares will automatically convert to Class A shares after 10 years. Generally, to be eligible to have your Class C shares automatically converted to Class A shares, the Fund or the financial intermediary through which you purchased your shares will need to have records verifying that your Class C shares have been held for 10 years. Due to operational limitations at your financial intermediary, your ability to have your Class C shares automatically converted to Class A shares may be limited. Group retirement plans of certain financial intermediaries who hold Class C shares with the Fund in an omnibus account do not track participant level aging of shares and therefore these shares will not be eligible for an automatic conversion. Certain intermediaries may convert your Class C shares to Class A shares in accordance with a conversion schedule that may differ from the one described above. Please consult your financial representative for more information.
Any account with an outstanding CDSC liability will be assessed the CDSC before converting to the new share class. Any conversions into a class of shares with a front end sales charge will not be subject to an initial sales charge; however, future purchases may be subject to a sales charge, if applicable.
Generally, a conversion between share classes of the same fund is a nontaxable event to the shareholder. All requests for conversions must follow the procedures set forth by the Distributor. The Fund reserves the right to refuse any conversion request. Due to operational limitations at your financial intermediary, your ability to convert share classes of the same fund or have your Class C shares automatically converted to Class A shares may be limited. Please consult your financial representative for more information.
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In general, you may sell Class Y shares of any Natixis Fund and use the proceeds to purchase Class I shares in any Loomis Sayles Fund, subject to the eligibility requirements, including fund minimums, of the fund you are purchasing into.
Cost Basis Reporting. Upon the redemption or exchange of your shares in a Fund, the Fund, or, if you purchased your shares through a broker-dealer or other financial intermediary, your financial intermediary will be required to provide you and the Internal Revenue Service (“IRS”) with cost basis and certain other related tax information about the Fund shares you redeemed or exchanged. The cost basis reporting requirement is effective for shares purchased, including through dividend reinvestment, on or after January 1, 2012. Please contact the Fund at 800-225-5478, visit im.natixis.com or consult your financial intermediary, as appropriate, for more information regarding available methods for cost basis reporting and how to select a particular method. Please also consult your tax adviser to determine which available cost basis method is best for you.
Restrictions on Buying, Selling and Exchanging Shares
The Funds discourage excessive short-term trading that may be detrimental to the Funds and their shareholders. Frequent purchases and redemptions of Fund shares by shareholders may present certain risks for other shareholders in a Fund. This includes the risk of diluting the value of Fund shares held by long-term shareholders, interfering with the efficient management of each Fund’s portfolio and increasing brokerage and administrative costs. Funds investing in securities that require special valuation processes (such as foreign securities, below investment grade securities or small-cap securities), also may have increased exposure to these risks. The Board of Trustees has adopted the following policies to address and discourage such trading.
Each Fund reserves the right to suspend or change the terms of purchasing or exchanging shares. Each 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 Fund’s 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 under “How to Redeem Shares.”
Limits on Frequent Trading. Excessive trading activity in a Fund is measured by the number of round trip transactions in a shareholder’s account. A round trip is defined as (1) a purchase (including a purchase by exchange) into a Fund followed by a redemption (including a redemption by exchange) of any amount out of the same Fund; or (2) a redemption (including a redemption by exchange) out of a Fund followed by a purchase (including a purchase by exchange) of any amount into the same Fund. Two round trip transactions in a single Fund within a rolling 90-day period is considered to be excessive and will constitute a violation of the Fund’s trading limitations. After the detection of a first violation, the Fund or the Distributor will issue the shareholder and/or his or her financial intermediary, if any, a written warning. After the detection of a second violation (i.e., two more round trip transactions in the Fund within a rolling 90-day period), the Fund or the Distributor will restrict the account from making subsequent purchases (including purchases by exchange) for 90 days. After the detection of a third violation, the Fund or the Distributor will permanently restrict the account and any other accounts under the shareholder’s control in any Natixis Fund or Loomis Sayles Fund from making subsequent purchases (including purchases by exchange). The above limits are applicable whether a shareholder holds shares directly with a 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 a Fund and the Distributor may consider to be excessive and, at its discretion, a Fund and the Distributor may restrict or prohibit transactions by such identified shareholders or intermediaries.
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. Each Fund may choose to rely on a financial intermediary’s restrictions on frequent trading in place of the Fund’s own restrictions if the Fund determines, at its discretion, that the financial intermediary’s 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 certain funds-of-funds or similar asset allocation programs that rebalance their investments only infrequently. To be eligible for this exemption, the fund-of-funds or asset allocation program must identify itself to and receive prior written approval from a Fund or the Distributor. A Fund and the 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 Fund’s 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 the 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. Under certain circumstances, waivers to these conditions (including waivers to permit more frequent rebalancing) may be approved for programs that in the Fund’s opinion are not vehicles for market timing and are not likely to engage in abusive trading.
Trade Activity Monitoring. Trading activity is monitored selectively on a daily basis in an effort to detect excessive short-term trading activities. If a Fund or the Distributor believes that a shareholder or financial intermediary has engaged in excessive, short-term trading activity, it may, at its discretion, request that the shareholder or financial intermediary stop such activities or refuse to process purchases or exchanges in the accounts. At its discretion, a Fund and the Distributor, as well as an adviser to a Fund may ban trading in an account if, in their judgment, a shareholder or financial intermediary has engaged in short-term transactions that, while not necessarily in violation of the Fund’s stated policies on frequent trading, are harmful to a Fund or its shareholders. A Fund and the Distributor also reserve the right to notify financial intermediaries of the shareholder’s trading activity.
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Accounts Held by Financial Intermediaries. The ability of a Fund and the Distributor to monitor trades that are placed by omnibus or other nominee accounts is severely limited in those instances in which the financial intermediary maintains the record of a Fund’s underlying beneficial owners. In general, each Fund and the Distributor will review trading activity at the omnibus account level. If a 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 excessive short-term trading activity. If a Fund believes that a shareholder has engaged in excessive short-term trading activity in violation of the Fund’s policies through an omnibus account, the Fund will attempt to limit transactions by the underlying shareholder that engaged in such trading, although it may be unable to do so. A Fund may also limit or prohibit additional purchases of Fund shares by an intermediary. Investors should not assume a Fund will be able to detect or prevent all trading practices that may disadvantage a Fund.
Purchase Restrictions
Each Fund is required by federal regulations to obtain certain personal information from you and to use that information to verify your identity. The Funds may not be able to open your account if the requested information is not provided. Each 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 a Fund. Please see the SAI for additional information regarding redemption payment policies.
Restriction |
Situation |
Each Fund may suspend the right of redemption: |
When the New York Stock Exchange (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. |
Each 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. |
Each 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 or if it is advisable for the Fund to redeem in-kind, as determined in the sole discretion of the Adviser or subadviser, or if requested by the redeeming shareholder and agreed to by the Fund. |
Each 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. |
The Funds reserve the right to suspend account services or refuse transaction requests if a Fund receives notice of a dispute between registered owners or of the death of a registered owner or a Fund suspects a fraudulent act. If a Fund refuses a transaction request because it receives notice of a dispute, the transaction will be processed at the NAV next determined after the Fund receives notice that the dispute has been settled or a court order has been entered adjudicating the dispute. If a Fund determines that its suspicion of fraud or belief that a dispute existed was mistaken, the transaction will be processed as of the NAV next determined after the transaction request was first received in good order.
Certificates. Certificates will not be issued or honored for any class of shares.
Shareholders that hold their accounts directly with Funds may use the following self-service options. Shareholders that hold Fund shares through a financial intermediary should consult their financial intermediary regarding any self-service options that they may offer.
(Excludes Class N and Class T shares)
Natixis Funds Website.
You can access our website at www.im.natixis.com to perform transactions (purchases, redemptions or exchanges), review your account information and Fund NAVs, change your address, order duplicate statements or tax forms or obtain a prospectus, an SAI, an application or periodic reports (certain restrictions may apply).
Natixis Funds Automated Voice Response System. You have access to your account 24 hours a day by calling Natixis Funds’ Automated Voice Response System at 800-225-5478, option 1. Using this customer service option, you may review your account balance and Fund NAV, order duplicate statements, order duplicate tax forms, obtain distribution and performance information and obtain wiring instructions (certain restrictions may apply).
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Restructuring and Liquidations
Investors should note that each Fund reserves the right to merge or reorganize at any time, or to cease operations or liquidate itself. At any time prior to the liquidation of a Fund, shareholders may redeem their shares of the Fund pursuant to the procedures set forth under “How to Redeem Shares.” The proceeds from any such redemption will be the NAV of the Fund’s shares. Shareholders may also exchange their shares, subject to investment minimums and other restrictions on exchanges as described under “Exchanging or Converting Shares.” For federal income tax purposes, an exchange of a fund’s shares for shares of another Natixis Fund or Loomis Sayles Fund is generally treated as a sale on which a gain or loss may be recognized.
Retirement Accounts. Absent an instruction to the contrary prior to the liquidation date of a Fund, for shares of a Fund held using a Natixis Funds’ prototype document, in individual retirement accounts, in custodial accounts under a SEP, SIMPLE, SARSEP or 403(b) plan, or in certain other retirement accounts, Natixis Distribution, L.P. will exchange any shares remaining in the Fund on the liquidation date for shares of Loomis Sayles Limited Term Government and Agency Fund (or, if that fund is no longer in existence, then in shares of another comparable Natixis Fund or Loomis Sayles Fund) at NAV, unless contrary instructions are timely received prior to the liquidation. Please refer to your plan documents or contact your plan administrator or plan sponsor to determine whether the preceding sentence applies to you.
NAV is the price of one share of a Fund without a sales charge, and is calculated each business day using this formula:
The NAV of Fund shares is determined pursuant to policies and procedures approved by the Board of Trustees, as summarized below:
| A share’s NAV 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. A Fund’s shares will not be priced on the days on which the NYSE is closed for trading. In addition, a Fund’s 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 NAV next calculated (plus or minus applicable sales charges as described earlier in the Fund Summary) after your order is received by the transfer agent, DST Asset Manager Solutions, Inc., (rather than when the order arrives at the P.O. box) “in good order” (meaning that the order is complete and contains all necessary information).1 |
| Requests received by the Funds after the NYSE closes will be processed based upon the NAV determined at the close of regular trading on the next day that the NYSE is open. If the transfer agent receives the order in good order prior to the NYSE market close (normally 4:00 p.m., Eastern time), the shareholder will receive that day’s NAV. Under limited circumstances, the Distributor may enter into contractual agreements pursuant to which orders received by your investment dealer before a Fund determines its NAV and transmitted to the transfer agent prior to market open on the next business day are processed at the NAV 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 NAV next determined after your investment dealer submits the order to a Fund. |
| If a Fund invests in foreign securities, it may have NAV changes on days when you cannot buy or sell its shares. |
1 | Please see the section “How to Purchase Shares,” which provides additional information regarding who can receive a purchase order. |
Generally, during times of substantial economic or market change, it may be difficult to place your order by phone. During these times, you may send your order by mail as described in the sections “How to Purchase Shares” and “How to Redeem Shares.”
Fund securities and other investments for which market quotations are readily available, as outlined in the Funds’ policies and procedures, are valued at market value. The Fund may use independent pricing services recommended by the Adviser and Subadviser and approved by the Board of Trustees to obtain market quotations. Generally, Fund securities and other investments are valued as follows:
| Equity securities (including shares of closed-end investment companies and exchange-traded funds (“ETFs”)), exchange traded notes, rights, and warrants — listed equity securities are valued at the last sale price quoted on the exchange where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. 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 quotations on the applicable NASDAQ Market. Unlisted equity securities (except unlisted preferred equity securities discussed below) are valued at the last sale price quoted in the market where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. If there is no sale price or closing bid quotation available, unlisted equity securities will be valued using evaluated bids furnished by an independent pricing service, if available. In some foreign markets, an official close price and a last sale price may be available from the foreign exchange or market. In those cases, the official close price is used. Valuations based on information from foreign markets may be subject to the Funds’ fair value policies described below. If a right is not traded on any exchange, its value is based on the market value of the underlying security, less the cost to subscribe to the underlying security (e.g., to exercise the right), adjusted for the subscription ratio. If a warrant is not traded on any exchange, a price is obtained from a broker-dealer. |
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| Debt securities and unlisted preferred equity securities — evaluated bids furnished to a Fund by an independent pricing service using market information, transactions for comparable securities and various relationships between securities, if available, or bid prices obtained from broker-dealers. |
| Senior Loans — bid prices supplied by an independent pricing service, if available, or bid prices obtained from broker-dealers. |
| Bilateral Swaps — bilateral credit default swaps are valued based on mid prices (between the bid price and the ask price) supplied by an independent pricing service. Bilateral interest rate swaps and bilateral standardized commodity and equity index total return swaps are valued based on prices supplied by an independent pricing service. If prices from an independent pricing service are not available, prices from a broker-dealer may be used. |
| Centrally Cleared Swaps — settlement prices of the clearing house on which the contracts were traded or prices obtained from broker-dealers. |
| Options — domestic exchange-traded single name equity options contracts (including options on ETFs) are valued at the mean of the National Best Bid and Offer quotations. Foreign exchange-traded single name equity options contracts are valued at the most recent settlement price. Options contracts on domestic indices shall be priced at the average of the closing bid and ask quotations as of the close of trading on the Chicago Board Options Exchange (“CBOE”). On the last business day of the month, the Funds will fair value the S&P 500® index options using the closing rotation values published by the CBOE. Options contracts on foreign indices are priced at the most recent settlement price. Options on futures contracts are valued using the current settlement price on the exchange on which, over time, they are traded most extensively. Other exchange-traded options are valued at the average of the closing bid and ask quotations on the exchange on which, over time, they are traded most extensively. Over-the-counter (“OTC”) currency options and swaptions are valued at mid prices (between the bid and asking price) supplied by an independent pricing service, if available. Other OTC options contracts (including currency options and swaptions not priced through an independent pricing service) are valued based on prices obtained from brokerdealers. Valuations based on information from foreign markets may be subject to the Fund’s fair value policies described below. |
| Futures — most recent settlement price on the exchange on which the Adviser or Subadviser believes that, over time, they are traded most extensively. Valuations based on information from foreign markets may be subject to the Funds’ fair value policies described below. |
| Forward Foreign Currency Contracts — interpolated rates determined based on information provided by an independent pricing service. |
Foreign denominated assets and liabilities are translated into U.S. dollars based upon foreign exchange rates supplied by an independent pricing service. Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the Adviser or Subadviser pursuant to procedures approved by the Board of Trustees. A Fund may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign 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 issuer’s 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). When fair valuing its securities or other investments, each Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities or other market activity and/or significant events that occur after the close of the foreign market and before the time a Fund’s NAV is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Fund’s NAV 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 a Fund. Valuations for securities traded in the OTC market may be based on factors such as market information,transactions for comparable securities, various relationships between securities or bid prices obtained from broker-dealers. Evaluated prices from an independent pricing service may require subjective determinations and may be different than actual market prices or prices provided by other pricing services.
Trading in some of the portfolio securities or other investments of some of the Funds 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 these Funds’ NAV does not take place at the same time as the prices of many of its portfolio securities or other investments are determined, and the value of these Funds’ portfolios may change on days when these Funds are not open for business and their shares may not be purchased or redeemed.
The Funds generally distribute annually all or substantially all of their net investment income (other than capital gains) in the form of dividends. The following table shows when each Fund expects to distribute dividends. Each Fund expects to distribute all or substantially all of its net realized long- and short-term capital gains annually (or, in the case of short-term capital gains, more frequently than annually if determined by the Fund to be in the best interest of shareholders), after applying any capital loss carryovers. To the extent permitted by law, the Board of Trustees may adopt a different schedule for making distributions as long as payments are made at least annually. A Fund’s distribution rate fluctuates over time for various reasons, and there can be no assurance that a Fund’s distributions will not decrease or that a Fund will make any distributions when scheduled. For example, foreign currency losses potentially reduce or eliminate, and have in the past reduced, regularly scheduled distributions for the Loomis Sayles Multi-Asset Income Fund, Loomis Sayles High Income Fund and Loomis Sayles Investment Grade Bond Fund.
Dividend Payment Schedule | ||
Annually |
Quarterly |
Monthly |
Mirova Global Sustainable Equity Fund |
Mirova Global Green Bond Fund |
Loomis Sayles High Income Fund |
Mirova International Sustainable Equity Fund |
|
Loomis Sayles Investment Grade Bond Fund |
Natixis Oakmark Fund |
|
Loomis Sayles Multi-Asset Income Fund |
94
Fund Services
Dividend Payment Schedule | ||
Annually |
Quarterly |
Monthly |
Natixis Oakmark International Fund |
|
|
Natixis U.S. Equity Opportunities Fund |
|
|
Vaughan Nelson Small Cap Value Fund |
|
|
Vaughan Nelson Value Opportunity Fund |
|
|
Distributions will automatically be reinvested in shares of the same class of the distributing Fund at NAV 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 NAV 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 the 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; or |
| Receive all distributions in cash. |
If a dividend or capital gain distribution check remains uncashed for six months and your account is still open, each Fund will reinvest the dividend or distribution in additional shares of the Fund promptly after making this determination and the check will be canceled. In addition, future dividends and capital gain distributions will be automatically reinvested in additional shares of the Fund unless you subsequently contact the Fund and request to receive distributions by check.
If you do not select an option when you open your account, all distributions will be reinvested.
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 year’s distributions on your U.S. federal income tax return. This information will also be reported to the IRS. Be sure to keep this Form 1099 as a permanent record. A fee may be charged for any duplicate information requested.
Except as noted, the discussion below addresses only the U.S. federal income tax consequences of an investment in the Funds and does not address any non-U.S., state or local tax consequences.
Each Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, (the “Code”) necessary to qualify and be eligible for treatment each year as a “regulated investment company” and thus does not expect to pay any U.S. federal income tax on income and capital gains that are timely distributed to shareholders.
Unless otherwise noted, the discussion below, to the extent it describes shareholder-level tax consequences, pertains solely to taxable shareholders.
Taxation of Distributions from the Funds. For U.S. federal income tax purposes, distributions of investment income are generally taxable to Fund shareholders as ordinary income. Taxes on distributions of capital gains are determined by how long a Fund owned (or is deemed to have 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 that a Fund owned (or is deemed to have owned) for more than one year over net short-term capital losses from the sale of investments that a Fund owned (or is deemed to have owned) for one year or less, and that are properly reported by the Fund as capital gain dividends (“Capital Gain Dividends”) generally will be taxable to a shareholder receiving such distributions as long-term capital gain includible in net capital gain and taxed to individuals at reduced rates. Distributions attributable to the excess of net short-term capital gains from the sale of investments that a Fund owned (or is deemed to have owned) for one year or less over net long-term capital losses from the sale of investments that a Fund owned (or is deemed to have owned) for more than one year, will be taxable as ordinary income. A Fund’s transactions in derivatives or short sales may cause a larger portion of distributions to be taxable to shareholders as ordinary income than would be the case absent such transactions.
Distributions of investment income properly reported by a Fund as derived from “qualified dividend income” will be taxed in the hands of individuals at the reduced rates applicable to net capital gain, provided holding period and other requirements are met at both the shareholder and Fund levels. Income generated by investments in fixed-income securities, derivatives and REITs generally is not eligible for treatment as qualified dividend income. Dividends received by a Fund from foreign corporations that are not eligible for the benefits of a comprehensive income tax treaty with the U.S. (other than dividends paid on stock of such a foreign corporation that is readily tradable on an established securities market in the U.S.) will not be eligible for treatment as qualified dividend income.
An additional Medicare contribution tax is imposed on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. Net investment income generally includes for this purpose dividends, including any Capital Gain Dividends paid by a Fund, and net capital gains recognized on the sale, redemption, exchange or other taxable disposition of shares of a Fund.
Fund distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares. In addition, Fund distributions are taxable to shareholders even if they are paid from income or gains earned by a Fund before a shareholder’s investment (and thus were included in the price the
95
Fund Services
shareholder paid for his or her shares). Such distributions are likely to occur in respect of shares purchased at a time when the Fund’s NAV reflects gains that are either unrealized or realized but not distributed.
Dividends and distributions declared by a Fund and payable to shareholders of record in October, November or December of one year and paid in January of the next year generally are taxable in the year in which the distributions are declared, rather than the 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. Each Fund will advise shareholders annually of the proportion of its dividends that are derived from such interest.
Distributions by a Fund to retirement plans and other investors that qualify for tax-advantaged treatment under U.S. federal income tax laws generally will not be taxable, although distributions by retirement plans to their participants may be taxable. Special tax rules apply to investments through such retirement plans. If your investment is through such a plan, you should consult your tax adviser to determine the suitability of the Funds as an investment through your plan and the tax treatment of distributions to you (including distributions of amounts attributable to an investment in a Fund) from the plan.
Redemption, Sale or Exchange of Fund Shares. A redemption, sale or exchange of Fund shares (including an exchange of Fund shares for shares of another Natixis Fund or Loomis Sayles Fund) is a taxable event and generally will result in recognition of gain or loss. Gain or loss, if any, recognized by a shareholder on a redemption, sale, exchange or other taxable disposition of Fund shares generally will be taxed as long-term capital gain or loss if the shareholder held the shares for more than one year, and as short-term capital gain or loss if the shareholder held the shares for one year or less, assuming in each case that the shareholder held the shares as capital assets. Short-term capital gains generally are taxed at the rates applicable to ordinary income. Any loss realized upon a disposition of shares held for six months or less will be treated as long-term, rather than short-term, capital loss to the extent of any Capital Gain Dividends received by the shareholder with respect to the shares. The deductibility of capital losses is subject to limitations.
Taxation of Certain Fund Investments. A Fund’s investments in foreign securities may be subject to foreign withholding or other taxes. In that case, the Fund’s yield on those securities would be decreased. If a Fund invests more than 50% of its assets in foreign securities, it
generally may elect to permit shareholders to claim a credit or deduction on their income tax returns with respect to
foreign taxes paid by the Fund. In addition, a Fund’s investments in foreign securities and foreign currency may
be subject to special tax rules that have the effect of increasing or accelerating the Fund’s recognition of ordinary income and may affect the timing or amount of the Fund’s distributions to shareholders.
A Fund’s transactions in derivatives or short sales may cause a larger portion of distributions to be taxable to shareholders
as ordinary income than would be the case absent such transactions. A Fund’s investments in certain debt
obligations (such as those issued with “OID” or having accrued market discount, as described in the
SAI) or derivatives may cause the Fund to recognize taxable income in excess of the cash generated by such investments. Thus, a Fund could be required to liquidate investments, including at times when it is not advantageous to do so, in order to satisfy the distribution
requirements applicable to regulated investment companies under the Code. In addition, a Fund’s investments in
derivatives may affect the amount, timing or character of distributions to shareholders.
A Fund’s investments 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, a Fund could be required to liquidate investments, including at times when it is not advantageous to do so, in order to satisfy its distribution requirements. A Fund may at times purchase debt instruments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax purposes, some or all of this market discount will, when recognized as income by a Fund, be included in such Fund’s ordinary income, and will be taxable to shareholders as such when it is distributed.
Backup Withholding. Each Fund is required in certain circumstances to apply backup withholding on taxable dividends, redemption proceeds and certain other payments that are paid to any shareholder who does not furnish to the Fund certain information and certifications or who is otherwise subject to backup withholding.
Please see the SAI for additional information on the U.S. federal income tax consequences of an investment in a Fund.
You should consult your tax adviser for more information on your own situation, including possible U.S. federal, state, local, foreign or other applicable taxes.
Retirement Plans
Natixis Funds offer a range of retirement plans, including Coverdell Education Savings Accounts, IRAs, SEPs and other pension and profit sharing plans. For more information about our Retirement Plans, call us at 800-225-5478.
Investment Builder Program
(Excludes Class T shares)
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 “How to Purchase Shares.”
Dividend Diversification Program
(Excludes Class T shares)
96
Prior Related Performance of Similarly Managed Accounts
This program 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 eligibility requirements of that other fund and to state securities law requirements. The fund minimum must be met in the new fund prior to establishing the dividend diversification program. Shares will be purchased at the selected fund’s NAV without a front-end sales charge or CDSC on the ex dividend date. Before establishing a Dividend Diversification Program into any other Natixis Fund, please read its prospectus carefully.
Automatic Exchange Plan
(Excludes Class T shares)
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. The fund minimum must be met prior to establishing an automatic exchange plan. There is no fee for exchanges made under this plan. Please see the section “Exchanging or Converting Shares” above and refer to the SAI for more information on the Automatic Exchange Plan.
Systematic Withdrawal Plan
(Excludes Class T shares)
This plan allows you to redeem shares and receive payments from a Fund on a regular schedule. Redemptions of shares that are part of the Systematic Withdrawal Plan are 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 “How to Redeem Shares.”
Prior Related Performance of Similarly Managed Accounts
Mirova Global Sustainable Equity Fund
The following table sets forth historical performance information for the institutional accounts and accounts of pooled investment vehicles (the “Composite”) that have substantially similar investment objectives, policies and strategies as the Fund. The Composite consists of two pooled investment vehicles managed by Mirova US. Mirova has entered into a personnel-sharing arrangement with Mirova US with respect to management of the Fund, as further described in the section “Management Team” above.
The Composite data is provided to illustrate the past performance of substantially similar accounts as measured against a specified market index and does not represent the performance of the Fund. The Composite is separate and distinct from the Fund; the performance of the composite is not intended as a substitute for the Fund’s performance and should not be considered a prediction of the future performance of the Fund or of Mirova US or Mirova.
The Composite’s returns were calculated on a total return basis, and assume the reinvestment of dividends, capital gains and other earnings. All returns are net of trading costs, without provision for U.S. federal or state income taxes. “Net of Fees” figures also reflect the deduction of all fees applicable to the account in the composite including a bundled fee (which includes all effective charges for management fees, custody and other administrative fees) and performance fees. The Composite includes the accounts with assets of at least 8 million managed by Mirova or Mirova US that has investment objectives, policies and strategies substantially similar to those of the Fund.
Other substantially similar accounts may be included in the future. However, if the net assets of a portfolio drop below 8 million (but stay above 4.5 million) for a period of 6 months and then return to a level of 8 million or higher, the portfolio will not be excluded. The 8 million threshold described above represents Mirova US’s current assessment of the lowest asset size that would reasonably allow for full implementation of the management process employed by the Fund.
A portfolio is included in the Composite at the beginning of the month following either its creation or the date at which it first meets the inclusion guidelines. Similarly, a portfolio is taken out of the Composite at the end of the month preceding either its liquidation or the date at which it ceases to meet the inclusion criteria. The Composite may include both tax-exempt and taxable accounts.
Securities transactions are accounted for on trade date and accrual accounting is utilized. Cash and equivalents are included in performance returns. Monthly returns of the Composite combine the individual account’s returns by asset-weighting the account’s asset value as of the last trading day of the month. Monthly returns are linked together in order to calculate annual returns. Performance information shown below was calculated differently than the methodology mandated by the SEC for registered investment companies.
The accounts that are included in the Composite may not be subject to the diversification requirements, specific tax restrictions and investment limitations imposed on the Fund by the Investment Company Act of 1940 or Subchapter M of the Internal Revenue Code. Consequently, the performance results for the Composite would have been less favorable had the underlying account been subject to the same expenses as the Fund and may have been less favorable had it been regulated as an investment company under the federal securities laws. One account in the Composite was denominated in euro. Consequently, the performance of the Composite would have been different had the account been denominated in U.S. dollars. The expenses used in the Composite are lower than those used in the Fund.
97
Financial Performance
The returns set forth below may not be representative of the results that may be achieved by the Fund in the future, in part because the past results are not necessarily indicative of future results. In addition, the results presented below may not necessarily equate with the return experienced by any particular investor as a result of the timing of investments and redemptions, market conditions and other factors. The effect of taxes on any investor will depend on such person’s tax status, and the results have not been reduced to reflect any income tax that may have been payable.
The table below shows the annual total returns for the Composite, and a broad-based securities market index for periods ended December 31, 2018.
Mirova’s Prior Performance of Similar Accounts Relating to the Fund
Average Annual Total Returns |
Past 1 Year |
Past 5 Years |
Since Inception |
Mirova Global Equity Composite (Net of Fees) |
-7.18% |
4.75% |
6.01% |
Mirova Global Equity Composite (Gross of Fees) |
-6.28% |
5.67% |
6.95% |
MSCI World Index (Net) |
-8.71% |
4.56% |
5.19% |
* | Jens Peers, CFA® has managed the accounts in the Composite since their inception. Hua Cheng, CFA®, PhD was added to the management team of the account in the Composite on March 3, 2014. Amber Fairbanks was added to the management team of the accounts in the Composite on November 1st 2018, replacing Suzanne Senellart. |
The financial highlights tables are intended to help you understand each Fund’s financial performance for the last five years (or, if shorter, the period of the Fund’s operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the return that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, whose report, along with each Fund’s financial statements, is included in the Funds’ annual report to shareholders. The annual report is incorporated by reference into the SAI, both of which are available free of charge upon request from the Distributor.
The Class T shares of each Fund, as applicable, have not commenced operations and had no performance history as of the date of this Prospectus. Therefore, financial highlights tables are not included for Class T shares of the Funds.
98
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles High Income Fund
|
Class A | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
4.25 |
$ |
4.37 |
$ |
4.23 |
$ |
3.99 |
$ |
4.49 |
$ |
4.59 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.05 |
|
0.20 |
|
0.22 |
|
0.20 |
|
0.19 |
|
0.21 |
Net realized and |
|
(0.24
) |
|
(0.14
) |
|
0.12 |
|
0.21 |
|
(0.39
) |
|
0.17 |
Total from Investment |
|
(0.19
) |
|
0.06 |
|
0.34 |
|
0.41 |
|
(0.20
) |
|
0.38 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.06
) |
|
(0.18
) |
|
(0.20
) |
|
(0.16
) |
|
(0.19
) |
|
(0.22
) |
Net realized capital gains |
|
(0.01
) |
|
- |
|
- |
|
(0.01
) |
|
(0.11
) |
|
(0.26
) |
Total Distributions |
|
(0.07
) |
|
(0.18
) |
|
(0.20
) |
|
(0.17
) |
|
(0.30
) |
|
(0.48
) |
Net asset value, end of |
$ |
3.99 |
$ |
4.25 |
$ |
4.37 |
$ |
4.23 |
$ |
3.99 |
$ |
4.49 |
Total return(b) |
|
(4.54
)% (c)(d) |
|
1.41
% (c) |
|
8.17
% (c) |
|
10.66
% (c) |
|
(4.78
)% (c) |
|
8.42
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
23,125 |
$ |
26,175 |
$ |
34,039 |
$ |
34,820 |
$ |
37,870 |
$ |
42,630 |
Net expenses |
|
1.05
% (e)(f) |
|
1.05
% (e) |
|
1.09
% (e)(g) |
|
1.10
% (e) |
|
1.11
% (e)(h) |
|
1.14
% |
Gross expenses |
|
1.27
% (f) |
|
1.16
% |
|
1.15
% |
|
1.14
% |
|
1.13
% |
|
1.14
% |
Net investment income |
|
5.13
% (f) |
|
4.73
% |
|
5.03
% |
|
5.16
% |
|
4.41
% |
|
4.57
% |
Portfolio turnover rate |
|
17
% |
|
55
% |
|
46
% |
|
38
% |
|
69
% |
|
59
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
Periods less than one year are not annualized. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Effective July 1, 2017, the expense limit decreased to 1.05%. |
(h) |
Effective July 1, 2015, the expense limit decreased to 1.10%. |
99
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles High Income Fund
|
Class C | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
4.27 |
$ |
4.38 |
$ |
4.24 |
$ |
4.00 |
$ |
4.50 |
$ |
4.61 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.05 |
|
0.17 |
|
0.18 |
|
0.18 |
|
0.16 |
|
0.18 |
Net realized and |
|
(0.26
) |
|
(0.13
) |
|
0.12 |
|
0.20 |
|
(0.39
) |
|
0.16 |
Total from Investment |
|
(0.21
) |
|
0.04 |
|
0.30 |
|
0.38 |
|
(0.23
) |
|
0.34 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.05
) |
|
(0.15
) |
|
(0.16
) |
|
(0.13
) |
|
(0.16
) |
|
(0.19
) |
Net realized capital gains |
|
(0.01
) |
|
- |
|
- |
|
(0.01
) |
|
(0.11
) |
|
(0.26
) |
Total Distributions |
|
(0.06
) |
|
(0.15
) |
|
(0.16
) |
|
(0.14
) |
|
(0.27
) |
|
(0.45
) |
Net asset value, end of |
$ |
4.00 |
$ |
4.27 |
$ |
4.38 |
$ |
4.24 |
$ |
4.00 |
$ |
4.50 |
Total return(b) |
|
(4.95
)% (c)(d) |
|
0.86
% (c) |
|
7.33
% (c) |
|
9.81
% (c) |
|
(5.48
)% (c) |
|
7.60
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
5,351 |
$ |
6,248 |
$ |
11,227 |
$ |
12,288 |
$ |
12,609 |
$ |
14,555 |
Net expenses |
|
1.80
% (e)(f) |
|
1.80
% (e) |
|
1.84
% (e)(g) |
|
1.85
% (e) |
|
1.86
% (e)(h) |
|
1.89
% |
Gross expenses |
|
2.02
% (f) |
|
1.91
% |
|
1.90
% |
|
1.89
% |
|
1.88
% |
|
1.89
% |
Net investment income |
|
4.38
% (f) |
|
3.99
% |
|
4.29
% |
|
4.43
% |
|
3.68
% |
|
3.84
% |
Portfolio turnover rate |
|
17
% |
|
55
% |
|
46
% |
|
38
% |
|
69
% |
|
59
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
Periods less than one year are not annualized. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Effective July 1, 2017, the expense limit decreased to 1.80%. |
(h) |
Effective July 1, 2015, the expense limit decreased to 1.85%. |
100
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles High Income Fund
|
Class N | |||||
|
Period Ended |
Year Ended |
Period Ended | |||
Net asset value, beginning of the period |
$ |
4.25 |
$ |
4.36 |
$ |
4.16 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
Net investment income(a) |
|
0.06 |
|
0.20 |
|
0.19 |
Net realized and unrealized gain (loss) |
|
(0.25
) |
|
(0.12
) |
|
0.18 |
Total from Investment Operations |
|
(0.19
) |
|
0.08 |
|
0.37 |
Less Distributions From: |
|
|
|
|
|
|
Net investment income |
|
(0.06
) |
|
(0.19
) |
|
(0.17
) |
Net realized capital gains |
|
(0.01
) |
|
- |
|
- |
Total Distributions |
|
(0.07
) |
|
(0.19
) |
|
(0.17
) |
Net asset value, end of the period |
$ |
3.99 |
$ |
4.25 |
$ |
4.36 |
Total return(b) |
|
(4.47
)% (c) |
|
1.96
% |
|
8.99
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
10,417 |
$ |
10,338 |
$ |
1 |
Net expenses(d) |
|
0.75
% (e) |
|
0.75
% |
|
0.75
% (e)(f) |
Gross expenses |
|
0.89
% (e) |
|
0.79
% |
|
31.73
% (e) |
Net investment income |
|
5.45
% (e) |
|
4.65
% |
|
5.19
% (e) |
Portfolio turnover rate |
|
17
% |
|
55
% |
|
46
% (g) |
* |
For the three month period ended December 31, 2018. |
** |
From commencement of Class operations on November 30, 2016 through September 30, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Effective July 1, 2017, the expense limit decreased to 0.75%. |
(g) |
Represents the Fund’s portfolio turnover rate for the year ended September 30, 2017. |
101
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles High Income Fund
|
Class Y | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
4.24 |
$ |
4.36 |
$ |
4.22 |
$ |
3.98 |
$ |
4.48 |
$ |
4.59 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.06 |
|
0.21 |
|
0.23 |
|
0.21 |
|
0.20 |
|
0.22 |
Net realized and |
|
(0.25
) |
|
(0.14
) |
|
0.12 |
|
0.21 |
|
(0.39
) |
|
0.16 |
Total from Investment |
|
(0.19
) |
|
0.07 |
|
0.35 |
|
0.42 |
|
(0.19
) |
|
0.38 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.06
) |
|
(0.19
) |
|
(0.21
) |
|
(0.17
) |
|
(0.20
) |
|
(0.23
) |
Net realized capital gains |
|
(0.01
) |
|
- |
|
- |
|
(0.01
) |
|
(0.11
) |
|
(0.26
) |
Total Distributions |
|
(0.07
) |
|
(0.19
) |
|
(0.21
) |
|
(0.18
) |
|
(0.31
) |
|
(0.49
) |
Net asset value, end of |
$ |
3.98 |
$ |
4.24 |
$ |
4.36 |
$ |
4.22 |
$ |
3.98 |
$ |
4.48 |
Total return |
|
(4.49
)% (b)(c) |
|
1.68
% (b) |
|
8.47
% (b) |
|
10.98
% (b) |
|
(4.54
)% (b) |
|
8.72
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
97,585 |
$ |
127,699 |
$ |
133,940 |
$ |
129,169 |
$ |
116,837 |
$ |
125,185 |
Net expenses |
|
0.80
% (d)(e) |
|
0.80
% (d) |
|
0.84
% (d)(f) |
|
0.85
% (d) |
|
0.86
% (d)(g) |
|
0.89
% |
Gross expenses |
|
1.02
% (e) |
|
0.91
% |
|
0.90
% |
|
0.89
% |
|
0.88
% |
|
0.89
% |
Net investment income |
|
5.39
% (e) |
|
4.98
% |
|
5.28
% |
|
5.43
% |
|
4.67
% |
|
4.83
% |
Portfolio turnover rate |
|
17
% |
|
55
% |
|
46
% |
|
38
% |
|
69
% |
|
59
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Effective July 1, 2017, the expense limit decreased to 0.80%. |
(g) |
Effective July 1, 2015, the expense limit decreased to 0.85%. |
102
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Investment Grade Bond Fund
|
Class A | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
10.98 |
$ |
11.30 |
$ |
11.59 |
$ |
11.10 |
$ |
12.11 |
$ |
12.22 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.08 |
|
0.30 |
|
0.36 |
|
0.39 |
|
0.40 |
|
0.46 |
Net realized and |
|
(0.16
) |
|
(0.28
) |
|
0.05 |
|
0.48 |
|
(0.95
) |
|
0.26 |
Total from Investment |
|
(0.08
) |
|
0.02 |
|
0.41 |
|
0.87 |
|
(0.55
) |
|
0.72 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.08
) |
|
(0.21
) |
|
(0.26
) |
|
(0.23
) |
|
(0.34
) |
|
(0.51
) |
Net realized capital gains |
|
(0.05
) |
|
(0.13
) |
|
(0.44
) |
|
(0.15
) |
|
(0.12
) |
|
(0.32
) |
Total Distributions |
|
(0.13
) |
|
(0.34
) |
|
(0.70
) |
|
(0.38
) |
|
(0.46
) |
|
(0.83
) |
Net asset value, end of |
$ |
10.77 |
$ |
10.98 |
$ |
11.30 |
$ |
11.59 |
$ |
11.10 |
$ |
12.11 |
Total return(b) |
|
(0.66
)% (c)(d) |
|
0.19
% (c) |
|
3.88
% |
|
8.06
% |
|
(4.72
)% |
|
6.04
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
721,110 |
$ |
777,391 |
$ |
902,955 |
$ |
1,130,260 |
$ |
1,628,216 |
$ |
1,932,847 |
Net expenses |
|
0.78
% (e)(f) |
|
0.80
% (e)(g) |
|
0.82
% (h) |
|
0.85
% |
|
0.83
% |
|
0.83
% |
Gross expenses |
|
0.82
% (f) |
|
0.82
% |
|
0.82
% |
|
0.85
% |
|
0.83
% |
|
0.83
% |
Net investment income |
|
3.09
% (f) |
|
2.73
% |
|
3.23
% |
|
3.49
% |
|
3.38
% |
|
3.75
% |
Portfolio turnover rate |
|
39
% (i) |
|
3
% |
|
10
% |
|
11
% |
|
23
% |
|
19
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
Periods less than one year are not annualized. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Effective July 1, 2018, the expense limit decreased to 0.78%. |
(h) |
Effective July 1, 2017, the expense limit decreased to 0.80%. |
(i) |
The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund. |
103
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Investment Grade Bond Fund
|
Class C | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
10.86 |
$ |
11.19 |
$ |
11.48 |
$ |
11.00 |
$ |
12.00 |
$ |
12.11 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.06 |
|
0.22 |
|
0.27 |
|
0.30 |
|
0.31 |
|
0.36 |
Net realized and |
|
(0.16
) |
|
(0.28
) |
|
0.06 |
|
0.47 |
|
(0.94
) |
|
0.27 |
Total from Investment |
|
(0.10
) |
|
(0.06
) |
|
0.33 |
|
0.77 |
|
(0.63
) |
|
0.63 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.06
) |
|
(0.14
) |
|
(0.18
) |
|
(0.14
) |
|
(0.25
) |
|
(0.42
) |
Net realized capital gains |
|
(0.05
) |
|
(0.13
) |
|
(0.44
) |
|
(0.15
) |
|
(0.12
) |
|
(0.32
) |
Total Distributions |
|
(0.11
) |
|
(0.27
) |
|
(0.62
) |
|
(0.29
) |
|
(0.37
) |
|
(0.74
) |
Net asset value, end of |
$ |
10.65 |
$ |
10.86 |
$ |
11.19 |
$ |
11.48 |
$ |
11.00 |
$ |
12.00 |
Total return(b) |
|
(0.86
)% (c)(d) |
|
(0.53
)% (d) |
|
3.12
% |
|
7.18
% |
|
(5.40
)% |
|
5.29
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
366,068 |
$ |
412,788 |
$ |
689,798 |
$ |
1,001,522 |
$ |
1,219,687 |
$ |
1,524,806 |
Net expenses |
|
1.53
% (e)(f) |
|
1.55
% (e)(g) |
|
1.57
% (h) |
|
1.60
% |
|
1.58
% |
|
1.58
% |
Gross expenses |
|
1.57
% (f) |
|
1.57
% |
|
1.57
% |
|
1.60
% |
|
1.58
% |
|
1.58
% |
Net investment income |
|
2.34
% (f) |
|
1.96
% |
|
2.49
% |
|
2.74
% |
|
2.63
% |
|
3.00
% |
Portfolio turnover rate |
|
39
% (i) |
|
3
% |
|
10
% |
|
11
% |
|
23
% |
|
19
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(c) |
Periods less than one year are not annualized. |
(d) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Effective July 1, 2018, the expense limit decreased to 1.53%. |
(h) |
Effective July 1, 2017, the expense limit decreased to 1.55%. |
(i) |
The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund. |
104
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Investment Grade Bond Fund
|
Class N | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
10.98 |
$ |
11.30 |
$ |
11.58 |
$ |
11.11 |
$ |
12.11 |
$ |
12.22 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.09 |
|
0.34 |
|
0.39 |
|
0.43 |
|
0.44 |
|
0.50 |
Net realized and |
|
(0.15
) |
|
(0.28
) |
|
0.07 |
|
0.47 |
|
(0.93
) |
|
0.26 |
Total from Investment |
|
(0.06
) |
|
0.06 |
|
0.46 |
|
0.90 |
|
(0.49
) |
|
0.76 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.09
) |
|
(0.25
) |
|
(0.30
) |
|
(0.28
) |
|
(0.39
) |
|
(0.55
) |
Net realized capital gains |
|
(0.05
) |
|
(0.13
) |
|
(0.44
) |
|
(0.15
) |
|
(0.12
) |
|
(0.32
) |
Total Distributions |
|
(0.14
) |
|
(0.38
) |
|
(0.74
) |
|
(0.43
) |
|
(0.51
) |
|
(0.87
) |
Net asset value, end of |
$ |
10.78 |
$ |
10.98 |
$ |
11.30 |
$ |
11.58 |
$ |
11.11 |
$ |
12.11 |
Total return |
|
(0.58
)% (b) |
|
0.50
% |
|
4.34
% |
|
8.31
% |
|
(4.28
)% |
|
6.41
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
1,216,690 |
$ |
1,251,189 |
$ |
1,203,169 |
$ |
47,343 |
$ |
21,851 |
$ |
6,101 |
Net expenses |
|
0.48
% (c) |
|
0.47
% (d) |
|
0.48
% (e) |
|
0.47
% |
|
0.47
% |
|
0.47
% (f) |
Gross expenses |
|
0.48
% (c) |
|
0.47
% |
|
0.48
% |
|
0.47
% |
|
0.47
% |
|
0.47
% (f) |
Net investment income |
|
3.40
% (c) |
|
3.05
% |
|
3.51
% |
|
3.88
% |
|
3.78
% |
|
4.07
% |
Portfolio turnover rate |
|
39
% (g) |
|
3
% |
|
10
% |
|
11
% |
|
23
% |
|
19
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Periods less than one year are not annualized. |
(c) |
Computed on an annualized basis for periods less than one year. |
(d) |
Effective July 1, 2018, the expense limit decreased to 0.48%. |
(e) |
Effective July 1, 2017, the expense limit decreased to 0.50%. |
(f) |
Includes fee/expense recovery of less than 0.01%. |
(g) |
The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund. |
105
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Investment Grade Bond Fund
|
Class Y | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
10.99 |
$ |
11.31 |
$ |
11.59 |
$ |
11.11 |
$ |
12.12 |
$ |
12.23 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.09 |
|
0.33 |
|
0.39 |
|
0.42 |
|
0.43 |
|
0.49 |
Net realized and |
|
(0.16
) |
|
(0.28
) |
|
0.06 |
|
0.47 |
|
(0.95
) |
|
0.26 |
Total from Investment |
|
(0.07
) |
|
0.05 |
|
0.45 |
|
0.89 |
|
(0.52
) |
|
0.75 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.09
) |
|
(0.24
) |
|
(0.29
) |
|
(0.26
) |
|
(0.37
) |
|
(0.54
) |
Net realized capital gains |
|
(0.05
) |
|
(0.13
) |
|
(0.44
) |
|
(0.15
) |
|
(0.12
) |
|
(0.32
) |
Total Distributions |
|
(0.14
) |
|
(0.37
) |
|
(0.73
) |
|
(0.41
) |
|
(0.49
) |
|
(0.86
) |
Net asset value, end of |
$ |
10.78 |
$ |
10.99 |
$ |
11.31 |
$ |
11.59 |
$ |
11.11 |
$ |
12.12 |
Total return |
|
(0.59
)% (b)(c) |
|
0.43
% (c) |
|
4.24
% |
|
8.25
% |
|
(4.47
)% |
|
6.30
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
2,912,537 |
$ |
3,001,906 |
$ |
3,453,137 |
$ |
4,571,167 |
$ |
6,081,536 |
$ |
6,911,938 |
Net expenses |
|
0.53
% (d)(e) |
|
0.55
% (d)(f) |
|
0.57
% (g) |
|
0.60
% |
|
0.58
% |
|
0.59
% |
Gross expenses |
|
0.57
% (e) |
|
0.57
% |
|
0.57
% |
|
0.60
% |
|
0.58
% |
|
0.59
% |
Net investment income |
|
3.35
% (e) |
|
2.98
% |
|
3.48
% |
|
3.74
% |
|
3.63
% |
|
3.99
% |
Portfolio turnover rate |
|
39
% (h) |
|
3
% |
|
10
% |
|
11
% |
|
23
% |
|
19
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Periods less than one year are not annualized. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Effective July 1, 2018, the expense limit decreased to 0.53%. |
(g) |
Effective July 1, 2017, the expense limit decreased to 0.55%. |
(h) |
The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund. |
106
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Investment Grade Bond Fund
|
Admin Class | |||||||||||
|
Period Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | ||||||
Net asset value, beginning |
$ |
10.95 |
$ |
11.28 |
$ |
11.56 |
$ |
11.08 |
$ |
12.09 |
$ |
12.20 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.08 |
|
0.28 |
|
0.34 |
|
0.37 |
|
0.37 |
|
0.43 |
Net realized and |
|
(0.15
) |
|
(0.28
) |
|
0.06 |
|
0.47 |
|
(0.95
) |
|
0.26 |
Total from Investment |
|
(0.07
) |
|
0.00 (b) |
|
0.40 |
|
0.84 |
|
(0.58
) |
|
0.69 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.08
) |
|
(0.20
) |
|
(0.24
) |
|
(0.21
) |
|
(0.31
) |
|
(0.48
) |
Net realized capital gains |
|
(0.05
) |
|
(0.13
) |
|
(0.44
) |
|
(0.15
) |
|
(0.12
) |
|
(0.32
) |
Total Distributions |
|
(0.13
) |
|
(0.33
) |
|
(0.68
) |
|
(0.36
) |
|
(0.43
) |
|
(0.80
) |
Net asset value, end of |
$ |
10.75 |
$ |
10.95 |
$ |
11.28 |
$ |
11.56 |
$ |
11.08 |
$ |
12.09 |
Total return |
|
(0.63
)% (c)(d) |
|
(0.07
)% (d) |
|
3.76
% (d) |
|
7.73
% |
|
(4.95
)% |
|
5.79
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the |
$ |
111,864 |
$ |
115,301 |
$ |
25,521 |
$ |
35,294 |
$ |
37,355 |
$ |
25,585 |
Net expenses |
|
1.03
% (e)(f) |
|
1.02
% (e)(g)(h) |
|
1.02
% (e)(i)(j) |
|
1.07
% (k) |
|
1.08
% |
|
1.09
% |
Gross expenses |
|
1.07
% (f) |
|
1.05
% (g) |
|
1.03
% (i) |
|
1.07
% (k) |
|
1.08
% |
|
1.09
% |
Net investment income |
|
2.85
% (f) |
|
2.56
% |
|
3.03
% |
|
3.27
% |
|
3.14
% |
|
3.49
% |
Portfolio turnover rate |
|
39
% (l) |
|
3
% |
|
10
% |
|
11
% |
|
23
% |
|
19
% |
* |
For the three month period ended December 31, 2018. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
Periods less than one year are not annualized. |
(d) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Includes refund of prior year service fee of 0.02%. |
(h) |
Effective July 1, 2018, the expense limit decreased to 1.03%. |
(i) |
Includes refund of prior year service fee of 0.05%. |
(j) |
Effective July 1, 2017, the expense limit decreased to 1.05%. |
(k) |
Includes refund of prior year service fee of 0.03%. |
(l) |
The variation in the Fund’s turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in the investment strategy and management structure of the Fund. |
107
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Multi-Asset Income Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
13.87 |
$ |
13.24 |
$ |
12.85 |
$ |
13.45 |
$ |
12.21 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.48 |
|
0.47 |
|
0.49 |
|
0.32 |
|
0.32 |
Net realized and unrealized gain (loss) |
|
(1.71
) |
|
1.15 |
|
0.80 |
|
(0.58
) |
|
1.26 |
Total from Investment Operations |
|
(1.23
) |
|
1.62 |
|
1.29 |
|
(0.26
) |
|
1.58 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.42
) |
|
(0.45
) |
|
(0.40
) |
|
(0.34
) |
|
(0.34
) |
Net realized capital gains |
|
(0.44
) |
|
(0.54
) |
|
(0.50
) |
|
- |
|
- |
Total Distributions |
|
(0.86
) |
|
(0.99
) |
|
(0.90
) |
|
(0.34
) |
|
(0.34
) |
Net asset value, end of the period |
$ |
11.78 |
$ |
13.87 |
$ |
13.24 |
$ |
12.85 |
$ |
13.45 |
Total return(b) |
|
(9.24
)% (c) |
|
12.41
% (c) |
|
10.14
% (c) |
|
(1.96
)% (c) |
|
13.08
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
51,028 |
$ |
54,754 |
$ |
57,320 |
$ |
63,254 |
$ |
110,874 |
Net expenses |
|
0.95
% (d) |
|
0.95
% (d) |
|
0.95
% (d) |
|
1.04
% (d)(e) |
|
1.06
% |
Gross expenses |
|
1.11
% |
|
1.13
% |
|
1.09
% |
|
1.11
% |
|
1.06
% |
Net investment income |
|
3.63
% |
|
3.37
% |
|
3.70
% |
|
2.40
% |
|
2.46
% |
Portfolio turnover rate |
|
282
% |
|
221
% |
|
341
% (f) |
|
93
% (g) |
|
41
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Effective September 1, 2015, the expense limit decreased from 1.25% to 0.95%. |
(f) |
The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015. |
(g) |
The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund. |
108
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Multi-Asset Income Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
13.82 |
$ |
13.18 |
$ |
12.80 |
$ |
13.41 |
$ |
12.17 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.38 |
|
0.36 |
|
0.39 |
|
0.24 |
|
0.22 |
Net realized and unrealized gain (loss) |
|
(1.71
) |
|
1.16 |
|
0.79 |
|
(0.60
) |
|
1.27 |
Total from Investment Operations |
|
(1.33
) |
|
1.52 |
|
1.18 |
|
(0.36
) |
|
1.49 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.32
) |
|
(0.34
) |
|
(0.30
) |
|
(0.25
) |
|
(0.25
) |
Net realized capital gains |
|
(0.44
) |
|
(0.54
) |
|
(0.50
) |
|
- |
|
- |
Total Distributions |
|
(0.76
) |
|
(0.88
) |
|
(0.80
) |
|
(0.25
) |
|
(0.25
) |
Net asset value, end of the period |
$ |
11.73 |
$ |
13.82 |
$ |
13.18 |
$ |
12.80 |
$ |
13.41 |
Total return(b) |
|
(9.96
)% (c) |
|
11.70
% (c) |
|
9.27
% (c) |
|
(2.73
)% (c) |
|
12.28
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
24,058 |
$ |
36,814 |
$ |
46,351 |
$ |
47,791 |
$ |
53,074 |
Net expenses |
|
1.70
% (d) |
|
1.70
% (d) |
|
1.70
% (d) |
|
1.80
% (d)(e) |
|
1.81
% |
Gross expenses |
|
1.86
% |
|
1.88
% |
|
1.84
% |
|
1.87
% |
|
1.81
% |
Net investment income |
|
2.83
% |
|
2.65
% |
|
2.96
% |
|
1.78
% |
|
1.70
% |
Portfolio turnover rate |
|
282
% |
|
221
% |
|
341
% (f) |
|
93
% (g) |
|
41
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Effective September 1, 2015, the expense limit decreased from 2.00% to 1.70%. |
(f) |
The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015. |
(g) |
The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund. |
109
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Multi-Asset Income Fund
|
Class N | |||||||
|
Year Ended |
Year Ended |
Year Ended |
Period Ended | ||||
Net asset value, beginning of the period |
$ |
13.79 |
$ |
13.16 |
$ |
12.77 |
$ |
12.70 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.52 |
|
0.51 |
|
0.53 |
|
0.14 |
Net realized and unrealized gain (loss) |
|
(1.71
) |
|
1.15 |
|
0.80 |
|
0.10 |
Total from Investment Operations |
|
(1.19
) |
|
1.66 |
|
1.33 |
|
0.24 |
Less Distributions From: |
|
|
|
|
|
|
|
|
Net investment income |
|
(0.46
) |
|
(0.49
) |
|
(0.44
) |
|
(0.17
) |
Net realized capital gains |
|
(0.44
) |
|
(0.54
) |
|
(0.50
) |
|
- |
Total Distributions |
|
(0.90
) |
|
(1.03
) |
|
(0.94
) |
|
(0.17
) |
Net asset value, end of the period |
$ |
11.70 |
$ |
13.79 |
$ |
13.16 |
$ |
12.77 |
Total return(b) |
|
(9.02
)% |
|
12.83
% |
|
10.53
% |
|
1.91
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
32 |
$ |
35 |
$ |
1 |
$ |
1 |
Net expenses(d) |
|
0.65
% |
|
0.65
% |
|
0.65
% |
|
0.65
% (e) |
Gross expenses |
|
1.35
% |
|
1.35
% |
|
13.53
% |
|
13.66
% (e) |
Net investment income |
|
3.93
% |
|
3.71
% |
|
4.02
% |
|
3.22
% (e) |
Portfolio turnover rate |
|
282
% |
|
221
% |
|
341
% (f) |
|
93
% |
* |
From commencement of Class operations on August 31, 2015 through December 31, 2015. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015. |
110
Financial Performance
For a share outstanding throughout each period.
Loomis Sayles Multi-Asset Income Fund
|
Class Y | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
13.80 |
$ |
13.17 |
$ |
12.79 |
$ |
13.39 |
$ |
12.19 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.52 |
|
0.49 |
|
0.53 |
|
0.36 |
|
0.38 |
Net realized and unrealized gain (loss) |
|
(1.73
) |
|
1.16 |
|
0.78 |
|
(0.59
) |
|
1.19 |
Total from Investment Operations |
|
(1.21
) |
|
1.65 |
|
1.31 |
|
(0.23
) |
|
1.57 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.45
) |
|
(0.48
) |
|
(0.43
) |
|
(0.37
) |
|
(0.37
) |
Net realized capital gains |
|
(0.44
) |
|
(0.54
) |
|
(0.50
) |
|
- |
|
- |
Total Distributions |
|
(0.89
) |
|
(1.02
) |
|
(0.93
) |
|
(0.37
) |
|
(0.37
) |
Net asset value, end of the period |
$ |
11.70 |
$ |
13.80 |
$ |
13.17 |
$ |
12.79 |
$ |
13.39 |
Total return |
|
(9.13
)% (b) |
|
12.77
% (b) |
|
10.38
% (b) |
|
(1.72
)% (b) |
|
13.05
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
44,303 |
$ |
52,938 |
$ |
20,101 |
$ |
11,272 |
$ |
14,428 |
Net expenses |
|
0.70
% (c) |
|
0.70
% (c) |
|
0.70
% (c) |
|
0.80
% (c)(d) |
|
0.82
% |
Gross expenses |
|
0.86
% |
|
0.88
% |
|
0.84
% |
|
0.86
% |
|
0.82
% |
Net investment income |
|
3.88
% |
|
3.53
% |
|
4.00
% |
|
2.73
% |
|
2.92
% |
Portfolio turnover rate |
|
282
% |
|
221
% |
|
341
% (e) |
|
93
% (f) |
|
41
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(d) |
Effective September 1, 2015, the expense limit decreased from 1.00% to 0.70%. |
(e) |
The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015. |
(f) |
The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund. |
111
Financial Performance
For a share outstanding throughout each period.
Mirova Global Green Bond Fund
|
Class A | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
9.96 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.08 |
|
0.04 |
Net realized and unrealized gain (loss) |
|
(0.02
) |
|
0.11 |
Total from Investment Operations |
|
0.06 |
|
0.15 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.31
) |
|
(0.19
) |
Net asset value, end of the period |
$ |
9.71 |
$ |
9.96 |
Total return(b)(c) |
|
0.64
% |
|
1.46
% (d) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
814 |
$ |
139 |
Net expenses(e) |
|
0.96
% (f) |
|
0.96
% (g)(h) |
Gross expenses |
|
1.75
% (f) |
|
5.23
% (g)(h) |
Net investment income |
|
0.85
% |
|
0.49
% (g) |
Portfolio turnover rate |
|
46
% |
|
46
% |
* |
From commencement of operations on February 28, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
Periods less than one year are not annualized. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.95% and the ratio of gross expenses would have been 1.74%. |
(g) |
Computed on an annualized basis for periods less than one year. |
(h) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.95% and the ratio of gross expenses would have been 5.22%. |
112
Financial Performance
For a share outstanding throughout each period.
Mirova Global Green Bond Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
9.98 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.11 |
|
0.06 |
Net realized and unrealized gain (loss) |
|
(0.02
) |
|
0.12 |
Total from Investment Operations |
|
0.09 |
|
0.18 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.34
) |
|
(0.20
) |
Net asset value, end of the period |
$ |
9.73 |
$ |
9.98 |
Total return(b) |
|
0.93
% |
|
1.77
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
27,050 |
$ |
25,805 |
Net expenses(d) |
|
0.66
% (e) |
|
0.67
% (f)(g) |
Gross expenses |
|
1.12
% (e) |
|
1.11
% (f)(g) |
Net investment income |
|
1.13
% |
|
0.75
% (g) |
Portfolio turnover rate |
|
46
% |
|
46
% |
* |
From commencement of operations on February 28, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.65% and the ratio of gross expenses would have been 1.11%. |
(f) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.65% and the ratio of gross expenses would have been 1.10%. |
(g) |
Computed on an annualized basis for periods less than one year. |
113
Financial Performance
For a share outstanding throughout each period.
Mirova Global Green Bond Fund
|
Class Y | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
9.97 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.12 |
|
0.06 |
Net realized and unrealized gain (loss) |
|
(0.03
) |
|
0.11 |
Total from Investment Operations |
|
0.09 |
|
0.17 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.34
) |
|
(0.20
) |
Net asset value, end of the period |
$ |
9.72 |
$ |
9.97 |
Total return(b) |
|
0.89
% |
|
1.66
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
1,205 |
$ |
43 |
Net expenses(d) |
|
0.71
% (e) |
|
0.71
% (f)(g) |
Gross expenses |
|
1.39
% (e) |
|
3.62
% (f)(g) |
Net investment income |
|
1.19
% |
|
0.71
% (g) |
Portfolio turnover rate |
|
46
% |
|
46
% |
* |
From commencement of operations on February 28, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.70% and the ratio of gross expenses would have been 1.39%. |
(f) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.70% and the ratio of gross expenses would have been 3.62%. |
(g) |
Computed on an annualized basis for periods less than one year. |
114
Financial Performance
For a share outstanding throughout each period.
Mirova Global Sustainable Equity Fund
|
Class A | |||||
|
Year Ended |
Year Ended |
Period Ended | |||
Net asset value, beginning of the period |
$ |
12.77 |
$ |
9.90 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.00 (b) |
|
(0.04
) |
|
0.02 |
Net realized and unrealized gain (loss) |
|
(0.84
) |
|
3.06 |
|
(0.11
) |
Total from Investment Operations |
|
(0.84
) |
|
3.02 |
|
(0.09
) |
Less Distributions From: |
|
|
|
|
|
|
Net investment income |
|
0.00 (b) |
|
(0.03
) |
|
(0.00
) (b) |
Net realized capital gains |
|
(0.48
) |
|
(0.12
) |
|
(0.01
) |
Total Distributions |
|
(0.48
) |
|
(0.15
) |
|
(0.01
) |
Net asset value, end of the period |
$ |
11.45 |
$ |
12.77 |
$ |
9.90 |
Total return(c)(d) |
|
(6.54
)% |
|
30.44
% |
|
(0.85
)% (e) |
Ratios to Average Net Assets: |
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
6,360 |
$ |
3,260 |
$ |
71 |
Net expenses(f) |
|
1.30
% (g)(h) |
|
1.29
% |
|
1.30
% (i) |
Gross expenses |
|
1.39
% (h) |
|
1.43
% |
|
1.72
% (i) |
Net investment income (loss) |
|
0.03
% |
|
(0.36
)% |
|
0.23
% (i) |
Portfolio turnover rate |
|
19
% |
|
20
% |
|
20
% |
* |
From commencement of operations on March 31, 2016 through December 31, 2016. |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
A sales charge for Class A shares is not reflected in total return calculations. |
(d) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(e) |
Periods less than one year are not annualized. |
(f) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(g) |
Effective December 28, 2018, the expense limit decreased from 1.30% to 1.20%. |
(h) |
Includes interest expense of less than 0.01%. |
(i) |
Computed on an annualized basis for periods less than one year. |
115
Financial Performance
For a share outstanding throughout each period.
Mirova Global Sustainable Equity Fund
|
Class C | |||||
|
Year Ended |
Year Ended |
Period Ended | |||
Net asset value, beginning of the period |
$ |
12.63 |
$ |
9.85 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
Net investment loss(a) |
|
(0.09
) |
|
(0.12
) |
|
(0.06
) |
Net realized and unrealized gain (loss) |
|
(0.82
) |
|
3.02 |
|
(0.08
) |
Total from Investment Operations |
|
(0.91
) |
|
2.90 |
|
(0.14
) |
Less Distributions From: |
|
|
|
|
|
|
Net realized capital gains |
|
(0.48
) |
|
(0.12
) |
|
(0.01
) |
Net asset value, end of the period |
$ |
11.24 |
$ |
12.63 |
$ |
9.85 |
Total return(b)(c) |
|
(7.20
)% |
|
29.40
% |
|
(1.39
)% (d) |
Ratios to Average Net Assets: |
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
2,706 |
$ |
1,164 |
$ |
52 |
Net expenses(e) |
|
2.05
% (f)(g) |
|
2.04
% |
|
2.05
% (h) |
Gross expenses |
|
2.14
% (g) |
|
2.18
% |
|
2.20
% (h) |
Net investment loss |
|
(0.72
)% |
|
(1.02
)% |
|
(0.77
)% (h) |
Portfolio turnover rate |
|
19
% |
|
20
% |
|
20
% |
* |
From commencement of operations on March 31, 2016 through December 31, 2016. |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) |
Periods less than one year are not annualized. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Effective December 28, 2018, the expense limit decreased from 2.05% to 1.95%. |
(g) |
Includes interest expense of less than 0.01%. |
(h) |
Computed on an annualized basis for periods less than one year. |
116
Financial Performance
For a share outstanding throughout each period.
Mirova Global Sustainable Equity Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
12.81 |
$ |
11.29 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income (loss)(a) |
|
(0.01
) |
|
0.02 |
Net realized and unrealized gain (loss) |
|
(0.79
) |
|
1.66 |
Total from Investment Operations |
|
(0.80
) |
|
1.68 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.04
) |
|
(0.04
) |
Net realized capital gains |
|
(0.48
) |
|
(0.12
) |
Total Distributions |
|
(0.52
) |
|
(0.16
) |
Net asset value, end of the period |
$ |
11.49 |
$ |
12.81 |
Total return(b) |
|
(6.26
)% |
|
14.81
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
2,842 |
$ |
1 |
Net expenses(d) |
|
1.01
% (e)(f) |
|
1.00
% (g) |
Gross expenses |
|
1.08
% (f) |
|
14.30
% (g) |
Net investment income (loss) |
|
(0.08
)% |
|
0.29
% (g) |
Portfolio turnover rate |
|
19
% |
|
20
% (h) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Effective December 28, 2018, the expense limit decreased from 1.00% to 0.90%. |
(f) |
Includes interest expense. Without this expense the ratio of net expenses would have been 0.99% and the ratio of gross expenses would have been 1.07%. |
(g) |
Computed on an annualized basis for periods less than one year. |
(h) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
117
Financial Performance
For a share outstanding throughout each period.
Mirova Global Sustainable Equity Fund
|
Class Y | |||||
|
Year Ended |
Year Ended |
Period Ended | |||
Net asset value, beginning of the period |
$ |
12.81 |
$ |
9.91 |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
Net investment income(a) |
|
0.04 |
|
0.03 |
|
0.03 |
Net realized and unrealized gain (loss) |
|
(0.85
) |
|
3.02 |
|
(0.10
) |
Total from Investment Operations |
|
(0.81
) |
|
3.05 |
|
(0.07
) |
Less Distributions From: |
|
|
|
|
|
|
Net investment income |
|
(0.03
) |
|
(0.03
) |
|
(0.01
) |
Net realized capital gains |
|
(0.48
) |
|
(0.12
) |
|
(0.01
) |
Total Distributions |
|
(0.51
) |
|
(0.15
) |
|
(0.02
) |
Net asset value, end of the period |
$ |
11.49 |
$ |
12.81 |
$ |
9.91 |
Total return(b) |
|
(6.32
)% |
|
30.75
% |
|
(0.70
)% (c) |
Ratios to Average Net Assets: |
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
69,705 |
$ |
63,359 |
$ |
49,593 |
Net expenses(d) |
|
1.05
% (e)(f) |
|
1.04
% |
|
1.05
% (g) |
Gross expenses |
|
1.15
% (f) |
|
1.16
% |
|
1.21
% (g) |
Net investment income |
|
0.29
% |
|
0.26
% |
|
0.35
% (g) |
Portfolio turnover rate |
|
19
% |
|
20
% |
|
20
% |
* |
From commencement of operations on March 31, 2016 through December 31, 2016. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Effective December 28, 2018, the expense limit decreased from 1.05% to 0.95%. |
(f) |
Includes interest expense of less than 0.01%. |
(g) |
Computed on an annualized basis for periods less than one year. |
118
Financial Performance
For a share outstanding throughout each period.
Mirova International Sustainable Equity Fund
|
Class A | |
|
Period Ended | |
Net asset value, beginning of the period |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
Net investment loss(a) |
|
(0.00
) (b) |
Net realized and unrealized gain (loss) |
|
0.03 |
Total from Investment Operations |
|
0.03 |
Net asset value, end of the period |
$ |
10.03 |
Total return(c)(d) |
|
0.30
% (e) |
Ratios to Average Net Assets: |
|
|
Net assets, end of the period (000’s) |
$ |
1 |
Net expenses(f)(g) |
|
1.20
% |
Gross expenses(g) |
|
22.87
% |
Net investment loss(g) |
|
(1.20
)% |
Portfolio turnover rate |
|
0
% |
* |
From commencement of operations on December 28, 2018 through December 31, 2018. |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
A sales charge for Class A shares is not reflected in total return calculations. |
(d) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. Periods less than one year are not annualized. |
(e) |
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total returns based on the adjusted net asset values per share may differ from the total returns reported in the average annual total return table. |
(f) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(g) |
Computed on an annualized basis for periods less than one year. |
119
Financial Performance
For a share outstanding throughout each period.
Mirova International Sustainable Equity Fund
|
Class N | |
|
Period Ended | |
Net asset value, beginning of the period |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
Net investment loss(a) |
|
(0.00
) (b) |
Net realized and unrealized gain (loss) |
|
0.03 |
Total from Investment Operations |
|
0.03 |
Net asset value, end of the period |
$ |
10.03 |
Total return(c) |
|
0.30
% (d) |
Ratios to Average Net Assets: |
|
|
Net assets, end of the period (000’s) |
$ |
10,035 |
Net expenses(e)(f) |
|
0.90
% |
Gross expenses(f) |
|
22.55
% |
Net investment loss(f) |
|
(0.90
)% |
Portfolio turnover rate |
|
0
% |
* |
From commencement of operations on December 28, 2018 through December 31, 2018. |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. Periods less than one year are not annualized. |
(d) |
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total returns based on the adjusted net asset values per share may differ from the total returns reported in the average annual total return table. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
120
Financial Performance
For a share outstanding throughout each period.
Mirova International Sustainable Equity Fund
|
Class Y | |
|
Period Ended | |
Net asset value, beginning of the period |
$ |
10.00 |
Income (loss) from Investment Operations: |
|
|
Net investment loss(a) |
|
(0.00
) (b) |
Net realized and unrealized gain (loss) |
|
0.03 |
Total from Investment Operations |
|
0.03 |
Net asset value, end of the period |
$ |
10.03 |
Total return(c) |
|
0.30
% (d) |
Ratios to Average Net Assets: |
|
|
Net assets, end of the period (000’s) |
$ |
1 |
Net expenses(e)(f) |
|
0.95
% |
Gross expenses(f) |
|
22.51
% |
Net investment loss(f) |
|
(0.95
)% |
Portfolio turnover rate |
|
0
% |
* |
From commencement of operations on December 28, 2018 through December 31, 2018. |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. Periods less than one year are not annualized. |
(d) |
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total returns based on the adjusted net asset values per share may differ from the total returns reported in the average annual total return table. |
(e) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) |
Computed on an annualized basis for periods less than one year. |
121
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
24.72 |
$ |
21.37 |
$ |
18.79 |
$ |
20.43 |
$ |
21.40 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.10 |
|
0.11 |
|
0.16 |
|
0.14 |
|
0.10 |
Net realized and unrealized gain (loss) |
|
(3.28
) |
|
4.28 |
|
3.20 |
|
(1.02
) |
|
2.11 |
Total from Investment Operations |
|
(3.18
) |
|
4.39 |
|
3.36 |
|
(0.88
) |
|
2.21 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.08
) |
|
(0.10
) |
|
(0.16
) |
|
(0.13
) |
|
(0.07
) |
Net realized capital gains |
|
(2.02
) |
|
(0.94
) |
|
(0.62
) |
|
(0.63
) |
|
(3.11
) |
Total Distributions |
|
(2.10
) |
|
(1.04
) |
|
(0.78
) |
|
(0.76
) |
|
(3.18
) |
Net asset value, end of the period |
$ |
19.44 |
$ |
24.72 |
$ |
21.37 |
$ |
18.79 |
$ |
20.43 |
Total return(b) |
|
(13.01 )%
|
|
20.75
% |
|
18.37
% |
|
(4.41
)% |
|
10.43
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
164,748 |
$ |
203,792 |
$ |
173,036 |
$ |
173,925 |
$ |
195,061 |
Net expenses |
|
1.13
% |
|
1.18
% |
|
1.18
% |
|
1.14
% |
|
1.22
% |
Gross expenses |
|
1.13
% |
|
1.18
% |
|
1.18
% |
|
1.14
% |
|
1.22
% |
Net investment income |
|
0.41
% |
|
0.48
% |
|
0.82
% |
|
0.68
% |
|
0.44
% |
Portfolio turnover rate |
|
39
% |
|
16
% |
|
16
% |
|
23
% |
|
64
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
122
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
21.58 |
$ |
18.83 |
$ |
16.65 |
$ |
18.19 |
$ |
19.48 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
(0.07
) |
|
(0.05
) |
|
0.01 |
|
(0.01
) |
|
(0.06
) |
Net realized and unrealized gain (loss) |
|
(2.83
) |
|
3.74 |
|
2.80 |
|
(0.90
) |
|
1.90 |
Total from Investment Operations |
|
(2.90
) |
|
3.69 |
|
2.81 |
|
(0.91
) |
|
1.84 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
- |
|
(0.00
) (b) |
|
(0.01
) |
|
(0.00
) (b) |
|
(0.02
) |
Net realized capital gains |
|
(2.02
) |
|
(0.94
) |
|
(0.62
) |
|
(0.63
) |
|
(3.11
) |
Total Distributions |
|
(2.02
) |
|
(0.94
) |
|
(0.63
) |
|
(0.63
) |
|
(3.13
) |
Net asset value, end of the period |
$ |
16.66 |
$ |
21.58 |
$ |
18.83 |
$ |
16.65 |
$ |
18.19 |
Total return(c) |
|
(13.63 )%
|
|
19.85
% |
|
17.45
% |
|
(5.07
)% |
|
9.55
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
53,606 |
$ |
62,272 |
$ |
55,910 |
$ |
70,616 |
$ |
62,941 |
Net expenses |
|
1.88
% |
|
1.93
% |
|
1.93
% |
|
1.89
% |
|
1.97
% |
Gross expenses |
|
1.88
% |
|
1.93
% |
|
1.93
% |
|
1.89
% |
|
1.97
% |
Net investment income (loss) |
|
(0.33
)% |
|
(0.27
)% |
|
0.09
% |
|
(0.07
)% |
|
(0.30
)% |
Portfolio turnover rate |
|
39
% |
|
16
% |
|
16
% |
|
23
% |
|
64
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
123
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
25.91 |
$ |
23.13 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.22 |
|
0.14 |
Net realized and unrealized gain (loss) |
|
(3.45
) |
|
3.44 |
Total from Investment Operations |
|
(3.23
) |
|
3.58 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.17
) |
|
(0.17
) |
Net realized capital gains |
|
(2.02
) |
|
(0.63
) |
Total Distributions |
|
(2.19
) |
|
(0.80
) |
Net asset value, end of the period |
$ |
20.49 |
$ |
25.91 |
Total return(b) |
|
(12.60 )%
|
|
15.46
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
10 |
$ |
1 |
Net expenses(d) |
|
0.75
% |
|
0.75
% (e) |
Gross expenses |
|
3.79
% |
|
13.79
% (e) |
Net investment income |
|
0.88
% |
|
0.84
% (e) |
Portfolio turnover rate |
|
39
% |
|
16
% (f) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
124
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark Fund
|
Class Y | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
25.90 |
$ |
22.34 |
$ |
19.60 |
$ |
21.28 |
$ |
22.16 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.17 |
|
0.17 |
|
0.21 |
|
0.19 |
|
0.15 |
Net realized and unrealized gain (loss) |
|
(3.44
) |
|
4.48 |
|
3.36 |
|
(1.06
) |
|
2.20 |
Total from Investment Operations |
|
(3.27
) |
|
4.65 |
|
3.57 |
|
(0.87
) |
|
2.35 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.15
) |
|
(0.15
) |
|
(0.21
) |
|
(0.18
) |
|
(0.12
) |
Net realized capital gains |
|
(2.02
) |
|
(0.94
) |
|
(0.62
) |
|
(0.63
) |
|
(3.11
) |
Total Distributions |
|
(2.17
) |
|
(1.09
) |
|
(0.83
) |
|
(0.81
) |
|
(3.23
) |
Net asset value, end of the period |
$ |
20.46 |
$ |
25.90 |
$ |
22.34 |
$ |
19.60 |
$ |
21.28 |
Total return |
|
(12.76 )%
|
|
21.05
% |
|
18.69
% |
|
(4.18
)% |
|
10.70
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
53,829 |
$ |
49,955 |
$ |
26,252 |
$ |
21,696 |
$ |
26,694 |
Net expenses |
|
0.88
% |
|
0.93
% |
|
0.92
% |
|
0.89
% |
|
0.97
% |
Gross expenses |
|
0.88
% |
|
0.93
% |
|
0.92
% |
|
0.89
% |
|
0.97
% |
Net investment income |
|
0.68
% |
|
0.71
% |
|
1.05
% |
|
0.92
% |
|
0.67
% |
Portfolio turnover rate |
|
39
% |
|
16
% |
|
16
% |
|
23
% |
|
64
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
125
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark International Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
15.58 |
$ |
12.15 |
$ |
11.47 |
$ |
12.44 |
$ |
13.74 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.25 |
|
0.18 |
|
0.17 |
|
0.15 |
|
0.18 |
Net realized and unrealized gain (loss) |
|
(4.02
) |
|
3.41 |
|
0.76 |
|
(0.80
) |
|
(1.01
) |
Total from Investment Operations |
|
(3.77
) |
|
3.59 |
|
0.93 |
|
(0.65
) |
|
(0.83
) |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.29
) |
|
(0.16
) |
|
(0.21
) |
|
(0.20
) |
|
(0.25
) |
Net realized capital gains |
|
(0.23
) |
|
- |
|
(0.04
) |
|
(0.12
) |
|
(0.22
) |
Total Distributions |
|
(0.52
) |
|
(0.16
) |
|
(0.25
) |
|
(0.32
) |
|
(0.47
) |
Net asset value, end of the period |
$ |
11.29 |
$ |
15.58 |
$ |
12.15 |
$ |
11.47 |
$ |
12.44 |
Total return(b) |
|
(24.15 )%
|
|
29.56
% |
|
8.19
% |
|
(5.35
)% |
|
(6.05
)% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
257,551 |
$ |
603,988 |
$ |
533,112 |
$ |
722,805 |
$ |
617,383 |
Net expenses |
|
1.31
% |
|
1.32
% |
|
1.34
% |
|
1.31
% |
|
1.31
% |
Gross expenses |
|
1.31
% |
|
1.32
% |
|
1.34
% |
|
1.31
% |
|
1.31
% |
Net investment income |
|
1.72
% |
|
1.28
% |
|
1.54
% |
|
1.17
% |
|
1.34
% |
Portfolio turnover rate |
|
50
% |
|
40
% |
|
41
% |
|
51
% |
|
31
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
126
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark International Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
15.30 |
$ |
11.96 |
$ |
11.29 |
$ |
12.25 |
$ |
13.53 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.13 |
|
0.06 |
|
0.08 |
|
0.05 |
|
0.08 |
Net realized and unrealized gain (loss) |
|
(3.92
) |
|
3.35 |
|
0.74 |
|
(0.78
) |
|
(0.98
) |
Total from Investment Operations |
|
(3.79
) |
|
3.41 |
|
0.82 |
|
(0.73
) |
|
(0.90
) |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.17
) |
|
(0.07
) |
|
(0.11
) |
|
(0.11
) |
|
(0.16
) |
Net realized capital gains |
|
(0.23
) |
|
- |
|
(0.04
) |
|
(0.12
) |
|
(0.22
) |
Total Distributions |
|
(0.40
) |
|
(0.07
) |
|
(0.15
) |
|
(0.23
) |
|
(0.38
) |
Net asset value, end of the period |
$ |
11.11 |
$ |
15.30 |
$ |
11.96 |
$ |
11.29 |
$ |
12.25 |
Total return(b) |
|
(24.74 )%
|
|
28.55
% |
|
7.36
% |
|
(6.08
)% |
|
(6.67
)% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
212,618 |
$ |
363,018 |
$ |
255,249 |
$ |
341,959 |
$ |
327,319 |
Net expenses |
|
2.07
% |
|
2.07
% |
|
2.09
% |
|
2.06
% |
|
2.05
% |
Gross expenses |
|
2.07
% |
|
2.07
% |
|
2.09
% |
|
2.06
% |
|
2.05
% |
Net investment income |
|
0.94
% |
|
0.42
% |
|
0.73
% |
|
0.39
% |
|
0.61
% |
Portfolio turnover rate |
|
50
% |
|
40
% |
|
41
% |
|
51
% |
|
31
% |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
127
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark International Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
15.58 |
$ |
13.98 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.28 |
|
0.15 |
Net realized and unrealized gain (loss) |
|
(4.02
) |
|
1.66 |
Total from Investment Operations |
|
(3.74
) |
|
1.81 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.36
) |
|
(0.21
) |
Net realized capital gains |
|
(0.23
) |
|
- |
Total Distributions |
|
(0.59
) |
|
(0.21
) |
Net asset value, end of the period |
$ |
11.25 |
$ |
15.58 |
Total return(b) |
|
(23.94 )%
|
|
12.96
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
758 |
$ |
1 |
Net expenses(d) |
|
0.99
% |
|
0.92
% (e) |
Gross expenses |
|
1.02
% |
|
25.21
% (e) |
Net investment income |
|
2.04
% |
|
1.54
% (e) |
Portfolio turnover rate |
|
50
% |
|
40
% (f) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
128
Financial Performance
For a share outstanding throughout each period.
Natixis Oakmark International Fund
|
Class Y | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
15.56 |
$ |
13.98 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.26 |
|
0.00 (b) |
Net realized and unrealized gain (loss) |
|
(3.99
) |
|
1.79 |
Total from Investment Operations |
|
(3.73
) |
|
1.79 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.35
) |
|
(0.21
) |
Net realized capital gains |
|
(0.23
) |
|
- |
Total Distributions |
|
(0.58
) |
|
(0.21
) |
Net asset value, end of the period |
$ |
11.25 |
$ |
15.56 |
Total return |
|
(23.93 )%
|
|
12.79
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
215,123 |
$ |
172,978 |
Net expenses |
|
1.07
% |
|
1.07
% (d) |
Gross expenses |
|
1.07
% |
|
1.07
% (d) |
Net investment income |
|
1.85
% |
|
0.03
% (d) |
Portfolio turnover rate |
|
50
% |
|
40
% (e) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
Periods less than one year are not annualized. |
(d) |
Computed on an annualized basis for periods less than one year. |
(e) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
129
Financial Performance
For a share outstanding throughout each period.
Natixis U.S. Equity Opportunities Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
36.90 |
$ |
30.27 |
$ |
27.60 |
$ |
27.40 |
$ |
33.07 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.08 |
|
0.06 |
|
0.12 |
|
0.06 |
|
0.02 |
Net realized and unrealized gain (loss) |
|
(2.51
) |
|
7.88 |
|
3.12 |
|
1.55 |
|
4.31 |
Total from Investment Operations |
|
(2.43
) |
|
7.94 |
|
3.24 |
|
1.61 |
|
4.33 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.05
) |
|
(0.06
) |
|
(0.12
) |
|
- |
|
- |
Net realized capital gains |
|
(3.42
) |
|
(1.25
) |
|
(0.45
) |
|
(1.41
) |
|
(10.00 )
|
Total Distributions |
|
(3.47
) |
|
(1.31
) |
|
(0.57
) |
|
(1.41
) |
|
(10.00 )
|
Net asset value, end of the period |
$ |
31.00 |
$ |
36.90 |
$ |
30.27 |
$ |
27.60 |
$ |
27.40 |
Total return(b) |
|
(6.48
)% |
|
26.28
% |
|
11.86
% |
|
5.86
% |
|
12.94
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
523,665 |
$ |
604,330 |
$ |
472,436 |
$ |
422,069 |
$ |
400,678 |
Net expenses |
|
1.16
% |
|
1.21
% (c) |
|
1.23
% (d) |
|
1.25
% (e) |
|
1.29
% (f) |
Gross expenses |
|
1.16
% |
|
1.21
% |
|
1.23
% (d) |
|
1.25
% |
|
1.29
% (f) |
Net investment income |
|
0.20
% |
|
0.16
% |
|
0.42
% |
|
0.21
% |
|
0.07
% |
Portfolio turnover rate |
|
23
% |
|
17
% |
|
17
% |
|
20
% |
|
93
% (g) |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
A sales charge for Class A shares is not reflected in total return calculations. |
(c) |
Effective July 1, 2017, the expense limit decreased from 1.25% to 1.20%. |
(d) |
Includes fee/expense recovery of less than 0.01%. |
(e) |
Effective July 1, 2015, the expense limit decreased from 1.30% to 1.25%. |
(f) |
Includes fee/expense recovery of 0.02%. |
(g) |
The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments. |
130
Financial Performance
For a share outstanding throughout each period.
Natixis U.S. Equity Opportunities Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
25.73 |
$ |
21.54 |
$ |
19.86 |
$ |
20.24 |
$ |
26.92 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment loss(a) |
|
(0.14
) |
|
(0.14
) |
|
(0.07
) |
|
(0.11
) |
|
(0.19
) |
Net realized and unrealized gain (loss) |
|
(1.75
) |
|
5.58 |
|
2.22 |
|
1.14 |
|
3.51 |
Total from Investment Operations |
|
(1.89
) |
|
5.44 |
|
2.15 |
|
1.03 |
|
3.32 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
- |
|
(0.00
) (b) |
|
(0.02
) |
|
- |
|
- |
Net realized capital gains |
|
(3.42
) |
|
(1.25
) |
|
(0.45
) |
|
(1.41
) |
|
(10.00 )
|
Total Distributions |
|
(3.42
) |
|
(1.25
) |
|
(0.47
) |
|
(1.41
) |
|
(10.00 )
|
Net asset value, end of the period |
$ |
20.42 |
$ |
25.73 |
$ |
21.54 |
$ |
19.86 |
$ |
20.24 |
Total return(c) |
|
(7.18
)% |
|
25.35
% |
|
11.02
% |
|
5.06
% |
|
12.12
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
78,783 |
$ |
112,615 |
$ |
72,768 |
$ |
61,864 |
$ |
53,925 |
Net expenses |
|
1.91
% |
|
1.96
% (d) |
|
1.98
% (e) |
|
2.00
% (f) |
|
2.04
% (g) |
Gross expenses |
|
1.91
% |
|
1.96
% |
|
1.98
% (e) |
|
2.00
% |
|
2.04
% (g) |
Net investment loss |
|
(0.54
)% |
|
(0.59
)% |
|
(0.33
)% |
|
(0.54
)% |
|
(0.68
)% |
Portfolio turnover rate |
|
23
% |
|
17
% |
|
17
% |
|
20
% |
|
93
% (h) |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(d) |
Effective July 1, 2017, the expense limit decreased from 2.00% to 1.95%. |
(e) |
Includes fee/expense recovery of less than 0.01%. |
(f) |
Effective July 1, 2015, the expense limit decreased from 2.05% to 2.00%. |
(g) |
Includes fee/expense recovery of 0.01%. |
(h) |
The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments. |
131
Financial Performance
For a share outstanding throughout each period.
Natixis U.S. Equity Opportunities Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
42.63 |
$ |
37.62 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.25 |
|
0.12 |
Net realized and unrealized gain (loss) |
|
(2.91
) |
|
6.20 |
Total from Investment Operations |
|
(2.66
) |
|
6.32 |
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.18
) |
|
(0.16
) |
Net realized capital gains |
|
(3.42
) |
|
(1.15
) |
Total Distributions |
|
(3.60
) |
|
(1.31
) |
Net asset value, end of the period |
$ |
36.37 |
$ |
42.63 |
Total return(b) |
|
(6.11
)% |
|
16.78
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
1 |
$ |
1 |
Net expenses(d) |
|
0.76
% |
|
0.78
% (e)(f) |
Gross expenses |
|
13.35
% |
|
13.41
% (f) |
Net investment income |
|
0.56
% |
|
0.44
% (f) |
Portfolio turnover rate |
|
23
% |
|
17
% (g) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Effective July 1, 2017, the expense limit decreased from 0.95% to 0.90%. |
(f) |
Computed on an annualized basis for periods less than one year. |
(g) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
132
Financial Performance
For a share outstanding throughout each period.
Natixis U.S. Equity Opportunities Fund
|
Class Y | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
42.61 |
$ |
34.77 |
$ |
31.61 |
$ |
31.18 |
$ |
36.32 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income(a) |
|
0.20 |
|
0.16 |
|
0.21 |
|
0.15 |
|
0.12 |
Net realized and unrealized gain (loss) |
|
(2.92
) |
|
9.07 |
|
3.59 |
|
1.76 |
|
4.74 |
Total from Investment Operations |
|
(2.72
) |
|
9.23 |
|
3.80 |
|
1.91 |
|
4.86 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.14
) |
|
(0.14
) |
|
(0.19
) |
|
(0.07
) |
|
- |
Net realized capital gains |
|
(3.42
) |
|
(1.25
) |
|
(0.45
) |
|
(1.41
) |
|
(10.00 )
|
Total Distributions |
|
(3.56
) |
|
(1.39
) |
|
(0.64
) |
|
(1.48
) |
|
(10.00 )
|
Net asset value, end of the period |
$ |
36.33 |
$ |
42.61 |
$ |
34.77 |
$ |
31.61 |
$ |
31.18 |
Total return |
|
(6.24
)% |
|
26.60
% |
|
12.13
% |
|
6.11
% |
|
13.25
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
296,255 |
$ |
285,008 |
$ |
143,231 |
$ |
70,643 |
$ |
37,636 |
Net expenses |
|
0.91
% |
|
0.95
% (b) |
|
0.98
% (c) |
|
1.00
% (d) |
|
1.05
% (e) |
Gross expenses |
|
0.91
% |
|
0.95
% |
|
0.98
% (c) |
|
1.00
% |
|
1.05
% (e) |
Net investment income |
|
0.45
% |
|
0.40
% |
|
0.63
% |
|
0.46
% |
|
0.32
% |
Portfolio turnover rate |
|
23
% |
|
17
% |
|
17
% |
|
20
% |
|
93
% (f) |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Effective July 1, 2017, the expense limit decreased from 1.00% to 0.95%. |
(c) |
Includes fee/expense recovery of less than 0.01%. |
(d) |
Effective July 1, 2015, the expense limit decreased from 1.05% to 1.00%. |
(e) |
Includes fee/expense recovery of 0.01%. |
(f) |
The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments. |
133
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Small Cap Value Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
18.71 |
$ |
19.79 |
$ |
17.74 |
$ |
20.65 |
$ |
22.34 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.01 |
|
(0.01
) |
|
0.02 |
|
0.06 (b) |
|
(0.06
) |
Net realized and unrealized gain (loss) |
|
(2.76
) |
|
1.21 |
|
3.49 |
|
(0.07
) |
|
1.95 |
Total from Investment Operations |
|
(2.75
) |
|
1.20 |
|
3.51 |
|
(0.01
) |
|
1.89 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.00
) (c) |
|
(0.00
) (c) |
|
(0.01
) |
|
(0.04
) |
|
- |
Net realized capital gains |
|
(3.48
) |
|
(2.28
) |
|
(1.45
) |
|
(2.86
) |
|
(3.58
) |
Total Distributions |
|
(3.48
) |
|
(2.28
) |
|
(1.46
) |
|
(2.90
) |
|
(3.58
) |
Net asset value, end of the period |
$ |
12.48 |
$ |
18.71 |
$ |
19.79 |
$ |
17.74 |
$ |
20.65 |
Total return(d) |
|
(14.84 )%
|
|
6.28
% |
|
20.24
% |
|
(0.29
)% (b) |
|
8.79
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
66,376 |
$ |
93,751 |
$ |
106,447 |
$ |
103,092 |
$ |
125,201 |
Net expenses |
|
1.38
% |
|
1.36
% |
|
1.35
% |
|
1.35
% |
|
1.37
% |
Gross expenses |
|
1.38
% |
|
1.36
% |
|
1.35
% |
|
1.35
% |
|
1.37
% |
Net investment income (loss) |
|
0.03
% |
|
(0.03
)% |
|
0.11
% |
|
0.26
% (b) |
|
(0.27
)% |
Portfolio turnover rate |
|
70
% |
|
92
% |
|
74
% |
|
62
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.04), total return would have been (0.77)% and the ratio of net investment loss to average net assets would have been (0.20)%. |
(c) |
Amount rounds to less than $0.01 per share. |
(d) |
A sales charge for Class A shares is not reflected in total return calculations. |
134
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Small Cap Value Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
11.67 |
$ |
13.26 |
$ |
12.39 |
$ |
15.36 |
$ |
17.61 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment loss(a) |
|
(0.09
) |
|
(0.10
) |
|
(0.08
) |
|
(0.08
) (b) |
|
(0.18
) |
Net realized and unrealized gain (loss) |
|
(1.69
) |
|
0.79 |
|
2.40 |
|
(0.03
) |
|
1.51 |
Total from Investment Operations |
|
(1.78
) |
|
0.69 |
|
2.32 |
|
(0.11
) |
|
1.33 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.00
) (c) |
|
(0.00
) (c) |
|
- |
|
- |
|
- |
Net realized capital gains |
|
(3.48
) |
|
(2.28
) |
|
(1.45
) |
|
(2.86
) |
|
(3.58
) |
Total Distributions |
|
(3.48
) |
|
(2.28
) |
|
(1.45
) |
|
(2.86
) |
|
(3.58
) |
Net asset value, end of the period |
$ |
6.41 |
$ |
11.67 |
$ |
13.26 |
$ |
12.39 |
$ |
15.36 |
Total return(d) |
|
(15.51 )%
|
|
5.50
% |
|
19.32
% |
|
(1.02
)% (b) |
|
7.94
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
3,480 |
$ |
15,756 |
$ |
20,379 |
$ |
21,188 |
$ |
27,292 |
Net expenses |
|
2.12
% |
|
2.11
% |
|
2.10
% |
|
2.10
% |
|
2.12
% |
Gross expenses |
|
2.12
% |
|
2.11
% |
|
2.10
% |
|
2.10
% |
|
2.12
% |
Net investment loss |
|
(0.83
)% |
|
(0.79
)% |
|
(0.64
)% |
|
(0.48
)% (b) |
|
(1.02
)% |
Portfolio turnover rate |
|
70
% |
|
92
% |
|
74
% |
|
62
% |
|
58
% |
(a) |
Per share net investment loss has been calculated using the average shares outstanding during the period. |
(b) |
Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.15), total return would have been (1.48)% and the ratio of net investment loss to average net assets would have been (0.96)%. |
(c) |
Amount rounds to less than $0.01 per share. |
(d) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
135
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Small Cap Value Fund
|
Class N | |||
|
Year Ended |
Period Ended | ||
Net asset value, beginning of the period |
$ |
19.37 |
$ |
19.55 |
Income (loss) from Investment Operations: |
|
|
|
|
Net investment income(a) |
|
0.08 |
|
0.07 |
Net realized and unrealized gain (loss) |
|
(2.86
) |
|
1.35 |
Total from Investment Operations |
|
(2.78
) |
|
1.42
|
Less Distributions From: |
|
|
|
|
Net investment income |
|
(0.03
) |
|
(0.02
) |
Net realized capital gains |
|
(3.48
) |
|
(1.58
) |
Total Distributions |
|
(3.51
) |
|
(1.60
) |
Net asset value, end of the period |
$ |
13.08 |
$ |
19.37 |
Total return(b) |
|
(14.48 )%
|
|
7.17
% (c) |
Ratios to Average Net Assets: |
|
|
|
|
Net assets, end of the period (000’s) |
$ |
1 |
$ |
1 |
Net expenses(d) |
|
0.96
% |
|
0.96
% (e) |
Gross expenses |
|
15.17
% |
|
14.68
% (e) |
Net investment income |
|
0.43
% |
|
0.56
% (e) |
Portfolio turnover rate |
|
70
% |
|
92
% (f) |
* |
From commencement of Class operations on May 1, 2017 through December 31, 2017. |
(a) |
Per share net investment income has been calculated using the average shares outstanding during the period. |
(b) |
Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(c) |
Periods less than one year are not annualized. |
(d) |
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(e) |
Computed on an annualized basis for periods less than one year. |
(f) |
Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017. |
136
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Small Cap Value Fund
|
Class Y | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
19.37 |
$ |
20.36 |
$ |
18.21 |
$ |
21.13 |
$ |
22.73 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.04
|
|
0.05 |
|
0.07 |
|
0.11 (b) |
|
(0.00
) (c) |
Net realized and unrealized gain (loss) |
|
(2.84
) |
|
1.25 |
|
3.59 |
|
(0.07
) |
|
1.98 |
Total from Investment Operations |
|
(2.80
) |
|
1.30 |
|
3.66 |
|
0.04 |
|
1.98 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.01
) |
|
(0.01
) |
|
(0.06
) |
|
(0.10
) |
|
- |
Net realized capital gains |
|
(3.48
) |
|
(2.28
) |
|
(1.45
) |
|
(2.86
) |
|
(3.58
) |
Total Distributions |
|
(3.49
) |
|
(2.29
) |
|
(1.51
) |
|
(2.96
) |
|
(3.58
) |
Net asset value, end of the period |
$ |
13.08 |
$ |
19.37 |
$ |
20.36 |
$ |
18.21 |
$ |
21.13 |
Total return |
|
(14.61 )%
|
|
6.60
% |
|
20.53
% |
|
(0.05
)% (b) |
|
9.04
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
58,538 |
$ |
176,940 |
$ |
183,145 |
$ |
179,322 |
$ |
176,905 |
Net expenses |
|
1.12
% |
|
1.11
% |
|
1.10
% |
|
1.10
% |
|
1.12
% |
Gross expenses |
|
1.12
% |
|
1.11
% |
|
1.10
% |
|
1.10
% |
|
1.12
% |
Net investment income (loss) |
|
0.22
% |
|
0.23
% |
|
0.36
% |
|
0.50
% (b) |
|
(0.01
)% |
Portfolio turnover rate |
|
70
% |
|
92
% |
|
74
% |
|
62
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.02, total return would have been (0.53)% and the ratio of net investment income to average net assets would have been 0.07%. |
(c) |
Amount rounds to less than $0.01 per share. |
137
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Value Opportunity Fund
|
Class A | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
22.65 |
$ |
20.55 |
$ |
20.04 |
$ |
21.29 |
$ |
20.63 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.09 |
|
0.17 (b) |
|
0.07 |
|
0.03 (c) |
|
(0.08
) |
Net realized and unrealized gain (loss) |
|
(3.71
) |
|
2.48 |
|
1.05 |
|
(0.79
) |
|
2.31 |
Total from Investment Operations |
|
(3.62
) |
|
2.65 |
|
1.12 |
|
(0.76
) |
|
2.23 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.15
) |
|
(0.18
) |
|
(0.05
) |
|
(0.02
) |
|
- |
Net realized capital gains |
|
(1.51
) |
|
(0.37
) |
|
(0.56
) |
|
(0.47
) |
|
(1.57
) |
Total Distributions |
|
(1.66
) |
|
(0.55
) |
|
(0.61
) |
|
(0.49
) |
|
(1.57
) |
Net asset value, end of the period |
$ |
17.37 |
$ |
22.65 |
$ |
20.55 |
$ |
20.04 |
$ |
21.29 |
Total return(d) |
|
(16.10 )%
|
|
12.93
% (b) |
|
5.85
% |
|
(3.66
)% (c) |
|
10.92
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
43,769 |
$ |
67,186 |
$ |
87,536 |
$ |
142,833 |
$ |
73,237 |
Net expenses |
|
1.24
% |
|
1.22
% |
|
1.23
% |
|
1.23
% |
|
1.25
% |
Gross expenses |
|
1.24
% |
|
1.22
% |
|
1.23
% |
|
1.23
% |
|
1.25
% |
Net investment income (loss) |
|
0.42
% |
|
0.77
% (b) |
|
0.35
% |
|
0.16
% (c) |
|
(0.37
)% |
Portfolio turnover rate |
|
44
% |
|
42
% |
|
57
% |
|
32
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.09, total return would have been 12.53% and the ratio of net investment income to average net assets would have been 0.41%. |
(c) |
Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.01), total return would have been (3.94)% and the ratio of net investment loss to average net assets would have been (0.04)%. |
(d) |
A sales charge for Class A shares is not reflected in total return calculations. |
138
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Value Opportunity Fund
|
Class C | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
21.50 |
$ |
19.51 |
$ |
19.16 |
$ |
20.51 |
$ |
20.07 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
(0.08
) |
|
0.00 (b)(c) |
|
(0.07
) |
|
(0.13
) (d) |
|
(0.23
) |
Net realized and unrealized gain (loss) |
|
(3.48
) |
|
2.36 |
|
0.98 |
|
(0.75
) |
|
2.24 |
Total from Investment Operations |
|
(3.56
) |
|
2.36 |
|
0.91 |
|
(0.88
) |
|
2.01 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
- |
|
- |
|
(0.00
) (b) |
|
- |
|
- |
Net realized capital gains |
|
(1.51
) |
|
(0.37
) |
|
(0.56
) |
|
(0.47
) |
|
(1.57
) |
Total Distributions |
|
(1.51
) |
|
(0.37
) |
|
(0.56
) |
|
(0.47
) |
|
(1.57
) |
Net asset value, end of the period |
$ |
16.43 |
$ |
21.50 |
$ |
19.51 |
$ |
19.16 |
$ |
20.51 |
Total return(e) |
|
(16.71 )%
|
|
12.11
% (c) |
|
5.03
% |
|
(4.39
)% (d) |
|
10.12
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
23,967 |
$ |
47,559 |
$ |
68,923 |
$ |
89,284 |
$ |
35,894 |
Net expenses |
|
1.98
% |
|
1.97
% |
|
1.98
% |
|
1.98
% |
|
2.00
% |
Gross expenses |
|
1.98
% |
|
1.97
% |
|
1.98
% |
|
1.98
% |
|
2.00
% |
Net investment income (loss) |
|
(0.36
)% |
|
0.00
% (c)(f) |
|
(0.38
)% |
|
(0.61
)% (d) |
|
(1.10
)% |
Portfolio turnover rate |
|
44
% |
|
42
% |
|
57
% |
|
32
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Amount rounds to less than $0.01 per share. |
(c) |
Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.07), total return would have been 11.70% and the ratio of net investment loss to average net assets would have been (0.35)%. |
(d) |
Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.16), total return would have been (4.68)% and the ratio of net investment loss to average net assets would have been (0.77)%. |
(e) |
A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(f) |
Amount rounds to less than 0.01%. |
139
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Value Opportunity Fund
|
Class N | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
22.87 |
$ |
20.75 |
$ |
20.26 |
$ |
21.50 |
$ |
20.76 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.17 |
|
0.25 (b) |
|
0.16 |
|
0.11 (c) |
|
(0.00
) (d) |
Net realized and unrealized gain (loss) |
|
(3.75
) |
|
2.51 |
|
1.04 |
|
(0.81
) |
|
2.31 |
Total from Investment Operations |
|
(3.58
) |
|
2.76 |
|
1.20 |
|
(0.70
) |
|
2.31 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.24
) |
|
(0.27
) |
|
(0.15
) |
|
(0.07
) |
|
- |
Net realized capital gains |
|
(1.51
) |
|
(0.37
) |
|
(0.56
) |
|
(0.47
) |
|
(1.57
) |
Total Distributions |
|
(1.75
) |
|
(0.64
) |
|
(0.71
) |
|
(0.54
) |
|
(1.57
) |
Net asset value, end of the period |
$ |
17.54 |
$ |
22.87 |
$ |
20.75 |
$ |
20.26 |
$ |
21.50 |
Total return |
|
(15.78 )%
|
|
13.31
% (b) |
|
6.21
% |
|
(3.35
)% (c) |
|
11.24
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
70,902 |
$ |
134,205 |
$ |
148,365 |
$ |
65,010 |
$ |
12,024 |
Net expenses |
|
0.88
% |
|
0.88
% |
|
0.88
% |
|
0.89
% |
|
0.91
% (e) |
Gross expenses |
|
0.88
% |
|
0.88
% |
|
0.88
% |
|
0.89
% |
|
0.91
% (e) |
Net investment income (loss) |
|
0.76
% |
|
1.16
% (b) |
|
0.78
% |
|
0.50
% (c) |
|
(0.00
)% (f) |
Portfolio turnover rate |
|
44
% |
|
42
% |
|
57
% |
|
32
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.17, total return would have been 12.92% and the ratio of net investment income to average net assets would have been 0.76%. |
(c) |
Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.08, total return would have been (3.59)% and the ratio of net investment income to average net assets would have been 0.35%. |
(d) |
Amount rounds to less than $0.01 per share. |
(e) |
Includes fee/expense recovery of less than 0.01%. |
(f) |
Amount rounds to less than 0.01%. |
140
Financial Performance
For a share outstanding throughout each period.
Vaughan Nelson Value Opportunity Fund
|
Class Y | |||||||||
|
Year Ended |
Year Ended |
Year Ended |
Year Ended |
Year Ended | |||||
Net asset value, beginning of the period |
$ |
22.89 |
$ |
20.77 |
$ |
20.27 |
$ |
21.52 |
$ |
20.78 |
Income (loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)(a) |
|
0.15 |
|
0.23 (b) |
|
0.12 |
|
0.09 (c) |
|
(0.02
) |
Net realized and unrealized gain (loss) |
|
(3.75
) |
|
2.51 |
|
1.07 |
|
(0.82
) |
|
2.33 |
Total from Investment Operations |
|
(3.60
) |
|
2.74 |
|
1.19 |
|
(0.73
) |
|
2.31 |
Less Distributions From: |
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.21
) |
|
(0.25
) |
|
(0.13
) |
|
(0.05
) |
|
- |
Net realized capital gains |
|
(1.51
) |
|
(0.37
) |
|
(0.56
) |
|
(0.47
) |
|
(1.57
) |
Total Distributions |
|
(1.72
) |
|
(0.62
) |
|
(0.69
) |
|
(0.52
) |
|
(1.57
) |
Net asset value, end of the period |
$ |
17.57 |
$ |
22.89 |
$ |
20.77 |
$ |
20.27 |
$ |
21.52 |
Total return |
|
(15.85 )%
|
|
13.19
% (b) |
|
6.14
% |
|
(3.47
)% (c) |
|
11.23
% |
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s) |
$ |
453,085 |
$ |
774,304 |
$ |
903,545 |
$ |
1,133,634 |
$ |
656,071 |
Net expenses |
|
0.99
% |
|
0.97
% |
|
0.98
% |
|
0.98
% |
|
1.00
% |
Gross expenses |
|
0.99
% |
|
0.97
% |
|
0.98
% |
|
0.98
% |
|
1.00
% |
Net investment income (loss) |
|
0.66
% |
|
1.04
% (b) |
|
0.62
% |
|
0.39
% (c) |
|
(0.10
)% |
Portfolio turnover rate |
|
44
% |
|
42
% |
|
57
% |
|
32
% |
|
58
% |
(a) |
Per share net investment income (loss) has been calculated using the average shares outstanding during the period. |
(b) |
Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.15, total return would have been 12.80% and the ratio of net investment income to average net assets would have been 0.67%. |
(c) |
Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.05, total return would have been (3.70)% and the ratio of net investment income to average net assets would have been 0.20%. |
141
Appendix A - Financial Intermediary Specific Sales Load Waivers
Appendix A - Financial Intermediary Specific Sales Load Waivers
Set forth below is information regarding sales load waivers and discounts available at specific financial intermediaries which are not affiliated with the Funds, the Advisers, Subadvisers and/or the Distributor. In all instances, it is the purchaser’s responsibility to notify the financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales load waivers or discounts.
Ameriprise Financial
Class A Shares Front-End Sales Charge Waivers Available at Ameriprise Financial:
The following information applies to Class A shares purchases if you have an account with or otherwise purchase Fund shares through Ameriprise Financial:
Shareholders purchasing Fund shares through an Ameriprise Financial platform or account are eligible for the following front-end sales charge waivers and discounts, which may differ from those disclosed elsewhere in this Fund’s prospectus or SAI:
Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and
money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement
plans do not include SEP IRAs, Simple IRAs or SAR-SEPs.
Shares purchased through an Ameriprise Financial
investment advisory program (if an Advisory or similar share class for such investment advisory program is not
available).
Shares purchased by third party investment advisors on behalf of their advisory clients through
Ameriprise Financial’s platform (if an Advisory or similar share class for such investment advisory program is
not available).
Shares purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other fund within the same fund family).
Shares exchanged from Class C shares of the same fund in the month of or following the 10-year anniversary of the purchase
date. To the extent that this prospectus elsewhere provides for a waiver with respect to such shares following a
shorter holding period, that waiver will apply to exchanges following such shorter period. To the extent that this
prospectus elsewhere provides for a waiver with respect to exchanges of Class C shares for load waived shares, that
waiver will also apply to such exchanges.
Employees and registered representatives of Ameriprise Financial
or its affiliates and their immediate family members.
Shares purchased by or through qualified accounts
(including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit
plans) that are held by a covered family member, defined as an Ameriprise financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant (mother, father, grandmother, grandfather, great grandmother, great grandfather), advisor’s lineal descendant (son,
step-son, daughter, step-daughter, grandson, granddaughter, great grandson, great granddaughter) or any spouse of a
covered family member who is a lineal descendant.
Shares purchased from the proceeds of redemptions within
the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption
and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e.
Rights of Reinstatement).
Merrill Lynch
Shareholders purchasing Fund shares through a Merrill Lynch platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or in the SAI.
Front-end Sales Load Waivers on Class A Shares available at Merrill Lynch
| Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan; |
| Shares purchased by or through a 529 Plan; |
| Shares purchased through a Merrill Lynch affiliated investment advisory program; |
| Shares purchased by third party investment advisors on behalf of their advisory clients through Merrill Lynch’s platform; |
| Shares of funds purchased through the Merrill Edge Self-Directed platform (if applicable); |
| Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family); |
| Shares exchanged from Class C (i.e., level-load) shares of the same fund in the month of or following the 10-year anniversary of the purchase date; |
| Employees and registered representatives of Merrill Lynch or its affiliates and their family members; |
| Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in the Prospectus; and |
| Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the |
A-1
Appendix A - Financial Intermediary Specific Sales Load Waivers
redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement). |
CDSC Waivers on Class A and Class C Shares available at Merrill Lynch
| Death or disability of the shareholder; |
| Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus; |
| Return of excess contributions from an IRA account; |
| Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 70½; |
| Shares sold to pay Merrill Lynch fees but only if the transaction is initiated by Merrill Lynch; |
| Shares acquired through a right of reinstatement; and |
| Shares held in retirement brokerage accounts, that are exchanged for a lower cost share class due to transfer to a fee based account or platform. |
Merrill Lynch clients subject to a CDSC when transferring from one share class to another may be eligible for CDSC proration. Merrill Lynch will remit the portion of the payment to be made to the Distributor solely for the number of months remaining on the CDSC period divided by the total number of months of the CDSC period.
Front-end load Discounts Available at Merrill Lynch: Breakpoints, Rights of Accumulation & Letters of Intent
| Breakpoints as described in this Prospectus; |
| Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Merrill Lynch. Eligible fund family assets not held at Merrill Lynch may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets; and |
| Letters of Intent (LOI) which allow for breakpoint discounts based on anticipated purchases within a fund family, through Merrill Lynch, over a 13-month period of time (if applicable). |
Morgan Stanley Wealth Management
Shareholders purchasing Fund shares through a Morgan Stanley Wealth Management transactional brokerage account are eligible only for the following front-end sales charge waivers with respect to Class A shares, which may differ from and may be more limited than those disclosed elsewhere in this Fund’s Prospectus or SAI.
Front-end Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth Management
Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and
money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement
plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans
Morgan Stanley employee and
employee-related accounts according to Morgan Stanley’s account linking rules
Shares purchased through
reinvestment of dividends and capital gains distributions when purchasing shares of the same fund
Shares
purchased through a Morgan Stanley self-directed brokerage account
Class C (i.e., level-load) shares that
are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund
pursuant to Morgan Stanley Wealth Management’s share class conversion program
Shares purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90
days following the redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge.
Raymond James & Associates, Inc., Raymond James Financial Services, Inc., & Raymond James affiliates (“Raymond James”)
Shareholders purchasing Fund shares through a Raymond James platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Fund’s prospectus or SAI.
Front-End Sales Load Waivers on Class A Shares available at Raymond James
Shares purchased in an investment advisory program
Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the
same fund (but not any other fund within the fund family)
Employees and registered representatives of Raymond James or its affiliates and their family members as designated by
Raymond James
Shares purchased from the proceeds of redemptions within the same fund family, provided (1)
the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occurs in the same
account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of
Reinstatement)
A shareholder in the Fund’s Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a
CDSC and the conversion is in line with the policies and procedures of Raymond James
A-2
Appendix A - Financial Intermediary Specific Sales Load Waivers
CDSC Waivers on Classes A and C Shares available at Raymond James
Death or disability of the shareholder
Shares sold as part of a systematic withdrawal plan as described in the Fund’s prospectus
Return of excess contributions from an IRA account
Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age
70½ as described in the Fund’s prospectus
Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James
Shares acquired through a right of reinstatement
Front-End Load Discounts Available at Raymond James: Breakpoints and/or Rights of Accumulation
Breakpoints as described in this prospectus
Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the
aggregated holding of fund family assets held by accounts within the purchaser’s household at Raymond James.
Eligible fund family assets not held at Raymond James may be included in the rights of accumulation calculation only
if the shareholder notifies his or her financial advisor about such assets
A-3
If you would like more information about the Funds, the following documents are available free upon request:
Annual and Semiannual Reports—Provide additional information about each Fund’s investments. Each annual report includes a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.
Statement of Additional Information (SAI)—Provides more detailed information about the Funds and their investment limitations and policies. The SAI has been filed with the SEC and is incorporated into this Prospectus by reference.
For a free copy of the Funds’ annual or semiannual reports or their SAIs, to request other information about the Funds, and to make shareholder inquiries generally, contact your financial representative, visit the Funds’ website at im.natixis.com or call the Funds at 800-225-5478.
Important Notice Regarding Delivery of Shareholder Documents:
In our continuing effort to reduce your fund’s 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.
Text-only copies of the Funds’ reports and SAI are available free from the EDGAR Database on the SEC’s 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.
Portfolio Holdings—A description of the Funds’ policies and procedures with respect to the disclosure of each Fund’s portfolio securities is available in the SAI.
Investment Company Act File No. 811-04323 Investment Company Act File No. 811-00242
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XS51-0519 |
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2019
NATIXIS FUNDS TRUST I
Loomis Sayles Multi-Asset Income Fund - Class A (IIDPX), Class C (CIDPX), Class N (LMINX), Class T* (LMUTX) and Class Y (YIDPX)
Mirova Global Green Bond Fund - Class A (MGGAX), Class N (MGGNX) and Class Y (MGGYX)
Mirova Global Sustainable Equity Fund - Class A (ESGMX), Class C (ESGCX), Class N (ESGNX), Class T* (ETSGX) and Class Y (ESGYX)
Mirova International Sustainable Equity Fund- Class A (MRVAX), Class N (MRVNX) and Class Y (MRVYX)
Natixis Oakmark International Fund - Class A (NOIAX), Class C (NOICX), Class N (NIONX), Class T* (NIOTX) and Class Y (NOIYX)
Natixis U.S. Equity Opportunities Fund - Class A (NEFSX), Class C (NECCX), Class N (NESNX), Class T* (NUSTX) and Class Y (NESYX)
Vaughan Nelson Small Cap Value Fund - Class A (NEFJX), Class C (NEJCX), Class N (VSCNX), Class T* (NEJTX) and Class Y (NEJYX)
NATIXIS FUNDS TRUST II
Natixis Oakmark Fund - Class A (NEFOX), Class C (NECOX), Class N (NOANX), Class T* (NOKTX) and Class Y (NEOYX)
Vaughan Nelson Value Opportunity Fund - Class A (VNVAX), Class C (VNVCX), Class N (VNVNX), Class T* (VNVTX) and Class Y (VNVYX)
LOOMIS SAYLES FUNDS II
Loomis Sayles High Income Fund
Class A (NEFHX), Class C (NEHCX), Class N (LSHNX), Class T* (NEHTX) and Class Y (NEHYX)
Loomis Sayles Investment Grade Bond Fund
Class A (LIGRX), Class C (LGBCX), Class N (LGBNX), Class T* (LIGTX), Class Y (LSIIX) and Admin Class (LIGAX)
* | Class T shares of the Funds are not currently available for purchase. |
This Statement of Additional Information (Statement) contains specific information that may be useful to investors but that is not included in the Statutory Prospectuses of the series of Natixis Funds Trust I, Natixis Funds Trust II, or Loomis Sayles Funds II listed above (each, a Trust and together, the Trusts, with each series being known as a Fund). This Statement is not a prospectus and is authorized for distribution only when accompanied or preceded by each Funds Statutory or Summary Prospectus, each of which is dated May 1, 2019, as from time to time revised or supplemented (each a Prospectus and together the Prospectuses). This Statement should be read together with the Prospectuses. Investors may obtain the Prospectuses without charge from Natixis Distribution, L.P. (the Distributor), Prospectus Fulfillment Desk, 888 Boylston Street, Suite 800, Boston, MA 02199-8197, by calling Natixis Funds at 800-225-5478 or by visiting the Funds website at im.natixis.com.
The Funds financial statements and accompanying notes that appear in the Funds annual and semiannual reports are incorporated by reference into this Statement. Each Funds annual and semiannual reports contain additional performance information and are available upon request and without charge by calling 800-225-5478 or by visiting the Funds website at im.natixis.com.
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The following is a description of restrictions on the investments to be made by the Funds. The restrictions marked with an asterisk (*) are fundamental policies that may not be changed without the vote of a majority of the outstanding voting securities of the relevant Fund (as defined in the Investment Company Act of 1940, as amended (the 1940 Act)). The other restrictions set forth below are not fundamental policies and may be changed by each Trusts Board of Trustees (the Board). Except in the case of restrictions marked with a dagger () below, the percentages set forth below and the percentage limitations set forth in each Funds Prospectus apply at the time an investment is made and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment.
The Loomis Sayles High Income Fund (the High Income Fund) may not:
*(1) | Buy more than 10% of the voting securities or more than 10% of all of the securities of any issuer, or invest to control or manage any company. |
*(2) | Purchase securities on margin, except for short-term credits as needed to clear securities purchases. |
*(3) | Invest in securities issued by other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization, or by purchase in the open market of securities of closed-end investment companies where no underwriter or dealer commission or profit, other than a customary brokerage commission, is involved and only if immediately thereafter not more than 10% of the value of its total assets would be invested in such securities. |
*(4) | Purchase securities, other than shares of the Fund, from or sell portfolio securities to its directors or officers, or firms they are affiliated with as principals, except as permitted by the regulations of the SEC. |
*(5) | Purchase or sell commodities or commodity contracts, or write, purchase or sell options, except that the Fund may (a) buy or sell futures contracts on securities or on securities indices and (b) write, purchase or sell put or call options on securities, on securities indices or on futures contracts of the type referred to in clause (a) of this restriction. |
*(6) | Make loans, except loans of portfolio securities and except to the extent that the purchase of notes, repurchase agreements, bonds, or other evidences of indebtedness or deposits with banks or other financial institutions may be considered loans. |
*(7) | Make short sales of securities or maintain a short position. |
*(8) | Purchase or sell real estate, provided that the Fund may invest in securities secured by real estate or interests therein or in securities issued by companies that invest in real estate or interests therein. |
*(9) | Purchase or sell interests in oil and gas or other mineral exploration or development programs, provided that the Fund may invest in securities issued by companies which do invest in or sponsor such programs. |
*(10) | Underwrite the securities of other issuers. |
*(11) | Invest more than 10% of the value of its total assets, in the aggregate, in repurchase agreements maturing in more than seven days and restricted securities. |
*(12) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one industry (in the utilities category, gas, electric, water, and telephone companies will be considered as being in separate industries). |
*(13) | Borrow money, except as a temporary measure for extraordinary or emergency purposes, up to an amount not in excess of 33 1/3% of its total assets. |
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*(14) | Issue senior securities. For the purpose of this restriction, none of the following is deemed to be a senior security: any borrowing permitted by restriction (13) above; any collateral arrangements with respect to options, forward contracts, futures contracts, swap contracts and other similar contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts, swap contracts or similar contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of Loomis Sayles Funds IIs First Amended and Restated Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom. |
(15) | Invest more than 15% of the Funds total net assets in illiquid securities. |
The Loomis Sayles Investment Grade Bond Fund (the Investment Grade Bond Fund) may not:
(1) | Invest in companies for the purpose of exercising control or management. |
*(2) | Act as underwriter, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. |
*(3) | Invest in oil, gas or other mineral leases, rights or royalty contracts or in real estate, commodities or commodity contracts. (This restriction does not prevent the Fund from engaging in transactions in futures contracts relating to securities indices, interest rates or financial instruments or options, or from investing in issuers that invest or deal in the foregoing types of assets or from purchasing securities that are secured by real estate.) |
*(4) | Make loans, except that the Fund may lend its portfolio securities to the extent permitted under the 1940 Act. (For purposes of this investment restriction, neither (i) entering into repurchase agreements nor (ii) purchasing debt obligations in which the Fund may invest consistent with its investment policies is considered the making of a loan.) |
(5) | With respect to 75% of its assets, purchase any security (other than U.S. government securities) if, as a result, more than 5% of the Funds assets (taken at current value) would then be invested in securities of a single issuer. |
(6) | With respect to 75% of its assets, acquire more than 10% of the outstanding voting securities of an issuer. |
*(7) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds assets (taken at current value) would be invested in any one industry (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries.) |
*(8) | Borrow in excess of 10% of its assets (taken at cost) or 5% of its assets (taken at current value), whichever is lower, nor borrow any money except as a temporary measure for extraordinary or emergency purposes. |
(9) | Purchase securities on margin (except such short-term credits as are necessary for clearance of transactions) or make short sales (except where, by virtue of ownership of other securities, it has the right to obtain, without payment of additional consideration, securities equivalent in kind and amount to those sold.) |
(10) | Participate on a joint or joint and several basis in any trading account in securities. (The bunching of orders for the purchase or sale of portfolio securities with Loomis Sayles or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction.) |
(11) | Purchase any illiquid security, including any security that is 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. |
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(12) | Write or purchase puts, calls, or combinations of both, except that the Fund may (1) acquire warrants or rights to subscribe to securities of companies issuing such warrants or rights, or of parents or subsidiaries of such companies, (2) purchase and sell put and call options on securities, and (3) write, purchase and sell put and call options on currencies and enter into currency forward contracts. |
*(13) | Issue senior securities. (For purposes of this restriction, none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restriction (15) below; any borrowing permitted by restriction (8) above; any collateral arrangements with respect to options, futures contracts, and options on futures contracts and with respect to initial and variation margin; and the purchase or sale of options, forward contracts, futures contracts, or options on futures contracts.) |
(14) | Invest, under normal circumstances, less than 80% of its net assets (plus borrowings made for investment purposes) in investment grade fixed-income securities. Prior to any change to such policy adopted by the Board of Trustees of the Fund, the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the SEC. |
The Fund may:
(15) | Pledge its assets to the maximum extent permitted by applicable law. |
In restriction (14) above, the 80% policy is applied at the time of investment. However, if the Fund no longer meets the 80% policy due to changes in the value of its portfolio holdings or other circumstances beyond its control, it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
Loomis Sayles Multi-Asset Income Fund (Multi-Asset Income Fund) may not:
(1) | With respect to 75% of its total assets, purchase any security if, as a result, more than 5% of its total assets (based on current value) would then be invested in the securities of a single issuer or acquire more than 10% of the outstanding voting securities of any issuer, provided however, this limitation does not apply to government securities as defined in the 1940 Act. |
*(2) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one industry, except that the Fund may invest more than 25% of its total assets in securities of companies primarily engaged in the real estate 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 with regard to bank obligations, bank obligations are considered to be one industry, and asset-backed securities are not considered to be bank obligations. |
*(3) | Make short sales of securities or maintain a short position or purchase securities on margin, except that the Fund may obtain short-term credits as necessary for the clearance of security transactions, and 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. |
*(4) | Borrow money, except to the extent permitted under the 1940 Act. |
*(5) | 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. |
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*(6) | 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. |
*(7) | 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. |
*(8) | Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities. |
*(9) | Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act. |
Mirova Global Green Bond Fund (Global Green Bond 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. 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, finance companies whose financing activities are not related primarily to the activities of their parent companies are classified in the industry the Funds adviser believes is most applicable to such finance companies, and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry. For purposes of this restriction, 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. |
(8) | Invest less than 80% of its net assets (plus any borrowings made for investment purposes) in green bonds, as defined in the section Principal Investment Strategies in the Prospectus (Non-Fundamental). Prior to any change to such policy adopted by the Board of Trustees (the Board), the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the SEC. |
(9) | Acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on subparagraph 12(d)(1)(G) or subparagraph 12(d)(1)(F) of the Investment Company Act of 1940, as amended (Non-Fundamental). |
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The Fund may:
*(10) | Purchase and sell commodities to the maximum extent permitted by applicable law. |
In investment restriction (8) above, the 80% policy is applied at the time of investment. However, if the Fund no longer meets the 80% policy (due to changes in the value of its portfolio holdings or other circumstances beyond its control), it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
Mirova Global Sustainable Equity Fund (Global Sustainable Equity 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. 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, finance companies whose financing activities are not related primarily to the activities of their parent companies are classified in the industry the Funds adviser believes is most applicable to such finance companies, and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry. For purposes of this restriction, 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. |
(8) | Invest less than 80% of its net assets (plus any borrowings made for investment purposes) in equity securities (Non-Fundamental). Prior to any change to such policy adopted by the Board, the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the SEC. |
The Fund may:
*(9) | Purchase and sell commodities to the maximum extent permitted by applicable law. |
7
In investment restriction (8) above, the 80% policy is applied at the time of investment. However, if the Fund no longer meets the 80% policy (due to changes in the value of its portfolio holdings or other circumstances beyond its control), it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
Mirova International Sustainable Equity Fund (International Sustainable Equity 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. 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, finance companies whose financing activities are not related primarily to the activities of their parent companies are classified in the industry the Funds adviser believes is most applicable to such finance companies, and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry. For purposes of this restriction, 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. |
(8) | Invest less than 80% of its net assets (plus any borrowings made for investment purposes) in equity securities (Non-Fundamental). Prior to any change to such policy adopted by the Board, the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the Securities and Exchange Commission (SEC). |
(9) | Acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on subparagraph 12(d)(1)(G) or subparagraph 12(d)(1)(F) of the Investment Company Act of 1940, as amended (Non-Fundamental). |
The Fund may:
*(10) | Purchase and sell commodities to the maximum extent permitted by applicable law. |
In investment restriction (8) above, the 80% policy is applied at the time of investment. However, if the Fund no longer meets the 80% policy (due to changes in the value of its portfolio holdings or other circumstances beyond its control), it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
8
Natixis Oakmark Fund may not:
*(1) | With respect to 75% of its total assets, purchase any security if, as a result, more than 5% of its total assets (based on current value) would then be invested in the securities of a single issuer or acquire more than 10% of the outstanding voting securities of any issuer; provided however, this limitation does not apply to government securities as defined in the 1940 Act. |
*(2) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one 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 the purpose of this restriction with regard to bank obligations, bank obligations are considered to be one industry, and asset-backed securities are not considered to be bank obligations. |
*(3) | Make short sales of securities, maintain a short position or purchase securities on margin, except that the Fund may obtain short-term credits as necessary for the clearance of security transactions, and 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. |
*(4) | Purchase or sell real estate, although it may purchase securities of issuers that deal in real estate, securities that are secured by interests in real estate, and securities that 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 interests therein. |
*(5) | Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities. |
*(6) | Act as underwriter, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. |
*(7) | Make loans, except that the Fund may purchase or hold debt instruments in accordance with its investment objective and policies; provided however, this restriction does not apply to repurchase agreements or loans of portfolio securities. |
*(8) | Borrow money except for temporary or emergency purposes; provided however, that the Fund may loan securities, engage in reverse repurchase agreements and dollar rolls, in an amount not exceeding 33 1/3% of its total assets taken at cost. |
*(9) | Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act. |
(10) | Invest more than 15% of the Funds total net assets in illiquid securities. |
Natixis Oakmark International 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. For purposes of this restriction, telephone, gas and electric public utilities are each regarded as separate industries, finance companies whose financing activities are related primarily to the activities of their parent companies are classified in the industry of their parents, finance companies whose financing activities are not related primarily to the activities of their parent companies are classified in the industry the Funds adviser or subadviser believes is most applicable to such finance companies, and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry. 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. |
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*(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 objective 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. |
Natixis U.S. Equity Opportunities Fund (U.S. Equity Opportunities Fund) may not:
*(1) | With respect to 75% of its total assets, invest in the securities of any one issuer (other than the U.S. government and its agencies and instrumentalities) if, immediately after and as a result of such investment, more than 5% of the total assets of the Fund would be invested in such issuer. |
*(2) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one industry (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries, and each foreign countrys government (together with subdivisions thereof) will be considered to be a separate industry.) |
(3) | Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except when, by virtue of ownership of other securities, it has the right to obtain, without payment of further consideration, securities equivalent in kind and amount to those sold, and the Fund will not deposit or pledge more than 10% of its total assets (taken at current value) as collateral for such sales. (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin.) |
(4) | Acquire more than 10% of any class of securities of an issuer (other than U.S. government securities and taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of an issuer. |
*(5) | Borrow money in excess of 25% of its total assets, and then only as a temporary measure for extraordinary or emergency purposes. |
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*(6) | Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Funds portfolio securities. |
*(7) | Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts, except that the Fund may buy and sell futures contracts and related options. (This restriction does not prevent the Fund from purchasing securities of companies investing in the foregoing.) |
*(8) | Act as underwriter, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. |
(9) | Except to the extent permitted by rule or order of the SEC, participate on a joint or joint and several basis in any trading account in securities. (The bunching of orders for the purchase or sale of portfolio securities with any investment adviser or subadviser of the Fund or accounts under any such investment advisers or subadvisers management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction.) |
(10) | Write, purchase or sell options, except that the Fund may (a) write, purchase and sell put and call options on securities, securities indices, currencies, futures contracts, swap contracts and other similar instruments and (b) enter into currency forward contracts. |
(11) | Purchase any illiquid security if, as a result, more than 15% of its net assets (taken at current value) would be invested in such securities. |
*(12) | Issue senior securities. For the purpose of this restriction none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restrictions (3) or (6) above; any borrowing permitted by restriction (5) above; any collateral arrangements with respect to forward contracts, options, futures contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of the Trusts Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom. |
(13) | Invest less than 80% of its net assets (plus any borrowings made for investment purposes) in U.S. securities. Prior to any change to such policy adopted by the Board, the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the SEC. |
(14) | Invest less than 80% of its net assets (plus any borrowings made for investment purposes) in equity securities. Prior to any change to such policy adopted by the Board, the Fund will provide notice to shareholders as required by Rule 35d-1 under the 1940 Act, as such Rule may be interpreted from time to time by the staff of the SEC. |
The Fund may:
(15) | Pledge its assets to the maximum extent permitted by applicable law. |
In restrictions (13) and (14) above, the 80% policies are applied at the time of investment. However, if the Fund no longer meets the 80% policies (due to changes in the value of its portfolio holdings or other circumstances beyond its control), it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
11
Vaughan Nelson Small Cap Value Fund (Small Cap Value Fund) may not:
(1) | With respect to 75% of its total assets, invest in the securities of any one issuer (other than the U.S. government and its agencies and instrumentalities) if, immediately after and as a result of such investment, more than 5% of the total assets of the Fund would be invested in such issuer. |
*(2) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one industry (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries, and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry.) |
(3) | Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities). (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin.) |
(4) | Acquire more than 10% of any class of securities of an issuer (other than U.S. government securities and taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or, with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of an issuer. |
*(5) | Borrow money in excess of 33 1/3% of its total assets, and then only as a temporary measure for extraordinary or emergency purposes. |
*(6) | Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Funds portfolio securities. |
*(7) | Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts, except that the Fund may buy and sell futures contracts and related options, swap contracts, currency forward contracts, structured notes and other similar instruments. (This restriction does not prevent the Fund from purchasing securities of companies investing in the foregoing.) |
*(8) | Act as underwriter, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. |
(9) | Except to the extent permitted by rule or order of the SEC, participate on a joint or joint and several basis in any trading account in securities. (The bunching of orders for the purchase or sale of portfolio securities with any investment adviser or subadviser of the Fund or accounts under any such investment advisers or subadvisers management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction.) |
(10) | Purchase any illiquid security if, as a result, more than 15% of its net assets (taken at current value) would be invested in such securities. |
*(11) | Issue senior securities. For the purpose of this restriction none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restriction (6) above; any borrowing permitted by restriction (5) above; any collateral arrangements with respect to options or futures contracts, and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts, swap contracts or other similar instruments; and the issuance of shares of beneficial interest permitted from time to time by the provisions of the Trusts Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom. (The Fund is required, under regulatory provisions applicable to it as interpreted by the staff of the SEC, to set aside in a segregated account with its custodian bank liquid assets in amounts sufficient at all times to satisfy its obligations under options, futures contracts, forward contracts, swap contracts and other similar instruments.) |
12
(12) | Under normal circumstances, invest less than 80% of its net assets (plus any borrowings made for investment purposes) in small cap companies. The Fund will provide shareholders with notice at least 60 days in advance of any change to such policy adopted by the Board. Currently, the Fund defines a small cap company to be one whose market capitalization, at the time of purchase, either falls within the capitalization range of the Russell 2000® Value Index, an unmanaged index that measures the performance of those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values, or is $3.5 billion or less. |
The Fund may:
(13) | Pledge its assets to the maximum extent permitted by applicable law. |
In restriction (12) above, the 80% policy is applied at the time of investment. However, if the Fund no longer meets the 80% policy (due to changes in the value of its portfolio holdings or other circumstances beyond its control), it must make future investments in a manner that would bring the Fund into compliance with the 80% requirement, but would not be required to sell portfolio holdings that have increased in value.
Vaughan Nelson Value Opportunity Fund (Value Opportunity Fund) may not:
*(1) | Purchase any security (other than U.S. government securities) if, as a result, more than 25% of the Funds total assets (taken at current value) would be invested in any one industry. For purposes of this restriction, telephone, gas and electric public utilities are each regarded as separate industries, finance companies whose financing activities are related primarily to the activities of their parent companies are classified in the industry of their parents and each foreign countrys government (together with all subdivisions thereof) will be considered to be a separate industry). 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 or purchase securities on margin, except that the Fund may obtain short-term credits as necessary for the clearance of security transactions, and 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) | Purchase or sell commodities, except that the Fund may buy and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities. |
*(6) | Act as 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. |
*(7) | 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. |
*(8) | Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act. |
13
General Notes on Investment Restrictions
In addition to temporary borrowing, and subject to any stricter restrictions on borrowing applicable to any particular Fund, 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 the 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 Securities and Exchange Commission (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%. With respect to restrictions on borrowing, the 1940 Act limits a Funds ability to borrow money on a non-temporary basis if such borrowings constitute senior securities. The Funds may also borrow money or engage in economically similar transactions if those transactions do not constitute senior securities under the 1940 Act.
Where applicable, the foregoing investment restrictions shall be interpreted based upon no-action letters and other pronouncements of the staff of the SEC. Under current pronouncements, certain positions (e.g., reverse repurchase agreements) are excluded from the definition of senior security so long as a Fund maintains adequate cover, segregation of assets or otherwise. 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.
A Fund may not purchase any illiquid security, if, as a result, more than 15% of the Funds net assets (based on current value) would then be invested in such securities. Securities generally will be considered illiquid if a Fund reasonably expects the security cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the security.
For purposes of the foregoing restrictions, the Funds do not consider a swap or other derivative contract on one or more securities, indices, currencies or interest rates to be a commodity or a commodity contract nor, consistent with the position of the SEC, do the Funds consider such swap contracts to involve the issuance of a senior security, provided a Fund designates on its records or segregates with its custodian or otherwise designates liquid assets (marked to market on a daily basis) sufficient to meet its obligations under such contracts.
ADVISORY FEES
Pursuant to separate investment advisory agreements, Loomis, Sayles & Company, L.P (Loomis Sayles) has agreed to manage the investment and reinvestment of the assets of the High Income Fund and the Investment Grade Bond Fund and to provide a range of administrative services to each Fund, subject to the supervision of the Board. For the services described in the advisory agreements, each Fund has agreed to pay Loomis Sayles an advisory fee at the annual rate set forth in the following table:
Fund |
Date of Agreement |
Advisory fee payable by Fund to Loomis Sayles (as a % of average daily net assets of the Fund) |
||||||||
High Income Fund |
9/12/03, as amended, 7/1/04 |
0.60 | % | |||||||
Investment Grade Bond Fund |
10/30/00, as amended, 7/1/13 |
|
0.40 0.38 |
% % |
|
of the first $15 billion of amounts in excess of $15 billion |
|
Pursuant to separate advisory agreements, Natixis Advisors, L.P., (Natixis Advisors) has agreed, subject to the supervision of the Board of the relevant Trust, to manage the investment and reinvestment of the assets of Multi-Asset Income Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund, U.S. Equity Opportunities Fund and Value Opportunity Fund, and to provide a range of administrative services to such Funds.
14
For the services described in the advisory agreements, each such Fund has agreed to pay Natixis Advisors an advisory fee at the annual rate set forth in the following table, reduced by the amount of any subadvisory fees payable directly by a Fund to its subadvisers pursuant to any subadvisory agreement:
Fund |
Date of Agreement | Advisory fee payable by Fund to Natixis Advisors (as a % of average daily net assets of the Fund) | ||||
Multi-Asset Income Fund |
11/01/05 | 0.55% 0.50% |
of the first $1 billion of the amounts in excess of $1 billion | |||
Natixis Oakmark Fund |
10/30/00 | 0.70% 0.65% 0.60% |
of the first $200 million of the next $300 million of the amounts in excess of $500 million | |||
Natixis Oakmark International Fund |
12/13/2010 | 0.85% | ||||
Small Cap Value Fund |
10/30/00, as amended 03/01/04 |
0.90% | ||||
U.S. Equity Opportunities Fund |
10/30/00, as amended 7/1/17 |
0.75% | ||||
Value Opportunity Fund |
10/31/08, as amended 07/01/15 |
0.80% 0.75% |
of the first $1.5 billion of the amounts in excess of $1.5 billion |
Pursuant to separate investment advisory agreements, Mirova US LLC (Mirova US, formerly, Ostrum Asset Management U.S., LLC) has agreed to manage the investment and reinvestment of the assets of the Global Green Bond Fund, Global Sustainable Equity Fund and International Sustainable Equity Fund, subject to the supervision of the Board. For the services described in the advisory agreement, each Fund has agreed to pay Mirova US an advisory fee at the annual rate set forth in the following table:
Fund |
Date of Agreement |
Advisory fee payable by Fund to Mirova US (as a % of average daily net assets of the Fund) |
||||||
Global Sustainable Equity Fund |
03/31/16 | 0.80 | % | |||||
Global Green Bond Fund |
02/28/17 | 0.55 | % | |||||
International Sustainable Equity Fund |
12/28/18 | 0.80 | % |
Natixis Advisors (or Loomis Sayles, in the case of the High Income and Investment Grade Bond Fund, or Mirova US, in the case of the Global Green Bond Fund, Global Sustainable Equity Fund and International Sustainable Equity Fund) has given a binding contractual undertaking for all classes of the Funds in the table below to waive its advisory fee and, if necessary, to reimburse certain expenses, related to operating the Funds in order to limit the Funds expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes and organizational and extraordinary expenses, such as litigation and indemnification expenses and with respect to the Small Cap Value Fund substitute dividend expenses on securities sold short, to the annual rates indicated below. The undertakings are in effect through April 30, 2020, and will be reevaluated on an annual basis and may be terminated before then only with the consent of the Funds Board. Natixis Advisors (or Loomis Sayles, in the case of the High Income and Investment Grade Bond Fund, or Mirova US, in the case of the Global Green Bond Fund, Global Sustainable Equity Fund and International Sustainable Equity Fund) will be permitted to recover, on a class-by-class basis, expenses it has borne through the undertaking described above (whether through waiver of its advisory fee or otherwise) to the extent that a classs expenses fall below the annual rate set forth in the relevant undertaking. The Funds will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fee/expense was waived/reimbursed.
15
Fund |
Expense Limit | Date of Undertaking | ||||||
High Income Fund* |
||||||||
Class A |
1.05 | % | February 1, 2019 | |||||
Class C |
1.80 | % | February 1, 2019 | |||||
Class N |
0.75 | % | February 1, 2019 | |||||
Class T |
1.05 | % | February 1, 2019 | |||||
Class Y |
0.80 | % | February 1, 2019 | |||||
Investment Grade Bond Fund* |
||||||||
Class A |
0.78 | % | February 1, 2019 | |||||
Class C |
1.53 | % | February 1, 2019 | |||||
Class N |
0.48 | % | February 1, 2019 | |||||
Class T |
0.78 | % | February 1, 2019 | |||||
Class Y |
0.53 | % | February 1, 2019 | |||||
Admin Class |
1.03 | % | February 1, 2019 | |||||
Multi-Asset Income Fund** |
||||||||
Class A |
0.95 | % | May 1, 2019 | |||||
Class C |
1.70 | % | May 1, 2019 | |||||
Class N |
0.65 | % | May 1, 2019 | |||||
Class T |
0.95 | % | May 1, 2019 | |||||
Class Y |
0.70 | % | May 1, 2019 | |||||
Global Green Bond Fund*** |
||||||||
Class A |
0.95 | % | May 1, 2019 | |||||
Class N |
0.65 | % | May 1, 2019 | |||||
Class Y |
0.70 | % | May 1, 2019 | |||||
Global Sustainable Equity Fund*** |
||||||||
Class A |
1.20 | % | December 28, 2018 | |||||
Class C |
1.95 | % | December 28, 2018 | |||||
Class N |
0.90 | % | December 28, 2018 | |||||
Class T |
1.20 | % | December 28, 2018 | |||||
Class Y |
0.95 | % | December 28, 2018 | |||||
International Sustainable Equity Fund*** |
||||||||
Class A |
1.20 | % | December 28, 2018 | |||||
Class N |
0.90 | % | December 28, 2018 | |||||
Class Y |
0.95 | % | December 28, 2018 | |||||
Natixis Oakmark Fund |
||||||||
Class A |
1.30 | % | May 1, 2019 | |||||
Class C |
2.05 | % | May 1, 2019 | |||||
Class N |
1.00 | % | May 1, 2019 | |||||
Class T |
1.30 | % | May 1, 2019 | |||||
Class Y |
1.05 | % | May 1, 2019 | |||||
Natixis Oakmark International Fund**** |
||||||||
Class A |
1.45 | % | May 1, 2019 | |||||
Class C |
2.20 | % | May 1, 2019 | |||||
Class N |
1.15 | % | May 1, 2019 | |||||
Class T |
1.45 | % | May 1, 2019 | |||||
Class Y |
1.20 | % | May 1, 2019 | |||||
Small Cap Value Fund***** |
||||||||
Class A |
1.45 | % | May 1, 2019 | |||||
Class C |
2.20 | % | May 1, 2019 | |||||
Class N |
1.15 | % | May 1, 2019 | |||||
Class T |
1.45 | % | May 1, 2019 | |||||
Class Y |
1.20 | % | May 1, 2019 | |||||
U.S. Equity Opportunities Fund****** |
||||||||
Class A |
1.20 | % | May 1, 2019 | |||||
Class C |
1.95 | % | May 1, 2019 | |||||
Class N |
0.90 | % | May 1, 2019 |
16
Fund |
Expense Limit | Date of Undertaking | ||||||
Class T |
1.20 | % | May 1, 2019 | |||||
Class Y |
0.95 | % | May 1, 2019 | |||||
Value Opportunity Fund***** |
||||||||
Class A |
1.40 | % | May 1, 2019 | |||||
Class C |
2.15 | % | May 1, 2019 | |||||
Class N |
1.10 | % | May 1, 2019 | |||||
Class T |
1.40 | % | May 1, 2019 | |||||
Class Y |
1.15 | % | May 1, 2019 |
* | Natixis Advisors, L.P. (Natixis Advisors) will bear a portion of the waiver and/or expense reimbursement. The Natixis Advisors portion of the waiver and/or expense reimbursement will be equal to the ratio of the Natixis Advisors Support Services Fee divided by the management fee earned by Loomis Sayles. |
** | Loomis Sayles and Natixis Advisors have agreed to bear the fee waiver and/or expense reimbursement jointly on a pro rata basis relative to their advisory and sub-advisory fees, respectively. |
*** | Natixis Advisors will bear a portion of the waiver and/or expense reimbursement. The Natixis Advisors portion of the waiver and/or expense reimbursement will be equal to the ratio of the Natixis Advisors Support Services Fee divided by the management fee earned by Mirova US. |
**** | Harris Associates L.P. (Harris Associates) and Natixis Advisors have agreed to bear the fee waiver and/or expense reimbursement jointly on a pro rata basis relative to their advisory and sub-advisory fees, respectively. |
***** | Vaughan Nelson Investment Management, L.P. (Vaughan Nelson) and Natixis Advisors have agreed to bear the fee waiver and/or expense reimbursement jointly on a pro rata basis relative to their advisory and sub-advisory fees, respectively. |
****** | Natixis Advisors and each subadviser to the Fund have agreed to share the fee waiver and/or expense reimbursement pursuant to separate side letter agreements. |
SUBADVISORY FEES
Each advisory agreement between Natixis Advisors and a Fund provides that Natixis Advisors may delegate its responsibilities thereunder to other parties. Pursuant to separate subadvisory agreements, Natixis Advisors has delegated its portfolio management responsibilities to one or more subadvisers, as follows: Harris Associates, in the case of Natixis Oakmark Fund and Natixis Oakmark International Fund; Vaughan Nelson, in the case of Small Cap Value Fund and Value Opportunity Fund; Loomis Sayles, in the case of Multi-Asset Income Fund; and Harris Associates and Loomis Sayles, in the case of U.S. Equity Opportunities Fund. For the services described in the subadvisory agreements, each Fund has agreed to pay its respective subadviser(s) a subadvisory fee at the annual rate set forth in the following table:
Fund |
Subadviser | Date of Subadvisory Agreement |
Subadvisory fee payable to Subadviser (as a % of average daily net assets of the Fund/Segment) | |||||
Multi-Asset Income Fund |
Loomis Sayles | 11/01/05, as amended 08/31/15 |
0.325% 0.30% |
of the first $1 billion of the amounts in excess of $1 billion | ||||
Natixis Oakmark Fund |
Harris Associates |
10/29/02, as amended 02/28/14 |
0.52% 0.50% |
of the first $200 million of the amounts in excess of $200 million | ||||
Natixis Oakmark International Fund |
Harris Associates |
12/13/10 | 0.60% | |||||
Small Cap Value Fund |
Vaughan Nelson | 03/01/04 | 0.55% | |||||
U.S. Equity Opportunities Fund |
Harris Associates Large Cap Value Segment |
10/30/00, as amended 02/28/14 |
0.52% | on all assets of the Large Cap Value segment | ||||
Loomis Sayles All Cap Growth |
05/18/01, as amended 02/28/14 |
0.35% | on all assets of the All Cap Growth segment | |||||
Value Opportunity Fund |
Vaughan Nelson | 10/31/08, as amended 07/01/15 |
0.50% 0.47% |
of the first $1.5 billion of the amounts in excess of $1.5 billion |
17
Payment of Advisory and Subadvisory Fees
Advisory fees and subadvisory fees are allocated and paid on a pro rata basis by each class of each Fund based on the relative net assets of each class to the total net assets of that Fund. For the last three fiscal years (and the period ended December 31, 2018 for the High Income Fund and Investment Grade Bond Fund), the following table shows the total advisory fees (including subadvisory fees) paid by the Funds, and of these amounts, the total paid to Natixis Advisors and the total paid to a subadviser of a Fund:
HIGH INCOME FUND*
Fiscal Year Ended 09/30/16 |
Fiscal Year Ended 09/30/17 |
Fiscal Year Ended 09/30/18 |
Period Ended 12/31/18 |
|||||||||||||
Total Advisory Fee |
$ | 971,664 | $ | 1,042,422 | $ | 1,042,957 | $ | 249,773 | ||||||||
Amount Waived |
$ | 67,553 | $ | 25,903 | $ | 190,092 | $ | 90,030 | ||||||||
Total Paid |
$ | 904,111 | $ | 1,016,519 | $ | 852,865 | $ | 159,743 |
INVESTMENT GRADE BOND FUND*
Fiscal Year Ended 09/30/16 |
Fiscal Year Ended 09/30/17 |
Fiscal Year Ended 09/30/18 |
Period Ended 12/31/18 |
|||||||||||||
Total Advisory Fee |
$ | 30,715,703 | $ | 24,815,274 | $ | 24,064,905 | $ | 5,487,700 | ||||||||
Amount Waived |
$ | | $ | | $ | | $ | 404,301 | ||||||||
Total Paid |
$ | 30,715,703 | $ | 24,815,274 | $ | 24,064,905 | $ | 5,083,399 |
MULTI-ASSET INCOME FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 650,601 | $ | 732,509 | $ | 805,940 | ||||||
Natixis Advisors |
||||||||||||
Fee Earned |
$ | 266,155 | $ | 299,663 | $ | 329,703 | ||||||
Fee Waived |
$ | 56,931 | $ | 100,935 | $ | 97,434 | ||||||
Total Paid |
$ | 209,224 | $ | 198,728 | $ | 232,269 | ||||||
Loomis Sayles |
||||||||||||
Fee Earned |
$ | 384,446 | $ | 432,846 | $ | 476,237 | ||||||
Fee Waived |
$ | 82,234 | $ | 136,377 | $ | 140,738 | ||||||
Total Paid |
$ | 302,212 | $ | 296,469 | $ | 335,499 |
GLOBAL GREEN BOND FUND**
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | | $ | 117,442 | $ | 151,791 | ||||||
Mirova US |
||||||||||||
Fee Waived |
$ | | $ | 95,290 | $ | 131,419 | ||||||
Total Paid |
$ | | $ | 22,152 | $ | 20,372 |
GLOBAL SUSTAINABLE EQUITY FUND***
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 204,341 | $ | 480,229 | $ | 690,581 | ||||||
Mirova US |
||||||||||||
Fee Waived |
$ | 39,340 | $ | 73,324 | $ | 84,091 | ||||||
Total Paid |
$ | 165,001 | $ | 406,905 | $ | 606,490 |
18
INTERNATIONAL SUSTAINABLE EQUITY FUND****
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | | $ | | $ | 658 | ||||||
Mirova US |
||||||||||||
Fee Waived |
$ | | $ | | $ | 658 | ||||||
Total Paid |
$ | | $ | | $ | |
NATIXIS OAKMARK FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 1,621,055 | $ | 1,931,901 | $ | 2,269,902 | ||||||
Natixis Advisors |
||||||||||||
Total Paid |
$ | 411,013 | $ | 482,746 | $ | 560,747 | ||||||
Harris Associates |
||||||||||||
Total Paid |
$ | 1,210,042 | $ | 1,449,155 | $ | 1,709,155 |
NATIXIS OAKMARK INTERNATIONAL FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 7,627,201 | $ | 8,209,610 | $ | 9,186,539 | ||||||
Natixis Advisors |
||||||||||||
Total Paid |
$ | 2,243,294 | $ | 2,414,591 | $ | 2,701,923 | ||||||
Harris Associates |
||||||||||||
Total Paid |
$ | 5,383,907 | $ | 5,795,019 | $ | 6,484,616 |
SMALL CAP VALUE FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 2,696,750 | $ | 2,776,415 | $ | 2,059,281 | ||||||
Natixis Advisors |
||||||||||||
Total Paid |
$ | 1,048,736 | $ | 1,079,717 | $ | 800,831 | ||||||
Vaughan Nelson |
||||||||||||
Total Paid |
$ | 1,648,014 | $ | 1,696,698 | $ | 1,258,450 |
U.S. EQUITY OPPORTUNITIES FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 4,649,135 | $ | 6,770,989 | $ | 7,916,621 | ||||||
Natixis Advisors |
||||||||||||
Fee Earned |
$ | 2,142,090 | $ | 2,988,240 | $ | 3,381,374 | ||||||
Fee Waived |
$ | | $ | | $ | | ||||||
Total Paid |
$ | 2,142,090 | $ | 2,988,240 | $ | 3,381,374 | ||||||
Harris Associates |
||||||||||||
Fee Earned |
$ | 1,446,972 | $ | 2,188,458 | $ | 2,571,931 | ||||||
Fee Waived |
$ | | $ | | $ | | ||||||
Total Paid |
$ | 1,446,972 | $ | 2,188,458 | $ | 2,571,931 | ||||||
Loomis Sayles***** |
||||||||||||
Fee Earned |
$ | 1,060,073 | $ | 1,594,291 | $ | 1,963,316 | ||||||
Fee Waived |
$ | | $ | | $ | | ||||||
Total Paid |
$ | 1,060,073 | $ | 1,594,291 | $ | 1,963,316 |
19
VALUE OPPORTUNITY FUND
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Total Advisory Fee |
$ | 10,797,453 | $ | 8,663,668 | $ | 7,376,974 | ||||||
Natixis Advisors |
||||||||||||
Total Paid |
$ | 4,049,045 | $ | 3,248,876 | $ | 2,766,365 | ||||||
Vaughan Nelson |
||||||||||||
Total Paid |
$ | 6,748,408 | $ | 5,414,792 | $ | 4,610,609 |
* | Effective November 1, 2018, each of High Income Funds and Investment Grade Bond Funds fiscal year end was changed from September 30 to December 31. |
** | The Global Green Bond Fund commenced operations on February 28, 2017. |
*** | The Global Sustainable Equity Fund commenced operations on March 31, 2016. |
**** | The International Sustainable Equity Fund commenced operations on December 28, 2018. |
***** | For the period January 1, 2016 to December 31, 2016, the Fees Earned and Fees Waived represent the fees earned and waived by Loomis Sayles for subadvising the Loomis Sayles All Cap Growth segment of the U.S. Equity Opportunities Fund. |
For more information about the Funds advisory and subadvisory agreements, see the section Investment Advisory and Other Services in this Statement.
The table below shows the expenses of the Funds that were reimbursed by Mirova US for the last three fiscal years, as applicable:
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
|||||||||
Global Green Bond Fund* |
$ | | $ | 1,303 | $ | | ||||||
International Sustainable Equity Fund** |
$ | | $ | | $ | 17,138 |
* | The Global Green Bond Fund commenced operations on February 28, 2017. |
** | The International Sustainable Equity Fund commenced operations on December 28, 2018. |
The table below shows the expenses of the Funds that were reimbursed by Natixis Advisors for the last three fiscal years, as applicable:
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
|||||||||
Multi-Asset Income Fund |
$ | 23,116 | $ | | $ | | ||||||
Value Opportunity Fund |
$ | 225 | $ | | $ | |
The table below shows the class level and other expenses of the Funds that were reimbursed by Loomis Sayles for the last three fiscal years and the period ended December 31, 2018, as applicable.
Fund |
Fiscal Year Ended 9/30/16 |
Fiscal Year Ended 9/30/17 |
Fiscal Year Ended 9/30/18 |
Period Ended 12/31/18* |
||||||||||||
High Income Fund |
$ | | $ | 89,118 | $ | 195 | $ | 39 | ||||||||
Investment Grade Bond Fund |
$ | | $ | 135,494 | $ | 1,270,386 | $ | |
* | Effective November 1, 2018, each of High Income Funds and Investment Grade Bond Funds fiscal year end was changed from September 30 to December 31. |
The table below shows advisory fees and/or other expenses recovered by Natixis Advisors for the last three fiscal years, as applicable.
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
|||||||||
U.S. Equity Opportunities Fund |
$ | 2,238 | $ | | $ | | ||||||
Multi-Asset Income Fund |
$ | 23,116 | $ | | $ | | ||||||
Value Opportunity Fund |
$ | 225 | $ | | $ | |
20
BROKERAGE COMMISSIONS
Set forth below are the amounts each Fund paid in brokerage commissions and the amount of brokerage transactions allocated to brokers providing research services during the last three fiscal years (and the period ended December 31, 2018 for the High Income Fund and Investment Grade Bond Fund), as applicable. Loomis Sayles has a comprehensive internal voting process whereby the equity portfolio managers, research analysts and strategists vote on various aspects of a broker-dealers qualitative services, which include without limitation: research and other services, idea generation, models, expert consultants, political and economic analysts, technical analysts, discussions with research analysts and corporate executives, seminars and conferences (the Equity Research Vote). The Equity Research Vote is performed on a quarterly basis.
For a description of how transactions in portfolio securities are effected and how the Funds advisers or subadvisers select brokers, see the section entitled Portfolio Transactions and Brokerage in this Statement.
High Income Fund
Fiscal Year Ended 9/30/16 |
Fiscal Year Ended 9/30/17 |
Fiscal Year Ended 9/30/18 |
Period Ended 12/31/18* |
|||||||||||||
Brokerage Transactions |
||||||||||||||||
Allocated to Brokers Providing Research Services |
$ | 1,223,499 | $ | | $ | 332,422 | $ | | ||||||||
Brokerage Commissions |
||||||||||||||||
Total Brokerage Commissions Paid |
$ | 1,371 | $ | | $ | 850 | $ | 664 | ||||||||
Commissions Paid to Brokers Providing Research Services |
$ | 840 | $ | | $ | 461 | $ | |
* | Effective November 1, 2018, each of High Income Funds and Investment Grade Bond Funds fiscal year end was changed from September 30 to December 31. |
Investment Grade Bond Fund
Fiscal Year Ended 9/30/16 |
Fiscal Year Ended 9/30/17** |
Fiscal Year Ended 9/30/18 |
Period Ended 12/31/18* |
|||||||||||||
Brokerage Transactions |
||||||||||||||||
Allocated to Brokers Providing Research Services |
$ | 327,317,042 | $ | 5,443,988 | $ | | $ | | ||||||||
Brokerage Commissions |
||||||||||||||||
Total Brokerage Commissions Paid |
$ | 503,008 | $ | 16,796 | $ | | $ | 30,769 | ||||||||
Commissions Paid to Brokers Providing Research Services |
$ | 493,161 | $ | 6,299 | $ | | $ | |
* | Effective November 1, 2018, each of High Income Funds and Investment Grade Bond Funds fiscal year end was changed from September 30 to December 31. |
** | The aggregate brokerage commissions paid changed significantly from 2016 to 2017 as a result of decreased trading volume in the Funds portfolio. |
Multi-Asset Income Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 197,163,635 | $ | 260,195,220 | $ | 158,781,818 | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 251,586 | $ | 232,685 | $ | 198,389 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 159,424 | $ | 189,856 | $ | 77,295 |
21
International Sustainable Equity Fund*
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | | $ | | $ | | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | | $ | | $ | 2,796 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | | $ | | $ | |
Global Green Bond Fund**
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | | $ | | $ | | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | | $ | 3,797 | $ | 5,317 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | | $ | | $ | |
Natixis Oakmark Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 78,571,112 | $ | 41,807,346 | $ | 198,585,973 | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 29,758 | $ | 13,584 | $ | 43,447 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 22,241 | $ | 7,096 | $ | 41,098 |
22
Natixis Oakmark International Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 648,607,039 | $ | 490,341,096 | $ | 819,760,656 | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 654,551 | $ | 490,284 | $ | 614,085 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 408,653 | $ | 301,246 | $ | 443,707 |
Small Cap Value Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 240,950,182 | $ | 256,021,945 | $ | | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 257,557 | $ | 319,516 | $ | 224,771 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 186,306 | $ | 221,228 | $ | |
U.S. Equity Opportunities Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 133,983,623 | $ | 206,817,676 | $ | 278,122,130 | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 87,714 | $ | 125,874 | $ | 119,090 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 55,455 | $ | 75,906 | $ | 58,651 |
Value Opportunity Fund
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
||||||||||
Brokerage Transactions |
||||||||||||
Allocated to Brokers Providing Research Services |
$ | 870,209,439 | $ | 576,759,324 | $ | | ||||||
Brokerage Commissions |
||||||||||||
Total Brokerage Commissions Paid |
$ | 965,969 | $ | 652,394 | $ | 573,094 | ||||||
Commissions Paid to Brokers Providing Research Services |
$ | 755,257 | $ | 480,058 | $ | |
* | The International Sustainable Equity Fund commenced operations on December 28, 2018. |
** | The Global Green Bond Fund commenced operations on February 28, 2017. |
*** | The Global Sustainable Equity Fund commenced operations on March 31, 2016. |
23
REGULAR BROKER-DEALERS
The following table contains the aggregate value of securities of each Funds regular broker-dealers* (or the parent of the regular broker-dealers) held by each Fund, if any, as of the fiscal year ended December 31, 2018.
Fund |
Regular Broker-Dealer |
Aggregate Value of Securities of each Regular Broker-Dealer (or its Parent) Held by Fund |
||||
High Income Fund |
Credit Suisse Mortgage Trust Barclays PLC Bank of America Corp. GS Mortgage Securities Trust JPMorgan Chase Commercial Mortgage |
$ $ $ $ $ |
912,767 814,795 236,497 59,852 18,288 |
| ||
Investment Grade Bond Fund |
Bank of America Corp. JPMorgan Chase & Co. Morgan Stanley Citigroup, Inc. Goldman Sachs Group, Inc. (The) |
$ $ $ $
|
95,887,269 72,978,032 71,515,176 18,385,738 6,793,587 |
| ||
Multi-Asset Income Fund |
JPMorgan Chase & Co. Bank of America Corp. Credit Suisse Group AG HSBC Holdings PLC Citigroup, Inc. Toronto-Dominion Bank (The) |
$ $ $ $ $ $ |
3,048,811 2,311,060 1,627,255 1,462,500 261,862 44,736 |
| ||
Global Green Bond |
Bank of America Corp. | $ | 600,090 | |||
Natixis Oakmark Fund |
Citigroup, Inc. Bank of America Corp. State Street Corp. Goldman Sachs Group, Inc. (The) |
$ $ $ $ |
8,225,480 7,776,384 6,489,903 3,062,862 |
| ||
Natixis Oakmark International Fund |
Credit Suisse Group AG | $ | 25,192,473 | |||
U.S. Equity Opportunities Fund |
Citigroup, Inc. Bank of America Corp. State Street Corp. |
$ $ $ |
19,059,166 17,614,397 14,998,046 |
|
* | Regular Broker-Dealers are defined by the SEC as: (a) one of the ten brokers or dealers that received the greatest dollar amount of brokerage commissions by virtue of direct or indirect participation in the companys portfolio transactions during the companys most recent fiscal year; (b) one of the ten brokers or dealers that engaged as principal in the largest dollar amount of portfolio transactions of the investment company during the companys most recent fiscal year; or (c) one of the ten brokers or dealers that sold the largest dollar amount of securities of the investment company during the companys most recent fiscal year. |
SALES CHARGES AND DISTRIBUTION AND SERVICE (12B-1) FEES
As explained in this Statement, the Class A, Class C and Class T shares of each Fund and the Admin Class shares of Investment Grade Bond Fund pay the Distributor fees under plans adopted pursuant to Rule 12b-1 under the 1940 Act (the Plans). The following tables show the amounts of Rule 12b-1 fees paid by the Funds under the Plans during the last three fiscal years (and the period ended December 31, 2018 for the High Income Fund and Investment Grade Bond Fund), as applicable. Class T shares of the Funds have not yet commenced operations and thus the Funds have not paid any Rule 12b-1 fees under the Class T shares Plans as of the date of this Statement. The anticipated benefits to the Funds of the Plans include the ability to attract and maintain assets. See the section Distribution Agreements and Rule 12b-1 Plans in this Statement for more information.
24
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/18 |
|||||||||
Multi-Asset Income Fund |
||||||||||||
Class A |
$ | 144,660 | $ | 155,810 | $ | 144,708 | ||||||
Class C |
$ | 471,574 | $ | 409,663 | $ | 317,899 | ||||||
International Sustainable Equity Fund* |
||||||||||||
Class A |
$ | | $ | | $ | | ||||||
Global Green Bond Fund** |
||||||||||||
Class A |
$ | | $ | 75 | $ | 1,976 | ||||||
Global Sustainable Equity Fund*** |
||||||||||||
Class A |
$ | 43 | $ | 1,682 | $ | 13,464 | ||||||
Class C |
$ | 219 | $ | 3,541 | $ | 21,487 | ||||||
Natixis Oakmark Fund |
||||||||||||
Class A |
$ | 400,057 | $ | 461,458 | $ | 520,086 | ||||||
Class C |
$ | 571,332 | $ | 591,895 | $ | 638,548 | ||||||
Natixis Oakmark International Fund |
||||||||||||
Class A |
$ | 1,532,803 | $ | 1,532,273 | $ | 1,212,722 | ||||||
Class C |
$ | 2,841,968 | $ | 3,028,149 | $ | 3,371,797 | ||||||
Small Cap Value Fund |
||||||||||||
Class A |
$ | 247,423 | $ | 248,096 | $ | 213,758 | ||||||
Class C |
$ | 200,153 | $ | 177,501 | $ | 94,692 | ||||||
U.S. Equity Opportunities Fund |
||||||||||||
Class A |
$ | 1,089,500 | $ | 1,385,153 | $ | 1,540,530 | ||||||
Class C |
$ | 631,967 | $ | 940,569 | $ | 1,045,160 | ||||||
Value Opportunity Fund |
||||||||||||
Class A |
$ | 322,652 | $ | 186,275 | $ | 151,108 | ||||||
Class C |
$ | 818,649 | $ | 556,511 | $ | 377,545 |
* | The International Sustainable Equity Fund commenced operations on December 28, 2018. |
** | The Global Green Bond Fund commenced operations on February 28, 2017. |
*** | The Global Sustainable Equity Fund commenced operations on March 31, 2016. |
Fund |
Fiscal Year Ended 9/30/16 |
Fiscal Year Ended 9/30/17 |
Fiscal Year Ended 9/30/18 |
Fiscal Year Ended 12/31/18* |
||||||||||||
High Income Fund |
||||||||||||||||
Class A |
$ | 85,726 | $ | 86,056 | $ | 73,200 | $ | 15,693 | ||||||||
Class C |
$ | 118,181 | $ | 118,758 | $ | 90,350 | $ | 14,540 | ||||||||
Investment Grade Bond Fund |
||||||||||||||||
Class A |
$ | 3,382,403 | $ | 2,393,233 | $ | 2,162,593 | $ | 474,671 | ||||||||
Class C |
$ | 10,898,740 | $ | 8,203,363 | $ | 5,637,877 | $ | 974,077 | ||||||||
Admin Class1 |
$ | 179,589 | $ | 133,640 | $ | 190,500 | $ | 142,626 |
1 | Up to 50% of the fees paid to the Distributor are administrative service fees and are not paid pursuant to a 12b-1 plan. |
* | Effective November 1, 2018, each of High Income Funds and Investment Grade Bond Funds fiscal year end was changed from September 30 to December 31. |
25
For the fiscal period ended December 31, 2018, the Distributor used the Rule 12b-1 fees paid by the Funds under the Plans as follows:
Fund |
Compensation to Broker- Dealers |
Retained by Distributor |
Total | |||||||||
High Income Fund |
$ | 146,440 | $ | 0 | $ | 146,440 | ||||||
Investment Grade Bond Fund |
$ | 7,319,960 | $ | 0 | $ | 7,319,960 | ||||||
Multi-Asset Income Fund |
$ | 462,607 | $ | 0 | $ | 462,607 | ||||||
Global Green Bond Fund |
$ | 1,976 | $ | 0 | $ | 1,976 | ||||||
Global Sustainable Equity Fund |
$ | 34,951 | $ | 0 | $ | 34,951 | ||||||
International Sustainable Equity Fund |
$ | 0 | $ | 0 | $ | 0 | ||||||
Natixis Oakmark Fund |
$ | 1,158,634 | $ | 0 | $ | 1,158,634 | ||||||
Natixis Oakmark International Fund |
$ | 4,584,519 | $ | 0 | $ | 4,584,519 | ||||||
Small Cap Value Fund |
$ | 308,450 | $ | 0 | $ | 308,450 | ||||||
U.S. Equity Opportunities Fund |
$ | 2,585,690 | $ | 0 | $ | 2,585,690 | ||||||
Value Opportunity Fund |
$ | 528,653 | $ | 0 | $ | 528,653 |
TRANSFER AGENCY EXPENSES
Natixis Advisors has given a binding contractual undertaking to the High Income Fund, Multi-Asset Income Fund, Global Sustainable Equity Fund, Natixis Oakmark Fund, Natixis Oakmark International Fund, U.S. Equity Opportunities Fund and Small Cap Value Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through April 30, 2020 and may be terminated before then only with the consent of the Funds Board. For the year ended December 31, 2018 (for the period ended December 31, 2018 for the High Income Fund) Natixis Advisors reimbursed the High Income Fund $39, Multi-Asset Income Fund $193, Global Sustainable Equity Fund $170, Natixis Oakmark Fund $156, Natixis Oakmark International Fund $132, Small Cap Value Fund $152 and U.S. Equity Opportunities Fund $153 for transfer agency expenses related to Class N shares.
Natixis Advisors has given a binding contractual undertaking to reimburse the Class N shares of the Funds for any and all transfer agency expenses attributable to accounts admitted to Class N via a prospectus provision that allows the Distributor, at its sole discretion, to waive the investment minimum for accounts as to which the relevant financial intermediary has provided assurances, in writing, that the accounts will be held in omnibus fashion beginning no more than two years following the establishment date of such accounts in Class N. Such reimbursement will be in effect during the period June 9, 2017 to June 30, 2019 and may be terminated before the only with the consent of the Board. As of December 31, 2018, no expenses were reimbursed pursuant to this undertaking.
As of April 1, 2019, to the Trusts knowledge, the following persons owned of record or beneficially 5% or more of the outstanding shares of the indicated classes of the Funds set forth below.1 Class T shares of the Funds did not have shares outstanding as of April 1, 2019.
FUND |
SHAREHOLDER |
PERCENTAGE | ||
Global Green Bond Fund3 |
||||
Class A |
Charles Schwab & Co. Inc. | 78.43% | ||
San Francisco, CA 94105-1905 | ||||
TD Ameritrade, Inc. | 13.23% | |||
Omaha, NE 68103-2226 |
26
Folio Investments Inc. Mclean, VA 22102-3865 |
6.71% | |||
Class N | Natixis Investment Managers, L.P. | 80.33% | ||
Boston, MA 02199-8197 | ||||
Class Y | LPL Financial | 55.19% | ||
San Diego, CA 92150-9045 | ||||
Charles Schwab & Co. Inc. | 10.53% | |||
San Francisco, CA 94105-1905 | ||||
National Financial Services LLC | 8.92% | |||
Jersey City, NJ 07310-1995 | ||||
Pershing LLC | 7.13% | |||
Jersey City, NJ 07399-0001 | ||||
Global Sustainable Equity Fund | ||||
Class A | TD Ameritrade, Inc. | 40.48% | ||
Omaha, NE 68103-2226 | ||||
UBS WM USA | 13.04% | |||
Weehawken, NJ 07086-6761 | ||||
Merrill Lynch Pierce Fenner & Smith | 12.37% | |||
Jacksonville, FL 32246-6484 | ||||
Charles Schwab & Co. Inc. | 9.75% | |||
San Francisco, CA 94105-1905 | ||||
SEI Private Trust Company Oaks, PA 19456-99989 |
6.30% | |||
Class C | Merrill Lynch Pierce Fenner & Smith | 66.54% | ||
Jacksonville, FL 32246-6484 | ||||
UBS WM USA | 16.46% | |||
Weehawken, NJ 07086-6761 | ||||
LPL Financial | 6.37% | |||
San Diego, CA 92121-3091 | ||||
Class N | American Geophysical Union | 99.95% | ||
Washington, DC 20009-1231 | ||||
Class Y | Natixis Investment Managers, L.P. | 22.79% | ||
Boston, MA 02116-3368 | ||||
UBS WM USA | 21.28% | |||
Weehawken, NJ 07086-6761 |
27
Merrill Lynch Pierce Fenner & Smith | 20.65% | |||
Jacksonville, FL 32246-6484 | ||||
Charles Schwab & Co. Inc. | 8.14% | |||
San Francisco, CA 94105-1905 | ||||
LPL Financial | 6.42% | |||
San Diego, CA 92121-3091 | ||||
High Income Fund2 | ||||
Class A | Deferred Compensation Plan for General Agents of New England Fin Met Life Securities Accting | 12.76% | ||
Boston, MA 02111-2694 | ||||
Pershing LLC | 7.17% | |||
Jersey City, NJ 07399-0001 | ||||
Wells Fargo Clearing Services LLC | 5.25% | |||
St. Louis, MO 63103-2523 | ||||
Class C | Morgan Stanley Smith Barney | 15.79% | ||
New York, NY 10004-1965 | ||||
LPL Financial | 10.89% | |||
San Diego, CA 92121-3091 | ||||
Wells Fargo Clearing Services LLC | 10.86% | |||
Saint Louis, MO 63103-2523 | ||||
Pershing LLC | 9.52% | |||
Jersey City, NJ 07399-0001 | ||||
Merrill Lynch Pierce Fenner & Smith Inc. | 8.80% | |||
Jacksonville, FL 32246-6484 | ||||
Charles Schwab & Co. Inc. | 8.69% | |||
San Francisco, CA 94105-4151 | ||||
Class N | National Financial Services LLC. | 99.98% | ||
Jersey City, NJ 07310-1995 | ||||
Class Y | National Financial Services LLC. | 24.47% | ||
Jersey City, NJ 07310-1995 |
28
Merrill Lynch Pierce Fenner & Smith Inc. | 20.14% | |||
Jacksonville, FL 32246-6484 | ||||
Pershing LLC | 10.47% | |||
Jersey City, NJ 07399-0001 | ||||
Reliance Trust Company FBO Mass Mutual Life Insurance Co |
7.13% | |||
Atlanta, GA 30358-0004 | ||||
TIAA-CREF Trust Company, FSB | 6.83% | |||
St. Louis, MO 63102-2733 | ||||
International Sustainable Equity Fund4 | ||||
Class A | Natixis Advisors LP Boston, MA 02199-8197 |
99.86% | ||
Class N | Natixis Investment Managers LP | 79.77% | ||
Boston, MA 02199-8197 | ||||
Class Y | Natixis Advisors LC | 99.86% | ||
Boston, MA 02199-8197 | ||||
Investment Grade Bond Fund | ||||
Class A | Merrill Lynch Pierce Fenner & Smith Inc. | 17.62% | ||
Jacksonville, FL 32246-6484 | ||||
Morgan Stanley Smith Barney | 9.04% | |||
New York, NY 10004-1965 | ||||
Charles Schwab & Co. Inc. | 8.55% | |||
San Francisco, CA 94105-4151 | ||||
UBS WM USA | 7.94% | |||
Weehawken, NJ 07086-6761 | ||||
Pershing LLC | 7.61% | |||
Jersey City, NJ 07399-0001 | ||||
Wells Fargo Clearing Services LLC | 6.12% | |||
Saint Louis, MO 63103-2523 | ||||
Class C | Merrill Lynch Pierce Fenner & Smith Inc. | 24.19% | ||
Jacksonville, FL 32246-6484 | ||||
Morgan Stanley Smith Barney | 16.49% | |||
New York, NY 10004-1965 |
29
Wells Fargo Clearing Services LLC | 14.79% | |||
Saint Louis, MO 63103-2523 | ||||
UBS WM USA | 11.33% | |||
Weehawken, NJ 07086-6761 | ||||
LPL Financial | 7.29% | |||
San Diego, CA 92121-3091 | ||||
Charles Schwab & Co. Inc. | 6.26% | |||
San Francisco, CA 94105-4151 | ||||
Pershing LLC | 5.72% | |||
Jersey City, NJ 07399-0001 | ||||
Class N | Edward D. Jones and Co. | 81.56% | ||
Saint Louis, MO 63131-3729 | ||||
Class Y | UBS WM USA | 12.89% | ||
Weehawken, NJ 07086-6761 | ||||
LPL Financial | 11.97% | |||
San Diego, CA 92121-3091 | ||||
Morgan Stanley Smith Barney | 9.40% | |||
New York, NY 10004-1965 | ||||
Charles Schwab & Co. Inc. | 9.38% | |||
San Francisco, CA 94105-4151 | ||||
Merrill Lynch Pierce Fenner & Smith Inc. | 7.55% | |||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 5.94% | |||
Saint Louis, MO 63103-2523 | ||||
Raymond James | 5.12% | |||
St. Petersburg, FL 33716-1100 | ||||
Admin Class | Minnesota Life Insurance Company | 81.32% | ||
Saint Paul, MN 55101-2099 | ||||
Merrill Lynch Pierce Fenner & Smith Inc. | 7.86% | |||
Jacksonville, FL 32246-6484 | ||||
State Street Bank & Trust Co | 6.03% | |||
Boston, MA 02111-2901 |
30
Multi-Asset Income Fund | ||||
Class A | Morgan Stanley Smith Barney | 41.82% | ||
Jersey City, NJ 07311 | ||||
Merrill Lynch Pierce Fenner & Smith | 11.41% | |||
Jacksonville, FL 32246-6484 | ||||
Class C | Merrill Lynch Pierce Fenner & Smith | 27.67% | ||
Jacksonville, FL 32246-6484 | ||||
Morgan Stanley Smith Barney | 16.99% | |||
Jersey City, NJ 07311 | ||||
Wells Fargo Clearing Services LLC | 11.82% | |||
St. Louis, MO 63103-2523 | ||||
LPL Financial | 8.95% | |||
San Diego, CA 92121-3091 | ||||
UBS WM USA | 7.91% | |||
Weehawken, NJ 07086-6761 | ||||
Charles Schwab & Co. Inc. | 5.01% | |||
San Francisco, CA 94105-4151 | ||||
Class N | Janney Montgomery Scott LLC | 96.36% | ||
Philadelphia, PA 19103-2713 | ||||
Class Y | Merrill Lynch Pierce Fenner & Smith | 30.90% | ||
Jacksonville, FL 32246-6484 | ||||
Charles Schwab & Co. Inc. | 15.21% | |||
San Francisco, CA 94105-1905 | ||||
LPL Financial | 9.76% | |||
San Diego, CA 92150-9046 | ||||
UBS WM USA | 6.70% | |||
Weehawken, NJ 07086-6761 | ||||
JP Morgan Securities LLC | 6.30% | |||
Brooklyn, NY 11245-0003 | ||||
Raymond James St. Petersburg, FL 33716-1100 |
5.24% | |||
American Enterprise Investment SVC | 5.18% | |||
Minneapolis, MN 55402-2405 |
31
Natixis Oakmark Fund | ||||
Class A | Morgan Stanley Smith Barney | 8.08% | ||
Jersey City, NJ 07311 | ||||
Pershing LLC | 7.22% | |||
Jersey City, NJ 07399-0001 | ||||
Merrill Lynch Pierce Fenner & Smith | 6.19% | |||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 5.65% | |||
St. Louis, MO 63103-2523 | ||||
Class C | Merrill Lynch Pierce Fenner & Smith | 17.52% | ||
Jacksonville, FL 32246-6484 | ||||
Morgan Stanley Smith Barney | 17.25% | |||
Jersey City, NJ 07311 | ||||
Raymond James | 12.11% | |||
St. Petersburg, FL 33716-1100 | ||||
Wells Fargo Clearing Services LLC | 11.29% | |||
St. Louis, MO 63103-2523 | ||||
LPL Financial | 11.17% | |||
San Diego, CA 92121-3091 | ||||
UBS WM USA | 10.78% | |||
Weehawken, NJ 07086-6761 | ||||
Charles Schwab & Co. Inc. | 7.29% | |||
San Francisco, CA 94105-1905 | ||||
Class N | Planmember Services | 89.48% | ||
Carpinteria, CA 93013-2805 | ||||
Natixis Advisors, L.P. | 10.50% | |||
Boston, MA 02199-8197 | ||||
Class Y | LPL Financial | 23.84% | ||
San Diego, CA 92121-3091 | ||||
Raymond James | 16.56% | |||
St. Petersburg, FL 33716-1100 | ||||
Wells Fargo Clearing Services LLC | 8.06% | |||
St. Louis, MO 63103-2523 | ||||
Merrill Lynch Pierce Fenner & Smith | 8.00% | |||
Jacksonville, FL 32246-6484 | ||||
Morgan Stanley Smith Barney | 5.98% | |||
New York, NY 10004-1965 | ||||
American Enterprise Investment SVC | 5.14% | |||
Minneapolis, MN 55402-2405 |
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Natixis Oakmark International Fund | ||||
Class A | Morgan Stanley Smith Barney | 40.74% | ||
Jersey City, NJ 07311 | ||||
Merrill Lynch Pierce Fenner & Smith | 11.43% | |||
Jacksonville, FL 32246-6484 | ||||
UBS WM USA | 8.49% | |||
Weehawken, NJ 07086-6761 | ||||
Pershing LLC | 6.13% | |||
Jersey City, NJ 07399-0001 | ||||
Wells Fargo Clearing Services LLC | 5.11% | |||
St. Louis, MO 63103-2523 | ||||
Class C | Morgan Stanley Smith Barney | 23.96% | ||
Jersey City, NJ 07311 | ||||
Merrill Lynch Pierce Fenner & Smith | 19.61% | |||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 13.89% | |||
St. Louis, MO 63103-2523 | ||||
UBS WM USA | 12.05% | |||
Weehawken, NJ 07086-6761 | ||||
Raymond James | 9.28% | |||
St. Petersburg, FL 33716-1100 | ||||
Class N | C/O Nationwide Trust Co. | 59.16% | ||
Columbus, OH 43218-2029 | ||||
Reliance Trust Co. | 23.10% | |||
Orlando, FL 32822-2700 | ||||
National Financial Services LLC | 13.97% | |||
Jersey City, NJ 07310-1995 | ||||
Class Y | UBS WM USA | 32.77% | ||
Weehawken, NJ 07086-6761 | ||||
Raymond James | 28.47% | |||
St. Petersburg, FL 33716-1100 | ||||
Wells Fargo Clearing Services LLC | 15.97% | |||
St. Louis, MO 63103-2523 | ||||
American Enterprise Investment Svc. Minneapolis, MN 55402-2405 |
8.25% |
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Small Cap Value Fund | ||||
Class A | Wells Fargo Clearing Services LLC | 5.18% | ||
St. Louis, MO 63103-2523 | ||||
Class C | Merrill Lynch Pierce Fenner & Smith | 24.44% | ||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 17.44% | |||
St. Louis, MO 63103-2523 | ||||
Morgan Stanley Smith Barney | 10.71% | |||
New York, NY 10004-1965 | ||||
LPL Financial | 8.36% | |||
San Diego, CA 92121-3091 | ||||
Charles Schwab & Co. Inc. | 5.84% | |||
San Francisco, CA 94104-4151 | ||||
Class N | Natixis Advisors, L.P. | 99.90% | ||
Boston, MA 02116-3368 | ||||
Class Y | Morgan Stanley Smith Barney | 25.65% | ||
New York, NY 10004-1965 | ||||
UBS WM USA | 13.93% | |||
Weehawken, NJ 07086-6761 | ||||
LPL Financial | 12.56% | |||
San Diego, CA 92121-3091 | ||||
National Financial Services LLC | 11.39% | |||
Jersey City, NJ 07310-1995 | ||||
TD Ameritrade Inc. | 10.94% | |||
Omaha, NE 68103-2226 | ||||
Charles Schwab & Co. Inc. | 6.32% | |||
San Francisco, CA 94104-4151 | ||||
U.S. Equity Opportunities Fund | ||||
Class C | Wells Fargo Clearing Services LLC | 25.81% | ||
St. Louis, MO 63103-2523 | ||||
Merrill Lynch Pierce Fenner & Smith | 15.87% | |||
Jacksonville, FL 32246-6484 | ||||
Raymond James | 9.98% | |||
St. Petersburg, FL 33716-1100 | ||||
UBS WM USA | 8.67% | |||
Weehawken, NJ 07086-6761 | ||||
Morgan Stanley Smith Barney | 8.22% | |||
New York, NY 10004-1965 |
34
American Enterprise Investment Svc. | 7.64% | |||
Minneapolis, MN 55402-2405 | ||||
LPL Financial | 6.29% | |||
San Diego, CA 92121-3091 | ||||
Charles Schwab & Co. Inc. | 5.29% | |||
San Francisco, CA 94104-4151 | ||||
Class N | Natixis Advisors, L.P. | 99.90% | ||
Boston, MA 02116-3368 | ||||
Class Y | Morgan Stanley Smith Barney | 14.69% | ||
New York, NY 10004-1965 | ||||
Raymond James | 11.17% | |||
St. Petersburg, FL 33716-1100 | ||||
Merrill Lynch Pierce Fenner & Smith | 11.07% | |||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 9.47% | |||
St. Louis, MO 63103-2523 | ||||
UBS WM USA | 8.23% | |||
Weehawken, NJ 07086-6761 | ||||
LPL Financial | 7.93% | |||
San Diego, CA 92121-3091 | ||||
American Enterprise Investment Svc. | 7.53% | |||
Minneapolis, MN 55402-2405 | ||||
Value Opportunity Fund | ||||
Class A | Morgan Stanley Smith Barney | 13.56% | ||
New York, NY 10004-1965 | ||||
Pershing LLC | 10.40% | |||
Jersey City, NJ 07399-0001 | ||||
LPL Financial | 8.92% | |||
San Diego, CA 92121-3091 | ||||
Wells Fargo Clearing Services LLC | 8.44% | |||
St. Louis, MO 63103-2523 | ||||
UBS WM USA | 6.03% | |||
Weehawken, NJ 07086-6761 | ||||
Charles Schwab & Co. Inc. | 5.86% | |||
San Francisco, CA 94104-4151 | ||||
Edward D. Jones & Co. St. Louis, MO 63131-3729 |
5.42% |
35
Class C | Morgan Stanley Smith Barney | 15.49% | ||
New York, NY 10004-1965 | ||||
LPL Financial | 14.11% | |||
San Diego, CA 92121-3091 | ||||
UBS WM USA | 13.63% | |||
Weehawken, NJ 07086-6761 | ||||
Merrill Lynch Pierce Fenner & Smith | 11.81% | |||
Jacksonville, FL 32246-6484 | ||||
Wells Fargo Clearing Services LLC | 11.77% | |||
St. Louis, MO 63103-2523 | ||||
American Enterprise Investment Svc. Minneapolis, MN 55402-2405 |
8.22% | |||
Raymond James | 6.98% | |||
St. Petersburg, FL 33716-1100 | ||||
Class N | National Financial Services LLC | 38.90% | ||
Jersey City, NJ 07310-1995 | ||||
Reliance Trust Co. | 20.46% | |||
Atlanta, GA 30358-0004 | ||||
Vanguard Fiduciary Trust Co. | 16.65% | |||
Valley Forge, PA 19482-2600 | ||||
Charles Schwab & Co. Inc. | 15.45% | |||
San Francisco, CA 94104-1905 | ||||
T Rowe Price Trust and Company | 7.76% | |||
Owings Mills, MD 21117-4903 | ||||
Class Y | LPL Financial | 23.32% | ||
San Diego, CA 92121-3091 | ||||
Charles Schwab & Co. Inc. | 15.09% | |||
San Francisco, CA 94104-4151 | ||||
TD Ameritrade Inc. | 7.12% | |||
Omaha, NE 68103-2226 | ||||
UBS WM USA | 6.93% | |||
Weehawken, NJ 07086-6761 |
1 | Such ownership may be beneficially held by individuals or entities other than the owner listed. To the extent that any listed shareholder beneficially owns more than 25% of a Fund, it may be deemed to control the Fund within the meaning of the 1940 Act. The effect of such control may be to reduce the ability of other shareholders of the Fund to take actions requiring the affirmative vote of holders of a plurality or majority of the Funds shares without the approval of the controlling shareholder. |
36
2 | As of April 1, 2019, National Financial Services, Jersey City, NY 07310-1995, owned 36.83% of the High Income Fund and therefore may be presumed to control the Fund, as that term is defined in the 1940 Act. However, such ownership may be beneficially held by individuals or entities other than Natixis Investment Managers, L.P. |
3 | As of April 1, 2019, Natixis Investment Managers, L.P., Boston, MA 02199-8197, owned 73.32% of the Global Green Bond Fund and therefore may be presumed to control the Fund, as that term is defined in the 1940 Act. However, such ownership may be beneficially held by individuals or entities other than Natixis Investment Managers, L.P. |
4 | As of April 1, 2019, LPL Financial, San Diego, CA 92121-3091, owned 79.75% of the International Sustainable Equity Fund and therefore may be presumed to control the Fund, as that term is defined in the 1940 Act. However, such ownership may be beneficially held by individuals or entities other than LPL Financial. |
A Fund may experience large and/or frequent redemptions or investments due to transactions in Fund shares by funds of funds, other large shareholders or similarly managed accounts. While it is impossible to predict the overall effect of these transactions over time, there could be an adverse impact on a Funds performance. In the event of such redemptions or investments, a Fund could be required to sell securities or to invest cash at a time when it may not otherwise desire to do so. Such transactions may increase a Funds brokerage and/or other transaction costs. In addition, when funds of funds or other investors own a substantial portion of a Funds shares, a large redemption could cause actual expenses to increase, or could result in the Funds current expenses being allocated over a smaller asset base, leading to an increase in the Funds expense ratio. Redemptions by a large investor may increase realized capital gains, including short-term capital gains taxable as ordinary income, may accelerate the realization of taxable income to shareholders and may limit the use of any capital loss carryforwards and certain other losses to offset future realized capital gains (if any). The impact of these transactions is likely to be greater when a fund of funds or other significant investor purchases, redeems, or owns a substantial portion of the Funds shares. When possible, a Funds adviser will consider how to minimize these potential adverse effects, and may take such actions as it deems appropriate to address potential adverse effects, including redemption of shares in-kind rather than in cash or carrying out the transactions over a period of time, although there can be no assurance that such actions will be successful.
Natixis Funds Trust I is registered with the SEC as an open-end management investment company and is organized as a Massachusetts business trust under the laws of Massachusetts by a Declaration of Trust dated June 7, 1985, as amended and restated on June 2, 2005, and is a series company as described in Section 18(f)(2) of the 1940 Act, as amended. Currently, each series of the Natixis Funds Trust I, except the Global Green Bond Fund, is diversified. The name of Natixis Funds Trust I has changed several times since its organization, as noted below:
Trust Name |
Date | |
The New England Life Government Securities Trust | June 1985 to August 1986 | |
The New England Funds | September 1986 to March 1994 | |
New England Funds Trust I | April 1994 to January 2000 | |
Nvest Funds Trust I | February 2000 to April 2001 | |
CDC Nvest Funds Trust I | May 2001 to April 2005 | |
IXIS Advisor Funds Trust I | May 2005 to August 2007 | |
Natixis Funds Trust I | August 2007 to present |
Natixis Funds Trust I has eight (8) separate portfolios. Loomis Sayles Core Plus Bond Fund has a different fiscal year end and information regarding this portfolio can be found in the Natixis Funds Statement of Additional Information dated February 1, 2019. Multi-Asset Income Fund was organized in 2005 and commenced operations on November 17, 2005. Prior to August 31, 2015, Multi-Asset Income Fund was named Natixis Diversified Income Fund and prior to August 1, 2011, Natixis Diversified Income Fund was named Natixis Income Diversified Portfolio and prior to August 1, 2007, Natixis Income Diversified Portfolio was named IXIS Income Diversified Portfolio. International Sustainable Equity Fund was organized in 2018 and commenced operations December 28, 2018. Global Sustainable Equity Fund was organized in 2016 and commenced operations on March 31, 2016. Global Green Bond Fund was organized in 2017 and commenced operations on February 28, 2017. Natixis Oakmark International Fund was organized in 2010 and commenced operations on December 15, 2010. Small Cap Value Fund was organized in 1996 and commenced operations on December 31, 1996. Prior to March 1,
37
2004, Small Cap Value Fund was named CDC Nvest Star Small Cap Fund. U.S. Equity Opportunities Fund was organized in 1994 and commenced operations on July 7, 1994. Prior to March 1, 2014, U.S. Equity Opportunities Fund was known as Natixis U.S. Multi-Cap Equity Fund and prior to June 1, 2011, Natixis U.S. Multi-Cap Equity Fund was named Natixis U.S. Diversified Portfolio.
Natixis Funds Trust II is registered with 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 amended and restated on June 2, 2005, and consisted of a single Fund (now the Natixis Oakmark Fund) until January 1989, when it was reorganized as a series company as described in Section 18(f)(2) of the 1940 Act. Currently, each series of Natixis Funds Trust II, except the ASG Dynamic Allocation Fund, Loomis Sayles Floating Rate and Fixed Income Fund, Loomis Sayles Strategic Alpha Fund and Vaughan Nelson Select Fund, is diversified. The name of Natixis Funds Trust II has changed several times since its organization, as noted below:
Trust Name |
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 | May 2005 to August 2007 | |
Natixis Funds Trust II | August 2007 to present |
Natixis Funds Trust II currently has eleven (11) separate portfolios. Information for seven of these portfolios can be found in the Statement of Additional Information for the ASG Global Alternatives Fund, ASG Dynamic Allocation Fund, ASG Managed Futures Strategy Fund, ASG Tactical U.S. Market Fund, Loomis Sayles Strategic Alpha Fund and McDonnell Intermediate Municipal Bond Fund dated May 1, 2019. Information for three (3) other portfolios, Loomis Sayles Global Growth Fund, Loomis Sayles Senior Floating Rate and Fixed Income Fund and Vaughan Nelson Select Fund can be found in their Statement of Additional Information dated April 1, 2019. Natixis Oakmark Fund was organized in 1931 and commenced operations on May 6, 1931. Prior to March 1, 2014, the Natixis Oakmark Fund was named Harris Associates Large Cap Value Fund and prior to March 1, 2004, Harris Associates Large Cap Value Fund was named Harris Associates Growth and Income Fund. Value Opportunity Fund was organized in 2008 and commenced operations on October 31, 2008.
Loomis Sayles Funds II is registered with the SEC as an open-end management investment company. Loomis Sayles Funds II is organized as a Massachusetts business trust under the laws of Massachusetts by a Declaration of Trust dated February 20, 1991, as amended and restated on July 21, 2005 (the Declaration of Trust), and is a series company as described in Section 18(f)(2) of the 1940 Act. Each series of the Trust is diversified. Prior to July 1, 2003, Loomis Sayles Funds II was named Loomis Sayles Funds.
Loomis Sayles Funds II has eight (8) separate portfolios. High Income Fund commenced operations on February 22, 1984 and was reorganized from Natixis Funds Trust I into Loomis Sayles Funds II on September 12, 2003. Prior to September 12, 2003, the name of the Fund was CDC Nvest High Income Fund. Investment Grade Bond Fund was organized in Massachusetts and commenced operations on December 31, 1996.
INVESTMENT STRATEGIES AND RISKS
Investment Strategies
The table and descriptions below summarize and describe certain investment strategies, including particular types of securities, instruments, or specific practices that may be used by the adviser or subadviser of a Fund in managing the Fund. Each Funds principal strategies are described in its Prospectus. Due to the multi-manager approach of the U.S. Equity Opportunities Fund, investing in a certain security or engaging in a certain practice may be a principal strategy for one segment of a Fund and a secondary strategy for another segment of such Fund. This Statement describes some of the non-principal strategies the Funds may use, in addition to providing additional information, including related risks, about their principal strategies.
38
The list of securities or other instruments under each category below is not intended to be an exclusive list of securities, instruments and practices for investment and unless a strategy, practice or security is specifically prohibited by the investment restrictions listed in the Funds Prospectus, in the section Investment Restrictions in this Statement or under applicable law, each Fund may engage in each of the strategies and invest in securities and instruments in addition to those listed below. The adviser or subadviser 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. A Fund is not required to engage in a particular transaction or invest in any security or instrument, even if to do so might benefit the Fund. The adviser or subadviser may invest in some securities under a given category as a primary strategy and in other securities under the same category as a secondary strategy. The adviser or subadviser may invest in any security that falls under the specific category, including securities that are not listed below. The Prospectuses and/or this Statement will be updated if the Funds begin to engage in investment practices that are not described in the Prospectuses and/or this Statement.
Fund |
Securities |
Practices | ||
Global Green Bond Fund | Debt Securities (Adjustable-Rate Mortgage, Asset-Backed Securities, Collateralized Mortgage Obligations, Convertible Securities, Cybersecurity, Operational and Technology Risk, Investment Grade Fixed-Income Securities, Below Investment-Grade Fixed-Income Securities, Green Bonds, Inflation-Linked and Inflation-Indexed Securities, Investments in Banks, Mortgage Dollar Rolls, Mortgage-Related Securities, Rule 144A Securities, Step-Coupon Securities, Stripped Securities, Structured Notes, U.S. Government Securities , Zero-Coupon Securities) Equity Securities (Corporate Reorganizations, Investment Companies, Market Capitalizations, Preferred Stock, REITs, Real Estate Securities) Foreign Securities (Depositary Receipts, Emerging Markets, Foreign Investment Companies, Foreign Securities, Supranational Entities, Foreign Currency Transactions) Money Market Instruments |
Futures Contracts Options Warrants and Rights Swap Contracts Illiquid Securities Initial Public Offerings Private Placements Regulation S Securities Privatizations Repurchase Agreements Reverse Repurchase Agreements Short-Term Trading When-Issued, Delayed Delivery and Forward Commitment Securities |
39
Fund |
Securities |
Practices | ||
Global Sustainable Equity Fund | Debt Securities (Adjustable-Rate Mortgage, Asset-Backed Securities, Collateralized Mortgage Obligations, Convertible Securities, Investment Grade Fixed-Income Securities, Below Investment-Grade Fixed-Income Securities, Inflation-Linked and Inflation-Indexed Securities, Investments in Banks, Mortgage Dollar Rolls, Mortgage-Related Securities, Pay-in-Kind Securities, Rule 144A Securities, Step-Coupon Securities, Stripped Securities, Structured Notes, U.S. Government Securities, Zero-Coupon Securities) Equity Securities (Commodities, Corporate Reorganizations, Investment Companies, Preferred Stock, REITs, Real Estate Securities) Foreign Securities (Depositary Receipts, Emerging Markets, Foreign Investment Companies, Canadian Investments, Foreign Currency Transactions, Supranational Entities) Money Market Instruments |
Forward Contracts Futures Contracts Illiquid Securities Initial Public Offerings Options Private Placements Privatizations Repurchase Agreements Reverse Repurchase Agreements Swap Transactions Warrants and Rights When-Issued, Delayed Delivery and Forward Commitment Securities | ||
High Income Fund | Debt Securities (Adjustable-Rate Mortgage Securities, Asset-Backed Securities, Bank Loans, Collateralized Loan Obligations, Collateralized Mortgage Obligations, Convertible Securities, Stripped Securities, Structured Notes, Step-Coupon Securities, Zero-Coupon Securities, Pay-in-Kind Securities, U.S. Government Securities, Mortgage-Related Securities, Inflation-Linked and Inflation-Indexed Securities, Bonds, Real Estate Investment Trusts) Equity Securities (only those obtained through conversions, restructurings or similar events) Foreign Securities (U.S. dollar-denominated only, Depository Receipts, Supranational Entities) Money Market Instruments |
When-Issued Securities, Illiquid Securities, Futures Contracts, Options, Swap Contracts, Repurchase Agreements. |
40
Fund |
Securities |
Practices | ||
International Sustainable Equity Fund | Debt Securities (Adjustable-Rate Mortgage, Asset-Backed Securities, Collateralized Mortgage Obligations, Convertible Securities, Investment Grade Fixed-Income Securities, Below Investment-Grade Fixed-Income Securities, Green Bonds, Inflation-Linked and Inflation-Indexed Securities, Investments in Banks, Mortgage Dollar Rolls, Mortgage-Related Securities, Rule 144A Securities, Step-Coupon Securities, Stripped Securities, Structured Notes, U.S. Government Securities, Zero-Coupon Securities) Equity Securities (Commodities, Corporate Reorganizations, Investment Companies, Market Capitalizations, Preferred Stock, REITs, Real Estate Securities) Foreign Securities (Depositary Receipts, Emerging Markets, Foreign Investment Companies, Foreign Securities, Supranational Entities, Foreign Currency Transactions) Money Market Instruments |
Forward Contracts Futures Contracts Illiquid Securities Initial Public Offerings Options Private Placements Privatizations Repurchase Agreements Reverse Repurchase Agreements Swap Transactions Warrants and Rights When-Issued, Delayed Delivery and Forward Commitment Securities Regulation S Securities | ||
Investment Grade Bond Fund | Debt Securities (Asset-Backed Securities, Bank Loans, Commercial Paper, Convertible Securities, Collateralized Loan Obligations, Collateralized Mortgage Obligations, Stripped Securities, Mortgage-Backed Securities, Mortgage Dollar Rolls, Stripped Mortgage-Backed Securities, Pay-in-Kind Securities, Inflation-Linked Securities, Structured Notes, U.S. Government Securities, When-Issued Securities, Zero-Coupon Securities) Equity Securities (Investment Companies, Growth Stock, Preferred Stock, Value Stocks) Foreign Securities (U.S. dollar-denominated only, Depository Receipts, Supranational Entities) Money Market Instruments |
Futures Contracts, Options, Swap Contracts, Repurchase Agreements. |
41
Fund |
Securities |
Practices | ||
Multi-Asset Income Fund | Debt Securities (Asset-Backed Securities, Bank Loans, Collateralized Loan Obligations, Collateralized Mortgage Obligations, Exchange-Traded Notes, Below Investment-Grade Fixed-Income Securities, Investment Grade Fixed-Income Securities, Mortgage-related Securities, Structured Notes, Stripped Securities, Step Coupon Securities, Zero-Coupon Securities, Pay-in-Kind Securities, Convertible Securities, U.S. Government Securities) Equity Securities (Corporate Reorganizations, Investment Companies, Master Limited Partnerships, REITs, Real Estate Securities, Preferred Securities) Foreign Securities (Bonds, Supranational Entities, Developed Markets, Currency Hedging Transactions, Depositary Receipts, Emerging Markets, Foreign Currency) Money Market Instruments |
Initial Public Offerings When-Issued Securities Privatizations Futures Contracts Options Swap Contracts Short Sales Illiquid Securities Private Placements Repurchase Agreements Reverse Repurchase Agreements Securities Lending | ||
Natixis Oakmark Fund | Debt Securities (Investment Grade Fixed-Income Securities, Zero-Coupon Securities, Convertible Securities, U.S. Government Securities) Equity Securities (Corporate Reorganizations, Investment Companies) Foreign Securities (Supranational Entities, Depositary Receipts, Currency Hedging) Money Market Instruments |
Initial Public Offerings Futures Contracts Options Swap Contracts Illiquid Securities Repurchase Agreements Securities Lending Short Sales | ||
Natixis Oakmark International Fund | Debt Securities (Asset-Backed Securities, Inflation-Linked and Inflation-Indexed Securities, Rule 144A Securities, U.S. Government Securities) Equity Securities (Preferred Stock, REITs, Value Stocks) Foreign Investment (Depositary Receipts, Emerging Markets, Foreign Currency Transactions, Foreign Investment Companies, Foreign Securities) Money Market Instruments |
Illiquid Securities Initial Public Offerings Options Private Placements Privatizations Repurchase Agreements Securities Lending Short Sales Warrants and Rights When-Issued Securities |
42
Fund |
Securities |
Practices | ||
Small Cap Value Fund | Debt Securities (Structured Notes, Mortgage-related Securities, Asset-backed Securities, Collateralized Mortgage Obligations, Step-Coupon Securities, Pay-in-Kind Securities, Zero-Coupon Securities, Section 4(a)(2) Commercial Paper, Stripped Securities, Convertible Securities, U.S. Government Securities) Equity Securities (Corporate Reorganizations, Investment Companies, REITs) Foreign Securities (Bonds, Currency Hedging, Currency Speculation, Emerging Markets, Depositary Receipts, Supranational Entities) Money Market Instruments |
Initial Public Offerings When-Issued Securities Privatizations Futures Contracts Options Swap Contracts Illiquid Securities Short Sales Repurchase Agreements Reverse Repurchase Agreements Securities Lending | ||
U.S. Equity Opportunities Fund | Debt Securities (Structured Notes, Zero-Coupon Securities, Pay-in-Kind Securities, Stripped Securities, Step-Coupon Securities, Mortgage-related Securities, Asset-Backed Securities, Collateralized Mortgage Obligations, U.S. Government Securities) Equity Securities (Common Stock, Corporate Reorganizations, Investment Companies, Preferred Stock, REITs) Foreign Securities (Bonds, Currency Hedging, Supranational Entities, Emerging Markets, Depositary Receipts, Currency Speculation) Money Market Instruments |
Initial Public Offerings When-Issued Securities Privatizations Futures Contracts Options Swap Contracts Illiquid Securities Short Sales Repurchase Agreements Reverse Repurchase Agreements Rights Securities Lending | ||
Value Opportunity Fund | Debt Securities (Convertible Securities, Investment Grade Fixed-Income Securities, Mortgage-Related Securities, Rule 144A Securities, U.S. Government Securities) Equity Securities (Common Stock, Corporate Reorganizations, Investment Companies, Preferred Stock, REITs, Convertible Securities, Partnerships, Warrants) Foreign Securities (Depositary Receipts, Emerging Markets, Currency Transactions) Money Market Instruments |
Initial Public Offerings Illiquid Securities Futures Contracts Options When-Issued Securities Repurchase Agreements Reverse Repurchase Agreements Securities Lending |
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Debt Securities
Each of the Funds 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/issuer risk and credit/counterparty 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/counterparty 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 and municipal debt securities. Market/issuer 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 a Fund the principal on the security before it is due, thus depriving the Fund of a favorable stream of future interest payments.
Because interest rates vary, it is impossible to predict the income of a Fund that invests in debt securities for any particular period. Fluctuations in the value of a Funds investments in debt securities will cause the Funds net asset value (NAV) to increase or decrease.
Adjustable-Rate Mortgage (ARM) Securities
Some Funds may invest in ARMs. 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, changes in the interest rate on ARMs may lag behind changes in prevailing market interest rates. In addition, 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, a 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. See the section Mortgage-Related Securities for more information on the risks involved in ARMs.
Asset-Backed Securities
Some of the Funds may invest in asset-backed securities, which are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., trade receivables). The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. Mortgage-backed securities are a type of asset-backed security. The securitization techniques used to develop mortgage securities are also applied to a broad range of other assets. Through the use of trusts and special purpose vehicles, assets, such as automobile and credit card receivables, are securitized in pass-through structures similar to mortgage pass-through structures or in a pay-through structure similar to a collateralized mortgage obligation (CMO) structure (described herein).
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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, a Fund will ordinarily reinvest the prepaid amounts in securities, the yields of which reflect interest rates prevailing at the time. Therefore, a 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 a Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of a Fund to successfully utilize these instruments may depend in part upon the ability of its adviser or subadviser to forecast interest rates and other economic factors correctly. These types of securities may also decline for reasons associated with the underlying collateral. Asset-backed securities involve risks similar to those described in the section Mortgage-Related Securities. Some Funds may also invest in residual interests in asset-backed securities, which are interests in the excess cash flow remaining after the issuer makes required payments on the securities and pays related administrative expenses. The total amount of residual cash flow resulting from a particular issue of asset-backed securities depends in part on the characteristics of the underlying assets, the coupon rate on the securities, prevailing interest rates, the amount of administrative expenses and the actual performance of the underlying assets. Among other things, such performance is influenced by the amount and timing of losses incurred on the assets and leasing and disposition activity of the asset manager.
Certain Funds may also gain exposure to asset-backed securities through entering into credit default swaps or other derivative instruments related to this asset class. For example, a Fund may enter into credit default swaps on asset-backed securities, which are indices made up of tranches of asset-backed securities, each with different credit ratings. Utilizing asset-backed securities, one can either gain synthetic risk exposure to a portfolio of such securities by selling protection or take a short position by buying protection. The protection buyer pays a monthly premium to the protection seller, and the seller agrees to cover any principal losses and interest shortfalls of the referenced underlying asset-backed securities. Credit default swaps and other derivative instruments related to asset-backed securities are subject to the risks associated with asset-backed securities generally, as well as the risks of derivative transactions. See the section Derivative Instruments below.
Bank Loans, Loan Participations and Assignments
Some Funds may invest in bank loans, which include both 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. Senior loans can include term loans, revolving credit facility loans and second lien loans. The proceeds of senior loans primarily are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, dividends, and, to a lesser extent, to finance internal growth and for other corporate purposes. These loans may not be rated investment-grade by the rating agencies. Although secured loans are secured by collateral of the borrower, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrowers obligation, or that the collateral can be liquidated. 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. Some senior loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate such senior loans to presently existing or future indebtedness of the borrower or take other action detrimental to the holders of senior loans including, in certain circumstances, invalidating such senior loans or causing interest previously paid to be refunded to the borrower.
A Funds investments in loans are subject to credit/counterparty risk and, as described above, even secured bank loans may not be adequately collateralized. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. The interest rates on many bank loans reset frequently, and therefore investors are subject to the risk that the return will be less than anticipated when the investment was first made. 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 Funds may participate in the primary syndicate for a bank loan or they may also purchase loans from other lenders (sometimes referred to as loan assignments).
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Bank loans are generally less liquid than many other debt securities. Transactions in bank loans may settle on a delayed basis, such that a Fund may not receive the proceeds from the sale of a loan for a substantial period of time after the sale. As a result, the proceeds related to the sale of bank loans may not be available to make additional investments or to meet the Funds redemption obligations until a substantial period after the sale of the loans. In order to finance redemptions pending settlement of bank loans, a Fund may employ a wide variety of means to meet short-term liquidity needs, including, without limitation drawing on its cash and other short-term positions, all of which may adversely affect the Funds performance. With limited exceptions, the adviser will take steps intended to ensure that it does not receive material non-public information about the issuers of bank loans who also issue publicly traded securities, and therefore the adviser may have less information than other investors about certain of the loans in which it seeks to invest.
Large loans to corporations or governments may be shared or syndicated among several lenders, usually (but often not limited to) banks. A 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), in either case becoming a direct lender. A Fund also may acquire a participation interest in another lenders portion of the loan. Participation interests involve special types of risk, including liquidity risk and the risks of being a lender. Loans and loan participations may be transferable among financial institutions; however, they may not have the liquidity of conventional debt securities and because they may be subject to restrictions on resale, they are potentially illiquid. The purchase or sale of loans may require the consent of a third party or of the borrower, and although such consent is rarely withheld in practice, the consent requirement could delay a purchase or affect the Funds ability to dispose of its investments in loans in a timely fashion. Although the market for loans and loan participations has become increasingly liquid over time, this market is still developing, and there can be no assurance that adverse developments with respect to this market or particular borrowers will not prevent a Fund from selling these loans at their market values at a desirable time or price. To the extent a senior loan has been deemed illiquid, it will be subject to a Funds restrictions on investment in illiquid securities. When investing in a loan participation, a Fund typically will have the right to receive payments only from the lender to the extent the lender receives payments from the borrower, and not from the borrower itself. Likewise, a Fund typically will be able to enforce its rights only through the lender, and not directly against the borrower. As a result, the Fund will assume the credit/counterparty risk of both the borrower and the lender that is selling the participation.
Investments in loans through direct assignment of a financial institutions interests with respect to a loan may involve additional risks to a Fund. For example, if the loan is foreclosed, a Fund could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a Fund could be held liable as a co-lender.
Some loans may not be considered securities for certain purposes under the federal securities laws, and purchasers, such as a Fund, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws. Loans and other debt instruments that are not in the form of securities may offer less legal protection to a Fund in the event of fraud or misrepresentation.
A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. Unless, under the terms of the loan or other indebtedness, a Fund has direct recourse against the borrower, it may have to rely on the agent to pursue appropriate credit remedies against a borrower. In addition, holders of the loans, such as the Funds, may be required to indemnify the agent bank in certain circumstances.
In addition to investing in senior secured loans, a Fund may invest in other loans, such as second lien loans and other secured loans, as well as unsecured loans. Second lien loans and other secured loans are subject to the same risks associated with investment in senior loans and below investment grade bonds. However, such loans may rank lower in right of payment than senior secured loans, and are subject to additional risk that the cash flow of the borrower and any property securing the loan may be insufficient to meet scheduled payments after giving effect to the higher
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ranking secured obligations of the borrower. Second lien loans and other secured loans are expected to have greater price volatility than more senior loans and may be less liquid. There is also a possibility that originators will not be able to sell participations in lower ranking loans, which would create greater credit/counterparty risk exposure. Each of these risks may be increased in the case of unsecured loans, which are not backed by a security interest in any specific collateral.
Each Fund may also gain exposure to loan investments through the use of derivatives. See the section Derivative Instruments.
Collateralized Loan Obligations
A Fund may invest in Collateralized Loan Obligations (CLOs). CLOs are types of asset-backed securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CLOs may charge management fees and administrative expenses.
For CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the equity tranche which bears the bulk of defaults from the loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since they are partially protected from defaults, senior tranches from a trust typically have higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CLO securities as a class. The Fund may invest in any tranche, including the equity tranche, of a CLO. The risks of an investment in a CLO depend largely on the type of the collateral securities and the class of the instrument in which the Fund invests.
Normally, CLOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CLOs may be characterized by the Fund as illiquid securities, although an active dealer market may exist for CLOs allowing them to qualify for Rule 144A under the Securities Act. In addition to the normal risks associated with debt instruments discussed elsewhere in this prospectus and in the SAI (e.g., prepayment risk, credit risk, liquidity risk, market risk, structural risk, legal risk, default risk and interest rate risk (which may be exacerbated if the interest rate payable on a structured financing changes inversely to changes in interest rates or based on multiples of changes in interest rates)), CLOs may carry additional risks including, but are not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the possibility that the quality of the collateral may decline in value or default; (iii) the possibility that investments in CLOs are subordinate to other classes or tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
Collateralized Mortgage Obligations (CMOs)
Some Funds may invest in CMOs. CMOs are securities backed by a portfolio of mortgages or mortgage-backed securities held under indentures. CMOs may be issued either by U.S. government instrumentalities or by non-governmental entities. CMOs are not direct obligations of the U.S. government. The issuers obligation to make interest and principal payments is secured by the underlying portfolio of mortgages or mortgage-backed 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 a Fund would have a similar effect to 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 in the section Mortgage-Related Securities.
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Convertible Securities
Some Funds 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.
Cybersecurity, Operational and Technology Risk
The Funds, their service providers, and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the Funds and their shareholders. These risks include theft, loss, misuse, improper release, corruption and destruction of, or unauthorized access to, confidential or highly sensitive information relating to a Fund and its shareholders; and compromises or failures to systems, networks, devices and applications relating to the operations of a Fund and its service providers. Power outages, natural disasters, equipment malfunctions and processing errors that threaten these systems, as well as market events that occur at a pace that overloads these systems, may also disrupt business operations or impact critical data. Cybersecurity and other operational and technology issues may result in, among other things, financial losses to a Fund and its shareholders; the inability of a Fund to transact business with its shareholders or to engage in portfolio transactions; delays or mistakes in the calculation of a Funds NAV or other materials provided to shareholders; the inability to process transactions with shareholders or other parties; violations of privacy and other laws; regulatory fines, penalties and reputational damage; and compliance and remediation costs, legal fees and other expenses. A Funds service providers (including, but not limited to, the investment adviser, any subadvisers, administrator, transfer agent, and custodian), financial intermediaries, companies in which a Fund invests and parties with which a Fund engages in portfolio or other transactions also may be adversely impacted by cybersecurity and other operational and technology risks, resulting in losses to a Fund or its shareholders. Furthermore, as a result of breaches in cybersecurity or other operational and technology disruptions or failures, an exchange or market may close or issue trading halts on specific securities or the entire market, which may result in the Funds being, among other things, unable to buy or sell certain securities or financial instruments or unable to accurately price their investments. The Funds have developed processes, risk management systems and business continuity plans designed to reduce the risks associated with cybersecurity and other operational and technology issues. However, there is no guarantee that those measures will be effective, particularly since the Funds do not directly control the cybersecurity defenses and operational and technology plans and systems of their service providers, financial intermediaries and companies in which they invest or with which they do business and there are inherent limitations in systems designed to minimize the risk of cyber-attacks through the use of technology, processes and controls. Similar types of cybersecurity risks also are present for issuers of securities in which a Fund invests, which could result in material adverse consequences for such issuers, and may cause a Funds investment in such securities to lose value.
Exchange-Traded Notes
The Multi-Asset Income Fund may invest in exchange-traded notes (ETNs). ETNs are generally unsecured debt securities whose returns are linked to the performance of a particular market benchmark or strategy minus applicable fees. ETNs are traded on an exchange (e.g., the New York Stock Exchange) during normal trading hours. However, investors can also hold the ETN until maturity. At maturity, the issuer pays to the investor a cash amount equal to the principal amount, adjusted to reflect the performance of the relevant benchmark or strategy factor(s). ETNs generally do not make periodic coupon payments or provide principal protection. ETNs are subject to credit/counterparty risk, and the value of the ETN may drop due to a downgrade in the issuers credit rating, notwithstanding the performance of the underlying market benchmark or strategy. The value of an ETN may also be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying assets, changes in the applicable interest rates, changes in the issuers credit rating, and economic, legal, political, or geographic events that affect the referenced underlying benchmark or strategy. When the Multi-Asset
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Income Fund invests in ETNs it will bear its proportionate share of any fees and expenses borne by the ETN. These fees and expenses generally reduce the return realized at maturity or upon redemption from an investment in an ETN; therefore, the value of the index underlying the ETN must increase in order for an investor in an ETN to receive at least the principal amount of the investment at maturity or upon redemption. The Multi-Asset Income Funds decision to sell its ETN holdings may be limited by the availability of a secondary market.
The market price and return of the ETN may not correspond with that of the underlying benchmark or strategy. As a result, there may be times when an ETN share trades at a premium or discount to its market benchmark or strategy. This difference in price may be due to the fact that the supply and demand in the market for ETN shares at any point in time is not always identical to the supply and demand in the market for the securities or other components underlying the market benchmark or strategy that the ETN seeks to track. An ETN that is tied to a specific market benchmark or strategy may not be able to replicate and maintain exactly the composition and relative weighting of securities, commodities or other components in the applicable market benchmark or strategy.
The returns of some ETNs may be leveraged. Leveraged ETNs are subject to the same risk as other instruments that use leverage in any form. ETNs can, at times, be relatively illiquid, and thus they may be difficult to purchase or sell at an advantageous price. ETNs are also subject to tax risk. No assurance can be given that the U.S. Internal Revenue Service (the IRS) will accept, or a court will uphold, how the Multi-Asset Income Fund characterizes and treats ETNs for tax purposes. The tax treatment of income and gains from ETNs is not settled. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the Funds ability to qualify for treatment as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the Code) and to avoid a fund-level tax.
Fixed-Income Securities
Some Funds may invest in 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 a 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 NAV of a 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 S&P Global Ratings (S&P)) must have rated the security in one of its respective top four rating categories at the time a Fund acquires the security or, if the security is unrated, the Funds adviser or subadviser must have determined it to be of comparable quality.
Below Investment-Grade Fixed-Income Securities. Below investment-grade fixed-income securities (commonly referred to as junk bonds) are rated below investment-grade quality. To be considered below investment-grade quality, none of the three major rating agencies (Fitch, Moodys and S&P) must have rated the security in one of its respective top four rating categories at the time a Fund acquires the security or, if the security is unrated, the Funds adviser or subadviser must have determined it to be of comparable quality.
Below investment-grade fixed-income securities are subject to greater credit/counterparty risk and market risk than higher-quality fixed-income securities. Below investment-grade fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to make timely principal and interest payments. If a Fund invests in below investment-grade fixed-income securities, a Funds achievement of its objective may be more dependent on the advisers or the subadvisers own credit analysis than is the case with funds that invest in higher-quality fixed-income securities. The market for below investment-grade 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
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of financial institutions to invest in these securities. In addition, the secondary market may be less liquid for below investment-grade 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. Below investment-grade fixed-income securities may be in poor standing or in default and typically have speculative characteristics.
For more information about the ratings services descriptions of the various ratings categories, see Appendix A. A Fund may continue to hold fixed-income securities that are downgraded in quality subsequent to their purchase if the Funds adviser or subadviser believes it would be advantageous to do so.
Green Bonds
Some Funds may invest in green bonds. Under normal circumstances, Global Green Bond Fund invests principally in green bonds. Green bonds are issued to finance specific projects to generate an environmental benefit while offering potential market return in the same manner as other conventional fixed income securities. Green bonds may be issued by corporations, banks, supranational entities, development banks, agencies, regions and governments, among others. Mirova has developed its definition of green bonds, set forth in the Prospectus, using the International Capital Market Associations Green Bond Principles (GBP) as a foundation. The GBP are a set of guidelines and best practices designed to ensure the integrity of the green bond market. They recommend a process for designating, disclosing, managing and reporting on the proceeds of a bond. The GBP are intended for broad use by the market and aim to: (i) provide issuers with guidance on the key components involved in a green bond; (ii) aid investors by ensuring the availability of information necessary to evaluate the environmental impact of their green bond investments; and (iii) assist underwriters by moving the market towards standard disclosures which facilitate transactions. Certain green bonds may be dependent on government incentives and subsidies and lack of political support for the financing of projects with a positive environmental impact could negatively impact the performance of the Fund. As the green bond market is relatively new and continues to evolve, the criteria used to define green bonds may change in the future. Green bonds are often purchased on the primary market and the advisers ability to purchase green bonds on the primary market may be restricted if an affiliate of the adviser is part of the underwriting or selling syndicate.
Inflation-Linked and Inflation-Indexed Securities
Some Funds may invest in inflation-linked and -indexed securities. Inflation-linked and -indexed securities are fixed-income securities whose principal values are adjusted periodically according to the rate of inflation. These securities generally have maturities of ten or thirty years and interest is payable semiannually. The principal amount of these securities increases with increases in the price index used as a reference value for the securities. 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 amount (as adjusted) by a fixed coupon rate.
Although inflation-linked and -indexed securities 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 and -indexed securities 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 and indexed securities. 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 and indexed securities. If inflation is lower than expected during a period in which a Fund holds inflation-linked or indexed securities, the Funds may earn less on such securities than on a conventional security. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in inflation-linked and indexed securities may not be protected to the extent that the increase is not reflected in the price index used as a reference for the securities. There can be no assurance that the price index used for an inflation-linked or indexed security will accurately measure the real rate of inflation in the prices of goods and services. Inflation-linked and -indexed securities include Treasury Inflation-Protected Securities issued by the U.S. government (see the section 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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A Funds investments in inflation-linked and indexed securities can cause the Fund to accrue income for U.S. federal income tax purposes without a corresponding receipt of cash; and the Fund may be required to dispose of portfolio securities (including when not otherwise advantageous to do so) in order to obtain sufficient cash to meet its distribution requirements for eligibility to be treated as a regulated investment company (RIC) under the Code.
Investments in Banks
Some Funds may invest a portion of their assets 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 a Funds derivative contracts.
A Fund also may 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 or other 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.
These restrictions will not limit which banks may serve as counterparties for a Funds derivative instruments.
Mortgage Dollar Rolls
Some Funds may enter into mortgage dollar rolls. A dollar roll involves the sale of a security by a 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. A 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. A 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 a Funds use of the cash that it receives from a dollar roll will provide a return that exceeds borrowing costs.
Mortgage-Related Securities
Some Funds may invest in mortgage-related securities, such as 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 a Fund purchases these assets at a premium, a faster-than-expected prepayment rate tend to reduce yield to maturity, and a slower-than-expected prepayment rate may have the opposite effect of increasing yield to maturity. If a Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will tend to increase, and slower-than-expected prepayments will tend to reduce, yield to maturity.
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Prepayments, and resulting amounts available for reinvestment by a 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 increase the inherent volatility of a Fund by increasing the average life of the Funds portfolio securities.
The value of some mortgage-backed or asset-backed securities in which a Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of a Fund to successfully utilize these instruments may depend in part upon the ability of a Funds adviser or subadviser to forecast interest rates and other economic factors correctly. These types of securities may also decline for reasons associated with the underlying collateral. The risk of non-payment is greater for mortgage-related securities that are backed by mortgage pools that contain subprime or Alt-A loans (loans made to borrowers with weakened credit histories, less documentation 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 downturn, 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. Securities issued by the GNMA and the FNMA and similar issuers also may be exposed to risks described under U.S. Government Securities.
A Fund also may gain exposure to mortgage-related securities through entering into credit default swaps or other derivative instruments related to this asset class. For example, a Fund may enter into credit default swaps on CMBX, which are indices made up of tranches of commercial mortgage-backed securities, each with different credit ratings. Utilizing CMBX, one can either gain synthetic risk exposure to a portfolio of such securities by selling protection or take a short position by buying protection. The protection buyer pays a monthly premium to the protection seller, and the seller agrees to cover any principal losses and interest shortfalls of the referenced underlying mortgage-backed securities. Credit default swaps and other derivative instruments related to mortgage-related securities are subject to the risks associated with mortgage-related securities generally, as well as the risks of derivative transactions. See the section Derivative Instruments below.
Pay-in-Kind Securities
Some Funds 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. A Fund would be required to distribute the income on these instruments as it accrues, even though the Fund will not receive the income on a current basis or in cash. Thus, such Fund may have to sell other investments, including when it may not be advisable to do so, to make income distributions to its shareholders.
Rule 144A Securities and Section 4(a)(2) Commercial Paper
Some Funds may invest in Rule 144A securities and/or Section 4(a)(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. A Fund may also purchase commercial paper issued under Section 4(a)(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(a)(2) commercial paper could have the effect of increasing the level of a Funds illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. Rule 144A securities and Section 4(a)(2) commercial paper are treated as illiquid unless a Funds adviser or subadviser has determined, under guidelines established by the Board, that the particular issue is liquid. Under the guidelines, a Funds adviser or subadviser considers such factors as: (1) the frequency of the trades and quotes for a security; (2) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and the nature of the marketplace trades in the security.
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Step-Coupon Securities
Some Funds 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 a Fund to dispose of them or determine their current value.
Stripped Securities
Some Funds 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 prepayments of principal, a Fund may fail to recoup fully its investments in IOs. Stripped securities may be illiquid. Stripped securities may be considered derivative securities. See the section Derivative Instruments below.
Structured Notes
Some Funds 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.
Structured notes include, but are not limited to, equity-linked notes. An equity-linked note is a note whose performance is tied to a single stock, a basket of stocks, or a stock index. Equity-linked notes combine the principal protection normally associated with fixed-income securities with the potential for capital appreciation normally associated with equity securities. Upon the maturity of the note, the holder generally receives a return of principal based on the capital appreciation of the linked securities. Depending on the terms of the note, equity-linked notes may also have a cap or floor on the principal amount to be repaid to holders, irrespective of the performance of the linked securities. For example, a note may guarantee the repayment of the original principal amount invested (even if the linked securities have negative performance during the notes term), but may cap the maximum payment at maturity at a certain percentage of the issuance price or the return of the linked securities. Alternatively, the note may not guarantee a full return on the original principal, but may offer a greater participation in any capital appreciation of the linked securities. The terms of an equity-linked note may also provide for periodic interest payments at either a fixed or floating rate.
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Structured notes can serve many different purposes in the management of a Fund. For example, they can be used to increase a 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 a 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 a 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 a 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 a 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 an advisers or subadvisers analysis of the issuers creditworthiness and financial prospects, and of the advisers or subadvisers 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 below) apply. Structured notes may be considered derivative securities.
U.S. Government Securities
The Funds 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 thirty years, with interest normally payable every six (6) months. These obligations are backed by the full faith and credit of the U.S. government.
U.S. Treasury Floating Rate Notes Treasury Floating Rate Notes are new instruments authorized by amendments to the U.S. Treasurys marketable securities auction rules. As with other floating rate securities, at certain intervals the interest payment on a Treasury Floating Rate Note will increase when the applicable index increases, and will decrease when the applicable index decreases. Treasury Floating Rate Notes are a relatively new type of financial instrument. As such, there is no significant trading history of these securities, and there can be no assurance that a liquid market in these securities will develop. Lack of a liquid market may impose the risk of higher transaction costs and the possibility that a Fund may be forced to liquidate positions when it would not be advantageous to do so.
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 that 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 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
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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 Funds) 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 Funds, which reinvest 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, including state and federally chartered savings and loan associations, mutual savings banks, commercial banks, credit unions and mortgage banks. Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to timely payment of principal and interest by FNMA, but these obligations 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, but these obligations are not backed by the full faith and credit of the U.S. government.
U.S. government securities generally do not involve the credit risks associated with 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, 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 a Funds NAV. Because the magnitude of these fluctuations generally will be greater at times when a Funds average maturity is longer, under certain market conditions a 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 those issued by Fannie Mae and Freddie Mac are guaranteed as to the payment of principal and interest by the relevant entity (e.g., FNMA or FHLMC) but have not been backed by the full faith and credit of the U.S. government. Instead, they have been supported only by the discretionary authority of the U.S. government to purchase the agencys obligations. 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.
S&P downgraded its long-term sovereign credit rating on the United States from AAA to AA+ on August 5, 2011. The downgrade by S&P and other possible downgrades in the future may result in increased volatility or liquidity risk, higher interest rates and lower prices for U.S. government securities and increased costs for all kinds of debt. The value of the Funds shares may be adversely affected by S&Ps downgrade or any future downgrades of the U.S. governments credit rating given that the Funds may invest in U.S. government securities.
In September 2008, the U.S. Treasury Department placed FNMA and FHLMC into conservatorship. The companies remain in conservatorship, and the effect that this conservatorship will have on the companies debt and equity securities is unclear. Although the U.S. government has recently provided financial support to FNMA and FHLMC, there can be no assurance that it will support these or other government-sponsored enterprises in the future. In addition, any such government support may benefit the holders of only certain classes of an issuers 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 a 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.
See the section Mortgage-Related Securities for additional information on these securities.
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Zero-Coupon Securities
Some Funds 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; the holder generally is entitled to receive the par value of the security at maturity. 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. A Funds investment in zero-coupon securities will require the Fund to accrue income without a corresponding receipt of cash. The Fund may be required to dispose of other portfolio securities (including at a time when it is not otherwise advantageous to do so) in order to obtain sufficient cash to meet its distribution requirements for treatment as a RIC under the Code.
Equity Securities
The Funds may invest in equity securities. Common stocks, preferred stocks, warrants, securities convertible into common or preferred stocks and similar securities, together called equity securities, are generally volatile and more risky than some other forms of investment. Equity securities of companies with relatively small market capitalizations may be more volatile than the securities of larger, more established companies and than the broad equity market indices generally. Common stock and other equity securities may take the form of stock in corporations, partnership interests, interests in limited liability companies and other direct or indirect interests in business organizations.
Equity securities are securities that represent an ownership interest (or the right to acquire such an interest) in a company and may include common and preferred stocks, 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) 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 that an issuer is liquidated or declares bankruptcy, the claims of owners of bonds and other debt securities generally 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. The value of your investment in a fund that invests in equity securities may decrease, potentially by a significant amount. A 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. See the section Market Capitalizations below. A Funds investments may include securities traded over-the-counter (OTC) as well as those traded on a securities exchange. Some securities, particularly OTC securities, may be more difficult to sell under some market conditions.
The Funds may invest in growth stocks and value stocks. Growth stocks are those stocks of companies that a Funds adviser or subadviser believes have earnings that will grow faster than the economy as a whole. Growth stocks typically trade at higher multiples of current earnings than other stocks. As a result, the values of growth stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If an advisers or subadvisers assessment of the prospects for a companys earnings growth is wrong, or if its judgment of how other investors will value the companys earnings growth is wrong, then the price of that companys stock may fall or may not approach the value that the adviser or subadviser has placed on it.
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Value stocks are those stocks of companies that are not expected to experience significant earnings growth, but that a Funds adviser or subadviser believes are undervalued compared to their true worth. These companies may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If an advisers or subadvisers assessment of a companys prospects is wrong, or if other investors do not eventually recognize the value of the company, then the price of the companys stock may fall or may not approach the value that the adviser or subadviser has placed on it.
Many stocks may have both growth and value characteristics, and for some stocks it may be unclear under which category, if any, the stock should be characterized.
Commodities
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. A 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, investments in commodity-linked instruments do not generally provide a claim on the underlying commodity. In addition, the ability of a Fund to invest directly in commodities, and in certain commodity-related securities and other instruments, is subject to significant limitations in order to enable a Fund to maintain its status as a RIC under the Code. See Taxes below for more information.
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 droughts, 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 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. A Fund may lose money on its commodity investments.
Corporate Reorganizations
Each Fund may invest in securities for which a tender or exchange offer has been made or announced and in securities of companies for which a merger, consolidation, liquidation or reorganization proposal has been announced if, in the judgment of the Funds investment adviser, there is a reasonable prospect of capital appreciation significantly greater than the brokerage and other transaction expenses involved. The primary risk of such investments is that if the contemplated transaction is abandoned, revised, delayed or becomes subject to unanticipated uncertainties, the market price of the securities may decline below the purchase price paid by a Fund.
In general, securities, which are the subject of such an offer or proposal sell at a premium to their historic market price immediately prior to the announcement of the offer or proposal. However, the increased market price of such securities may also discount what the stated or appraised value of the security would be if the contemplated transaction were approved or consummated. Such investments may be advantageous when the discount significantly overstates the risk of the contingencies involved, significantly undervalues the securities, assets or cash to be received by shareholders of the prospective company as a result of the contemplated transaction or fails adequately to recognize the possibility that the offer or proposal may be replaced or superseded by an offer or proposal of greater value. The evaluation of such contingencies requires unusually broad knowledge and experience on the part of the Funds investment adviser or subadviser which must appraise not only the value of the issuer and its component businesses, but also the financial resources and business motivation of the offer or proposal as well as the dynamics of the business climate when the offer or proposal is in process.
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Investment Companies
Some of the Funds may invest in other investment companies. Investment companies, including exchange-traded funds (ETFs), 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. In other circumstances, the market value of an investment companys shares may be less than the NAV per share of the investment company. As an investor in another investment company, a 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. A Fund may also be exposed to the risks associated with the underlying investment companys investments.
Despite the possibility of greater fees and expenses, investment in other investment companies may be attractive nonetheless for several reasons, especially in connection with foreign investments. Because of restrictions on direct investment by U.S. entities in certain countries, investing indirectly in such countries (by purchasing shares of another fund that is permitted to invest in such countries) may be the most practical and efficient way for a Fund to invest in such countries. In other cases, when a Funds adviser desires to make only a relatively small investment in a particular country, investing through another fund that holds a diversified portfolio in that country may be more effective than investing directly in issuers in that country. In addition, it may be efficient for a Fund to gain exposure to particular market segments by investing in shares of one or more investment companies.
Exchange-Traded Funds. Some of the Funds may invest in shares of ETFs. An ETF is an investment company that is generally registered under the 1940 Act that holds a portfolio of securities designed to track the performance of a particular index. The index may be actively managed. ETFs sell and redeem their shares at NAV in large blocks (typically 50,000 of its shares or more) 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 entities that are not registered under the 1940 Act 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.
Limitations on Investments in Other Investment Companies. Investments in other investment companies are typically subject to limitations prescribed by the 1940 Act. The 1940 Act limitations currently provide, in part, that, unless an exception applies, a Fund may not purchase shares of an investment company if such a purchase would cause the Fund (a) to own in the aggregate more than 3% of the total outstanding voting stock of the investment company; (b) to have more than 5% of its total assets invested in the aggregate in the investment company; or (c) to have more than 10% of its total assets invested in the aggregate in all investment companies. Investments by a Fund may exceed these limitations, however, if permitted by applicable exemptive relief; for example, the Fund may invest in excess of the foregoing limitations in an unaffiliated ETF if the ETF has obtained exemptive relief from the SEC and both the ETF and the Fund adhere to the conditions in the exemptive relief.
Market Capitalizations
Some Funds may invest in companies with small, medium or large market capitalizations. Large capitalization companies are generally large companies that have been in existence for a number of years and are well established in their market. Middle market capitalization companies are generally medium-sized companies that are not as established as large capitalization companies, may be more volatile and are subject to many of the same risks as smaller capitalization companies.
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Small Capitalization Companies
Some Funds may invest in companies with relatively small market capitalizations. Such investments may involve greater risk than is usually associated with more established companies. These companies often have sales and earnings growth rates that exceed those of companies with larger market capitalizations. Such growth rates may in turn be reflected in more rapid share price appreciation. However, companies with smaller market capitalization often have limited product lines, markets or financial resources and may be dependent upon a relatively small management group. These securities may have limited marketability and may be subject to more abrupt or erratic movements in price than securities of companies with larger market capitalization or market averages in general. To the extent that a Fund invests in companies with relatively small market capitalizations, the value of its stock portfolio may fluctuate more widely than broad market averages.
Master Limited Partnerships (MLPs)
Certain Funds may invest in MLPs, which are limited partnerships the ownership units of which are publicly traded. MLPs may be treated as qualified publicly traded partnerships for U.S. federal income tax purposes, as described in Taxes herein. MLPs often own or own interests in properties or businesses that are related to oil and gas industries, including pipelines, although MLPs may invest in other types of investments, including credit-related investments. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, exploration and production spending, the success of exploration projects, tax and other government regulations, weather or meteorological events, world events and economic conditions. The energy industries also may be affected by fluctuations in energy prices, energy conservation, exploration and production spending, government regulations, weather, world events and economic conditions. Generally, an MLP is operated under the supervision of one or more managing general partners. Limited partners (like a Fund when it invests in an MLP) are not involved in the day-to-day management of the partnership. Certain Funds also may invest in companies that serve (or the affiliates of which serve) as the general partner of an MLP.
Investments in MLPs are generally subject to many of the risks that apply to partnerships. For example, holders of the units of MLPs will generally have limited control and limited voting rights on matters affecting the partnership. There may be fewer corporate protections afforded to investors in an MLP than investors in a corporation. Conflicts of interest may exist among unit holders, subordinated unit holders and the general partner of an MLP, including those arising from incentive distribution payments. The general partner of an MLP may have limited call rights that may require the Fund to sell its units of such MLP at a time or price that is not advantageous, which may lower the Funds return or result in a loss. A Fund may also be required to repay to an MLP distributions that are incorrectly distributed to the Fund, and in certain circumstances holders of MLP units may be responsible for the obligations of the MLP. In addition, should an MLP fail to meet the current legal requirements for treatment as a partnership, or if there are changes to the tax law, an MLP could be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay tax at the entity level, and distributions to the Fund would be taxed as ordinary income. This could result in a significant reduction in the income to the Fund from an investment in an MLP. MLPs that concentrate in a particular industry or region are subject to risks associated with such industry or region. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. Investments held by MLPs may be illiquid and are subject to equity risk. MLP units may trade infrequently and in limited volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly based companies.
Certain Funds investments in MLPs can bear on or be limited by a Funds intention to qualify as a RIC.
Certain Funds may also hold investments in limited liability companies that have many of the same characteristics and are subject to many of the same risks as MLPs.
Preferred Stock
Some Funds may invest in preferred stock. Preferred stock pays dividends at a specified rate and generally has preference over common stock in the payment of dividends and the liquidation of the issuers assets, but is junior to the debt securities of the issuer in those same respects. Unlike interest payments on debt securities, dividends on preferred stock are generally payable at the discretion of the issuers board of directors. Shareholders may suffer a loss of value if dividends are not paid. The market prices of preferred stocks are subject to changes in interest rates and are more sensitive to changes in the issuers creditworthiness than are the prices of debt securities. Under normal circumstances, preferred stock does not carry voting rights.
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REITs
Some Funds 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 and changes in interest rates. REITs, whose the underlying assets are concentrated in properties used by a particular industry, such as health care, are also subject to risks associated with such industry. 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 favorable tax treatment available to REITs under the Code, and failing to maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks, including prepayment risk. When interest rates decline, the value of a REITs investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REITs investment in fixed rate obligations can be expected to decline. If the REIT invests in adjustable rate mortgage loans the interest rates on which are reset periodically, yields on a REITs investments in such loans will gradually align themselves to reflect changes in market interest rates. This causes the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. 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.
A Funds investment in a REIT may result in the Funds making distributions that constitute a return of capital to Fund shareholders for U.S. federal income tax purposes. In addition, distributions by a Fund from REITs will not qualify for the corporate dividends-received deduction or, generally, for treatment as qualified dividend income.
Real Estate Securities
Certain Funds 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. Certain other Funds may also have significant exposure to the real estate industry from time to time.
Depositary Receipts
Some Funds may invest in foreign equity securities by purchasing depositary receipts. Depositary receipts are instruments issued by banks 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 the price may be more volatile than in the case of sponsored depositary receipts. American Depositary Receipts 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 risk. European Depositary Receipts and Global Depositary Receipts are depositary receipts that are typically issued by foreign banks or trust companies which evidence ownership of underlying securities issued by either a foreign or U.S. corporation. All depositary receipts, including those denominated in U.S. dollars, will be subject to foreign currency risk. The effect of changes in the dollar value of a foreign currency on the dollar value of a Funds assets and on the net investment income available for distribution may be favorable or unfavorable. A Fund may incur costs in connection with conversions between various currencies. In addition, a 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 Funds may invest in depositary receipts, changes in foreign economies and political climates are more likely to affect a 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 a 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 highly developed. The same or similar risks are seen in investments in companies that are located in developed markets but derive substantial revenues from emerging markets. The risks associated with investing in foreign securities are often heightened for investments in emerging market countries. These heightened risks include (i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the small size of the markets for securities of emerging market issuers and the oftentimes low or nonexistent volume of trading, resulting in lack of liquidity and in price volatility; (iii) certain national policies that may restrict a Funds investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests or currency transfer restrictions; (iv) an economys dependence on revenues from particular commodities or on international aid or development assistance; (v) the absence of developed legal structures governing private or foreign investment and private property and/or less developed custodial and deposit systems and delays and disruptions in securities settlement procedures; and (vi) risks associated with the imposition of sanctions by the U.S. government. A Funds purchase and sale of portfolio securities in certain emerging market countries may be constrained by limitations as to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. In certain cases, such limitations may be computed based upon the aggregate trading by or holdings of a Fund, its adviser or subadviser and their affiliates, and their respective clients and other service providers. A Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached. These limitations may have a negative impact on the Funds performance and may adversely affect the liquidity of the Funds investment to the extent that it invests in certain emerging market countries. In addition, some emerging market countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Further, certain emerging market countries currencies may not be internationally traded. Certain of these currencies have experienced a steady devaluation relative to the U.S. dollar. If a Fund does not hedge the U.S. dollar value of securities it owns denominated in currencies that are devalued, the Funds NAV will be adversely affected. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain of these countries.
In determining whether to invest in securities of foreign issuers, a Funds adviser or subadviser may consider the likely effects of foreign taxes on the net yield available to a Fund and its shareholders. Compliance with foreign tax laws may reduce a Funds net income available for distribution to shareholders.
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Foreign Investment Companies
Some of the countries in which some of the Funds may invest may not permit, or may place economic restrictions on, direct investment by outside investors. Investments in such countries may only be permitted through foreign government-approved or authorized investment vehicles, which may include other investment companies. Some of the Funds may also invest in registered or unregistered closed-end investment companies that invest in foreign securities. Investing through such vehicles may involve frequent or layered fees or expenses and may also be subject to limitation under the 1940 Act or to special tax rules under the Code. If a Fund invests in investment companies, shareholders will bear not only their proportionate share of the Funds expenses (including operating expenses and the fees of the Funds adviser), but also, indirectly, the similar expenses of the underlying investment companies.
Foreign Securities
The Funds may invest in foreign securities. Each Fund may define foreign securities differently and the examples described in this section should not be considered a definition of foreign securities. Foreign securities may include, among other things, securities of issuers organized or headquartered outside the U.S. as well as obligations of supranational entities. 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. Investments in emerging markets may be subject to these risks to a greater extent than those in more developed markets, as described more fully in the section Emerging Markets. The non-U.S. securities in which a 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; (e) non-U.S. dollar-denominated securities of U.S. corporate issuers; and (f) equity securities issued by foreign corporations or other business organizations. In addition to the risks associated with investing in foreign securities generally, such investments present additional risks not typically associated with investments in comparable securities of U.S. issuers.
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. If a Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on a Fund than a Fund that is not over-weighted in that region. 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 a Fund may be affected favorably or unfavorably by changes in currency exchange rates or exchange control regulations. To the extent a 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.
The 2008 global economic crisis has caused many European countries to experience serious fiscal difficulties, including bankruptcy, public budget deficits, recession, sovereign default, restructuring of government debt, credit rating downgrades and an overall weakening of the banking and financial sectors. In addition, some European economies may depend on others for assistance, and the inability of such economies to achieve the reforms or objectives upon which that assistance is conditioned may result in deeper and/or longer financial downturns among the Eurozone nations. Recent events in the Eurozone have called into question the long-term viability of the euro as a shared currency among the Eurozone nations. Moreover, strict fiscal and monetary controls imposed by the European Economic and Monetary Union as well as any other requirements it may impose on member countries may significantly impact such countries and limit them from implementing their own economic policies to some
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degree. As the result of economic, political, regulatory or other actions taken in response to this crisis, including any discontinuation of the euro as the shared currency among the Eurozone nations or the implementation of capital controls or the restructuring of financial institutions, a Funds euro-denominated investments may become difficult to value, a Fund may be unable to dispose of investments or repatriate investment proceeds, a Funds ability to operate its strategy in connection with euro-denominated securities may be significantly impaired and the value of the Funds euro-denominated investments may decline significantly and unpredictably.
In June 2016, the United Kingdom approved a referendum to leave the European Union (commonly known as Brexit). On March 29, 2017, the United Kingdom formally notified the European Council of its intention to leave the European Union; as a result, the United Kingdom will remain a member state, subject to European Union law with privileges to provide services under the single market directives, for at least two years from that date. However, there is a significant degree of uncertainty about how negotiations relating to the UKs withdrawal and new trade agreements will be conducted, as well as the potential consequences and precise timeframe for Brexit. Given the size and importance of the United Kingdoms economy, uncertainty about its legal, political, and economic relationship with the remaining member states of the European Union may continue to be a source of instability. Moreover, other countries may seek to withdraw from the European Union and/or abandon the euro, the common currency of the European Union. The ultimate effects of these events and other socio-political or geopolitical issues are not known but could profoundly affect global economies and markets. Whether or not a Fund invests in securities of issuers located in Europe or with significant exposure to European issuers or countries, these events could negatively affect the value and liquidity of the Funds investments.
Although a 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 a 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 a 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. Compliance with foreign tax laws may reduce a Funds net income available for distribution to shareholders.
In addition, because the Funds may invest in foreign securities traded primarily on markets that close prior to the time each Fund determines its 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 a 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 a Funds shares by virtue of their transaction, if those prices reflect the fair value of the foreign securities. Although each 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 that are inherently subjective, may not always eliminate the risk of price arbitrage. The Funds securities may change in price on days on which the U.S. markets are closed and the Funds do not calculate their NAVs or sell or redeem their shares. For more information on how the Funds use fair value pricing, see the section Net Asset Value.
Foreign withholding or other taxes imposed on a Funds investments in foreign securities will reduce the Funds return on those securities. In certain circumstances, certain Funds may be able to elect to permit shareholders to claim a credit or deduction on their income tax returns with respect to foreign taxes paid by the Fund. See the section Taxes.
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Canadian Investments
Certain Funds may invest in securities of Canadian issuers to a significant extent. The Canadian and U.S. economies are closely integrated, and U.S. market conditions, including consumer spending, can have a significant impact on the Canadian economy such that an investment in Canadian securities may not have the same diversifying affect as investments in other countries. In addition, Canada is a major producer of commodities, such as forest products, metals, agricultural products and energy-related products like oil, gas and hydroelectricity. As a result, the Canadian economy is very dependent on the demand for, and supply and price of, natural resources and the Canadian market is relatively concentrated in issuers involved in the production and distribution of natural resources. Canadas economic growth may be significantly affected by fluctuations in currency and global demand for such commodities. Investments in Canadian securities may be in Canadian dollars; see the section Foreign Currency Transactions for more information.
Supranational Entities
Certain Funds may invest in securities issued by supranational entities, such as the International Bank for Reconstruction and Development (commonly called the World Bank), the Asian Development Bank and the Inter-American Development Bank. The governmental members of these supranational entities are stockholders that typically make capital contributions to support or promote such entities economic reconstruction or development activities and may be committed to make additional capital contributions if the entity is unable to repay its borrowings. A supranational entitys lending activities may be limited to a percentage of its total capital, reserves and net income. There can be no assurance that the constituent governments will be able or willing to honor their commitments to those entities, with the result that the entity may be unable to pay interest or repay principal on its debt securities, and a Fund may lose money on such investments. Obligations of supranational entities that are denominated in foreign currencies will also be subject to the risks associated with investments in foreign currencies, as described in the sections Foreign Securities and Foreign Currency Transactions.
Foreign Currency Transactions
Some Funds may engage in foreign currency transactions for both hedging and investment purposes. Many foreign securities in a Funds portfolio 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 a 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 a Funds portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of a 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 a Funds assets and on the net investment income available for distribution may be favorable or unfavorable.
To protect against a change in the foreign currency exchange rate between the date on which a 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, a Fund might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing spot rate or may enter into futures contracts on an exchange. If conditions warrant, a Fund may also enter into contracts with banks or broker-dealers to purchase or sell foreign currencies at a future date (forward contracts), as described in the section Derivative Instruments.
Forward contracts are subject to many of the same risks as derivatives described in the section Derivative Instruments. 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 a Funds assets and on the net investment income available for distribution may be favorable or unfavorable. A Fund may incur costs in connection with conversions between various currencies, and the Fund will be subject to increased illiquidity and credit/counterparty risk because forward contracts are not traded on an exchange and often are not standardized. A 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.
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Additionally, in their forward trading, the Funds are subject to the risk of the bankruptcy of, or the inability or refusal to perform with respect to their forward contracts by, the principals with which the Funds trade. Funds on deposit with such principals are generally not protected by the same segregation requirements imposed on U.S. Commodity Futures Trading Commission (CFTC) regulated commodity brokers in respect of customer funds on deposit with them. A Fund may place forward trades through agents, so that the insolvency or bankruptcy of such agents could also subject the Fund to the risk of loss.
In addition, some Funds 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. A Fund may use options on foreign currencies 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, a Fund may buy put options on the foreign currency. If the value of the currency declines, a 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, a 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 a 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, a Fund could sustain losses or lesser gains 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.
Certain Funds 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, a Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the decline expected by a 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, a 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, a Fund also may lose all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.
The adviser may decide not to engage in currency transactions, and there is no assurance that any currency strategy used by a Fund will succeed. In addition, suitable currency transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions when they would be beneficial. The foreign currency transactions in which a Fund may engage involve risks similar to those described in the section Derivative Instruments.
A Funds use of currency transactions may be limited by tax considerations. 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 and may affect the timing or amount of distributions to shareholders.
Transactions in non-U.S. currencies are also subject to many of the risks of investing in non-U.S. securities described in the section Foreign Securities. Because a Fund may invest in foreign securities and foreign currencies, changes in foreign economies and political climates are more likely to affect a 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 a Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on a Fund than a fund that is not over-weighted in that region.
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Money Market Instruments
Each Fund may invest in money market instruments. Money market instruments are high-quality, short-term securities. A 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 adviser or subadviser. The Funds may invest in instruments of lesser quality and do not have any minimum credit quality restriction. Money market instruments maturing in less than one year may yield less than obligations of comparable quality having longer maturities.
Although changes in interest rates can change the market value of a security, the Funds expect those changes to be minimal with respect to these securities, which may be purchased by a Fund for defensive purposes. A 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 adviser or subadviser believes the risks are minimal.
The Funds 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. 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. See the section U.S. Government Securities for additional information.
Although the Funds may invest in money market instruments, they are not money market funds and therefore are not subject to the portfolio quality, maturity and NAV requirements applicable to money market funds. The Funds will not seek to maintain a stable NAV. The Funds 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 a Fund from investing in money market instruments paying the highest available yield at a particular time. In addition, a 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, a 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 experienced financial difficulties, leading in some cases to rating downgrades and decreases in the value of their securities. In addition, during the 2008 global financial downturn, many money market instruments that were thought to be highly liquid became illiquid. If a Funds money market instruments become illiquid, the Fund may be unable to satisfy certain of its obligations or may only be able to do so by selling other securities at prices or times that may be disadvantageous to do so.
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TYPES OF PRACTICES
Derivative Instruments
Some Funds may, but are not required to, use a number of derivative instruments for risk management purposes to seek to enhance investment returns. 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, related indices and other assets. For additional information about the use of derivatives in connection with foreign currency transactions, see the section Foreign Currency Transactions. A Funds adviser or subadviser may decide not to employ one or more of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. In addition, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial. Examples of derivative instruments that a Fund may use include (but are not limited to) options and warrants, futures contracts, options on futures contracts, structured notes, zero strike warrants and options, swap agreements (including interest rate and credit default swaps), swaptions and debt-linked and equity-linked securities.
Transactions in certain derivatives are subject to clearance on a clearing house, while other derivatives are subject to risks of trading in the OTC markets or on non-U.S. exchanges. In addition, the U.S. government has enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which includes provisions for regulation of the derivatives market, including new clearing, margin, reporting and registration requirements. The European Union (and some other countries) are implementing similar requirements that will affect a Fund when it enters into derivatives transactions with a counterparty organized in that country or otherwise subject to that countrys derivatives regulations. Because these requirements are new and evolving (and some of the rules are not yet final), their ultimate impact remains unclear. These regulatory changes could, among other things, restrict the Funds ability to engage in derivatives transactions (including because certain types of derivatives transactions may no longer be available to the Fund) and/or increase the costs of such derivatives transactions (including through increased margin requirements), and the Fund may be unable to execute its investment strategy as a result.
Additionally, the new requirements may result in increased uncertainty about credit/counterparty risk, and they may also limit the flexibility of the Fund to protect its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterpartys (or its affiliates) insolvency, a Funds ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could be stayed or eliminated under new special resolution regimes adopted in the United States, the European Union and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to such proceedings in the European Union, the liabilities of such counterparties to the Fund could be reduced, eliminated, or converted to equity in such counterparties (sometimes referred to as a bail in). The regulation of derivatives transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government and judicial action.
Derivatives involve special risks, including credit/counterparty risk, illiquidity, difficulties in valuation, leverage risk and, to the extent the advisers or subadvisers view as to certain market movements is incorrect, the risk that the use of derivatives could result in significantly greater losses or lower income or gains than if they had not been used. A Funds derivative counterparties may experience financial difficulties or otherwise be unwilling or unable to honor their obligations, possibly resulting in losses to the Fund. Losses resulting from the use of derivatives will reduce a Funds NAV, and possibly income, and the losses may be significantly greater than if derivatives had not been used. The degree of a Funds use of derivatives may be limited by certain provisions of the Code. When used, derivatives may affect the amount, timing and/or character of distributions payable to, and thus taxes payable by, shareholders. See the section Additional Risks of Derivative Instruments below for additional information about the risks relating to derivative instruments.
Several types of derivative instruments in which a Fund may invest are described in more detail below. However, the Funds are not limited to investments in these instruments and may decide not to employ any or all of these strategies.
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Asset Segregation and Coverage
Each Fund will segregate with its custodian or otherwise designate on its records liquid assets to ensure that it has sufficient liquid assets to meet its obligations under its derivatives contracts and similar transactions, or the Fund may engage in other measures to cover its obligations with respect to such transactions. The amounts that are segregated or designated may be based on the notional value of the derivative or on the daily mark-to-market obligation under the derivatives contract and may be reduced by amounts on deposit with the applicable broker or counterparty to the derivatives transaction. In certain circumstances, a Fund may enter into an offsetting position rather than segregating or designating liquid assets (e.g., a Fund may cover a written put option with a purchased put option with the same or higher exercise price). Although a Funds adviser or subadviser will attempt to ensure that the Fund has sufficient liquid assets to cover its obligations under its derivatives contracts, it is possible that the Funds liquid assets may be insufficient to support such obligations under its derivatives positions. A Fund may modify its asset segregation policies from time to time.
Futures Contracts
Futures transactions involve a Funds buying or selling futures contracts. A futures contract is an agreement between two parties to buy and sell a particular security, commodity, currency or other asset, or group or index of securities, commodities, currencies or other assets, 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 may trade in contracts with a value equal to $250 multiplied by the price of the S&P 500® Index.
When a trader, such as a 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/liquid 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.
The 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 and other transaction costs. Should the value of the assets in the margin account drop below the minimum amount required to be maintained, or maintenance margin, the Fund will be required to deposit additional assets to the account.
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 an offsetting contract. If the price of the sale of the futures contract by a 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, a futures purchase is closed by the purchaser selling an offsetting futures contract.
Futures contract prices, and the prices of the related contracts in which the Fund may trade, may be highly volatile. Such prices are influenced by, among other things: changing supply and demand relationships; government trade, fiscal, monetary and exchange control programs and policies; national and international political and economic events; and changes in interest rates. In addition, governments from time to time intervene, directly and by regulation, in these markets, with the specific intention of influencing such prices. The effect of such intervention is often heightened by a group of governments acting in concert.
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Furthermore, the low margin deposits normally required in futures trading permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a futures contract can result in immediate and substantial losses to the investor. As an added risk in these volatile and highly leveraged markets, it is not always possible to liquidate futures positions to prevent further losses or recognize unrealized gains. Illiquidity can arise due to daily price limits taking effect or to market disruptions. Futures positions may be illiquid because certain commodity exchanges limit fluctuations in certain futures contract prices during a single day by regulations referred to as daily price fluctuation limits or daily limits. Under such daily limits, during a single trading day no trades may be executed at prices beyond the daily limits. Once the price of a particular futures contract has increased or decreased by an amount equal to the daily limit, positions in that contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved beyond the daily limits for several consecutive days with little or no trading. The potential inability to liquidate futures positions creates the possibility of the Fund being unable to control its losses. If a Fund were to borrow money to use for trading purposes, the effects of such leverage would be magnified. Cash posted as margin in connection with a Funds futures contracts will not be available to the Fund for investment or other purposes.
Funds that invest in futures contracts may be subject to risks related to rolling. When investing in futures contracts, a Fund will generally seek to roll its futures positions rather than hold them through expiration. In some circumstances, the prices of futures contracts with near-term expirations are lower than the prices of similar futures contracts with longer-term expirations, resulting in a cost to roll the futures contracts. The actual realization of a potential roll cost will depend on the difference in prices of futures contracts with near- and longer-term expirations, and the rolling of futures positions may result in losses to a Fund.
Commodity Futures Contracts
Some Funds may invest in commodity futures contracts. There are additional risks associated with transactions in commodity futures contracts including, but not limited to the following:
Storage. Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while a Fund is invested in futures contracts on that commodity, the value of the futures contract may also change (even if the Fund does not intend to physically settle the commodity futures contract). While the Fund typically does not intend to physically settle any commodity futures contracts, physical delivery of commodities can result in temporary illiquidity and a Fund would incur additional charges associated with the holding and safekeeping of any such commodities.
Reinvestment. In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing positions and views of the participants in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for a Fund. If the positions and views of the participants in futures markets have shifted when it is time for a Fund to reinvest the proceeds of a maturing contract in a new futures contract, a Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.
Speculative Position Limits.
The CFTC and domestic exchanges have established speculative position limits (position limits) on the maximum speculative position which any person, or group of persons acting in concert, may hold or control in particular contracts and certain related swaps. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of trading.
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Index Futures Contracts
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 may trade in contracts with a value equal to $250 multiplied by the price of the S&P 500® Index. 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.
Options
Options transactions may involve a Funds buying or writing (selling) options on securities, futures contracts, securities indices (including futures on securities indices) or currencies. A 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 (seller) 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 (by the amount of such premium) on the underlying security or other asset if the option is exercised, and results in a loss (equal to the amount of such premium) 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 or options exchange.
If the holder (writer) of an option wishes to terminate its position, it may seek to effect a closing sale transaction by selling (buying) an option identical to the option previously purchased. The effect of the purchase is that the previous option position will be canceled. A 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; a 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, a 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.
Warrants and Rights
Some Funds 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
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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.
Some Funds may invest in low exercise price call warrants, which are equity call warrants with an exercise price that is very low relative to the market price of the underlying instrument at the time of issue. Low exercise price call warrants are typically used to gain exposure to stocks in difficult to access local markets. The warrants typically have a strike price set such that the value of the warrants will be identical to the price of the underlying stock. The value of the warrants is correlated with the value of the underlying stock price and therefore, the risk and return profile of the warrants is similar to owning the underlying securities. In addition, the owner of the warrant is subject to the risk that the issuer of the warrant (i.e., the counterparty) will default on its obligations under the warrant. The warrants have no voting rights. Dividends issued to the warrant issuer by the underlying company will generally be distributed to the warrant holders, net of any taxes or commissions imposed by the local jurisdiction in respect of the receipt of such amount. Low exercise price call warrants are typically sold in private placement transactions, may be illiquid and may be classified as derivative instruments.
Options on Indices
Some Funds may transact in options on indices (index options). Put and call index options are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss at expiration depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When a Fund writes an index call option, it receives a premium and undertakes the obligation that, prior to the expiration date (or, upon the expiration date for European-style options), the purchaser of the call, upon exercise of the call, will receive from the Fund an amount of cash if the exercise settlement value of the relevant index is greater than the exercise price of the call. The manner of determining exercise settlement value for a particular option series is fixed by the options market on which the series is traded. S&P 500® Index options, for example, have a settlement value that is calculated using the opening sales price in the primary market of each component security on the last business day (usually a Friday) before the expiration date. The amount of cash is equal to the difference between the exercise settlement value of the index and the exercise price of the call times a specified multiple (multiplier). When a Fund buys an index call option, it pays a premium and has the same rights as to such call as are indicated above. When a Fund buys an index put option, it pays a premium and has the right, prior to the expiration date (or upon the expiration date for European-style options) to collect, upon the Funds exercise of the put an amount of cash equal to the difference between the exercise price of the option and the exercise settlement value of the index, times a multiplier, similar to that described above for calls, if the exercise settlement value is less than the exercise price. When a Fund writes an index put option, 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 exercise settlement value of the index and exercise price times the multiplier if the closing level is less than the exercise price.
Exchange-Traded and Over-the-Counter Options
Some Funds may purchase or write both exchange-traded and 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 before its scheduled maturity 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. 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
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may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation (OCC) 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 OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
An OTC option (an option not traded on an established exchange) may be closed out before its scheduled maturity only by agreement with the other party to the original option transaction. With OTC options, a 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. While a Fund will seek to enter into OTC 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 OTC option at a favorable price at any time prior to its expiration. OTC options are not subject to the protections afforded purchasers of listed options by the OCC or other clearing organizations.
Index Warrants
Some Funds 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 a 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. A Fund will normally use index warrants in a manner similar to its use of options on securities indices.
The risks of a Funds use of index warrants generally are 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 a 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 a Funds ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do.
Forward Contracts
As described in the section Foreign Currency Transactions, some Funds may invest in forward contracts. Forward contracts are transactions involving a Funds obligation to purchase or sell a specific currency or other asset at a future date at a specified price. For example, forward contracts may be used when the adviser or subadviser 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 held in a Funds investment portfolio. Forward contracts may also be used by a Fund for hedging purposes to protect against uncertainty in the level of future foreign currency exchange rates, such as when a Fund anticipates purchasing or selling a foreign security. This technique would allow a 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 a Funds existing holdings of foreign securities. There may be, however, imperfect correlation between a Funds foreign securities holdings and the forward contracts entered into with respect to such holdings. The cost to a 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.
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Forward contracts are not traded on exchanges and are not standardized; rather, banks and dealers act as principals in these markets negotiating each transaction on an individual basis. Trading in forward contracts is generally unregulated. There is no limitation on the daily price movements of forward contracts. Principals in the forward markets have no obligation to continue to make markets in the forward contracts traded. There have been periods during which certain banks or dealers have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the price at which they are prepared to buy and that at which they are prepared to sell. Disruptions can occur in the forward markets because of unusually high trading volume, political intervention or other factors. For example, the imposition of credit controls by governmental authorities might limit forward trading, to the possible detriment of the Fund.
Forward contracts are subject to many of the same risks as options, warrants and futures contracts described above. As described in the section Foreign Currency Transactions, 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 Funds may incur costs in connection with conversions between various currencies, and the Funds will be subject to increased illiquidity and credit/counterparty risk because forward contracts are not traded on an exchange and often are not standardized. A 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.
Additionally, in its forward trading, the Funds are subject to the risk of the bankruptcy of, or the inability or refusal to perform with respect to its forward contracts by, the principals with which the Funds trade. Funds on deposit with such principals are generally not protected by the same segregation requirements imposed on CFTC-regulated commodity brokers and futures commission merchants (FCMs) in respect of customer funds on deposit with them. A Fund may place forward trades through agents, so that the insolvency or bankruptcy of such agents could also subject the Fund to the risk of loss.
Swap Transactions
Some Funds may enter into a variety of swap agreements, including, but not limited to, interest rate, index, commodity, equity-linked, credit default, credit-linked and currency exchange swaps. Depending on the structure of the swap agreement, a Fund may enter into 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 or attempt to take advantage of currency fluctuations, to protect against any increase in the price of securities that a Fund anticipates purchasing at a later date, to efficiently gain exposure to certain markets, to add economic leverage to the Funds portfolio or to shift the Funds investment exposure from one type of investment to another.
Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to a number of years. Swap agreements are individually negotiated and structured to include exposure to a variety of types of investments or market factors. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties generally are calculated with respect to a notional amount, such as the return on or increase in value of a particular dollar amount invested at a particular interest rate or in a basket of securities representing a particular index. In a typical interest rate swap, for example, one party agrees to make regular payments equal to a floating interest rate times a notional principal amount, in return for payments equal to a fixed rate times the same amount, for the term of the swap agreement. The notional principal amount of a swap transaction is the agreed-upon basis for calculating the payments that the parties agree to exchange, i.e., the return on or increase in value of a particular dollar amount invested at particular interest rate, in a particular foreign currency or commodity or in a basket of securities. Under most swap agreements, payments by the parties will be exchanged on a net basis, and a party will receive or pay, as the case may be, only the net amount of the two payments.
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Swap agreements are sophisticated financial instruments that typically involve a small investment of cash relative to the magnitude of risks assumed. Swaps can be highly volatile and may have a considerable impact on a Funds performance, as the potential gain or loss on any swap transaction is not subject to any fixed limit. A Funds successful use of swap agreements will depend on the advisers or subadvisers ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Because swaps are two-party contracts that may be subject to contractual restrictions on transferability and termination and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. If a swap is not liquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. A Fund may also suffer losses if it is unable to terminate (or terminate at the time and price desired) outstanding swap agreements (either by assignment or other disposition) or reduce its exposure through offsetting transactions.
A Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. When a counterpartys obligations are not fully secured by collateral, then the Fund is essentially an unsecured creditor of the counterparty. If a counterpartys credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that a Fund may not receive adequate collateral or that the counterparty may default. If the counterparty defaults, the Fund will have contractual remedies, but there is no assurance that a counterparty will be able to meet its obligations pursuant to such contracts or that, in the event of default, the Fund will succeed in enforcing contractual remedies. Credit/counterparty risk still exists even if a counterpartys obligations are secured by collateral because the Funds interest in collateral may not be perfected or additional collateral may not be promptly posted as required. Credit/counterparty risk also may be more pronounced if a counterpartys obligations exceed the amount of collateral held by the Fund (if any), the Fund is unable to exercise its interest in collateral upon default by the counterparty, or the termination value of the instrument varies significantly from the marked-to-market value of the instrument.
Credit/counterparty risk with respect to derivatives is being affected by new rules and regulations affecting the derivatives market. Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit/counterparty risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit/counterparty risk of its original counterparty to the derivative transaction. Credit/counterparty risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted and what impact an insolvency of a clearing house would have on the financial system. A clearing member is obligated by contract and by applicable regulation to segregate all funds received from customers with respect to cleared derivatives transactions from the clearing members proprietary assets. However, all funds and other property received by a clearing broker from its customers generally are held by the clearing broker on a commingled basis in an omnibus account, and the clearing member may invest those funds in certain instruments permitted under the applicable regulations. The assets of a Fund might not be fully protected in the event of the bankruptcy of a Funds clearing member, because the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing brokers customers for a relevant account class. Also, the clearing member is required to transfer to the clearing organization the amount of margin required by the clearing organization for cleared derivatives, which amounts generally are held in an omnibus account at the clearing organization for all customers of the clearing member. Regulations promulgated by the CFTC require that the clearing member notify the clearing house of the amount of initial margin provided by the clearing member to the clearing organization that is attributable to each customer. However, if the clearing member does not provide accurate reporting, the Funds are subject to the risk that a clearing organization will use a Funds assets held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the clearing member to the clearing organization. In addition, clearing members generally provide to the clearing organization the net amount of variation margin required for cleared swaps for all of its customers in the aggregate, rather than the gross amount of each customer. The Funds are therefore subject to the risk that a clearing organization will not make variation margin payments owed to a Fund if another customer of the clearing member has suffered a loss and is in default, and the risk that a Fund will be required to provide additional variation margin to the clearing house before the clearing house will move the Funds cleared derivatives transactions to another clearing member. In addition, if a clearing member does not comply with the applicable regulations or its agreement with the Funds, or in the event of fraud or misappropriation of customer assets by a clearing member, a Fund could have only an unsecured creditor claim in an insolvency of the clearing member with respect to the margin held by the clearing member.
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Additionally, U.S. regulators, the European Union and certain other jurisdictions have adopted minimum margin and capital requirements for uncleared OTC derivatives transactions. These rules impose minimum margin requirements on derivatives transactions between the Fund and its swap counterparties and may increase the amount of margin the Fund is required to provide. They also impose regulatory requirements on the timing of transferring margin. They also effectively require changes to typical derivatives margin documentation. Variation margin requirements became effective in 2017 and initial margin requirements are expected to become effective with respect to certain of the Funds by 2020.
Certain Funds may also enter into swaptions. A Fund may engage in swaptions for hedging purposes or to manage and mitigate credit and interest rate risk. A Fund may write (sell) and purchase put and call swaptions. The use of swaptions involves risks, including, among others, (i) imperfect correlation between movements of the price of the swaptions and the price of the securities, indices or other assets serving as reference instruments for the swaption, reducing the effectiveness of the instrument for hedging or investment purposes, (ii) the absence of a liquid market to sell a swaption, which could result in difficulty closing a position, (iii) the exacerbation of losses incurred due to changes in the market value of the securities to which they relate, and (iv) credit/counterparty risk.
Credit Default Swaps
Some Funds may enter into credit default swap agreements, which may have as reference obligations one or more debt securities or an index of such securities. In a credit default swap, one party (the protection buyer) is obligated to pay the other party (the protection seller) a stream of payments over the term of the contract, provided that no credit event, such as a default or a downgrade in credit rating, occurs on the reference obligation. If a credit event occurs, the protection seller must generally pay the protection buyer the par value (the agreed-upon notional value) of the referenced debt obligation in exchange for an equal face amount of deliverable reference obligations or a specified amount of cash depending upon the terms of the swap.
A Fund may be either the protection buyer or protection seller in a credit default swap. If a Fund is a protection buyer, such Fund would pay the counterparty a periodic stream of payments over the term of the contract and would not recover any of those payments if no credit event were to occur. However, if a credit event occurs, a Fund that is a protection buyer has the right to deliver the referenced debt obligations or a specified amount of cash, depending on the terms of the swap, and receive the par value of such debt obligations from the counterparty protection seller. As a protection seller, a Fund would receive fixed payments throughout the term of the contract if no credit event occurs. If a credit event occurs, however, the value of the obligation received by a Fund (e.g., bonds which defaulted), plus the periodic payments previously received, may be less than the par value of the obligation, or cash received, resulting in a loss to the protection seller. Furthermore, a Fund that is a protection seller would effectively add leverage to its portfolio because such Fund will have investment exposure to the notional amount of the swap.
Credit default swap agreements are subject to greater risk than a direct investment in the reference obligation. Like all swap agreements, credit default swaps are subject to liquidity, credit and counterparty risks. The notional value of credit default swaps with respect to a particular investment is often larger than the total par value of such investment outstanding and, in event of a default, there may be difficulties in making the required deliveries of the reference investments, possibly delaying payments.
A Fund generally may exit its obligations under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting credit default swap position, which may cause the Fund to incur losses.
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Swap Execution Facilities (SEF)
Certain derivatives contracts are required to be executed through SEFs. A SEF is a trading platform where multiple market participants can execute derivatives by accepting bids and offers made by multiple other participants in the platform. Such requirements may make it more difficult and costly for investment funds, such as the Fund, to enter into highly tailored or customized transactions. Trading swaps on a SEF may offer certain advantages over traditional bilateral OTC trading, such as ease of execution, price transparency, increased liquidity and/or favorable pricing. Execution through a SEF is not, however, without additional costs and risks, as parties are required to comply with SEF and CFTC rules and regulations, including disclosure and recordkeeping obligations, and SEF rights of inspection, among others. SEFs typically charge fees, and if the Fund executes derivatives on a SEF through a broker intermediary, the intermediary may impose fees as well. The Fund also may be required to indemnify a SEF, or a broker intermediary who executes swaps on a SEF on the Funds behalf, against any losses or costs that may be incurred as a result of the Funds transactions on the SEF. In addition, the Fund may be subject to execution risk if it enters into a derivatives transaction that is required to be cleared, and no clearing member is willing to clear the transaction on the Funds behalf. In that case, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of any increase in the value of the transaction after the time of the trade. Similar trade execution regulations are being implemented in the European Union.
Credit/Counterparty Risk
The Funds will be exposed to the credit risk of the counterparties with which, or the brokers, dealers and exchanges through which, they deal, whether they engage in exchange traded or off-exchange transactions. Transactions entered into by the Funds may be executed on various U.S. and non-U.S. exchanges, and may be cleared and settled through various clearing houses, custodians, depositories and prime brokers throughout the world. There can be no assurance that a failure by any such entity will not lead to a loss to a Fund. To the extent a Fund engages in cleared derivatives transactions, it will be subject to the credit/counterparty risk of the clearing house and the clearing member through which it holds its cleared position. If a Fund engages in cleared futures transactions, it will also be exposed to the credit/counterparty risk of its FCM. If a Funds FCM becomes bankrupt or insolvent, or otherwise defaults on its obligations to the Fund, the Fund may not receive all amounts owed to it in respect of its trading, even if the clearing house fully discharges all of its obligations. The Commodity Exchange Act (the CEA) requires an FCM to segregate all funds received from its customers with respect to regulated futures transactions from such FCMs proprietary funds. If an FCM were not to do so to the full extent required by law, the assets of an account might not be fully protected in the event of the bankruptcy of an FCM. Furthermore, in the event of an FCMs bankruptcy, a Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of an FCMs combined customer accounts, even if certain property held by an FCM is specifically traceable to the Fund (for example, U.S. Treasury bills deposited by the Fund). It is possible that a Fund would be unable to recover from the FCMs estate the full amount of their funds on deposit with such FCM and owing to them. Such situations could arise due to various factors, or a combination of factors, including inadequate FCM capitalization, inadequate controls on customer trading and inadequate customer capital. In addition, in the event of the bankruptcy or insolvency of a clearing house, a Fund might experience a loss of funds deposited through its FCM as margin with the clearing house, a loss of unrealized profits on its open positions and the loss of funds owed to it as realized profits on closed positions. Such a bankruptcy or insolvency might also cause a substantial delay before a Fund could obtain the return of funds owed to it by an FCM who is a member of such clearing house.
The Funds may also engage in bilateral (OTC) derivatives transactions, which are not centrally cleared. Because bilateral derivative and other transactions are traded between counterparties based on contractual relationships, the Funds are subject to the risk that a counterparty will not perform its obligations under the related contracts. Although the Funds intend to enter into transactions only with counterparties that the Funds adviser or subadviser believes to be creditworthy, there can be no assurance that a counterparty will not default and that a Fund will not sustain a loss on a transaction as a result. In situations where a Fund is required to post margin or other collateral with a counterparty, the counterparty may fail to segregate the collateral or may commingle the collateral with the counterpartys own assets. As a result, in the event of the counterpartys bankruptcy or insolvency, a Funds collateral may be subject to conflicting claims of the counterpartys creditors, and the Fund may be exposed to the risk of a court treating the Fund as a general unsecured creditor of the counterparty, rather than as the owner of the collateral.
The Funds are subject to the risk that issuers of the instruments in which it invests and trades may default on their obligations under those instruments, and that certain events may occur that have an immediate and significant adverse effect on the value of those instruments and any derivatives whose value is based on such instruments. There can be no assurance that an issuer of an instrument in which a Fund invests will not default, or that an event that has an immediate and significant adverse effect on the value of an instrument will not occur, and that the Fund will not sustain a loss on a transaction as a result.
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As described above, in the event of a counterpartys (or its affiliates) insolvency, a Funds ability to exercise remedies could be stayed or eliminated under new special resolution regimes adopted in the United States, the European Union and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty and may prohibit the Fund from exercising termination rights based on the financial institutions insolvency. Transactions entered into by a Fund may be executed on various U.S. and non-U.S. exchanges, and may be cleared and settled through various clearinghouses, custodians, depositories and prime brokers throughout the world. Although the Funds attempt to execute, clear and settle the transactions through entities the Advisor believes to be sound, there can be no assurance that a failure by any such entity will not lead to a loss to a Fund.
Investment Pools of Swap Contracts
Some Funds 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, or sometimes a single security. These types of pools are often used to gain exposure to multiple securities with less of an 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 and/or the relevant foreign market. To the extent that a Fund invests in pools of swap contracts and related underlying securities or securities loan agreements whose performance 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. In addition to the risks associated with investing in swaps generally, an investing 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 a Fund. Interests in privately offered investment pools of swap contracts may be considered illiquid and, except to the extent that such interests are deemed liquid under the Funds policies, subject to the Funds restriction on investments in illiquid securities.
Short Exposure Risk
A short exposure through a derivative may present various risks, including credit/counterparty risk and leverage risk. If the value of the asset, asset class or index on which a Fund has obtained a short investment exposure increases, the Fund will incur a loss. Unlike a direct cash investment such as a stock, bond or exchange-traded fund, where the potential loss is limited to the purchase price, the potential risk of loss from a short exposure is theoretically unlimited. Moreover, there can be no assurance that a Fund will be able to cover its short positions. For example, an uncovered call writers loss is potentially unlimited.
Certain Additional Risks of Derivative Instruments
As described in the Prospectuses, certain Funds intend to use derivative instruments, including several of the instruments described above, to seek to enhance investment returns as well as for risk management purposes. Although an adviser or subadviser may seek to use these transactions to achieve a Funds investment goals, no assurance can be given that the use of these transactions will achieve this result. Any or all of these investment techniques may be used at any time. The ability of a Fund to utilize these derivative instruments successfully will depend on its advisers or subadvisers ability to predict pertinent market movements, which cannot be assured. Furthermore, a Funds use of certain derivatives may in some cases involve forms of financial leverage, which involves risk and may increase the volatility of a Funds NAV. Leveraging may cause a Fund to liquidate portfolio positions to satisfy its obligations or to meet segregation requirements when it may not be advantageous to do so. To the extent that a Fund is not able to close out a leveraged position because of market illiquidity, its liquidity may be impaired to the extent that it has a substantial portion of liquid assets segregated or earmarked to cover obligations. Each Fund will comply with applicable regulatory requirements when implementing these strategies, techniques and
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instruments. Use of derivatives for other than hedging purposes may be considered a speculative activity, involving greater risks than are involved in hedging. A short exposure through a derivative may present additional risks. If the value of the asset, asset class or index on which a Fund has obtained a short exposure increases, the Fund will incur a loss. Moreover, the potential loss from a short exposure is theoretically unlimited.
The value of some derivative instruments in which a Fund invests may be particularly sensitive to changes in prevailing interest rates or other economic factors and the ability of a Fund to successfully utilize these instruments may depend in part upon the ability of an Adviser or Subadviser to forecast interest rates and other economic factors correctly. If an Adviser or Subadviser incorrectly forecasts such factors and has taken positions in derivative instruments contrary to prevailing market trends, a Fund could be exposed to the risk of loss. If an Adviser or Subadviser incorrectly forecasts interest rates, market values or other economic factors in using a derivatives strategy for a Fund, a Fund might have been in a better position if it had not entered into the transaction at all. Also, suitable derivative transactions may not be available in all circumstances. The use of these strategies involves certain special risks, including a possible imperfect correlation, or even no correlation, between price movements of derivative instruments and price movements of related investments. While some strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in related investments or otherwise, due to the possible inability of a Fund to purchase or sell a portfolio security at a time that otherwise would be favorable or the possible need to sell a portfolio security at a disadvantageous time because a Fund is required to maintain asset coverage or offsetting positions in connection with transactions in derivative instruments, and the possible inability of a Fund to close out or to liquidate its derivatives positions. In addition, a Funds use of such instruments may cause a Fund to realize higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if it had not used such instruments. To the extent that a Fund gains exposure to an asset class using derivative instruments backed by a collateral portfolio of other securities, changes in the value of those other securities may result in greater or lesser exposure to that asset class than would have resulted from a direct investment in securities comprising that asset class.
Although the adviser may seek to use these transactions to achieve a Funds investment goals, no assurance can be given that the use of derivative transactions will achieve this result. One risk arises because of the imperfect correlation between movements in the price of derivatives contracts and movements in the price of the securities, indices or other assets serving as reference instruments for the derivative. A Funds derivative strategies will not be fully effective unless the Fund can compensate for such imperfect correlation. There is no assurance that a Fund will be able to effect such compensation. For example, 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, a 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, a 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, a Fund may purchase or sell futures contracts in a smaller dollar amount than the hedged securities if the volatility of the price of hedged securities is historically less than that of the futures contracts. The use of derivatives for other than hedging purposes may be considered a speculative activity, and involves greater risks than are involved in hedging. With respect to certain derivative transactions (e.g. short positions in which a Fund does not hold the instrument to which the short position relates), the potential risk of loss to a Fund is theoretically unlimited.
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.
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Price movement correlation in derivative transactions also may be distorted by the illiquidity of the derivatives markets and the participation of speculators in such markets. If an insufficient number of contracts are traded, commercial users may not deal in derivatives 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, derivatives 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, the presence of speculators 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 that 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, a 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 a Fund from its options activities generally will be treated as capital gain and, if not offset by net recognized capital losses incurred by a Fund, will be distributed to shareholders in taxable distributions. Although gain from options transactions may hedge against a decline in the value of a 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.
The value of a Funds derivative instruments 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 a Funds portfolio. All transactions in derivatives involve the possible risk of loss to a 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 a Funds investment. When a 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 successful use of derivatives will depend in part on the advisers ability to forecast securities market, currency or other financial market movements correctly. For example, a 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 certain other derivatives also depends on the availability of a liquid secondary market to enable a Fund to close its positions on a timely basis. There can be no assurance that such a market will exist at any particular time. Furthermore, a Funds use of certain derivatives may in some cases involve forms of financial leverage, which involves risk and may increase the volatility of a Funds NAV. Leveraging may cause a Fund to liquidate portfolio positions to satisfy its obligations or to meet segregation requirements when it may not be advantageous to do so. To the extent a Fund is not able to close out a leveraged position because of market illiquidity, its liquidity may be impaired to the extent that it has a substantial portion of liquid assets segregated or earmarked to cover obligations.
In the case of OTC options, a Fund is at risk that the other party to the transaction will default on its obligations, or will not permit a Fund to terminate the transaction before its scheduled maturity.
The derivatives markets of some foreign countries are small compared to those of the United States and consequently are characterized in some cases by less liquidity than U.S. markets. In addition, derivatives that are traded on foreign exchanges may not be regulated as effectively as similar transactions in the United States, may not involve a clearing mechanism and related guarantees, may be subject to less detailed reporting requirements and
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regulatory controls, and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political, legal and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii) delays in a Funds ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) lesser trading volume. Furthermore, investments in derivatives markets outside of the United States are subject to many of the same risks as other foreign investments. See the section Foreign Securities.
Risk of Government Regulation of Derivatives
It is possible that government regulation of various types of derivative instruments, including futures and swap agreements, may limit or prevent a Fund from using such instruments as part of its investment strategy, and could ultimately prevent a Fund from being able to achieve its investment goals. It is impossible to fully predict the effects of legislation and regulation in this area, but the effects could be substantial and adverse. It is possible that legislative and regulatory activity could limit or completely restrict the ability of a Fund to use these instruments as a part of its investment strategy, increase the costs of using these instruments or make them less effective. Limits or restrictions applicable to the counterparties with which a Fund engages in derivative transactions could also prevent a Fund from using these instruments or affect the pricing or other factors relating to these instruments, or may change the availability of certain investments.
There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in the Funds or the ability of the Funds to continue to implement their investment strategies. In particular, the Dodd-Frank Act, which was signed into law on July 21, 2010, has and will continue to change the way in which the U.S. financial system is supervised and regulated. Title VII of the Dodd-Frank Act sets forth a legislative framework for OTC derivatives, such as swaps, in which the Funds may invest. Title VII of the Dodd-Frank Act has caused broad changes to the OTC derivatives market and granted significant authority to the SEC and the CFTC to regulate OTC derivatives and market participants. Pursuant to such authority, rules have been enacted that currently require clearing of many OTC derivatives transactions and may require clearing of additional OTC derivatives transactions in the future and that impose minimum margin and capital requirements for uncleared OTC derivatives transactions. Similar regulations are being adopted in other jurisdictions around the world.
These and other new rules and regulations could, among other things, further restrict a Funds ability to engage in, or increase the cost to the Fund of, derivatives transactions, for example, by making some types of derivatives no longer available to the Fund or otherwise limiting liquidity. The implementation of the clearing requirement generally has increased the costs of derivatives transactions for the Fund, since the Fund has to pay fees to its clearing members and is typically required to post more margin for cleared derivatives than it has historically posted for bilateral derivatives. The costs of derivatives transactions are expected to increase further as clearing members raise their fees to cover the costs of additional capital requirements and other regulatory changes applicable to the clearing members. These rules and regulations are new and evolving, so their potential impact on the Funds and the financial system are not yet known. While the new rules and regulations and central clearing of some derivatives transactions are designed to reduce systemic risk (i.e., the risk that the interdependence of large derivatives dealers could cause them to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that they will achieve that result, and in the meantime, as noted above, central clearing and related requirements expose the Fund to new kinds of costs and risks.
The futures markets are subject to comprehensive statutes, regulations, and margin requirements. The SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of trading.
In addition, the SEC has issued a proposed rule under the 1940 Act providing for the regulation of registered investment companies use of derivatives and certain related instruments. The ultimate impact, if any, and the timing of possible regulation remains unclear, but the proposed rule, if adopted, could, among other things, restrict the Funds ability to engage in derivatives transactions and/or increase the costs of such derivatives transactions such that the Fund may be unable to implement its investment strategy.
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Additional Risk Factors in Cleared Derivatives Transactions
Under recently adopted rules and regulations, transactions in some types of swaps (including interest rate swaps and credit default index swaps on North American and European indices) are required to be centrally cleared. In a cleared derivatives transaction, a Funds counterparty is a clearing house, rather than a bank or broker. Since the Funds are not members of a clearing house and only members of clearing houses can participate directly in the clearing house, the Funds will hold cleared derivatives through accounts at clearing members. In cleared derivatives transactions, the Funds will make payments (including margin payments) to and receive payments from a clearing house through their accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house.
In some ways, centrally cleared derivative arrangements are less favorable to the Funds than bilateral arrangements. For example, the Funds may be required to provide greater amounts of margin for cleared derivatives transactions than for bilateral derivatives transactions. Also, in contrast to bilateral derivatives transactions, following a period of notice to a Fund, a clearing member generally can require termination of existing cleared derivatives transactions at any time or increases in margin requirements above the margin that the clearing member required at the beginning of a transaction. Clearing houses also have broad rights to increase margin requirements for existing transactions or to terminate transactions at any time. Any increase in margin requirements or termination by the clearing member or the clearing house could interfere with the ability of a Fund to pursue its investment strategy. Further, any increase in margin requirements by a clearing member could also expose a Fund to greater credit risk to its clearing member, because margin for cleared derivatives transactions in excess of clearing house margin requirements typically is held by the clearing member. Also, a Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or that the adviser or subadviser expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. While the documentation in place between the Funds and their clearing members generally provides that the clearing members will accept for clearing all transactions submitted for clearing that are within credit limits (specified in advance) for each Fund, the Funds are still subject to the risk that no clearing member will be willing or able to clear a transaction. In those cases, the transaction might have to be terminated, and the Fund could lose some or all of the benefit of the transaction, including loss of an increase in the value of the transaction and/or loss of hedging protection offered by the transaction. In addition, the documentation governing the relationship between the Funds and the clearing members is developed by the clearing members and generally is less favorable to the Funds than typical bilateral derivatives documentation. For example, this documentation generally includes a one-way indemnity by the Funds in favor of the clearing member, indemnifying the clearing member against losses it incurs in connection with acting as the Funds clearing member, and the documentation typically does not give the Funds any rights to exercise remedies if the clearing member defaults or becomes insolvent.
Some types of cleared derivatives are required to be executed on an exchange or on a SEF. A SEF is a trading platform where multiple market participants can execute derivatives by accepting bids and offers made by multiple other participants in the platform. While this execution requirement is designed to increase transparency and liquidity in the cleared derivatives market, trading on a SEF can create additional costs and risks for the Funds. For example, SEFs typically charge fees, and if a Fund executes derivatives on a SEF through a broker intermediary, the intermediary may impose fees as well. Also, a Fund may indemnify a SEF, or a broker intermediary who executes cleared derivatives on a SEF on the Funds behalf, against any losses or costs that may be incurred as a result of the Funds transactions on the SEF. See the subsection Swap Execution Facilities above for additional information.
Other Derivatives; Future Developments
The above discussion relates to the Funds proposed use of certain types of derivatives currently available. However, the Funds are not limited to the transactions described above. In addition, the relevant markets and related regulations are constantly changing and, in the future, the Funds may use derivatives not currently available or widely in use.
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CFTC Regulation
As of the date of this Statement, the Funds adviser has claimed an exclusion from the definition of commodity pool operator (a CPO) under the CEA pursuant to Rule 4.5 under the CEA (the exclusion) promulgated by the CFTC with respect to its operation of the Funds. Accordingly, the advisers (with respect to the Funds) are not subject to registration or regulation as a CPO under the CEA. To remain eligible for the exclusion, each of the Funds will be limited in its ability to use certain financial instruments regulated under the CEA (commodity interests), including futures and options on futures and certain swaps transactions. In the event that a Funds investments in commodity interests are not within the thresholds set forth in the exclusion, the adviser may be required to register as a CPO and/or commodity trading advisor with the CFTC with respect to that Fund. The advisers eligibility to claim the exclusion with respect to a Fund will be based upon, among other things, the level and scope of a Funds investment in commodity interests, the purposes of such investments and the manner in which the Fund holds out its use of commodity interests. Each Funds ability to invest in commodity interests (including, but not limited to, futures and swaps on broad-based securities indexes and interest rates) is limited by the advisers intention to operate the Fund in a manner that would permit the adviser to continue to claim the exclusion under Rule 4.5, which may adversely affect such Funds total return. In the event the adviser becomes unable to rely on the exclusion in Rule 4.5 and is required to register with the CFTC as a CPO with respect to a Fund, such Funds expenses may increase, adversely affecting that Funds total return.
Illiquid Securities
Some Funds may purchase illiquid securities. Illiquid securities are those that are not readily resalable. Securities whose disposition is restricted by federal securities laws may be considered illiquid. Securities generally will be considered illiquid if a Fund reasonably expects the security cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the security. Investment in illiquid securities involves the risk that a Fund may be unable to sell such a security at the desired time or at the price at which the Fund values the security. Also, a Fund may incur expenses, losses or delays in the process of registering restricted securities prior to resale.
As required by the liquidity risk management rule adopted by the SEC, the Funds have adopted a liquidity risk management program and appointed administrators to administer the program. The impact the rule will have on the Funds, and on the open-end fund industry in general, is not yet fully known, but the rule could impact each Funds performance and its ability to achieve its investment objective(s).
Initial Public Offerings (IPO)
The Funds may purchase securities of companies that are offered pursuant to an IPO. An IPO is a companys first offering of stock to the public in the primary market, typically to raise additional capital. A 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. A Funds investment in IPO securities may have a significant impact on the Funds performance and may result in significant capital gains.
Private Placements
Some Funds may invest in securities that are purchased in private placements. While private placements may offer opportunities for investment that are not otherwise available on the open market, these securities may be subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for these securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, a Fund could find it more difficult or impossible to sell the securities when its adviser or subadviser believes that it is advisable to do so, or may be able to sell the securities only at prices lower than if the securities were more widely held. At times, it also may be more difficult to determine the fair value of the securities for purposes of computing a Funds NAV.
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The absence of a trading market can make it difficult to ascertain a market value for illiquid investments such as private placements. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for a Fund to sell the illiquid securities promptly at an acceptable price. A Fund may have to bear the extra expense of registering the securities for resale and the risk of substantial delay in effecting the registration. In addition, market quotations are typically less readily available (if available at all) for these securities. The judgment of a Funds adviser or subadviser may at times play a greater role in valuing these securities than in the case of unrestricted securities.
A Fund may be deemed to be an underwriter for purposes of the Securities Act when reselling privately issued securities to the public. As such, a Fund may be liable to purchasers of the securities if the registration statement prepared by the issuer, or the prospectus forming a part of the registration statement, is materially inaccurate or misleading.
Regulation S Securities
Subject to certain conditions, the Fund may purchase securities issued pursuant to Regulation S of the Securities Act (Regulation S Securities). Regulation S Securities are subject to restrictions on sales to U.S. persons. Therefore, when the Fund sells Regulation S Securities that it has purchased, the market for such securities will generally be limited to non-U.S. investors.
Privatizations
Some Funds may participate in privatizations. In a number of countries around the world, governments have undertaken to sell to investors interests in enterprises that the government has historically owned or controlled. These transactions are known as privatizations and may in some cases represent opportunities for significant capital appreciation. In some cases, the ability of U.S. investors, such as the Funds, to participate in privatizations may be limited by local law, and the terms of participation for U.S. investors may be less advantageous than those for local investors. Also, there is no assurance that privatized enterprises will be successful, or that an investment in such an enterprise will retain its value or appreciate in value.
Repurchase Agreements
A Fund may enter into repurchase agreements, by which the 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 interest rate unrelated to the coupon rate on the purchased security. Repurchase agreements are economically similar to collateralized loans by a Fund. Such transactions afford a Fund the opportunity to earn a return on temporarily available cash at relatively low market/issuer risk. The Funds do not have percentage limitations on how much of their total assets may be invested in repurchase agreements. The Funds typically may also use repurchase agreements for cash management and temporary defensive purposes. A Fund may invest in a repurchase agreement that does not produce a positive return to the Fund if the adviser or subadviser believes it is appropriate to do so under the circumstances (for example, to help protect the Funds uninvested cash against the risk of loss during periods of market turmoil). 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, a Fund would attempt to exercise rights with respect to the underlying security, including possible disposition in the market. However, a 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, for example, against a counterparty undergoing financial distress.
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Reverse Repurchase Agreements
Some Funds may enter into reverse repurchase agreements. In a reverse repurchase agreement a 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, a Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous. Reverse repurchase agreements are economically similar to secured borrowings by a Fund.
Securities Lending
The Funds may lend a portion of their portfolio securities to brokers, dealers or other financial institutions under contracts calling for the deposit by the borrower with the Funds custodian of collateral equal to at least the market value of the securities loaned, marked to market on a daily basis. If a Fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned and the Fund will also receive a fee or interest on the collateral, which may include shares of a money market fund subject to any investment restrictions listed in this Statement. These fees or interest are income to each Fund, although a Fund often must share the income with the securities lending agent and/or the borrower. A Fund will continue to benefit from interest or dividends on the securities loaned (although the payment characteristics may change) and may also earn a return from the collateral, which may include shares of a money market fund subject to any investment restrictions listed in this Statement. Under some securities lending arrangements, a Fund may receive a set fee for keeping its securities available for lending. Any voting rights, or rights to consent, relating to securities loaned, pass to the borrower. However, if a material event (as determined by the adviser or subadviser) affecting the investment occurs, the Fund may seek to recall the securities so that the securities may be voted by the Fund, although the adviser or subadviser may not know of such event in time to recall the securities or may be unable to recall the securities in time to vote them. Each Funds securities lending activities are implemented pursuant to policies and procedures approved by the Board and are subject to Board oversight. The Funds pay various fees in connection with such loans, including fees to the party arranging the loans, shipping fees and custodian and placement fees approved by the Board or persons acting pursuant to the direction of the Board.
Securities loans must be fully collateralized at all times, but involve some credit/counterparty risk to the Funds if the borrower or the party (if any) guaranteeing the loan should default on its obligation and the Funds are delayed in or prevented from recovering the collateral. In addition, 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 generally are 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, possibly requiring it to liquidate other portfolio securities to satisfy its obligations. The Funds did not have any securities lending activity during their most recently completed fiscal year.
Short Sales
Some Funds may enter into short sales of securities. To sell a security short, a Fund must borrow that security from a lender, such as a prime broker, and deliver it to the short sale counterparty. If the Fund is unable to borrow the security it wishes to sell short at an advantageous time or price, the Funds ability to pursue its short sale strategy may be adversely affected. When closing out a short position, the Fund will have to purchase the security it originally sold short. The Fund will realize a profit from closing out a short position if the price of the security sold short has declined since the short position was opened; the Fund will realize a loss from closing out a short position if the value of the shorted security has risen since the short position was opened. Because there is no upper limit on the price to which a security can rise, short selling exposes the Fund to potentially unlimited losses if it does not hold the security sold short.
While short sales can be used to further the Funds investment objective, under certain market conditions, they can increase the volatility of the Fund and decrease the liquidity of the Fund. Under adverse market conditions, the Fund may have difficulty purchasing the securities required to meet its short sale delivery obligations, and may have to sell portfolio securities at a disadvantageous time or price to raise the funds necessary to meet its short sale
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obligations. If a request to return the borrowed securities occurs at a time when other short sellers of those same securities are receiving similar requests, a short squeeze can occur, and the Fund may be forced to replace the borrowed securities with purchases on the open market at a disadvantageous time, potentially at a cost that significantly exceeds the original short sale proceeds originally received in selling the securities short. It is possible that the value of the Funds long positions will decrease at the same time that the value of its short positions increases, which could increase losses to the Fund.
The Fund intends to cover its short sale transactions either by segregating or earmarking liquid assets, such that the segregated/earmarked amount, combined with any amount deposited with a broker as margin, equals the current market value of the securities underlying the short sale or by purchasing the securities underlying the short sale transaction or call options on those securities with a strike price no higher than the price at which the security was sold. Ordinarily, the Fund will incur a fee or pay a premium to borrow securities, may also be required to pay interest and other charges, and will have to repay the lender any dividends or interest that accrue on the security while the loan is outstanding. The amount of the premium, dividends, interest and other expenses the Fund pays in connection with the short sale will decrease the amount of any gain from a short sale and increase the amount of any loss.
Short sales may protect a Fund against the risk of losses in the value of its portfolio securities because any unrealized losses with respect to such portfolio securities should be wholly or partially offset by a corresponding gain in the short position. However, any potential gains in such portfolio securities should be wholly or partially offset by a corresponding loss in the short position. The extent to which such gains or losses are offset will depend on the amount of securities sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium.
Short sale transactions involve certain risks. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss, and if the price declines during this period, the Fund will realize a short-term capital gain. Any realized short-term capital gain will be decreased, and any incurred loss increased, by the amount of transaction costs and any premium, dividend or interest which the Fund may have to pay in connection with such short sale. Certain provisions of the Code may limit the degree to which a Fund is able to enter into short sales. There is no limitation on the amount of each Funds assets that, in the aggregate, may be deposited as collateral for the obligation to replace securities borrowed to effect short sales and allocated to segregated accounts in connection with short sales.
Short-Term Trading
The Funds may, consistent with their 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 a Funds portfolio, which may produce higher transaction costs and the realization of taxable capital gains (including short-term gains, which generally are taxed to individuals at ordinary income rates). Portfolio turnover considerations will not limit the advisers or subadvisers investment discretion in managing a Funds assets. Each Fund anticipates that its portfolio turnover rates will vary significantly from time to time depending on the volatility of economic and market conditions.
When-Issued, Delayed Delivery and Forward Commitment Securities
To reduce the risk of changes in interest rates and securities prices, the Funds 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 purchases are fixed when a Fund enters into the commitment, but a Fund does not make payment until it receives delivery from the counterparty. An adviser or subadviser will commit to purchase such securities only with the intention of actually acquiring the securities, but the adviser or subadviser 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
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anticipated, in the level of interest rates. Securities so purchased may expose a 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 an adviser or subadviser is fully or almost fully invested may result in greater potential fluctuation in the value of a 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 a Fund on a forward commitment basis will not honor its purchase obligation. In such cases, a Fund may incur a loss.
Each Fund has the flexibility to respond promptly to changes in market and economic conditions. In the interest of preserving shareholders capital, the adviser and subadviser(s) of each Fund may employ a temporary defensive strategy if they determine such a strategy to be warranted. Pursuant to such a defensive strategy, a Fund temporarily may hold cash (U.S. dollars, foreign currencies or multinational currency units) and/or invest up to 100% of its assets in cash, high-quality debt securities or money market instruments of U.S. or foreign issuers. It is impossible to predict whether, when or for how long a Fund will employ temporary defensive strategies. The use of temporary defensive strategies may prevent a Fund from achieving its goal.
In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, a Fund may temporarily hold cash (U.S. dollars, foreign currencies or multinational currency units) and may invest any portion of its assets in money market or other short-term high-quality instruments.
A 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 each Fund, thereby decreasing each Funds total return. High portfolio turnover also may give rise to additional taxable income for the Funds shareholders, including through the realization of short-term capital gains, which are typically taxed to shareholders at ordinary income tax rates, and therefore can result in higher taxes for shareholders that hold their shares in taxable accounts. It is impossible to predict with certainty whether future portfolio turnover rates will be higher or lower than those experienced during past periods. Each Fund anticipates that its portfolio turnover rate will vary from time to time depending on the volatility of economic and market conditions.
The rate of portfolio turnover will not be a limiting factor when each Funds adviser or subadviser believes that portfolio changes are appropriate.
For the period ended December 31, 2018 and the fiscal year ended September 30, 2018, the portfolio turnover rates for the Investment Grade Bond Fund were 39% and 3%, respectively. The variation in the Funds turnover rate from the year ended September 30, 2018 to the period ended December 31, 2018 was primarily due to a change in investment strategy and management structure of the Fund.
PORTFOLIO HOLDINGS INFORMATION
Each Trusts Board 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. These policies are summarized below. Generally, portfolio holdings information will not be disclosed until it is first posted on the Funds website at im.natixis.com. Generally, full portfolio holdings information will not be posted until it is aged for at least 30 days (15 days for Small Cap Value Fund and Value Opportunity Fund and 10 business days after quarter-end for Natixis Oakmark Fund, Natixis Oakmark International Fund and U.S. Equity Opportunities Fund). A list of the top 10 holdings of the Global Green Bond Fund, Global Sustainable Equity Fund, International Sustainable Equity Fund, High Income Fund, Investment Grade Bond Fund, Multi-Asset Income Fund, Small Cap Value Fund and Value Opportunity Fund will generally be available on a monthly basis within 7 business days after
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month-end. Any holdings information that is released must clearly indicate the date of the information, and must state that due to active management, the Funds 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 has approved exceptions to the general policy on the sharing of portfolio holdings information as in the best interests of the Funds:
(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; |
(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 6 days after month-end) (excluding Natixis Oakmark International Fund, U.S. Equity Opportunities Fund and Natixis Oakmark Fund), 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 recordkeeping services provided to the Funds, and to Institutional Shareholder Services Inc. and Glass Lewis & Co., LLC (Glass Lewis) as part of the proxy voting administration and research services, respectively, provided to the advisers and subadvisers of the Funds (votable portfolio holdings of issuers as of record date for shareholder meetings); |
(4) | Disclosure to employees of the Funds advisers (and the advisers participating affiliates, if any), subadvisers, principal underwriter, administrator, custodian, financial printer, fund accounting agent and independent registered public accounting firm, fund counsel and Independent Trustees counsel, as well as to broker-dealers executing and third-party firms analyzing the trading costs of portfolio transactions for the Funds, provided that such disclosure is made for bona fide business purposes; |
(5) | Disclosure to Natixis Investment Managers (Natixis), in its capacity as the seed capital investor for Funds, in order to satisfy certain reporting obligations to its parent company and for its own risk management purposes; provided that Natixis agrees to maintain its seed capital in the Funds for a set period and does not effect a redemption of Fund shares while in possession of information that is not publicly available to other investors in the Fund. Natixis and its parent utilize a third-party service provider, Aptimum Formation Développment (Aptimum), to assist with its analysis of risk. Any sharing of holdings information with Aptimum is subject to a confidentiality agreement; and |
(6) | Other disclosures made for non-investment purposes, but only if approved in writing in advance by an officer of the Funds. Such exceptions will be reported to the Board. |
With respect to items (2) through (5) above, disclosure is made pursuant to procedures that have been approved by the Board, and may be made by employees of each Funds adviser, subadviser, administrator or custodian. With respect to (6) above, approval will be granted only when the officer determines that the Funds have 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.
As of the date of this Statement, the only entities that receive information pursuant to this exception are Advent Software, Inc. (daily disclosure of full portfolio holdings) for the purpose of performing certain electronic reconciliations with respect to Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund, Value Opportunity Fund and the Harris Associates subadvised discipline of the U.S. Equity Opportunities Fund; Barra Portfolio Manager (daily disclosure of full portfolio holdings) for the purpose of performing certain functions related to the research, reporting, strategy development, portfolio construction, and performance and risk attribution with respect to the Loomis Sayles All Cap Growth segment of the U.S. Equity Opportunities Fund; Donnelley Financial Solutions (quarterly, or more frequently as needed, disclosure of full portfolio holdings) for the purpose of performing certain functions related to the production of the Funds semiannual financial statements, quarterly Form N-PORT filings and other related items; Bloomberg (daily disclosure of full portfolio holdings, provided next business day) for the purpose of performing attribution analysis with respect to Multi-Asset Income Fund, High
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Income Fund, Investment Grade Bond Fund, Global Green Bond Fund, Global Sustainable Equity Fund, International Sustainable Equity Fund, and the Loomis Sayles All Cap Growth segment of U.S. Equity Opportunities Fund and portfolio analytics for High Income Fund and Investment Grade Bond Fund; Electra (daily disclosure of full portfolio holdings) for the purpose of performing certain electronic reconciliations with respect to Natixis Oakmark Fund, Natixis Oakmark International Fund, Multi-Asset Income Fund, High Income Fund, Investment Grade Bond Fund, and U.S. Equity Opportunities Fund; Barclays Capital (periodic disclosure of full portfolio holdings) for the purpose of performing analytics and scenario analysis with respect to the Multi-Asset Income Fund, High Income Fund, and Investment Grade Bond Fund; Yield Book (periodic disclosure of full portfolio holdings) for the purpose of performing certain portfolio analytics for the Multi-Asset Income Fund, High Income Fund, and Investment Grade Bond Fund; Ernst & Young LLP (annually, or more frequently as needed, disclosure of foreign equity securities) for the purpose of performing certain functions related to the production of the Funds federal income and excise tax returns; ICE Data Services (daily disclosure of full portfolio holdings) for the purpose of performing functions related to the liquidity classification of investments; Wilshire (periodic disclosure of full portfolio holdings) for the purpose of performing due diligence and Ultimus Fund Solutions, LLC (daily, disclosure of full portfolio holdings) for purposes of performing investment guideline compliance with respect to the Funds as an underlying fund holding of the Natixis Sustainable Future Funds with respect to the Global Green Bond Fund and the International Sustainable Equity Fund. Although the Trusts 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 Funds to rely on such common law, professional or statutory duties. The Funds Board exercises oversight of the disclosure of the Funds 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 Funds in connection with proposed new exceptions or new disclosures pursuant to item (6) above. Notwithstanding the above, there is no assurance that the Funds policies on the sharing of portfolio holdings information will protect the Funds from the potential misuse of holdings by individuals or firms in possession of that information.
Other registered investment companies that are advised or sub-advised by a Funds adviser or subadviser may be subject to different portfolio holdings disclosure policies, and neither the adviser, subadviser nor the relevant Trusts Board exercises control over such policies or disclosure. In addition, separate account clients of the adviser have access to their portfolio holdings and are not subject to each Funds portfolio holdings disclosure policies. Some of the funds that are advised or sub-advised by an adviser and some of the separate accounts managed by an adviser may have investment objectives and strategies that are substantially similar or identical to the Funds investment objectives and strategies, and therefore potentially substantially similar, and in certain cases nearly identical, portfolio holdings as certain Funds.
In addition, any disclosures of portfolio holdings information by a Fund or its 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. Each Funds policies expressly prohibit the sharing of portfolio holdings information if the Fund, its adviser, subadviser, 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 a Fund or in other funds or accounts managed by the Funds adviser or subadviser or by any affiliated person of the adviser or subadviser.
Each Trust is governed by the Board, 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 Funds and review the Funds performance.
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Trustees and Officers
The table below provides certain information regarding the trustees and officers of the Trusts. For the 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 relevant 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, as defined in the 1940 Act, of the relevant Trust.
The following table provides information about the members of the Board, including information about their principal occupations during the past five years, information about other directorships held at public companies, and a summary of the experience, qualifications, attributes or skills that led to the conclusion that the trustee should serve as such. Unless otherwise indicated, the address of all persons below is 888 Boylston Street, Suite 800, Boston, MA 02199-8197.
Name and Year of Birth |
Position(s) Held with the Trust(s), Length of Time Served and Term of Office1 |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen2 and Other Directorships Held During Past 5 Years |
Experience, Qualifications, Attributes, Skills for Board Membership | ||||
INDEPENDENT TRUSTEES | ||||||||
Kenneth A. Drucker (1945) |
Chairperson of the Board of Trustees since January 2017
Trustee since 2008
Ex Officio member of the Audit Committee, the Contract Review Committee and the Governance Committee |
Retired | 52
None |
Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation) | ||||
Edmond J. English (1953) |
Trustee since 2013
Audit Committee Member and Governance Committee Member |
Executive Chairman; formerly, Chief Executive Officer of Bobs Discount Furniture (retail) | 52
Director, Burlington Stores, Inc. (retail) |
Significant experience on the Board and significant experience on the boards of other business organizations (including retail companies and a bank); executive experience (including at a retail company) |
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Name and Year of Birth |
Position(s) Held with the Trust(s), Length of Time Served and Term of Office1 |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen2 and Other Directorships Held During Past 5 Years |
Experience, Qualifications, Attributes, Skills for Board Membership | ||||
Richard A. Goglia (1951) |
Trustee since 2015
Audit Committee Member |
Retired; formerly Vice President and Treasurer of Raytheon Company (defense) | 52
None |
Experience on the Board and executive experience (including his role as vice president and treasurer of a defense company and experience at a financial services company) | ||||
Wendell J. Knox (1948) |
Trustee since 2009
Contract Review Committee Member and Governance Committee Member |
Director of Abt Associates Inc. (research and consulting) | 52
Director, The Hanover Insurance Group (property and casualty insurance); formerly, Director, Eastern Bank (bank) |
Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company) | ||||
Martin T. Meehan (1956) |
Trustee since 2012
Audit Committee Member |
President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell | 52
None |
Significant experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience |
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Name and Year of Birth |
Position(s) Held with the Trust(s), Length of Time Served and Term of Office1 |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen2 and Other Directorships Held During Past 5 Years |
Experience, Qualifications, Attributes, Skills for Board Membership | ||||
Maureen B. Mitchell (1951) |
Trustee since 2017
Contract Review Committee Member |
Retired; formerly President, Global Sales and Marketing, GE Asset Management, Inc. (financial services) | 52
Director, Sterling Bancorp (Bank) |
Experience on the Board; financial services industry and executive experience (including role as president of global sales and marketing at a financial services company) | ||||
James P. Palermo (1955) |
Trustee since 2016
Contract Review Committee Member |
Founding Partner, Breton Capital Management, LLC (private equity); Partner, STEP Partners, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation | 52
Director, FutureFuel.io (Chemicals and Biofuels) |
Experience on the Board; financial services industry and executive experience (including roles as chief executive officer of client management and asset servicing for a banking and financial services company) | ||||
Erik R. Sirri (1958) |
Trustee since 2009
Chairperson of the Audit Committee |
Professor of Finance at Babson College | 52
None |
Significant experience on the Board; experience as Director of the Division of Trading and Markets at the Securities and Exchange Commission; academic experience; training as an economist | ||||
Peter J. Smail (1952) |
Trustee since 2009
Chairperson of the Contract Review Committee and Governance Committee Member |
Retired | 52
None |
Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser) |
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Name and Year of Birth |
Position(s) Held with the Trust(s), Length of Time Served and Term of Office1 |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen2 and Other Directorships Held During Past 5 Years |
Experience, Qualifications, Attributes, Skills for Board Membership | ||||
Cynthia L. Walker (1956) |
Trustee since 2005
Chairperson of the Governance Committee and Audit Committee Member |
Deputy Dean for Finance and Administration, Yale University School of Medicine | 52
None |
Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration) | ||||
INTERESTED TRUSTEES | ||||||||
Kevin P. Charleston3 (1965) One Financial Center Boston, MA 02111 |
Trustee since 2015 | President, Chief Executive Officer and Chairman of the Board of Directors; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P. | 52
None |
Experience on the Board; continuing service as President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P. | ||||
David L. Giunta4 (1965) |
Trustee since 2011
President and Chief Executive Officer of Natixis Funds Trust I, President of Loomis Sayles Funds II since 2008 |
President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation. | 52
None |
Significant experience on the Board; experience as President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation. |
1 | Each Trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term. |
2 | The Trustees of the Trusts serve as Trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (collectively, the Natixis Funds Trusts), Loomis Sayles Funds I and Loomis Sayles Funds II (collectively, the Loomis Sayles Funds Trusts) and Natixis ETF Trust (collectively, the Fund Complex). |
3 | Mr. Charleston is deemed an interested person of the Trusts because he holds the following positions with an affiliated person of the Trusts: President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P. |
4 | Mr. Giunta is deemed an interested person of the Trusts because he holds the following positions with an affiliated person of the Trusts: President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation. |
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Name and Year of Birth |
Position(s) Held with the Trust |
Term of Office1 and Length of Time Served |
Principal Occupation During Past 5 Years2 | |||
OFFICERS OF THE TRUST | ||||||
Daniel J. Fuss (1933) One Financial Center Boston, MA 02111 |
Executive Vice President of Loomis Sayles Funds II | Since 2003 | Vice Chairman and Director, Loomis, Sayles & Company, L.P. | |||
Russell L. Kane (1969) |
Secretary, Clerk, and Chief Legal Officer | Since July 2016 | Executive Vice President, General Counsel, Secretary and Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P. | |||
Michael C. Kardok (1959) |
Treasurer, Principal Financial and Accounting Officer | Since October 2004 | Senior Vice President, Natixis Advisors, L.P. and Natixis Distribution, L.P. | |||
Kirk D. Johnson (1981) |
Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer | Since December 2018 | Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Associate General Counsel, Natixis Distribution, L.P.; Vice President and Counsel, Natixis Investment Managers, L.P. |
1 | Each officer of the Trusts 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. |
2 | Each person listed above, except as noted, holds the same position(s) with the Fund Complex. Mr. Fuss is not an officer of the Natixis Funds Trusts. Previous positions during the past five years with Natixis Distribution, L.P., Natixis Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from an officers current position with such entity. |
Qualifications of Trustees
The preceding tables provide an overview of the considerations that led the Board to conclude that each individual serving as a trustee of the Trusts should so serve. The current members of the Board have joined the Board at different points in time. Generally, no one factor was determinative in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (i) the individuals knowledge in matters relating to the mutual fund industry; (ii) any experience possessed by the individual as a director or senior officer of other public companies; (iii) the individuals
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educational background; (iv) the individuals reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the individual, and the extent to which such expertise would complement the Boards existing mix of skills and qualifications; (vi) the individuals perceived ability to contribute to the ongoing functions of the Board, including the individuals ability and commitment to attend meetings regularly and work collaboratively with other members of the Board; (vii) the individuals ability to qualify as an Independent Trustee for purposes of applicable regulations; and (viii) such other factors as the Board determined to be relevant in light of the existing composition of the Board and any anticipated vacancies or other transitions. Each trustees professional experience and additional considerations that contributed to the Boards conclusion that an individual should serve on the Board are summarized in the tables above.
Leadership and Structure of the Board
The Board is led by the Chairperson of the Board, who is an Independent Trustee. The Board currently consists of twelve Trustees, ten of whom are Independent Trustees. The Trustees have delegated significant oversight authority to the three standing committees of the Trusts, the Audit Committee, the Contract Review Committee and the Governance Committee, each of which consists solely of Independent Trustees. These committees meet separately and at times jointly, with the joint meetings intended to educate and involve all Independent Trustees in significant committee-level topics. As well as handling matters directly, the committees raise matters to the Board for consideration. In addition to the oversight performed by the committees and the Board, the Chairperson of the Board and the chairpersons of each committee interact frequently with management regarding topics to be considered at Board and committee meetings as well as items arising between meetings. At least once a year the Governance Committee reviews the Boards governance practices and procedures and recommends appropriate changes to the full Board. The Board believes its leadership structure is appropriate and effective in that it allows for oversight at the committee or board level, as the case may be, while facilitating communications among the Trustees and between the Board and Fund management.
The Contract Review Committee of the Trusts consists solely of Trustees who are not employees, officers or directors of Natixis Advisors, the Distributor or their affiliates and considers matters relating to advisory, subadvisory and distribution arrangements and potential conflicts of interest between the Funds adviser and the Trusts. During the fiscal year ended December 31, 2018, this committee held five meetings.
The Governance Committee of the Trusts consists solely of Trustees who are not employees, officers or directors of Natixis Advisors, the Distributor or their affiliates and considers matters relating to candidates for membership on the Board and Trustee compensation. The Governance Committee makes nominations for Independent Trustee membership on the Board 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. Pursuant to those procedures, shareholders must submit a recommendation for nomination in a signed writing addressed to the attention of the Board, c/o Secretary of the Funds, Natixis Advisors, L.P., 888 Boylston Street, Suite 800, Boston, MA 02199-8197. This written communication must (i) be signed by the shareholder, (ii) include the name and address of the shareholder, (iii) identify the name of the Fund to which the communication relates, 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 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 recommendation must contain sufficient background information concerning the Trustee candidate to enable a proper judgment to be made as to the candidates qualifications. During the fiscal year ended December 31, 2018, this committee held four meetings.
The Governance Committee has not established specific, minimum qualifications that must be met by an individual to be recommended for nomination as an Independent Trustee. The Governance Committee, however, believes that the Board as a whole should reflect a diversity of viewpoints, and will generally consider each nominees professional experience, education, financial expertise, gender, ethnicity, age and other individual qualities and attributes, such considerations will vary based on the Boards existing composition. The Governance Committee conducts an annual self-assessment and will consider the effectiveness of its diversity policy as part of this process. In evaluating candidates for a position on the Board, the Governance Committee may consider a variety of factors,
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including (i) the nominees reputation for integrity, honesty and adherence to high ethical standards; (ii) the nominees educational and professional accomplishments; (iii) the nominees demonstrated business acumen, including, but not limited to, knowledge of the mutual fund industry and/or any experience possessed by the nominee as a director or senior officer of a financial services company or a public company; (iv) the nominees ability to exercise sound judgment in matters related to the objectives of the Funds; (v) the nominees willingness to contribute positively to the decision-making process of the Board and to bring an independent point of view; (vi) the nominees commitment and ability to devote the necessary time and energy to be an effective Independent Trustee; (vii) the nominees ability to understand the sometimes conflicting interests of various constituencies of the Funds and to act in the interests of all shareholders; (viii) the absence of conflicts of interests that would impair his or her ability to represent all shareholders and to fulfill director fiduciary responsibilities; (ix) the nominees ability to be collegial and compatible with current members of the Board and management of the Funds; (x) 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; (xi) the nominees ability to qualify as an Independent Trustee for purposes of applicable regulations; and (xii) such other factors as the Committee may request in light of the existing composition of the Board and any anticipated vacancies or other transitions.
The Audit Committee of the Trusts 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 an audit with the Board. The Audit Committee also reviews and monitors compliance with stated investment objectives and policies, SEC regulations as well as operational issues relating to the transfer agent, administrator, sub-administrator and custodian. In addition, the Audit Committee implements procedures for receipt, retention and treatment of complaints received by a Fund regarding its accounting, internal accounting controls and the confidential, anonymous submission by officers of a Fund or employees of certain service providers of concerns related to such matters. During the fiscal year ended December 31, 2018, this Committee held four meetings.
The current membership of each committee is as follows:
Audit Committee |
Contract Review Committee |
Governance Committee | ||
Erik R. Sirri Chairperson | Peter J. Smail Chairperson | Cynthia L. Walker Chairperson | ||
Edmond J. English | Wendell J. Knox | Edmond J. English | ||
Richard A. Goglia | Maureen B. Mitchell | Wendell J. Knox | ||
Martin T. Meehan | James P. Palermo | Peter J. Smail | ||
Cynthia L. Walker |
As chairperson of the Board, Mr. Drucker is an ex officio member of each Committee.
Boards Role in Risk Oversight of the Funds
The Boards role is one of oversight of the practices and processes of the Funds and their service providers, rather than active management of the Trusts, including in matters relating to risk management. The Board seeks to understand the key risks facing the Funds, including those involving conflicts of interest; how Fund management identifies and monitors these risks on an ongoing basis; how Fund management develops and implements controls to mitigate these risks; and how Fund management tests the effectiveness of those controls. The Board cannot foresee, know, or guard against all risks, nor are the trustees guarantors against risk.
Periodically, Fund officers provide the full Board with an overview of the enterprise risk assessment program in place at Natixis Advisors and the Distributor, which serve as the administrator of and principal underwriter to the Funds, respectively. Fund officers on a quarterly and annual basis also provide the Board (or one of its standing committees) with written and oral reports on regulatory and compliance matters, operational and service provider matters, organizational developments, product proposals, Fund and internal audit results, and insurance and fidelity bond coverage, along with a discussion of the risks and controls associated with these matters, and periodically make presentations to management on risk issues and industry best practices. Fund service providers, including advisers, subadvisers, transfer agents and the custodian, periodically provide Fund management and/or the Board with information about their risk assessment programs and/or the risks arising out of their activities. The scope and frequency of these reports vary. Fund officers also communicate with the trustees between meetings regarding material exceptions and other items germane to the Boards risk oversight function.
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Pursuant to Rule 38a-1 under the 1940 Act, the Board has appointed a Chief Compliance Officer (CCO) who is responsible for administering the Funds compliance program, including monitoring and enforcing compliance by the Funds and their service providers with the federal securities laws. The CCO has an active role in daily Fund operations and maintains a working relationship with all relevant advisory, compliance, operations and administration personnel for the Funds service providers. On at least a quarterly basis, the CCO reports to the Independent Trustees on significant compliance program developments, including material compliance matters, and on an annual basis, the CCO provides the full Board with a written report that summarizes his review and assessment of the adequacy of the compliance programs of the Funds and their service providers. The CCO also periodically communicates with the Audit Committee members between its scheduled meetings.
Fund Securities Owned by the Trustees
As of December 31, 2018, the trustees had the following ownership in the Funds and in all funds in the Fund Complex:
Independent Trustees
Dollar Range of Fund Shares1 |
Kenneth A. Drucker |
Edmond J. English2 |
Richard A. Goglia2 |
Wendell J. Knox2 |
Martin T. Meehan2 |
Maureen B. Mitchell |
James P. Palermo2 |
Erik R. Sirri2 |
Peter J. Smail |
Cynthia L. Walker2 | ||||||||||
High Income Fund |
A | A | A | A | A | A | A | A | A | A | ||||||||||
Investment Grade Bond Fund |
A | E | A | A | A | A | A | A | A | A | ||||||||||
Multi-Asset Income Fund |
D | A | A | A | A | A | A | A | A | A | ||||||||||
Global Sustainable Equity Fund |
D | A | A | A | A | A | A | A | A | A | ||||||||||
Global Green Bond Fund |
A | A | A | A | A | A | A | A | A | A | ||||||||||
International Sustainable Equity Fund |
A | A | A | A | A | A | A | A | A | A | ||||||||||
Natixis Oakmark Fund |
A | A | E | E | A | A | A | A | A | A | ||||||||||
Natixis Oakmark International Fund |
A | E | D | A | A | A | A | A | A | A | ||||||||||
Small Cap Value Fund |
A | A | A | A | A | A | A | A | A | A | ||||||||||
U.S. Equity Opportunities Fund |
E | A | D | A | E | A | E | A | A | E | ||||||||||
Value Opportunity Fund |
A | A | A | A | A | A | A | A | A | A | ||||||||||
Aggregate Dollar Range of Fund Shares in Fund Complex Overseen by Trustee |
E | E | E | E | E | E | E | E | E | E |
1 | A. None |
B. | $1 - $10,000 |
C. | $10,001 - $50,000 |
D. | $50,001 - $100,000 |
E. | over $100,000 |
2 | Amounts include economic value of notional investments held through the deferred compensation plan. |
Interested Trustees
Dollar Range of Fund Shares* |
Kevin P. Charleston |
David L. Giunta | ||
High Income Fund |
A | A | ||
Investment Grade Bond Fund |
A | A | ||
Multi-Asset Income Fund |
A | A | ||
Global Green Bond Fund |
A | A | ||
Global Sustainable Equity Fund |
A | A | ||
International Sustainable Equity Fund |
A | A | ||
Natixis Oakmark Fund |
A | A | ||
Natixis Oakmark International Fund |
A | A | ||
Small Cap Value Fund |
A | A | ||
U.S. Equity Opportunities Fund |
A | A | ||
Value Opportunity Fund |
A | A | ||
Aggregate Dollar Range of Fund Shares in Fund Complex Overseen by Trustee |
E | E |
* A. None B. $1 - 10,000 C. $10,001 - $50,000 |
D. $50,001 - $100,000 E. over $100,000 |
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Trustee Fees
The Trusts pay no compensation to their officers or to trustees who are employees, officers or directors of Natixis Advisors, the Distributor, or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of $360,000. The Chairperson does not receive any meeting attendance fees for Board meetings or committee meetings that he attends. Each Trustee who is not an employee, officer or director of Natixis Advisors, the Distributor or their affiliates (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $190,000. Each Trustee who is not an employee, officer or director of Natixis Advisors, the Distributor or their affiliates also receives a meeting attendance fee of $10,000 for each meeting of the Board that he or she attends in person and $5,000 for each meeting of the Board that he or she attends telephonically. In addition, the Chairperson of the Audit Committee and the Chairperson of the Contract Review Committee each receive an additional retainer fee at an annual rate of $20,000. The Chairperson of the Governance Committee receives an additional retainer fee at an annual rate of $15,000. Each Contract Review Committee and Audit Committee member is compensated $6,000 for each committee meeting that he or she attends in person and $3,000 for each committee meeting that he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust based on a formula that takes into account, among other factors, the relative net assets of each mutual fund portfolio. Trustees are reimbursed for travel expenses in connection with attendance at meetings.
During the fiscal year ended December 31, 2018, the Trustees received the amounts set forth in the following table for serving as Trustees of the Natixis Funds Trusts and Loomis Sayles Funds Trusts. The table also sets forth, as applicable, pension or retirement benefits accrued as part of fund expenses, as well as estimated annual retirement benefits:
Compensation Table
For the Fiscal Year Ended December 31, 2018
Aggregate Compensation from Natixis Funds Trust I1 |
Aggregate Compensation from Natixis Funds Trust II1 |
Aggregate Compensation from Loomis Sayles Funds II1 |
Pension or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated Annual Benefits Upon Retirement |
Total Compensation from the Fund Complex2 |
|||||||||||||||||||
INDEPENDENT TRUSTEES |
| |||||||||||||||||||||||
Kenneth A. Drucker |
$ | 41,192 | $ | 51,495 | $ | 126,525 | $ | 0 | $ | 0 | $ | 340,000 | ||||||||||||
Edmond J. English |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
Richard A. Goglia |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
Wendell J. Knox |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
Martin T. Meehan |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
Maureen B. Mitchell |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
James P. Palermo |
$ | 30,502 | $ | 42,036 | $ | 75,726 | $ | 0 | $ | 0 | $ | 245,000 | ||||||||||||
Erik R. Sirri |
$ | 32,987 | $ | 45,420 | $ | 82,042 | $ | 0 | $ | 0 | $ | 265,000 | ||||||||||||
Peter J. Smail |
$ | 32,987 | $ | 45,420 | $ | 82,042 | $ | 0 | $ | 0 | $ | 265,000 | ||||||||||||
Cynthia L. Walker |
$ | 31,993 | $ | 44,066 | $ | 79,515 | $ | 0 | $ | 0 | $ | 257,000 | ||||||||||||
INTERESTED TRUSTEES |
||||||||||||||||||||||||
Kevin P. Charleston |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
David L. Giunta |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
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1 | Amounts include payments deferred by Trustees for the fiscal year ended December 31, 2018, with respect to the Trusts. The total amount of deferred compensation accrued for Natixis Funds Trust I as of December 31, 2018 for the Trustees is as follows: Drucker $36,996, English $96,826, Goglia $69,668, Knox $227,156, Meehan $61,216, Palermo $28,634, Sirri $173,683 and Walker $325,997. The total amount of deferred compensation accrued for Natixis Funds Trust II as of December 31, 2018 for the Trustees is as follows: Drucker $46,252, English $171,493, Goglia $99,766, Knox $306,012, Meehan $100,570, Palermo $41,400, Sirri $245,777 and Walker $376,926. The total amount of deferred compensation accrued for Loomis Sayles Funds II as of December 31, 2018 for the Trustees is as follows: Drucker $113,629, English $300,105, Goglia $176,883, Knox $709,551, Meehan $197,570, Palermo $73,339, Sirri $535,059, and Walker $987,300. |
2 | Total Compensation represents amounts paid during the fiscal year ended December 31, 2018 to a Trustee for serving on the board of seven (7) trusts with a total of fifty-two (52) funds as of December 31, 2018. |
The Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust do not provide pension or retirement benefits to the 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.
Management Ownership
As of April 1, 2019, the officers and trustees of the Trusts collectively owned less than 1% of the then outstanding shares of each Fund and each Trust.
Code of Ethics
The Trusts, their advisers and subadvisers, 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 Funds may purchase or hold. The codes of ethics are on public file with and are available from the SEC.
Proxy Voting Policies
The Board has adopted the Proxy Voting Policy and Guidelines (the Procedures) for the voting of proxies for securities held by the Funds. Under the Procedures, decisions regarding the voting of proxies are to be made solely in the interest of the Funds and their shareholders. The adviser or subadviser shall exercise its fiduciary responsibilities to vote proxies with respect to each Funds investments that are managed by that adviser or subadviser in a prudent manner in accordance with the Guidelines and the proxy voting policies of the adviser or subadviser. Because each adviser and subadviser manages its portfolio independently from the other, the different Funds and/or different segments of the same Fund may vote differently on the same matter. The adviser or subadviser is responsible for maintaining certain records and reporting to the Audit Committee of the Trusts in connection with the voting of proxies. The adviser or subadviser shall make available to each Fund, or Natixis Advisors, the Funds administrator, the records and information maintained by the adviser or subadviser under the Guidelines.
Natixis Advisors. Generally, proxy voting responsibility and authority are delegated to a Funds subadviser. In situations where Natixis Advisors retains proxy voting authority it follows the following guidelines. Natixis Advisors endeavors to do so in accordance with the best economic interest of its clients. Natixis Advisors endeavors to resolve any conflicts of interest exclusively in the best economic interest of the clients. In order to minimize conflicts of interest, Natixis Advisors has contracted with Broadridge/Glass Lewis, an independent third party service provider, to vote Natixis Advisors client proxies. Natixis Advisors has a fiduciary responsibility to exercise proxy voting authority, when such authority is granted to it. Glass Lewis may maintain records, provide reports, develop models and research, and vote proxies in accordance with instructions and guidelines provided or approved by Natixis Advisors. These instructions and guidelines shall be consistent with the Proxy Voting Policy of Natixis Advisors, which generally votes for proposals that, in the judgment of Natixis Advisors, would serve to enhance shareholder value, and votes against proposals that, in the judgment of Natixis Advisors, would impair shareholder value. These instructions and guidelines from Glass Lewis direct Broadridge to vote for or against specific types of routine proposals, while generally reserving other non-routine proposals for Natixis Advisors to decide on a case-by-case basis. With respect to proposals to be decided by Natixis Advisors on a case-by-case basis, a designated member of the portfolio management team of Natixis Advisors has the responsibility to determine how the proxies should be voted and for directing the proxy voting agent, through other operational personnel of Natixis Advisors, to vote accordingly.
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Natixis Advisors reviews its proxy voting policy on a periodic basis, usually annually. Additionally, on a periodic basis, Natixis Advisors reviews reports produced by Broadridge that summarize voting activity. Furthermore, an internal team of Natixis Advisors, which team is composed of legal, compliance, portfolio management, and operational personnel, also conducts periodic reviews of proxy voting activity and issues, if any, that may arise. Finally, compliance conducts a random sampling review of proxy ballots to ascertain whether votes are cast in compliance with Natixis Advisors proxy voting policy. Upon request, clients may obtain a full and complete copy of the Natixis Advisors proxy voting policy and a record of how their securities were voted.
Harris Associates. Harris Associates (Harris) believes that proxy voting rights are valuable portfolio assets and an important part of the investment process, and Harris exercises voting responsibilities as a fiduciary solely with the goal of serving the best interests of Harris clients in their capacity as shareholders of a company. In determining the vote on any proposal, the Proxy Voting Committee will consider the proposals expected impact on shareholder value and will not consider any benefit to Harris, its employees, its affiliates or any other person, other than benefits to the owners of the securities to be voted, as shareholders.
Harris considers the reputation, experience and competence of a companys management when it evaluates the merits of investing in a particular company, and invests in companies in which Harris believes management goals and shareholder goals are aligned. When this happens, by definition, voting with management is generally the same as voting to maximize the expected value of Harris investment. Accordingly, on most issues, Harris casts votes in accordance with managements recommendations. This does not mean that Harris Associates does not care about corporate governance. Rather, it is confirmation that Harris process of investing with shareholder aligned management is working. Proxy voting is not always black and white, however, and reasonable people can disagree over some matters of business judgment. When Harris believes that managements position on a particular issue is not in the best interests of its clients, Harris will vote contrary to managements recommendation.
The proxy voting guidelines below summarize Harris position on various issues of concern to investors and give a general indication of how proxies on portfolio securities will be voted on proposals dealing with particular issues. Harris will generally vote proxies in accordance with these guidelines, except as otherwise determined by the Proxy Voting Committee, unless the client has specifically instructed Harris to vote otherwise. Harris voting guidelines generally address issues related to boards of directors, auditors, equity based compensation plans, and shareholder rights.
| With respect to a companys board of directors, Harris believes that boards should have a majority of independent directors and that audit, compensation and nominating committees should generally consist solely of independent directors, and it will usually vote in favor of proposals that ensure such independence. |
| With respect to auditors, Harris believes that the relationship between an issuer and its auditors should be limited primarily to the audit engagement, although it may include certain closely-related activities that do not raise any appearance of impaired independence. |
| With respect to equity based compensation plans, Harris believes that appropriately designed equity-based compensation plans approved by shareholders can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. However, Harris is opposed to plans that substantially dilute its clients ownership interest in the company or provide participants with excessive awards or have inherently objectionable structural features. |
| With respect to corporate structure and shareholder rights, Harris generally believes that all shareholders of an issuer should have an equal voice and that barriers which limit the ability of shareholders to effect change and to realize full value are not desirable. |
| With respect to social responsibility issues, Harris believes that matters related to a companys day-to-day business operations are primarily the responsibility of management and should be reviewed and supervised solely by the companys board of directors. Harris is focused on maximizing long-term shareholder value and will typically vote against shareholder proposals requesting that a company disclose or amend certain business practices unless Harris believes the proposal would have a substantial positive economic impact on the company. |
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Harris may determine not to vote a Funds proxy if it has concluded that the costs of or disadvantages resulting from voting outweigh the economic benefits of voting. For example, in some non- U.S. jurisdictions, sales of securities voted may be prohibited for some period of time, usually between the record and meeting dates (share blocking), and Harris may determine that the loss of investment flexibility resulting from share blocking outweighs the benefit to be gained by voting.
The Proxy Voting Committee, in consultation with Harris Legal and Compliance Departments, is responsible for monitoring and resolving any possible potential conflicts of interest with respect to proxy voting. A conflict of interest may exist, for example, when: (i) proxy votes regarding non-routine matters are solicited by an issuer who has an institutional separate account relationship with Harris, or Harris is actively soliciting business from the issuer; (ii) when Harris is aware that a proponent of a proxy proposal has a business relationship with Harris or Harris is actively soliciting such business (e.g., an employee group for which Harris manages money); (iii) when Harris is aware that it has business relationships with participants in proxy contests, corporate directors or director candidates; or (iv) when Harris is aware that a Harris employee has a personal interest in the outcome of a particular matter before shareholders (e.g., a Harris executive has an immediate family member who serves as a director of a company).
Harris is committed to resolving any such conflicts in its clients collective best interest, and accordingly, will vote pursuant to the Guidelines set forth in the Proxy Voting Policy when conflicts of interest arise. However, if Harris believes that voting in accordance with a Guideline is not in the best interest of clients under the particular facts and circumstances presented, or if the proposal is not addressed by the Guidelines, then Harris will vote in accordance with the guidance of an independent third party voting service, Institutional Shareholder Services (ISS). If ISS has not provided guidance with respect to the proposal or if Harris believes the recommendation of ISS is not in the best interests of clients, then the Proxy Voting Committee will refer the matter to (1) the Executive Committee of the Board of Trustees of Harris. Investment Trust for a determination of how shares held in the Oakmark Funds will be voted, and (2) the Proxy Voting Conflicts Committee consisting of Harris General Counsel, Chief Compliance Officer (CCO) and Chief Financial Officer for a determination of how shares held in all other client accounts will be voted. Each of those committees will keep a written record of the basis for its decision.
Loomis Sayles. Under the Procedures, the responsibility for voting proxies generally is delegated to Loomis Sayles. Decisions regarding the voting of proxies shall be made solely in the interest of each Fund and its shareholders. Loomis Sayles shall exercise its fiduciary responsibilities to vote proxies with respect to a Funds investments that are managed by Loomis Sayles in a prudent manner in accordance with the Procedures and the proxy voting policies. Proposals that, in the opinion of Loomis Sayles, are in the best interests of shareholders are generally voted for and proposals that, in the judgment of Loomis Sayles, are not in the best interests of shareholders are generally voted against. Loomis Sayles is responsible for maintaining certain records and reporting to the Audit Committee of the Trusts in connection with the voting of proxies. Upon request for reasonable periodic review as well as annual reporting to the SEC, Loomis Sayles shall make available to each such Fund, or Natixis Advisors, each such Funds administrator, the records and information maintained by Loomis Sayles under the Procedures.
Loomis Sayles uses the services of third parties (Proxy Voting Service(s)), to research and administer the vote on proxies for those accounts and funds for which Loomis Sayles has voting authority. One of Loomis Sayles Proxy Voting Services, Glass Lewis, provides vote recommendations and analysis to Loomis Sayles based on Glass Lewis own research. Loomis Sayles will generally follow its express policy with input from Glass Lewis unless Loomis Sayles Proxy Committee (the Proxy Committee) determines that the clients best interests are served by voting otherwise.
All issues presented for shareholder vote are subject to the oversight of the Proxy Committee, either directly or by application of this policy. All non-routine issues will generally be considered directly by the Proxy Committee and, when necessary, the investment professionals responsible for an account holding the security, and will be voted in the best investment interests of the Fund. All routine for and against issues will be voted according to this policy unless special factors require that they be considered by the Proxy Committee and, when necessary, the investment professionals responsible for an account holding the security.
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The specific responsibilities of the Proxy Committee, include, (1) developing, authorizing, implementing and updating Procedures, including an annual review of the Procedures, existing voting guidelines and the proxy voting process in general, (2) oversight of the proxy voting process including oversight of the vote on proposals according to the predetermined policies in the voting guidelines, directing the vote on proposals where there is reason not to vote according to the predetermined policies in the voting guidelines or where proposals require special consideration, and consultation with the portfolio managers and analysts for the Fund(s) advised by Loomis Sayles holding the security when necessary or appropriate, (3) periodic sampling or engaging an outside party to sample proxy votes to ensure they comply with the Procedures and are cast in accordance with the Funds best interests, and, (4) engagement and oversight of third-party vendors, such as Proxy Voting Services including:
(i) | determining whether a Proxy Voting Service has the capacity and competency to adequately analyze proxy issues by considering: |
a. | the adequacy and quality of the Proxy Voting Services staffing and personnel, and |
b. | the robustness of the Proxy Voting Services policies and procedures regarding its ability to ensure that its recommendations are based on current and accurate information and to identify and address any relevant conflicts of interest, |
(ii) | providing ongoing oversight of Proxy Voting Services to ensure that proxies continue to be voted in the best interests of clients, |
(iii) | receiving and reviewing updates from Proxy Voting Services regarding relevant business changes or changes to Proxy Voting Services conflict policies and procedures, and |
(iv) | in the event that the Proxy Committee becomes aware that a Proxy Voting Services recommendation was based on a material factual error, investigating the error, considering the nature of the error and the related recommendation, and determining whether the Proxy Voting Service has taken reasonable steps to reduce the likelihood of similar errors in the future. |
Loomis Sayles has established several policies to ensure that proxies are voted in its clients best interest and are not affected by any possible conflicts of interest. First, except in certain limited instances, Loomis Sayles votes in accordance with its pre-determined policies set forth in the Procedures. Second, where these Procedures allow for discretion, Loomis Sayles will generally consider the recommendations of Glass Lewis in making its voting decisions. However, if the Proxy Committee determines that Glass Lewis recommendation is not in the best interest of its clients, then the Proxy Committee may use its discretion to vote against Glass Lewis recommendation, but only after taking the following steps: (1) conducting a review for any material conflict of interest Loomis Sayles may have and, (2) if any material conflict is found to exist, excluding anyone at Loomis Sayles who is subject to that conflict of interest from participating in the voting decision in any way. However, if deemed necessary or appropriate by the Proxy Committee after full prior disclosure of any conflict, that person may provide information, opinions or recommendations on any proposal to the Proxy Committee. In such event the Proxy Committee will make reasonable efforts to obtain and consider, prior to directing any vote information, opinions or recommendations from or about the opposing position on any proposal.
Mirova US and Mirova understand that proxy voting is an important right of shareholders and that reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. Mirova US, in reliance on Mirova, will vote in a manner that is consistent with what it believes to be in the best interests of such clients and in accordance with the Proxy Voting Policy and Procedures that it has adopted.
Mirova US has adopted written policies and procedures setting forth the principles and procedures by which it votes or gives consent with respect to securities owned by the Fund and other clients. With respect to its Mirova division, in particular, Mirova US has chosen to adopt a voting policy that develops an integrated voting and engagement strategy, focused on long-term value creation for all stakeholders. This approach is based on three principles:
Pragmatism: Mirova analyses resolutions from an investors point of view, considering the macro-economic context as well as countries and companies specific characteristics;
Responsibility: Mirova takes into consideration Environmental, Social and Governance (ESG) issues when analyzing resolutions and making voting decisions;
Engagement: Mirova conducts a permanent and constructive dialogue with companies in order to promote good corporate governance practices and the integration of sustainable development issues to their long-term strategies.
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This Proxy Voting Policy emphasizes the essential issues facing companies in the new context in which they operate. Mirova favors, notably: (i) the institution of a board that incorporates stakeholders in a balanced fashion and that resolutely takes account of issues of corporate social responsibility (CSR), (ii) an equitable distribution of value among the different stakeholders, notably integrating environmental and social criteria in the remuneration of executives, and (iii) the transparency and quality of financial and extra-financial information, with the implementation of reporting that integrates the issues of sustainable development. These principles furthermore constitute the primary themes of engagement that Mirova emphasizes in the context of its dialogue with issuers. Below is additional detail on how the Mirova division of Mirova US generally will/will not vote on certain matters:
Governance Structure and Balance of Power | Mirovas voting decisions generally will favor the appointment of directors allowing for: (1) a balance in the composition of the board among the companys different strategic stakeholders; (2) effective supervision of decisions taken in the long-term interests of the company and the respect for the rights of all stakeholders; and (3) better integration of CSR issues in strategic considerations. | |
Distribution of Value | Mirova generally will support votes concerning aspects of the compensation of executives that are: (1) tied to the long-term strategy of the company; (2) correlated with long-term economic, but also environmental and social objectives (with pertinent and stable measurement indicators); (3) consistent with the creation of real value and its distribution among the different stakeholders; and (4) consistent with the companys social policy.
Mirova generally will not support votes on dividend policies that: (1) are not correlated with the creation of value; (2) are detrimental to the companys capacity to invest or to its solvency; and/or (3) are not consistent with the companys social policy.
Mirova generally will support all resolutions aiming to maintain the loyalty of long-term shareholders and to develop employee shareholding. | |
Transparency of Information | Mirova generally will not support a resolution approving the annual report if the annual report does not integrate audited and certified information on the environmental and social performance of the company. | |
The Proxy Voting Policy is reviewed annually by the Research team in order to take into account potential changes in national or regional legal framework and to also reflect evolutions in the Sustainable and Responsible Investment (SRI) philosophy. The Voting & Governance analyst and the Head of SRI Research are more specifically dedicated to this process. The new Proxy Voting Policy is submitted to the Compliance Officer and the CEO for their respective approval. Mirovas board of directors is also asked to approve the proposed Policy.
The analysis of resolutions is carried out by the ESG Research team, and more specifically the Voting and Governance Analyst. This proxy voting procedure involves the analysis of resolutions presented at general meetings. Mirova may also engage in dialogue with issuers. Voting decisions are the responsibility of the voting committee, composed of Mirovas Chief Executive Officer, the Head of Responsible Investment Research, and the Voting and Governance Analyst. Managers and extra-financial analysts may be invited to participate in the committees deliberations depending on the subject under discussion.
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As part of the framework established for delegating voting rights, Mirova uses an independent voting services provider, Institutional Shareholder Services, to: (i) inform Mirova of upcoming general meetings related to securities belonging to its voting universe; (ii) analyze resolutions according to the principles defined in the present voting policy; (iii) provide access to a voting platform for the exercise of voting rights; and (iv) transmit voting instructions to issuers.
Although Mirova has implemented a customized voting policy with ISS, its in-house analysis has always priority on the voting recommendations proposed by ISS.
Mirova has implemented procedures to prevent, identify, and manage potential conflicts of interest. If a conflict of interest between Mirova and one of its clients is identified, the Head of Compliance and Internal Control, in coordination with the members of the voting committee, decide on the appropriate response. If exercising its voting rights for a given company exposes Mirova to a significant conflict of interest, the Voting and Governance Analyst will refer the matter to the Head of Compliance and Internal Control, who will decide on the appropriate measures to take, including whether or not to participate in the companys general meeting. Mirova USs Chief Compliance Officer or her/his deputy is responsible for confirming that the Voting and Governance analyst is not aware of any conflicts of interest that may arise between Mirova US and its affiliates, on the one hand, and the interests of its clients, on the other, regardless of whether these conflicts are actual or perceived. If a conflict of interest is identified, the Chief Compliance Officer of Mirova US or her/his deputy (who may be located at Mirova) will decide on an appropriate response. Where the Chief Compliance Officer deems appropriate in her/his sole discretion, unaffiliated third parties may be used to help resolve conflicts. In this regard, the Chief Compliance Officer shall have the power to retain independent fiduciaries, consultants, or professionals to assist with voting decisions and/or to delegate voting or consent powers to such fiduciaries, consultants or professionals.
Vaughan Nelson. Vaughan Nelson utilizes the services of a Proxy Service Provider to assist in voting proxies. Vaughan Nelson undertakes to vote all client proxies in a manner reasonably expected to ensure the clients best interest is upheld and in a manner that does not subrogate the clients best interest to that of Vaughan Nelsons in instances where a material conflict exists. Vaughan Nelson has created a Proxy Voting Guideline (Guideline) believed to be in the best interest of clients relating to common and recurring issues found within proxy voting material. The Guideline is the work product of Vaughan Nelsons Investment Committee and it considers the nature of the firms business, the types of securities being managed and other sources of information including, but not limited to, research provided by an independent research firm, internal research, published information on corporate governance and experience. The Guideline helps to ensure voting consistency on issues common amongst issuers and to serve as evidence that a vote was not the product of a conflict of interest but rather a vote in accordance with a pre-determined policy. However, in many recurring and common proxy issues a blanket voting approach cannot be applied. In these instances, the Guideline indicates that such issues will be addressed on a case-by-case basis in consultation with a portfolio manager to determine how to vote the issue in the clients best interest.
In executing its duty to vote proxies for the client, a material conflict of interest may arise. Vaughan Nelson does not envision a large number of situations where a conflict of interest would exist, if any, between it and the client given the nature of its business, client base, relationships, the types of securities managed and the fact Vaughan Nelson is not affiliated with an investment banking or similar firm. Notwithstanding, if a conflict of interest arises Vaughan Nelson will undertake to vote the proxy or proxy issue in the clients continued best interest. This will be accomplished by either casting the vote in accordance with the Guideline, if the application of such policy to the issue at hand involves little discretion on Vaughan Nelsons part, or casting the vote as indicated by the independent third-party research firm.
Finally, there may be circumstances or situations that may preclude or limit the manner in which a proxy is voted. These may include: 1) mutual funds whereby voting may be controlled by restrictions within the fund or the actions of authorized persons, 2) international securities whereby the perceived benefit of voting an international proxy does not outweigh the anticipated costs of doing so, 3) new accounts instances where security holdings assumed will be sold in the near term thereby limiting any benefit to be obtained by a vote of proxy material, 4) small combined holdings/unsupervised securities where the firm does not have a significant holding or basis on which to offer advice, 5) a security is out on loan, 6) securities not held on meeting date or 7) investments in banking entities where aggregate ownership of all the Natixis IM subsidiaries exceed 5% of the outstanding voting shares of a bank.
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Information regarding how the Funds voted proxies related to their respective portfolio securities during the 12-month period ended June 30, 2018 is available without charge through the Funds website, im.natixis.com and on the SECs website at www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
Information About the Organization and Ownership of the Advisers and Subadvisers of the Funds
Natixis Advisors is a limited partnership owned by Natixis Investment Managers, L.P., the holding company for the North American asset management business (Natixis IM-NA).
Harris Associates is a limited partnership whose sole general partner is Harris Associates Inc., a wholly-owned subsidiary of Natixis IM-NA.
Loomis Sayles is a limited partnership whose sole general partner, Loomis, Sayles & Company, Inc., is owned by Natixis IM-NA.
Mirova US is a majority-owned subsidiary of Natixis Investment Managers and a minority-owned subsidiary of Mirova, which is in turn a subsidiary of Natixis Investment Managers. Mirova US has entered into a personnel-sharing arrangement with its Paris-based affiliate, Mirova, which, like Mirova US, is part of Natixis Investment Managers. Pursuant to this arrangement, certain employees of Mirova, as a participating affiliate, serve as associated persons of Mirova US and, in this capacity, are subject to the oversight of Mirova US and its Chief Compliance Officer. These associated persons may, on behalf of Mirova US, provide discretionary investment management services (including acting as portfolio managers), research and related services to the Fund in accordance with the investment objectives, policies and limitations set forth in the Funds prospectus and SAI. Unlike Mirova US, Mirova is not registered as an investment adviser with the SEC. The personnel-sharing arrangement is based on no-action letters of the staff of the SEC that permit SEC-registered investment advisers to rely on and use the resources of advisory affiliates, subject to certain conditions.
Vaughan Nelson is a limited partnership owned by Natixis IM-NA.
Natixis IM-NA is part of Natixis Investment Managers, an international asset management group based in Paris, France, that is in turn owned by Natixis, a French investment banking and financial services firm. Natixis is principally owned by BPCE, Frances second largest banking group. BPCE is owned by banks comprising two autonomous and complementary retail banking networks consisting of the Caisse dEpargne regional savings banks and the Banque Populaire regional cooperative banks. The registered address of Natixis is 30, avenue Pierre Mendès France, 75013 Paris, France. The registered address of BPCE is 50, avenue Pierre Mendès France, 75013 Paris, France.
The 11 principal subsidiary or affiliated asset management firms of Natixis IM-NA collectively had over $440.6 billion in assets under management or administration as of December 31, 2018.
Advisory and Subadvisory Agreements
Each Funds advisory agreement with Natixis Advisors (or with Mirova US in the case of Global Green Bond Fund, Global Sustainable Equity Fund and International Sustainable Equity Fund, or with Loomis Sayles in the case of High Income Fund and Investment Grade Bond Fund) provides that the adviser will furnish or pay the expenses of the applicable Fund for office space, facilities and equipment, services of executive and other personnel of the Trusts and certain 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 each Funds assets in accordance with its investment objectives and policies.
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Each Fund pays all expenses not borne by its adviser or subadviser(s) including, but not limited to, the charges and expenses of the Funds custodian and transfer agent, independent registered public accounting firm, legal counsel for the Funds, legal counsel for 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 Funds adviser, subadviser(s) or their affiliates, other than affiliated registered investment companies. Certain expenses may be allocated differently among the Funds Class A, Class C, Class T shares, and Admin class shares, on the one hand, and Class N and Class Y shares on the other hand. See Description of the Trusts.
Except as noted below, each advisory agreement and, where applicable, each subadvisory agreement, provides that it will continue in effect for two years from its date of execution and thereafter from year to year if its continuance is approved at least annually (i) by the Board of the relevant Trust or by vote of a majority of the outstanding voting securities of the relevant 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. Natixis Advisors and the Trusts have received an exemptive order from the SEC (the Order), which permits Natixis Advisors, subject to approval by the Board but without shareholder approval, to hire or terminate, and to modify any existing or future subadvisory agreement with, subadvisers that are not affiliated with Natixis Advisors as well as subadvisers that are indirect or direct wholly-owned subsidiaries of Natixis Advisors or of another company that, indirectly or directly, wholly owns Natixis Advisors. Before any Fund can begin to rely on the exemptions described above, a majority of the shareholders of the Fund must approve the Funds ability to rely on the Order. Shareholders of certain Natixis Funds have already approved the Funds operation under the manager-of-managers structure contemplated by the Order. If a new subadviser is hired for a Fund, shareholders will receive information about the new subadviser within 90 days of the change.
Each advisory and subadvisory agreement may be terminated without penalty by vote of the Board of the relevant Trust or by vote of a majority of the outstanding voting securities of the relevant Fund, upon 60 days written notice, or by the Funds adviser upon 90 days written notice. Each advisory agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act). Each subadvisory agreement also may be terminated by the subadviser upon 90 days notice and automatically terminates upon termination of the related advisory agreement.
Each advisory and subadvisory agreement provides that the adviser or subadviser shall not be subject to any liability in connection with the performance of its services thereunder in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties. Natixis Advisors, with respect to all Funds except Global Green Bond Fund, Global Sustainable Equity Fund, International Sustainable Equity Fund, High Income Fund and Investment Grade Bond Fund, oversees the portfolio management services provided to the Funds by each of the subadvisers and provides certain administrative services. Subject to the review of the Board, Natixis Advisors monitors each subadviser to assure that the subadviser is managing a 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, Natixis Advisors also provides subadvised Funds 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. In addition, Natixis Advisors does not determine what investments will be purchased or sold for any Fund. Because each subadviser manages its portfolio independently from the others, the same security may be held in two or more different Funds (or segments of U.S. Equity Opportunities Fund) or may be acquired for one Fund (or segments of U.S. Equity Opportunities Fund) at a time when the subadviser of another Fund (or segment) deems it appropriate to dispose of the security from that other Fund (or segment) or otherwise take a short position in or related to that security. Similarly, under some market conditions, one or more of the subadvisers may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another subadviser or subadvisers believe continued exposure to the broader securities is appropriate. Because each subadviser directs the trading for its segment(s) of U.S. Equity Opportunities Fund, and does not aggregate its transactions with those of the other subadvisers, the Fund or Portfolio may incur higher brokerage costs than would be the case if a single adviser or subadviser were managing the entire Fund. Natixis Advisors will provide, or cause the Funds custodian to provide, information to each subadviser regarding the composition of assets of each applicable Fund and the assets to be invested and reinvested by the subadviser.
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Natixis Advisors may terminate any subadvisory agreement without shareholder approval. In such case, Natixis Advisors will either enter into an agreement with another subadviser to manage the Fund (or segments of U.S. Equity Opportunities Fund) or allocate the segments assets among the other segments of the Fund.
Distribution Agreements and Rule 12b-1 Plans
Under a separate agreement with each Fund, the Distributor serves as the principal distributor of each class of shares of the Funds. The Distributors principal business address is 888 Boylston Street, Suite 800, Boston, Massachusetts 02199-8197. 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 Funds available through advertising and other means and the cost of printing and mailing Prospectuses to persons other than shareholders. Each Fund pays the cost of registering and qualifying its shares under state and federal securities laws and distributing Prospectuses to existing shareholders.
The Distributor is compensated under each agreement through receipt of the sales charges on Class A and Class T shares described below under Net Asset Value and is paid by the Funds the service and distribution fees described in the applicable Prospectus. The Distributor may, at its discretion, reallow the entire sales charge imposed on the sale of Class A, Class C and Class T shares of a 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 a Funds shares.
Each Fund has adopted Rule 12b-1 plans (the Plans) for its Class A, Class C, Class T shares and Admin Class shares. Class N and Class Y shares have no such plans. The Plans, among other things, permit the applicable class of shares to pay the Distributor monthly fees out of its net assets. These fees consist of a service fee and a distribution fee. Certain Distributor 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 each Fund, and (together with the related Distribution Agreement) by the Board, including a majority of the Independent Trustees of the relevant Trust. (Note that not all Funds offer Class N or Admin Class shares.)
Under the Plans, each Fund pays the Distributor a monthly service fee at an annual rate not to exceed 0.25% of each Funds average daily net assets attributable to the Class A, Class C and Class T shares, as applicable. 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, Class T 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 each Funds shares, on a monthly (or quarterly basis), unless other arrangements are made between the Distributor and the securities dealer, for providing personal services to investors in shares of each 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 each Funds Class A and Class T shares.
The service fees on Class A and Class T 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. Under these Plans, intermediaries providing shareholder servicing and/or account maintenance services for the benefit of retirement plan record keeping investors and/or no transaction fee or wrap program investors may be eligible to receive Admin Class share payments.
Each 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 respective Funds Class C shares. The Distributor retains the 0.75% distribution fee assessed against both 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 each 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 Prospectuses, investors will not be permitted to purchase $1,000,000 or more of Class C shares as a single investment per account.
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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 relevant 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 relevant 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 relevant Trust shall be committed to the discretion of such trustees.
Under the Plans, each Fund with Admin Class shares pays the Distributor a monthly distribution fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Funds Admin Class shares, as compensation for services provided by the Distributor in connection with the marketing or sale of Admin Class shares or for payments made by the Distributor to securities dealers or other financial intermediaries as commissions, asset-based sales charges or other compensation with respect to the sale of Admin Class shares, or for providing personal services to investors and/or the maintenance of shareholder accounts.
Fees paid by Class A, Class C, Class T and Admin Class shares of any 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 or relative sales. 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.
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, Natixis Advisors, and their affiliates may, at their expense, pay additional amounts to dealers who have selling agreements with the Distributor. Class Y shares of the Funds may be offered by registered representatives of certain affiliates who are also employees of Natixis US and may receive compensation from the Funds adviser or subadviser with respect to sales of Class Y shares. (Note that certain Funds do not currently offer Admin Class shares.)
The Distribution Agreement for any Fund may be terminated at any time on 60 days written notice without payment of any penalty by the Distributor or by vote of a majority of the outstanding voting securities of the relevant Fund or by vote of a majority of the Independent Trustees.
The Distribution Agreements 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 and (ii) by the vote of a majority of the entire Board cast in person at a meeting called for that purpose, or by a vote of a majority of the outstanding securities of a 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 Trusts or any trustee of the Trusts had any direct or indirect financial interest in the operation of the Plans or any related agreement. Benefits to the Funds 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 controls the words Natixis in the names of the Natixis Funds trusts and if it should cease to be the principal distributor of such Funds shares, the Trusts may be required to change their names and delete these words or letters. The Distributor also acts as principal distributor for Loomis Sayles Funds I, and Gateway Trust. The address of the Distributor is 888 Boylston Street, Suite 800, Boston, Massachusetts 02199-8197.
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The portion of the various fees and expenses for Funds offering Class A, Class T, and, with respect to certain Funds, Class C shares that are paid (reallowed) to securities dealers are shown below:
Class A
All Funds (except Multi-Asset Income Fund, Global Green Bond Fund, High Income Fund and Investment Grade Bond Fund)
Cumulative 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(1) |
| |||||||||||||||
Up to $2,999,999 million |
None | 1.00 | % | 0.25 | % | 1.25 | % | |||||||||
$3,000,000 to $4,999,999 |
None | 0.75 | % | 0.25 | % | 1.00 | % | |||||||||
Excess over $5,000,000 |
None | 0.50 | % | 0.25 | % | 0.75 | % | |||||||||
Investments with no Sales Charge (2) |
None | 0.00 | % | 0.25 | % | 0.25 | % |
(1) | Commissions are based on cumulative investments over the life of the account with no adjustment for redemptions, transfers or market declines. For example, if a shareholder has accumulated investments in excess of $5 million and subsequently redeems all or a portion of the account(s), purchases following the redemption will generate a dealer commission of 0.50%. |
(2) | Refers to any investments made by investors not subject to a sales charge as described in the Prospectuses for Classes A and C shares of the Funds in the section How Sales Charges Are Calculated. |
Multi-Asset Income Fund, Global Green Bond Fund, High Income Fund and Investment Grade Bond Fund
Cumulative 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 $100,000 |
4.25 | % | 3.75 | % | 0.25 | % | 4.00 | % | ||||||||
$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(1) |
| |||||||||||||||
Up to $2,999,999 million |
None | 1.00 | % | 0.25 | % | 1.25 | % | |||||||||
$3,000,000 to $4,999,999 |
None | 0.75 | % | 0.25 | % | 1.00 | % | |||||||||
Excess over $5,000,000 |
None | 0.50 | % | 0.25 | % | 0.75 | % | |||||||||
Investments with no Sales Charge (2)(3) |
None | 0.00 | % | 0.25 | % | 0.25 | % |
(1) | Commissions are based on cumulative investments over the life of the account with no adjustment for redemptions, transfers or market declines. For example, if a shareholder has accumulated investments in excess of $5 million and subsequently redeems all or a portion of the account(s), purchases following the redemption will generate a dealer commission of 0.50%. |
(2) | Refers to any investments made by investors not subject to a sales charge as described in the Prospectuses for Classes A and C shares of the Funds in 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 Funds that are paid to securities dealers are shown in the following chart:
Investment |
Maximum FrontEnd 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 | % |
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Class T
The portion of the various fees and expenses for Class T shares that are paid (re-allowed) to securities dealers are shown below.
Cumulative 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 $250,000 |
2.50 | % | 2.50 | % | 0.25 | % | 2.75 | % | ||||||||
$250,000 $499,999 |
2.00 | % | 2.00 | % | 0.25 | % | 2.25 | % | ||||||||
$500,000 $999,999 |
1.50 | % | 1.50 | % | 0.25 | % | 1.75 | % | ||||||||
$1,000,000 and above |
1.00 | % | 1.00 | % | 0.25 | % | 1.25 | % |
All Funds
As described in the Prospectus, each purchase or sale of shares is effected at the NAV 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 Trusts. The Distributor may, at its discretion, pay (reallow) the entire sales charge imposed on the sale of Class A and Class T shares to investment dealers from time to time.
For new amounts invested at NAV 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 Funds may pay fees to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-administration, sub-transfer agency and other services, including, but not limited to, recordkeeping, shareholder or participant reporting or shareholder or participant recordkeeping) (recordkeeping and processing-related services) associated with shareholders whose shares are held of record in omnibus, other group accounts (for example, 401(k) plans) or accounts traded through registered securities clearing agents. These fees are paid directly or indirectly by the Funds (with the exception of Class N shares, which do not bear such expenses) in light of the fact that other costs may be avoided by the Funds where the intermediary, not the Funds service providers, provides shareholder services to Fund shareholders. The intermediary may impose other account or service charges directly on account holders or participants. In addition, depending on the arrangements, the Funds advisers and/or Distributor or their affiliates may, out of their own resources, compensate such financial intermediaries or their agents directly or indirectly for such recordkeeping and processing-related services; such payments will not be made with respect to Class N shares. The services provided and related payments vary from firm to firm. Under these programs, the Distributor may enter into administrative services agreements with intermediaries pursuant to which intermediaries will provide sub-transfer agency services, sub-administrative services and other services with respect to the Funds. These services may include, but are not limited to, shareholder record set-up and maintenance, account statement preparation and mailing, transaction processing and settlement and account level tax reporting. The Distributor is reimbursed by the Funds for all or a portion of any fees paid to intermediaries by the Distributor on behalf of the Funds.
The Distributor, Natixis Advisors and their affiliates may, out of their own resources, make additional payments to financial intermediaries who sell shares of the Funds. Such payments and compensation are in addition to any fees paid or reimbursed by the Funds. These payments may include: (i) full reallowance of the sales charge of Class A and Class T shares, (ii) additional compensation with respect to the sale and/or servicing of Class A, Class C Class N, Class T, Class Y and Admin Class shares, (iii) payments based upon various factors, as described below, and (iv)
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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. From its own profits and resources, the Distributor may, from time to time, make payments to qualified wholesalers, registered financial institutions and third party marketers for marketing support services and/or retention of assets. Among others, the Distributor has agreed to make such payments for marketing support services to AXA Advisors, LLC. In addition to marketing and/or financial support payments described above, 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 Distributor intends that 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. 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 0.25% of gross sales) and/or the amount of assets a financial intermediarys clients have invested in the Funds (at annual rates generally ranging from 0.03% to 0.35% of the value of the clients shares). The actual payment rates to a financial intermediary 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 financial intermediary to provide access to its representatives for educational and marketing purposes. The payments to financial intermediaries described in this section and elsewhere in this Statement, which may be significant to the financial intermediaries, may create an incentive for a financial intermediary or its representatives to recommend or sell shares of a particular Fund or 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 financial representative for details about the payment the financial intermediaries may receive.
From time to time, the Funds service providers, or any of their affiliates, may also pay non-cash compensation to the sales representatives of financial intermediaries in the form of (i) occasional gifts; (ii) occasional meals, tickets or other entertainment; and/or (iii) sponsorship support of regional events of intermediaries.
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 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.
The commissions and sales charges for the last three fiscal years (and the period ended December 31, 2018 for the High Income Fund and Investment Grade Bond Fund) were allocated as follows:
NATIXIS FUNDS TRUST I |
||||||||||||
12/31/16 | 12/31/17 | 12/31/18 | ||||||||||
Total commissions on sales of Class A shares |
$ | 550,589 | $ | 2,063,506 | $ | 1,074,045 | ||||||
Amount reallowed to other securities dealers |
$ | 478,155 | $ | 1,795,618 | $ | 933,078 | ||||||
Amount retained by Distributor |
$ | 72,434 | $ | 267,888 | $ | 140,967 | ||||||
Total CDSCs on redemptions of Classes A and C shares |
$ | 123,246 | $ | 52,938 | $ | 281,789 | ||||||
Amount retained by Distributor* |
$ | 123,246 | $ | 52,938 | $ | 281,789 |
| Information is only provided for the Funds in this Statement as listed on the cover page. |
* | See the section Other Arrangements for information about amounts received by the Distributor from Natixis Funds Trust Is investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to Natixis Funds Trust I. |
110
NATIXIS FUNDS TRUST II |
||||||||||||
12/31/16 | 12/31/17 | 12/31/18 | ||||||||||
Total commissions on sales of Class A shares |
$ | 271,292 | $ | 263,754 | $ | 229,638 | ||||||
Amount reallowed to other securities dealers |
$ | 236,292 | $ | 229,560 | $ | 198,589 | ||||||
Amount retained by Distributor |
$ | 35,000 | $ | 34,194 | $ | 31,049 | ||||||
Total CDSCs on redemptions of Classes A and C shares |
$ | 59,848 | $ | 12,988 | $ | 10,578 | ||||||
Amount retained by Distributor* |
$ | 59,848 | $ | 12,988 | $ | 10,578 |
| Information is only provided for the Funds in this Statement as listed on the cover page. |
** | See the section Other Arrangements for information about amounts received by the Distributor from Natixis Funds Trust IIs investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to Natixis Funds Trust II. |
LOOMIS SAYLES FUNDS II |
||||||||||||||||
9/30/16 | 9/30/17 | 9/30/18 | 12/31/18 | |||||||||||||
Total commissions on sales of Class A shares |
$ | 167,289 | $ | 244,025 | $ | 177,246 | $ | 36,699 | ||||||||
Amount reallowed to other securities dealers |
$ | 146,072 | $ | 212,485 | $ | 153,842 | $ | 31,927 | ||||||||
Amount retained by Distributor |
$ | 21,217 | $ | 31,540 | $ | 23,404 | $ | 4,772 | ||||||||
Total CDSCs on redemptions of Classes A and C shares |
$ | 108,638 | $ | 62,279 | $ | 21,771 | $ | 1,737 | ||||||||
Amount retained by Distributor* |
$ | 108,638 | $ | 62,279 | $ | 21,771 | $ | 1,737 |
* | See the section Other Arrangements for information about amounts received by the Distributor from Loomis Sayles Funds IIs investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to Loomis Sayles Funds II. |
| Information is only provided for the Funds in this Statement as listed on the cover page. |
Class T shares have not commenced operations and thus the Trusts have not paid any sales charges for Class T shares as of the date of this Statement.
Administrative Services
Natixis Advisors, 888 Boylston Street, Suite 800, Boston, MA 02199-8197, performs certain accounting and administrative services for the Funds, pursuant to an Administrative Services Agreement dated January 1, 2005, as amended from time to time (the Administrative Agreement). Under the Administrative Agreement, Natixis Advisors provides the following services to the Funds: (i) personnel that perform bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Funds, (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 Funds 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.
For these services, Natixis Advisors received the following fees from the Funds for the last three fiscal years (and the period ended December 31, 2018 for the High Income Fund and Investment Grade Bond Fund):
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/184 |
|||||||||
Fee | Fee | Fee | ||||||||||
Multi- Asset Income Fund |
||||||||||||
Gross Administrative Fees |
$ | 52,502 | $ | 59,310 | $ | 64,293 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 326 | ||||||
Net Administrative Fees |
$ | 52,502 | $ | 59,310 | $ | 63,967 | ||||||
Global Green Bond Fund1 |
||||||||||||
Gross Administrative Fees |
$ | | $ | 9,509 | $ | 12,105 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 72 | ||||||
Net Administrative Fees |
$ | | $ | 9,509 | $ | 12,033 |
111
Fund |
Fiscal Year Ended 12/31/16 |
Fiscal Year Ended 12/31/17 |
Fiscal Year Ended 12/31/184 |
|||||||||
Fee | Fee | Fee | ||||||||||
Global Sustainable Equity Fund2 |
||||||||||||
Gross Administrative Fees |
$ | 11,358 | $ | 26,726 | $ | 37,858 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 224 | ||||||
Net Administrative Fees |
$ | 11,358 | $ | 26,726 | $ | 37,634 | ||||||
International Sustainable Equity Fund3 |
||||||||||||
Gross Administrative Fees |
$ | | $ | | $ | 37 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 1 | ||||||
Net Administrative Fees |
$ | | $ | | $ | 36 | ||||||
Natixis Oakmark Fund |
||||||||||||
Gross Administrative Fees |
$ | 103,858 | $ | 125,161 | $ | 146,703 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 803 | ||||||
Net Administrative Fees |
$ | 103,858 | $ | 125,161 | $ | 145,900 | ||||||
Natixis Oakmark International Fund |
||||||||||||
Gross Administrative Fees |
$ | 398,119 | $ | 429,971 | $ | 474,361 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 2,120 | ||||||
Net Administrative Fees |
$ | 398,119 | $ | 429,971 | $ | 472,241 | ||||||
Small Cap Value Fund |
||||||||||||
Gross Administrative Fees |
$ | 132,988 | $ | 137,407 | $ | 100,598 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 422 | ||||||
Net Administrative Fees |
$ | 132,988 | $ | 137,407 | $ | 100,176 | ||||||
U.S. Equity Opportunities Fund |
||||||||||||
Gross Administrative Fees |
$ | 257,981 | $ | 390,154 | $ | 463,021 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 2,509 | ||||||
Net Administrative Fees |
$ | 257,981 | $ | 390,154 | $ | 460,512 | ||||||
Value Opportunities Fund |
||||||||||||
Gross Administrative Fees |
$ | 598,897 | $ | 482,459 | $ | 403,699 | ||||||
Waiver of Administrative Fees |
$ | | $ | | $ | 1,913 | ||||||
Net Administrative Fees |
$ | 598,897 | $ | 482,459 | $ | 401,786 |
1 | Global Sustainable Equity Fund commenced operations on March 31, 2016. |
2 | Global Green Bond Fund commenced operations on February 28, 2017. |
3 | International Sustainable Equity Fund commenced operations on December 28, 2018. |
4 | Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving as sub-administrator to the Funds. Also effective October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Funds in an amount equal to the reduction in sub-administrative fees discussed above. The waiver is in effect through June 30, 2019. |
Fund |
Fiscal Year Ended 9/30/16 |
Fiscal Year Ended 9/30/17 |
Fiscal Year Ended 9/30/18 |
Period Ended 12/31/18 |
||||||||||||
Fee | Fee | Fee | Fee | |||||||||||||
High Income Fund |
|
|||||||||||||||
Gross Administrative Fees |
$ | | $ | | $ | | $ | 18,014 | ||||||||
Waiver of Administrative Fees |
$ | | $ | | $ | | $ | 411 | ||||||||
Net Administrative Fees |
$ | 71,381 | $ | 77,527 | $ | 76,503 | $ | 17,603 | ||||||||
Investment Grade Bond Fund |
||||||||||||||||
Gross Administrative Fees |
$ | | $ | | $ | | $ | 599,847 | ||||||||
Waiver of Administrative Fees |
$ | | $ | | $ | | $ | 13,538 | ||||||||
Net Administrative Fees |
$ | 3,383,108 | $ | 2,768,521 | $ | 2,648,877 | $ | 586,309 |
112
Support Services. Pursuant to separate support service agreements between Natixis Advisors and Loomis Sayles (for High Income Fund and Investment Grade Bond Fund) and Natixis Advisors and Mirova US (for the Global Green Bond Fund, Global Sustainable Equity Fund and International Sustainable Equity Fund), Natixis Advisors provides various marketing, relationship management and other support services to the Funds, Loomis Sayles and Mirova US. With respect to these contractual arrangements, Loomis Sayles and Mirova US, and not the Funds, pay Natixis Advisors for such services.
Custodial Arrangements. State Street Bank and Trust Company (State Street Bank), One Lincoln Street, Boston, MA, 02111, serves as the custodian for the Trusts. As such, State Street Bank holds in safekeeping certificated securities and cash belonging to each Fund and, in such capacity, is the registered owner of securities in book-entry form belonging to each Fund. Upon instruction, State Street Bank receives and delivers cash and securities of each 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 Trusts and calculates the total NAV, total net income and NAV per share of each Fund on a daily basis.
Transfer Agency Services. Pursuant to a contract between the Trusts, on behalf of each Fund, and DST Asset Manager Solutions, Inc. (DST or the Transfer Agent), whose principal business address is 2000 Crown Colony Drive, Quincy, MA 02169, DST acts as the shareholder servicing and transfer agent for the Funds 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.
From time to time, the Funds, directly or indirectly through arrangements with Natixis Advisors and its affiliates or the Transfer Agent, may pay amounts to third parties that provide recordkeeping and other administrative services relating to a Fund to persons who beneficially own interests in the Fund, such as shareholders whose shares are held of record in omnibus, other group accounts (for example, 401(k) plans) or accounts traded through registered securities clearing agents. See the section Distribution Agreements and Rule 12b-1 Plans in this Statement.
Independent Registered Public Accounting Firm. The Trusts independent registered public accounting firm is PricewaterhouseCoopers LLP, located at 101 Seaport Blvd., Boston, MA 02210. The independent registered public accounting firm conducts an annual audit of each Funds financial statements, assists in the review of federal and state income tax returns and consults with the Trusts as to matters of accounting and federal and state income taxation. The financial highlights in the Prospectuses for the Funds, and the financial statements contained in those Funds annual reports for the year ended December 31, 2018 and incorporated by reference into this Statement, have been so included in reliance on the reports of the Trusts independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
Counsel to the Funds. Ropes & Gray LLP, located at Prudential Tower, 800 Boylston Street, Boston, MA 02199, serves as counsel to the Funds.
113
PORTFOLIO MANAGEMENT INFORMATION
PORTFOLIO MANAGERS MANAGEMENT OF OTHER ACCOUNTS
As of December 31, 2018, many of the portfolio manager(s) of the Funds managed other accounts in addition to managing one or more of the Funds. 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 (Firm) |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets | ||||||||||||
Dennis G. Alff (Vaughan Nelson) |
2 | $772.05 million |
0 | $0 | 0 | $0 | 0 | 0 | 59 | $1.2 billion |
3 | $46.68 million | ||||||||||||
Marc Briand (Mirova US) |
1 | $29.3 million |
0 | $0 | 2 | $2.1 billion |
2 | $112.7 billion |
0 | 0 | 0 | 0 | ||||||||||||
Hua Cheng (Mirova US) |
3 | $107.6 million |
0 | $0 | 0 | $0 | 1 | $451.7 million |
0 | 0 | 0 | 0 | ||||||||||||
Stephen Davis (Vaughan Nelson) |
1 | $408.9 million |
0 | $0 | 1 | $42.6 million |
0 | $0 | 125 | $2.4 billion |
1 | $277.18 million | ||||||||||||
Matthew J. Eagan (Loomis Sayles) |
17 | $26.8 billion |
0 | $0 | 26 | $11.2 billion |
0 | $0 | 136 | $21.7 billion |
3 | $611.6 million | ||||||||||||
Thomas Fahey (Loomis Sayles) |
0 | $0 | 0 | $0 | 4 | $1.4 billion |
0 | $0 | 5 | $1.2 billion |
0 | $0 | ||||||||||||
Chad D. Fargason (Vaughan Nelson) |
2 | $772.05 million |
0 | $0 | 0 | $0 | 0 | 0 | 59 | $1.2 billion |
3 | $46.68 million | ||||||||||||
Amber Fairbanks (Mirova US) |
3 | $107.6 million |
0 | $0 | 0 | $0 | 1 | $451.7 million |
0 | 0 | 0 | 0 | ||||||||||||
Kevin G. Grant (Harris Associates) |
1 | $16.4 billion |
0 | $0 | 1 | $24.0 million |
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||
Aziz V. Hamzaogullari (Loomis Sayles) |
20 | $20.3 billion |
0 | $0 | 15 | $5.8 billion |
1 | $721.6 million |
131 | $19.5 billion |
0 | $0 | ||||||||||||
David G. Herro (Harris Associates) |
14 | $40.6 billion |
0 | 0 | 29 | $9.3 billion |
3 | $508.5 million |
46 | $12.6 billion |
1 | $113.0 million | ||||||||||||
M. Colin Hudson (Harris Associates) |
1 | $12.4 billion |
0 | 0 | 10 | $652.8 million |
0 | 0 | 471 | $2.7 million |
0 | 0 | ||||||||||||
Kevin P. Kearns (Loomis Sayles) |
6 | $2.4 billion |
0 | $0 | 9 | $4.4 billion |
0 | $0 | 17 | $5.3 billion |
0 | $0 | ||||||||||||
Brian P. Kennedy (Loomis Sayles) |
11 | $23.9 billion |
0 | $0 | 10 | $5.8 billion |
0 | $0 | 66 | $11.1 billion |
0 | $0 | ||||||||||||
Michael L. Manelli (Harris Associates) |
10 | $37.0 billion |
0 | 0 | 15 | $4,06 billion |
3 | $508.5 million |
26 | $7.45 billion |
1 | $113.0 million | ||||||||||||
Michael J. Mangan (Harris Associates) |
0 | 0 | 0 | 0 | 1 | $24.0 million |
0 | 0 | 681 | $3.2 billion |
0 | 0 | ||||||||||||
Maura T. Murphy (Loomis Sayles) |
1 | $29.5 million |
0 | $0 | 1 | $16.2 million |
0 | $0 | 9 | $9.6 million |
0 | $0 | ||||||||||||
William C. Nygren (Harris Associates) |
5 | $22.4 billion |
0 | 0 | 2 | $44.7 million |
0 | 0 | 3 | $422.20 million |
0 | 0 | ||||||||||||
Jens Peers (Mirova US) |
3 | $107.6 million |
0 | $0 | 0 | 0 | 1 | $451.7 million |
0 | 0 | 0 | 0 |
114
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 (Firm) |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets | ||||||||||||
Charles Portier (Mirova US) |
1 | $29.4 million |
0 | 0 | 7 | $2,08 billion |
1 | $77.0 million |
0 | 0 | 0 | 0 | ||||||||||||
Elaine M. Stokes (Loomis Sayles) |
13 | $24.6 billion |
0 | $0 | 19 | $8.1 billion |
0 | $0 | 140 | $20.6 billion |
3 | $611.6 million | ||||||||||||
Todd D. Vandam (Loomis Sayles) |
4 | $2.2 billion |
0 | $0 | 10 | $2.9 billion |
0 | $0 | 28 | $3.9 billion |
0 | $0 | ||||||||||||
Chris D. Wallis (Vaughan Nelson) |
9 | $1.8 billion |
0 | 0 | 3 | $62.8 million |
0 | 0 | 331 | $5.7 billion |
24 | $467.0 million |
Material Conflicts of Interest
Conflicts of interest may arise in the allocation of investment opportunities and the allocation of aggregated orders among the Funds and other accounts managed by the portfolio managers. 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. Each of the advisers and subadvisers has adopted policies and procedures to mitigate the effects of these conflicts. For more information on how each of the advisers and subadvisers allocates investment opportunities between the Funds and their other clients, see the section Allocation of Investment Opportunity Among Funds and Other Investors Managed by Advisers and Subadvisers in this Statement. Conflicts of interest also arise to the extent a portfolio manager short sells a stock or otherwise takes a short position in one client account but holds that stock long in other accounts, including the Funds, or sells a stock for some accounts while buying the stock for others, and through the use of soft dollar arrangements, which are discussed in the section Portfolio Transactions and Brokerage below.
Portfolio Managers Compensation
The following describes the structure of, and the method used to determine, the compensation of each of the above-listed portfolio managers as of December 31, 2018:
Harris Associates. Each of the portfolio managers of the Harris Associates-subadvised Funds/segments are compensated solely by Harris Associates, a subadviser. Compensation for each of the portfolio managers is based on Harris Associates assessment of the individuals long-term contribution to the investment success of Harris Associates. Each portfolio manager receives a base salary and participates in a discretionary bonus pool. In addition, most of the portfolio managers also participate in a long-term compensation plan that provides current compensation to certain key employees of the adviser and deferred compensation to both current and former key employees. The compensation plan consists of bonus units awarded to participants that vest and are paid out over a period of time.
The determination of the amount of each portfolio managers base salary and discretionary bonus participation and, where applicable, participation in the long-term compensation plan is based on a variety of qualitative and quantitative factors. The factor given the most significant weight is the subjective assessment of the individuals contribution to the overall investment results of Harris Associates U.S. or international investment group, whether as a portfolio manager, a research analyst, or both.
115
The quantitative factors considered in evaluating the contribution of a portfolio manager include the performance of the portfolios managed by that individual relative to benchmarks, peers and other portfolio managers, as well as the assets under management in the accounts managed by the portfolio manager. The portfolio managers compensation is not based solely on an evaluation of the performance of the funds or the amount of fund assets. Performance is measured in a number of ways, including by accounts and by strategy, and is compared to one or more of the following benchmarks: S&P 500® Index, Russell Midcap® Value Index, Russell 1000® Value Index, Lipper Balanced Funds Index (60% S&P 500® Index and 40% Barclays Bond Index), MSCI World Index, MSCI World ex USA Index (Net), MSCI World ex USA Small Cap Index (Net) and Harris Associates approved lists of stocks, depending on whether the portfolio manager manages accounts in the particular strategy to which these benchmarks would be applicable. Performance is measured over shorter- and longer-term periods, including one year, three years, five years, ten years, and since a funds inception or since a portfolio manager has been managing a fund, as applicable. Performance is measured on a pre-tax and after-tax basis to the extent such information is available.
If a portfolio manager also serves as a research analyst, then his or her compensation is also based on the contribution made to Harris Associates in that role. The specific quantitative and qualitative factors considered in evaluating a research analysts contributions include, among other things, new investment ideas, the performance of investment ideas covered by the analyst during the current year as well as over longer-term periods, the portfolio impact of the analysts investment ideas, other contributions to the research process and an assessment of the quality of analytical work. If a portfolio manager also serves as a research analyst, then such manager may participate in a long-term compensation plan that may provide future compensation upon vesting after a multi-year period. The plan consists of an award, based on a quantitative evaluation of the performance of the investment ideas covered by the analyst over the same multi-year period. In addition, an individuals other contributions to Harris Associates, such as a role in investment thought leadership and management of the firm, are taken into account in the overall compensation process.
Loomis Sayles. Loomis Sayles believes that portfolio manager compensation should be driven primarily by the delivery of consistent and superior long-term performance for its clients. Portfolio manager compensation is made up primarily of three main components: base salary, variable compensation and a long-term incentive program. Although portfolio manager compensation is not directly tied to assets under management, a portfolio managers base salary and/or variable compensation potential may reflect the amount of assets for which the manager is responsible relative to other portfolio managers. Loomis Sayles also offers a profit sharing plan. Base salary is a fixed amount based on a combination of factors including industry experience, firm experience, job performance and market considerations. Variable compensation is an incentive-based component and generally represents a significant multiple of base salary. Variable compensation is based on four factors: investment performance, profit growth of the firm, profit growth of the managers business unit and personal conduct. Investment performance is the primary component of total variable compensation and generally represents at least 60% of the total for fixed-income managers and 70% for equity managers. The other three factors are used to determine the remainder of variable compensation, subject to the discretion of the Chief Investment Officer (CIO) and senior management. The CIO and senior management evaluate these other factors annually.
Fixed-Income Funds Portfolio Managers. While mutual fund performance and asset size do not directly contribute to the compensation calculation, investment performance for fixed-income managers is measured by comparing the performance of the firms institutional composite (pre-tax and net of fees) in the managers style to the performance of an external benchmark and a customized peer group. The benchmark used for the investment style utilized for each fixed-income fund is noted in the table below:
FUND MANAGER BENCHMARKS |
||
High Income Fund |
Bloomberg Barclays U.S. Corporate High Yield Bond Index | |
Investment Grade Bond Fund |
Bloomberg Barclays U.S. Government/Credit Bond Index | |
Multi-Asset Income Fund |
Bloomberg Barclays U.S. Aggregate Bond Index |
116
The customized peer group is created by the firm and is made up of institutional managers in the particular investment style. A managers relative performance for the past five years, or seven years for some products, is used to calculate the amount of variable compensation payable due to performance. To ensure consistency, the firm analyzes the five or seven year performance on a rolling three year basis. If a manager is responsible for more than one product, the rankings of each product are weighted based on relative revenue size of accounts represented in each product.
Loomis Sayles uses both an external benchmark and a customized peer group as a point of comparison for fixed-income manager performance because it believes they represent an appropriate combination of the competitive fixed-income product universe and the investment styles offered by Loomis Sayles.
Equity Funds Portfolio Managers. While mutual fund performance and asset size do not directly contribute to the compensation calculation, investment performance for equity managers is measured by comparing the performance of the firms institutional composite to the performance of the applicable Morningstar® peer group and/or the Lipper universe. To the extent the majority of assets managed in the fund strategy are for institutional separate accounts, the eVestment Alliance institutional peer group will also be used as an additional comparison. In situations where substantially all of the assets for the strategy are institutional, the institutional peer group will be used as the primary method of comparison. A managers performance relative to the peer group for the 1-, 3- and 5- year periods (3, 5 and 10 years for large cap growth, all cap growth and global growth) or since the start of the managers tenure, if shorter, is used to calculate the amount of variable compensation payable due to performance. Longer-term performance is typically weighted more than shorter-term performance. In addition, the performance measurement for equity compensation usually incorporates a consistency metric using longer term rolling excess return compared to peer group over a sustained measurement period; however, the exact method may be adjusted to a products particular style. If a manager is responsible for more than one product, the rankings of each product are weighted based on either relative revenue or asset size of accounts represented in each product. An external benchmark is used as a secondary comparison. The benchmarks used for the investment style utilized for the equity sleeve of the U.S. Equity Opportunities Fund are noted below:
FUND MANAGER BENCHMARKS |
||
All Cap Growth Segment |
S&P 500® Index | |
Russell 1000® Index |
Mr. Hamzaogullari also receives additional compensation based on revenue and performance hurdles for his strategies, and performance fee based compensation as portfolio manager for a private investment fund.
In cases where the institutional peer groups are used, Loomis Sayles believes they represent the most competitive product universe while closely matching the investment styles offered by the Loomis Sayles fund.
General. Most mutual funds do not directly contribute to a portfolio managers overall compensation because Loomis Sayles uses the performance of the portfolio managers institutional accounts compared to an institutional peer group. However, each fund managed by the firm employs strategies endorsed by the firm and fits into the product category for the relevant investment style. Loomis Sayles may adjust compensation if there is significant dispersion among the returns of the composite and accounts not included in the composite.
Loomis Sayles has developed and implemented two distinct long-term incentive plans to attract and retain investment talent. These plans supplement existing compensation. The first plan has several important components distinguishing it from traditional equity ownership plans:
| the plan grants units that entitle participants to an annual payment based on a percentage of company earnings above an established threshold; |
| upon retirement a participant will receive a multi-year payout for his or her vested units; |
| participation is contingent upon signing an award agreement, which includes a non-compete covenant. |
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The second plan is also similarly constructed although the participants annual participation in company earnings is deferred for two years from the time of award and is only payable if the portfolio manager remains at Loomis Sayles. In this plan, there is no post-retirement payments or non-compete covenants.
Senior management expects that the variable compensation portion of overall compensation will continue to remain the largest source of income for those investment professionals included in the plan(s). The plan(s) was initially offered to portfolio managers and over time, the scope of eligibility widened to include other key investment professionals. Management has full discretion on what units are issued and to whom.
Portfolio managers also participate in the Loomis Sayles profit sharing plan, in which Loomis Sayles makes a contribution to the retirement plan of each employee based on a percentage of base salary (up to a maximum amount). The portfolio managers may also participate in the Loomis Sayles defined benefit pension plan, which applies to all Loomis Sayles employees who joined the firm prior to May 3, 2003. The defined benefit is based on years of service and base compensation (up to a maximum amount).
In addition to the compensation described above, portfolio managers may receive additional compensation based on the overall growth of their strategies.
Mirova US and Mirova. The portfolio managers are compensated according to the Mirova global salary policy. Mirovas global salary policy is intended to encourage staff loyalty and performance, by rewarding individual and collective performance in an unbiased manner. Investment professionals are compensated through both fixed and variable compensation.
Portfolio Manager compensation is made up primarily of three main components: fixed compensation (salary), variable compensation (bonus) and, for key people, a long-term incentive program.
Fixed compensation is re-evaluated annually and applies the firms salary grid as well as industry compensation data. Base salary is a fixed amount based on a combination of factors, including industry experience, firm experience, job performance and market considerations.
Variable compensation is distributed in two forms:
| Cash bonuses awarded to portfolio managers and analysts, with the allocation based upon quantitative (collective and individual) as well as qualitative criteria. Quantitative criteria include the excess performance of the portfolio versus the benchmark, for both one-year and three-year periods. Qualitative criteria are defined annually to assess the contribution of each team to the overall performance of all portfolios, not just their own. |
| A long-term incentive plan (LTIP) is awarded to key people, i.e. people whose yearly performance and contribution to Mirovas results are high. The LTIP is indexed to Mirovas operating income before tax. |
The allocation of variable compensation is validated by the Mirova Remuneration Committee to ensure internal equity and consistency with market practices. The Compliance Officer gives an annual opinion on Mirovas variable compensation policy.
Vaughan Nelson. The compensation program at Vaughan Nelson is designed to align the interests of portfolio management professionals with the interests of clients and Vaughan Nelson by retaining top-performing employees and creating incentives to enhance Vaughan Nelsons long-term success.
Compensation of portfolio management professionals includes a fixed base salary, a variable bonus and deferral plan and a contribution to the firms retirement plan.
All portfolio management professionals (at the discretion of the Compensation Committee of the Vaughan Nelson Board) participate in the variable bonus and deferral plan component which, as a whole, is based upon a percentage of Vaughan Nelsons net profit. Each portfolio management professionals participation in the variable bonus and deferral plan is based upon many factors, including but not limited to
| Performance of the strategy managed (both absolute and relative to peers) |
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| Amount of revenue derived from the strategy managed |
| Contribution to the development and execution of the firms investment philosophy and process |
| Participation and effectiveness in performing client service activities and marketing initiatives |
The degree to which any one factor influences participation in the bonus pool will vary between individuals and over time. A portion of the variable bonus is subject to deferral and each participant has the option to invest the deferral into Vaughan Nelson managed product(s) while it vests. Each years deferral is paid out over a period of three years. Payments are conditioned upon compliance with non-compete and non-solicitation arrangements.
The contribution to the firms retirement plan is based on a percentage (at the discretion of the Vaughan Nelson Board) of total cash compensation (subject to the IRS limits) and such percentage is the same for all firm personnel. Compensation at Vaughan Nelson is determined by the Compensation Committee at the recommendation of the Chief Executive Officer.
There is no distinction for purposes of compensation between the Fund and any other accounts managed.
Portfolio Managers Ownership of Fund Shares
The following table sets forth the dollar range* of equity securities of the Funds beneficially owned by each portfolio manager as of December 31, 2018:
Name of Portfolio Manager |
Fund(s) Managed |
Dollar Range of Equity Securities Invested | ||
Dennis G. Alff (Vaughan Nelson) |
Value Opportunity Fund | G | ||
Marc Briand (Mirova US) |
Global Green Bond Fund | A | ||
Hua Cheng (Mirova US) |
Global Sustainable Equity Fund | A A | ||
Stephen Davis (Vaughan Nelson) |
Small Cap Value Fund | A | ||
Matthew J. Eagan (Loomis Sayles) |
High Income Fund Investment Grade Bond Fund |
A A | ||
Thomas Fahey (Loomis Sayles) |
Multi-Asset Income Fund | E | ||
Chad D. Fargason (Vaughan Nelson) |
Value Opportunity Fund | G | ||
Amber Fairbanks (Mirova US) |
Global Sustainable Equity Fund | D A | ||
Kevin G. Grant (Harris Associates) |
Natixis Oakmark Fund Natixis U.S. Equity Opportunities Fund |
A | ||
Aziz V. Hamzaogullari (Loomis Sayles) |
Natixis U.S. Equity Opportunities Fund | A | ||
David G. Herro (Harris Associates) |
Natixis Oakmark International Fund | A | ||
M. Colin Hudson (Harris Associates) |
Natixis Oakmark Fund Natixis U.S. Equity Opportunities Fund |
A | ||
Kevin P. Kearns (Loomis Sayles) |
Multi-Asset Income Fund | G | ||
Brian P. Kennedy (Loomis Sayles) |
High Income Fund Investment Grade Bond Fund |
A E | ||
Michael L. Manelli (Harris Associates) |
Natixis Oakmark International Fund | A | ||
Michael J. Mangan (Harris Associates) |
Natixis Oakmark Fund Natixis U.S. Equity Opportunities Fund |
A | ||
Maura T. Murphy (Loomis Sayles) |
Multi-Asset Income Fund | C | ||
William C. Nygren (Harris Associates) |
Natixis Oakmark Fund Natixis U.S. Equity Opportunities Fund |
A |
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Jens Peers (Mirova US) |
Global Sustainable Equity Fund International Sustainable Equity Fund |
A A | ||
Charles Portier (Mirova US) |
Global Green Bond Fund | A | ||
Elaine M. Stokes (Loomis Sayles) |
High Income Fund Investment Grade Bond Fund |
E A | ||
Todd P. Vandam (Loomis Sayles) |
High Income Fund | A | ||
Chris D. Wallis (Vaughan Nelson) |
Small Cap Value Fund Value Opportunity Fund |
A D |
* A. None |
E. $100,001 - $500,000 | |
B. $1 - 10,000 |
F. $500,001 - $1,000,000 | |
C. $10,001 - $50,000 |
G. over $1,000,000 | |
D. $50,001 - $100,000 |
There are various reasons why a portfolio manager may not own shares of the Fund(s) he or she manages. One reason is that the Funds investment objectives and strategies may not match those of the portfolio managers personal investment objective. Another explanation is that the U.S. Equity Opportunities Fund, is multi-segmented and a portfolio manager may manage only one segment; the other segments are managed by different investment advisers using different investment styles. In addition, portfolio managers may invest in other Funds or pooled investment vehicles or separate accounts managed by the portfolio manager in a similar style to the Natixis Fund managed by such portfolio manager. Administrative reasons (such as facilitating compliance with an advisers or subadvisers code of ethics) also may explain why a portfolio manager has chosen not to invest in the Natixis Funds.
Allocation of Investment Opportunity among Funds and Other Investors Managed by Advisers and Subadvisers; Cross Relationships of Officers and Trustees
Harris Associates. Certain officers and employees of Harris Associates have responsibility for portfolio management of other advisory accounts and clients (including other registered investment companies and accounts of affiliates of Harris Associates) that may invest in securities in which its subadvised Funds may invest. Where Harris Associates 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 Harris Associates to the participating accounts. In situations in which advisory accounts have competing interests in a limited investment opportunity, Harris Associates will allocate investment opportunities based on numerous considerations, including cash availability and/or liquidity requirements, the time competing accounts have had funds available for investment or have had investments 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 Harris Associates policy to allocate, to the extent practicable, investment opportunities to each client over a period of time on a fair and equitable basis relative to its other clients. Harris believes that the ability of the subadvised Funds to participate in larger aggregated transactions will in some cases produce better executions for these Funds. However, in some cases, this procedure could have a detrimental effect on the price and amount of a security available to these Funds or the price at which a security may be sold.
Loomis Sayles. Loomis Sayles has organized its business into two investment groups: The Fixed-Income Group and The Equity Group. The Fixed-Income Group and The Equity Group make investment decisions for the Funds managed by Loomis Sayles. The groups make investment decisions independently of one another. These groups also have responsibility for the management of other client portfolios. The other investment companies and clients served by Loomis Sayles investment platforms sometimes invest in securities in which the Funds (or segments thereof) advised or subadvised by Loomis Sayles also invest. If one of these Funds and such other clients advised or subadvised by the same investment group of Loomis Sayles desire to buy or sell the same portfolio securities at or about the same time, the respective group allocates purchases and sales, to the extent practicable, on a pro rata basis in proportion to the amount desired to be purchased or sold for each Fund or client advised or subadvised by that investment group. It is recognized that in some cases the practices described in this paragraph could have a detrimental effect on the price or amount of the securities which each of the Funds purchases or sells. In other cases, however, it is believed that these practices may benefit the relevant Fund.
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Mirova US. Certain of the Funds portfolio managers may encounter situations in which they must determine how to allocate investment opportunities among various clients and other persons. The adviser has written policies and procedures relating to the allocation of investment opportunities. These policies and procedures address the potential conflicts of interest that may arise as the portfolio managers allocate investment opportunities among the Fund and other clients. In allocating investment opportunities to client accounts, the adviser first determines which of its clients will participate in such opportunity. The adviser assesses whether an investment opportunity is appropriate for a particular client based on the clients investment objectives, strategies and risk tolerance. Prior to allocating any investment opportunity to a client account, the adviser determines what additional factors may restrict or limit the offering of an investment opportunity to the client. The adviser then will, in its discretion, decide how to allocate such investment opportunity among the identified clients. To the extent a particular investment is suitable for multiple client accounts of the adviser, such investment will be allocated among such client accounts in a manner that is fair and equitable over time under the circumstances to all clients. The advisers exercise of its discretion in allocating investment opportunities with respect to a particular investment among such clients in this manner may not, and often will not, result in proportional allocations among such clients, and such allocations may be more or less advantageous to some clients relative to other clients. In exercising its discretion to allocate investment opportunities and fees and expenses, the Adviser may be faced with a variety of potential conflicts of interest. It is the advisers policy not to favor or disfavor, consistently or consciously, any client account or class of client accounts in relation to any other client accounts. Further, the adviser will not allocate investment opportunities based, in whole or in part, on the relative fee structure or amount of fees paid by any client or the profitability of any client. In addition, principal executive officers and other personnel of the adviser may invest indirectly in and may be permitted to invest directly in clients and may therefore participate indirectly in investments made by the clients in which such personnel may invest. Such interests will vary among clients. The existence of these varying circumstances may present conflicts of interest in determining how much, if any, of certain investment opportunities to offer to a client.
Vaughan Nelson. In addition to managing its Funds, Vaughan Nelson serves as investment adviser to foundations, university endowments, corporate retirement plans and family/individual funds. Portfolio transactions for each client account are either completed independently, or, when decisions are made to purchase or sell the same securities for a number of client accounts simultaneously, through a blocked order. Investments decisions are typically implemented across all accounts managed within a particular strategy. Blocked orders are averaged as to price and are generally allocated on a pro rata basis based upon the actual purchase or sell orders placed for each security. Block orders are undertaken when possible to facilitate best execution, as well as for the purpose of negotiating more favorable brokerage commissions.
Description of the Multi-Adviser Approach of U.S. Equity Opportunities Fund
Natixis Advisors believes that the multi-adviser approach to equity investing offers diversification and a different investment opportunity than funds managed by a single adviser using a single style. Natixis Advisors believes that assigning portfolio management responsibility for a fund to two subadvisers, whose management styles have resulted in records of success, may increase the likelihood that the fund may produce superior results for its shareholders, with less variability of return and less risk of persistent under-performance than a fund managed by a single adviser. Of course, there is no assurance that a fund will in fact achieve superior or less variable results over any period of time.
On a daily basis, capital activity will be allocated equally by Natixis Advisors among the segments of the Fund. However, Natixis Advisors may, subject to review of Board of the Trusts, allocate net investment capital differently between the subadvisers. This action may be necessary if, for example, a subadviser determines that it desires no additional investment capital. Similarly, because each segment of the Fund will perform differently from the other segment depending upon the investments it holds and changing market conditions, one segment may be larger or smaller at various times than the other segment. Each subadviser manages its segment of the Funds assets in accordance with its distinct investment style and strategy.
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The Board of the Trusts has adopted asset allocation guidelines for the Fund to ensure that no segment of the Fund becomes too large or too small relative to the other segments of the Fund due to performance, market conditions or other factors. Natixis Advisors will generally monitor the asset allocation of the Funds segments on a monthly basis and when any one segment rises above or falls below the measures stated in the guidelines, action will generally be taken to reallocate cash flow away or towards a specific segment. Natixis Advisors may, subject to the review of the Board of the Trusts, allocate net investment capital differently among any of the subadvisers.
PORTFOLIO TRANSACTIONS AND BROKERAGE
All Funds
In placing orders for the purchase and sale of equity securities, each Funds 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. Each Funds 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. Each Funds adviser or subadviser may place orders for the Funds which, combined with orders for the advisers/subadvisers other clients, may impact the price of the relevant security. This could cause the Funds 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, each Funds 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 Funds, 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 Board, including a majority of the Independent Trustees, has 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, option, and futures exchanges involve the payment of negotiated brokerage commissions. In the case of securities traded in the OTC market, there is generally no stated commission but the price usually includes an undisclosed commission or mark-up.
As discussed in more detail below, each advisers and subadvisers receipt of brokerage and research products may sometimes be a factor in each such advisers or subadvisers selection of a broker or dealer to execute transactions for the Funds, subject to the advisers or subadvisers duty to seek best execution of the transactions. Such brokerage and research services may be paid for with the advisers or sub-advisers own assets or may, in connection with transactions in securities effected for client accounts for which the adviser or subadviser exercises investment discretion, be paid for with client commissions (the latter, sometimes referred to as soft dollars).
Harris Associates. Harris Associates is responsible for selecting brokers and dealers for the execution of security transactions for each Fund it subadvises. Harris Associates seeks to place purchase and sale orders in a manner that is fair and reasonable to a Fund. The primary consideration in placing all portfolio transactions is Harris Associates ability to obtain best execution of such orders. Best execution means the combination of the most favorable execution and net price available under the circumstances. In determining best execution Harris Associates takes into account a number of relevant factors including, among other things, the overall direct net economic result to a
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Fund (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction in the desired price range with a minimum market impact, the reliability, integrity and financial condition of the broker, the ability of the broker to commit resources to the execution of the trade, and the value of the brokerage or research products or services provided. Such factors are weighed by Harris Associates in determining the overall reasonableness of the brokerage commission. In selecting brokers for portfolio transactions, Harris Associates takes into account its past experiences in determining those brokers who are likely to help achieve best execution.
There are many instances when, in Harris Associates judgment, more than one broker can offer comparable execution services. In selecting among such brokers, consideration may be given to those brokers that supply research and brokerage products and services that are deemed to qualify as eligible research and brokerage products and services under the safe harbor of Section 28(e) of the Securities Exchange Act of 1934 (the Exchange Act). Eligible research products and services may include, among other things, research reports, discussions with research analysts and corporate executives, seminars or conferences, financial and economic publications that are not targeted to a wide audience, software that provides analysis of securities portfolios, market research, including pre-and post-trade analytics, and market data. Eligible brokerage products and services may include services and products that (i) are used to effect securities transactions; (ii) perform services incidental to securities transactions; or (iii) are required by an applicable SRO or SEC rule(s). The research and brokerage products or services provided to Harris Associates by a particular broker may include both (a) products and services created by such broker and (b) products and services created by a third party. The provision of research and brokerage products and services is often referred to as soft dollar arrangements. Such arrangements may cause a Fund to pay a commission for effecting a securities transaction in excess of the amount another broker would have charged for effecting that transaction, if Harris Associates determines that an arrangement qualifies for the safe harbor provided by Section 28(e).
Harris Associates is the principal source of information and advice to each Fund it subadvises, and the research and other services provided by brokers to Harris Associates are considered to be in addition to the information and advice provided by Harris Associates to the Funds. Harris Associates believes that it is important for Harris Associates, in performing its responsibilities to a Fund, to continue to receive and evaluate the broad spectrum of economic and financial information that many brokers have customarily furnished in connection with brokerage transactions, and that in compensating brokers for their services, it is in the interest of a Fund to take into account the value of the information received for use in advising the Fund. Other clients of Harris Associates, including those clients who are restricted from participating in soft dollar arrangements, may benefit from the research and other services obtained from brokers through whom a Fund effects securities transactions, and that not all such research and services may be used by Harris Associates for a Fund. Likewise, a Fund may benefit from research and other services obtained from brokers through whom other clients of Harris Associates effected securities transactions.
If Harris Associates receives an eligible research or brokerage product or service that it also utilizes for non-eligible research or brokerage purposes, Harris Associates will make a good faith determination as to the cost of such mixed-use item between the eligible and non-eligible purposes and use soft dollars to pay for that portion of the cost relating to its eligible purpose.
Harris Associates may also participate in client commission arrangements, commission sharing arrangements and step-out transactions to receive eligible research and brokerage products and services. In client commission arrangements or commission sharing arrangements, Harris Associates may effect transactions, subject to best execution, through a broker and request that the broker allocate a portion of the commission or commission credits to a segregated research pool(s) maintained by the broker. Harris Associates may then direct such broker to pay for various products and services that are eligible under the safe harbor of Section 28(e). Participating in client commission arrangements or commission sharing arrangements may enable Harris Associates to (1) strengthen its key brokerage relationships; (2) consolidate payments for research and brokerage products and services; and (3) continue to receive a variety of high quality research and brokerage products and services while facilitating best execution in the trading process.
In a step-out transaction, Harris Associates directs a trade to a broker with instructions that the broker execute the transaction, but step-out all or portion of the transaction or commission in favor of another broker that provides eligible research and brokerage products or services. The second broker may clear and/or settle the transaction and receive commissions for the stepped-in portion. Harris Associates only enters into step-out transactions if it will not hinder best execution.
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In addition to trading with client commission arrangement brokers as discussed above, Harris Associates effects trades with full service and introducing brokers, electronic communication networks, alternative trading systems, and other execution services. The reasonableness of brokerage commissions paid by a Fund in relation to transaction and research services received is evaluated by the staff of Harris Associates on an ongoing basis.
When Harris Associates believes it desirable, appropriate and feasible to purchase or sell the same security for a number of client accounts at the same time, Harris Associates may aggregate its clients orders (Aggregated Orders), including orders on behalf of a Fund, in a way that seeks to obtain more favorable executions, in terms of the price at which the security is purchased or sold, the costs of the execution of the orders, and the efficiency of the processing of the transactions. Each account that participates in an Aggregated Order will participate at the average share price.
The trade allocation process takes place on as timely a basis as possible, i.e., as a client order is completed in full, or, in the case of a partially executed Aggregated Order, at the markets close when the average price can be calculated. The trader will aggregate trade orders of different portfolio managers if the trader believes the Aggregated Order would provide each client with an opportunity to achieve a more favorable execution.
In the case of an Aggregated Order that has not been completely filled, Harris Associates uses an automated application that determines an average execution price and then allocates securities among the accounts participating in the order. While Harris has a dual allocation methodology i.e., rotational and pro-rata for accounts such as the Funds, Harris Associates generally seeks to allocate partially executed Aggregated Orders in proportion to the size of the order placed for each account (i.e., pro rata), subject to certain minimum lot sizes depending on the size of the account.
Although Harris Associates believes that the ability to aggregate orders for client accounts will in general benefit its clients as a whole over time, in any particular instance, such aggregation may result in a less favorable price or execution for a particular client than might have been obtained if the transaction had been effected on an unaggregated basis.
Loomis Sayles. Generally, Loomis Sayles seeks to obtain quality executions at favorable security prices and at competitive commission rates, where applicable, through brokers and dealers who, in Loomis Sayles opinion, can provide the best overall net results for its clients. Transactions in equity securities are frequently executed through a primary market maker but may also be executed on an Electronic Communication Network (ECN), Alternative Trading System (ATS), or other execution systems that in Loomis Sayles opinion can provide the best overall net results for its clients. Fixed-income securities are generally purchased from the issuer or a primary market maker acting as principal on a net basis with no brokerage commission paid by the client. Such securities, as well as equity securities, may also be purchased from underwriters at prices which include underwriting fees.
Commissions and Other Factors in Broker or Dealer Selection. Loomis Sayles uses 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 to evaluate the overall reasonableness of brokerage commissions paid on client portfolio transactions by reference to such data. In making this evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker or dealer, are taken into account. Other relevant factors may include, without limitation: (a) the execution capabilities of the brokers and/or dealers, (b) research and other products or services (as described in the section Soft Dollars below) provided by such brokers and/or dealers which are expected to enhance Loomis Sayles general portfolio management capabilities, (c) the size of the transaction, (d) the difficulty of execution, (e) the operations facilities of the brokers and/or dealers involved, (f) the risk in positioning a block of securities, (g) fair dealing and (h) the quality of the overall brokerage and research services provided by the broker-dealer.
Soft Dollars. Loomis Sayles receipt of brokerage and research products or services are factors in Loomis Sayles selection of a broker-dealer to execute transactions for the Funds where Loomis Sayles believes that the broker-dealer will provide best execution of the transactions. Such brokerage and research products or services may be paid for with Loomis Sayles own assets or may, in connection with transactions in equity securities effected for client accounts for which Loomis Sayles exercises investment discretion, be paid for with client commissions (i.e., soft dollars).
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Loomis Sayles will only acquire research and brokerage products and services that are deemed to qualify as eligible products and services under the safe harbor of Section 28(e) of the 1934 Act. Eligible research services and products that may be acquired by Loomis Sayles are those products and services that provide advice, analysis or reports that will aid Loomis Sayles in carrying out its investment decision-making responsibilities. Eligible research must reflect the expression of reasoning or knowledge (having inherently intangible and non-physical attributes) and may include the following research items: traditional research reports; discussions with research analysts and corporate executives; seminars or conferences; financial and economic publications that are not targeted to a wide public audience; software that provides analysis of securities portfolios; market research including pre-trade and post-trade analytics; and market data. Eligible brokerage services and products that may be acquired by Loomis Sayles are those services or products that (i) are required to effect securities transactions; (ii) perform functions incidental to securities transactions; or (iii) are services that are required by an applicable self-regulatory organization or SEC rule(s). The brokerage and research products or services provided to Loomis Sayles by a particular broker-dealer may include (a) products and services created by such broker-dealer, (b) products and services created by other broker-dealers, and (c) products and services created by a third party. All soft dollar services are reviewed and approved by Loomis Sayles Chief Compliance Officer.
If Loomis Sayles receives a particular product or service that both aids it in carrying out its investment decision-making responsibilities (i.e., a research use) and provides non-research related uses, Loomis Sayles will make a good faith determination as to the allocation of the cost of such mixed-use item between the research and non-research uses, and will only use soft dollars to pay for the portion of the cost relating to its research use.
In connection with Loomis Sayles use of soft dollars, the Loomis Sayles Funds may pay a broker-dealer an amount of commission for effecting a transaction for the Funds in excess of the amount of commission another broker-dealer would have charged for effecting that transaction if Loomis Sayles determines in good faith that the amount of commission is reasonable in relation to the value of the brokerage and research products or services provided by the broker-dealer, viewed in terms of either the particular transaction or Loomis Sayles overall responsibilities to the accounts as to which Loomis Sayles exercises investment discretion.
Loomis Sayles may use soft dollars to acquire brokerage or research products and services that have potential application to all client accounts, including the Funds, or to acquire brokerage or research products and services that will be applied in the management of a certain group of client accounts and, in some cases, may not be used with respect to the Funds. The products or services may not be used in connection with the management of some of the accounts including the Funds that paid commissions to the broker-dealer providing the products or services and may be used in connection with the management of other accounts.
Loomis Sayles use of soft dollars to acquire brokerage and research products and services benefits Loomis Sayles by allowing it to obtain such products and services without having to purchase them with its own assets. Loomis Sayles believes that its use of soft dollars also benefits the Funds as described above. However, conflicts may arise between a Funds interest in paying the lowest commission rates available and Loomis Sayles interest in receiving brokerage and research products and services from particular brokers and dealers without having to purchase such products and services with Loomis Sayles own assets.
For purposes of this soft dollars discussion, the term commission includes commissions paid to brokers in connection with transactions effected on an agency basis. Loomis Sayles does not generate soft dollars on fixed-income transactions.
The revised European Union (EU) Markets in Financial Instruments Directive (MiFID II), which became effective January 3, 2018, requires EU investment managers in the scope of the EU Markets in Financial Instruments Directive to pay for research services from brokers and dealers directly out of their own resources or by establishing research payment accounts for each client, rather than through client commissions. MiFID IIs research requirements present various compliance and operational considerations for investment advisers and broker-dealers serving clients in both the United States and the EU. It is possible that Loomis Sayles will cause a Fund to pay for
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research services with soft dollars in circumstances where Loomis Sayles is prohibited from causing its other client accounts to do so, including where Loomis Sayles aggregates trades on behalf of a Fund and those other client accounts. In such situations, the Fund would bear a cost for the research services and Loomis Sayles other client accounts would not, although Loomis Sayles other client accounts might nonetheless benefit from those research services.
Client Commission Arrangements
Loomis Sayles has entered into client commission arrangements (CCAs) (also known as commission sharing arrangements) with some of its key broker-dealer relationships. In a CCA, subject to best execution, Loomis Sayles will allocate a higher portion of its clients equity trading with broker-dealers who have agreed to unbundle their commission rates in order to enable Loomis Sayles to separately negotiate rates for execution and research and research services. The execution rates Loomis Sayles has negotiated with such firms vary depending on the difficulty of the orders Loomis Sayles has asked the CCAs to execute.
Pursuant to the CCAs Loomis Sayles has with these broker-dealers, each firm will pool the research commissions accumulated during a calendar quarter and then, at the direction of Loomis Sayles, pay various broker-dealers and third party services from this pool for the research and research services such firms have provided to Loomis Sayles.
The CCAs enable Loomis Sayles to strengthen its relationships with its key broker-dealers, and limit the broker-dealers with whom it trades to those with whom it has FIX connectivity, while still maintaining the research relationships with broker-dealers that provide Loomis Sayles with research and research services. In addition, the ability to unbundle the execution and research components of commissions enables Loomis Sayles to manage commissions more efficiently and to provide greater transparency to its clients in their commission reports.
These CCAs are deemed to be soft dollar arrangements and Loomis Sayles and each CCA intends to comply with the applicable requirements of Section 28(e) of the 1934 Act, as amended, as well as the Commission Guidance Regarding Client Commission Practices under Section 28(e) in the SEC Release No. 34-54165 dated July 18, 2006.
In addition to trading with the CCA broker-dealers discussed above, Loomis Sayles continues to trade with full service broker-dealers and ECNs, ATSs and other electronic providers.
Mirova US. Mirova US has a Best Execution Committee that meets on a quarterly basis to evaluate systematically the execution performance of brokers used. For products where price is the same between different brokers, the analysis will be mainly qualitative. For products where price is a major determinant (e.g., bonds, FX), a regular audit of whether the best price was actually chosen will be performed as determined necessary.
Vaughan Nelson. In placing orders for the purchase and sale of securities for its Funds, Vaughan Nelson selects only brokers or dealers that it believes are financially responsible and will provide efficient and effective services in executing, clearing and settling an order. Vaughan Nelson 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 paid on transactions by reference to such data. In making such evaluation, all 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. Transactions in unlisted securities are carried out through broker-dealers who make the primary market for such securities unless, in the judgment of Vaughan Nelson, a more favorable price can be obtained by carrying out such transactions through other brokers or dealers.
Receipt of research services from brokers is one factor used in selecting a broker that Vaughan Nelson believes will provide best execution for a transaction. These research services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation and portfolio structure, but also meetings with management representatives of issuers and with other analysts and specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce Vaughan Nelsons expenses. Such services may be used by Vaughan Nelson in servicing other client accounts and in some cases may not be used with respect to the Funds. Receipt of services or products other than research from brokers is not a factor in the selection of brokers.
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In placing orders for the purchase and sale of securities for a Fund, Vaughan Nelson may cause the Fund to pay a broker-dealer that provides the brokerage and research services to Vaughan Nelson an amount of commission for effecting a securities transaction for the Fund in excess of the amount another broker-dealer would have charged for effecting that transaction. Vaughan Nelson must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or Vaughan Nelsons overall responsibilities to the Trusts and its other clients. Vaughan Nelsons authority to cause the Funds to pay such greater commissions is also subject to such policies as the trustees of the Trusts may adopt from time to time.
General
Subject to procedures adopted by the Board of each Trust, the Funds brokerage transactions may be executed by brokers that are affiliated with Natixis-NA or the Funds advisers or subadvisers. 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 each Trust are prohibited from dealing with each Trusts funds as a principal in the purchase and sale of securities. Since transactions in the OTC market usually involve transactions with dealers acting as principals for their own accounts, affiliated persons of the Trusts may not serve as the Funds dealer in connection with such transactions. However, the Trusts have obtained exemptive relief from the SEC permitting segments of the certain funds to enter into principal transactions with affiliates of the subadvisers to other segments of the same 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, an adviser or subadviser 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 a Fund toward the reduction of that 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 Declarations of Trust of Natixis Funds Trust I, Natixis Funds Trust II and Loomis Sayles Funds II permit each Trusts trustees to issue an unlimited number of full and fractional shares of each series. Each share of each Fund represents an equal proportionate interest in such Fund with each other share of that Fund and is entitled to a proportionate interest in the dividends and distributions from that Fund. The Declarations of Trust further permit each Trusts Board 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 each Trusts Board may determine. When you invest in a Fund, you acquire freely transferable shares of beneficial interest that entitle you to receive dividends as determined by each Trusts Board and to cast a vote for each share you own at shareholder meetings. The shares of each Fund do not have any preemptive rights. Upon termination of any Fund, whether pursuant to liquidation of the Trust or otherwise, shareholders of each class of that Fund are entitled to share pro rata in the net assets attributable to that class of shares of that Fund available for distribution to shareholders. Each Declaration of Trust also permits the Board to charge shareholders directly for custodial, transfer agency, servicing and other expenses.
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The shares of all the Funds (except as noted in this Statement and in each of the Funds Prospectuses) are divided into five classes: Class A, Class C, Class N, Class T and Class Y. The Investment Grade Bond Fund also offers Admin Class shares. Each Fund offers such classes of shares as set forth in such Funds Prospectus. As disclosed in the Prospectuses, not every Fund offers each class of shares. The share classes each have different eligibility and minimum investment requirements, which are disclosed in the relevant Prospectuses. All expenses of each Fund (including advisory and subadvisory fees) are borne by its Class A, Class C, Class N, Class T, Class Y and Admin Class shares, as applicable, on a pro rata basis, except for 12b-1 fees, which are borne only by Class A, Class C Class T and Admin Class shares and may be charged at a separate rate to each such class, and transfer agency fees for Class N shares of Multi-Asset Income Fund and Value Opportunity Fund. Transfer agency fees for Class N shares are borne directly by that class. 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 a 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 a Fund are charged with the expenses with respect to that class of the Fund and with a share of the general expenses of the relevant Fund and Trust. Any general expenses of a Trust that are not readily identifiable as belonging to a particular class of a 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 each Trust are allocated to the separate books of account of each Fund, certain expenses may be legally chargeable against the assets of all of the Funds in a Trust.
Each Declaration of Trust also permits the Trusts Board, without shareholder approval, to subdivide any 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. Each Trusts Board may also, without shareholder approval (except to the extent such approval is required by law), establish one or more additional series or classes or merge two or more existing series or classes.
Each Declaration of Trust provides for the perpetual existence of the Trusts. Each Trust, however, may be terminated at any time by vote of at least two-thirds of each series of the Trust entitled to vote. In addition, the Fund may be terminated at any time by vote of at least two-thirds of the outstanding shares of each series of the Trust. Each Fund may be terminated at any time by vote of at least two-thirds of the outstanding shares of such Fund. Similarly, any class within a Fund may be terminated by vote of at least two-thirds of the outstanding shares of such class. Each Declaration of Trust further provides that the Board may also without shareholder approval terminate the relevant Trust or Fund upon written notice to its shareholders.
Shareholders of all Funds are entitled to one vote for each full share held (with fractional votes for each fractional share held) and may vote (to the extent provided therein) on the election of trustees and the termination of a Trust and on other matters submitted to the vote of shareholders.
All classes of shares of each 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 a Trust then entitled to vote shall, except as otherwise provided in each Trusts 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 class 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.
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There will normally be no meetings of shareholders for the purpose of electing Trustees except that, in accordance with the 1940 Act, (i) a 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, 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 a 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 NAV 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 Trusts have 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 Trusts voted (assuming a quorum is present in person or by proxy) is required to amend a 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 a Trust is established and designated by the Trustees, the shareholders having beneficial interests in the other funds 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 other funds.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of a Trust. However, the Declarations of Trust disclaim shareholder liability for acts or obligations of a Trust and require that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by a Trust or the trustees. The Declarations of Trust provide for indemnification out of each 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 such 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 a Fund itself would be unable to meet its obligations.
The Declarations of Trust further provide that the relevant Board will not be liable for errors of judgment or mistakes of fact or law. However, nothing in the Declarations 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 each 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.
Each Trust offers only its own Funds shares for sale, but it is possible that a Trust might become liable for any misstatements in a prospectus that relate to another Trust. The Trustees of each Trust have considered this possible liability and approved the use of the combined prospectus for Funds of the Trust.
The procedures for purchasing shares of the Funds are summarized in the Prospectuses. All purchases made by check should be in U.S. dollars and made payable to Natixis Funds or the Funds custodian bank.
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The procedures for redemption of shares of a Fund are summarized in its Prospectus.
A shareholder automatically receives access to the ability to redeem shares by telephone following the completion of the Fund application, which is available at im.natixis.com or from an investment dealer. When selecting the service, a shareholder may have the withdrawal proceeds sent to his or her bank, in which case the shareholder must designate a bank account on his or her application 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 DST or your investment dealer a completed Service Options Form, which may require a Medallion signature guarantee, or a Signature Validation Program Stamp. 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 Federal Reserve System. If the account is with a savings bank, it must have only one correspondent bank that is a member of the Federal Reserve System. The Funds, Distributor, 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. DST, as agreed to with the Funds, 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.
The redemption price will be the NAV per share (less any applicable CDSC) next determined after the redemption request and any necessary special documentation is received by the transfer agent or your investment dealer in proper form. Payment normally will be made by the Funds within seven days thereafter. 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 Funds may withhold redemption proceeds for ten days when redemptions are made within ten calendar days of purchase by check or through ACH.
The CDSC may be waived on redemptions made from IRA accounts due to attainment of age 59 1/2 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 70 1/2 (waivers apply only to amounts necessary to meet the required minimum amount based on assets held within the Funds), 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. However, if an account is transferred to a new registration solely as an operational processing step to facilitate the distribution request from the deceased shareholders (or the estates) account, the CDSC will be waived. 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.
The CDSC also may be waived on redemptions necessary to pay plan participants or beneficiaries from certain 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.
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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.
Each Fund will normally redeem shares for cash; however, each Fund reserves the right to pay the redemption price wholly or partly in kind, if Natixis Advisors determines it to be advisable and in the interest of the remaining shareholders of a Fund. The redemptions in kind will generally, but will not necessarily, result in 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 Funds have elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which each 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 NAV of each Fund at the beginning of such period.
The Funds do not currently impose any redemption charge other than the CDSC imposed by the Funds distributor, as described in the Prospectuses. The Board reserves the right to impose additional charges at any time. A redemption constitutes a sale of shares for U.S. federal income tax purposes on which the investor may realize a long- or short-term capital gain or loss. See the section Taxes in this Statement.
The Funds reserve the right to suspend account services or refuse transaction requests if a Fund receives notice of a dispute between registered owners or of the death of a registered owner or a Fund suspects a fraudulent act. If a Fund refuses a transaction request because it receives notice of a dispute, the transaction will be processed at the NAV next determined after a Fund receives notice that the dispute has been settled or a court order has been entered adjudicating the dispute. If the Funds determine that their suspicion of fraud or belief that a dispute existed was mistaken, the transaction will be processed as of the NAV next determined after the transaction request was first received in good order.
Open Accounts
A shareholders investment is automatically credited to an open account maintained for the shareholder by DST. 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, the Funds will send each shareholder a statement providing account information that 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.
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 or honored for any class of shares.
The costs of maintaining the open account system are paid by the Funds and no direct charges are made to shareholders. Although the Funds have no present intention of making such direct charges to shareholders, they each reserve the right to do so. Shareholders will receive prior notice before any such charges are made.
Unclaimed Property Laws
States increasingly are looking at inactive mutual fund accounts as possible unclaimed or abandoned property. If your account is deemed unclaimed or abandoned under state law, the Funds may be required to escheat or transfer the assets in your account to the applicable states unclaimed property administration. The state may sell escheated shares and, if you subsequently seek to reclaim your proceeds of liquidation from the state, you may only be able to recover the amount received when the shares were sold.
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It is your responsibility to ensure that you maintain a correct address for your account, keep your account active in ways such as by contacting the Transfer Agent by mail or telephone or accessing your account through the Funds website at least every three years, and promptly cash all checks for dividends, capital gains and redemptions. Each States requirements to keep an account active can vary and are subject to change. If you invest in a Fund through a financial intermediary, we encourage you to contact the financial intermediary regarding applicable state unclaimed property laws. The Funds, the Transfer Agent and the Distributor will not be liable to shareholders or their representatives for good faith compliance with state unclaimed property laws.
Minimum Balance Policy
The Funds minimum balance policy is described in the Prospectuses.
Automatic Investment Plans (All Classes Except Class T)
Subject to each Funds investor eligibility requirements, investors may automatically invest in additional shares of a Fund on a monthly basis under the Investment Builder Program by authorizing the Fund to draw from an investors bank account. A Service Options Form must be completed to open an automatic investment plan and may be obtained by calling the Funds at 800-225-5478 or your investment dealer or by visiting the Funds website at im.natixis.com.
This program is voluntary and may be terminated at any time by DST upon notice to existing plan participants. The Investment Builder Program plan may be discontinued at any time by the investor by written notice to DST, 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 Funds are under no obligation to notify shareholders as to the nonpayment of any check.
Retirement Plans and Other Plans Offering Tax Benefits (Class A and Class 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 Funds or with certain other investments. The plans include H.R. 10 (Keogh) plans for self-employed 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.
The minimum initial investment available to retirement plans and other plans offering tax benefits is referred to in the Prospectus. For these plans, initial investments in a Fund for Class A and Class C shares 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 $50 for any subsequent investments. There is no initial or subsequent investment minimum for SIMPLE IRAs using the Natixis Funds Prototype documents. Income dividends and capital gain distributions must be reinvested (unless the investor is over age 59 1/2 or disabled). These types of accounts may be subject to fees. Plan documents and further information can be obtained from the Distributor.
Certain retirement plans may also be eligible to purchase Class N, Class T, Class Y and Admin Class shares. See the Prospectus for details.
Systematic Withdrawal Plans (All Classes Except Class T)
An investor owning a Funds shares having a value of $10,000 or more at the current public offering price may establish a Systematic Withdrawal Plan (SWP) providing for periodic payments of a fixed or variable amount. An investor may terminate the SWP at any time. A form for use in establishing an SWP is available from DST, your financial intermediary or by visiting our website at im.natixis.com. 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 Funds.
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A shareholder under an SWP may elect to receive payments monthly, quarterly, semi-annually or annually for a fixed amount of not less than $50 or a variable amount based on (1) the market value of a stated number of shares, or (2) a specified percentage of the accounts market value.
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 SWP. Withdrawals of shares of a Fund under the SWP will be treated as redemptions of shares purchased through the reinvestment of Fund distributions, or, to the extent, such shares purchased through the reinvestment of distribution in your account are insufficient to cover SWP payments, as redemptions from the earliest purchased shares of such Fund in your account. No CDSC applies to redemptions pursuant to the SWP.
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 NAV. Accordingly, a shareholder should consider whether an SWP and the specified amounts to be withdrawn are appropriate under the circumstances. The Funds 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 an SWP. See the sections Redemptions and Taxes in this Statement for certain information as to U.S. 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 an SWP. Accordingly, the Funds and the Distributor do not recommend additional investments in Class A shares by a shareholder who has an SWP 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, an SWP may not be available to pension or profit-sharing plans or IRAs that have UMB Bank N.A. as Trustee. Different documentation may be required.
Dividend Diversification Program (All Classes Except Class T)
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 other Fund and to state securities law requirements. Shares will be purchased based upon the selected Funds NAV (without a sales charge or CDSC) determined as of the close of regular trading on the NYSE on the ex-dividend date for each dividend and distribution. A dividend diversification account must be registered to the same shareholder as the distributing Fund account and, if a new account in the purchased Natixis Fund is being established, the purchased Funds minimum investment requirements must be met. Before establishing a Dividend Diversification Program into any other Natixis Fund, you must obtain and carefully read a copy of that Funds Prospectus.
Exchanging or Converting Shares
A Funds policies for exchanging or converting shares are described in its Prospectus.
Before requesting an exchange into any other Natixis Fund, please read its Prospectus carefully. Subject to the applicable rules of the SEC, the Board 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.
For purposes of determining the date on which Class C shares convert into Class A shares, a Class C share purchased through the reinvestment of dividends or capital gains distributions (a Distributed Share) will be considered to have been purchased on the purchase date (or deemed purchase date) of the Class C share through which such Distributed Share was issued. In addition, any Class C shares for which the Transfer Agent cannot determine a holding period (commonly known as Free Shares) may, depending upon system settings, convert to Class A shares even if such Class C Free Shares have been held for less than ten years. Free Shares typically arise with respect to reinvested dividends not associated with purchased shares and with respect to shares from a Fund that liquidated prior to implementation of the Class C to Class A conversion policy. Automatic conversions of Class C shares to Class A shares will generally be processed monthly on or about the 10th day of the month.
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Merrill Lynch Client Accounts Only
A shareholder currently holding Class A or C shares of a Fund in a fee-based advisory program (Advisory Program) account or currently holding Class A or C shares in a brokerage account but wishing to transfer into an Advisory Program account may convert such shares to Class Y shares of the Fund within the Advisory Program at any time. Such conversions will be on the basis of the relative net asset values per share, without requiring any investment minimum to be met and without the imposition of any redemption fee or other charge. If a CDSC is applicable to such Class A or C shares, then the conversion may not occur until after the shareholder has held the shares for an 18 month period (Class A shares) or 12 month period (Class C shares), except that a CDSC applicable to Class A or C shares converted to Class Y shares through a fee-based individual retirement account on the Merrill Lynch platform will be waived and Merrill Lynch will remit the portion of the payment to be made to the Distributor equal to the number of months remaining on the CDSC period divided by the total number of months of the CDSC period.
Automatic Exchange Plan (All Classes Except T)
As described in the Prospectus, a shareholder may establish an Automatic Exchange Plan under which shares of a Fund are automatically exchanged each month for shares of the same class of one or more of the other Funds. Registration on all accounts must be identical. The Fund minimum of the new fund must be met in connection with each investment. Exchanges may be processed on any day of the month (or the first business day thereafter if the exchange date is not a business day) until the account is exhausted or until DST is notified in writing to terminate the plan. Exchanges may be made in amounts of $50 or more. The Service Options Form may be used to establish an Automatic Exchange Plan and is available from DST, your financial representative or by visiting our website at im.natixis.com.
Restrictions on Buying, Selling and Exchanging Shares
As stated in each Funds Prospectus, each 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 a Fund when the authorized broker or intermediary accepts such orders; and such orders will be priced using that Funds NAV 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 market open 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, free of charge, at the shareholders request.
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Self-Servicing Your Account with Natixis Funds Personal Access Line® and Website (All Classes Except Class N and Class T)
Natixis Funds shareholders may access account information, including share balances and recent account activity, online by visiting our website at im.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 numbers (PINs). In addition, you may restrict these privileges from your account by calling Natixis Funds 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 im.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 website. The initiation of any activity through the Natixis Funds Personal Access Line® or website at im.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 website 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.
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 NATIXIS FUNDS.
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 PROSPECTUS OF THE SELECTED 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.
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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 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 website 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. |
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:
All account types excluding SIMPLE IRAs:
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.
SIMPLE IRA shareholders please use:
Natixis Funds
P.O. Box 219011
Kansas City, MO 64121-9011
Notification may also be made by calling 800-813-4127 during normal business hours.
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The method for determining the public offering price and NAV per share is summarized in the Prospectuses.
The total NAV of each class of shares of a Fund (the excess of the assets of such 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. Each Fund will not 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. Fund securities and other investments for which market quotations are readily available, as outlined in the Funds policies and procedures, are valued at market value. A Fund may use independent pricing services recommended by the adviser and subadviser and approved by the Board to obtain market quotations. Generally, Fund securities and other investments are valued as follows:
| Equity securities (including shares of closed-end investment companies and exchange-traded funds (ETFs)), exchange traded notes, rights, and warrants listed equity securities are valued at the last sale price quoted on the exchange where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. 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 quotations on the applicable NASDAQ Market. Unlisted equity securities (except unlisted preferred equity securities discussed below) are valued at the last sale price quoted in the market where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. If there is no sale price or closing bid quotation available, unlisted equity securities will be valued using evaluated bids furnished by an independent pricing service, if available. In some foreign markets, an official close price and a last sale price may be available from the foreign exchange or market. In those cases, the official close price is used. Valuations from foreign markets may be subject to the Funds fair value policies described below. If a right is not traded on any exchange, its value is based on the market value of the underlying security, less the cost to subscribe to the underlying security (e.g., to exercise the right), adjusted for the subscription ratio. If a warrant is not traded on any exchange, a price is obtained from a broker-dealer. |
| Debt Securities and unlisted preferred equity securities evaluated bids furnished to a Fund by an independent pricing service using market information, transactions for comparable securities and various relationships between securities, if available, or bid prices obtained from broker-dealers. |
| Senior Loans bid prices supplied by an independent pricing service, if available, or bid prices obtained from broker-dealers. |
| Bilateral Swaps bilateral credit default swaps are valued based on mid prices (between the bid price and the ask price) supplied by an independent pricing service. Bilateral interest rate swaps and bilateral standardized commodity and equity index total return swaps are valued based on prices supplied by an independent pricing service. If prices from an independent pricing service are not available, prices from a broker-dealer may be used. |
| Centrally Cleared Swaps settlement prices of the clearing house on which the contracts were traded or prices obtained from broker-dealers. |
| Options domestic exchange-traded single name equity options contracts (including options on ETFs) are valued at the mean of the National Best Bid and Offer quotations. Foreign exchange-traded single name equity options contracts are valued at the most recent settlement price. Options contracts on domestic indices shall be priced at the average of the closing bid and ask quotations as of the close of trading on the Chicago Board Options Exchange (CBOE). On the last business day of the month, the Funds will fair value the S&P 500® index options using the closing rotation values published by the CBOE. Options contracts on foreign indices are priced at the most recent settlement price. Options on futures contracts are valued using the current settlement price on the exchange on which, over time, they are traded most extensively. Other exchange-traded options are valued at the average of the closing bid and ask quotations on the exchange on which, over time, they are traded most extensively. OTC currency options and swaptions are valued at mid prices (between the bid and the ask price) supplied by an independent pricing service, if available. Other OTC option contracts (including currency options and swaptions not priced through an independent pricing service) are valued based on prices obtained from broker-dealers. Valuations based on information from foreign markets may be subject to the Funds fair value policies described below. |
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| Futures most recent settlement price on the exchange on which the Funds adviser or subadviser believes that, over time, they are traded most extensively. Valuations based on information from foreign markets may be subject to the Funds fair value policies described below. |
| Forward Foreign Currency Contracts interpolated rates determined based on information provided by an independent pricing service. |
Foreign denominated assets and liabilities are translated into U.S. dollars based upon foreign exchange rates supplied by an independent pricing service. Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser or subadviser pursuant to procedures approved by the Board. A Fund may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign 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). When fair valuing its securities or other investments, each Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities or other market activity and/or significant events that occur after the close of the foreign market and before the time a Funds NAV is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Funds NAV 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 a Fund. Valuations for securities traded in the OTC market may be based on factors such as market information, transactions for comparable securities, and various relationships between securities or bid prices obtained from broker-dealers. Evaluated prices from an independent pricing service may require subjective determinations and may be different than actual market prices or prices provided by other pricing services.
Trading in some of the portfolio securities or other investments of some of the Funds 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 these Funds NAV does not take place at the same time as the prices of many of its portfolio securities or other investments are determined, and the value of these Funds portfolios may change on days when these Funds are not open for business and their shares may not be purchased or redeemed.
The per share NAV of a class of each Funds shares is computed by dividing the number of shares outstanding into the total NAV attributable to such class.
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 financial intermediary, and not the Funds, 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.
Please see Appendix A to the Prospectus for information regarding eligibility for sales load waivers and discounts available through specific financial intermediaries, which may differ from those disclosed elsewhere in the Prospectus or this SAI.
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If you invest in class T shares, it is the responsibility of the financial intermediary to ensure you obtain the proper breakpoint discount.
Cumulative Purchase Discount
The Cumulative Purchase Discount privilege is described in the prospectus.
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., $50,000, $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 Trusts and other Natixis Funds 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 Transfer Agent.
Purchases made within 90 days of the establishment of the Letter may be used towards meeting the Letter of Intent.
The cumulative purchase discount, described in the prospectus, permits the aggregate value at the current public offering price of Class A shares of any accounts with the Trusts 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 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 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 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 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 Natixis Funds (excluding Class T shares) 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 retirement accounts and sole proprietorships or any other group of individuals acceptable to the Distributor. If the combined value of the purchases and total investments exceed a sales charge breakpoint as disclosed in the Prospectus, 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. Savings Incentive Match Plan for Employees (SIMPLE IRA) contributions will automatically be linked with those of 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.
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.
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Clients of the Adviser
Investment advisory clients of each adviser and its affiliates may invest in Class Y shares of the Funds below the 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 Trusts or another Natixis Fund; any director, officer or partner of a client of an adviser to any series of the Trusts or another Natixis Fund; 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 Trusts or another Natixis Fund if at least one participant in the plan qualifies under category (1) above; and (3) an individual who invests through a Keogh or IRA and is a participant in an employee benefit plan that is a client of an adviser to any series of the Trusts or another Natixis Fund. Any investor eligible for this arrangement should so indicate in writing at the time of the purchase. In addition, the front-end sales charge or CDSC may be waived for investments in Class A shares, for Funds that do not offer Class Y shares, by clients of an adviser to any series of the Trusts or another Natixis Fund.
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 a 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 any Fund may be purchased at NAV by registered investment advisers, financial planners or other intermediaries who place trades for their own accounts or by clients of registered investment advisers, financial planners or other intermediaries where the registered investment adviser, financial planner or other intermediary receives an advisory, management, or consulting fee for the investment in the fund. 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 any Fund may also be purchased at NAV through certain broker-dealers or financial services organizations without any transaction fee. Such organizations may also receive compensation paid by Natixis Advisors, or its affiliates out of their own assets (as described in the section Distribution Agreements and Rule 12b-1 Plans), or be paid indirectly by the Fund in the form of servicing, distribution or transfer agent fees.
Class A shares of the Funds may be purchased at NAV for investments by certain retirement plans. The availability of this pricing may depend upon the policies and procedures of your specific intermediary; consult your financial adviser.
Certain Retirement Plans as it relates to load waivers, share class eligibility, and account minimums is defined as follows:
Certain Retirement Plans includes 401(k) plans, 457 plans, 401(a) plans (including profit-sharing and money purchase pension plans), 403(b) and 403(b)(7) plans, defined benefit plans, non-qualified deferred compensation plans, Taft Hartley multi-employer plans and retiree health benefit plans. The accounts must be plan level omnibus accounts to qualify.
Certain Retirement Plans does not include individual retirement plan accounts such as IRAs, Roth IRAs, SIMPLE, SEP, SARSEP, etc. Any retirement plan accounts registered in the name of a participant would not qualify.
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Certain Clients of Financial Intermediaries
Class A shares may be offered without front-end sales charges or a CDSC to clients of a financial intermediary that has entered into an agreement with the Distributor and has been approved by the Distributor to offer Fund shares to self-directed investment brokerage accounts that may or may not charge a transaction fee.
Certain Retirement Plans
Class A shares of the Funds are available at NAV for investments by participants in certain employer-sponsored retirement plans. The availability of this pricing may depend upon the policies and procedures of your specific intermediary; consult your financial adviser.
Bank Trust Departments or Trust Companies
Class A shares of the Funds are available at NAV 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.
As described in the Prospectuses, it is the policy of each Fund to pay shareholders at least annually according to the schedule specified in each Funds Prospectus, as dividends, all or substantially all of its net investment income and to distribute annually (or, in the case of short-term gains, more frequently than annually if determined by the Fund to be in the best interest of shareholders) all or substantially all of its net realized capital gains, if any, after offsetting any capital loss carryforwards. To the extent permitted by law, the Board may adopt a different schedule for making distributions as long as distributions of net investment income and net realized capital gains, if any, are made at least annually. A Funds distribution rate fluctuates over time for various reasons, and there can be no assurance that a Funds distributions will not decrease or that a Fund will make any distributions when scheduled. For example, foreign currency losses potentially reduce or eliminate, and have in the past reduced, regularly scheduled distributions for the Multi-Asset Income Fund, High Income Fund and Investment Grade Bond Fund.
Ordinary income dividends and capital gain distributions are reinvested based upon the NAV determined as of the close of the NYSE on the ex-dividend 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 Natixis Funds, contacting Natixis Funds at 800-225-5478 or visiting im.natixis.com to change your distribution option. In order for a change to be in effect for any dividend or distribution, it must be received by the Natixis Funds 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 as undeliverable to the Funds 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.
As required by federal law, U.S. federal tax information regarding Fund distributions will be furnished to each shareholder for each calendar year early in the succeeding year. Funds with significant investments in REITs typically request a 30-day extension to provide such federal tax information to their shareholders.
The following discussion of certain U.S. federal income tax consequences of investing in a Fund is based on the Code, U.S. Treasury regulations, and other applicable authorities, all as of the date of this Statement. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal tax considerations generally applicable to investing in the Funds. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situations and the possible application of foreign, state and local tax laws.
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Taxation of the Funds
Each Fund has elected to be treated and intends to qualify and be eligible to be treated each year as a RIC under Subchapter M of the Code. In order to qualify for the special tax treatment accorded to RICs and their shareholders under the Code, each Fund must, among other things: (i) derive at least 90% of its gross income in 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 (QPTPs); (ii) diversify its holdings so that at the end of each quarter of a Funds taxable year (a) at least 50% of the value of the Funds total assets consists of cash and cash items, U.S. government securities, securities of other RICs, and other securities limited, with respect to any one issuer, to not 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, including through corporations in which the Fund owns a 20% or more voting stock interest (1) in the securities (other than those of the U.S. government or other RICs) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar or related trades or businesses, or (2) in the securities of one or more QPTPs; and (iii) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid generally taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses, in each case determined with reference to any capital loss carryforwards) and net tax-exempt interest income, if any, for such year.
In general, for purposes of the 90% gross income requirement described in (i) above, income derived by a Fund 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 directly by the Fund. However, 100% of the net income derived by a Fund from an interest in a QPTP (a partnership (a) interests in which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof, and (b) that derives less than 90% of its income from the qualifying income described in (i)(a) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for U.S. federal income tax purposes because they meet the passive income requirement under Code Section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to RICs, such rules do apply to a RIC with respect to items attributable to an interest in a QPTP.
Gains from foreign currencies (including foreign currency futures and foreign currency forward contracts) currently constitute qualifying income for purposes of the 90% test described in (i) above. However, the U.S. Treasury has the authority to issue regulations (possibly with retroactive effect) excluding from the definition of qualifying income a Funds foreign currency gains to the extent that such income is not directly related to a Funds principal business of investing in stock or securities. This could adversely affect the qualification of the Fund as a RIC.
The tax treatment of certain derivative instruments in which a Fund might invest is not certain and may bear on the Funds ability to qualify as a RIC under the Code. In particular, it is unclear how such instruments, and the income or gains therefrom are treated under the gross income or diversification tests applicable to RICs. In the event the Fund were not to qualify as a RIC, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits would be taxable to shareholders as ordinary income, as further described below.
For purposes of the diversification requirements set forth in (ii) above, outstanding voting securities of an issuer include the equity securities of a QPTP. Also for purposes of the diversification requirements in (ii) above, identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the IRS with respect to identification of the issuer for a particular type of investment may adversely affect a Funds ability to satisfy the diversification requirements.
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Assuming that it qualifies for treatment as a RIC, a Fund will not be subject to U.S. federal income tax on income or gains distributed to its shareholders in a timely manner in the form of dividends (including Capital Gain Dividends, as defined below). If a Fund were to fail to satisfy the income, diversification or distribution requirements described above, the Fund could in some cases cure such failure, including by paying a Fund-level tax, paying interest, making additional distributions or disposing of certain assets. If a Fund were ineligible to or did not cure such a failure for any year, or if the Fund otherwise were to fail to qualify as a RIC accorded special tax treatment for such 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 long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends-received deduction in the case of corporate shareholders and may be eligible to be treated as qualified dividend income in the case of shareholders taxed as individuals, provided in both cases that the shareholder meets certain holding period and other requirements in respect of a Funds shares (as described below). In addition, a Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying for the special tax treatment accorded to RICs under the Code.
Each 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 a Fund retains any investment company taxable income, the Fund will be subject to tax at regular corporate rates on the amounts retained. Each Fund also intends to distribute annually all or substantially all of its net capital gain (that is, the excess of net long-term capital gain over net short-term capital loss, in each case determined with reference to any loss carryforwards). If a Fund retains 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 timely notice to its shareholders, who then in turn (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gains, their respective 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 U.S. federal income tax liabilities, if any, and to claim refunds on properly-filed U.S. federal income tax returns to the extent the credit exceeds such liabilities. If a Fund makes this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by an amount equal to the difference between the amount of undistributed capital gains included in the shareholders gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The Funds are not required to, and there can be no assurance that a Fund will, make this designation if a Fund retains all or a portion of its net capital gain in a taxable year.
In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend, its taxable income and its earnings and profits, a RIC generally may elect to treat any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to such portion of the taxable year) and certain late-year ordinary losses (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable disposition of property attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.
Capital losses in excess of capital gains (net capital losses) are not permitted to be deducted against a Funds net investment income. Instead, potentially subject to certain limitations, a Fund may carry net capital losses from any taxable year forward to subsequent taxable years to offset capital gains, if any, realized during such subsequent taxable years. Distributions from capital gains generally are made after applying any available capital loss carryforwards. Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether a Fund retains or distributes such gains. If a Fund incurs or has incurred net capital losses, those losses will be carried forward to one or more subsequent taxable years without expiration to offset capital gains realized during such subsequent taxable years; any such carryforward losses will retain their character as short-term or long-term. A Funds annual shareholder report will describe its available capital loss carryforwards (if any).
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If a Fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending on October 31 of such year (or November 30 or December 31 of that year if the Fund is permitted to elect and so elects) of such year plus any such amounts retained from the prior year, the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For purposes of the required excise tax distribution, a Funds ordinary gains and losses from the sale, exchange or other taxable disposition of property that would be taken into account after October 31 (or November 30 or December 31, if the Fund makes the election referred to above) generally are treated as arising on January 1 of the following calendar year; in the case of a Fund with a December 31 year end that makes the election described above, no such gains or losses will be so treated. Also for purposes of the excise tax, each Fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. Each Fund generally intends to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.
Taxation of Fund Distributions
For U.S. federal income tax purposes, distributions of investment income generally are taxable to shareholders as ordinary income to the extent of a Funds earnings and profits. Taxes on distributions of capital gains are determined by how long a Fund owned (or is deemed to have owned) the investments that generated them, rather than how long a shareholder has owned his or her shares. In general, a Fund will recognize long-term capital gain or loss on the disposition of assets it has owned (or is deemed to have owned) for more than one year, and short-term capital gain or loss on the disposition of investments it has owned (or is deemed to have owned) for one year or less. Distributions of net capital gain that are properly reported by the Fund as capital gain dividends (Capital Gain Dividends) generally will be taxable to a shareholder receiving such distributions as long-term capital gain includible in net capital gain and taxed to individuals at reduced rates. Distributions of the excess of net short-term capital gain over net long-term capital loss generally will be taxable to a shareholder receiving such distributions as ordinary income. Distributions from capital gains generally are made after applying any available capital loss carryforwards.
Fund distributions are taxable to shareholders as described herein even if they are paid from income or gains earned by a 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.
Dividends declared and payable by the Funds during October, November or December to shareholders of record on a date in any such month and paid by the Funds during the following January generally will be treated for U.S. federal income tax purposes as paid by the Funds and received by shareholders on December 31 of the year in which dividends are declared rather than the calendar year in which they are received.
Distributions of investment income properly reported by a Fund as derived from qualified dividend income will be taxable to individuals at the reduced rates applicable to long-term capital gain. In order for some portion of the dividends received by a 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 that Funds shares. In general, a dividend is not 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 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 that is readily tradable on an established securities market in the U.S.) or (b) treated as a passive foreign investment company (as defined below). Income derived from investments in derivatives, fixed-income securities and REITs generally is not eligible for treatment as qualified dividend income.
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If the aggregate qualified dividends received by a 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 reported Capital Gain Dividends) will be eligible to be treated as qualified dividend income.
In general, properly reported dividends of net investment income received by corporate shareholders of a Fund generally will qualify for the dividends-received deduction available to corporations to the extent they are properly reported as being attributable to the amount of eligible dividends received by the Fund from domestic corporations for the taxable year. In general, a dividend received by a Fund will not be treated as an eligible dividend (1) 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 (2) 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 a Fund or (2) otherwise by application of various provisions of the Code (for example, the dividends-received deduction is reduced in the case of a dividend received on debt-financed portfolio stock generally, stock acquired with borrowed funds). Dividends received by a Fund from a REIT will not qualify for the corporate dividends-received deduction. Please reference the Funds website at im.natixis.com for the Funds historical corporate qualified dividends amounts. Data shown represents historical corporate qualified dividends amounts and is not an indication nor a guarantee of future results.
Any distribution of income that is attributable to (i) income received by a Fund in lieu of dividends with respect to securities on loan pursuant to a securities lending transaction, or (ii) dividend income received by a Fund on securities it temporarily purchased from a counterparty pursuant to a repurchase agreement that, for U.S. federal income tax purposes, is treated as a loan by the Fund, generally will not constitute qualified dividend income to individual shareholders or be eligible for the dividends-received deduction for corporate shareholders.
Pursuant to proposed regulations on which RICs may rely, distributions by a RIC to its shareholders that the RIC properly reports as section 199A dividends, as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non-corporate shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to certain limitations. Very generally, a section 199A dividend is any dividend or portion thereof that is attributable to certain dividends received by the RIC from REITs, to the extent such dividends are properly reported as such by the RIC in a written notice to its shareholders. A section 199A dividend is treated as a qualified REIT dividend only if the shareholder receiving such dividend holds the dividend-paying RIC shares for at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to make related payments with respect to a position in substantially similar or related property. A RIC is permitted to report such part of its dividends as section 199A dividends as are eligible, but is not required to do so.
The Code generally imposes an additional Medicare contribution tax on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. For these purposes, net investment income generally includes, among other things, (i) distributions paid by a Fund of net investment income and capital gains as described above, and (ii) any net gain from the sale, exchange, redemption or other taxable disposition of Fund shares. Shareholders are advised to consult their tax advisers regarding the possible implications of this additional tax on their investment in a Fund.
If a 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 generally 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
A sale, exchange or redemption of Fund shares generally will 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, gain or loss on the taxable disposition of Fund shares generally will be
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treated as short-term capital gain or loss. However, any loss realized upon a taxable disposition of Fund shares held by a shareholder for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends 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 under the Codes wash sale rules if other substantially identical shares of that 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.
Upon the redemption or exchange of Fund shares, the Fund or, in the case of shares purchased through a financial intermediary, the financial intermediary may be required to provide you and the IRS with cost basis and certain other related tax information about the Fund shares you redeemed or exchanged. See the Funds Prospectus for more information.
Certain Fixed-Income and Other Instruments
Some debt obligations with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) that are acquired by a Fund will be treated as debt obligations that are issued originally at a discount. Generally, the amount of the OID is treated as interest income and is included in a Funds income (and required to be distributed by the Fund) over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. In addition, payment-in-kind securities will give rise to income that is required to be distributed and is taxable even though the Fund holding the security receives no interest payment in cash on the security during the year.
Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by a Fund in the secondary market may be treated as having market discount. Very generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its revised issue price) over the purchase price of such obligation. Subject to the discussion below regarding Section 451 of the Code, (i) generally, any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the accrued market discount on such debt security, (ii) alternatively, a Fund may elect to accrue market discount currently, in which case the Fund will be required to include the accrued market discount in the Funds income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security, and (iii) the rate at which the market discount accrues, and thus is included in the Funds income, will depend upon which of the permitted accrual methods the Fund elects. Notwithstanding the foregoing, effective for taxable years beginning after 2017, Section 451 of the Code generally requires any accrual method taxpayer to take into account items of gross income no later than the time at which such items are taken into account as revenue in the taxpayers financial statements. Although the application of Section 451 to the accrual of market discount is currently unclear, the Treasury and IRS have announced that they intend to issue proposed regulations providing that Section 451 does not apply to market discount. If Section 451 were to apply to the accrual of market discount, the Fund would be required to include in income any market discount as it takes the same into account on its financial statements. Each Funds current practice is to include in income any market discount as it takes the same into account on its financial statements and therefore no changes to the Funds financial statements would be expected to result if Section 451 applied to the accrual of market discount.
Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by a Fund may be treated as having OID or, in certain cases, acquisition discount (very generally, the excess of the stated redemption price over the purchase price). A Fund will be required to include the OID or acquisition discount in income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which OID or acquisition discount accrues, and thus is included in a Funds income, will depend upon which of the permitted accrual methods the Fund elects.
If a Fund holds the foregoing kinds of obligations, or other debt obligations subject to special rules under the Code, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the Fund actually received. Such distributions may be made from the cash assets of the Fund or, if
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necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause a Fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger Capital Gain Dividend than if the Fund had not held such obligations.
A portion of the OID accrued on certain high yield discount obligations may not be deductible to the issuer and will instead be treated as a dividend paid by the issuer. 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 attributable to the deemed dividend portion of such OID.
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 whether or to what extent the Fund should recognize market discount on a debt obligation; when the Fund may cease to accrue interest, OID or market discount; when and to what extent the Fund may take deductions for bad debts or worthless securities and how the Fund should allocate payments received on obligations in default between principal and income. These and other related issues will be addressed by the Fund when, as and if it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a RIC and does not become subject to U.S. federal income or excise tax.
Investments in Collateralized Loan Obligations. The timing and character of income or gains arising from CLOs can be uncertain depending on the tranche (debt or equity). Equity tranches of CLOs elect to be treated as partnerships or corporations. To the extent a Fund invests in equity tranches that are treated as partnerships for U.S. federal income tax purposes, all or a portion of any income and gains from such entities could constitute non-qualifying income to the Fund for purposes of the 90% gross income requirement described above. In such cases, a Funds investments in such entities could be limited by its intention to qualify as a RIC, and could bear on its ability to so qualify. Income from such entities may be allocated to a Fund on a gross, rather than net, basis, for purposes of the 90% gross income requirement. To the extent, a Fund invests in equity tranches that are treated as corporations, the CLO could be subject to the PFIC rules depending on where the CLO is organized. See PFIC discussion.
Securities Purchased at a Premium
Very generally, where a Fund purchases a bond at a price that exceeds the redemption price at maturity (i.e., a premium), the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if a Fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the Fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, the Fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require a Fund to reduce its tax basis by the amount of amortized premium.
Passive Foreign Investment Companies
Funds that invest in foreign securities may own shares (or be treated as owning shares) in certain foreign entities that are treated as passive foreign investment companies (each a PFIC), which could potentially subject such a Fund to U.S. federal income tax (including interest charges) on distributions received from the PFIC or on proceeds received from a disposition of shares in the PFIC. This tax cannot be eliminated by making distributions to Fund shareholders. However, a Fund may make certain elections to avoid the imposition of that tax. For example, a Fund may elect to mark the gains (and to a limited extent losses) in a PFIC to the market as though the Fund had sold and repurchased its holdings in the PFIC on the last day of the Funds taxable year. Such gains and losses are treated as ordinary income and loss. Each Fund also may in certain cases elect to treat a PFIC as a qualified electing fund (i.e., make a QEF election), in which case the Fund would be required to include in its income annually its share of the PFICs income and net capital gains, regardless of whether it receives any distributions from the PFIC.
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The mark-to-market and QEF elections may accelerate the recognition of income (without the receipt of cash) and increase the amount required to be distributed by a Fund to avoid taxation. Making either of these elections therefore may require a Fund to liquidate other investments (including when it is not advantageous to do so) to meet its distribution requirements, which also may accelerate the recognition of gain and affect the Funds total return. Because it is not always possible to identify a foreign corporation as a PFIC, a Fund may incur the tax and interest charges described above in some instances. If a Fund indirectly invests in PFICs by virtue of the Funds investment in other funds, it may not make such PFIC elections; rather, the underlying funds directly investing in the PFICs would decide whether to make such elections. Dividends paid by PFICs will not be eligible to be treated as qualified dividend income.
Some of the CLOs in which the Fund may invest may be PFICs, which are generally subject to the tax consequences described above. Investment in certain equity interests of CLOs that are subject to treatment as PFICs for U.S. federal income tax purposes may cause the Fund to recognize income in a tax year in excess of the Funds distributions from such CLOs, PFICs and the Funds proceeds from sales or other dispositions of equity interests in other CLOs and other PFICs during that tax year. As a result, the Fund generally would be required to distribute such income to satisfy the distribution requirements applicable to RICs.
Master Limited Partnerships
A Funds pursuit of investments in MLPs will potentially be limited by the Funds intention to qualify for the special tax treatment accorded a RIC and its shareholders and could adversely affect the Funds ability to qualify as such. If a Fund does not appropriately limit such investments or if such investments are recharacterized for U.S. federal income tax purposes, the Funds status as a RIC may be jeopardized.
A Funds investments in MLPs may result in the Fund recognizing ordinary income and capital gains and/or receiving tax-free return of capital distributions. For U.S. federal income tax purposes, MLPs are generally treated as partnerships. As a partner in the MLPs, a Fund must report its allocable share of the MLPs taxable income in computing its taxable income, regardless of the extent (if any) to which the MLPs make cash distributions. The Funds expect that the cash received by a Fund with respect to its MLP investments will generally exceed the taxable income allocated to the Fund with respect to such investments (and this excess generally will not be currently taxable to the Fund but, rather, will result in a reduction of the Funds adjusted tax basis in each MLP interest as described in the following paragraph). This is the result of a variety of factors, including significant non-cash deductions, such as depreciation and depletion deductions, available to the MLPs in calculating their taxable income.
A distribution from an MLP is treated as a tax-free return of capital to the extent of the Funds tax basis in its MLP interest and as gain from the sale or exchange of the MLP interest to the extent the distribution exceeds the Funds tax basis in its MLP interest, which gain is treated as either capital gain or ordinary income depending on a variety of factors. If the Fund distributes a portion or all of such excess cash that is not supported by other income of the Fund, the distribution will be treated as a return of capital to shareholders for U.S. federal income tax purposes. Although return of capital distributions are not taxable, such distributions would reduce a shareholders basis in his or her shares and therefore may increase a shareholders tax liability upon a sale of such shares. The Funds do not intend to make return of capital distributions. Further, a Fund may realize (i) taxable income in excess of economic gain in respect of interests in an MLP, on the disposition of an interests therein, or (ii) taxable income in excess of cash flow with respect to the MLP in a later period (including, for example, in respect of an MLP debt restructuring), and the Fund must take such income into account in determining whether the Fund has satisfied its distribution requirements. The Fund may have to borrow or liquidate securities to satisfy its distribution requirements and to meet its redemption requests, including at times when it may not be advantageous to do so. In addition, any gain recognized, either upon the sale of a Funds MLP interest or sale by the MLP of property held by it, including in excess of economic gain thereon, treated as so-called recapture income, will be treated as ordinary income.
Foreign Taxes
Income, gains and proceeds received by a Fund from investments in securities of foreign issuers may be subject to foreign withholding and other taxes. This will decrease the Funds yield on securities subject to such taxes. Tax treaties between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of a Funds assets at the Funds tax year end consists of the securities of foreign corporations, the Fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portions of qualified taxes
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paid by the Fund to foreign countries in respect of foreign securities that the Fund has held for at least the minimum period specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes paid by the Fund. A shareholders ability to claim an offsetting foreign tax credit or deduction in respect of foreign taxes paid by a Fund is subject to certain limitations imposed by the Code, which may result in the shareholders not receiving a full credit or deduction (if any) for the amount of such taxes. Shareholders who do not itemize on their U.S. federal income tax returns may claim a credit (but not a deduction) for such foreign taxes. Shareholders that are not subject to U.S. federal income tax, and those who invest in the Fund through tax-exempt shareholders (including those who invest in the Fund through IRAs or other tax-advantaged retirement plans), generally will receive no benefit from any tax credit or deduction passed through by the Fund. Even if a Fund were eligible to make such an election for a given year, it may determine not to do so.
Foreign Currency Transactions
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. Any such net gains could require a larger dividend toward the end of the calendar year. Any such net losses will generally reduce and potentially require the recharacterization of prior ordinary income distributions. Such ordinary income treatment may accelerate Fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by a Fund to offset income or gains earned in subsequent taxable years.
Gain or loss on foreign currency denominated debt securities and on certain other financial instruments, such as forward currency contracts and currency swaps, that is attributable to fluctuations in exchange rates occurring between the date of acquisition and the date of settlement or disposition of such securities or instruments may be treated under Section 988 of the Code as ordinary income or loss. A Fund may elect out of the application of Section 988 of the Code with respect to the tax treatment of each of its foreign currency forward contracts to the extent that (i) such contract is a capital asset in the hands of that Fund and is not part of a straddle transaction and (ii) the Fund makes an election by the close of the day the contract is entered into to treat the gain or loss attributable to such contract as capital gain or loss.
A Funds forward contracts may qualify as Section 1256 Contracts under the Code if the underlying currencies are currencies for which there are futures contracts that are traded on and subject to the rules of a qualified board or exchange. However, a forward currency contract that is a Section 1256 Contract would, absent an election out of Section 988 of the Code as described in the preceding paragraph, be subject to Section 988. Accordingly, although such a forward currency contract would be marked-to-market annually like other Section 1256 Contracts, the resulting gain or loss would be ordinary. If a Fund were to elect out of Section 988 with respect to forward currency contracts that qualify as Section 1256 Contracts, the tax treatment generally applicable to Section 1256 Contracts, as described above, would apply to those forward currency contracts: that is, the contracts would be marked-to-market annually and gains and losses with respect to the contracts would be treated as 60/40 gain or loss. If a Fund were to elect out of Section 988 with respect to any of its forward currency contracts that do not qualify as Section 1256 Contracts, such contracts will not be marked to market annually and the Fund will recognize short-term or long-term capital gain or loss depending on the Funds holding period therein. A Fund may elect out of Section 988 with respect to all, some or none of its forward currency contracts.
Options, Futures, Forward Contracts, Swap Agreements, Short Sales and Hedging Transactions
A Funds investments in options, futures contracts, hedging transactions, forward contracts, swap agreements, short sales, structured notes, securities loans and certain other transactions may be subject to one or more special tax rules (including mark-to-market, constructive sale, straddle, notional principal contract, wash sale, short sale and other rules). These rules may affect whether gains and losses recognized by a Fund are treated as ordinary or capital or as short-term or long-term, accelerate the recognition of income or gains to the Fund, defer losses to the Fund, or cause adjustments in the holding periods of Fund securities. These rules could therefore affect the amount, timing and/or character of distributions to Fund shareholders. Moreover, because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether a Fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a RIC and avoid a Fund-level tax.
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The tax treatment of certain positions entered into by a Fund (including regulated futures contracts, certain foreign currency positions and certain listed non-equity options) will be governed by section 1256 of the Code (section 1256 contracts). Gains or losses on section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses (60/40), although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, section 1256 contracts held by the Fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are marked to market with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable.
In general, option premiums received by a Fund are not immediately included in the income of the Fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the Fund transfers or otherwise terminates the option (e.g., through a closing transaction). If a call option written by a Fund is exercised and the Fund sells or delivers the underlying stock, the Fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the Fund minus (b) the Funds basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by a Fund pursuant to the exercise of a put option written by it, the Fund generally will subtract the premium received for purposes of computing its cost basis in the securities purchased. Gain or loss arising in respect of a termination of a Funds obligation under an option other than through the exercise of the option will be short-term gain or loss depending on whether the premium income received by the Fund is greater or less than the amount paid by the Fund (if any) in terminating the transaction. Thus, for example, if an option written by a Fund expires unexercised, the Fund generally will recognize short-term gain equal to the premium received.
A Funds options activities may include transactions constituting straddles for U.S. federal income tax purposes, that is, that trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Such straddles include, for example, positions in a particular security, or an index of securities, and one or more options that offset the former position, including options that are covered by a Funds long position in the subject security. Very generally, where applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect to substantially similar or related property, to the extent of unrealized gain in the latter, and (ii) that the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and begin anew once the position is no longer part of a straddle. Options on single stocks that are not deep in the money may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying qualified covered calls that are in the money although not deep in the money will be suspended during the period that such calls are outstanding. These straddle rules and the rules governing qualified covered calls could cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions that would otherwise constitute qualified dividend income or qualify for the dividends-received deduction to fail to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends-received deduction, as the case may be.
Certain of a Funds investments in derivative instruments, foreign currency denominated instruments, and any of the Funds transactions in foreign currencies and hedging activities, may result in a difference between the Funds book income and taxable income. This difference may cause a portion of a Funds distributions to constitute a return of capital or capital gain for tax purposes or require the Fund to make distributions exceeding book income to qualify as a RIC accorded special tax treatment and to avoid a fund-level tax.
Commodity-Linked Derivatives
A Funds use of certain commodity-linked structure notes will potentially be limited by the Funds intention to qualify as a RIC, and will potentially bear on the Funds ability to qualify as such. The tax treatment of certain commodity-linked instruments including structured notes in which a Fund might invest is not certain, in particular with respect to whether income or gains from such instruments constitute qualifying income to a RIC. If a Fund were to treat income or gain from a particular instrument as qualifying income and the income or gain were later determined not to constitute qualifying income and, together with any other nonqualifying income, caused the Funds nonqualifying income to exceed 10% of its gross income in any taxable year, the Fund would fail to qualify as a RIC unless it is eligible to and does pay a tax at the Fund level.
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Exchange-Traded Notes/Structured Notes/Equity-Linked Notes
The tax rules are uncertain with respect to the treatment of income or gains arising in respect of commodity-linked ETNs and certain commodity-linked structured notes and equity linked notes; also, the timing and character of income or gains arising from ETNs can be uncertain. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the Multi-Asset Income Funds ability to qualify for treatment as a RIC and avoid a Fund-level tax.
Partnerships and Other Pass-Through Structures
To the extent the Fund invests in entities that are treated as partnerships (other than QPTPs, as defined above), trusts, or other pass-through structures for U.S. federal income tax purposes, all or a portion of any income and gains from such entities could constitute non-qualifying income to the Fund for purposes of the 90% gross income requirement described above. For example, income that the Fund derives from indirect investments, through such entities, in certain commodity-linked instruments generally will not or may not be considered qualifying income for the purposes of the 90% gross income requirement. In such cases, the Funds investments in such entities could be limited by its intention to qualify as a RIC, and could bear on its ability to qualify as such. Income from such entities may be allocated to the Fund on a gross, rather than net, basis, for purposes of the 90% gross income requirement.
REITs, REMICs, and TMPs
A Funds investments in REIT equity securities may result in the Fund receiving cash in excess of the REITs earnings; if the Fund distributes these amounts, such distributions could constitute a return of capital to Fund shareholders for U.S. federal income tax purposes. Dividends received by a Fund from a REIT will not qualify for the corporate dividends-received deduction and generally will not constitute qualified dividend income.
A Fund may invest directly or indirectly (including through REITs) in residual interests in real estate mortgage investment conduits (REMICs) (including by investing in residual interests in CMOs with respect to which an election to be treated as a REMIC is in effect) or equity interests in taxable mortgage pools (TMPs). Under a notice issued by the IRS in October 2006 and Treasury regulations that have yet to be issued but may apply retroactively, a portion of a Funds income (including income allocated to a Fund from a REIT or other pass-through entity) that is attributable to a residual interest in a REMIC or an equity interest in a TMP (referred to in the Code as an excess inclusion) will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a RIC will generally be allocated to shareholders of the RIC in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related interest directly. As a result, to the extent a Fund invests in such interests, it may not be a suitable investment for charitable remainder trusts (CRTs), as noted below. Each Fund does not intend to invest in REITs in which a substantial portion of the assets will consist of residual interests in REMICs.
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. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. See also the section Tax-Exempt Shareholders below for a discussion of the special tax consequences that may result where a tax-exempt entity invests in a RIC that recognizes excess inclusion income.
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Investments in Other RICs
A Funds investments in shares of another mutual fund, ETF or another company that qualifies as a RIC (each, an underlying RIC) can cause the Fund to be required to distribute greater amounts of net investment income or net capital gain than the Fund would have distributed had it invested directly in the securities held by the underlying RIC, rather than in shares of the underlying RIC. Further, the amount or timing of distributions from such a Fund qualifying for treatment as a particular character (for example, long-term capital gain, exempt interest, eligibility for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the Fund invested directly in the securities held by the underlying RIC.
If a Fund receives dividends from an underlying RIC that qualifies as a RIC, and the underlying RIC reports such dividends as qualified dividend income, then the Fund is permitted in turn to report a portion of its distributions as qualified dividend income, provided the Fund meets holding period and other requirements with respect to shares of the underlying RIC.
If a Fund receives dividends from an underlying RIC that qualifies as a RIC and the underlying RIC reports such dividends as eligible for the dividends-received deduction, then the Fund is permitted in turn to report its distributions derived from those dividends as eligible for the dividends-received deduction as well, provided the Fund meets holding period and other requirements with respect to shares of the underlying RIC.
Tax-Exempt Shareholders
Income of a RIC that would be UBTI if earned directly by a tax-exempt entity generally will not constitute UBTI when distributed to a tax-exempt shareholder of the RIC. Notwithstanding this blocking effect, a tax-exempt shareholder may realize UBTI by virtue of its investments in a 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 a Fund recognizes excess inclusion income derived from direct or indirect investments in residual interests in REMICs or equity interests in TMPs, as described above, 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 a Fund has state or local governments or other tax-exempt organizations as shareholders.
In addition, special tax consequences apply when CRTs invest in RICs that invest directly or indirectly in residual interests in REMICs or equity interests in TMPs. Under legislation enacted in December 2006, if a CRT (as defined in Section 664 of the Code) realizes any UBTI for a taxable year, a 100% excise tax is imposed on such UBTI. Under IRS guidance issued in October 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 U.S. federal corporate income tax rate. To the extent permitted under the 1940 Act, a 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. CRTs and other tax-exempt investors are urged to consult their tax advisers concerning the consequences of investing in the Funds.
Backup Withholding
Each 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 a Fund with a correct taxpayer identification number, who has under-reported dividend or interest income, or who fails to certify to a Fund that he or she is not subject to such withholding.
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Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholders U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.
Non-U.S. Shareholders
Distributions by a Fund to shareholders that are not U.S. persons within the meaning of the Code (Foreign Persons) properly reported by the Fund as (1) Capital Gain Dividends, (2) short-term capital gain dividends and (3) interest-related dividends, each as defined and subject to certain conditions described below, generally are not subject to withholding of U.S. federal income tax.
In general, the Code defines (1) short-term capital gain dividends as distributions of net short-term capital gains in excess of net long-term capital losses and (2) interest-related dividends as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual Foreign Person, in each case to the extent such distributions are properly reported as such by the Fund in a written notice to shareholders.
The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual Foreign Person who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the Foreign Person of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a Foreign Person (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the Foreign Person is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, and (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the Foreign Person and the Foreign Person is a controlled foreign corporation. The Funds are permitted to report such part of their dividends as short-term capital gain and/or interest-related dividends as are eligible, but are not required to do so, and do not intend to report any eligible distributions as short-term capital gain or interest-related dividends.
In the case of shares held through an intermediary, the intermediary may withhold even if a Fund reports all or a portion of a payment as a short-term capital gain or interest-related dividend to shareholders. Foreign Persons should contact their intermediaries regarding the application of these rules to their accounts.
Distributions by the Fund to Foreign Persons other than Capital Gain Dividends, short-term capital gain dividends and interest-related dividends (e.g., dividends attributable to dividend and foreign-source interest income or to short-term capital gains or U.S. source interest income to which the exception from withholding described above does not apply) are generally subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate).
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 a sale or redemption of shares of a Fund unless (i) such gain is effectively connected with the conduct by the Foreign Person of a trade or business within the United States, (ii) in the case of an individual Foreign Person, the Foreign Person is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or redemption, and certain other conditions are met, or (iii) the special rules relating to gain attributable to the sale or exchange of U.S. real property interests (USRPIs) apply to the Foreign Persons sale or redemption of shares of the Fund (as described below).
Foreign Persons with respect to whom income from a Fund is effectively connected with a trade or business conducted by the Foreign Person within the United States will in general be subject to U.S. federal net income tax on the income derived from the Fund at the graduated rates applicable to U.S. citizens, residents or domestic corporations, whether such income is received in cash or reinvested in shares of the Fund and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a Foreign Person 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 a net basis only if it is also attributable to a permanent establishment maintained by the holder in the United States. More generally, Foreign Persons who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisers.
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Subject to certain exceptions (for example, for a fund that is a United States real property holding corporation as described below), a Fund is generally not required to withhold on the amount of a non-dividend distribution (i.e., a distribution that is not paid out of the Funds current or accumulated earnings and profits for the applicable taxable year) when paid to a beneficial holder of Fund shares who or which is a Foreign Person.
Special rules would apply if a Fund were a qualified investment entity (QIE) because it 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 of USRPIs described below. Very generally, a USRPHC is a domestic corporation that holds USRPIs 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 trade or business assets. USRPIs generally are defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A Fund that holds, directly or indirectly, significant interests in REITs may be a USRPHC. Interests in domestically controlled QIEs, including REITs and RICs that are QIEs, not-greater-than-10% interests in publicly traded classes of stock in REITs and not-greater-than-5% interests in publicly traded classes of stock in RICs generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a Fund is a QIE.
If a Fund were a QIE, under a special look-through rule, any distributions by the Fund to a Foreign Person (including, in certain cases, distributions made by the Fund in redemption of its shares) attributable directly or indirectly to (i) distributions received by the Fund from a lower-tier RIC or REIT that the Fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the Fund would retain their character as gains realized from USRPIs in the hands of Foreign Persons and would be subject to U.S. tax withholding. In addition, such distributions could result in the Foreign Person being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a Foreign Person, including the rate of such withholding and character of such distributions (e.g., as ordinary income or USRPI gain), would vary depending upon the extent of the Foreign Persons current and past ownership of the Fund.
In addition, if an interest in the Fund were a USRPI, the Fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% shareholder that is a Foreign Person, in which case such Foreign Person generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.
Shareholders of the Fund that are Foreign Persons also may be 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.
The Funds generally do not expect that they will be QIEs.
In order to qualify for any exemptions from withholding described above or for lower withholding tax rates under income tax treaties, or to establish an exemption from backup withholding, Foreign Persons must comply with special certification and filing requirements relating to their non-U.S. status (including, in general, furnishing an IRS Form W-8BEN, W-8BEN-E or substitute form). Foreign Persons should consult their tax advisers concerning the tax consequences of ownership of shares of a Fund, including the certification and filing requirements imposed on foreign investors in order to qualify for an exemption from the backup withholding tax described above or a reduced rate of withholding provided by treaty.
Shareholder Reporting Obligations With Respect to Foreign Bank and Financial Accounts
Shareholders that are U.S. persons and own, directly or indirectly, more than 50% of the Fund by vote or value could be required to report annually their financial interest in the Funds foreign financial accounts, if any, on FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Shareholders should consult a tax advisor, or if holding shares through an intermediary, their intermediary, regarding the applicability to them of this reporting requirement.
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Tax Shelter Reporting Regulations
Under Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct holders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. 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.
Certain Additional Reporting and Withholding Requirements
Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, FATCA) generally require a Fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an IGA) between the United States and a foreign government. If a shareholder of a Fund fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the Fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not apply to the gross proceeds of share redemptions or Capital Gain Dividends the Fund pays. If a payment by a Fund is subject to FATCA withholding, the Fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to Foreign Persons described above (e.g., interest-related dividends and short-term capital gain dividends). Each prospective investor is urged to consult its tax adviser regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investors own situation, including investments through an intermediary.
Other Tax Matters
Special tax rules apply to investments through defined contribution plans and other tax-qualified plans or tax-advantaged arrangements. Shareholders should consult their tax advisers to determine the suitability of shares of a Fund as an investment through such plans and arrangements and the precise effect of such an investment in their particular tax situations.
Dividends and distributions, and gains from the sale of a Funds shares may be subject to state, local and foreign taxes. Shareholders are urged to consult their tax advisers regarding specific questions as to federal, state, local and, where applicable, foreign taxes.
Yield and Total Return
Each Fund may advertise the yield and total return of each class of its shares. Each 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 relevant Trust allocated to each 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 a Funds yield and total return to yields and total returns published for other investment companies and other investment vehicles. Yield and total returns 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. Yield and total returns may be stated with or without giving effect to any expense limitations in effect for a Fund. For those Funds that present yield and total returns reflecting an expense limitation, its yield and total return would have been lower if no limitation were in effect. Yields and total return will generally be higher for Class A, Class T, Class Y and Admin Class shares than for Class C shares of the same Fund, because of the higher levels of expenses borne by the Class C shares. Because of its lower operating expenses, Class N shares of each Fund can be expected to achieve a higher yield and total return than the same Funds Class A, Class C, Class T, Class Y and Admin Class shares.
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Each 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 NAV. If the NAV, rather than the maximum offering price, is used to calculate the distribution rate, the rate will be higher.
At any time in the future, yield and total return may be higher or lower than past yields or total returns, and there can be no assurance that any historical results will continue.
Investors in the Funds are specifically advised that share prices, expressed as the NAVs per share, will vary just as yield and total return will vary. An investors focus on the yield of a Fund to the exclusion of the consideration of the share price of that Fund may result in the investors misunderstanding the total return he or she may derive from the Fund.
Benchmark Comparisons
Performance information for a Fund with over one calendar year of performance history will be included in the Funds Prospectus (in the subsection Risk/Return Bar Chart and Table within the Fund Summary), along with the performance of an appropriate benchmark index. Because index comparisons are generally calculated as of the end of each month, index performance information under the Since Inception, Life of Fund or Life of Class headings in the Prospectus for Funds with less than ten years of performance history may not be coincident with the inception date of the Fund (or class, as applicable). In such instances, index performance is generally presented from the month-end nearest to the inception date of the Fund (or class, as applicable).
This document may contain references to third-party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively Natixis Affiliates) and does not sponsor, endorse or participate in the provision of any Natixis Affiliates services, funds or other financial products.
The index information contained in the Prospectuses and this Statement is derived from third parties and is provided on an as is basis. The user of this information assumes the entire risk of use of this information. Each of the third-party entities involved in compiling, computing or creating index information, disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.
The financial statements, financial highlights and the reports of PricewaterhouseCoopers LLP, the independent registered public accounting firm included in the Funds annual report dated December 31, 2018, are incorporated herein by reference to such report. The Funds annual and semiannual reports are available upon request and without charge. Each Fund will send a single copy of its annual and semiannual report to an address at which more than one shareholder of record with the same last name has indicated that mail is to be delivered. Shareholders may request additional copies of any annual or semiannual report by telephone at 800-225-5478 or by writing to the Funds at: 888 Boylston Street, Suite 800, Boston, MA 02199-8197 or by visiting the Funds website at im.natixis.com. The annual and semiannual reports are also available on-line at the SECs website at www.sec.gov.
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DESCRIPTION OF SECURITIES RATINGS
The Funds make use of average portfolio credit quality standards to assist institutional investors whose own investment guidelines limit their investments accordingly. In determining a Funds overall dollar-weighted average quality, unrated securities are treated as if rated, based on the advisers view of their comparability to rated securities. A Funds use of average quality criteria is intended to be a guide for those investors whose investment guidelines require that assets be invested according to comparable criteria. Reference to an overall average quality rating for a Fund does not mean that all securities held by the Fund will be rated in that category or higher. A Funds investments may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by S&P Global Ratings, Moodys Investors Service, Inc. (Moodys) or Fitch Investor Services, Inc. (Fitch) or, if unrated, determined by the adviser to be of comparable quality). The percentage of a Funds assets invested in securities in a particular rating category will vary. Following is a description of S&P Global Ratings, Moodys, and Fitch ratings applicable to fixed-income securities.
S&P Global RatingsA brief description of the applicable rating symbols of S&P Global Ratings and their meanings (as published by S&P Global Ratings) follows:
Issue Credit Rating Definitions
An S&P Global Ratings issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&P Global Ratings view of the obligors capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings*
Issue credit ratings are based, in varying degrees, on S&P Global Ratings analysis of the following considerations:
| Likelihood of paymentcapacity and willingness of the obligor to meet its financial commitment on a financial obligation in accordance with the terms of the obligation; |
| Nature of and provisions of the financial obligation and the promise we impute; |
| Protection afforded by, and relative position of, the financial obligation in the event of a bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors rights. |
Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
A-1
AAA
An obligation rated AAA has the highest rating assigned by S&P Global Ratings. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
A
An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB
An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB
An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
B
An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
CCC
An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated CC is currently highly vulnerable to nonpayment. The CC rating is used when a default has not yet occurred, but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
A-2
C
An obligation rated C is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D
An obligation rated D is in default or in breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a distressed exchange offer.
* | Ratings from AA to CCC may be modified by the addition of a plus (+) or minus () sign to show relative standing within the major rating categories. |
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated A-1 is rated in the highest category by S&P Global Ratings. The obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A-3
A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B
A short-term obligation rated B is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitments.
C
A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D
A short-term obligation rated D is in default or in breach of an imputed promise. For non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligations rating is lowered to D if it is subject to a distressed exchange offer.
A-3
SPUR (S&Ps Underlying Rating)
A SPUR is an opinion about the stand-alone capacity of an obligor to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at the request of the debt issuer or/obligor with the designation SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. S&P Global Ratings maintains surveillance of an issue with a published SPUR.
Municipal Short-Term Note Ratings Definitions
An S&P Global Ratings U.S. municipal note rating reflects S&P Global Ratings opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P Global Ratings analysis will review the following considerations:
| Amortization schedulethe larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
| Source of paymentthe more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Note rating symbols are as follows:
SP-1
Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2
Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3
Speculative capacity to pay principal and interest.
D
D is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.
Dual Ratings
Dual ratings may be assigned to debt issues that have a put option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example, AAA/A-1+ or A-1+/A-1). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example SP-1+/A-1+).
A-4
S&P Global Ratings Disclaimers
The analyses, including ratings, of S&P Global Ratings and its affiliates (together, S&P Global Ratings) are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or make any investment decisions. S&P Global Ratings assumes no obligation to update any information following publication. Users of ratings or other analyses should not rely on them in making any investment decision. S&P Global Ratings opinions and analyses do not address the suitability of any security. S&P Global Ratings does not act as a fiduciary or an investment advisor except where registered as such. While S&P Global Ratings has obtained information from sources it believes to be reliable, it does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Ratings and other opinions may be changed, suspended, or withdrawn at any time.
Active Qualifiers
S&P Global Ratings uses the following qualifiers that limit the scope of a rating. The structure of the transaction can require the use of a qualifier such as a p qualifier, which indicates the rating addresses the principal portion of the obligation only. A qualifier appears as a suffix and is part of the rating.
Federal deposit insurance limit: L qualifier
Ratings qualified with L apply only to amounts invested up to federal deposit insurance limits.
Principal: p qualifier
This suffix is used for issues in which the credit factors, the terms, or both, that determine the likelihood of receipt of payment of principal are different from the credit factors, terms or both that determine the likelihood of receipt of interest on the obligation. The p suffix indicates that the rating addresses the principal portion of the obligation only and that the interest is not rated.
Preliminary Ratings: prelim qualifier
Preliminary ratings, with the prelim suffix, may be assigned to obligors or obligations, including financial programs, in the circumstances described below. Assignment of a final rating is conditional on the receipt by S&P Global Ratings of appropriate documentation. S&P Global Ratings reserves the right not to issue a final rating. Moreover, if a final rating is issued, it may differ from the preliminary rating.
| Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions. |
| Preliminary ratings may be assigned to obligations that will likely be issued upon the obligors emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans, documentation and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or post-bankruptcy issuer as well as attributes of the anticipated obligation(s). |
| Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in S&P Global Ratings opinion, documentation is close to final. Preliminary ratings may also be assigned to the obligations of these entities. |
A-5
| Preliminary ratings may be assigned when a previously unrated entity is undergoing a well-formulated restructuring, recapitalization, significant financing or other transformative event, generally at the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, S&P Global Ratings would likely withdraw these preliminary ratings. |
| A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating. |
Termination Structures: t qualifier
This symbol indicates termination structures that are designed to honor their contracts to full maturity or, should certain events occur, to terminate and cash settle all their contracts before their final maturity date.
Counterparty Instrument Rating: cir qualifier
This symbol indicates a Counterparty Instrument Rating (CIR), which is a forward-looking opinion about the creditworthiness of an issuer in a securitization structure with respect to a specific financial obligation to a counterparty (including interest rate swaps, currency swaps, and liquidity facilities). The CIR is determined on an ultimate payment basis; these opinions do not take into account timeliness of payment.
Inactive Qualifiers (Inactive Qualifiers are no longer applied or outstanding)
Contingent upon final documentation: * inactive qualifier
This symbol that indicated that the rating was contingent upon S&P Global Ratings receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows. Discontinued use in August 1998.
Termination of obligation to tender: c inactive qualifier
This qualifier was used to provide additional information to investors that the bank may terminate its obligation to purchase tendered bonds if the long-term credit rating of the issuer was lowered to below an investment-grade level and/or the issuers bonds were deemed taxable. Discontinued use in January 2001.
U.S. direct government securities: G inactive qualifier
The letter G followed the rating symbol when a funds portfolio consisted primarily of direct U.S. government securities.
Public Information Ratings: pi qualifier
This qualifier was used to indicate ratings that were based on an analysis of an issuers published financial information, as well as additional information in the public domain. Such ratings did not, however, reflect in-depth meetings with an issuers management and therefore, could have been based on less comprehensive information than ratings without a pi suffix. Discontinued use as of December 2014 and as of August 2015 for Lloyds Syndicate Assessments.
Provisional Ratings: pr inactive qualifier
The letters pr indicate that the rating was provisional. A provisional rating assumed the successful completion of a project financed by the debt being rated and indicates that payment of debt service requirements was largely or entirely dependent upon the successful, timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, made no comment on the likelihood of or the risk of default upon failure of such completion.
A-6
Quantitative Analysis of public information: q inactive qualifier
A q subscript indicates that the rating is based solely on quantitative analysis of publicly available information. Discontinued use in April 2001.
Extraordinary risks: r inactive qualifier
The r modifier was assigned to securities containing extraordinary risks, particularly market risks, which are not covered in the credit rating. The absence of an r modifier should not be taken as an indication that an obligation would not exhibit extraordinary non-credit related risks. S&P Global Ratings discontinued the use of the r modifier for most obligations in June 2000 and for the balance of obligations (mainly structured finance transactions) in November 2002.
Local Currency and Foreign Currency Ratings
S&P Global Ratings issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. An issuers foreign currency rating will differ from its local currency rating when the obligor has a different capacity to meet its obligations denominated in its local currency versus obligations denominated in a foreign currency.
Moodys Investors Service, Inc.A brief description of the applicable Moodys rating symbols and their meanings (as published by Moodys) follows:
A-7
Long-Term Obligation Ratings
Ratings assigned on Moodys global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Moodys defines credit risk as the risk that an entity may not meet its contractual financial obligations as they come due and any estimated financial loss in the event of default or impairment. The contractual financial obligations addressed by Moodys ratings are those that call for, without regard to enforceability, the payment of an ascertainable amount, which may vary based upon standard sources of variation (e.g., floating interest rates), by an ascertainable date. Moodys rating addresses the issuers ability to obtain cash sufficient to service the obligation, and its willingness to pay. Moodys ratings do not address non-standard sources of variation in the amount of the principal obligation (e.g., equity indexed), absent an express statement to the contrary in a press release accompanying an initial rating. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment. Moodys issues ratings at the issuer level and instrument level on both the long-term scale and the short-term scale. Typically, ratings are made publicly available although private and unpublished ratings may also be assigned.
Moodys differentiates structured finance ratings from fundamental ratings (i.e., ratings on nonfinancial corporate, financial institution, and public sector entities) on the global long-term scale by adding (sf ) to all structured finance ratings. The addition of (sf) to structured finance ratings should eliminate any presumption that such ratings and fundamental ratings at the same letter grade level will behave the same. The (sf ) indicator for structured finance security ratings indicates that otherwise similarly rated structured finance and fundamental securities may have different risk characteristics. Through its current methodologies, however, Moodys aspires to achieve broad expected equivalence in structured finance and fundamental rating performance when measured over a long period of time.
Moodys Global Long-Term Rating Scale:
Aaa
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A
Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa
Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high credit risk.
A-8
Caa
Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a (hyb) indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.
Issuer Ratings
Issuer Ratings are opinions of the ability of entities to honor senior unsecured debt and debt like obligations. As such, Issuer Ratings incorporate any external support that is expected to apply to all current and future issuance of senior unsecured financial obligations and contracts, such as explicit support stemming from a guarantee of all senior unsecured financial obligations and contracts, and/or implicit support for issuers subject to joint default analysis (e.g., banks and government-related issuers). Issuer Ratings do not incorporate support arrangements, such as guarantees, that apply only to specific (but not to all) senior unsecured financial obligations and contracts. While Issuer Ratings reflect the risk that debt and debt-like claims are not serviced on a timely basis, they do not reflect the risk that a contract or other non-debt obligation will be subjected to commercial disputes. Additionally, while an issuer may have senior unsecured obligations held by both supranational institutions and central banks (e.g., IMF, European Central Bank), as well as other investors, Issuer Ratings reflect only the risks faced by other investors.
Long-Term and Short-Term Obligation Ratings
Moodys assigns ratings to long-term and short-term financial obligations. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.
Medium-Term Note Program Ratings
Moodys assigns provisional ratings to medium-term note (MTN) programs and definitive ratings to the individual debt securities issued from them (referred to as drawdowns or notes).
MTN program ratings are intended to reflect the ratings likely to be assigned to drawdowns issued from the program with the specified priority of claim (e.g., senior or subordinated). To capture the contingent nature of a program rating, Moodys assigns provisional ratings to MTN programs. A provisional rating is denoted by a (P) in front of the rating and is defined elsewhere in this document.
The rating assigned to a drawdown from a rated MTN or bank/deposit note program is definitive in nature, and may differ from the program rating if the drawdown is exposed to additional credit risks besides the issuers default, such as links to the defaults of other issuers, or has other structural features that warrant a different rating. In some circumstances, no rating may be assigned to a drawdown.
A-9
Moodys encourages market participants to contact Moodys Ratings Desks or visit www.moodys.com directly if they have questions regarding ratings for specific notes issued under a medium-term note program. Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
Global Short-Term Rating Scale
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Short-Term Issuer Ratings
Not included in Moodys current definitions.
Fitch Investor Services, Inc. A brief description of the applicable rating symbols of Fitch and their meanings (as published by Fitch) follows:
Credit Rating Scales
Fitchs credit ratings relating to issuers are an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agencys credit ratings cover the global spectrum of corporate, sovereign, financial, bank, insurance, and public finance entities (including supranational and sub-national entities) and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
The terms investment grade and speculative grade have established themselves over time as shorthand to describe the categories AAA to BBB (investment grade) and BB to D (speculative grade). The terms investment grade and speculative grade are market conventions, and do not imply any recommendation or endorsement of a specific security for investment purposes. Investment grade categories indicate relatively low to moderate credit risk, while ratings in the speculative categories either signal a higher level of credit risk or that a default has already occurred.
For the convenience of investors, Fitch may also include issues relating to a rated issuer that are not and have not been rated on its web page. Such issues are also denoted as NR. Credit ratings express risk in relative rank order, which is to say they are ordinal measures of credit risk and are not predictive of a specific frequency of default or loss. For information about the historical performance of ratings please refer to Fitchs Ratings Transition and Default studies which detail the historical default rates and their meaning. The European Securities and Markets Authority also maintains a central repository of historical default rates.
A-10
Fitchs credit ratings do not directly address any risk other than credit risk. In particular, ratings do not deal with the risk of a market value loss on a rated security due to changes in interest rates, liquidity and other market considerations. However, in terms of payment obligation on the rated liability, market risk may be considered to the extent that it influences the ability of an issuer to pay upon a commitment. Ratings nonetheless do not reflect market risk to the extent that they influence the size or other conditionality of the obligation to pay upon a commitment (for example, in the case of index-linked bonds).
In the default components of ratings assigned to individual obligations or instruments, the agency typically rates to the likelihood of non-payment or default in accordance with the terms of that instruments documentation. In limited cases, Fitch may include additional considerations (i.e., rate to a higher or lower standard than that implied in the obligations documentation).
Long-Term Rating Scales
Issuer Default Ratings
Rated entities in a number of sectors, including financial and non-financial corporations, sovereigns, insurance companies and certain sectors within public finance, are generally assigned Issuer Default Ratings (IDRs). IDRs are also assigned to certain entities or enterprises in global infrastructure, project finance and public finance. IDRs opine on an entitys relative vulnerability to default (including by way of a distressed debt exchange) on financial obligations. The threshold default risk addressed by the IDR is generally that of the financial obligations whose non-payment would best reflect the uncured failure of that entity. As such, IDRs also address relative vulnerability to bankruptcy, administrative receivership or similar concepts.
In aggregate, IDRs provide an ordinal ranking of issuers based on the agencys view of their relative vulnerability to default, rather than a prediction of a specific percentage likelihood of default.
AAA
Highest credit quality. AAA ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA
Very high credit quality. AA ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A
High credit quality. A ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB
Good credit quality. BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB
Speculative. BB ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.
A-11
B
Highly speculative. B ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
CCC
Substantial credit risk. Default is a real possibility.
CC
Very high levels of credit risk. Default of some kind appears probable.
C
Near default. A default or default-like process has begun, or the issuer is in standstill, or for a closed funding vehicle, payment capacity is irrevocably impaired. Conditions that are indicative of a C category rating for an issuer include:
a. | the issuer has entered into a grace or cure period following non-payment of a material financial obligation; |
b. | the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; |
c. | the formal announcement by the issuer or their agent of a distressed debt exchange; |
d. | a closed financing vehicle where payment capacity is irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the transaction, but where no payment default is imminent. |
RD: Restricted default.
RD ratings indicate an issuer that in Fitchs opinion has experienced:
a. | an uncured payment default or distressed debt exchange on a bond, loan or other material financial obligation, but |
b. | has not entered into bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedure, and |
c. | has not otherwise ceased operating. |
This would include:
i. | the selective payment default on a specific class or currency of debt; |
ii. | the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation; |
iii. | the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; |
iv. | ordinary execution of a distressed debt exchange on one or more material financial obligations. |
D
Default. D ratings indicate an issuer that in Fitchs opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.
A-12
Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period generally will not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.
In all cases, the assignment of a default rating reflects the agencys opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuers financial obligations or local commercial practice.
Specific Limitations Relevant to Ratings Assigned Using the Primary Credit Rating Scale, Bank Viability Ratings and Bank Support Ratings.
The following specific limitations relate to issuer default scales, ratings assigned to corporate finance obligations, ratings assigned to public finance obligations, ratings assigned to structured finance transactions, ratings assigned to global infrastructure and project finance transactions, ratings assigned for banks (Viability Ratings, Support Ratings, Support Floors), derivative counterparty ratings and insurer financial strength ratings.
| The ratings do not predict a specific percentage of default likelihood or failure likelihood over any given time period. |
| The ratings do not opine on the market value of any issuers securities or stock, or the likelihood that this value may change. |
| The ratings do not opine on the liquidity of the issuers securities or stock. |
| The ratings do not opine on the possible loss severity on an obligation should an issuer (or an obligation with respect to structured finance transactions) default, except in the following cases: |
| Ratings assigned to individual obligations of issuers in corporate finance, banks, non-bank financial institutions, insurance and covered bonds. |
| In limited circumstances for U.S. public finance obligations where Chapter 9 of the U.S. Bankruptcy Code provides reliably superior prospects for ultimate recovery to local government obligations that benefit from a statutory lien on revenues or during the pendency of a bankruptcy proceeding under the U.S. Bankruptcy Code if there is sufficient visibility on potential recovery prospects. |
| The ratings do not opine on the suitability of an issuer as counterparty to trade credit. |
| The ratings do not opine on any quality related to an issuers business, operational or financial profile other than the agencys opinion on its relative vulnerability to default or in the case of bank Viability Ratings on its relative vulnerability to failure. For the avoidance of doubt, not all defaults will be considered a default for rating purposes. Typically, a default relates to a liability payable to an unaffiliated, outside investor. |
| The ratings do not opine on any quality related to a transactions profile other than the agencys opinion on the relative vulnerability to default of an issuer and/or of each rated tranche or security. |
| The ratings do not predict a specific percentage of extraordinary support likelihood over any given period. |
| In the case of bank Support Ratings and Support Rating Floors, the ratings do not opine on any quality related to an issuers business, operational or financial profile other than the agencys opinion on its relative likelihood of receiving external extraordinary support. |
The ratings do not opine on the suitability of any security for investment or any other purposes.
A-13
Short-Term Credit Ratings
Short-Term Ratings Assigned to Issuers or Obligations in Corporate, Public and Structured Finance
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term deposit ratings may be adjusted for loss severity. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as short term based on market convention. Typically, this means up to 13 months for corporate, sovereign and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
F1
Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
F2
Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.
F3
Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.
B
Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C
High short-term default risk. Default is a real possibility.
RD
Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D
Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.
Standard Rating Actions
Affirmations*:
The rating has been reviewed with no change in rating. Ratings affirmations may also include an affirmation of, or change to an Outlook when an Outlook is used.
Downgrade*:
The rating has been lowered in the scale.
Matured*/Paid-In-Full:
a. Matured Denoted as NR. This action is used when an issue has reached its redemption date and rating coverage is discontinued. This indicates that a previously rated issue has been repaid, but other issues of the same program (rated or unrated) may remain outstanding. For the convenience of investors, Fitch may also include issues relating to a rated issuer or transaction that are not and have not been rated on its section of the web page relating to the respective issuer or transaction. Such issues will also be denoted NR.
b. Paid-In-Full Denoted as PIF. This action indicates that an issue has been paid in full. In covered bonds, PIF is only used when all issues of a program have been repaid.
A-14
Assignment (New Rating)*:
A Rating has been assigned to a previously unrated issuer or issue.
Pre-refunded*:
Assigned to certain long-term U.S. Public Finance issues after Fitch assesses refunding escrow.
Publication (Publish)*:
Initial public announcement of a rating on the agencys website, although not necessarily the first rating assigned. This action denotes when a previously private rating is published. In cases where the publication coincides with a rating change, Fitch will only publish the changed rating. The rating history during the time when the rating was private will not be published.
Upgrade*:
The rating has been raised in the scale.
Withdrawn*:
The rating has been withdrawn and the issue or issuer is no longer rated by Fitch. Withdrawals may occur for one or several of the following reasons:
| Incorrect or insufficient information. |
| Bankruptcy of the rated entity, debt restructuring or default. |
| Reorganization of rated entity (e.g. merger or acquisition of rated entity or rated entity no longer exists). |
| The debt instrument was taken private. |
| Withdrawal of a guarantor rating. |
| An Expected Rating that is no longer expected to convert to a Final Rating. |
| Criteria or policy change. |
| Bonds were pre-refunded, repaid early (off schedule), or canceled. This includes cases where the issuer has no debt outstanding and is no longer issuing debt. |
| Ratings are no longer considered relevant to the agencys coverage. |
| Commercial reasons. |
| Other reasons. |
When a public rating is withdrawn, Fitch will issue a Rating Action Commentary that details the current rating and Outlook or Watch status (if applicable), a statement that the rating is withdrawn and the reason for the withdrawal.
Withdrawals cannot be used to forestall a rating action. Every effort is therefore made to ensure that the rating opinion upon withdrawal reflects an updated view. Where significant elements of uncertainty remain (for example, a rating for an entity subject to a takeover bid) or where information is otherwise insufficient to support a revised opinion, the agency attempts when possible to indicate in the withdrawal disclosure the likely direction and scale of any rating movement had coverage been maintained.
Ratings that have been withdrawn will be indicated by the symbol WD.
Rating Modifier Actions
Modifiers include Rating Outlooks and Rating Watches.
Outlook Revision
Outlook revisions (e.g. to Rating Outlook Stable from Rating Outlook Positive) are used to indicate changes in the ratings trend. In structured finance transactions, the Outlook may be revised independently of a full review of the underlying rating.
An Outlook revision may also be used when a series of potential event risks has been identified, none of which individually warrants a Rating Watch but which cumulatively indicate heightened probability of a rating change over the following one to two years.
A-15
A revision to the Outlook may also be appropriate where a specific event has been identified that could lead to a change in ratings, but where the conditions and implications of that event are largely unclear and subject to high execution risk over a one- to two-year period.
Rating Watch Maintained*:
The issue or issuer has been reviewed and remains on active Rating Watch status.
Rating Watch On*:
The issue or issuer has been placed on active Rating Watch status.
Rating Watch Revision*:
Rating Watch status has changed.
Rating Watch Resolved*:
The issue or issuer has been reviewed and ceases to be on active Rating Watch. This rating action is typically used in conjunction with another action on the rating and the Outlook, such as affirmation, downgrade or upgrade or Outlook affirmation or revision.
Support Floor Rating Revision:
Applicable only to Support ratings related to Financial Institutions, which are amended only with this action.
Under Review*:
Applicable to ratings that may undergo a change in scale not related to changes in fundamental credit quality. Final action will be Revision Rating.
* | A rating action must be recorded for each rating in a required cycle to be considered compliant with Fitch policy concerning aging of ratings. Not all Ratings or Data Actions, or changes in rating modifiers, will meet this requirement. Actions that meet this requirement are noted with an * in the above definitions. |
XS33-0519
A-16
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