Registration Nos. 002-98326
811-04323
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 | ☐ | |||
Pre-Effective Amendment No. | ☐ | |||
Post-Effective Amendment No. 126 | ☒ |
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 | ☐ | |||
Amendment No. 127 | ☒ |
(Check appropriate box or boxes.)
NATIXIS FUNDS TRUST I
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts | 02116 | |
(Address of principal executive offices) | (Zip Code) |
Registrants Telephone Number, including Area Code (617) 449-2810
Copy to:
Russell Kane, Esq. NGAM Distribution, L.P. 399 Boylston Street Boston, Massachusetts 02116 |
John M. Loder, Esq. Ropes & Gray 800 Boylston Street Boston, Massachusetts 02116 | |
(Name and Address of Agent for Service) |
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check appropriate box):
☐ | immediately upon filing pursuant to paragraph (b) |
☐ | on (date) pursuant to paragraph (b) |
☐ | 60 days after filing pursuant to paragraph (a)(1) |
☐ | on (date) pursuant to paragraph (a)(1) |
☐ | 75 days after filing pursuant to paragraph (a)(2) |
☒ | on February 24, 2017 pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
☐ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
Prospectus February 24, 2017 | |
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Class A |
Class N |
Class Y | |
Mirova Global Green Bond Fund |
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The Securities and Exchange Commission ("SEC") has not approved or disapproved the Fund's shares or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a crime.
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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 | ||
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Mirova Global Green Bond Fund
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 [ ] of the Prospectus and on page [ ] 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) |
[ ] |
[ ] |
[ ] |
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Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) |
[ ] |
1 |
[ ] |
[ ] |
||
Redemption fees |
[ ] |
[ ] |
[ ] |
1 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 |
[ ] |
% |
[ ] |
% |
[ ] |
% |
Distribution and/or service (12b-1) fees |
[ ] |
% |
[ ] |
% |
[ ] |
% |
Other expenses 1 |
[ ] |
% |
[ ] |
% |
[ ] |
% |
Total annual fund operating expenses |
[ ] |
% |
[ ] |
% |
[ ] |
% |
Fee waiver and/or expense reimbursement 2 |
[ ] |
% |
[ ] |
% |
[ ] |
% |
Total annual fund operating expenses after fee waiver and/or expense reimbursement |
[ ] |
% |
[ ] |
% |
[ ] |
% |
1 Other expenses are estimated for the current fiscal year.
2 Natixis Asset Management U.S., LLC ("Natixis AM 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 [ ]%, [ ]% and [ ]% 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 [ ] 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 for the first [ ] months 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 | ||||
Class A |
$ |
[ ] |
$ |
[ ] |
||
Class N |
$ |
[ ] |
$ |
[ ] |
||
Class Y |
$ |
[ ] |
$ |
[ ] |
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Fund Summary | ||
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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.
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. 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, Fitch or S&P) 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 alpha.
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 ESG 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.
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Fund Summary | ||
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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 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 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 derivative transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearinghouse, are not available in connection with over-the-counter ("OTC") derivative transactions, such as foreign currency transactions. As a result, in instances when the Fund enters into OTC derivative transactions, the Fund will be subject to the risk that its direct 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 receive revenues 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 and forward contracts) 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 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 and other 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.
Fixed-Income Securities Risk: Fixed-income securities are subject to credit risk, interest rate risk and liquidity risk. You may lose money on your investment due to unpredictable drops in a security's value or periods of below-average performance in a given security or in the securities market as a whole. Rule 144A securities and structured notes may be less liquid than other fixed-income securities. In addition, an economic downturn or period of rising interest rates could adversely affect the market of these securities and reduce the Fund's ability to sell them.
Foreign Securities Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit 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 of these securities and reduce the Fund's ability to sell them, negatively impacting the performance of the Fund.
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, 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 a fund's returns, and may lead to significant losses if investments are not successful.
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Fund Summary | ||
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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.
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. 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
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.
Management
Investment Adviser
Natixis Asset Management U.S., LLC ("Natixis AM US")
Portfolio Managers
Christopher Wigley, has served as lead portfolio manager of the Fund since 2017.
Marc Briand, has served as portfolio manager of the Fund since 2017.
Each portfolio manager is an employee of Mirova, an affiliate of Natixis AM US, and provides portfolio management through a personnel-sharing arrangement between Mirova and Natixis AM US.
Purchase and Sale of Fund Shares
Class A Shares
The following chart shows the investment minimums for various types of accounts:
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Fund Summary | ||
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Type of Account |
Minimum Initial Purchase |
Minimum Subsequent Purchase | ||||
Any account other than those listed below |
$ |
2,500 |
$ |
100 |
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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 |
$ |
100 |
||
Coverdell Education Savings Accounts using the Natixis Funds' prototype document (direct accounts, not held through intermediary) |
$ |
500 |
$ |
100 |
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 NGAM Distribution, L.P. There is no subsequent investment minimum for these shares.
Class Y Shares
Class Y shares of the Fund may be purchased by the following entities at the following investment minimums.
A minimum initial investment of
$100,000 and the minimum subsequent investment of $100 for:
Other mutual funds, endowments, foundations, bank trust departments or trust companies.
There is no initial or subsequent investment minimum for:
Wrap Fee Programs of certain broker-dealers, the advisers or the Distributor. Please consult your financial representative to determine if your wrap fee program is subject to additional or different conditions or fees.
Certain Retirement Plans.
Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the retirement plans invested in the Fund.
Registered Investment Advisers investing on behalf of clients in exchange for 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.
Due to operational limitations at your financial intermediary, certain wrap fee 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 ngam.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. See the section "How Fund Shares are Priced" for details.
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.
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Investment Goals, Strategies and Risks | ||
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More Information About the Fund
Mirova Global Green Bond Fund
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 is non-fundamental and 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. 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, Fitch or S&P) 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 alpha.
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 ESG 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.
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Investment Goals, Strategies and Risks | ||
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Principal Investment Risks
The Fund has principal investment strategies that come with inherent risks. The principal risks of investing in the Fund are summarized in the Fund Summary under "Principal Investment Risks." The Fund does not represent a complete investment program. The following provides more information about some of the risks to which the Fund may be subject because of its investments in various types of securities or engagement in various practices.
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, none of the three major rating agencies (Moody's Investors Service, Inc., Fitch Investor Services, Inc. or Standard & Poor's Ratings Group) must have rated the security in one of their respective top four rating categories at the time the 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 the 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, the Fund may incur additional expenses to seek recovery.
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 derivative transactions. Many of the protections afforded to participants on organized exchanges, such as the performance guarantee of an exchange clearinghouse, 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 derivative 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 the Fund enters into cleared derivatives transactions, the Fund will be subject to the credit risk of the clearinghouse 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. The market for some or all currencies may from time to time have low trading volume and become illiquid, which may prevent the Fund from effecting a position or from promptly liquidating unfavorable positions in such markets, thus subjecting the Fund to substantial losses. 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
As described herein and in the SAI, the use of derivative instruments (such as those in which the Fund may invest, including futures and forward contracts) 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 the Fund's exposure to securities markets values, interest rates or currency exchange rates. The Fund's use of derivatives involves other risks, such as the credit and counterparty risk relating to a broker, futures commission merchant or other party to a derivative contract (which is greater for over-the-counter-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 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 the Fund may be unable to terminate or sell a derivatives position at an advantageous time or price. The use of derivatives may cause the Fund to incur losses greater than those which would have occurred had derivatives not been used. It is possible that the Fund's liquid assets may be insufficient to support its obligations under its derivatives positions. To the extent that the Fund uses a derivative for purposes other than as a hedge, or if the Fund hedges imperfectly, the Fund is directly exposed to the risks of that derivative and any loss generated by the derivative will not be offset by a gain. When used, derivatives may affect the amount, timing or character of tax distributions payable to, and thus taxes payable by, shareholders.
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 market companies may be smaller and have shorter operating histories than companies in developed markets.
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Investment Goals, Strategies and Risks | ||
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Fixed-Income Securities Risk
Fixed-income securities are subject to credit risk, interest rate risk and liquidity risk. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when prevailing interest rates rise. This means that you may lose money on your investment due to unpredictable drops in a security's value or periods of below-average performance in a given security or in the securities market as a whole. In addition, an economic downturn or period of rising interest rates could adversely affect the market of these securities and reduce the Fund's ability to sell them. Below investment grade fixed-income securities may be subject to these risks (including the risk of default) to a greater extent than other fixed-income securities. These securities are considered predominantly speculative with respect to the issuer's continuing ability to make principal and interest payments.
Foreign Securities Risk
Foreign securities risk is the risk associated with investments in issuers located in foreign countries. The 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 the Fund's non-U.S. investments to decline. Nationalization, expropriation or confiscatory taxation, currency blockage, the imposition of sanctions by the U.S. government, political changes or diplomatic developments may also cause the value of the Fund's non-U.S. investments to decline. When imposed, foreign withholding or other taxes reduce the Fund's return on foreign securities. In the event of nationalization, expropriation or other confiscation, the 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 U.S. or through depositary receipt programs such as ADRs. To the extent the 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 and information risks. In addition, foreign securities may be subject to increased credit risk because of the potential difficulties of requiring foreign entities to honor their contractual commitments.
Interest Rate Risk
This is the risk that changes in interest rates will affect the value of the 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 the Fund's investments to decline. A prolonged period of low interest rates may cause the 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 the Fund's share price (and the value of your investment) to change.
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. If a large investor redeems a portion or all of its investment in the 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. In addition, such transactions may accelerate the realization of taxable income to shareholders if the 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 the Fund's expenses or could result in the 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. Although the portfolio managers will seek to manage the Fund's risk from the leverage associated with derivative investments by closely monitoring the volatility of such investments, the portfolio managers may not be successful in this respect. The use of leverage will increase 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 Funds' investments or in their capacity or willingness to transact may increase the Funds' 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 (securities issued under an exemption from registration under the Securities Act of 1933), 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
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Investment Goals, Strategies and Risks | ||
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derivatives are generally subject to greater liquidity risk as well. Liquidity issues may also make it difficult to value the 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 the Fund's objective and could cause your investment in the Fund to lose value. The Fund is subject to management risk because the Fund is actively managed. The portfolio managers will apply their investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that such decisions will produce the desired results. For example, securities that the 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 Fund.
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. The Fund also may incur a loss when there is a prepayment of securities that were purchased at a premium. Recent events in the U.S. mortgage markets have led to a reduced demand for mortgage loans and increased the liquidity risk for some mortgage-related securities. The value of some mortgage-related securities and other asset-backed securities in which the Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Fund's Adviser 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. The Fund's investments in other asset-backed securities are subject to risks similar to those associated with 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 ("NAV").
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. As the green bond market is relatively new and continues to evolve, the criteria used to define green bonds may change in the future.
More Information About the Fund's Strategies
Temporary Defensive Measures
As a temporary defensive measure, the 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 the Adviser deems appropriate. The Fund may miss certain investment opportunities if it uses defensive strategies and thus may not achieve its investment goal.
Percentage Investment Limitations
Except as set forth in the SAI, 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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Management Team | ||
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Portfolio Holdings
A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the section "Portfolio Holdings Information" in the SAI.
A "snapshot" of the Fund's investments will be found in its annual and semiannual reports, when available. In addition, a list of the Fund's full portfolio holdings, which is updated monthly after an aging period of at least 30 days, is available on the Fund's website at ngam.natixis.com/holdings. These holdings will remain accessible on the website until the Fund files its Form N-CSR or Form N-Q with the Securities and Exchange Commission for the period that includes the date of the information. In addition, a list of the Fund's 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 ngam.natixis.com/performance.
Management Team
Meet the Fund's Investment Adviser
The Natixis Funds family currently includes 32 mutual funds (the "Natixis Funds"). The Natixis Funds family had combined assets of $[ ] billion as of December 31, 2016. Natixis Funds are distributed through NGAM Distribution, L.P. (the "Distributor").
Adviser
Natixis AM US, located at 399 Boylston Street, Boston, Massachusetts 02116 serves as the adviser to the Fund. Natixis AM US was formed in 2014. As of December 31, 2016, Natixis AM US had $[ ] million in assets under management. Natixis AM US makes investment decisions for the Fund.
Natixis AM US has entered into a personnel-sharing arrangement with its Paris-based affiliate, Mirova, which is part of Natixis Global Asset Management. With assets under management of $[ ] billion as of December 31, 2016, 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 Natixis AM US and, in this capacity, are subject to the oversight of Natixis AM US and its Chief Compliance Officer. These associated persons will, on behalf of Natixis AM 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 prospectus and SAI. Unlike Natixis AM 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 fees to be paid by the Fund as a percentage of the Fund's average daily net assets is [ ]%.
A discussion of the factors considered by the Board of Trustees in approving the Fund's investment advisory contract will be included in the Fund's semi-annual report to shareholders for the period ending June 30, 2017.
Portfolio Trades
In placing portfolio trades, Natixis AM US may use brokerage firms that market the Fund's shares or are affiliated with Natixis AM US. In placing trades, Natixis AM US 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 Fund's Portfolio Managers
The following persons have had primary responsibility for the day-to-day management of the Fund's portfolio since the dates stated below.
Christopher Wigley, has served as lead portfolio manager of the Fund since its inception in 2017. Mr. Wigley is a portfolio manager with Mirova, located in Paris, France, which he joined in 2014. Prior to joining Mirova, he was a Senior Fund Manager at Epworth Investment Management from 2004 to 2014. Mr. Wigley is a graduate of the University of Essex in England, is a Chartered Wealth Manager and has over 28 years of investment experience.
Marc Briand, has served as portfolio manager of the 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 Natixis Asset Management from 2007 to 2013. Mr. Briand is a graduate of the French business school Institut Supérieur de Gestion in Paris and has over 28 years of investment experience.
Each portfolio manager is an employee of Mirova, an affiliate of Natixis AM US, and provides portfolio management through a personnel-sharing arrangement between Mirova and Natixis AM US.
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 Fund.
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Additional Information
The Fund enters into contractual arrangements with various parties, including, among others, the Adviser, the Distributor and the Fund's custodian and transfer agent, who provide services to the Fund. 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 Fund.
This Prospectus provides information concerning the Fund that you should consider in determining whether to purchase shares of the Fund. None of this Prospectus, the SAI or any contract that is an exhibit to the Fund's registration statement, is intended to, nor does it, give rise to an agreement or contract between the Fund 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.
Fund Services
Investing in the Fund
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. 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.
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 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 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 may pay lower annual expenses than Class Y shares.
Class Y Shares
The shares are available to a limited type of investor. See the section "Purchase and Sale of Fund 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.
You do not pay a sales charge on redemptions.
You pay lower annual expenses than Class A shares, giving you the potential for higher returns per share.
For information about the Fund's expenses, see the section "Fund Fees & Expenses" in the Fund Summary.
Certificates
Certificates will not be issued or honored for any class of shares.
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.
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How Sales Charges Are Calculated
Class A Shares
The price that you pay when you buy Class A shares (the "offering price") is their net asset value ("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 * | ||
Your Investment |
As a % of offering price |
As a % of your investment |
Less than $100,000 |
[ ]% |
[ ]% |
$100,000-$249,999 |
[ ]% |
[ ]% |
$250,000-$499,999 |
[ ]% |
[ ]% |
$500,000-$999,999 |
[ ]% |
[ ]% |
$1,000,000 or more ** |
[ ]% |
[ ]% |
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 ngam.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 $100,000 or more 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 the Fund, including the applicable sales charge, to the current public offering price of all series and classes of shares of the Natixis Funds held by you in one or more accounts. If your total investment exceeds a sales charge breakpoint in the table above, the lower sales charge applies to the entire amount of your current purchase in the Fund.
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 fiduciary accounts, sole proprietorships, single trust estates and any other individuals acceptable to the Distributor.
Certain 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);
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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;
Clients of an adviser or subadviser to any Natixis Fund with investments of $25,000 or more in the Natixis Funds;
Clients of NGAM Advisors that invest in a Natixis Fund that does not offer Class Y shares;
Wrap Fee Programs of certain broker-dealers, the advisers or the Distributor. Please consult your financial representative to determine if your wrap fee 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.
Repurchasing Fund Shares
You may apply proceeds from redeeming Class A shares of the Fund to repurchase Class A shares of any Natixis Fund without paying a front-end sales charge. To qualify, you must reinvest some or all of the proceeds within 120 days after your redemption and notify Natixis Funds in writing (directly or through your financial representative) at the time of reinvestment that you are taking advantage of this privilege. You may reinvest your proceeds by 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.
Class N and Class Y Shares
The offering price of Class N and Class Y 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 or Class Y shares.
Compensation to Securities Dealers
As part of its business strategy, the Fund pays securities dealers and other financial institutions (collectively, "dealers") that sell its shares. This compensation originates from two sources: sales charges (front-end or deferred) and 12b-1 fees (comprising the annual service and/or distribution fees paid under a plan adopted pursuant to Rule 12b-1 under the 1940 Act). The sales charges, some or all of which may be paid to dealers, are discussed in the section "How Sales Charges Are Calculated" and dealer commissions are disclosed in the SAI. Class A shares are subject to an annual service fee of 0.25% 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/or service (12b-1) fees are paid out of the Fund's assets on an ongoing basis, over time the fees for Class A shares will increase the cost of your investment and will cost you more than an investment in Class Y shares.
In addition, the Fund may make payments to financial intermediaries that provide shareholder services to shareholders whose shares are held of record in omnibus accounts, 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 the Fund in light of the fact that other costs may be avoided by the Fund where the intermediary, not the Fund's service provider, provides services to Fund shareholders.
The Distributor, the Adviser and each of their respective affiliates may, out of their own resources, which generally come directly or indirectly from fees paid by the Fund, 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 Fund, 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
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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. These payments may be in addition to payments made by the 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 the Fund or a particular share class over other mutual funds or share classes. Additionally, these payments may result in the Fund 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 the services it provides, 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.
It's Easy to Open an Account
To Open an Account with Natixis Funds:
Read this Prospectus carefully. The Fund is generally available for purchase in the United States, Puerto Rico, Guam and the U.S. Virgin Islands. Except to the extent otherwise permitted by the Distributor, the Funds will only accept accounts 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 Fund.
Determine how much you wish to invest. See the information regarding investment minimums for accounts in the section "Purchase and Sale of Fund Shares."
For Class
A shares, the Distributor, at its sole discretion, may lower investment minimums for accounts associated with wrap fee programs sponsored by certain broker-dealers and investment advisers and for accounts associated with certain retirement plans.
For Class Y, minimums are waived for such accounts.
The
Distributor, at its sole discretion, may waive the investment minimums for new accounts being established into existing Corporate Retirement Plans and existing SEP-IRA, SARSEP, SIMPLE and Keogh Plans using the Natixis Funds' prototype
document. The Fund is not available to new SIMPLE IRA plans.
Class A
and Class Y shares of the Fund are available to 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) with no initial or subsequent investment minimum.
At the
discretion of NGAM Advisors, clients of NGAM Advisors and its affiliates may purchase Class Y shares of the Fund below the stated minimums.
Complete the appropriate parts of the applicable account application, carefully following the instructions. If you have any questions, please call your financial representative or Natixis Funds at 800-225-5478. For more information on Natixis Funds' investment programs, refer to the section "Additional Investor Services" in this Prospectus.
Use the sections of this Prospectus that follow as your guide for purchasing shares.
Minimum Balance Policy
For Class A shares, in order to address the relatively higher costs of servicing smaller fund positions, on an annual basis the Fund may close an account and send the account holder the proceeds if the account falls below $50 for direct accounts and $500 for networked accounts. 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) and accounts associated with wrap fee programs or certain retirement accounts, are excepted from the liquidation. However, the Fund reserves the right to liquidate any account with a balance of one share or less regardless of the account type or share class. Due to operational limitations, the Fund's ability to apply the Minimum Balance Policy to shareholder accounts held through an intermediary in an omnibus fashion may be limited. The Fund 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 record keeping systems.
Self-Servicing Your Account
(Excludes Class N Shares)
Buying or selling shares is easy with the services described below (certain restrictions may apply):
Natixis Funds Personal Access Line®
800-225-5478, press 1
Natixis Funds Website:
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ngam.natixis.com
You have access to your account 24 hours a day by calling the Personal Access Line® from a touch-tone telephone or by visiting us online. Using these customer service options, you may:
purchase, exchange or redeem shares in your existing accounts;
review your account balance, recent transactions, current net asset value per share and recent performance;
order duplicate account statements; and
obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your shares.
Buying Shares
The Fund is generally available for purchase in the United States, Puerto Rico, Guam and the U.S. Virgin Islands. Except to the extent otherwise permitted by the Distributor, the Fund 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 Fund.
Opening an Account |
Adding to an Account | |
Through Your Investment Dealer |
Call your
investment dealer for information about opening or adding to an account. Dealers may also charge you a processing or servicing fee in connection with the purchase of Fund shares. | |
By Mail |
Make out a
check in U.S. dollars for the investment amount, payable to "Natixis Funds." Third party checks, "starter" checks and credit card convenience checks will not be accepted. However, third party checks under $10,000 may be accepted. Mail the check with your completed application to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579, or the overnight address, 330 West 9th Street, Kansas City, MO
64105-1514. Redemption proceeds may not be available immediately upon redemption of shares purchased by check. See the section "Selling Restrictions." |
Make out a
check in U.S. dollars for the investment amount, payable to "Natixis Funds." Third party checks, "starter" checks and credit card convenience checks will not be accepted. However, third party checks under $10,000 may be accepted. Uncashed
redemption checks from your account may be accepted.
Complete
the investment slip from an account statement or include a letter specifying the Fund name, your class of shares, your account number and the registered account name(s).
Redemption
proceeds may not be available immediately upon the redemption of shares purchased by check. See the section "Selling Restrictions." |
By Exchange (See the section "Exchanging Shares" for more details.) |
Call your
investment dealer or Natixis Funds at 800-225-5478 or visit ngam.natixis.com to 1) obtain a current prospectus for the fund into which you are exchanging and 2) request an exchange.
In
writing: Mail request to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579, or the overnight address, 330 West 9th Street, Kansas City, MO 64105-1514. |
Call your
investment dealer or Natixis Funds at 800-225-5478 or visit ngam.natixis.com to request an exchange.
In
writing: Mail request to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579, or the overnight address, 330 West 9th Street, Kansas City, MO 64105-1514. |
By Wire |
Mail your
completed application to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579. Call Natixis Funds at (800) 225-5478 to obtain an account number and wire transfer instructions. Your bank may charge you for such a transfer. |
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. |
Through Automated Clearing House ("ACH") |
You must
have an existing Natixis Funds account with an ACH eligible bank account already on file with the Funds. If you have an existing Natixis Funds account but have not signed up for the ACH system, please call Natixis Funds or visit ngam.natixis.com for
a Service Options Form. A medallion signature guarantee may be required to add this privilege.
Call your
investment dealer or Natixis Funds at 800-225-5478 to 1) obtain a current prospectus for the fund into which you are investing, and 2) request the purchase into a new fund.
Redemption
proceeds may not be available immediately upon redemption for shares purchased through ACH. See the section "Selling Restrictions." |
Call
Natixis Funds at 800-225-5478 or visit ngam.natixis.com to add shares to your account through ACH.
If you
have not signed up for the ACH system, please call Natixis Funds or visit ngam.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege.
Redemption
proceeds may not be available immediately upon redemption for shares purchased through ACH. See the section "Selling Restrictions." |
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Automatic Investing Through Investment Builder |
Although
you cannot open an account through Investment Builder, you may add this feature by selecting it on your account application. The Fund minimum must be met in order to establish an account.
Ask your
bank or credit union whether it is a member of the ACH system. |
If you
have not signed up for Investment Builder, please call Natixis Funds at 800-225-5478 or visit ngam.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege. See the section "Additional Investor Services."
Redemption
proceeds may not be available immediately upon redemption for shares purchased through ACH. See the section "Selling Restrictions." |
Selling Shares
To Sell Some or All of Your Shares
Certain restrictions may apply. Redemption proceeds may not be available immediately upon redemption for shares purchased by check, through ACH or Investment Builder. See the section "Restrictions on Buying, Selling and Exchanging Shares." 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 of more than $100,000 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 "Selling Shares in Writing" section for more information.
Through Your Investment Dealer |
Call your
investment dealer for information. Dealers may also charge you a processing or service fee in connection with the redemption of Fund shares. |
By Mail |
Write a
letter to request a redemption. Specify the name of your Fund, class of shares, account number, the exact registered account name(s), the number of shares or the dollar amount to be redeemed and the method by which you wish to receive your proceeds.
Additional materials may be required. See the section "Selling Shares in Writing."
The
request must be signed by all of the owners of the shares and must include the capacity in which they are signing, if appropriate.
Mail your
request by regular mail to Natixis Funds, P.O. Box 219579, Kansas City, MO 64121-9579 or by registered, express or certified mail to Natixis Funds, 330 West 9th Street, Kansas City, MO 64105-1514. Proceeds (less any applicable CDSC) will be delivered by the method chosen in your letter. Proceeds delivered by mail will generally be mailed to you within three business days after the request is
received in good order, although it may take longer. See the sections "Selling Shares in Writing" and "Selling Restrictions." |
By Exchange |
Obtain a
current prospectus for the fund into which you are exchanging by calling your investment dealer or Natixis Funds at 800-225-5478 or visit ngam.natixis.com.
Call
Natixis Funds or visit ngam.natixis.com to request an exchange. |
By Wire |
Complete
the "Bank Information" section on your account application.
Call
Natixis Funds at 800-225-5478, visit ngam.natixis.com or indicate in your redemption request letter (see above) that you wish to have your proceeds wired to your bank.
Proceeds
(less any applicable CDSC) will generally be wired on the next business day, although it may take longer. See the sections "Selling Shares in Writing" and "Selling Restrictions." A wire fee will be deducted from the proceeds. Your bank may charge
you a fee to receive the wire. If you have not signed up for banking information on your application, please call Natixis Funds at 800-225-5478 or visit ngam.natixis.com for a Service Options Form. A medallion signature guarantee may be required to
add this privilege. |
Through ACH |
Ask your
bank or credit union whether it is a member of the ACH system.
Complete
the "Bank Information" section on your account application.
If you
have not signed up for the ACH system on your application, please call Natixis Funds at 800-225-5478 or visit ngam.natixis.com for a Service Options Form. A medallion signature guarantee may be required to add this privilege. Call Natixis Funds or visit ngam.natixis.com to request an ACH redemption or indicate in your redemption letter that you wish to have your proceeds sent to your bank through ACH. Proceeds (less any applicable CDSC) will generally arrive at your bank within three business days, although it may take longer. See the sections "Selling Shares in Writing" and "Selling
Restrictions." |
By Telephone |
Call
Natixis Funds at 800-225-5478 to choose the method you wish to use to redeem your shares. You may receive your proceeds (less any applicable CDSC) by mail, by wire or through ACH (see above), subject to certain restrictions. See the sections
"Selling Shares in Writing" and "Selling Restrictions."
Redemptions by check in the amount greater than $100,000 must be done in writing. |
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By Systematic Withdrawal Plan |
Call
Natixis Funds at 800-225-5478 or your financial representative for more information. |
Selling Shares in Writing
If you wish to redeem your shares in writing, all owners of the shares must sign the redemption request in the exact names in which the shares are registered and indicate any special capacity in which they are signing. In certain situations, you will be required to make your request to sell shares in writing. In these instances, a letter of instruction signed by the authorized owner is necessary. In certain situations, we also may require a medallion signature guarantee or additional documentation.
A medallion signature guarantee protects you against fraudulent orders and is necessary if:
you are selling more than $100,000 worth of shares and you are requesting the proceeds by check (this does not apply to IRA transfer of assets to a new custodian);
your address of record has been changed within the past 30 days;
a proceeds check for any amount is either mailed to an address other than the address of record or not payable to the registered owner(s); or
the proceeds are sent by wire or ACH to a bank account not already on file with the fund account.
A notary public cannot provide a medallion signature guarantee. The Fund will only accept medallion signature guarantees bearing the STAMP2000 Medallion imprint. A medallion signature guarantee can be obtained from one of the following sources:
a financial representative or securities dealer;
a federal savings bank, cooperative or other type of bank;
a savings and loan or other thrift institution;
a credit union; or
a securities exchange or clearing agency.
In some situations additional documentation may be necessary. Please contact your financial representative or Natixis Funds regarding documentation requirements.
Exchanging Shares
In general, you may exchange Class A, Class N or Class Y shares of the Fund for shares of the same class of another Natixis Fund or Loomis Sayles Fund that offers such class of shares, without paying a sales charge or a CDSC, if applicable (see the sections "Buying Shares" and "Selling Shares") subject to restrictions noted below. The exchange will be subject to investment minimums. Once the fund minimum is met, exchanges under the Automatic Exchange Plan must be made for at least $100 (see the section "Additional Investor Services"). You may exchange Class Y shares of the Fund, subject to minimum investment requirements, for Institutional Class shares of any series of Loomis Sayles Funds that offers Institutional Class shares subject to certain restrictions noted below. The exchange must be for at least the minimum to open an account. 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.
In certain limited circumstances, accounts participating in wrap fee programs or held through a registered investment adviser may exchange Class Y shares of the Fund for Class A shares of the Fund. Class Y shares may be converted to Class A shares of the Fund if the Class Y shares are held in an investment option or program that no longer permits the use of Class Y shares in that option or program or if the shareholder otherwise becomes ineligible to participate in Class Y shares. Exchanges from Class Y shares to Class A shares will not be subject to an initial sales charge; however, future purchases may be subject to a sales charge, if applicable. In order to exchange shares, a representative of the wrap fee program or a registered investment adviser must follow the procedures set forth by the Distributor.
Accounts participating in or moving into wrap-fee programs or held through a registered investment adviser may exchange Class A shares of the Fund for Class Y shares of the Fund. Any account with an outstanding CDSC liability will be assessed the CDSC before converting to either Class A or Class Y shares. In order to exchange shares, a representative of the wrap-fee program or registered investment adviser must follow the procedures set forth by the Distributor. An exchange of shares for shares of a different class in the same fund generally should not be a taxable event for the exchanging shareholder.
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Class A shares of the Fund acquired by Fund trustees, former Fund trustees, employees of affiliates of the Natixis Funds, individuals who are affiliated with any Natixis Fund (including spouses, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned), Natixis and Natixis affiliate benefit plans (collectively, "Natixis affiliated shareholders") may be exchanged for Class Y shares of the Fund without payment of a CDSC.
Due to operational limitations at your financial intermediary, your ability to exchange between share classes of the same fund may be limited. Please consult your financial representative for more information.
Cost Basis Reporting. Upon the redemption or exchange of your shares in 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. Please contact the Fund at 800-225-5478, visit ngam.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 Fund discourages excessive short-term trading that may be detrimental to the Fund and its shareholders. Frequent purchases and redemptions of Fund shares by shareholders may present certain risks for other shareholders in the Fund. This includes the risk of diluting the value of Fund shares held by long-term shareholders, interfering with the efficient management of the 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.
The Fund reserves the right to suspend or change the terms of purchasing or exchanging shares. The Fund and the Distributor reserve the right to reject any purchase or exchange order for any reason, including if the transaction is deemed not to be in the best interests of the 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 "Selling Shares."
Limits on Frequent Trading. Excessive trading activity in the 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 the Fund followed by a redemption (including a redemption by exchange) of any amount out of the Fund; or (2) a redemption (including a redemption by exchange) out of the Fund followed by a purchase (including a purchase by exchange) of any amount into the Fund. Two round trip transactions in the 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 from making subsequent purchases (including purchases by exchange). The above limits are applicable whether a shareholder holds shares directly with the Fund or indirectly through a financial intermediary, such as a broker, bank, investment adviser, recordkeeper for retirement plan participants, or other third party. The preceding is not an exclusive description of activities that the Fund and the Distributor may consider to be excessive and, at its discretion, the 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. The 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 the Fund or the Distributor. The 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 the 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, the Fund and the Distributor, as well as an adviser to the Fund may ban trading in an account if, in their judgment, a shareholder or financial intermediary has engaged in
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short-term transactions that, while not necessarily in violation of the Fund's stated policies on frequent trading, are harmful to the Fund or its shareholders. The Fund and the Distributor also reserve the right to notify financial intermediaries of the shareholder's trading activity.
Accounts Held by Financial Intermediaries. The ability of the Fund and the Distributor to monitor trades that are placed by omnibus or other nominee accounts is severely limited in those instances in which the financial intermediary maintains the record of the Fund's underlying beneficial owners. In general, the Fund and the Distributor will review trading activity at the omnibus account level. If the Fund and the Distributor detect suspicious activity, they may request and receive personal identifying information and transaction histories for some or all underlying shareholders (including plan participants) to determine whether such shareholders have engaged in excessive short-term trading activity. If the 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. The Fund may also limit or prohibit additional purchases of Fund shares by an intermediary. Investors should not assume the Fund will be able to detect or prevent all trading practices that may disadvantage the Fund.
Purchase Restrictions
The Fund is required by federal regulations to obtain certain personal information from you and to use that information to verify your identity. The Fund may not be able to open your account if the requested information is not provided. The Fund reserves the right to refuse to open an account, close an account and redeem your shares at the then-current price or take other such steps that the Fund deems necessary to comply with federal regulations if your identity cannot be verified.
Selling Restrictions
The table below describes restrictions placed on selling shares of the Fund. Please see the SAI for additional information regarding redemption payment policies.
Restriction |
Situation |
The Fund may suspend the right of redemption or postpone payment for more than 7 days: |
When the
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. |
The Fund reserves the right to suspend account services or refuse transaction requests: |
With a
notice of a dispute between registered owners or death of a registered owner.
With
suspicion/evidence of a fraudulent act. |
The Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities in lieu of cash or may take up to 7 days to pay a redemption request in order to raise capital: |
When it is
detrimental for a Fund to make cash payments as determined in the sole discretion of the Adviser or Subadviser. |
The Fund may withhold redemption proceeds for 10 days from the purchase date: |
When
redemptions are made within 10 calendar days of purchase by check or ACH to allow the check or ACH transaction to clear. |
Although most redemptions are made in cash, as described in the SAI, the Fund reserves the right to redeem shares in kind. If a shareholder receives a distribution in kind, the shareholder will bear the market risk associated with the distributed securities and may incur brokerage or other charges in converting the securities to cash.
How Fund Shares Are Priced
NAV is the price of one share of the 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 New York Stock Exchange ("NYSE") on the days the NYSE is open for trading. This is normally 4:00 p.m., Eastern time. The Fund's shares will not be priced on the days on which the NYSE is closed for trading. In addition, the 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, Boston Financial Data Services, 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 Fund 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 market close (normally 4:00 p.m., Eastern time), the shareholder will receive
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that day's NAV. Under limited circumstances, the Distributor may enter into contractual agreements pursuant to which orders received by your investment dealer before the 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 the Fund.
If the 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 "Buying 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 "Buying Shares" and "Selling Shares."
Fund securities and other investments for which market quotations are readily available, as outlined in the Fund's policies and procedures, are valued at market value. The Fund may use independent pricing services recommended by the Adviser 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. 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. Valuations based on information from foreign markets may be subject to the Fund's fair value policies described below.
Debt securities and unlisted preferred equity securities — evaluated bids furnished to the 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 clearinghouse 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 Fund 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 the ask 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 broker-dealers. 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 believes that, over time, they are traded most extensively. Valuations based on information from foreign markets may be subject to the Fund's fair value policies as 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 pursuant to procedures approved by the Board. The 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, the 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 the Fund's NAV is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine the 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
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securities held by the 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 the Fund takes place in various markets outside the United States on days and at times other than when the NYSE is open for trading. Therefore, the calculation of the Fund's 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 the Fund's portfolio may change on days when the Fund is not open for business and its shares may not be purchased or redeemed.
Dividends and Distributions
The Fund generally distributes annually all or substantially all of its net investment income (other than capital gains) in the form of dividends. The Fund declares and pays its dividends quarterly. The 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 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.
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, the 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.
For more information or to change your distribution option, contact Natixis Funds in writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a Natixis Fund held in a non-retirement plan account, you will receive a Form 1099 to help you report the prior calendar 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.
Tax Consequences
Except as noted, the discussion below addresses only the U.S. federal income tax consequences of an investment in the Fund and does not address any non-U.S., state or local tax consequences.
The Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), necessary to qualify each year for treatment 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 Fund. 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 the 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 the Fund owned for more than one year over net short-term capital losses from the sale of investments that the Fund 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 will be taxable as ordinary income. The Fund's transactions in options or other 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 the 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.
A 3.8% 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 but not
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Fund Services | ||
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including exempt interest dividends, paid by the Fund, and net capital gains recognized on the sale, redemption, exchange or other taxable disposition of shares of the 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 the Fund before a shareholder's investment (and thus were included in the price the 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.
Fund distributions 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 Fund as an investment through your plan and the tax treatment of distributions to you (including distributions of amounts attributable to an investment in the 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 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. The 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 the 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, the Fund's investments in foreign securities or foreign currencies 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. Because the Fund invests in foreign securities, shareholders should consult their tax advisers about the consequences of their investment under foreign laws.
The Fund's investments in certain debt obligations (those issued with "OID" or having accrued with market discount, as described in the SAI), derivatives, or REITs may cause the Fund to recognize taxable income in excess of the cash generated by such investments. Thus, the Fund could be required to liquidate investments, including at times when it is not advantageous to do so, in order to satisfy the distribution requirements applicable to regulated investment companies under the Code. In addition, the Fund's investments in derivatives may affect the amount, timing or character of distributions to shareholders. In particular, a Fund's transactions in options or other 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.
Backup Withholding. The 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. The current backup withholding tax rate is 28%.
Please see the SAI for additional information on the U.S. federal income tax consequences of an investment in the Fund.
You should consult your tax adviser for more information on your own situation, including possible U.S. federal, state, local, foreign or other applicable taxes.
Additional Investor Services
Retirement Plans
Natixis Funds offer a range of retirement plans, including Coverdell Education Savings Accounts, IRAs and SEPs. Refer to the section "It's Easy to Open an Account" for investment minimums. For more information about our Retirement Plans, call us at 800-225-5478.
Investment Builder Program
This is Natixis Funds' automatic investment plan. Once you meet the Fund minimum, you may authorize automatic monthly transfers of $50 or more per Fund from your bank checking or savings account to purchase shares of one or more Natixis Funds. For instructions on how to join the Investment Builder Program, please refer to the section "Buying Shares."
Dividend Diversification Program
This program allows you to have all dividends and any other distributions automatically invested in shares of the same class of another Natixis Fund 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.
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Financial Performance | ||
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Automatic Exchange Plan
Natixis Funds have an automatic exchange plan under which shares of a class of a Natixis Fund are automatically exchanged each month for shares of the same class of another Natixis Fund. 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 Shares" above and refer to the SAI for more information on the Automatic Exchange Plan.
Systematic Withdrawal Plan
This plan allows you to redeem shares and receive payments from the 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 "Selling Shares."
Natixis Funds Personal Access Line®
(Excludes Class N Shares)
This automated customer service system allows you to have access to your account 24 hours a day by calling 800-225-5478, and pressing 1. With a touch-tone telephone, you can obtain information about your current account balance, recent transactions, Fund prices and recent performance. You may also use Personal Access Line® to purchase, exchange or redeem shares in any of your existing accounts. Certain restrictions may apply.
Natixis Funds Website
(Excludes Class N Shares)
Visit us at ngam.natixis.com to review your account balance and recent transactions, to view current net asset value per share and performance information or to order duplicate account statements and tax information. You may also go online to purchase, exchange or redeem shares in your existing accounts. Certain restrictions may apply.
Financial Performance
The Fund is new and has not yet issued financial statements.
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If you would like more information about the Fund, the following documents are available free upon request:
Annual and Semiannual Reports—Provide additional information about the Fund's investments. The 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 Fund and its 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 Fund's annual or semiannual reports or its SAI, to request other information about the Fund, and to make shareholder inquiries generally, contact your financial representative, visit the Fund's website at ngam.natixis.com or call the Fund 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.
Information about the Fund, including its reports and SAI, can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Text-only copies of the Fund's 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, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-1520.
Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090.
Portfolio Holdings—A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the SAI.
Investment Company Act File No. 811-04323 |
XMGG51-0217 |
STATEMENT OF ADDITIONAL INFORMATION
February 24, 2017
NATIXIS FUNDS TRUST I
MIROVA GLOBAL GREEN BOND FUND (the Fund)
Class A ([ ]), Class N ([ ]) and Class Y ([ ])
This Statement of Additional Information (Statement) contains specific information that may be useful to investors but that is not included in the Statutory Prospectus of the Fund. This Statement is not a prospectus and is authorized for distribution only when accompanied or preceded by the Funds Summary or Statutory Prospectus, each dated February 24, 2017 (the Prospectus), as from time to time revised or supplemented. This Statement should be read together with the Prospectus. Investors may obtain the Prospectus without charge from NGAM Distribution, L.P. (the Distributor), Prospectus Fulfillment Desk, 399 Boylston Street, Boston, MA 02116, by calling Natixis Funds at 800-225-5478 or by visiting the Funds website at ngam.natixis.com.
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The following is a description of restrictions on the investments to be made by the Fund. Except where noted below, these restrictions are fundamental policies that may not be changed without the vote of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended (the 1940 Act)). Except in the case of the restriction marked with a dagger () (see General Notes on Investment Restrictions below), the percentages set forth below and the percentage limitations set forth in the 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 Fund has elected to be classified as a non-diversified series of an open-end investment company.
Mirova Global Green Bond Fund
Mirova 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). |
Mirova Global Green Bond Fund may:
(10) | Purchase and sell commodities to the maximum extent permitted by applicable law. |
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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.
General Notes on Investment Restrictions
In addition to temporary borrowing, and subject to any stricter restrictions on borrowing applicable to the Fund, the 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%, the 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 the Funds ability to borrow money on a non-temporary basis if such borrowings constitute senior securities. The Fund 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 the Fund maintains adequate cover, segregation of assets or otherwise. Similarly, a short sale will not be considered a senior security if the Fund takes certain steps contemplated by SEC staff pronouncements, such as ensuring the short sale transaction is adequately covered.
The 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. This policy may be changed without a shareholder vote. The staff of the SEC is presently of the view that repurchase agreements maturing in more than seven days are subject to this restriction. Until that position is revised, modified or rescinded, the Fund will conduct its operations in a manner consistent with this view. This limitation on investment in illiquid securities does not apply to certain securities which might otherwise be considered illiquid, including securities issued pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act) and certain commercial paper, which the Funds adviser has determined to be liquid under procedures approved by the Board. Similarly, the Fund will not consider a security to be a restricted security for purposes of its investment restrictions if it is determined to be liquid under such procedures.
For purposes of the foregoing restrictions, the Fund does 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, does the Fund consider such swap contracts to involve the issuance of a senior security, provided the 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 an investment advisory agreement, Natixis Asset Management U.S., LLC (Natixis AM US or Adviser) has agreed to manage the investment and reinvestment of the assets of the Fund, subject to the supervision of the Board. For the services described in the advisory agreement, the Fund has agreed to pay Natixis AM US an advisory fee at the annual rate of [ ]% of the average daily net assets.
Natixis AM US has given a binding contractual undertaking to all classes of the Fund to waive its advisory fee and, if necessary, to reimburse certain expenses related to operating the Fund in order to limit the Funds expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes, organizational and extraordinary expenses, such as litigation and indemnification expenses, to the annual rates indicated below. The undertaking is in effect until [ ] and may be modified before then only with the consent of the Board. The
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undertaking will be reevaluated on an annual basis thereafter, subject to the obligation of the Fund to repay such advisory fees waived and/or expenses reimbursed in later periods to the extent that the total annual Fund operating expenses for a class fall below the expense limit; provided, however, that the Fund is not obligated to repay 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.
Fund |
Expense Limit |
Date of Undertaking |
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Mirova Global Green Bond Fund | [ ] | |||||||
Class A |
[ | ]% | ||||||
Class N |
[ | ]% | ||||||
Class Y |
[ | ]% |
Brokerage Commissions
The Fund is newly formed and thus has not incurred any brokerage commissions as of the date of this Statement.
For a description of how transactions in portfolio securities are effected and how the Adviser selects brokers, see the section entitled Portfolio Transactions and Brokerage in this Statement.
Regular Broker-Dealers
The Fund is newly formed and thus does not have any holdings of its regular broker-dealers as of the date of this Statement.
Sales Charges and Distribution and Service (12b-1) Fees
As explained in this Statement, the Class A shares of the Fund pay NGAM Distribution, L.P. (the Distributor) fees under plans adopted pursuant to Rule 12b-1 under the 1940 Act (the Plans). The Fund is newly formed and thus has not paid any Rule 12b-1 fees as of the date of this Statement.
The Fund is newly formed and has not yet publicly offered shares prior to the date of this Statement.
Ownership of shares of the Fund may be concentrated in one or a few large investors, including an affiliate of the Funds Adviser. The 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 the Funds performance. In the event of such redemptions or investments, the 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 the Funds brokerage and/or other transaction costs. In addition, when funds of funds or other investors own a substantial portion of the 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, may accelerate the realization of taxable income to shareholders and may limit 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, the 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.
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Natixis Funds Trust I (the Trust) 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 (the Declaration of Trust), and is a series company as described in Section 18(f)(2) of the 1940 Act, as amended. Currently, each series of the Trust except the Fund is diversified. The Fund is non-diversified. The name of the Trust 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 |
INVESTMENT STRATEGIES AND RISKS
Investment Strategies
The descriptions below summarize and describe certain investment strategies, including particular types of securities or instruments or specific practices, that may be used by the Adviser in managing the Fund.
The Funds principal strategies are described in its Prospectus. This Statement describes some of the non-principal strategies the Fund may use in addition to providing additional information, including related risks, about its principal strategies.
The list of securities or other instruments under each category below is not intended to be an exclusive list of securities, instruments and practices for investment. Unless a strategy, practice or security is specifically prohibited by the investment restrictions listed in the Prospectus, in the section Investment Restrictions in this Statement or under applicable law, the Fund may engage in each of the strategies and invest in securities and instruments in addition to those listed below. The Adviser may invest in a general category listed below and, where applicable, with particular emphasis on a certain type of security, but investment is not limited to the categories listed below or the securities specifically enumerated under each category. The 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 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 may invest in any security that falls under the specific category, including securities that are not listed below. The Prospectus and/or this Statement will be updated if the Fund begins to engage in investment practices that are not described in the Prospectus and/or this Statement.
Adjustable-Rate Mortgage (ARM) Securities
The Fund 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
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certain periods. Because of the resetting of interest rates, ARMs are less likely than non-adjustable rate securities of comparable quality and maturity to increase significantly in value when market interest rates fall. In addition, the Fund will not benefit from increases in interest rates to the extent that interest rates rise to the point where they cause the current coupon of the underlying ARM to exceed a cap rate for a particular mortgage. See the section Mortgage-Related Securities for more information on the risks involved in ARMs.
Asset-Backed Securities
The Fund 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). Generally, the issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities is of shorter maturity than mortgage loans. Instruments backed by pools of receivables are similar to mortgage-backed securities in that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are prepaid, the Fund will ordinarily reinvest the prepaid amounts in securities, the yields of which reflect interest rates prevailing at the time. Therefore, the Funds ability to maintain a portfolio that includes high-yielding asset-backed securities will be adversely affected to the extent that prepayments of principal must be reinvested in securities that have lower yields than the prepaid obligations. Moreover, prepayments of securities purchased at a premium could result in a realized loss.
In addition, the value of some mortgage-backed or asset-backed securities in which the Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Adviser to forecast interest rates and other economic factors correctly. 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.
The Fund 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, the 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.
Collateralized Mortgage Obligations (CMOs)
The Fund 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 the 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 under Mortgage-Related Securities below.
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Convertible Securities
The Fund may invest in convertible securities. Convertible securities include corporate bonds, notes or preferred stocks of U.S. or foreign issuers that can be converted into (exchanged for) common stocks or other equity securities. Convertible securities also include other securities, such as warrants, that provide an opportunity for equity participation. Since convertible securities may be converted into equity securities, their values will normally vary in some proportion with those of the underlying equity securities. Convertible securities usually provide a higher yield than the underlying equity, however, so that the price decline of a convertible security may sometimes be less substantial than that of the underlying equity security. Convertible securities are generally subject to the same risks as non-convertible fixed-income securities, but usually provide a lower yield than comparable fixed-income securities. Many convertible securities are relatively illiquid.
Cybersecurity, Operational and Technology Risk
The Fund, its 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 Fund and its shareholders. These risks include theft, loss, misuse, improper release, corruption and destruction of, or unauthorized access to, confidential or highly restricted data relating to the Fund and its shareholders; and compromises or failures to systems, networks, devices and applications relating to the operations of the Fund and its service providers. Cybersecurity and other operational and technology issues may result in, among other things, financial losses to the Fund and its shareholders; the inability of the Fund to transact business with its shareholders or to engage in portfolio transactions; delays or mistakes in the calculation of the Funds net asset value (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. The Funds service providers (including, but not limited to, investment adviser, any sub-advisers, administrator, transfer agent, and custodian), financial intermediaries, companies in which the Fund invests and parties with which the Fund engages in portfolio or other transactions also may be adversely impacted by cybersecurity and other operational and technology risks, resulting in losses to the 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 Fund being, among other things, unable to buy or sell certain securities or financial instruments or unable to accurately price its investments. The Fund has developed processes and risk management systems designed to reduce the risks associated with cybersecurity and other operational and technology plans and systems. However, there is no guarantee that those measures will be effective, particularly since the Fund does not directly control the cybersecurity defenses of its service providers, financial intermediaries and companies in which it invests or with which it does business.
Debt Securities
The Fund may invest in debt securities. Debt securities are used by issuers to borrow money. The issuer usually pays a fixed, variable or floating rate of interest and must repay the amount borrowed at the maturity of the security. Some debt securities, such as zero-coupon securities, do not pay interest but are sold at a discount from their face values. Debt securities include corporate bonds, government securities and mortgage- and other asset-backed securities. Debt securities include a broad array of short-, medium- and long-term obligations issued by the U.S. or foreign governments, government or international agencies and instrumentalities, and corporate issuers of various types. Some debt securities represent uncollateralized obligations of their issuers; in other cases, the securities may be backed by specific assets (such as mortgages or other receivables) that have been set aside as collateral for the issuers obligation. Debt securities generally involve an obligation of the issuer to pay interest or dividends on either a current basis or at the maturity of the securities, as well as the obligation to repay the principal amount of the security at maturity.
Risks. Debt securities are subject to market risk and credit risk. Credit risk relates to the ability of the issuer to make payments of principal and interest and includes the risk of default. Sometimes, an issuer may make these payments from money raised through a variety of sources, including, with respect to issuers of municipal securities, (i) the
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issuers general taxing power, (ii) a specific type of tax, such as a property tax or (iii) a particular facility or project such as a highway. The ability of an issuer to make these payments could be affected by general economic conditions, issues specific to the issuer, litigation, legislation or other political events, the bankruptcy of the issuer, war, natural disasters, terrorism or other major events. U.S. government securities are not generally perceived to involve credit risks to the same extent as investments in other types of fixed-income securities; as a result, the yields available from U.S. government securities are generally lower than the yields available from corporate and municipal debt securities. Market risk is the risk that the value of the security will fall because of changes in market rates of interest. Generally, the value of debt securities falls when market rates of interest are rising. Some debt securities also involve prepayment or call risk. This is the risk that the issuer will repay the Fund the principal on the security before it is due, thus depriving the Fund of a favorable stream of future interest payments.
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 the Funds investments in debt securities will cause the Funds NAV to increase or decrease.
Fixed-Income Securities
The Fund 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 the Fund for any particular period. In addition, the prices of fixed-income securities generally vary inversely with changes in interest rates. Prices of fixed-income securities may also be affected by items related to a particular issue or to the debt markets generally. The NAV of the Funds shares will vary as a result of changes in the value of the securities in the Funds portfolio.
Investment-Grade Fixed-Income Securities. To be considered investment-grade quality, at least one of the three major rating agencies (Fitch Investor Services, Inc. (Fitch), Moodys Investors Service, Inc. (Moodys) or S&P Global Ratings (S&P)) must have rated the security in one of its respective top four rating categories at the time the Fund acquires the security or, if the security is unrated, the Adviser must have determined it to be of comparable quality.
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 the Fund acquires the security or, if the security is unrated, the Adviser must have determined it to be of comparable quality.
Below investment-grade fixed-income securities are subject to greater credit 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 the Fund invests in below investment-grade fixed-income securities, the Funds achievement of its objective may be more dependent on the Advisers own credit analysis than is the case with funds that invest in higher-quality fixed-income securities. The market for 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 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. The Fund may continue to hold fixed-income securities that are downgraded in quality subsequent to their purchase if the Adviser believes it would be advantageous to do so.
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Green Bonds
Under normal circumstances, the 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.
Inflation-Linked and Inflation-Indexed Securities
The Fund may invest in inflation-linked securities. Inflation-linked securities are fixed-income securities the principal values of which are adjusted periodically according to the rate of inflation. 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 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 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 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 securities. If inflation is lower than expected during a period in which the Fund holds inflation-linked securities, the Fund 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 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 security will accurately measure the real rate of inflation in the prices of goods and services. Inflation-linked and inflation-indexed securities include Treasury Inflation-Protected Securities issued by the U.S. government (see 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.
The Funds investments in inflation-indexed securities can cause the Fund to accrue income for U.S. federal income tax purposes without a corresponding receipt of cash; 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 treatment as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the Code).
Investments in Banks
The Fund may invest a portion of its 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
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and instruments issued by domestic banks, foreign branches of domestic banks, foreign subsidiaries of domestic banks and domestic and foreign branches of foreign banks.
The 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 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.
Mortgage Dollar Rolls
The Fund may enter into mortgage dollar rolls. A dollar roll involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. The Fund will designate on its records or segregate with its custodian bank assets determined to be liquid in an amount sufficient to meet its obligations under the transactions. A dollar roll involves potential risks of loss that are different from those related to the securities underlying the transactions. The Fund may be required to purchase securities at a higher price than may otherwise be available on the open market. Since the counterparty in the transaction is required to deliver a similar, but not identical, security to the Fund, the security that the Fund is required to buy under the dollar roll may be worth less than an identical security. There is no assurance that the Funds use of the cash that it receives from a dollar roll will provide a return that exceeds borrowing costs.
Mortgage-Related Securities
The Fund 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 the Fund purchases these assets at a premium, a faster-than-expected prepayment rate will tend to reduce yield to maturity, and a slower-than-expected prepayment rate may have the opposite effect of increasing yield to maturity. If the Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will tend to increase, and slower-than-expected prepayments will tend to reduce, yield to maturity. Prepayments, and resulting amounts available for reinvestment by the Fund, are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates. Accelerated prepayments on securities purchased at a premium may result in a loss of principal if the premium has not been fully amortized at the time of prepayment. Although these securities will decrease in value as a result of increases in interest rates generally, they are likely to appreciate less than other fixed-income securities when interest rates decline because of the risk of prepayments. In addition, an increase in interest rates would increase the inherent volatility of the Fund by increasing the average life of the Funds portfolio securities.
The value of some mortgage-backed or asset-backed securities in which the Fund invests may be particularly sensitive to changes in prevailing interest rates, and the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Adviser to forecast interest rates and other economic factors correctly. 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
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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.
The 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, the 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.
Rule 144A Securities and Section 4(a)(2) Commercial Paper
The Fund 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. The 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 the Funds illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. As noted above, Rule 144A securities and Section 4(a)(2) commercial paper are treated as illiquid unless the Adviser has determined, under guidelines established by the Board, that the particular issue is liquid. Under the guidelines, the Adviser considers such factors as: (i) the frequency of the trades and quotes for a security; (ii) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; (iii) dealer undertakings to make a market in the security; and (iv) the nature of the security and the nature of the marketplace trades in the security.
Step-Coupon Securities
The Fund may invest in step-coupon securities. Step-coupon securities trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. Market values of these types of securities generally fluctuate in response to changes in interest rates to a greater degree than conventional interest-paying securities of comparable term and quality. Under many market conditions, investments in such securities may be illiquid, making it difficult for the Fund to dispose of them or determine their current value.
Stripped Securities
The Fund may invest in stripped securities, which are usually structured with two or more classes that receive different proportions of the interest and principal distribution on a pool of U.S. government or foreign government securities or mortgage assets. In some cases, one class will receive all of the interest (the interest-only or IO class), while the other class will receive all of the principal (the principal-only or PO class). Stripped securities commonly have greater market volatility than other types of fixed-income securities. In the case of stripped mortgage securities, if the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully its investments in IOs. Stripped securities may be illiquid. Stripped securities may be considered derivative securities, discussed in the section Derivative Instruments.
Structured Notes
The Fund may invest in a broad category of instruments known as structured notes. These instruments are debt obligations issued by industrial corporations, financial institutions or governmental or international agencies. Traditional debt obligations typically obligate the issuer to repay the principal plus a specified rate of interest. Structured notes, by contrast, obligate the issuer to pay amounts of principal or interest that are determined by reference to changes in some external factor or factors, or the principal and interest rate may vary from the stated rate because of changes in these factors. For example, the issuers obligations could be determined by reference to
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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 can serve many different purposes in the management of the Fund. For example, they can be used to increase the Funds exposure to changes in the value of assets that the Fund would not ordinarily purchase directly (such as commodities or stocks traded in a market that is not open to U.S. investors). They can also be used to hedge the risks associated with other investments the Fund holds. For example, if a structured note has an interest rate that fluctuates inversely with general changes in a countrys stock market index, the value of the structured note would generally move in the opposite direction to the value of holdings of stocks in that market, thus moderating the effect of stock market movements on the value of the Funds portfolio as a whole.
Risks. Structured notes involve special risks. As with any debt obligation, structured notes involve the risk that the issuer will become insolvent or otherwise default on its payment obligations. This risk is in addition to the risk that the issuers obligations (and thus the value of the Funds investment) will be reduced because of adverse changes in the external factor or factors to which the obligations are linked. The value of structured notes will in many cases be more volatile (that is, will change more rapidly or severely) than the value of traditional debt instruments. Volatility will be especially high if the issuers obligations are determined by reference to some multiple of the change in the external factor or factors. Many structured notes have limited or no liquidity, so that the Fund would be unable to dispose of the investment prior to maturity. As with all investments, successful use of structured notes depends in significant part on the accuracy of the Advisers analysis of the issuers creditworthiness and financial prospects, and of the Advisers forecast as to changes in relevant economic and financial market conditions and factors. In instances where the issuer of a structured note is a foreign entity, the usual risks associated with investments in foreign securities (described below) apply. Structured notes may be considered derivative securities.
U.S. Government Securities
The Fund may invest in some or all of the following U.S. government securities:
U.S. Treasury Bills Direct obligations of the U.S. Treasury that are issued in maturities of one year or less. No interest is paid on Treasury bills; instead, they are issued at a discount and repaid at full face value when they mature. They are backed by the full faith and credit of the U.S. government.
U.S. Treasury Notes and Bonds Direct obligations of the U.S. Treasury issued in maturities that vary between one and thirty years, with interest normally payable every six 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 the 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
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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 residential mortgage pools backing an issue of Ginnie Maes have a maximum maturity of 30 years. Scheduled payments of principal and interest are made to the registered holders of Ginnie Maes (such as the Fund) each month. Unscheduled prepayments may be made by homeowners, or as a result of a default. Prepayments are passed through to the registered holder (such as the Fund, which reinvests any prepayments) of Ginnie Maes along with regular monthly payments of principal and interest.
Fannie Maes The FNMA is a government-sponsored corporation owned entirely by private stockholders that purchases residential mortgages from a list of approved seller/servicers, 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.
Risks. 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, however, the values of U.S. government securities change as interest rates fluctuate. Fluctuations in the value of portfolio securities will not affect interest income on existing portfolio securities but will be reflected in the Funds NAV. Because the magnitude of these fluctuations generally will be greater at times when the Funds average maturity is longer, under certain market conditions the Fund may, for temporary defensive purposes, accept lower current income from short-term investments rather than investing in higher yielding long-term securities. Securities such as 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 Fund 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.
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The values of TIPS generally fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of TIPS. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of TIPS. If inflation is lower than expected during the period the Fund holds TIPS, the Fund may earn less on the TIPS than on a conventional bond. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in TIPS may not be protected to the extent that the increase is not reflected in the bonds inflation measure. There can be no assurance that the inflation index for TIPS will accurately measure the real rate of inflation in the prices of goods and services.
See the section Mortgage-Related Securities for additional information on these securities.
Zero-Coupon Securities
The Fund may invest in zero-coupon securities. Zero-coupon securities are debt obligations that do not entitle the holder to any periodic payments of interest either for the entire life of the obligation or for an initial period after the issuance of the obligations; 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. The 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 Fund 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. The Fund may invest in equity securities of companies with relatively small market capitalizations. Securities of such companies may be more volatile than the securities of larger, more established companies and the broad equity market indices. See the section Market Capitalizations. The 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.
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The Fund may invest in growth stocks and value stocks. Growth stocks are those stocks of companies that the Adviser 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 the Advisers 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 has placed on it.
Value stocks are those stocks of companies that are not expected to experience significant earnings growth, but whose stocks the Adviser 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 the Advisers 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 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.
Corporate Reorganizations
The 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 the 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 Adviser 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.
Investment Companies
The Fund may invest in other investment companies. Investment companies, including exchange-traded funds (ETFs) such as iShares, SPDRs and Vanguard 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, the Fund will bear its ratable share of the investment companys expenses, including advisory fees, and the Funds shareholders will bear such expenses indirectly, in addition to similar fees and expenses of the Fund.
Despite the possibility of greater fees and expenses, 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 the Fund to
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invest in such countries. In other cases, when the 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 the Fund to gain exposure to particular market segments by investing in shares of one or more investment companies.
Exchange-Traded Funds. The Fund 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 and is often designed to track the performance of a particular index. 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, the 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 the 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
The Fund 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.
The Fund may invest in companies with relatively small market capitalization. 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 the Fund invests in companies with relatively small market capitalizations, the value of its stock portfolio may fluctuate more widely than broad market averages.
Preferred Stock
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The Fund 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.
REITs
The Fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate-related loans. REITs involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds or extended vacancies of property). Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended and changes in interest rates. REITs, the underlying assets of which 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 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.
The 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, or may require the Fund to accrue and distribute income not yet received. In addition, distributions by the Fund from REITs will not qualify for the corporate dividends-received deduction or, generally, for treatment as qualified dividend income.
Real Estate Securities
The Fund may invest in securities of companies in the real estate industry, including REITs, and is, therefore, subject to the special risks associated with the real estate market and the real estate industry in general. Companies in the real estate industry are considered to be those that (i) have principal activity involving the development, ownership, construction, management or sale of real estate; (ii) have significant real estate holdings, such as hospitality companies, supermarkets and mining, lumber and paper companies; and/or (iii) provide products or services related to the real estate industry, such as financial institutions that make and/or service mortgage loans and manufacturers or distributors of building supplies. Securities of companies in the real estate industry are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws.
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Depositary Receipts
The Fund 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 (ADRs) are depositary receipts that are bought and sold in the United States and are typically issued by a U.S. bank or trust company which evidence ownership of underlying securities by a foreign corporation.
All depositary receipts, including those denominated in U.S. dollars, will be subject to foreign currency risk. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) 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 the Funds assets and on the net investment income available for distribution may be favorable or unfavorable. The Fund may incur costs in connection with conversions between various currencies. In addition, the Fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars.
Because the Fund may invest in depositary receipts, changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. If the Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on the Fund than a fund that is not over-weighted in that region.
Emerging Markets
Investments in foreign securities may include investments in emerging or developing countries, whose economies or securities markets are not yet highly developed. 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 the 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. The 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 the Fund, the Adviser and its affiliates, and its respective clients and other service providers. The 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 the 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
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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, the Adviser may consider the likely effects of foreign taxes on the net yield available to the Fund and its shareholders. Compliance with foreign tax laws may reduce the Funds net income available for distribution to shareholders.
Foreign Investment Companies
Some of the countries in which the Fund 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. The Fund 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 the 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 Fund may invest in 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 the Fund may invest, all or a portion of which may be non-U.S. dollar-denominated, may include, among other investments: (i) 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; (ii) debt obligations of supranational entities; (iii) debt obligations of the U.S. government issued in non-dollar securities; (iv) debt obligations and other fixed-income securities of foreign corporate issuers; (e) non-U.S. dollar-denominated securities of U.S. corporate issuers; and (v) 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 the Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on the Fund than a fund that is not over-weighted in that region. The receipt of interest on foreign government securities may depend on the availability of tax or other revenues to satisfy the issuers obligations.
Since most foreign securities are denominated in foreign currencies or traded primarily in securities markets in which settlements are made in foreign currencies, the value of these investments and the net investment income available for distribution to shareholders of the Fund may be affected favorably or unfavorably by changes in currency exchange rates or exchange control regulations. To the extent the Fund may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of the Funds assets and the Funds income available for distribution. The Fund may hedge its positions in these securities by writing index call options and purchasing index put options and also denominated in the euro. The recent global economic crisis has caused many European countries to experience
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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 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, the Funds euro-denominated investments may become difficult to value, the Fund may be unable to dispose of investments or repatriate investment proceeds, the 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, all the ramifications of which are yet to be known and include a range of possible political, regulatory, economic and market outcomes that are difficult to predict. Should other countries seek to leave the European Union or if the European Union dissolves, the worlds security markets will likely be significantly disrupted and the aforementioned risks more pronounced.
Although the Funds income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars. Therefore, if the value of a currency relative to the U.S. dollar declines after the Funds income has been earned in that currency, translated into U.S. dollars and declared as a dividend, but before payment of such dividend, the Fund could be required to liquidate portfolio securities to pay such dividend. Similarly, if the value of a currency relative to the U.S. dollar declines between the time the Fund incurs expenses or other obligations in U.S. dollars and the time such expenses or obligations are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in such currency of such expenses at the time they were incurred. Compliance with foreign tax law may reduce the Funds net income available for distribution to shareholders.
In addition, because the Fund may invest in foreign securities traded primarily on markets that close prior to the time the 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 the Fund takes place after the close of the primary foreign market, but before the time that the Fund determines its NAV, certain investors may seek to take advantage of the fact that there will be a delay in the adjustment of the market price for a security caused by this event until the foreign market reopens (sometimes referred to as price or time zone arbitrage). Shareholders who attempt this type of arbitrage may dilute the value of the Funds shares by virtue of their transaction, if those prices reflect the fair value of the foreign securities. Although the Fund has procedures designed to determine the fair value of foreign securities for purposes of calculating its NAV when such an event has occurred, fair value pricing, because it involves judgments 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 Fund does not calculate its NAV or sell or redeem its shares. For more information on how the Fund uses fair value pricing, see the section Net Asset Value.
Foreign withholding or other taxes imposed on the Funds investments in foreign securities will reduce the Funds return on those securities. The Fund does not expect to 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.
The Fund may invest in certain securities that are denominated and traded in the euro, the official currency of the Eurozone. The recent 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 Eurozone nations. Recent events in the Eurozone have called into question the long-term viability
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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 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, the Funds euro-denominated investments may become difficult to value, the Fund may be unable to dispose of investments or repatriate investment proceeds the 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.
Supranational Entities
The Fund 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 the 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 section Foreign Currency Transactions.
Foreign Currency Transactions
The Fund may engage in foreign currency transactions for both hedging and investment purposes. Many foreign securities in the 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 the Fund in foreign currencies. The value of these foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of the Funds portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of the Funds income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of the Funds assets and on the net investment income available for distribution may be favorable or unfavorable.
To protect against a change in the foreign currency exchange rate between the date on which the Fund contracts to purchase or sell a security and the settlement date for the purchase or sale, to gain exposure to one or more foreign currencies or to lock in the equivalent of a dividend or interest payment in another currency, the Fund might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing spot rate or may enter into futures contracts on an exchange.
If conditions warrant, the Fund may also enter into contracts with banks or broker-dealers to purchase or sell foreign currencies at a future date (forward contracts).
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 the Funds assets and on the net investment income available for distribution may be favorable or unfavorable. The Fund may incur costs in connection with conversions between various currencies, and the Fund will be subject to increased illiquidity and counterparty risk because forward contracts are not traded on an exchange and often are not standardized. The Fund may also be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars.
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In addition, the Fund may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. The 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, the Fund may buy put options on the foreign currency. If the value of the currency declines, the Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, the Fund could sustain losses 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.
The Fund may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar due to adverse fluctuations in exchange rates, the Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the decline expected by the Fund occurs, the option will most likely not be exercised and the diminution in value of portfolio securities be offset at least in part by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency which, if rates move in the manner projected by the Fund, will expire unexercised and allow the Fund to hedge the increased cost up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss, which may not be fully offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may lose all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.
The Adviser may decide not to engage in currency transactions, and there is no assurance that any currency strategy used by the Fund will succeed. In addition, suitable currency transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in these transactions when they would be beneficial. The foreign currency transactions in which the Fund may engage involve risks similar to those described in the section Derivative Instruments.
The 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 the Fund may invest in foreign securities and foreign currencies, changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. If the Funds portfolio is over-weighted in a certain geographic region, any negative development affecting that region will have a greater impact on the Fund than a fund that is not over-weighted in that region.
Money Market Instruments
The Fund may invest in money market instruments. Money market instruments are high-quality, short-term securities. The Funds money market investments at the time of purchase (other than U.S. government securities (defined below) and repurchase agreements relating thereto) generally will be rated at the time of purchase in the two highest short-term rating categories as rated by a major credit agency or, if unrated, will be of comparable
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quality as determined by the Adviser. The Fund 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 Fund expects those changes to be minimal with respect to these securities, which may be purchased by the Fund for defensive purposes. The Funds money market investments may be issued by U.S. banks, foreign banks (including their U.S. branches) or foreign branches and subsidiaries of U.S. banks. Obligations of foreign banks may be subject to foreign economic, political and legal risks. Such risks include foreign economic and political developments, foreign governmental restrictions that may adversely affect payment of principal and interest on the obligations, foreign withholding and other taxes on interest income, difficulties in obtaining and enforcing a judgment against a foreign obligor, exchange control regulations (including currency blockage) and the expropriation or nationalization of assets or deposits. Foreign branches of U.S. banks and foreign banks are not necessarily subject to the same or similar regulatory requirements that apply to domestic banks. For instance, such branches and banks may not be subject to the types of requirements imposed on domestic banks with respect to mandatory reserves, loan limitations, examinations, accounting, auditing, record keeping and the public availability of information. Obligations of such branches or banks will be purchased only when the Adviser believes the risks are minimal. In addition, during the recent global financial downturn, many
money market instruments that were thought to be highly liquid became illiquid. If the 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.
The Fund may invest in U.S. government securities that include all securities issued or guaranteed by the U.S. government or its agencies, authorities or instrumentalities (U.S. government securities). Some U.S. government securities are backed by the full faith and credit of the United States. 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 Fund may invest in money market instruments, it is not a money market fund and therefore is not subject to the portfolio quality, maturity and NAV requirements applicable to money market funds. The Fund will not seek to maintain a stable NAV. The Fund also will not be required to comply with the rating restrictions applicable to money market funds, and will not necessarily sell an investment in cases where a securitys rating has been downgraded.
Considerations of liquidity, safety and preservation of capital may preclude the Fund from investing in money market instruments paying the highest available yield at a particular time. In addition, the Funds ability to trade money market securities may be constrained by the collateral and asset coverage requirements related to the Funds other investments. As a result, the Fund may need to buy or sell money market instruments at inopportune times. In addition, even though money market instruments are generally considered to be high-quality and a low-risk investment, recently a number of issuers of money market and money market-type instruments have experienced financial difficulties, leading in some cases to rating downgrades and decreases in the value of their securities.
TYPES OF PRACTICES
Derivative Instruments
The Fund may use a number of derivative instruments for risk management purposes or as part of its investment strategies. 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. The Adviser may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by the Fund will succeed. In addition, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial. Examples of derivative instruments that the Fund may use include (but are not limited to) options and warrants, futures contracts, options on futures contracts, interest rate and credit default swaps, structured
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notes, zero strike warrants and options, swap agreements (including credit default swaps) and debt-linked and equity-linked securities.
Transactions in certain derivatives are subject to clearance on a U.S. national clearinghouse and to regulatory oversight, 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 new regulation of the derivatives market, including new clearing, margin, reporting and registration requirements. Because the legislation leaves much to rule making, various agencies are in the process of promulgating rules under the Dodd-Frank Act and other legislation. While certain of the rules are now effective, other rules are not yet final, so the ultimate impact of this legislation on the market remains unclear. The 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 counterparty credit 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 because of powers granted to clearinghouses and to the Federal Deposit Insurance Corporation to limit or delay close-out of derivatives positions of insolvent clearing members or financial companies and to transfer such positions to other entities. 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 counterparty risk, illiquidity, difficulties in valuation, leverage risk and, to the extent the Advisers 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. See the subsection Additional Risks of Derivative Instruments. The 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 the Funds NAV, and possibly income, and the losses may be significantly greater than if derivatives had not been used. The degree of the Funds use of derivatives may be limited by certain provisions of the Code. When used, derivatives may affect the amount, timing or character of distributions payable to, and thus taxes payable by, shareholders. See the subsection Additional Risks of Derivative Instruments below for additional information about the risks relating to derivative instruments.
Several types of derivative instruments in which the Fund may invest are described in more detail below. However, the Fund is not limited to investments in these instruments and may decide not to employ any or all of these strategies.
Asset Segregation and Coverage
The Fund will segregate with its custodian or otherwise designate on its records liquid assets in an amount the Fund believes to be adequate 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. The Fund may segregate amounts in addition to the amounts described above. In certain circumstances, the Fund may enter into an offsetting position rather than segregating or designating liquid assets (e.g., the Fund may cover a written put option with a purchased put option with the same or higher exercise price). Although the Adviser 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. The Fund may modify its asset segregation policies from time to time.
Futures Contracts
Futures transactions involve the Funds buying or selling futures contracts. A futures contract is an agreement between two parties to buy and sell a particular security, 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
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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 S&P 500® Index.
When a trader, such as the Fund, enters into a futures contract, it is required to deposit with (or for the benefit of) its broker as initial margin an amount of cash or short-term, high-quality/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 a comparable contract. If the price of the sale of the futures contract by the Fund is less than the price of the offsetting purchase, the Fund will realize a loss. A futures sale is closed by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity and with the same delivery date. Similarly, 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, are 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.
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 inability to liquidate futures positions creates the possibility of the Fund being unable to control its losses. If the Fund were to borrow money to use for trading purposes, the effects of such leverage would be magnified. The rights of any lenders to the Fund to receive payments of interest or repayments of principal will be senior to those of the investors and the terms of any loan agreements may contain provisions that limit certain activities of the Fund. The Fund may also be unable to utilize all cash available to it if certain margin requirements cannot be netted across exchanges, or alternatively if financing is unavailable. Physical delivery of commodities can result in temporary illiquidity and the Fund may incur additional charges associated with the holding and safekeeping of any such commodities.
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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 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 involves 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 the Funds buying or writing (selling) options on securities, futures contracts, securities indices (including futures on securities indices) or currencies. The Fund may engage in these transactions either to enhance investment return or to hedge against changes in the value of other assets that it owns or intends to acquire. Options can generally be classified as either call or put options. There are two parties to a typical options transaction: the writer (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 on the underlying security or other asset if the option is exercised, and results in a loss if the option expires unexercised. The writer of an option receives a premium from writing an option, which may increase its return if the option expires or is closed out at a profit. An American-style option allows exercise of the option at any time during the term of the option. A European-style option allows an option to be exercised only at a specific time or times, such as the end of its term. Options may be traded on or off an established securities 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. The Fund will realize a profit from closing out an option if the price received for selling the offsetting position is more than the premium paid to purchase the option; the Fund will realize a loss from closing out an option transaction if the price received for selling the offsetting option is less than the premium paid to purchase the option. Since premiums on options having an exercise price close to the value of the underlying securities or futures contracts usually have a time value component (i.e., a value that diminishes as the time within which the option can be exercised grows shorter), the value of an options contract may change as a result of the lapse of time even though the value of the futures contract or security underlying the option (and of the security or other asset deliverable under the futures contract) has not changed. As an alternative to purchasing call and put options on index futures, the Fund may purchase or sell call or put options on the underlying indices themselves. Such options would be used in a manner similar to the use of options on index futures.
Warrants and Rights
The Fund may invest in warrants and rights. A warrant is an instrument that gives the holder a right to purchase a given number of shares of a particular security at a specified price until a stated expiration date. Buying a warrant generally can provide a greater potential for profit or loss than an investment of equivalent amounts in the underlying common stock. The market value of a warrant does not necessarily move with the value of the underlying securities. If a holder does not sell the warrant, it risks the loss of its entire investment if the market price of the underlying security does not, before the expiration date, exceed the exercise price of the warrant.
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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.
Options on Foreign Currencies
As described in the section Foreign Currency Transactions, the Fund may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized, as described in the Prospectuses. In addition, options on foreign currencies may be used to hedge against adverse changes in foreign currency conversion rates. For example, a decline in the U.S. dollar value of a foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of the portfolio securities, the Fund may buy put options on the foreign currency. If the value of the currency declines, the Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, the Fund could sustain losses on transactions in foreign currency options that would require the Fund to forego a portion or all of the benefits of advantageous changes in those rates.
The Fund may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar due to adverse fluctuations in exchange rates, the Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the decline expected by the Fund occurs, the option will most likely not be exercised and the diminution in value of portfolio securities will be offset at least in part by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, the Fund could write a put option on the relevant currency which, if rates move in the manner projected by the Fund, will expire unexercised and allow the Fund to hedge the increased cost up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss, which may not be fully offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may lose all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates.
Options on Indices
The Fund may 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 the 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 the Fund buys an index call option, it pays a premium and has the same rights as to such call as are indicated above. When the 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
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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 the 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
The Fund 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 only on an exchange that generally provides a liquid secondary market for an option of the same series. If a liquid secondary market for an exchange-traded option does not exist, it might not be possible to effect a closing transaction with respect to a particular option, with the result that the Fund would have to exercise the option in order to consummate the transaction. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation or other clearing organization may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
An OTC option (an option not traded on an established exchange) may be closed out only by agreement with the other party to the original option transaction. With OTC options, the Fund is at risk that the other party to the transaction will default on its obligations or will not permit the Fund to terminate the transaction before its scheduled maturity. While the 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 Options Clearing Corporation or other clearing organizations.
Index Warrants
The Fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices (index warrants). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive, upon exercise of the warrant, a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at a time when, in the case of a call warrant, the exercise price is more than the value of the underlying index, or in the case of a put warrant, the exercise price is less than the value of the underlying index. If the Fund were not to exercise an index warrant prior to its expiration, then the Fund would lose the amount of the purchase price paid by it for the warrant. The Fund will normally use index warrants in a manner similar to its use of options on securities indices.
Forward Contracts
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As described in the section Foreign Currency Transactions, the Fund may invest in forward contracts. Forward contracts are transactions involving the 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 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 the Funds investment portfolio. Forward contracts may also be used by the Fund for hedging purposes to protect against uncertainty in the level of future foreign currency exchange rates, such as when the Fund anticipates purchasing or selling a foreign security. This technique would allow the Fund to lock in the U.S. dollar price of the investment. Forward contracts also may be used to attempt to protect the value of the Funds existing holdings of foreign securities. There may be, however, imperfect correlation between the Funds foreign securities holdings and the forward contracts entered into with respect to such holdings. The cost to the Fund of engaging in forward contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing.
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 Fund may incur costs in connection with conversions between various currencies, and the Fund will be subject to increased illiquidity and counterparty risk because forward contracts are not traded on an exchange and often are not standardized. The Fund may also be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars.
Additionally, in its forward trading, the Fund is 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 Fund trades. Funds on deposit with such principals are generally not protected by the same segregation requirements imposed on CFTC regulated commodity brokers in respect of customer funds on deposit with them. The 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
The Fund 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, the 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 the 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
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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.
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 the Funds performance, as the potential gain or loss on any swap transaction is not subject to any fixed limit. The Funds successful use of swap agreements will depend on the Advisers 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. The 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.
Moreover, the 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 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. 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. 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.
Counterparty risk with respect to derivatives will be 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 risk of the clearing house and the clearing member through which it holds its cleared position, rather than the credit risk of its original counterparty to the derivative transaction. Credit 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 are generally 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 the Fund might not be fully protected in the event of the bankruptcy of the 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 are generally held in an omnibus account at the clearing organization for all customers of the clearing member. Regulations promulgated by the U.S. Commodity Futures Trading Commission (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 Fund is subject to the risk that a clearing organization will use the Funds assets held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the clearing
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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 Fund is therefore subject to the risk that a clearing organization will not make variation margin payments owed to the Fund if another customer of the clearing member has suffered a loss and is in default, and the risk that the 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 Fund, or in the event of fraud or misappropriation of customer assets by a clearing member, the 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.
Additionally, U.S. regulators recently issued final rules pursuant to the Dodd-Frank Act that establish minimum margin and capital requirements for uncleared OTC derivatives transactions that will have a material impact on the Funds use of uncleared derivatives. These rules will impose minimum margin requirements on derivatives transactions between the Fund and their swap counterparties and may increase the amount of margin the Fund is required to provide. They will impose regulatory requirements on the timing of transferring margin, which may accelerate the Funds current margin process. They will also effectively require changes to typical derivatives margin documentation.
Title VII of the Dodd-Frank Act established a framework for the regulation of OTC swap markets; the framework outlined the joint responsibility of the CFTC and the SEC in regulating swaps. The CFTC is responsible for the regulation of swaps, the SEC is responsible for the regulation of security-based swaps and jointly they are both responsible for the regulation of mixed swaps.
Credit Default Swaps
The Fund 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.
The Fund may be either the protection buyer or protection seller in a credit default swap. If the 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, the 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, the 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 the 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, the 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. In addition, collateral posting requirements are individually negotiated and there is no regulatory requirement that a counterparty post collateral to secure its obligations or a specified amount of cash, depending upon the terms of the swap, under a credit default swap. Furthermore, there is no requirement that a party be informed in advance when a credit default swap agreement is sold. Accordingly, the Fund may have difficulty identifying the party responsible for payment of its claims. 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.
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If a counterpartys credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that the Fund may not receive adequate collateral. There is no readily available market for trading credit default swaps. The 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 more losses.
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.
Counterparty Risk
The Fund 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 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. There can be no assurance that a failure by any such entity will not lead to a loss to the Fund. To the extent the Fund engages in cleared derivatives transactions, it will be subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position. If the Fund engages in cleared futures transactions, it will also be exposed to the credit risk of its futures commission merchant (FCM). If the 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 clearinghouse 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, the 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). FCM bankruptcies have occurred in which customers were 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 clearinghouse, the Fund might experience a loss of funds deposited through its FCM as margin with the clearinghouse, 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 the Fund could obtain the return of funds owed to it by an FCM who is a member of such clearinghouse.
The Fund may also engage in bilateral derivative transactions, which are not centrally cleared. Because bilateral derivative and other transactions are traded between counterparties based on contractual relationships, the Fund is subject to the risk that a counterparty will not perform its obligations under the related contracts. There can be no assurance that a counterparty will not default and that the Fund will not sustain a loss on a transaction as a result. In situations where the Fund is required to post margin or other collateral with a counterparty, the counterparty may fail
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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, the 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 Fund is 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. There can be no assurance that an issuer of an instrument in which the 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.
Investment Pools of Swap Contracts
The Fund may invest in publicly or privately issued interests in investment pools whose underlying assets are credit default, credit-linked, interest rate, currency exchange, equity-linked or other types of swap contracts and related underlying securities or securities loan agreements. The pools investment results may be designed to correspond generally to the performance of a specified securities index or basket of securities, 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 the 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 the 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.
Additional Risks of Derivative Instruments
Although the Adviser may seek to use derivatives transactions to achieve the 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 the Fund to utilize these derivative instruments successfully will depend on the Advisers ability to predict pertinent market movements, which cannot be assured. Furthermore, the Funds use of certain derivatives may in some cases involve forms of financial leverage, which involves risk and may increase the volatility of the Funds NAV. Leveraging may cause the 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 the 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. The Fund will comply with applicable regulatory requirements when implementing these strategies, techniques and 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 the 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 the Fund invests may be particularly sensitive to changes in prevailing interest rates or other economic factors and the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Adviser to forecast interest rates and other economic factors correctly. If the Adviser incorrectly forecasts such factors and has taken positions in derivative instruments contrary to prevailing market trends, the Fund could be exposed to the risk of loss. If the Adviser incorrectly forecasts interest rates, market values or other economic factors in using a derivatives strategy for the Fund, the 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
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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 the 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 the Fund is required to maintain asset coverage or offsetting positions in connection with transactions in derivative instruments, and the possible inability of the Fund to close out or to liquidate its derivatives positions. In addition, the Funds use of such instruments may cause the 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 the 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. The Fund may invest in derivative instruments linked to the returns of one or more hedge funds or groups of hedge funds. To the extent that the Fund invests in such instruments, in addition to the risks associated with investments in derivative instruments generally, the Fund will be subject to the risks associated with investments in hedge funds.
The use of derivative instruments, including, but not limited to, the futures contracts, options and warrants, forward currency contracts and swap transactions described above, involves risks in addition to those described above or in the Prospectuses. Although the Adviser may seek to use these transactions to achieve the Funds investment goals, no assurance can be given that the use of these 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. The Funds derivative strategies will not be fully effective unless the Fund can compensate for such imperfect correlation. There is no assurance that the Fund will be able to effect such compensation. 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, the Fund would experience either a loss or a gain on the derivative that is not completely offset by movements in the price of the hedged securities. For example, in an attempt to compensate for imperfect price movement correlations, the Fund may purchase or sell futures contracts in a greater dollar amount than the hedged securities if the price movement volatility of the hedged securities is historically greater than the volatility of the futures contract. Conversely, the Fund may purchase or sell futures contracts 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 the Fund does not hold the instrument to which the short position relates), the potential risk of loss to the 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.
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
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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, the Fund would continue to be required to make daily cash payments of variation margin. However, if futures or options are used to hedge portfolio securities, an increase in the price of the securities, if any, may partially or completely offset losses on the futures contract.
Income earned by the Fund from its options activities will generally be treated as capital gain and, if not offset by net recognized losses incurred by the Fund, will be distributed to shareholders in taxable distributions. Although gain from options transactions may hedge against a decline in the value of the Funds portfolio securities, that gain, to the extent not offset by losses, will be distributed in light of certain tax considerations and will constitute a distribution of that portion of the value preserved against decline.
The value of the 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 the Funds portfolio. All transactions in derivatives involve the possible risk of loss to the Fund of all or a significant part of the value of its investment. In some cases, the risk of loss may exceed the amount of the Funds investment. When the Fund writes a call option or sells a futures contract without holding the underlying securities, currencies or futures contracts, its potential loss is unlimited.
The risks of the Funds use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the Fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the Funds ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do.
The successful use of derivatives will usually depend on the Advisers ability to forecast securities market, currency or other financial market movements correctly. For example, the Funds ability to hedge against adverse changes in the value of securities held in its portfolio through options and futures also depends on the degree of correlation between changes in the value of futures or options positions and changes in the values of the portfolio securities. The successful use of certain other derivatives also depends on the availability of a liquid secondary market to enable the Fund to close its positions on a timely basis. There can be no assurance that such a market will exist at any particular time. Furthermore, the Funds use of certain derivatives may in some cases involve forms of financial leverage, which involves risk and may increase the volatility of the Funds NAV. Leveraging may cause the 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 the 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 options that are not OTC options, the Fund is at risk that the other party to the transaction will default on its obligations, or will not permit the Fund to terminate the transaction before its scheduled maturity.
The derivatives markets of foreign countries are small compared to those of the United States and consequently are characterized in most cases by less liquidity than U.S. markets. In addition, 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 are subject
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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 the 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 options in foreign markets are subject to many of the same risks as other foreign investments. See the section Foreign Securities.
Risk of Potential 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 the Fund from using such instruments as part of its investment strategy, and could ultimately prevent the 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 the 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 the Fund engages in derivative transactions could also prevent the 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 Fund or the ability of the Fund to continue to implement their investment strategies. In particular, the Dodd-Frank Act was signed into law on July 21, 2010. The Dodd-Frank Act 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 new legislative framework for OTC derivatives, such as swaps, in which the Fund may invest. Title VII of the Dodd-Frank Act makes broad changes to the OTC derivatives market and grants significant new 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. 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 recently 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.
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, the Funds counterparty is a clearing house, rather than a bank or broker. Since the Fund is not a member of a clearing house and only a member of a clearing house can participate directly in the clearing house, the Fund will hold cleared derivatives through accounts at clearing members. In a cleared derivatives transaction, the Fund 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 many ways, centrally cleared derivative arrangements are less favorable to mutual funds than bilateral arrangements. For example, the Fund 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 the 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
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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 the Fund to pursue its investment strategy. Further, any increase in margin requirements by a clearing member could also expose the 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, the Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or that the Adviser 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 Fund and its 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 the Fund, the Fund is 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 Fund and the clearing members is developed by the clearing members and generally is less favorable to the Fund than typical bilateral derivatives documentation. For example, this documentation generally includes a one-way indemnity by the Fund 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 Fund 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 Fund. For example, SEFs typically charge fees, and if the Fund executes derivatives on a SEF through a broker intermediary, the intermediary may impose fees as well. Also, the 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.
These and other new rules and regulations could, among other things, further restrict the 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, increasing margin or capital requirements, or otherwise limiting liquidity or increasing transaction costs. These regulations are new and evolving, so their potential impact on the Fund and the financial system are not yet known. While the new regulations and the 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 a number of those dealers to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that the new clearing mechanisms will achieve that result, and in the meantime, as noted above, central clearing and related requirements will expose the Fund to new kinds of risks and costs.
Other Derivatives; Future Developments
The above discussion relates to the Funds proposed use of certain types of derivatives currently available. However, the Fund is not limited to the transactions described above. In addition, the relevant markets and related regulations are constantly changing and, in the future, the Fund may use derivatives not currently available or widely in use.
As of the date of this Statement, the Adviser has claimed an exclusion from the definition of commodity pool operator (a CPO) under the Commodity Exchange Act (the CEA) pursuant to Rule 4.5 under the CEA with respect to the Fund (the exclusion) promulgated by the CFTC. Accordingly, with respect to the Fund, the Adviser is not subject to registration or regulation as a CPO under the CEA. To remain eligible for the exclusion, the Fund 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 the 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 the Fund. The Advisers eligibility to claim the exclusion with respect to the Fund will be based upon, among other things, the level and scope of the Funds investment in commodity interests, the purposes of such investments and the manner in which the Fund
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holds out its use of commodity interests. The 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 the Fund, the Funds expenses may increase, adversely affecting the Funds total return.
Illiquid Securities
The Fund 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 such securities cannot be disposed of within seven days in the ordinary course of business at approximately the price at which the Fund has valued the securities. Investment in illiquid securities involves the risk that the 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, the Fund may incur expenses, losses or delays in the process of registering restricted securities prior to resale. Rule 144A securities and Section 4(a)(2) commercial paper are treated as illiquid, unless the Adviser has determined, under guidelines established by the Trusts Board, that the particular issue is liquid. See the section Rule 144A Securities and Section 4(a)(2) Commercial Paper for additional information on these instruments.
Initial Public Offerings
The Fund may purchase securities of companies that are offered pursuant to an initial public offering (IPO). An IPO is a companys first offering of stock to the public in the primary market, typically to raise additional capital. The Fund may purchase a hot IPO (also known as a hot issue), which is an IPO that is oversubscribed and, as a result, is an investment opportunity of limited availability. As a consequence, the price at which these IPO shares open in the secondary market may be significantly higher than the original IPO price. IPO securities tend to involve greater risk due, in part, to public perception and the lack of publicly available information and trading history. There is the possibility of losses resulting from the difference between the issue price and potential diminished value of the stock once traded in the secondary market. The Funds investment in IPO securities may have a significant impact on the Funds performance and may result in significant capital gains.
Private Placements
The Fund 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, the Fund could find it more difficult or impossible to sell the securities when the Adviser 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 the Funds NAV.
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 the Fund to sell the illiquid securities promptly at an acceptable price. The 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 the Adviser may at times play a greater role in valuing these securities than in the case of unrestricted securities.
The Fund may be deemed to be an underwriter for purposes of the Securities Act when reselling privately issued securities to the public. As such, the 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.
Privatizations
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The Fund 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 Fund, 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. In addition, 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 and Other Borrowings
The 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 rate unrelated to the coupon rate on the purchased security. Repurchase agreements are economically similar to collateralized loans by the Fund. Such transactions afford the Fund the opportunity to earn a return on temporarily available cash at relatively low market risk. The Fund does not have percentage limitations on how much of its total assets may be invested in repurchase agreements. The Fund may also use repurchase agreements for cash management and temporary defensive positions. The Fund may invest in a repurchase agreement that does not produce a positive return to the Fund if the Adviser 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, the Fund would attempt to exercise rights with respect to the underlying security, including possible disposition in the market. However, the Fund may be subject to various delays and risks of loss, including (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.
Reverse Repurchase Agreements and Other Borrowings
The Fund may enter into reverse repurchase agreements. In a reverse repurchase agreement the Fund transfers possession of a portfolio instrument to another person, such as a financial institution, broker or dealer, in return for cash, and agrees that on a stipulated date in the future the Fund will repurchase the portfolio instrument by remitting the original consideration plus interest at an agreed-upon rate. The ability to use reverse repurchase agreements may enable, but does not ensure the ability of, the Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous. Reverse repurchase agreements are economically similar to secured borrowings by the Fund.
Short-Term Trading
The Fund may, consistent with its investment objectives, engage in portfolio trading in anticipation of, or in response to, changing economic or market conditions and trends. These policies may result in higher turnover rates in the Funds portfolio, which may produce higher transaction costs and 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 investment discretion in managing the Funds assets. The Fund anticipates that its portfolio turnover rates will vary significantly from time to time depending on the volatility of economic and market conditions.
When-Issued, Delayed Delivery and Forward Commitment Securities
To reduce the risk of changes in interest rates and securities prices, the Fund may purchase securities on a forward commitment or when-issued or delayed delivery basis, which means delivery and payment take place a number of days after the date of the commitment to purchase. The payment obligation and the interest rate receivable with
40
respect to such purchases are fixed when the Fund enters into the commitment, but the Fund does not make payment until it receives delivery from the counterparty. The Adviser will commit to purchase such securities only with the intention of actually acquiring the securities, but the Adviser may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a forward commitment or when-issued or delayed delivery basis are subject to changes in value, generally changing in the same way, i.e., appreciating when interest rates decline and depreciating when interest rates rise, based upon the publics perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities so purchased may expose the Fund to risks because they may experience such fluctuations prior to their actual delivery. Purchasing securities on a when-issued or delayed delivery basis can involve the additional risk that the yield available in the market when the delivery takes place actually may be higher than that obtained in the transaction itself. Purchasing securities on a forward commitment or when-issued or delayed delivery basis when the Adviser is fully or almost fully invested may result in greater potential fluctuation in the value of the Funds net assets. In addition, there is a risk that securities purchased on a when-issued or delayed delivery basis may not be delivered and that the purchaser of securities sold by the Fund on a forward commitment basis will not honor its purchase obligation. In such cases, the Fund may incur a loss.
The Fund has the flexibility to respond promptly to changes in market and economic conditions. In the interest of preserving shareholders capital, the Adviser may employ a temporary defensive strategy if it determines such a strategy to be warranted. Pursuant to such a defensive strategy, the Fund temporarily may hold cash (U.S. dollars, 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 the Fund will employ temporary defensive strategies. The use of temporary defensive strategies may prevent the Fund from achieving its objective. In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, the Fund may temporarily hold cash (U.S. dollars, foreign currencies, or multinational currency units) and may invest any portion of its assets in money market or other short-term high-quality debt instruments.
The Funds portfolio turnover rate for a fiscal year is calculated by dividing the lesser of purchases or sales of portfolio securities for the fiscal year by the monthly average of the value of the portfolio securities owned by the Fund during the fiscal year, in each case excluding securities having maturity dates at acquisition of one year or less. High portfolio turnover involves correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Fund, thereby decreasing the Funds total return. 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. The rate of portfolio turnover will depend upon market and other conditions, and it will not be a limiting factor when the Adviser believes that portfolio changes are appropriate.
PORTFOLIO HOLDINGS INFORMATION
The 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 ngam.natixis.com. Generally, full portfolio holdings information will not be posted until it is aged for at least 30 days. A list of the Funds top 10 holdings will generally be available on a monthly basis within 7 business days after the 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 Fund may or may not still invest in the securities listed. Portfolio characteristics, such as industry/sector breakdown, current yield, quality breakdown, duration, average price-earnings ratio and other similar information may be provided on a current basis. However, portfolio characteristics do not include references to specific portfolio holdings.
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The Board has approved exceptions to the general policy on the sharing of portfolio holdings information as in the best interests of the Fund:
(1) | Disclosure of portfolio holdings posted on the Funds website, provided that information is shared no sooner than the next day following the day on which the information is posted; |
(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); 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 Fund, and to Institutional Shareholder Services Inc. as part of the proxy voting administration and research services, respectively, provided to the Adviser (votable portfolio holdings of issuers as of record date for shareholder meetings); |
(4) | Disclosure to employees of the Adviser and the Advisers participating affiliates, principal underwriter, administrator, custodian, financial printer, Fund accounting agent, independent registered public accountants, 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 Fund, provided that such disclosure is made for bona fide business purposes; |
(5) | Disclosure to Natixis Global Asset Management (NGAM), in its capacity as the seed capital investor for the Fund, in order to satisfy certain reporting obligations to its parent company and for its own risk management purposes; provided that NGAM agrees to maintain its seed capital in the Fund 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. NGAM and its parent utilize a third-party service provider, Aptimum Formation Développement (Aptimum), to assist with their 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 Fund. 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 the Adviser, administrator or custodian. With respect to (6) above, approval will be granted only when the officer determines that the Fund has a legitimate business reason for sharing the portfolio holdings information and the recipients are subject to a duty of confidentiality, including a duty not to trade on the information. As of the date of this Statement, the only entities that receive information pursuant to this exception are RR Donnelley (quarterly, or more frequently as needed, disclosure of full portfolio holdings) for the purposes of performing certain functions related to the production of the Funds semiannual financial statements, quarterly Form N-Q filings and other related items, 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, Bloomberg (daily disclosure of full portfolio holdings) for the purpose of performing analytics, and Wilshire (periodic disclosure of full portfolio holdings) for the purpose of performing due diligence with respect to the Fund as an underlying fund holding of the Natixis Sustainable Future Funds. Although the Trust may enter into written confidentiality agreements, in other circumstances, such as those described in (4) above, the obligation to keep information confidential may be based on common law, professional or statutory duties of confidentiality. Common law, professional or statutory duties of confidentiality, including the duty not to trade on the information, may not be as clearly delineated and may be more difficult to enforce than contractual duties. The Funds officers determine on a case-by-case basis whether it is appropriate for the Fund to rely on such common law, professional or statutory duties. The Board exercises oversight of the disclosure of portfolio holdings by, among other things, receiving and reviewing reports from the Funds chief compliance officer regarding any material issues concerning the Funds disclosure of portfolio holdings or from officers of the Fund in connection with proposed new exceptions or new disclosures pursuant to item (6) above. Notwithstanding the above,
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there is no assurance that the Funds policies on the sharing of portfolio holdings information will protect the Fund from the potential misuse of holdings by individuals or firms in possession of that information.
Other registered investment companies that are advised by the Adviser may be subject to different portfolio holdings disclosure policies, and neither the Adviser nor the 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 the Funds portfolio holdings disclosure policies. Some of the funds that are advised by the Adviser and some of the separate accounts managed by the Adviser may have investment objectives and strategies that are substantially similar or identical to the Funds, and therefore potentially substantially similar, and in certain cases nearly identical, portfolio holdings as the Fund.
In addition, any disclosures of portfolio holdings information by the 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. The Funds policies expressly prohibit the sharing of portfolio holdings information if the Fund, its Adviser, or any other affiliated party receives compensation or other consideration in connection with such arrangement. The term consideration includes any agreement to maintain assets in the Fund or in other funds or accounts managed by the Funds Adviser or by any affiliated person of the Adviser.
The 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 Fund and review the Funds performance.
Trustees and Officers
The table below provides certain information regarding the Trustees and officers of the Trust. 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 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 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 399 Boylston Street, Boston, MA 02116.
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Name and Year of Birth |
Position(s)
Held with the |
Principal Occupation(s) During |
Number of Portfolios in Fund and Other Directorships |
Experience, Qualifications, Attributes, | ||||
INDEPENDENT TRUSTEES | ||||||||
Kenneth A. Drucker (1945) |
Trustee since 2008
Chairperson of the Audit Committee and Governance Committee Member |
Retired | 44
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 |
Chief Executive Officer of Bobs Discount Furniture (retail) | 44
Director, Burlington Stores, Inc. (retail); Formerly, Director, BJs Wholesale Club (retail) |
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) | ||||
Richard A. Goglia (1951) |
Trustee since 2015
Audit Committee Member |
Retired; formerly Vice President and Treasurer of Raytheon Company (defense) | 44
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) |
44
Name and Year of Birth |
Position(s)
Held with the |
Principal Occupation(s) During |
Number of Portfolios in Fund and Other Directorships |
Experience, Qualifications, Attributes, | ||||
Wendell J. Knox (1948) |
Trustee since 2009
Contract Review Committee Member and Governance Committee Member |
Director of Abt Associates Inc. (research and consulting) | 44
Director, Eastern Bank (bank); Director, The Hanover Insurance Group (property and casualty insurance) |
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 consulting company) | ||||
Martin T. Meehan (1956) |
Trustee since 2012
Contract Review Committee Member |
President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell | 44
None |
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 |
45
Name and Year of Birth |
Position(s) Held with the |
Principal Occupation(s) During |
Number of Portfolios in Fund and Other Directorships |
Experience, Qualifications, Attributes, | ||||
Sandra O. Moose (1942) |
Chairperson of the Board since November 2005
Trustee since 1982
Ex Officio member of the Audit Committee, the Contract Review Committee and the Governance Committee |
President, Strategic Advisory Services (management consulting) | 44
Formerly, Director, AES Corporation (international power company); formerly, Director, Verizon Communications (telecommunications company) |
Significant experience on the Board and on the boards of other business organizations (including at a telecommunications company, an international power company and a specialty chemicals corporation); executive experience (including at a management consulting company) | ||||
James P. Palermo (1955) |
Trustee since 2016
Contract Review Committee Member |
Founding Partner, Breton Capital Management, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation | 44
None |
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
Audit Committee Member |
Professor of Finance at Babson College | 44
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 |
46
Name and Year of Birth |
Position(s) Held with the |
Principal Occupation(s) During |
Number of Portfolios in Fund and Other Directorships |
Experience, Qualifications, Attributes, | ||||
Peter J. Smail (1952) |
Trustee since 2009
Chairperson of the Contract Review Committee; and Governance Committee Member |
Retired | 44
None |
Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser) | ||||
Cynthia L. Walker (1956) |
Trustee since 2005
Chairperson of the Governance Committee and Contract Review Committee Member |
Deputy Dean for Finance and Administration, Yale University School of Medicine | 44
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 Director; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P. | 44
None |
Continuing service as President, Chief Executive Officer and Director of Loomis, Sayles & Company, L.P. | ||||
David L. Giunta4 (1965) |
Trustee since 2011
President and Chief Executive Officer since 2008 |
President and Chief Executive Officer, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | 44
None |
Significant experience on the Board; continuing experience as President and Chief Executive Officer of NGAM Advisors, L.P. and NGAM Distribution, L.P. |
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Name and Year of Birth |
Position(s) Held with the |
Principal Occupation(s) During |
Number of Portfolios in Fund and Other Directorships |
Experience, Qualifications, Attributes, | ||||
John T. Hailer5 (1960) |
Trustee since 2000 | President and Chief Executive Officer U.S. and Asia, Natixis Global Asset Management, L.P. | 44
None |
Significant experience on the Board; continuing experience as President and Chief Executive Officer U.S. and Asia, Natixis Global Asset Management, L.P. |
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. Ms. Moose was appointed to serve an additional three-year term as the Chairperson of the Board on December 13, 2013. |
2 | The Trustees of the Trust 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, Loomis Sayles Funds II (collectively, the Loomis Sayles Funds Trusts) and the Natixis ETF Trust (collectively, the Fund Complex). |
3 | Mr. Charleston is deemed an interested person of the Trust because he holds the following positions with an affiliated person of the Trust: President,Chief Executive Officer and Director of Loomis, Sayles & Company, L.P. |
4 | Mr. Giunta is deemed an interested person of the Trust because he holds the following positions with an affiliated person of the Trust: President and Chief Executive Officer of NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
5 | Mr. Hailer is deemed an interested person of the Trust because he holds the following positions with an affiliated person of the Trust: President and Chief Executive Officer U.S. and Asia, Natixis Global Asset Management, L.P. |
Name and Year of Birth |
Position(s) Held with the Trust |
Term of Office1 and Length of Time Served |
Principal Occupation(s) During Past 5 Years2 | |||
OFFICERS OF THE TRUST | ||||||
Russell L. Kane (1969) |
Secretary, Clerk, and Chief Legal Officer |
Secretary, Clerk and Chief Legal Officer since July 2016 |
Executive Vice President, General Counsel, Secretary and Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | |||
Michael C. Kardok (1959) |
Treasurer, Principal Financial and Accounting Officer |
Since October 2004 | Senior Vice President, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
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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(s) During Past 5 Years2 | |||
Rosa Licea-Mailloux (1976) |
Chief Compliance Officer, Assistant Secretary and Anti- Money Laundering Officer |
Since July 2016 | Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P.; formerly, Associate General Counsel, NGAM Distribution, L.P. |
1 | Each officer of the Trust serves for an indefinite term in accordance with the Trusts current by-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified. |
2 | Each person listed above, except as noted, holds the same position(s) with the Fund Complex. Previous positions during the past five years with NGAM Distribution, L.P., NGAM Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from a Trustees or 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 Trust 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 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 thirteen Trustees, ten of whom are Independent Trustees. The Trustees have delegated significant oversight authority to the three standing committees of the Trust, 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.
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The Contract Review Committee of the Trust consists solely of Trustees who are not employees, officers or directors of NGAM Advisors, the Distributor or their affiliates and considers matters relating to advisory and distribution arrangements and potential conflicts of interest between the Adviser and the Trusts. During the fiscal year ended December 31, 2016, this committee held [ ] meetings.
The Governance Committee of the Trust consists solely of Trustees who are not employees, officers or directors of NGAM 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, NGAM Advisors, L.P., 399 Boylston Street, 12th Floor, Boston, MA 02116. 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, 2016, this committee held [ ] 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. When identifying an individual to potentially fill a vacancy on the Board, the Governance Committee may seek referrals from a variety of sources, including current Trustees, management of the Trust, Fund counsel, and counsel to the Trustees, as well as shareholders of the Fund in accordance with the procedures described above. In evaluating candidates for a position on the Board, the Governance Committee may consider a variety of factors, 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 Trust consists solely of Independent Trustees and considers matters relating to the scope and results of the Trusts audits and serves as a forum in which the independent registered public accounting firm can raise any issues or problems identified in 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 the Fund regarding its accounting, internal accounting controls and the confidential, anonymous submission by officers of the Fund or employees of certain service providers of concerns related to such matters. During the fiscal year ended December 31, 2016, this committee held [ ] meetings.
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The current membership of each committee is as follows:
Audit Committee |
Contract Review Committee |
Governance Committee | ||
Kenneth A. Drucker Chairperson |
Peter J. Smail Chairperson |
Cynthia L. Walker Chairperson | ||
Edmond J. English |
Wendell J. Knox |
Kenneth A. Drucker | ||
Richard A. Goglia |
Martin T. Meehan |
Wendell J. Knox | ||
Erik R. Sirri |
James P. Palermo |
Peter J. Smail | ||
Cynthia L. Walker |
As chairperson of the Board, Ms. Moose is an ex officio member of each Committee.
The Boards Role in Risk Oversight of the Fund
The Boards role is one of oversight of the practices and processes of the Fund and its service providers, rather than active management of the Trust, including in matters relating to risk management. The Board seeks to understand the key risks facing the Fund, 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 NGAM Advisors and the Distributor, which serve as the administrator of and principal underwriter to the Fund, 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 the adviser, 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.
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 Fund and its 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 Fund and its service providers. The CCO also periodically communicates with the Audit Committee members between its scheduled meetings.
Fund Securities Owned by the Trustees
As of the date of this Statement, the Fund had not yet publicly offered its shares and therefore the Trustees did not own shares of the Fund.
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As of December 31, 2016, the Trustees had the following ownership in the funds in the Fund Complex:
Independent Trustees
Dollar Range of Fund Shares1 |
Aggregate Dollar Range of Fund Shares in Fund Complex Overseen by Trustee |
|||
Kenneth A. Drucker |
[ | ] | ||
Edmond J. English |
[ | ] | ||
Richard A. Goglia |
[ | ] | ||
Wendell J. Knox2 |
[ | ] | ||
Martin T. Meehan |
[ | ] | ||
Sandra O. Moose |
[ | ] | ||
James P. Palermo |
[ | ] | ||
Erik R. Sirri |
[ | ] | ||
Peter J. Smail |
[ | ] | ||
Cynthia L. Walker2 |
[ | ] |
1 |
A. None | |||
B. $1 - $10,000 | D. $50,001 - $100,000 | |||
C. $10,001 - $50,000 | E. over $100,000 | |||
2 |
Amounts include economic value of notional investments held through the deferred compensation plan. |
Interested Trustees
Dollar Range of Fund Shares1 |
Aggregate Dollar Range of Fund Shares in Fund Complex Overseen by Trustee |
|||
Kevin P. Charleston |
[ | ] | ||
David L. Giunta |
[ | ] | ||
John T. Hailer |
[ | ] |
1 |
A. None | |||
B. $1 - $10,000 | D. $50,001 - $100,000 | |||
C. $10,001 - $50,000 | E. over $100,000 |
Trustee Fees
The Trust pays no compensation to its officers or to Trustees who are employees, officers or directors of NGAM Advisors, the Distributor, or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of $325,000. The Chairperson does not receive any meeting attendance fees for Board meetings or committee meetings that she attends. Each Trustee who is not an employee, officer or director of NGAM Advisors, the Distributor or their affiliates (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $155,000. Each Trustee who is not an employee, officer or director of NGAM 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 $17,500. The Chairperson of the Governance Committee receives an additional retainer fee at an annual rate of $10,000. 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 mutual fund portfolios in the Natixis Funds Trusts and Loomis Sayles Funds Trusts 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, 2016, the Trustees received the amounts set forth in the following table for serving as Trustees of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust. The table also sets forth, as applicable, pension or retirement benefits accrued as part of fund expenses, as well as estimated annual retirement benefits:
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Compensation Table
For the Fiscal Year Ended December 31, 2016
Aggregate Compensation from Natixis Funds Trust I1 |
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 |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Edmond J. English |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Richard A. Goglia |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Wendell J. Knox |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Martin T. Meehan |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Sandra O. Moose |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
James P. Palermo3 |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Erik R. Sirri |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Peter J. Smail |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
Cynthia L. Walker |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
INTERESTED TRUSTEES |
| |||||||||||||||
Kevin P. Charleston |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
David L. Giunta |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] | ||||
John T. Hailer |
$ | [ | ] | $ | [ | ] | $ | [ | ] | $ | [ | ] |
1 | Amounts include payments deferred by Trustees for the fiscal year ended December 31, 2016, with respect to the Trust. The total amount of deferred compensation accrued for Natixis Funds Trust I as of December 31, 2016 for the Trustees is as follows: English ($[ ]), Goglia ($[ ]), Knox ($[ ]), Meehan ($[ ]), Palermo ($[ ]) and Sirri ($[ ]). |
2 | Total Compensation represents amounts paid during the fiscal year ended December 31, 2016 to a Trustee for serving on the Board of seven (7) trusts with a total of forty-four (44) funds as of December 31, 2016. |
3 | Mr. Palermo was appointed as a Trustee effective July 1, 2016. |
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 the date of this Statement, the Fund had not yet publicly offered its shares and, therefore, the officers and Trustees of the Trust collectively owned less than 1% of the then outstanding shares of the Fund.
Code of Ethics
The Trust, the Adviser, and the Distributor each have adopted a code of ethics under Rule 17j-1 of the 1940 Act. These codes of ethics permit the personnel of these entities to invest in securities, including securities that the Fund may purchase or hold. The codes of ethics are on public file with, and are available from the SECs EDGAR database which can be accessed through www.sec.gov.
Proxy Voting Policies
The Board has adopted Proxy Voting Policy and Guidelines (the Procedures) for the voting of proxies for securities held by the Fund. Under the Procedures, the responsibility for voting proxies generally is delegated to Natixis AM US. Decisions regarding the voting of proxies are to be made solely in the interest of the Fund and its shareholders. Natixis AM US shall exercise its fiduciary responsibilities to vote proxies with respect to the Funds investments that are managed by Natixis AM US in a prudent manner in accordance with the Procedures and the
53
proxy voting policies of Natixis AM US. Proposals that, in the opinion of Natixis AM US, are in the best interests of shareholders are generally voted for and proposals that, in the judgment of Natixis AM US, are not in the best interests of shareholders are generally voted against. Natixis AM US is responsible for maintaining certain records and reporting to the Audit Committee of the Trust in connection with the voting of proxies. Upon request for reasonable periodic review as well as annual reporting to the SEC, Natixis AM US shall make available to the Fund, or NGAM Advisors, the Funds administrator, the records and information maintained by Natixis AM US under the Procedures.
Natixis AM 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. Natixis AM 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.
Natixis AM 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, Natixis AM US has chosen to adopt a voting policy that 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 Natixis AM 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. |
54
The analysis of resolutions is carried out by Mirovas responsible investment research team. Each analyst on the team is responsible for the analysis of resolutions and the exercise of voting rights in his or her field, which allows for an expert and integrated approach to the specifics of each company. This 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 Head of Governance Research and Engagement. Managers and extra-financial analysts may be invited to participate in the committees deliberations depending on the subject under discussion.
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.
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 other members of the team responsible for the exercise of voting rights, decides on the appropriate response. If exercising its voting rights for a given company exposes Mirova to a significant conflict of interest, the Head of Governance Research and Engagement 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. Natixis AM USs Chief Compliance Officer or her/his deputy is responsible for confirming that the proxy voting team is not aware of any conflicts of interest that may arise between Natixis AM 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 interests is identified, the Chief Compliance Officer of Natixis AM 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.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12-month period ended June 30, 2017 will be available without charge (i) by calling toll-free at 800-225-5478, (ii) through the Funds website, ngam.natixis.com and (iii) on the SECs website at www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
Information About the Organization and Ownership of the Adviser
Natixis Asset Management U.S., LLC (Natixis AM US), located at 399 Boylston Street, Boston, MA 02116 serves as Adviser to the Fund. Natixis AM US, formed in 2014, is a subsidiary of Natixis Asset Management (NAM). NAM is owned by Natixis Global Asset Management, 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.
Natixis AM US has entered into a personnel-sharing arrangement with its Paris-based affiliate, Mirova, which, like Natixis AM US, is part of Natixis Global Asset Management. Pursuant to this arrangement, certain employees of Mirova serve as associated persons of Natixis AM US and, in this capacity, are subject to the oversight of Natixis AM US and its Chief Compliance Officer. These associated persons may, on behalf of Natixis AM 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.
55
Unlike Natixis AM 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 the supervision of the SEC-registered investment adviser. Mirova is a participating affiliate of Natixis AM US and certain employees of Mirova are associated persons of Natixis AM US.
Advisory Agreement
The Funds advisory agreement with its Adviser provides that the Adviser will furnish or pay the expenses of the Fund for office space, facilities and equipment, services of executive and other personnel of the Trust and certain administrative services. The Adviser may delegate certain administrative services to its affiliates. The Adviser is responsible for obtaining and evaluating such economic, statistical and financial data and information and performing such additional research as is necessary to manage the Funds assets in accordance with its investment objectives and policies.
The Fund pays all expenses not borne by the Adviser including, but not limited to, the charges and expenses of custodian and transfer agents, independent registered public accounting firm and legal counsel for the Fund and the Trusts Independent Trustees, 12b-1 fees, all brokerage commissions and transfer taxes in connection with portfolio transactions, all taxes and filing fees, the fees and expenses for registration or qualification of their shares under federal and state securities laws, all expenses of shareholders and Trustees meetings and of preparing, printing and mailing reports to shareholders and the compensation of Trustees who are not directors, officers or employees of the Adviser or its affiliates, other than affiliated registered investment companies. Certain expenses may be allocated differently among the Funds Class A shares, on the one hand, and Class N and Class Y shares on the other hand. See the section Description of the Trust below.
The advisory agreement of the Fund provides that it will continue in effect for two years from the date of execution and thereafter from year to year if its continuance is approved at least annually (i) by the Board of the Trust or by vote of a majority of the outstanding voting securities of the Fund and (ii) by vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval.
The advisory agreement of the Fund may be terminated without penalty by vote of the Board or by vote of a majority of the outstanding voting securities of the Fund, upon 60 days written notice, or by the Adviser upon 90 days written notice, and terminates automatically in the event of its assignment (as defined in the 1940 Act).
The advisory agreement of the Fund provides that the Adviser 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.
Distribution Agreement and Rule 12b-1 Plans
Under a separate agreement with the Fund, the Distributor serves as the principal distributor of each class of shares of the Fund. The Distributors principal business address is 399 Boylston Street, Boston, MA 02116. Under this agreement (the Distribution Agreement), the Distributor conducts a continuous offering and is not obligated to sell a specific number of shares. The Distributor bears the cost of making information about the Fund available through advertising and other means and the cost of printing and mailing the Prospectus to persons other than shareholders. The Fund pays the cost of registering and qualifying its shares under state and federal securities laws and distributing the Prospectus to existing shareholders.
The Distributor is compensated under the agreement through receipt of the sales charges on Class A shares described below under Net Asset Value and is paid by the Fund 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 shares of the Fund to investment dealers from time to time. The SEC is of the view that dealers receiving all or substantially all of the sales charge may be deemed underwriters of the Funds shares.
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The Fund has adopted Rule 12b-1 plans (the Plans) for its Class A shares. Class N and Class Y 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 that are paid by a distributor to securities dealers are known as trail commissions. Pursuant to Rule 12b-1 under the 1940 Act, each Plan was approved by the shareholders of the Fund, and (together with the related Distribution Agreement) by each Board, including a majority of the Independent Trustees of the Trust.
Under the Plans, the Fund pays the Distributor a monthly service fee at an annual rate not to exceed 0.25% of the Funds average daily net assets attributable to the Class A shares. For Class A and, after the first year, the Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Funds shares, on a quarterly basis, unless other arrangements are made between the Distributor and the securities dealer, for providing personal services to investors in shares of the Fund and/or the maintenance of shareholder accounts. This service fee will accrue to securities dealers of record immediately with respect to reinvested income dividends and capital gain distributions of the Funds Class A shares.
The service fees on Class A shares may be paid only to reimburse the Distributor for expenses of providing personal services to investors, including, but not limited to, (i) expenses (including overhead expenses) of the Distributor for providing personal services to investors in connection with the maintenance of shareholder accounts and (ii) payments made by the Distributor to any securities dealer or other organization (including, but not limited to, any affiliate of the Distributor) with which the Distributor has entered into a written agreement for this purpose, for providing personal services to investors and/or the maintenance of shareholder accounts, which payments to any such organization may be in amounts in excess of the cost incurred by such organization in connection therewith.
Each Plan may be terminated by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding voting securities of the relevant class of shares of the Fund. Each Plan may be amended by vote of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose. Any change in any Plan that would materially increase the fees payable thereunder by the relevant class of shares of the Fund requires approval by a vote of the holders of a majority of such shares outstanding. The Trusts Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. For so long as a Plan is in effect, selection and nomination of those Trustees who are Independent Trustees of the Trust shall be committed to the discretion of such Trustees.
Fees paid by Class A shares of the Fund may indirectly support sales and servicing efforts relating to shares of the other series of the Natixis Funds Trusts or the Loomis Sayles Funds Trusts. In reporting its expenses to the Trustees, the Distributor itemizes expenses that relate to the distribution and/or servicing of a single funds shares, and allocates other expenses among the relevant funds based on their relative net assets or relative sales. Expenses allocated to the 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, the Adviser and their affiliates may, at their expense, pay additional amounts to dealers who have selling agreements with the Distributor. Class Y shares of the Fund may be offered by registered representatives of certain affiliates who are also employees of Natixis US and may receive compensation from the Adviser with respect to sales of Class Y shares.
The Distribution Agreement for the 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 Fund or by vote of a majority of the Independent Trustees. The Distribution Agreement may be terminated at any time on 90 days, written notice to the Trust, without payment of any penalty.
The Distribution Agreement and the Plans will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees cast in person at a meeting called for that purpose and (ii) by the vote of the Board or by a vote of a majority of the outstanding securities of the Fund (or the relevant class, in the case of the Plans).
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With the exception of the Distributor, its affiliated companies and those Trustees that are not Independent Trustees, no interested person of the Trust or any Trustee of the Trust had any direct or indirect financial interest in the operation of the Plans or any related agreement. Benefits to the Fund and its 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 word Natixis in the names of the Natixis Funds Trusts and if it should cease to
be the principal distributor of the Funds shares, the Trust may be required to change its name and delete
these words or letters. The Distributor also acts as principal distributor for Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II, and Gateway Trust. The address of the Distributor is 399 Boylston Street, Boston, MA 02116.
The portion of the various fees and expenses for Class A shares that are paid (reallowed) to securities dealers are shown below. For Class A shares, the service fee is payable only to reimburse the Distributor for amounts it pays in connection with providing personal services to investors and/or maintaining shareholder accounts.
Mirova Global Green Bond Fund
Class A
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 |
[ ]% | [ ]% | [ ]% | [ ]% | ||||
$100,000 $249,999 |
[ ]% | [ ]% | [ ]% | [ ]% | ||||
$250,000 $499,999 |
[ ]% | [ ]% | [ ]% | [ ]% | ||||
$500,000 $999,999 |
[ ]% | [ ]% | [ ]% | [ ]% | ||||
Investments of $1 Million or More(1) | ||||||||
Up to $2,999,999 |
none | [ ]% | [ ]% | [ ]% | ||||
$3,000,000 to $4,999,999 |
none | [ ]% | [ ]% | [ ]% | ||||
Excess over $5,000,000 |
none | [ ]% | [ ]% | [ ]% | ||||
Investments with No Sales Charge(2) |
none | [ ]% | [ ]% | [ ]% |
(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 $5,000,000 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 Funds prospectus in the section How Sales Charges Are Calculated. |
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 shares are paid to the Distributor and are used by the Distributor to defray the expenses for services the Distributor provides the Trust. The Distributor may, at its discretion, pay (reallow) the entire sales charge imposed on the sale of Class A shares to investment dealers from time to time.
For new amounts invested at 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.
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The Fund 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 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 the Fund 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 Adviser 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 Fund. 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 Fund for all or a portion of any fees paid to intermediaries by the Distributor on behalf of the Fund.
The Distributor, the Adviser and their affiliates may, out of their own resources, make additional payments to financial intermediaries who sell shares of the Fund. Such payments and compensation are in addition to any fees paid or reimbursed by the Fund. These payments may include: (i) full reallowance of the sales charge of Class A shares, (ii) additional compensation with respect to the sale and/or servicing of Class A, Class N and Class Y shares, (iii) payments based upon various factors described below, and (iv) financial assistance programs to firms who sell or arrange for the sale of Fund shares including, but not limited to, remuneration for: the firms internal sales contests and incentive programs, marketing and sales fees, expenses related to advertising or promotional activity and events, and shareholder record keeping, sub-transfer agency or miscellaneous administrative services. 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 (FINRA). The participation of such firms in financial assistance programs is at the discretion of the firm and the Distributor. The payments described in (iii) above may be based on sales (generally ranging from 0.03% to 0.25% of gross sales) and/or the amount of assets a financial intermediarys clients have invested in the Fund (at annual rates generally ranging from 0.03% to 0.25% 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 the Fund or particular share class over other mutual funds or share classes. Additionally, these payments may result in the Funds inclusion on a sales list, including a preferred or select sales list, or in other sales programs. 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 by each individual dealer to its
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customers. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in the Funds Prospectus and this Statement. Customers will be provided with specific information about any processing or service fees charged by their dealer.
The Fund is newly formed and thus has not allocated any commissions and sales charges as of the date of this Statement.
Administrative Services NGAM Advisors, 399 Boylston Street, Boston, MA 02116, performs certain accounting and administrative services for the Fund, pursuant to an Administrative Services Agreement dated January 1, 2005, as amended from time to time (the Administrative Agreement). Under the Administrative Agreement, NGAM Advisors provides the following services to the Fund: (i) personnel that perform bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Fund, (ii) services required in connection with the preparation of registration statements and prospectuses, registration of shares in various states, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance, (iii) the various registrations and filings required by various regulatory authorities, and (iv) consultation and legal advice on Fund-related matters.
Custodial Arrangements State Street Bank and Trust Company (State Street Bank), One Lincoln Street, Boston, MA 02111, serves as the custodian for the Trust. As such, State Street Bank holds in safekeeping certificated securities and cash belonging to the Fund and, in such capacity, is the registered owner of securities in book-entry form belonging to the Fund. Upon instruction, State Street Bank receives and delivers cash and securities of the Fund in connection with Fund transactions and collects all dividends and other distributions made with respect to Fund portfolio securities. State Street Bank also maintains certain accounts and records of the Trust and calculates the total NAV, total net income and NAV per share of the Fund on a daily basis.
Transfer Agency Services Pursuant to a contract between the Trust, on behalf of the Fund, and Boston Financial Data Services, Inc. (Boston Financial or the Transfer Agent), whose principal business address is 2000 Crown Colony Drive, Quincy, Massachusetts 02169, Boston Financial acts as shareholder servicing and transfer agent for the Fund and is responsible for services in connection with the establishment, maintenance and recording of shareholder accounts, including all related tax and other reporting requirements and the implementation of investment and redemption arrangements offered in connection with the sale of the Funds shares.
From time to time, the Fund, directly or indirectly through arrangements with the Adviser or Transfer Agent, may pay amounts to third parties that provide recordkeeping and other administrative services relating to the 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.
Independent Registered Public Accounting Firm The Trusts independent registered public accounting firm is [ ], located at [ ]. The independent registered public accounting firm assists in the review of federal and state income tax returns, consults with the Trust as to matters of accounting and federal and state income taxation and will conduct an annual audit of the Funds financial statements.
Counsel to the Fund Ropes & Gray LLP, located at Prudential Tower, 800 Boylston Street, Boston, MA 02199, serves as counsel to the Fund.
PORTFOLIO MANAGEMENT INFORMATION
Portfolio Managers Management of Other Accounts
As of January 31, 2017, the portfolio managers of the Fund managed other accounts in addition to managing the Fund. The following table provides information on the other accounts managed by each portfolio manager.
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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 |
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Name of Portfolio Manager |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
# of Accts |
Total Assets |
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Christopher Wigley |
[ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | ||||||||||||||||||
Marc Briand |
[ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] | [ | ] | $ | [ | ] |
Material Conflicts of Interest
Conflicts of interest may arise in the allocation of investment opportunities and the allocation of aggregated orders among the Fund and other accounts managed by a portfolio manager. A portfolio manager potentially could give favorable treatment to some accounts for a variety of reasons, including favoring larger accounts, accounts that pay higher fees, accounts that pay performance-based fees, accounts of affiliated companies and accounts in which the portfolio manager has an interest. Such favorable treatment could lead to more favorable investment opportunities or allocations for some accounts. The Adviser has adopted policies and procedures to mitigate the effects of these conflicts. For more information on how the Adviser allocates investment opportunities between the Fund and its other clients, see the section Allocation of Investment Opportunity among the Fund and Other Accounts Managed by the Adviser in this Statement. Conflicts of interest also may arise to the extent a portfolio manager short sells a stock in one client account but holds that stock long in other accounts, including the Fund, 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.
Portfolio Manager 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 February 24, 2017.
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.
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Portfolio Managers Ownership of Fund Shares
The Fund is newly formed and, as of the date of this Statement, none of the portfolio managers owned any shares of the Fund.
There are various reasons why a portfolio manager may not own shares of the Fund in the future. One reason is that the Funds investment objective and strategies may not match those of the portfolio managers personal investment objective. Also, the portfolio manager may invest in other funds or pooled investment vehicles or separate accounts managed by the portfolio manager in a similar style to the Fund. Administrative reasons (such as facilitating compliance with an advisers code of ethics) also may explain why a portfolio manager has chosen not to invest in the Natixis Funds.
Allocation of Investment Opportunity among the Fund and Other Accounts Managed by the Adviser
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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of equity securities, the Adviser selects only brokers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates that, when combined with the quality of the foregoing services, will produce the best price and execution for the transaction. This does not necessarily mean that the lowest available brokerage commission, if any, will be paid. However, the commissions charged are believed to be competitive with generally prevailing rates. The Adviser will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions, if any, paid on transactions by reference to such data. In making such evaluation, factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. The Adviser may place orders for the Fund which, combined with orders for the Advisers other clients, may impact the price of the relevant security. This could cause the Fund to obtain a worse price on the transaction than would otherwise be the case if the orders were placed in smaller amounts or spread out over a longer period of time.
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Subject to the overriding objective of obtaining the best possible execution of orders, the Adviser may allocate brokerage transactions to affiliated brokers. Any such transactions will comply with Rule 17e-1 under the 1940 Act. In order for the affiliated broker to effect portfolio transactions for the Fund, the commissions, fees or other remuneration received by the affiliated broker must be reasonable and fair compared to the commissions, fees and other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period. Furthermore, the 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.
Natixis AM US
Natixis AM 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.
General
Subject to procedures adopted by the Board, the Funds brokerage transactions may be executed by brokers that are affiliated with Natixis US or the Adviser. Any such transactions will comply with Rule 17e-1 under the 1940 Act, or other applicable restrictions as permitted by the SEC pursuant to exemptive relief or otherwise.
Under the 1940 Act, persons affiliated with the Trust are prohibited from dealing with the 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 Trust may not serve as the Funds dealer in connection with such transactions.
To the extent permitted by applicable law, and in all instances subject to the foregoing policy of best execution, the Adviser may allocate brokerage transactions to broker-dealers (including affiliates of the Distributor) that have entered into arrangements in which the broker-dealer allocates a portion of the commissions paid by the Fund toward the reduction of the Funds expenses.
It is expected that the portfolio transactions in fixed-income securities will generally be with issuers or dealers on a net basis without a stated commission. Securities firms may receive brokerage commissions on transactions involving options, futures and options on futures and the purchase and sale of underlying securities upon exercise of options. The brokerage commissions associated with buying and selling options may be proportionately higher than those associated with general securities transactions.
The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of each series. Each share of the Fund represents an equal proportionate interest in the Fund with each other share of the Fund and is entitled to a proportionate interest in the dividends and distributions from the Fund. The Declaration of Trust further permits the 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 the Board may determine. When you invest in the Fund, you acquire freely transferable shares of beneficial interest that entitle you to receive dividends as determined by the Board and to cast a vote for each share you own at shareholder meetings. The shares of the Fund do not have any preemptive rights. Upon termination of the Fund, whether pursuant to liquidation of a Trust or otherwise, shareholders of each class of the Fund are entitled to share pro rata in the net assets attributable to that class of shares of the Fund available for distribution to shareholders. The Declaration of Trust also permits the Board to charge shareholders directly for custodial, transfer agency and servicing and other expenses.
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The shares of the Fund are divided into three classes: Class A, Class N and Class Y. As described in the Prospectus, Class Y shares are available for purchase only by certain eligible investors and have higher minimum purchase requirements than Class A shares. All expenses of the Fund (including advisory fees but excluding class specific expenses such as transfer agency fees (Other Expenses)) are borne by its Class A, Class N and Class Y shares on a pro rata basis, except for 12b-1 fees, which are borne only by Class A shares and may be charged at a separate rate to each such class. Other Expenses (with the exception of transfer agent expenses) are borne by such classes on a pro rata basis. Transfer agency fees for Class A and Class Y shares of the Fund are borne on a pro rata basis. Class N transfer agent expenses are borne directly by that class. The multiple class structure could be terminated should certain Internal Revenue Service (IRS) rulings or SEC regulatory positions be rescinded or modified.
The assets received by each class of the Fund for the issue or sale of its shares and all income, earnings, profits, losses and proceeds therefrom, subject only to the rights of the creditors, are allocated to, and constitute the underlying assets of, that class of the Fund. The underlying assets of each class of the Fund are segregated and are charged with the expenses with respect to that class of the Fund and with a share of the general expenses of the Fund and Trust. Any general expenses of the Trust that are not readily identifiable as belonging to a particular class of the Fund are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. While the expenses of the Trust are allocated to the separate books of account of each series of the Trust, certain expenses may be legally chargeable against the assets of all of the series in the Trust.
The Declaration of Trust also permits the Board, without shareholder approval, to subdivide the Fund or series or class of shares into various sub-series or sub-classes with such dividend preferences and other rights as the Trustees may designate. The Board may also, without shareholder approval, establish one or more additional series or classes or, with shareholder approval, merge two or more existing series or classes. Shareholders investments in such an additional or merged series would be evidenced by a separate series of shares (i.e., a new fund).
The Declaration of Trust provides for the perpetual existence of the Trust. The Trust or the Fund, 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 the Fund. Similarly, any class within the Fund may be terminated by vote of at least two-thirds of the outstanding shares of such class. The Declaration of Trust further provides that the Board may also, without shareholder approval, terminate the Trust or Fund upon written notice to its shareholders.
Shareholders of the Fund 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 the Trust and on other matters submitted to the vote of shareholders.
All classes of shares of the Fund have identical voting rights, except that each class of shares has exclusive voting rights on any matter submitted to shareholders that relates solely to that class, and has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. On any matters submitted to a vote of shareholders, all shares of the Trust then entitled to vote shall, except as otherwise provided in the 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 agreement relating to that series, and shareholders of each class within a series vote separately as to the Rule 12b-1 plan (if any) relating to that class.
There will normally be no meetings of shareholders for the purpose of electing Trustees except that, in accordance with the 1940 Act, (i) the Trust will hold a shareholders meeting for the election of Trustees at such time as less than a majority of the Trustees holding office have been elected by shareholders, and (ii) if there is a vacancy on a
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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 the Trusts custodian or by a vote of the holders of two-thirds of the outstanding shares at a meeting duly called for that purpose.
Upon written request by a minimum of ten holders of shares having held their shares for a minimum of six months and having an 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 Trust has undertaken to provide a list of shareholders or to disseminate appropriate materials (at the expense of the requesting shareholders).
Except as set forth above, the Trustees shall continue to hold office and may appoint successor Trustees. Shareholder voting rights are not cumulative.
The affirmative vote of a majority of shares of the Trust voted (assuming a quorum is present in person or by proxy) is required to amend 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 the Trust is established and designated by the Trustees, the shareholders having beneficial interests in the 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 the Trust. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. The Declaration of Trust provides for indemnification out of the Funds property for all loss and expense of any shareholder held personally liable for the obligations of the Fund by reason of owning shares of 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 the Fund itself would be unable to meet its obligations.
The Declaration of Trust further provides that the Board will not be liable for errors of judgment or mistakes of fact or law. However, nothing in the Declaration of Trust protects a Trustee against any liability to which the Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The by-laws of the Trust provide for indemnification by the Trust of Trustees and officers of the Trust, except with respect to any matter as to which any such person did not act in good faith in the reasonable belief that his or her action was in the best interests of the Trust. Such persons may not be indemnified against any liability to the Trust or the Trusts shareholders to whom he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
The procedures for purchasing shares of the Fund are summarized in the Prospectus. All purchases made by check should be in U.S. dollars and made payable to Natixis Funds or the Funds custodian bank.
At the discretion of the Distributor, bank trust departments or trust companies may also be eligible for investment in Class Y shares at a reduced minimum, subject to certain conditions including a requirement to meet the minimum investment balance within a specified time period. Please contact the Distributor at 800-225-5478 for more information. At the discretion of the Distributor, clients of NGAM Advisors may purchase, at NAV, Class A shares of Natixis Funds that do not offer Class Y shares.
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The procedures for redemption of shares of the 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 ngam.natixis.com or from your 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 or addition of a new bank account may be made by furnishing to Boston Financial 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 System. If the account is with a savings bank, it must have only one correspondent bank that is a member of the System. The Fund, the Distributor, the Transfer Agent and State Street Bank (the Funds custodian) are not responsible for the authenticity of withdrawal instructions received by telephone, although they will apply established verification procedures. Boston Financial, as agreed to with the Fund, will employ reasonable procedures to confirm that your telephone instructions are genuine, and if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. Such verification procedures include, but are not limited to, requiring a form of personal identification prior to acting on an investors telephone instructions and recording an investors instructions.
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 Fund 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 Fund 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 Fund), certain withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually of the value of the account, and redemptions made from the account to pay custodial fees. The CDSC may also be waived on redemptions within one year following the death of (i) the sole shareholder of an individual account, (ii) a joint tenant where the surviving joint tenant is the deceaseds spouse or (iii) the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfer to Minors Act or other custodial account. If the account is transferred to an account registered in the name of the deceaseds estate, the CDSC will be waived on any redemption occurring within one year of death. If the account is transferred to a new registration and then a redemption is requested, the applicable CDSC will be charged. If shares are not redeemed within one year of the death, they will remain subject to the applicable CDSC when redeemed from the transferees account.
The CDSC may be waived on redemptions made from 403(b)(7) custodial accounts due to attainment of age 59 1/2 for shareholders who established custodial accounts prior to January 3, 1995. The CDSC may also be waived on redemptions made from 403(b)(7) custodial accounts due to death or disability.
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.
The Fund will normally redeem shares for cash; however, the Fund reserves the right to pay the redemption price wholly or partly in kind, if NGAM Advisors determines it to be advisable and in the interest of the remaining shareholders of the 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 Fund has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is obligated to redeem shares solely in cash for any shareholder during any 90-day period up to the lesser of $250,000 or 1% of the total NAV of the Fund at the beginning of such period.
The Fund does not currently impose any redemption charge other than the CDSC imposed by the Distributor, as described in the Prospectus. 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 also the section Taxes.
The Fund reserves the right to suspend account services or refuse transaction requests if the Fund receives notice of a dispute between registered owners or of the death of a registered owner or the Fund suspects a fraudulent act. If the Fund refuses a transaction request because it receives notice of a dispute, the transaction will be processed at the 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 the 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.
Open Accounts
A shareholders investment is automatically credited to an open account maintained for the shareholder by Boston Financial. Following each additional investment or redemption from the account initiated by an investor (with the exception of systematic investment plans), a shareholder will receive a confirmation statement disclosing the current balance of shares owned and the details of recent transactions in the account. After the close of each calendar year, the Fund 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 Fund and no direct charges are made to shareholders. Although the Fund has no present intention of making such direct charges to shareholders, it reserves the right to do so. Shareholders will receive prior notice before any such charges are made.
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 Fund may be required to escheat or transfer the assets in your account to the applicable states unclaimed property administration. The state may sell
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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.
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 the Fund through a financial intermediary, we encourage you to contact the financial intermediary regarding applicable state unclaimed property laws. The Fund, 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 Prospectus.
Automatic Investment Plans
Subject to the Funds investor eligibility requirements, investors may automatically invest in additional shares of the 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 Fund at 800-225-5478 or your investment dealer or by visiting the Funds website at ngam.natixis.com.
This program is voluntary and may be terminated at any time by Boston Financial upon notice to existing plan participants. The Investment Builder Program plan may be discontinued at any time by the investor by written notice to Boston Financial, which must be received at least five business days prior to any payment date. The plan may be discontinued by State Street Bank at any time without prior notice if any check is not paid upon presentation or by written notice to the shareholder at least thirty days prior to any payment date. The Fund is under no obligation to notify shareholders as to the nonpayment of any check.
Retirement Plans and Other Plans Offering Tax Benefits
The federal tax laws provide for a variety of retirement plans offering tax benefits. These plans may be funded with shares of the Fund or with certain other investments. The plans include H.R. 10 (Keogh) plans for self-employed 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 the Fund for Class A 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 $100 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 and Class Y shares. See the Prospectus for details.
Systematic Withdrawal Plans (All Classes)
An investor owning the Funds shares having a value of $10,000 or more at the current public offering price may establish a Systematic Withdrawal Plan (a Plan) providing for periodic payments of a fixed or variable amount. An investor may terminate the plan at any time. A form for use in establishing such a plan is available from Boston Financial, your investment dealer or by visiting the Funds website at www.ngam.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 Fund.
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A shareholder under a Plan may elect to receive payments monthly, quarterly, semiannually or annually for a fixed amount of not less than $50 or a variable amount based on (1) the market value of a stated number of shares, (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 Plan. Withdrawals of shares of a Fund under the Plan 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 Plan payments, as redemptions from the earliest purchased shares of such Fund in your account. No CDSC applies to redemptions pursuant to the Plan.
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 a Plan and the specified amounts to be withdrawn are appropriate under the circumstances. The Fund and the Distributor make no recommendations or representations in this regard. It may be appropriate for a shareholder to consult a tax adviser before establishing such a plan. See the sections Redemptions and Taxes 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 a Plan. Accordingly, the Fund and the Distributor do not recommend additional investments in Class A shares by a shareholder who has a withdrawal plan in effect and who would be subject to a sales load on such additional investments. Natixis Funds may modify or terminate this program at any time.
Because of statutory restrictions this Plan may not be available to pension or profit-sharing plans and IRA plans that have State Street Bank as trustee. Different documentation may be required.
Dividend Diversification Program
You may also establish a Dividend Diversification Program, which allows you to have all dividends and any other distributions automatically invested in shares of the same class of another Natixis Fund, subject to the investor eligibility requirements of that 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 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.
Exchange Privilege
A shareholder may exchange Class A, Class N and Class Y shares of the Fund for shares of the same class of another Natixis Fund or series of Loomis Sayles Funds I or Loomis Sayles Funds II that offers that class (subject to the investor eligibility requirements, if any, of the fund into which the exchange is being made and any other limits on the sales of or exchanges into that fund) on the basis of relative NAVs at the time of the exchange without any sales charge. An exchange of shares in one fund for shares of another fund is a taxable event on which gain or loss may be recognized. When an exchange is made from the Class A shares of the Fund to the same class of shares of another fund, the shares received by the shareholder in the exchange will have the same age characteristics as the shares exchanged. The age of the shares determines the expiration of the CDSC. Class Y shares of the Fund may be exchanged, subject to investment minimums, for Institutional Class shares of any series of Loomis Sayles Funds I or Loomis Sayles Funds II that offers Institutional Class shares. These options are summarized in the Funds Prospectus.
Class A shares of a fund acquired by Trustees, former Trustees, employees of affiliates of the Natixis Funds, individuals who are affiliated with any Natixis Fund (including spouses, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned) and Natixis affiliate employee benefit plans (collectively, Natixis
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affiliated shareholders) may be exchanged for Class Y shares of the same fund without payment of a CDSC. An exchange of shares for shares of a different class in the same fund generally should not be a taxable event for the exchanging shareholder.
Accounts participating in or moving into wrap fee programs or held through a registered investment adviser may exchange Class A shares of a fund for Class Y shares of the same fund. Any account with an outstanding CDSC liability will be assessed the CDSC before converting to either Class A or Class Y shares. In order to exchange shares, a representative of the wrap-fee program or registered investment adviser must follow the procedures set forth by the Distributor. An exchange of shares for shares of a different class in the same fund generally should not be a taxable event for the exchanging shareholder.
In certain limited circumstances, accounts participating in wrap fee programs or held through a registered investment adviser may exchange Class Y shares of the Fund for Class A shares of the same Fund. Class Y shares may be converted to Class A shares of the same Fund if the Class Y shares are held in an investment option or program that no longer permits the use of Class Y shares in that option or program or if the shareholder otherwise becomes ineligible to participate in Class Y shares. Exchanges from Class Y shares to Class A shares will not be subject to an initial sales charge; however, future purchases may be subject to a sales charge, if applicable. In order to exchange shares, a representative of the wrap fee program or registered investment adviser must follow the procedures set forth by the Distributor. An exchange of shares for shares of a different class in the same fund generally should not be a taxable event for the exchanging shareholder.
Class A or Class Y shares of a Fund held in an omnibus fashion by certain retirement plans may be exchanged for Class N shares of the same Fund but must be held in omnibus position in Class N. See the section How to Buy Shares. Any account with an outstanding CDSC liability will be assessed the CDSC before converting to Class N shares. An exchange of shares for shares of a different class in the same fund generally should not be a taxable event for the exchanging shareholder.
Due to operational limitations at your financial intermediary, your ability to exchange between share classes of the same fund may be limited. Please consult your financial representative for more information.
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 the Fund. The exchange privilege may be exercised only in those states where shares of such Fund may be legally sold. The Fund reserves the right to suspend or change the terms of exchanging shares. The Fund and the Distributor reserve the right to refuse or limit any exchange order for any reason, including if the transaction is deemed not to be in the best interests of the Funds other shareholders or possibly disruptive to the management of the Fund.
Before requesting an exchange into any other Natixis Fund or series of Loomis Sayles Funds I or Loomis Sayles Funds II, 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.
Automatic Exchange Plan
As described in the Prospectus, a shareholder may establish an Automatic Exchange Plan under which shares of the 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 Boston Financial is notified in writing or by calling Natixis Funds at 800-225-5478 to terminate the plan. Exchanges may be made in amounts of $100 or more. The Service Options Form may be used to establish an Automatic Exchange Plan and is available from Boston Financial, your financial representative or by visiting our website at ngam.natixis.com.
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Restrictions on Buying, Selling and Exchanging Shares
As stated in the Funds Prospectus, the Fund and the Distributor reserve the right to reject any purchase or exchange order for any reason. When a purchase or exchange order is rejected, the Fund or the Distributor will send notice to the prospective investor or the investors financial intermediary promptly after receipt of the rejected order.
Broker Trading Privileges
The Distributor may, from time to time, enter into agreements with one or more brokers or other intermediaries to accept purchase and redemption orders for Fund shares until the close of regular trading on the NYSE (normally, 4:00 p.m., Eastern Time on each day that the NYSE is open for trading); such purchase and redemption orders will be deemed to have been received by the Fund when the authorized broker or intermediary accepts such orders; and such orders will be priced using the 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, Eastern Time, 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.
Self-Servicing Your Account with Natixis Funds Personal Access Line® and Website (All Classes Except Class N)
Natixis Funds shareholders may access account information, including share balances and recent account activity online, by visiting our website at ngam.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 (PIN). 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 ngam.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 ngam.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.
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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(R).
You are responsible for the confidentiality and use of your personal identification numbers, account numbers, social security numbers and any other personal information required to access the site or transmit telephonically. Any individual that possesses the information required to pass through all security measures will be presumed to be you. All transactions submitted by an individual presumed to be you will be solely your responsibility.
You agree that Natixis Funds does not have the responsibility to inquire as to the legitimacy or propriety of any instructions received from you or any person believed to be you, and is not responsible or liable for any losses that may occur from acting on such instructions.
Natixis Funds is not responsible for incorrect data received via the internet or telephonically from you or any person believed to be you. Transactions submitted over the internet and telephonically are solely your responsibility and Natixis Funds makes no warranty as to the correctness, completeness or 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 which 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.
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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 8705
Boston, MA 02266-8705
Notification may also be made by calling 800-813-4127 during normal business hours.
The method for determining the public offering price and NAV per share is summarized in the Prospectus.
The total NAV of each class of shares of the 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. The 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. The Fund may use independent pricing services recommended by the Adviser 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. 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. Valuations based on information from foreign markets may be subject to the Funds fair value policies described below. |
| Debt securities and unlisted preferred equity securities evaluated bids furnished to the 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. |
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| 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 clearinghouse 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 Fund will fair value 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 price 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. |
| Futures most recent settlement price on the exchange on which the Adviser 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 pursuant to procedures approved by the Board. The 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, the 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 the Funds NAV is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine the 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 the 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 the Fund takes place in various markets outside the United States on days and at times other than when the NYSE is open for trading. Therefore, the calculation of the Funds 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 the Funds portfolios may change on days when the Fund is not open for business and the shares may not be purchased or redeemed.
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The per share NAV of a class of the Funds shares is computed by dividing the number of shares outstanding into the total NAV attributable to such class. The public offering price of a Class A share of the Fund is the NAV per share plus a sales charge as set forth in the Funds Prospectus.
The following special purchase plans are summarized in the Prospectus and are described in greater detail below. Investors should note that in many cases, the financial intermediary, and not the Fund, is responsible for ensuring that the investor receives current discounts.
If you invest in Class A shares through a financial intermediary, it is the responsibility of the financial intermediary to ensure you obtain the proper breakpoint discount. In order to reduce your sales charge, it will be necessary at the time of purchase to inform the Distributor and your financial intermediary, in writing, of the existence of other accounts in which there are holdings eligible to be aggregated to meet sales load breakpoints. If the Distributor is not notified that you are eligible for a reduced sales charge, the Distributor will be unable to ensure that the reduction is applied to the investors account. You may be required to provide certain records and information, such as account statements, with respect to all of your accounts which hold Fund shares, including accounts with other financial intermediaries, and your family members and other related parties accounts, in order to verify your eligibility for the reduced sales charge.
Cumulative Purchase Discount
The 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 Trust 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. Certain shares held through Loomis Sayles Distributors, L.P. may not be eligible for this privilege.
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.
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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 with the purchases and total investment of the shareholders spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those previously mentioned, single trust estates, individual fiduciary accounts and sole proprietorships or any other group of individuals acceptable to the Distributor. If the combined value of the purchases and total investments exceeds a sales charge breakpoint as disclosed in the 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. Certain shares held through Loomis Sayles Distributors, L.P. may not be eligible for this privilege.
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.
Clients of the Adviser
Investment advisory clients of NGAM Advisors and the Adviser may invest in Class Y shares of the Fund below the minimums stated in the Prospectus. 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 the Adviser to any series of the Trust or another Natixis Fund; any director, officer or partner of a client of the Adviser to any series of the Trust 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 Plan under a prototype of the Adviser to any series of the Trust 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 the Adviser to any series of the Trust 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 the Adviser to any series of the Trust 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 the Fund is a legally permissible investment and that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment company.
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Investment Advisory Accounts
Class A shares of the Fund may be purchased at NAV by investment advisers, financial planners or other intermediaries who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services; clients of such investment advisers, financial planners or other intermediaries who place trades for their own accounts if the accounts are linked to the master account of such investment adviser, financial planner or other intermediary on the books and records of the broker or agent; and retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Sections 401(a), 403(b), 401(k) and 457 of the Code and rabbi trusts. Investors may be charged a fee if they effect transactions through a broker or agent.
Certain Broker-Dealers and Financial Services Organizations
Class A shares of the Fund also may be purchased at NAV through certain broker-dealers or financial services organizations without any transaction fee. Such organizations may also receive compensation paid by NGAM Advisors, or its affiliates out of their own assets (as described in the section Distribution Agreement and Rule 12b-1 Plans), or be paid indirectly by the Fund in the form of servicing, distribution or transfer agent fees.
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 Fund 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.
Bank Trust Departments or Trust Companies
Class A shares of the Fund 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.
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As described in the Prospectus, it is the policy of the Fund to pay to its shareholders, 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.
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 1-800-225-5478 or visiting ngam.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 Fund on or before the record date for such dividend or distribution.
If a dividend or capital gain distribution check remains uncashed for six months and your account is still open, the Fund will reinvest the dividend or distribution in additional shares of the Fund promptly after making this determination and the check will be cancelled. In addition, future dividends and capital gains distributions will be automatically reinvested in additional shares of the Fund unless you subsequently contact the Fund and request to receive distributions by check.
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.
The following discussion of certain U.S. federal income tax consequences of investing in the 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 Fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisers regarding their particular situations and the possible application of foreign, state and local tax laws.
Taxation of the Fund
The 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 RICs and their shareholders under the Code, the 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 the 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.
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In general, for purposes of the 90% gross income requirement described in (i) above, income derived by the 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 the 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.
For purposes of the diversification requirements set forth in (ii) above, outstanding voting securities of an issuer includes 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 the Funds ability to satisfy the diversification requirements.
Assuming that it qualifies for treatment as a RIC, the 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 the 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 the Fund-level tax, paying interest, making additional distributions or disposing of certain assets. If the 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 dividend 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 the Funds shares (as described below). In addition, the 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.
The Fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction). If the Fund retains any investment company taxable income, the Fund will be subject to tax at regular corporate rates on the amount retained. The 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 the 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 the 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 Fund is not required to, and there can be no assurance that the Fund will, make this designation if the 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
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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 the Funds net investment income. Instead, potentially subject to certain limitations, the 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 the Fund retains or distributes such gains. If the Fund incurs or has incurred net capital losses in taxable years beginning after December 22, 2010 (post-2010 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. The Funds annual shareholder report will describe its available capital loss carryforwards (if any).
If a RIC 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 RIC is permitted to elect and so elects) plus any such amounts retained from the prior year, the RIC will be subject to a nondeductible 4% excise tax on the undistributed amounts. For purposes of the required excise tax distribution, a RICs 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 RIC is permitted to elect and makes the election referred to above) generally are treated as arising on January 1 of the following calendar year. Also for purposes of the excise tax, a RIC 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. The 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 the Funds earnings and profits. Taxes on distributions of capital gains are determined by how long the 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, the 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.
Distributions are taxable to shareholders as described herein even if they are paid from income or gains earned by the Fund before a shareholders investment (and thus were included in the price the shareholder paid for his or her shares). Distributions are taxable whether shareholders receive them in cash or in additional shares.
Dividends declared and payable by the Fund during October, November or December to shareholders of record on a date in any such month and paid by the Fund during the following January generally will be treated for U.S. federal income tax purposes as paid by the Fund 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 the 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 the Fund shareholder to be qualified dividend income, the Fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the Funds shares. 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
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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.
If the aggregate qualified dividends received by the Fund during any taxable year are 95% or more of its gross income, excluding net long-term capital gain over net short-term capital loss, then 100% of the Funds dividends (other than properly 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 the Fund generally will qualify for the 70% 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 the 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 the 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).
Any distribution of income that is attributable to (i) income received by the Fund in lieu of dividends with respect to securities on loan pursuant to a securities lending transaction, or (ii) dividend income received by the 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.
Section 1411 of the Code generally imposes a 3.8% 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 the Fund of net investment income and capital gains as described above, and (ii) any net gain from the sale, exchange 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 the Fund.
If the Fund makes a distribution in excess of its current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of a shareholders tax basis in his or her shares, and thereafter as capital gain. A return of capital 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 treated as short-term capital gain or loss. However, any loss realized upon a taxable disposition of Fund shares held
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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 the Fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
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.
Foreign Taxation
Income, gains and proceeds received by the 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 the Funds assets at taxable 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 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 the 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 the Fund were eligible to make such an election for a given year, it may determine not to do so.
Tax Implications of Certain Fund Investments
Options, Futures, Forward Contracts, Swap Agreements and Hedging Transactions. The tax treatment of certain positions entered into by the 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 gains or losses) although certain foreign currency gains and losses from such contracts may be treated as ordinary in character, as described below. Also, any 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 60/40 or ordinary gain or loss, as applicable.
The Funds investments in futures contracts, forward contracts, options, straddles, swap agreements, and options on swaps and foreign currencies, derivatives, as well as any of its other hedging, short sale, or similar transactions, may be subject to one or more special tax rules (including the mark-to-market, constructive sale, notional principal contract, straddle, wash sale and short sale rules). These rules may affect whether gains and losses recognized by the Fund are treated as ordinary or capital, accelerate the recognition of income to the Fund, defer losses to the Fund, or cause adjustments in the holding periods of the Funds securities, thereby affecting whether capital gains and losses are treated as short-term or long-term. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders. Moreover, because the 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 the Fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a RIC and avoid a Fund-level tax.
In general, option premiums received by the 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
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transfers or otherwise terminates the option (e.g., through a closing transaction). If a call option written by the 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 the 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 the Funds obligation under an option other than through the exercise of the option and related sale or delivery of the underlying stock 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 the Fund expires unexercised, the Fund generally will recognize short-term gain equal to the premium received.
Certain covered call writing activities of the Fund may trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. 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. Thus, the 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 70% dividends-received deduction, as the case may be.
Certain of the Funds investments in derivative instruments, foreign-currency denominated instruments, and any of the Funds transactions in foreign currencies and hedging activities, may produce a difference between its book income and its taxable income. If the Funds book income is less than the sum of its taxable income and net tax-exempt income (if any), the Fund could be required to make distributions exceeding book income to qualify as a RIC that is accorded special tax treatment and avoid a Fund-level tax.
If the Funds book income exceeds the sum of its taxable income, including net realized capital gains, and net tax-exempt income (if any), the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the Funds remaining earnings and profits (including earnings and profits arising from tax-exempt income, if any), (ii) thereafter, as a return of capital to the extent of the recipients basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset.
Certain Foreign Currency Tax Issues. 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. The 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 the 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.
The 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 the 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.
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If the 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 would not be marked to market annually and the Fund would recognize short-term or long-term capital gain or loss depending on the Funds holding period therein. The Fund may elect out of Section 988 with respect to all, some or none of its forward currency contracts.
Investments in Other RICs. If the Fund receives dividends from another investment company that qualifies as a RIC, and the investment company 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 investment company.
If the Fund receives dividends from another investment company that qualifies as a RIC and the investment company 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 investment company.
If the Fund were to own 20% or more of the voting interests of an investment company, subject to a safe harbor in respect of certain fund of funds arrangements, the Fund would be required to look through the investment company to its holdings and combine the appropriate percentage (as determined pursuant to the applicable Treasury Regulations) of the investment companys assets with the Funds assets for purposes of satisfying the 25% diversification test described above.
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 so qualify. 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.
Investments in Exchange-Traded Notes. The timing and character of income or gains arising from exchange-traded notes can be uncertain. An adverse determination or future guidance by the IRS with respect to such rules (which determination or guidance could be retroactive) may affect the Funds ability to qualify for treatment as a RIC and to avoid a Fund-level tax.
Certain Investments in REITs, REMICs and TMPs. An investment by the Fund 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 federal income tax purposes. Dividends received by the Fund from a REIT will not qualify for the corporate dividends-received deduction and generally will not constitute qualified dividend income.
The Fund may invest directly or indirectly (including through a REIT) 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 the Funds income (including income allocated to the 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 federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a RIC generally will 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 the Fund invests in such interests, it may not be a suitable investment for charitable remainder trusts (CRTs), as noted below.
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
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tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. See 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. 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.
Special Rules for Debt Obligations. 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 the 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 the 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 the 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. 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. Alternatively, the 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. 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.
Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the 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). The 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 the Funds income, will depend upon which of the permitted accrual methods the Fund elects.
If the Fund holds the foregoing kinds of securities, or other debt securities 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 necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the 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 securities.
Securities Purchased at a Premium. Very generally, where the 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 the 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, 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 the Fund to reduce its tax basis by the amount of amortized premium.
Certain Higher-Risk and High Yield Securities. The Fund may invest in below investment-grade fixed-income securities, including debt obligations of issuers not currently paying interest or that are in default. Investments in
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debt obligations that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent 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 interest. These and other related issues will be addressed by the Fund when, as and if it invests in such securities as part of the Funds efforts to ensure that it distributes sufficient income to preserve its status as a RIC and avoid a Fund-level tax.
A portion of the interest paid or accrued on certain high yield discount obligations in which the Fund may invest may be treated as a dividend for purposes of the corporate dividends-received deduction. In such cases, if the issuer of the high yield discount obligations is a domestic corporation, dividend payments by the Fund to corporate shareholders may be eligible for the dividends-received deduction to the extent of the deemed dividend portion of such accrued interest.
Passive Foreign Investment Companies. The Fund 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 the 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, the Fund may make certain elections to avoid the imposition of that tax. For example, the 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. The 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.
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 the Fund to avoid taxation. Making either of these elections therefore may require the Fund to liquidate other investments (including when it is not advantageous to do so) to meet its distribution requirements, which also may accelerate the recognition of gain and affect the Funds total return. If the 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.
Because it is not always possible to identify a foreign corporation as a PFIC, the Fund may incur the tax and interest charges described above in some instances.
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 the Fund if shares in the Fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b).
A tax-exempt shareholder may also recognize UBTI if the Fund recognizes excess inclusion income derived from direct or indirect investments in residual interests in REMICs or 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 the 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
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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, the Fund may elect to specially allocate any such tax to the applicable CRT (or other shareholder), and thus reduce such shareholders distributions for the year by the amount of the tax that relates to such shareholders interest in the Fund. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. CRTs and other tax-exempt investors are urged to consult their tax advisers concerning the consequences of investing in the Fund.
Backup Withholding
The Fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable distributions and redemption proceeds paid to any individual shareholder who fails to properly furnish the Fund with a correct taxpayer identification number, who has under-reported dividend or interest income, or who fails to certify to the Fund that he or she is not subject to such withholding. The current backup withholding tax rate is 28%.
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 the 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 Capital Gain Dividends and for 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 (or is treated as) effectively connected with the conduct by the Foreign Person of a trade or business within the United States, including distributions subject to 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 Fund is permitted to report such part of its dividends as short-term capital gain and/or interest-related dividends as are eligible, but is not required to do so, and does 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 the 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 foreign-source dividend and 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).
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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 the 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 the 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 Foreign Person 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 advisors.
Subject to certain exceptions (for example, for a fund that is a United States real property holding corporation as described below), the 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 Foreign Person.
Special rules would apply if the 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 the 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 Fund generally does not expect that it will be a QIE.
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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 the 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.
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 the 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 the 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 and 30% of the gross proceeds of share redemptions or exchanges and certain Capital Gain Dividends it pays on or after January 1, 2017 (which date, under recent Treasury guidance, is expected to be delayed until on or after January 1, 2019). If a payment by the 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., Capital Gain Dividends, short-term capital gain dividends and interest-related 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 the Fund as an investment through such plans and arrangements and the precise effect of such an investment on their particular tax situations.
Dividends and distributions and gains from the sale of Fund 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.
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Yield and Total Return
The Fund may advertise the yield and total return of each class of its shares. The Funds yield and total return will vary from time to time depending upon market conditions, the composition of its portfolio and operating expenses of the Trust allocated to the Fund. These factors, possible differences in the methods used in calculating yield and total return and the tax-exempt status of distributions should be considered when comparing the Funds yield and total return to yields and total returns published for other investment companies and other investment vehicles. Yield and total return should also be considered relative to changes in the value of the Funds shares and to the relative risks associated with the investment objectives and policies of the Fund. Yields do not take into account any applicable sales charges or CDSC. Total return may or may not take into account any applicable sales charges or CDSC. Yield and total return may be stated with or without giving effect to any expense limitations in effect for the Fund. For those funds that present yields and total returns reflecting an expense limitation or waiver, the yield or total return would have been lower if no limitation or waiver were in effect. Because of its lower operating expenses, Class Y shares of the Fund can be expected to achieve a higher yield and total return than the same Funds Class A shares.
The Fund may also present one or more distribution rates for each class in its sales literature. These rates will be determined by annualizing the classs distributions from net investment income and net short-term capital gain over a recent 12-month, 3-month or 30-day period and dividing that amount by the maximum offering price or the 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 return, and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that share prices, expressed as the NAVs per share, will vary just as yield and total return will vary. An investors focus on the yield of the Fund to the exclusion of the consideration of the share price of the Fund may result in the investors misunderstanding the total return he or she may derive from the Fund.
Benchmark Comparisons
Performance information for a fund with over one calendar year of performance history will be included in the Prospectus (in the section Risk/Return Bar Chart and Table in such funds 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).
The Prospectus and this Statement 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 Global Asset Management or any of its related or affiliated companies (collectively NGAM) and does not sponsor, endorse or participate in the provision of any NGAM services, funds or other financial products.
The index information contained therein 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 Fund is newly formed and has not yet issued financial statements.
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DESCRIPTION OF SECURITIES RATINGS
The Fund makes use of average portfolio credit quality standards to assist institutional investors whose own investment guidelines limit their investments accordingly. In determining the Funds overall dollar-weighted average quality, unrated securities are treated as if rated, based on the Advisers view of their comparability to rated securities. The 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 the Fund does not mean that all securities held by the Fund will be rated in that category or higher. The 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, Moodys Investors Service, Inc. (Moodys) or Fitch Investor Services, Inc. (Fitch) or, if unrated, determined by the Subadviser to be of comparable quality). The percentage of the Funds assets invested in securities in a particular rating category will vary. Following is a description of S&Ps, Moodys, and Fitch ratings applicable to fixed-income securities.
Standard & PoorsA brief description of the applicable rating symbols of Standard & Poors and their meanings (as published by Standard & Poors) follows:
Issue Credit Rating Definitions
Standard & Poors national scale issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific debt, bond, lease, commercial paper program certificate of deposit, or other financial instrument (obligation) relative to the creditworthiness of other national obligors with respect to their own financial obligations. National obligors include all active borrowers, guarantors, insurers, and other providers of credit enhancement residing in the country, as well as any foreign obligor active in the countrys financial markets.
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. In the U.S., for example, that means obligations with an original maturity of no more than 365 days including commercial paper. 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 Standard & Poors analysis of the following considerations:
| Likelihood of paymentcapacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; |
| Nature of and provisions of the obligation and the promise we impute; |
| Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors rights. |
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 Standard & Poors. 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 Standard & Poors 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 Standard & Poors 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.
Plus (+) or minus ()
The 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.
NR
This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poors does not rate a particular obligation as a matter of policy.
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated A-1 is rated in the highest category by Standard & Poors. 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.
A-3
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 Standard & Poors 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
SPUR (Standard & Poors Underlying Rating)
A SPUR rating 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/obligor with the designation SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. Standard & Poors maintains surveillance of an issue with a published SPUR.
Municipal Short-Term Note Ratings Definitions
A Standard & Poors U.S. municipal note rating reflects Standard & Poors 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, Standard & Poors 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.
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
A-4
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+).
Standard & Poors Disclaimers
The analyses, including ratings, of Standard & Poors and its affiliates (together, Standard & Poors) 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. Standard & Poors 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. Standard & Poors opinions and analyses do not address the suitability of any security. Standard & Poors does not act as a fiduciary or an investment advisor except where registered as such. While Standard & Poors has obtained information from sources it believes to be reliable, Standard & Poors 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 (Currently applied and/or outstanding)
Standard & Poors 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 addressed 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 Standard & Poors of appropriate documentation. Standard & Poors 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 Standard & Poors opinion, documentation is close to final. Preliminary ratings may also be assigned to the obligations of these entities. |
| Preliminary ratings may be assigned when a previously unrated entity is undergoing a well-formulated |
A-5
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, Standard & Poors 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.
Inactive Qualifiers (No longer applied or outstanding)
Contingent upon final documentation: * inactive qualifier
This symbol indicated that the rating was contingent upon Standard & Poors 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 the Funds portfolio consisted primarily of direct U.S. government securities.
Public Information Ratings: pi inactive 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 indicated 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.
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
A-6
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. Standard & Poors 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 Risks
Standard & Poors 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, vs. obligations denominated in a foreign currency.
Moodys Investors Service, Inc.A brief description of the applicable Moodys Investor Services, Inc. (Moodys) rating symbols and their meanings (as published by Moodys) follows:
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. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both 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.
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.
A-7
Ba
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high credit risk.
Caa
Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
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 long-term 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 counterparty 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 all) senior unsecured financial obligations and contracts.
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 the likelihood of a default on contractually promised payments.
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.
A-8
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.
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 Investor Services (Fitch) and their meanings (as published by Fitch) follows:
Credit Rating Scale
Fitch Ratings credit ratings provide 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 (including supranational and sub-national), financial, bank, insurance, municipal and other public finance 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.
A designation of Not Rated or NR is used to denote securities not rated by Fitch where Fitch has rated some, but not all, securities comprising an issuance capital structure.
A-9
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 rating default rates.
Fitch Ratings 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 Ratings may include additional considerations (i.e., rate to a higher or lower standard than that implied in the obligations documentation). In such cases, the agency will make clear the assumptions underlying the agencys opinion in the accompanying rating commentary.
Long-Term Credit Rating Scales
Issuer Credit Rating Scales
Rated entities in a number of sectors, including financial and non-financial corporations, sovereigns and insurance companies, are generally assigned Issuer Default Ratings (IDRs). IDRs opine on an entitys relative vulnerability to default 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, although the agency recognizes that issuers may also make pre-emptive and therefore voluntary use of such mechanisms.
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. For historical information on the default experience of Fitch-rated issuers, please consult the transition and default performance studies available from the Fitch Ratings website.
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.
A-10
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.
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
Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. 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; or |
c. | Fitch Ratings otherwise believes a condition of RD or D to be imminent or inevitable, including through the formal announcement of a distressed debt exchange. |
RD
Restricted default. RD ratings indicate an issuer that in Fitch Ratings opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:
a. | the selective payment default on a specific class or currency of debt; |
b. | 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; |
c. | 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; or |
d. | execution of a distressed debt exchange on one or more material financial obligations. |
D
Default. D ratings indicate an issuer that in Fitch Ratings opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.
A-11
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.
Imminent default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.
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.
Note:
The modifiers + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA Long-Term IDR category, or to Long-Term IDR categories below B.
Limitations of the Issuer Credit Rating Scale
Specific limitations relevant to the issuer credit rating scale include:
| The ratings do not predict a specific percentage of default 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 default. |
| 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. |
Ratings assigned by Fitch Ratings articulate an opinion on discrete and specific areas of risk. The above list is not exhaustive, and is provided for the readers convenience. Readers are requested to review the section Understanding Credit RatingsLimitations and Usage for further information on the limitations of the agencys ratings.
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 or security stream, and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. 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.
A-12
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.
Limitations of the Short-Term Ratings Scale
Specific limitations relevant to the Short-Term Ratings scale include:
| The ratings do not predict a specific percentage of default 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 obligation default. |
| The ratings do not opine on any quality related to an issuer or transactions profile other than the agencys opinion on the relative vulnerability to default of the rated issuer or obligation. |
Ratings assigned by Fitch Ratings articulate an opinion on discrete and specific areas of risk. The above list is not exhaustive, and is provided for the readers convenience. Readers are requested to review the section Understanding Credit RatingsLimitations and Usage for further information on the limitations of the agencys ratings.
Standard Rating Actions
Affirmed*
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.
Confirmed
Action taken in response to an external request or change in terms. Rating has been reviewed in either context, and no rating change has been deemed necessary. For servicer ratings, action taken in response to change in financial condition or IDR of servicer where servicer rating is reviewed in that context exclusively, and no rating action has been deemed necessary.
Downgrade*
A-13
The rating has been lowered in the scale.
Matured*/Paid-In-Full
a. Matured This action is used when an issue has reached the end of its repayment term and rating coverage is discontinued. Denoted as NR.
b. Paid-In-Full This action indicates that the issue has been paid in full. As the issue no longer exists, it is therefore no longer rated. Denoted as PIF.
New Rating*
Rating has been assigned to a previously unrated issue primarily used in cases of shelf issues such as MTNs or similar programs.
Prerefunded*
Assigned to long-term US Public Finance issues after Fitch assesses refunding escrow.
Publish*
Initial public announcement of rating on the agencys website, although not necessarily the first rating assigned. This action denotes when a previously private rating is 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 Ratings. Indicated in rating databases with the symbol WD.
Rating Modifier Actions:
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.
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.
The Following Actions Will Only Apply in Structured Finance Transactions:
Revision Outlook*
Rating Outlook status has changed independent of a full review of the underlying rating.
A-14
* | 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. |
XMGG51-0217
A-15
Registration Nos. 002-98326
811-04323
NATIXIS FUNDS TRUST I
PART C
OTHER INFORMATION
Item 28. Exhibits
(a) | Articles of Incorporation. | |||||
(1) | (i) | Natixis Funds Trust I (the Registrant) Third Amended and Restated Agreement and Declaration of Trust dated June 2, 2005 (the Agreement and Declaration) is incorporated by reference to exhibit (a)(1) to post-effective amendment (PEA) No. 62 to the initial registration statement (Registration Statement) filed on August 18, 2005. | ||||
(ii) | Amendment No. 1 dated June 1, 2007 to the Agreement and Declaration is incorporated by reference to exhibit (a)(1)(ii) to PEA No. 72 filed on January 28, 2008. | |||||
(b) | ByLaws. | |||||
(1) | The Registrants Amended and Restated By-Laws dated September 23, 2008 (the By-laws) are incorporated by reference to exhibit (b)(1) to PEA No. 76 to the Registration Statement filed on December 3, 2008. | |||||
(c) | Instruments Defining Rights of Security Holders. | |||||
(1) | Rights of shareholders are described in Article III, Section 6 of the Agreement and Declaration is incorporated by reference to exhibit (a)(1) to PEA No. 62 to the Registration Statement filed on August 18, 2005. | |||||
(d) | Investment Advisory Contracts. | |||||
(1) | (i) | Advisory Agreement dated October 30, 2000 between Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as Nvest Star Advisers Fund) and NGAM Advisors is incorporated by reference to exhibit (d)(2)(iv) to PEA No. 43 to the Registration Statement filed on February 27, 2001 | ||||
(ii) | Addendum dated June 1, 2011 to Advisory Agreement dated October 30, 2000 between Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as Nvest Star Advisers Fund)and NGAM Advisors is incorporated by reference to exhibit (d)(1)(vi) to PEA No 91 to the Registration Statement filed on May 2, 2011. | |||||
(iii) | Advisory Agreement dated September 1, 2003 between Registrant on behalf of Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund) and Loomis, Sayles & Company, L.P. (Loomis Sayles) is incorporated by reference to exhibit (d)(2)(viii) to PEA No. 54 to the Registration Statement filed on November 28, 2003. |
(iv) | Addendum dated July 1, 2013 to the Advisory Agreement dated September 1, 2003 between Registrant, on behalf of Loomis Sayles Core Plus Bond Fund, and Loomis Sayles is incorporated by reference to exhibit (d)(1)(v) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |||
(v) | Advisory Agreement dated October 30, 2000 between Registrant on behalf of Vaughan Nelson Small Cap Value Fund (formerly known as Nvest Star Small Cap Fund) and NGAM Advisors is incorporated by reference to exhibit (d)(2)(xi) to PEA No. 43 to the Registration Statement filed on February 27, 2001. | |||
(vi) | Addendum dated February 4, 2004 to Advisory Agreement dated October 30, 2000 between Registrant on behalf of Vaughan Nelson Small Cap Value Fund (formerly known as Nvest Star Small Cap Fund) and NGAM Advisors is incorporated by reference to exhibit (d)(1)(xi) to PEA No. 57 to the Registration Statement filed on April 29, 2004. | |||
(vii) | Advisory Agreement dated November 1, 2005 between Registrant on behalf of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio) and NGAM Advisors is incorporated by reference to exhibit (d)(1)(xiii) to PEA No. 64 to the Registration Statement filed on January 30, 2006. | |||
(viii) | Advisory Agreement dated December 13, 2010 between the Registrant on behalf of Natixis Oakmark International Fund and NGAM Advisors is incorporated by reference to exhibit (d)(1)(xiv) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | |||
(ix) | Advisory Agreement dated March 31, 2016 between the Registrant on behalf of Mirova Global Sustainable Equity Fund and Natixis Asset Management U.S., LLC (Natixis AM US) is incorporated by reference to exhibit (d)(1)(ix) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||
(x) | Advisory Agreement dated February 24, 2017 between the Registrant on behalf of Mirova Global Green Bond Fund and Natixis AM US to be filed by amendment. | |||
(2) | (i) | Sub-advisory Agreement dated May 18, 2001 among Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund) (All Cap Growth Segment), NGAM Advisors and Loomis Sayles is incorporated by reference to exhibit (d)(3)(vii) to PEA No. 45 to the Registration Statement filed on August 1, 2001. | ||
(ii) | Amendment dated February 28, 2014 to Sub-Advisory Agreement dated May 18, 2001 among Registrant on behalf of Natixis U.S. Equity Opportunities Fund (All Cap Growth Segment), NGAM Advisors and Loomis Sayles is incorporated by reference to exhibit (d)(2)(viii) to PEA No. 107 to the Registration Statement filed on February 28, 2014. | |||
(iii) | Sub-advisory Agreement dated October 30, 2000 among Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund), NGAM Advisors and Harris Associates L.P. (Harris Associates) is incorporated by reference to exhibit (d)(3)(vii) to PEA No. 43 to the Registration Statement filed on February 27, 2001. |
(iv) | Amendment dated February 28, 2014 to Sub-advisory Agreement dated October 30, 2000 among Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund), NGAM Advisors and Harris Associates is incorporated by reference to exhibit (d)(2)(xii) to PEA No. 107 to the Registration Statement filed on February 28, 2014. | |||||
(v) | Sub-advisory Agreement dated March 1, 2004 among Registrant on behalf of Vaughan Nelson Small Cap Value Fund, NGAM Advisors and Vaughan Nelson is incorporated by reference to exhibit (d)(3)(xv) to PEA No. 57 to the Registration Statement filed on April 29, 2004. | |||||
(vi) | Sub-advisory Agreement dated November 1, 2005 among Registrant on behalf of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio), NGAM Advisors and Loomis Sayles is incorporated by reference to exhibit (d)(2)(xxi) to PEA No. 64 to the Registration Statement filed on January 30, 2006. | |||||
(vii) | Amendment dated August 31, 2015 to Sub-advisory Agreement dated November 1, 2005 among Registrant on behalf of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio), NGAM Advisors and Loomis Sayles is incorporated by reference to exhibit (d)(2)(ix) to PEA No. 116 to the Registration Statement filed on August 28, 2015. | |||||
(viii) | Sub-advisory Agreement dated December 13, 2010 among Registrant, on behalf of Natixis Oakmark International Fund, NGAM Advisors and Harris Associates is incorporated by reference to exhibit (d)(2)(xviii) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | |||||
(e) | Underwriting Contracts. | |||||
(1) | Distribution Agreement dated March 3, 2003 between the Registrant on behalf of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund) and NGAM Distribution, L.P. (NGAM Distribution) is incorporated by reference to exhibit (e)(5) to PEA No. 53 to the Registration Statement filed on April 29, 2003. | |||||
(2) | Distribution Agreement dated March 3, 2003 between the Registrant on behalf of Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund) and NGAM Distribution is incorporated by reference to exhibit (e)(10) to PEA No. 53 to the Registration Statement filed on April 29, 2003. | |||||
(3) | Distribution Agreement dated March 3, 2003 between the Registrant on behalf of Vaughan Nelson Small Cap Value Fund (formerly known as CDC Nvest Star Small Cap Fund) and NGAM Distribution is incorporated by reference to exhibit (e)(12) to PEA No. 53 to the Registration Statement filed on April 29, 2003. | |||||
(4) | Distribution Agreement dated November 1, 2005 between the Registrant on behalf of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio) and NGAM Distribution is incorporated by reference to exhibit (e)(8) to PEA No. 64 to the Registration Statement filed on January 30, 2006. |
(5) | Distribution Agreement dated December 13, 2010 between the Registrant on behalf of Natixis Oakmark International Fund and NGAM Distribution is incorporated by reference to exhibit (e)(9) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | |||||
(6) | Distribution Agreement dated March 31, 2016 between the Registrant on behalf of Mirova Global Sustainable Equity Fund and NGAM Distribution is incorporated by reference to exhibit (e)(6) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(7) | Distribution Agreement dated February 24, 2017 between the Registrant on behalf of Mirova Global Green Bond Fund and NGAM Distribution to be filed by amendment. | |||||
(8) | Form of Dealer Agreement used by NGAM Distribution is filed herewith. | |||||
(f) | Bonus or Profit Sharing Contracts. | |||||
None. | ||||||
(g) | Custodian Agreements. | |||||
(1) | Master Custodian Agreement dated September 1, 2005 among the Registrant, on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street Bank and Trust Company (State Street) is incorporated by reference to exhibit (g)(1) to PEA No. 63 to the Registration Statement filed on October 31, 2005. | |||||
(2) | Amendment No. 1 dated September 15, 2006 to Master Custodian Agreement dated September 1, 2005 between Registrant, on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II, and State Street is incorporated by reference to exhibit (g)(2) to PEA No. 66 to the Registration Statement filed on January 26, 2007. | |||||
(3) | Amendment to Master Custody Agreement dated October 14, 2016 by and among the Registrant, on behalf of its series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II, Natixis ETF Trust and State Street is filed herewith. | |||||
(h) | Other Material Contracts. | |||||
(1) | (i) | Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, and Boston Financial Data Services, Inc. (BFDS) is incorporated by reference to exhibit (h)(1) to PEA No. 63 to the Registration Statement filed on October 31, 2005. |
(ii) | Amendment dated October 1, 2008 to Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, and BFDS is incorporated by reference to exhibit (h)(1)(iii) to PEA No. 76 to the Registration Statement filed on December 3, 2008. | |||
(iii) | Amendment dated October 1, 2011 to Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II, and BFDS is incorporated by reference to exhibit (h)(1)(ii) to PEA No. 93 to the Registration Statement filed on January 30, 2012. | |||
(iv) | Amendment dated February 21, 2012 to Transfer Agency and Services Agreement dated October 1, 2005 is incorporated by reference to exhibit (h)(1)(iii) to PEA No. 96 to the Registration Statement filed on April 27, 2012. | |||
(v) | Addendum dated September 12, 2014 to Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Boston Financial is incorporated by reference to exhibit (h)(1)(v) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |||
(vi) | Amendment dated September 19, 2014 to the Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Boston Financial is incorporated by reference to exhibit (h)(1)(vi) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |||
(vii) | Revised Appendix A dated March 31, 2016 to the Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Boston Financial is incorporated by reference to exhibit (h)(1)(vii) to PEA No. 123 to the Registration Statement filed on April 28, 2016. | |||
(viii) | Revised Appendix A dated November 30, 2016 to the Transfer Agency and Services Agreement dated October 1, 2005 among the Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Boston Financial is filed herewith. | |||
(2) | (i) | Securities Lending Authorization Agreement dated September 1, 2005 between the Registrant, on behalf of its series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street is incorporated by reference to exhibit (h)(3) to PEA No. 63 to the Registration Statement filed on October 31, 2005. |
(ii) | First Amendment dated December 20, 2005 to the Securities Lending Authorization Agreement between the Registrant on behalf of its Series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street is incorporated by reference to exhibit (h)(2)(i) to PEA No. 73 to the Registration Statement filed on April 29, 2008. | |||
(iii) | Second Amendment dated February 29, 2008 to the Securities Lending Authorization Agreement between the Registrant on behalf of its Series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street is incorporated by reference to exhibit (h)(2)(ii) to PEA No. 73 to the Registration Statement filed on April 29, 2008. | |||
(iv) | Third Amendment dated January 1, 2011 to Securities Lending Authorization Agreement dated September 1, 2005 between the Registrant on behalf of its Series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and State Street is incorporated by reference to exhibit (h)(2)(iv) to PEA No. 88 to the Registration Statement filed on January 28, 2011. | |||
(3) | (i) | NGAM Advisor Fee Waiver/Expense Reimbursement undertaking dated January 31, 2016 between NGAM Advisors and the Registrant on behalf of Loomis Sayles Core Plus Bond Fund is incorporated by reference to exhibit (h)(3)(iv) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | ||
(ii) | Expense Reimbursement Undertaking of Transfer Agency Expenses for Class N shares dated January 31, 2016 between NGAM Advisors and the Registrant, on behalf of Loomis Sayles Multi-Asset Income Fund is incorporated by reference to exhibit (h)(3)(v) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||
(iii) | Fee Waiver/Expense Reimbursement Undertaking dated March 31, 2016 between Natixis AM US and the Registrant, on behalf of Mirova Global Sustainable Equity Fund and Natixis AM US is incorporated by reference to exhibit (h)(3)(vi) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||
(iv) | NGAM Advisor Fee Waiver/Expense Reimbursement undertaking dated April 30, 2016 between NGAM Advisors and the Registrant on behalf of Loomis Sayles Multi-Asset Income Fund, Natixis Oakmark International Fund, Natixis U.S. Equity Opportunities Fund and Vaughan Nelson Small Cap Value Fund is incorporated by reference to exhibit (h)(3)(iv) to PEA No. 123 to the Registration Statement filed on April 28, 2016. | |||
(v) | Fee Waiver/Expense Reimbursement Undertaking dated February 24, 2017 between Natixis AM US and the Registrant, on behalf of Mirova Global Green Bond Fund and Natixis AM US to be filed by amendment. | |||
(4) | (i) | Administrative Services Agreement dated January 3, 2005 between Registrant on behalf of its respective series, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II and NGAM Advisors is incorporated by reference to exhibit (h)(9) to PEA No. 58 to the Registration Statement filed on January 28, 2005. |
(ii) | First Amendment dated November 1, 2005 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(8) to PEA No. 64 to the Registration Statement filed on January 30, 2006. | |
(iii) | Second Amendment dated January 1, 2006 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(9) to PEA No. 64 to the Registration Statement filed on January 30, 2006. | |
(iv) | Third Amendment dated July 1, 2007 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(9) to PEA No. 70 to the Registration Statement filed on July 31, 2007. | |
(v) | Fourth Amendment dated September 17, 2007 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(10) to PEA No. 71 to the Registration Statement filed on December 3, 2007. | |
(vi) | Fifth Amendment dated February 1, 2008 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(11) to PEA No. 72 to the Registration Statement filed on January 28, 2008. | |
(vii) | Sixth Amendment dated February 19, 2008 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(11)(ii) to PEA No. 74 to the Registration Statement filed on July 17, 2008. | |
(viii) | Seventh Amendment dated July 1, 2008 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(11)(iii) to PEA No. 75 to the Registration Statement filed on September 15, 2008. | |
(ix) | Eighth Amendment dated September 29, 2008 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(viii) to PEA No. 76 to the Registration Statement filed on December 3, 2008. | |
(x) | Ninth Amendment dated October 31, 2008 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(ix) to PEA No. 76 to the Registration Statement filed on December 3, 2008. | |
(xi) | Tenth Amendment dated January 9, 2009 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xi) to PEA No. 77 to the Registration Statement filed on January 28, 2009. | |
(xii) | Eleventh Amendment dated July 27, 2009 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xii) to PEA No. 79 to the Registration Statement filed on November 23, 2009. | |
(xiii) | Twelfth Amendment dated February 25, 2010 to the Administrative Services Agreement incorporated by reference to exhibit (h)(5)(xiii) to PEA No. 82 to the Registration Statement filed on February 25, 2010. | |
(xiv) | Thirteenth Amendment dated July 1, 2010 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xiv) to PEA No. 85 to the Registration Statement filed on September 30, 2010. |
(xv) | Fourteenth Amendment dated September 21, 2010 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xv) to PEA No. 86 to the Registration Statement filed on November 22, 2010. | |
(xvi) | Fifteenth Amendment dated December 14, 2010 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xvi) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | |
(xvii) | Sixteenth Amendment dated July 1, 2011 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xvii) to PEA No. 93 to the Registration Statement filed on January 30, 2012. | |
(xviii) | Seventeenth Amendment dated September 16, 2011 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xviii) to PEA No. 93 to the Registration Statement filed on January 30, 2012. | |
(xix) | Eighteenth Amendment dated March 28, 2012 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xix) to PEA No. 96 to the Registration Statement filed on April 27, 2012. | |
(xx) | Nineteenth Amendment dated June 29, 2012 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xx) to PEA No. 98 to the Registration Statement filed on November 29, 2012. | |
(xxi) | Twentieth Amendment dated November 16, 2012 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xxi) to PEA No. 98 to the Registration Statement filed on November 29, 2012. | |
(xxii) | Twenty-First Amendment dated September 26, 2013 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xxii) to PEA No. 105 to the Registration Statement filed on January 27, 2014. | |
(xxiii) | Twenty-Second Amendment dated February 10, 2014 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(6)(xxiii) to PEA No. 107 to the Registration Statement filed on February 28, 2014. | |
(xxiv) | Twenty-Third Amendment dated July 1, 2014 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxiv) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |
(xxv) | Twenty-Fourth Amendment dated July 10, 2014 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxv) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |
(xxvi) | Twenty-Fifth Amendment dated September 30, 2014 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxvi) to PEA No. 110 to the Registration Statement filed on January 28, 2015. | |
(xxvii) | Twenty-Sixth Amendment dated December 1, 2014 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxvii) to PEA No. 110 to the Registration Statement filed on January 28, 2015. |
(xxviii) | Twenty-Seventh Amendment dated June 30, 2015 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxviii) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(xxix) | Twenty-Eighth Amendment dated November 30, 2015 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxix) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(xxx) | Twenty-Ninth Amendment dated March 31, 2016 to the Administrative Services Agreement is incorporated by reference to exhibit (h)(5)(xxx) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(xxxi) | Thirtieth Amendment dated October 14, 2016 to the Administrative Services Agreement is filed herewith. | |||||
(xxxii) | Thirty-First Amendment dated November 30, 2016 to the Administrative Services Agreement is filed herewith. | |||||
(xxxiii) | Thirty-Second Amendment dated February 24, 2017 to the Administrative Services Agreement to be filed by amendment. | |||||
(5) | Reliance Agreement for Exchange Privileges dated June 30, 2009 by and among the Registrant, Natixis Funds Trust II, Natixis Funds IV, Loomis Sayles Funds I, Loomis Sayles Funds II and Gateway Trust is incorporated by reference to exhibit (h)(6) to PEA No. 79 filed on November 23, 2009. | |||||
(6) | (i) | Advisory Administration Agreement dated September 1, 2003 between the Registrant, with respect to Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund), and NGAM Advisors is incorporated by reference to exhibit (h)(9) to PEA No. 54 to the Registration Statement filed on November 28, 2003. | ||||
(ii) | Amendment dated July 1, 2013 to the Advisory Administration Agreement between the Registrant, with respect to Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund), and NGAM Advisors is incorporated by reference to exhibit (h)(7)(ii) to PEA No. 108 to the Registration Statement filed on April 29, 2014. | |||||
(i) | Legal Opinion. | |||||
(1) | Opinion and consent of counsel relating to the Registrants Vaughan Nelson Small Cap Value Fund is incorporated by reference to exhibit 10(i) to PEA No. 34 to the Registration Statement filed on February 14, 1997. | |||||
(2) | Opinion and consent of counsel relating to the Registrants issuance of multiple classes of shares is incorporated by reference to PEA No. 38 to the Registration Statement filed on April 30, 1998. |
(3) | Opinion and consent of counsel relating to the Registrants Natixis U.S. Equity Opportunities Fund is incorporated by reference to PEA No. 38 to the Registration Statement filed on April 30, 1998. | |||||
(4) | Opinion and consent of counsel relating to the Registrants Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio) is incorporated by reference to exhibit (i)(5) to PEA No. 63 to the Registration Statement filed on October 31, 2005. | |||||
(5) | Opinion and consent of counsel relating to the Registrants Mirova Global Sustainable Equity Fund is incorporated by reference to exhibit (i)(5) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(6) | Opinion and consent of counsel relating to the Registrants Mirova Global Green Bond Fund to be filed by amendment. | |||||
(j) | Other Opinions. | |||||
Not applicable. | ||||||
(k) | Omitted Financial Statements | |||||
Not applicable. | ||||||
(l) | Initial Capital Agreements. | |||||
Not applicable. | ||||||
(m) | Rule 12b-1 Plan. | |||||
(1) | (a) | Rule 12b-1 Plan for Class A shares of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund) is incorporated by reference to exhibit (m)(5)(a) to PEA No. 44 to the Registration Statement filed on April 30, 2001. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Natixis U.S. Equity Opportunities Fund (formerly known as CDC Nvest Star Advisers Fund) is incorporated by reference to exhibit (m)(5)(c) to PEA No. 44 to the Registration Statement filed on April 30, 2001. | |||||
(2) | (a) | Rule 12b-1 Plan for Class A shares of Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund) is incorporated by reference to exhibit (m)(10)(a) to PEA No. 44 to the Registration Statement filed on April 30, 2001. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Loomis Sayles Core Plus Bond Fund (formerly known as CDC Nvest Bond Income Fund) is incorporated by reference to exhibit (m)(10)(c) to PEA No. 44 to the Registration Statement filed on April 30, 2001. |
(3) | (a) | Rule 12b-1 Plan for Class A shares of Vaughan Nelson Small Cap Value Fund (formerly known as CDC Nvest Star Small Cap Fund) is incorporated by reference to exhibit (m)(12)(a) to PEA No. 44 to the Registration Statement filed on April 30, 2001. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Vaughan Nelson Small Cap Value Fund (formerly known as CDC Nvest Star Small Cap Fund) is incorporated by reference to exhibit (m)(12)(c) to PEA No. 44 to the Registration Statement filed on April 30, 2001. | |||||
(4) | (a) | Rule 12b-1 Plan for Class A shares of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio) is incorporated by reference to exhibit (8)(a) to PEA No. 63 to the Registration Statement filed on October 31, 2005. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Loomis Sayles Multi-Asset Income Fund (formerly known as IXIS Income Diversified Portfolio) is incorporated by reference to exhibit (8)(b) to PEA No. 63 to the Registration Statement filed on October 31, 2005. | |||||
(5) | (a) | Rule 12b-1 Plan for Class A shares of Natixis Oakmark International Fund is incorporated by reference to exhibit (m)(9)(a) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Natixis Oakmark International Fund is incorporated by reference to exhibit (m)(9)(b) to PEA No. 87 to the Registration Statement filed on December 14, 2010. | |||||
(6) | (a) | Rule 12b-1 Plan for Class A shares of Mirova Global Sustainable Equity Fund is incorporated by reference to exhibit (m)(6)(a) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | ||||
(b) | Rule 12b-1 Plan for Class C shares of Mirova Global Sustainable Equity Fund is incorporated by reference to exhibit (m)(6)(b) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||||
(7) | (a) | Rule 12b-1 Plan for Class A shares of Mirova Global Green Bond Fund, to be filed by amendment. | ||||
(n) | Rule 18f-3 Plan | |||||
(1) | Registrants Amended and Restated Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940, as amended (the 1940 Act) dated January 12, 2016, is incorporated by reference to exhibit (n)(1) to PEA No. 117 to the Registration Statement filed on January 15, 2016. | |||||
(o) | Code of Ethics. | |||||
(1) | Code of Ethics of Registrant dated September 14, 2007 is incorporated by reference to exhibit (p)(1) to PEA No. 71 to the Registration Statement filed on December 3, 2007. |
(2) | Code of Ethics dated January 1, 2010 as amended July 1, 2016 of NGAM Advisors and NGAM Distribution is filed herewith. | |||
(3) | Code of Ethics dated January 14, 2000 as amended September 30, 2015 of Loomis Sayles is incorporated by reference to exhibit (o)(4) to PEA No. 117 to the Registration Statement filed on January 15, 2016. | |||
(4) | Code of Ethics dated September 30, 2005 as amended March 9, 2016 of Harris Associates is filed herewith. | |||
(5) | Code of Ethics dated May 20, 2008 as amended February 19, 2016 of Vaughan Nelson is filed herewith. | |||
(6) | Code of Ethics dated June 23, 2015 of Natixis AM US is incorporated by reference to exhibit (o)(7) to PEA No. 120 to the Registration Statement filed on March 31, 2016. | |||
(p) | Powers of Attorney | |||
(1) | Powers of Attorney for Kevin P. Charleston, Kenneth A. Drucker, Edmond J. English, David L. Giunta, Richard A. Goglia, John T. Hailer, Wendell J. Knox, Martin T. Meehan, Sandra O. Moose, James P. Palermo, Erik R. Sirri, Peter J. Smail and Cynthia L. Walker dated June 16, 2016, effective July 1, 2016, designating John M. Loder, Russell Kane, Rosa Licea-Mailloux and Michael Kardok as attorneys to sign for each Trustee is filed herewith. |
Item 29. Persons Controlled by or Under Common Control with the Fund
The Registrant is not aware of any person controlled or under common control with any of its series. As of November 30, 2016, the persons listed below owned 25% or more of the outstanding voting securities of one or more series of the Registrant and thus may be deemed to control the series within the meaning of section 2(a)(9) of the 1940 Act:*
Fund |
Shareholder and Address |
Percentage of shares held |
||||
Loomis Sayles Multi-Asset Income Fund |
Morgan Stanley Smith Barney Jersey City, NJ 07311 |
29.71 | % | |||
Loomis Sayles Multi-Asset Income Fund |
Merrill Lynch Pierce Fenner Jacksonville, FL 32246-6484 |
25.03 | % | |||
Natixis Oakmark International Fund |
Morgan Stanley Smith Barney Jersey City, NJ 07311 |
25.24 | % |
* | 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 the Fund, it may be deemed to control the Fund within the meaning of the 1940 Act. |
Item 30. Indemnification
Under Article 5 of the Registrants By-laws, any past or present Trustee or officer of the Registrant (hereinafter referred to as a Covered Person) shall be indemnified to the fullest extent permitted by law against all liability and all expenses reasonably incurred by him or her in connection with any claim, action, suit or proceeding to which he or she may be a party or otherwise involved by reason of his or her being or having been a Covered Person. That provision does not authorize indemnification when it is determined that such Covered Person would otherwise be liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. This description is modified in its entirety by the provision of Article 5 of the Registrants By-laws incorporated by reference to exhibit (b)(1) to PEA No. 76 to the Registration Statement filed on December 3, 2008.
The Distribution Agreement, the Custodian Contract, the Transfer Agency and Service Agreement and the Administrative Services Agreement (the Agreements) contained herein and in various post-effective amendments and incorporated herein by reference, provide for indemnification. The general effect of these provisions is to indemnify entities contracting with the Registrant against liability and expenses in certain circumstances. This description is modified in its entirety by the provisions of the Agreements as contained in this Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in connection with the successful defense of any claim, action, suit or proceeding) is asserted against the Registrant by such Trustee, officer or controlling person in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Registrant and its Trustees, officers and employees are insured, under a policy of insurance maintained by the Registrant in conjunction with Natixis Global Asset Management, L.P. and its affiliates, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such Trustees or officers. The policy expressly excludes coverage for any Trustee or officer for any claim arising out of any fraudulent act or omission, any dishonest act or omission or any criminal act or omission of the Trustee or officer.
Item 31. Business and Other Connections of Investment Adviser
(a) | NGAM Advisors, a wholly owned subsidiary Natixis Global Asset Management, L.P., serves as investment adviser to all the series of the Registrant except Loomis Sayles Core Plus Bond Fund and Mirova Global Sustainable Equity Fund. NGAM Advisors was organized in 1995. |
The list required by this Item 31 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of NGAM Advisors during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by NGAM Advisors pursuant to the Investment Advisers Act of 1940, as amended (the Advisers Act) (SEC File No. 801-48408; IARD/CRD No. 106800).
(b) | Loomis Sayles, adviser of the Registrants Loomis Sayles Core Plus Bond Fund and subadviser of the Registrants Natixis U.S. Equity Opportunities Fund and Loomis Sayles Multi-Asset Income Fund, provides investment advice to a number of other registered investment companies and to other organizations and individuals. |
The list required by this Item 31 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Loomis Sayles during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by Loomis Sayles pursuant to the Advisers Act (SEC File No. 801-170; IARD/CRD No. 105377).
(c) | Harris Associates serves as a subadviser to the Registrants Natixis U.S. Equity Opportunities Fund and Natixis Oakmark International Fund. Harris Associates serves as investment adviser to mutual funds, individuals, trusts, retirement plans, endowments and foundations, and manages several private partnerships, and is a registered commodity trading adviser and commodity pool operator. |
The list required by this Item 31 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Harris Associates during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by Harris Associates pursuant to the Advisers Act (SEC File No. 801-50333; IARD/CRD No. 106960).
(d) | Vaughan Nelson serves as a subadviser to the Registrants Vaughan Nelson Small Cap Value Fund, provides investment advice to a number of other registered investment companies and to other organizations and individuals. |
The list required by this Item 31 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Vaughan Nelson during the past two years is incorporated herein by reference to schedules A, C and D of Form ADV filed by Vaughan Nelson pursuant to the Advisers Act (File No. 801-51795; IARD/CRD No. 106975).
(e) | Natixis AM US, a subsidiary of Natixis Asset Management, serves as investment adviser to Mirova Global Sustainable Equity Fund and provides investment advice to a number of other organizations and individuals. |
The list required by this Item 31 regarding any other business, profession, vocation or employment of a substantial nature engaged in by officers and partners of Natixis AM US during the past two years is incorporated herein by reference to schedules A, C, and D of Form ADV filed by Natixis AM US pursuant to the Advisers Act (SEC file No. 801-79804; IARD/ CRD no. 171003).
Item 32. Principal Underwriter
(a) | NGAM Distribution, L.P., the principal underwriter of the Registrant, also serves as principal underwriter for: |
Natixis Funds Trust II
Natixis Funds Trust IV
Loomis Sayles Funds I
Loomis Sayles Funds II
Gateway Trust
(b) | The general partner and officers of the Registrants principal underwriter, NGAM Distribution, L.P., and their addresses are as follows: |
Name |
Positions and Offices with Principal Underwriter |
Positions and Offices with Registrant | ||
NGAM Distribution Corporation | General Partner | None | ||
David L. Giunta | President and Chief Executive Officer | President and Chief Executive Officer | ||
Russell Kane | Executive Vice President, General Counsel, Secretary and Clerk | Secretary, Clerk and Chief Legal Officer | ||
Rosa Licea-Mailloux | Senior Vice President, Deputy General Counsel, Assistant Secretary, Assistant Clerk and Chief Compliance Officer for Mutual Funds | Chief Compliance Officer, Anti-Money Laundering Officer and Assistant Secretary | ||
Michael C. Kardok | Senior Vice President | Treasurer, Principal Financial and Accounting Officer | ||
Anthony Loureiro | Senior Vice President, Chief Compliance Officer-Broker-Dealer and Anti-Money Laundering Compliance Officer | None | ||
Beatriz Pina Smith | Executive Vice President, Treasurer and Chief Financial Officer | None | ||
Marilyn Rosh | Senior Vice President and Controller | None | ||
Josh Bogen | Executive Vice President | None | ||
Matthew Coldren | Executive Vice President | None | ||
Mark Doyle | Executive Vice President | None |
Ed Farrington | Executive Vice President | None | ||
Marina Gross | Executive Vice President | None | ||
Robert Hussey | Executive Vice President | None | ||
George Marootian | Executive Vice President | None | ||
Dan Santaniello | Executive Vice President | None | ||
Paul Anderson | Senior Vice President | None | ||
Albert Barbaro | Senior Vice President | None | ||
John Bearce | Senior Vice President | None | ||
Bethany Burt | Senior Vice President | None | ||
William Butcher | Senior Vice President | None | ||
Claudine Ciccia | Senior Vice President | None | ||
Jeff Clough | Senior Vice President | None | ||
James Cove | Senior Vice President | None | ||
Abhijeet Dalvi | Senior Vice President | None | ||
Joe Duffey | Senior Vice President | None | ||
Elizabeth Durkee | Senior Vice President | None | ||
Dineen Dusablon | Senior Vice President | None | ||
Nick Elward | Senior Vice President | None | ||
Tracy Fagan | Senior Vice President | None | ||
Kevin Finney | Senior Vice President | None | ||
Tracey Flaherty | Senior Vice President | None | ||
Sean Foley | Senior Vice President | None | ||
Matt Garzone | Senior Vice President | None | ||
Alaina Giampapa | Senior Vice President | None | ||
David Goodsell | Senior Vice President | None | ||
Peter Gozelski | Senior Vice President | None |
Kenneth Herold | Senior Vice President | None | ||
Michael Hunt | Senior Vice President | None | ||
Christopher Hunter | Senior Vice President | None | ||
Kirk Johnson | Senior Vice President | None | ||
Sean Kane | Senior Vice President | None | ||
Jeff Keselman | Senior Vice President | None | ||
Joe Klimas | Senior Vice President | None | ||
Pete Klos | Senior Vice President | None | ||
David Lafferty | Senior Vice President | None | ||
Ted LeClair | Senior Vice President | None | ||
Rosa Licea-Mailloux | Senior Vice President | None | ||
Dan Lynch | Senior Vice President | None | ||
Cyndi Lyons | Senior Vice President | None | ||
Robert Lyons | Senior Vice President | None | ||
Ian MacDuff | Senior Vice President | None | ||
Stewart Martin | Senior Vice President | None | ||
Marla McDougall | Senior Vice President | None | ||
Theodore Meyer | Senior Vice President | None | ||
Peter Olsen | Senior Vice President | None | ||
Maureen ONeill | Senior Vice President | None | ||
Stacie Paoletti | Senior Vice President | None | ||
Meghan Peachey | Senior Vice President | None | ||
Rebecca Poulin | Senior Vice President | None | ||
Daniel Price | Senior Vice President | None | ||
John Refford | Senior Vice President | None |
Jim Roach | Senior Vice President | None | ||
Nancy Spalding Gray | Senior Vice President | None | ||
Lyle Steere | Senior Vice President | None | ||
David Vallon | Senior Vice President | None | ||
Susannah Wardly | Senior Vice President | None |
The principal business address of all the above persons or entities is 399 Boylston Street, Boston, MA 02116.
(c) | Not applicable. |
Item 33. Location of Accounts and Records
The following companies, in the aggregate, maintain possession of the documents required to be maintained by Section 31(a) of the 1940 Act and the rules thereunder:
(a) | For all series of Registrant: | |||||
(i) | Natixis Funds Trust I 399 Boylston Street Boston, MA 02116 | |||||
(ii) | Boston Financial Data Services, Inc. 2000 Crown Colony Drive Quincy, MA 02169 | |||||
(iii) | NGAM Distribution, L.P. 399 Boylston Street Boston, Massachusetts 02116 | |||||
(iv) | NGAM Advisors, L.P. 399 Boylston Street Boston, Massachusetts 02116 (excluding Loomis Sayles Core Plus Bond Fund) | |||||
(v) | State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 | |||||
(b) | For the series of the Registrant managed by Harris Associates: | |||||
Harris Associates L.P. | ||||||
Two North LaSalle Street, Suite 500 | ||||||
Chicago, Illinois 60602 | ||||||
(c) | For the series of the Registrant managed by Loomis Sayles: | |||||
Loomis, Sayles & Company, L.P. | ||||||
One Financial Center | ||||||
Boston, Massachusetts 02111 |
(d) | For the series of the Registrant managed by Vaughan Nelson: | |||
Vaughan Nelson Investment Management, L.P. | ||||
600 Travis Street, Suite 6300 Houston, Texas 77002 | ||||
(e) | For the series of the Registrant managed by Natixis AM US:
Natixis Asset Management U.S., LLC 399 Boylston Street Boston, Massachusetts 02116 |
Item 34. Management Services
None
Item 35. Undertakings
The Registrant undertakes to provide the annual report of any of its series to any person who receives a prospectus for such series and who requests the annual report.
NATIXIS FUNDS TRUST I
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused Post-Effective Amendment No. 126 to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and the Commonwealth of Massachusetts on the 9th day of December, 2016.
NATIXIS FUNDS TRUST I | ||
By: | /s/ David L. Giunta | |
David L. Giunta | ||
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
Signature |
Title |
Date | ||||
/s/ David L. Giunta |
President and Chief | |||||
David L. Giunta | Executive Officer and Trustee | December 9, 2016 | ||||
/s/ Michael C. Kardok |
||||||
Michael C. Kardok | Treasurer | December 9, 2016 | ||||
Kevin P. Charleston* |
||||||
Kevin P. Charleston | Trustee | December 9, 2016 | ||||
Kenneth A. Drucker* |
||||||
Kenneth A. Drucker | Trustee | December 9, 2016 | ||||
Edmond J. English* |
||||||
Edmond J. English | Trustee | December 9, 2016 | ||||
Richard A. Goglia* |
||||||
Richard A. Goglia | Trustee | December 9, 2016 | ||||
John T. Hailer* |
||||||
John T. Hailer | Trustee | December 9, 2016 | ||||
Wendell J. Knox* |
||||||
Wendell J. Knox | Trustee | December 9, 2016 | ||||
Martin T. Meehan* |
||||||
Martin T. Meehan | Trustee | December 9, 2016 | ||||
Sandra O. Moose* |
||||||
Sandra O. Moose | Trustee, Chairperson of the Board | December 9, 2016 | ||||
James P. Palermo* |
||||||
James P. Palermo | Trustee | December 9, 2016 | ||||
Erik Sirri* |
||||||
Erik Sirri | Trustee | December 9, 2016 |
Peter Smail* |
||||||
Peter Smail | Trustee | December 9, 2016 | ||||
Cynthia L. Walker* |
||||||
Cynthia L. Walker | Trustee | December 9, 2016 |
*By: | /s/ Russell Kane | |
Russell Kane | ||
Attorney-In-Fact 1 | ||
December 9, 2016 |
1 | Powers of Attorney for Kevin P. Charleston, Kenneth A. Drucker, Edmond J. English David L. Giunta, Richard A. Goglia, John T. Hailer, Wendell J. Knox, Martin T. Meehan, Sandra O. Moose, James P. Palermo, Erik R. Sirri, Peter J. Smail and Cynthia L. Walker is filed herewith. |
Natixis Funds Trust I
Exhibit Index
Exhibits for Item 28 of Form N-1A
Exhibit |
Exhibit Description | |
(e)(8) | Form of Dealer Agreement used by NGAM Distribution | |
(h)(1)(viii) | Revised Appendix A dated November 30, 2016 | |
(h)(5)(xxxi) | Thirtieth Amendment dated October 14, 2016 to the Administrative Services Agreement | |
(h)(5)(xxxii) | Thirty-First Amendment dated November 30, 2016 to the Administrative Services Agreement | |
(o)(2) | Code of Ethics dated January 1, 2010 as amended July 1, 2016 of NGAM Advisors and NGAM Distribution | |
(o)(4) | Code of Ethics dated September 30, 2005 as amended March 9, 2016 of Harris Associates | |
(o)(5) | Code of Ethics dated May 20, 2008 as amended February 19, 2016 of Vaughan Nelson | |
(p)(1) | Powers of Attorney for Kevin P. Charleston, Kenneth A. Drucker, Edmond J. English, David L. Giunta, Richard A. Goglia, John T. Hailer, Wendell J. Knox, Martin T. Meehan, Sandra O. Moose, James P. Palermo, Erik R. Sirri, Peter J. Smail and Cynthia L. Walker dated June 16, 2016, effective July 1, 2016, designating John M. Loder, Russell Kane, Rosa Licea-Mailloux and Michael Kardok as attorneys to sign for each Trustee |
Exhibit (e)(8)
NGAM Distribution, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Dealer Agreement
This dealer agreement (Dealer Agreement) is entered into between NGAM Distribution, L.P. (formerly Natixis Distributors, L.P.) (our, us, or we) and the undersigned company (you). We offer to sell to you shares of each of the mutual funds distributed by us (the Funds and each a Fund), for each of which we serve as principal underwriter as defined in the Investment Company Act of 1940, as amended (the Act), and from which we have the right to purchase shares.1 Shares are offered pursuant to the then current prospectus, including any supplements or amendments thereto, of each of the Funds (the Prospectus, which term as hereinafter used shall include the Statement of Additional Information of the Fund).
With respect to each of the Funds (except for Section 5, which applies only with respect to each Fund having in effect from time to time a service plan, service and distribution plan or other plan adopted pursuant to Rule 12b-1 under the Act, each a Plan and together the Plans):
1. For all sales of shares of the Funds you shall act as dealer for your own account, and in no transaction shall you have any authority to act as agent, except as limited agent for purposes of receiving and transmitting orders and instructions regarding the purchase, exchange and redemption of shares of your customers and employees, with no authority to otherwise act as agent for any Fund or for us.
2. You or your designated agent agree to obtain and provide to your customers the Prospectus(es) of the applicable Fund(s) together with any supplemental sales literature you provide. You agree not to purchase any Fund shares for any customer, unless you deliver or cause to be delivered to such customer, at or prior to the time of such purchase, a copy of the Prospectus of the applicable Fund, or the Prospectus of the applicable Fund. You hereby represent that you understand your obligation to deliver a Prospectus to customers who purchase Fund shares pursuant to federal securities laws and you have taken all necessary steps to comply with such Prospectus delivery requirements.
3. Orders received from you will be accepted by us only at the public offering price applicable to each order, except for transactions to which a reduced offering price applies as provided in the Prospectus of the Fund(s). The minimum dollar purchase of shares of each Fund by any investor shall be the applicable minimum amount described in the Prospectus of the Fund and no order for less than such amount will be accepted hereunder. The public offering price shall be the net asset value per share plus the sales charge, if any, applicable to the transaction, expressed as a percentage of the public offering price, as determined and effective as of the time specified in the Prospectus of the Fund(s). The procedures relating to the handling of orders shall be subject to any instructions that we shall forward from time to time to you. All orders are subject to acceptance or rejection by us, or our designated agent, in our sole discretion. You hereby agree to comply with attached Appendix A, Policies and Procedures with Respect to Mutual Fund Trading, as well as with the terms of the Prospectus and the policies and procedures of the Funds. You understand that in recommending the purchase, sale or exchange of any Fund shares to your customers, you must have reasonable grounds for believing that such recommendation is suitable for such customer.
4. The sales charge applicable to any sale of Fund shares by you and the dealer concession or commission applicable to any order from you for the purchase of Fund shares accepted by us shall be set forth in the Prospectus of the Fund. You shall notify us if you are not eligible to receive a dealer concession or commission. You may be deemed to be an underwriter in connection with sales by you of shares of the Fund where you receive all or substantially all of the sales charge as set forth in the Funds Prospectus, and therefore you may be subject to applicable provisions of the Securities Act of 1933.
(a) We are entitled to a contingent deferred sales charge (CDSC) on redemptions of applicable classes of shares of the Funds, as described in the Prospectus. You agree that you will sell shares subject to a CDSC and that are to be held in omnibus accounts only if you are a NETWORKING participant with the National Securities Clearing Corporation and if such accounts are established pursuant to a NETWORKING Agreement.
1 | The definition of Funds shall not include the following mutual funds, which are distributed by NGAM Distribution, L.P, but which are not available to you through the terms of this Dealer Agreement: Hansberger Emerging Markets Fund (Institutional Class); Hansberger International Growth Fund (Institutional Class); Hansberger International Value Fund (Institutional Class); Hansberger International Growth Fund (Advisor Class); Loomis Sayles Fixed Income Fund; Loomis Sayles Institutional High Income Fund; Loomis Sayles Investment Grade Fixed Income Fund; Loomis Sayles High Income Opportunities Fund; and Loomis Sayles Securitized Asset Fund. |
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(b) Reduced sales charges or no sales charge may apply to certain transactions, including under letter of intent, combined purchases or investments, reinvestment of dividends and distributions, repurchase privilege, unit investment trust distribution reinvestment or other programs, as described in the Prospectus of the Fund(s). To obtain any such reductions, you must notify us when the sale that would qualify for such reduction takes place.
5. Rule 12b-1 Plans. The substantive provisions of this Section 5 have been adopted pursuant to the Plans.
(a) You agree to provide (i) for the Funds with a service plan, personal services to investors in shares of the Funds and/or services related to the maintenance of shareholder accounts, and (ii) for those Funds with a service and distribution plan, both personal services to investors in shares of the Funds and/or services related to the maintenance of shareholder accounts and also distribution and marketing services in the promotion of Fund shares. As compensation for these services, we shall pay you, as agent, upon receipt by us from the Fund(s), a quarterly service fee or service fee and distribution fee based on the average daily net asset value of Fund shares at the rate set forth with respect to the relevant Class(es) of shares of the Fund(s) in the Prospectus. This fee will be based on the average daily net asset value of Fund shares that are owned of record by your firm as nominee for your customers or that are owned by those shareholders whose records, as maintained by the Fund or its agent, designate your firm as the shareholders dealer of record. Normally, payment of such fee to you shall be made within forty-five (45) days after the close of each quarter for which such fee is payable provided, however, that any other provision of this Dealer Agreement or the Prospectuses to the contrary notwithstanding, we shall not have any obligation whatsoever to pay any amount of distribution and/or service fee with respect to shares of any Fund except to the extent, and only to the extent, that we have actually received payment of at least such amount of distribution and/or service fee from the Funds with respect to such shares pursuant to a Plan in consideration of you furnishing distribution and client services hereunder with respect to your customers that own such class of shares of such Fund, it being understood that our liability to you in respect of such fees is limited solely to the proceeds of such fees received by us from the Funds.
(b) You shall furnish us and the Fund with such information as shall reasonably be requested by the Trustees of the Fund with respect to the fees paid to you pursuant to this Section 5 and you shall notify us if you are not eligible to receive 12b-1 fees, including without limitation by reason of your failure to provide the services as required in this Section 5.
(c) The provisions of this Section 5 may be terminated by the vote of a majority of the Trustees of the Funds who are not interested persons of the Funds and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan, or by a vote of a majority of the Funds outstanding shares, on sixty (60) days written notice, without payment of any penalty. Such provisions will be terminated also by any act that terminates either the Funds Distribution Contract or Underwriting Agreement with us, or this Dealer Agreement under Section 16 hereof or otherwise and shall terminate automatically in the event of the assignment (as that term is defined in the Act) of this Dealer Agreement.
(d) The provisions of the Distribution Contract or Underwriting Agreement between the Fund and us, insofar as they relate to the Plan, are incorporated herein by reference. The provisions of this Section 5 shall continue in full force and effect only so long as the continuance of the Plan, the Distribution Contract or Underwriting Agreement and these provisions are approved at least annually by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan, cast in person at a meeting called for the purpose of voting thereon.
6. You agree to purchase Fund shares only from us or from your customers. If you purchase Fund shares from us, you agree that all such purchases shall be made only: (a) to cover orders already received by you from your customers; (b) for shares being acquired by your customers pursuant to either the exchange privilege or the reinvestment privilege, as described in the Prospectus of the Fund; or (c) for your own bona fide investment. If you purchase shares from your customers, you agree to pay such customers not less than the applicable redemption price next quoted by the Fund pursuant to the procedures set forth in the Prospectus of the Fund.
7. You shall sell shares only: (a) to customers at the applicable public offering price, except for shares being acquired by your customers at net asset value as described in the Prospectus of the Fund, and (b) to us as agent for the Fund at the redemption price. In such a sale to us, you may act either as principal for your own account or as agent for your customer. If you act as principal for your own account in purchasing shares for resale to us, you agree to pay your customer not less than the price that you receive from us. If you act as agent for your customer in selling shares to us, you agree not to charge your
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customer more than a fair commission or fee for handling the transaction, except that you agree to receive no compensation of any kind based on the reinvestment of redemption or repurchase proceeds pursuant to the repurchase privilege, as described in the Prospectus of the Fund.
8. You hereby certify that all of your customers taxpayer identification numbers (TIN) or social security numbers (SSN) furnished to us by you are correct and that you will not open an account without providing us with the customers TIN or SSN. You agree to comply with the provisions of Appendix B, Policies and Procedures with Respect to Rule 22c-2.
9. You hereby acknowledge that, in the performance of the services contemplated by this Dealer Agreement, you use or have access to records, systems, or operations that include, in tangible or electronic form, information relating to your customers such as their name, address (including email address), phone number, account number, SSN, drivers license number, date of birth, account activity, investments, and other nonpublic personal information (including consumer reports) (collectively, Personal Information or Customer Data), which is subject to the requirements of the Gramm-Leach Bliley Act and Regulation S-P thereunder promulgated by the Securities and Exchange Commission, as from time to time amended, and other federal and state laws and regulations applicable to the management, use, disposal, and safekeeping of Personal Information and/or Customer Data as well as laws and regulations relating to know your customer, anti-money laundering, and similar federal and state regulatory requirements (collectively Privacy Laws). You agree to comply with all applicable Privacy Laws relating to Personal Information and Customer Data and to cooperate with us in enabling us to satisfy our regulatory requirements relating to Personal Information.
10. You shall not withhold placing with us orders received from your customers so as to profit yourself as a result of such withholding; e.g., by a change in the net asset value from that used in determining the public offering price to your customers.
11. | We will not accept from you any conditional orders for shares. |
12. If any Fund shares sold to you or your customers under the terms of this Dealer Agreement are redeemed by the Fund or repurchased by us as agent for the Fund within seven (7) business days after the date of our confirmation of the original purchase by you or your customers, it is agreed that you shall forfeit your right to any dealer concession or commission received by you on such Fund shares. We will notify you of any such repurchase or redemption within ten (10) business days after the date thereof and you shall forthwith refund to us the entire concession or commission allowed or paid to you on such sale. We agree, in the event of any such repurchase or redemption, to refund to the Fund the portion of the sales charge, if any, retained by us and, upon receipt from you of the concession allowed to you on any Fund shares, to pay such refund forthwith to the Fund.
13. Payment for Fund shares sold to you shall be made on or before the settlement date specified in our confirmation, at the office of our clearing agent, and by check payable to the order of the Fund, which reserves the right to delay issuance, redemption or transfer of shares until such check has cleared. If such payment and all necessary applications and documents are not received by us, we reserve the right, without notice, forthwith either to cancel the sale, or at our option, sell the shares ordered back to the Fund, in which case you shall bear any loss resulting from your failure to make payment as aforesaid.
14. You will also act as principal in all purchases by a shareholder for whom you are the dealer of record of Fund shares with respect to payments sent directly by such shareholder to the Shareholder Services and Transfer Agent (the TA) specified in the Prospectus of the Fund, and you authorize and appoint the TA to execute and confirm such purchases to such shareholders on your behalf. Upon receipt of payment from the Funds, we, as agent, will remit to you, no less frequently than monthly, the amount of any concessions due with respect to such purchases, except that no concessions will be paid to you on any transaction for which your net sales concession is less than $5.00 in any payment cycle. You also represent that with respect to all such direct purchases by such shareholder, you may lawfully sell shares of such Fund in the state designated as such shareholders record address.
15. No person is authorized to make any representations concerning shares of the Funds except those contained in the Prospectuses of the Funds and in sales literature issued by us supplemental to such Prospectuses or approved in writing by us. In purchasing shares from us, you shall rely solely on the representations contained in such Prospectuses and such sales literature. We will furnish you with additional copies of such Prospectuses and such sales literature and other releases and information issued by us in reasonable quantities upon request.
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(a) If, with prior written approval from us, you use any advertisement or sales literature which has not been supplied by us, you are responsible for ensuring that the material complies with all applicable regulations and has been filed with the appropriate authorities.
(b) You shall indemnify and hold us (and our directors, officers, employees, controlling persons and agents) and the Fund and its Trustees and officers harmless from and against any and all losses, claims, liabilities and expenses (including reasonable attorneys fees) (Losses) incurred by us or any of them arising out of (i) your dissemination of information regarding any Fund that is alleged to contain an untrue statement of material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and that was not published or provided to you by or on behalf of us, or accurately derived from information published or provided by or on behalf of us or any of our Affiliates, (ii) any breach by you of any representation, warranty or agreement contained in this Dealer Agreement, (iii) any act or omission, including without limitation any material misstatement by you in connection with any orders or solicitation of orders for, or transactions in, shares of the Funds, or (iv) any willful misconduct or negligence on your part in the performance of, or failure to perform, your obligations under this Dealer Agreement, except to the extent such losses are caused by our breach of this Dealer Agreement or our willful misconduct or negligence in the performance, or failure to perform, our obligations under this Dealer Agreement.
(c) We shall indemnify and hold you (and your directors, officers, employees, controlling persons and agents) harmless from and against any and all Losses incurred by you arising out of (i) our dissemination of information regarding any Fund that contains an untrue statement of material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, (ii) any breach by us of any representation, warranty or agreement contained in this Dealer Agreement, (iii) any act or omission, including without limitation any material misstatement by us in connection with any orders or solicitation of orders for, or transactions in, shares of the Funds, or (iv) any willful misconduct or negligence on our part in the performance of, or failure to perform, our obligations under this Dealer Agreement, except to the extent such losses are caused by your breach of this Dealer Agreement or your willful misconduct or negligence in the performance, or failure to perform, your obligations under this Dealer Agreement.
(d) This Section 15 shall survive termination of this Dealer Agreement.
16. The Fund reserves the right in its discretion and we reserve the right in our discretion, without notice, to refuse any order for the purchase of Fund shares for any reason whatsoever, and to suspend sales or withdraw the offering of Fund shares (or shares of any class(es)) entirely. We reserve the right, by written notice to you, to amend, modify, cancel or assign this Dealer Agreement, including Section 5 hereof, and any appendices that are now or in the future attached to this Dealer Agreement. Notice for all purposes shall be deemed to be given when mailed or electronically transmitted to you.
17. This Dealer Agreement shall replace any prior agreement between you and us or any of our predecessor entities (including but not limited to Natixis Distributors, L.P., IXIS Asset Management Distributors, L.P., CDC IXIS Asset Management Distributors, L.P., Nvest Funds Distributor, L.P., New England Funds, L.P., TNE Investment Services Corporation, and Investment Trust of Boston Distributors, Inc.) and is conditioned upon your representation and warranty that you are (i) registered as a broker/dealer under the Securities Exchange Act of 1934, as amended (the 1934 Act), and are a member in good standing of the Financial Industry Regulatory Authority, Inc. (FINRA) or (ii) exempt from registration as a broker/dealer under the 1934 Act. Regardless of whether you are a FINRA member, you and we agree to abide by the Rules and Regulations of FINRA, including without limitation Conduct Rules 2310, 2420, 3110, 3510 and 2830, and all applicable state and federal laws, rules and regulations. You agree to notify us immediately if you cease to be registered as a broker/dealer under the 1934 Act (or exempt from registration as a broker/dealer under the 1934 Act) and a member of FINRA. You agree to notify us of any material compliance matter related to the services provided by you pursuant to this Dealer Agreement. Should you cease to be registered as a broker/dealer under the 1934 Act (or exempt from such registration) and/or a cease to be a member in good standing of FINRA, you will be removed as broker-dealer of record and this Dealer Agreement will be terminated.
(a) You will not offer Fund shares for sale in any state (a) where they are not qualified for sale under the blue sky laws and regulations of such state or (b) where you are not qualified to act as a broker/dealer. You agree to offer Fund shares only to U.S. citizens with U.S. addresses.
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(b) If you are a bank, with respect to any and all transactions in shares of the Funds pursuant to this Dealer Agreement, it is understood and agreed in each case that unless otherwise agreed to by us in writing: (i) you shall be acting solely as agent for the account of your customer; (ii) each transaction shall be initiated solely upon the order of your customer; (iii) we shall execute transactions only upon receiving instructions from you acting as agent for your customer; (iv) as between you and your customer, your customer will have full beneficial ownership of all shares; and (v) each transaction shall be for the account of your customer and not for your account.
18. Each of the parties represents and warrants that it has enacted appropriate safeguards to protect non-public customer information. If non-public personal information regarding either partys customers or consumers is disclosed to the other party in connection with this Dealer Agreement, the party receiving such information will not disclose or use that information other than as necessary to carry out the purposes of this Dealer Agreement and in accordance with Regulation S-P.
19. You hereby represent and certify to us that you are aware of, and in compliance with, all applicable anti-money laundering laws, regulations, rules and government guidance, including the reporting, recordkeeping and compliance requirements of the Bank Secrecy Act (BSA), as amended by the USA PATRIOT Act of 2001 (the Patriot Act), its implementing regulations, and related Securities and Exchange Commission and self-regulatory organization rules and regulations. You hereby certify to us that, as required by the Patriot Act, you have a comprehensive anti-money laundering compliance program that includes: internal policies, procedures and controls for complying with the Patriot Act; a designated compliance officer or officers; an ongoing training program for appropriate employees; and an independent audit function. You also hereby certify to us that, to the extent applicable, you are in compliance with the economic sanctions programs administered by the U.S. Treasury Departments Office of Foreign Assets Control (OFAC), and have an OFAC compliance program that satisfies all applicable laws and regulations and sanctions programs administered by the U.S. Treasury Departments Office of Foreign Laws and Regulations. You represent that you have adopted a Customer Identification Program in compliance with applicable laws, rules and regulations and will verify the identity of customers who open accounts with you and who invest in shares of the Funds. Except to the extent restricted by applicable law, you hereby agree to notify the Funds promptly whenever questionable activity or potential indications of suspicious activity or OFAC matches are detected with respect to the Funds. You hereby undertake to notify us promptly if any of the foregoing certifications cease to be true and correct for any reason. You further agree to monitor your employees use of web based systems used by you to access customer account information. You agree to notify us should any system ID require reassignment. You agree to remove such access as necessary. You agree that any order to purchase shares shall constitute your continued certification of the matters you have certified in this Section 19.
20. You hereby agree that all purchases, redemptions and exchanges of shares contemplated by this Dealer Agreement shall be effected by you for your customers in accordance with each Funds Prospectus, including, without limitation, the collection of any redemption fees, if applicable, and in accordance with applicable laws and regulations. You agree that, in the event that it should come to your attention that any of your customers are engaging in a pattern of purchases, redemptions and/or exchanges of Funds that potentially violates the Funds frequent trading policy as described in the relevant Funds Prospectus, you shall immediately notify us of such pattern and shall cooperate fully with us in any investigation and, if deemed necessary or appropriate by us, terminating any such pattern of trading, including, without limitation, by refusing such customers orders to purchase or exchange shares of the Funds.
21. You hereby represent that you have established and will maintain a business continuity program, in compliance with FINRA Rules 3510 and 3520, designed to ensure that you will at all times fulfill your obligations as set forth in this Dealer Agreement.
22. You hereby agree to provide any additional material as we may reasonably request to allow us to conduct periodic due diligence reviews and to ensure compliance with this Dealer Agreement.
23. You hereby acknowledge that each Fund and class of shares thereof may be offered and sold only in accordance with the terms and conditions set forth in the respective Funds prospectus and statement of additional information, as may be amended from time to time.
24. All communications to us should be mailed to the above address and e-mailed to thirdpartynotices@ngam.natixis.com. Any notice to you shall be duly given if mailed or faxed to you at the address specified by you.
25. This Dealer Agreement together with attached appendices shall be effective when accepted by you below and shall be governed by and construed under the laws of the Commonwealth of Massachusetts.
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26. This Dealer Agreement together with attached appendices shall be effective as against you and your successor in interest. All obligations, representations, warranties and covenants made and belonging to you shall be enforceable against your successor in interest to the same extent that such would be enforceable against you.
Your submission and our acceptance of an order for the Funds, or receipt by us of an executed copy of this Dealer Agreement from you represents your acknowledgement and acceptance of the terms and conditions of this Dealer Agreement and its attached appendices.
Accepted: ____________________________________ Dealers Name
Address: _____________________________________ |
NGAM Distribution, L.P. By: NGAM Distribution Corporation, its general partner
Address: 399 Boylston Street Boston, MA 02116 | |
_____________________________________ | ||
_____________________________________ | ||
By:___________________________________ | By:___________________________________ | |
Authorized Signature of Dealer |
Authorized Signature | |
___________________________________ | Date:_________________________________ | |
(Please print name) |
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Appendix A
NGAM Distribution, L.P.
Policies and Procedures with Respect to Mutual Fund Trading
You shall establish and maintain effective internal policies and controls, including operational and system controls, with respect to the processing of orders of the funds received prior to and after the close of the New York Stock Exchange normally 4:00 p.m. Eastern Time (Pricing Time), for the purchase, redemption and exchange of shares of mutual funds, including the Funds.
For all transactions in the Funds, you shall follow all applicable rules and regulations and shall establish internal policies regarding the timely handling of orders for the purchase, redemption and exchange of shares of the Funds (Fund Orders) and maintain effective internal controls over the ability to distinguish and appropriately process Fund Orders received prior to and after the Funds Pricing Time, including operational and systems controls. Specifically, you represent as of the date of Dealer Agreement and each time that you accept a Fund Order on behalf of a Fund that:
| Your policies and procedures provide reasonable assurance that Fund Orders received by you prior to the Funds Pricing Time are segregated from Fund Orders received by you after the Funds Pricing Time and are properly transmitted to the Funds (or their agents) for execution at the current days net asset value (NAV). |
| Your policies and procedures provide reasonable assurances that Fund Orders received by you after the Funds Pricing Time are properly transmitted to the Funds (or their agents) for execution at the next days NAV. |
| Your policies and procedures provide reasonable assurance that transactional information is delivered to the Funds (or their agents) in a timely manner. |
| You have designed procedures to provide reasonable assurance that policies with regard to the receipt and processing of Fund Orders are complied with. Such procedures either prevent or detect, on a timely basis, instances of noncompliance with the policies governing the receipt and processing of Fund Orders. |
| Policies and procedures governing the timely handling of Fund Orders have been designed and implemented effectively by all third parties to whom you have designated the responsibility to distinguish and appropriately process Fund Orders received prior to and after the Funds Pricing Time. |
To the extent we have entered into related agreements with you regarding your handling of Fund Orders, you acknowledge and agree that this appendix shall apply to your handling of all Fund Orders, whether authorized under the Dealer Agreement or any other agreement with us or our affiliates.
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Appendix B
NGAM Distribution, L.P.
Policies and Procedures with Respect to Rule 22c-2
I. Shareholder Information.
1. Agreement to Provide Information. You agree to provide to the Fund, upon written request, the taxpayer identification number (TIN), the Individual/International Taxpayer Identification Number (ITIN), or other government-issued identifier (GII), if known, of any or all Shareholder(s) of each account held of record by you and the amount, date, name or other identifier of any investment professional(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by you during the period covered by the request.
2. Period Covered by Request. Requests must set forth a specific period, not to exceed ninety (90) days from the date of the request, for which transaction information is sought. The Fund may request transaction information older than ninety (90) days from the date of the request as the Fund deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
The Fund reserves the right to request the information set forth in Section I. (1) for each trading day and you agree, if so directed by the Fund, to provide the information.
3. Form and Timing of Response. You agree to provide, promptly upon request of the Fund or its designee, the requested information specified in Section I. (1). If requested by the Fund or its designee, you agree to use best efforts to determine promptly whether any specific person about whom you have received identification and transaction information specified in Section I. (1) is itself a financial intermediary (indirect intermediary) and, upon further request of the Fund or its designee, promptly either (i) provide (or arrange to have provided) the information set forth in Section I. (1) for those shareholders who hold an account with an indirect intermediary or (ii) restrict or prohibit the indirect intermediary from purchasing, in nominee name on behalf of other persons, securities issued by the Fund. You additionally agree to inform the Fund whether you plan to perform (i) or (ii). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format.
4. Limitations on Use of Information. Fund agrees not to use the information received for marketing or any other similar purpose without your prior written consent.
5. Agreement to Restrict Trading. You agree to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of Shares by a Shareholder that has been identified by the Fund as having engaged in transactions of the Funds Shares (directly or indirectly through your account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by the Fund.
6. Form of Instructions. Instructions to restrict or prohibit trading must include the TIN, ITIN, GII, if known, and the specific restriction(s) to be executed. If the TIN, ITIN, or GII is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.
7. Timing of Response. You agree to execute instructions as soon as reasonably practicable, but not later than five (5) business days after receipt of the instructions by you.
8. Confirmation. You must provide written confirmation to the Fund that instructions have been executed. You agree to provide confirmation as soon as reasonably practicable, but not later than ten (10) business days after the instructions have been executed.
9. Definitions. For purposes of this schedule only:
(a) The term Fund includes the funds principal underwriter and transfer agent. The term does not include any excepted funds as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940.*
* | As defined in SEC Rule 22c-2(b), the term excepted fund means any: (1) money market fund; (2) fund that issues securities that are listed on a national securities exchange; and (3) fund that affirmatively permits short-term trading of its securities, if its prospectus clearly and prominently discloses that the fund permits short-term trading of its securities and that such trading may result in additional costs for the fund. |
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(b) The term Shares means the interests of Shareholders corresponding to the redeemable securities of record issued by the Fund under the Investment Company Act of 1940 that are held by you.
(c) The term Shareholder means the beneficial owner of Shares, whether the Shares are held directly or by you in nominee name.
(d) Note that the term Shareholder may have alternative meanings as follows: (1) for Retirement Plan Recordkeepers the term Shareholder means the Plan participant notwithstanding that the Plan may be deemed to be the beneficial owner of Shares and (2) for Insurance Companies the term Shareholder means the holder of interests in a variable annuity or variable life insurance contract issued by an Intermediary.
(e) The term written includes electronic writings and facsimile transmissions.
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Exhibit (h)(1)(viii)
AMENDMENT
To
Transfer Agency and Service Agreement
Between
Each of the Entities Listed on Appendix A
And
Boston Financial Data Services, Inc.
This Amendment is made as of this 30th day of November 2016, between each of the investment companies listed below and Boston Financial Data Services, Inc. (the Transfer Agent). In accordance with Section 15.1 (Amendment) and Section 16 (Additional Funds/Portfolios) of the Transfer Agency and Service Agreement between the parties dated October 1, 2005, as amended (the Agreement), the parties desire to amend the Agreement as set forth herein.
NOW THEREFORE, the parties agree as follows:
1. | Appendix A. The current Appendix A to the Agreement is hereby replaced and superseded with the Appendix A attached hereto, effective as of November 30, 2016; and |
2. | All defined terms and definitions in the Agreement shall be the same in this Amendment (the November 28, 2016 Amendment) except as specifically revised by this Amendment; and |
3. | Except as specifically set forth in this November 30, 2016 Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. |
IN WITNESS WHEREOF, the parties hereto have caused this November 30, 2016 Amendment to be executed by a duly authorized officer on one or more counterparts as of the date and year first above written.
NATIXIS FUNDS TRUST I | ||||||
NATIXIS FUNDS TRUST II | ||||||
NATIXIS FUNDS TRUST IV | ||||||
LOOMIS SAYLES FUNDS I | ||||||
LOOMIS SAYLES FUNDS II | BOSTON FINANCIAL DATA | |||||
GATEWAY TRUST | SERVICES, INC. | |||||
By: | /s/ Michael Kardok |
By: | /s/ Richard J. Johnson | |||
Name: | Michael Kardok | Name: | Richard J. Johnson | |||
Title: | Treasurer | Title: | Managing Director | |||
As an Authorized Officer on behalf of each of the Funds indicated on Appendix A |
NGAM (Natixis)
APPENDIX A
Funds and Portfolios
Effective Date: November 30, 2016
Natixis Funds Trust I, a business trust organized under the laws of the Commonwealth of Massachusetts
Loomis Sayles Core Plus Bond Fund
Loomis Sayles Multi-Asset Income Fund
Mirova Global Sustainable Equity Fund
Natixis Oakmark International Fund
Natixis U.S. Equity Opportunities Fund
Vaughan Nelson Small Cap Value Fund
Natixis Funds Trust II, a business trust organized under the laws of the Commonwealth of Massachusetts
ASG Dynamic Allocation Fund
ASG Global Alternatives Fund
ASG Global Macro Fund
ASG Managed Futures Strategy Fund
ASG Tactical U.S. Market Fund
Loomis Sayles Dividend Income Fund
Loomis Sayles Global Growth Fund
Loomis Sayles Senior Floating Rate and Fixed Income Fund
Loomis Sayles Strategic Alpha Fund
McDonnell Intermediate Municipal Bond Fund
Natixis Oakmark Fund
Seeyond Multi-Asset Allocation Fund
Vaughan Nelson Value Opportunity Fund
Vaughn Nelson Select Fund
Natixis Funds Trust IV, a business trust organized under the laws of the Commonwealth of Massachusetts
AEW Real Estate Fund
Loomis Sayles Funds I, a business trust organized under the laws of the Commonwealth of Massachusetts
Loomis Sayles Bond Fund
Loomis Sayles Core Disciplined Alpha Bond Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles Global Bond Fund
Loomis Sayles High Income Opportunities Fund
Loomis Sayles Inflation Protected Securities Fund
Loomis Sayles Institutional High Income Fund
Loomis Sayles Intermediate Duration Bond Fund
Loomis Sayles Investment Grade Fixed Income Fund
Loomis Sayles Securitized Asset Fund
Loomis Sayles Small Cap Value Fund
NGAM (Natixis)
APPENDIX A
Funds and Portfolios
Effective Date: November 30, 2016
(continued)
Loomis Sayles Funds II, a business trust organized under the laws of the Commonwealth of Massachusetts
Loomis Sayles Global Equity and Income Fund
Loomis Sayles Growth Fund
Loomis Sayles High Income Fund
Loomis Sayles Investment Grade Bond Fund
Loomis Sayles Limited Term Government and Agency Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small/Mid Cap Growth Fund
Loomis Sayles Strategic Income Fund
Loomis Sayles Value Fund
Gateway Trust, a business trust organized under the laws of the Commonwealth of Massachusetts
Gateway Equity Call Premium Fund
Gateway Fund
NGAM (Natixis)
Exhibit (h)(5)(xxxi)
THIRTIETH AMENDMENT TO
ADMINISTRATIVE SERVICES AGREEMENT
This Amendment made as of October 14, 2016, by and between NGAM Advisors, L.P. (NGAM Advisors), Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II, Gateway Trust and the Natixis ETF Trust (collectively, the Trusts).
WHEREAS, NGAM Advisors and the Trusts are parties to an Administrative Services Agreement dated January 3, 2005, as amended November 1, 2005, January 1, 2006, July 1, 2007, September 17, 2007, February 1, 2008, February 19, 2008, July 1, 2008, September 29, 2008, October 31, 2008, January 9, 2009, July 27, 2009, February 25, 2010, July 1, 2010, September 21, 2010, December 14, 2010, July 1, 2011, September 16, 2011, March 28, 2012, June 29, 2012, November 16, 2012, September 26, 2013, February 10, 2014, July 1, 2014, July 10, 2014, September 30, 2014, December 1, 2014, June 30, 2015, November 30, 2015, March 31, 2016 (together with the amendments, the Agreement), governing the terms and conditions under which NGAM Advisors provides certain administrative services to the series of the Trusts;
WHEREAS, Natixis ETF Trust, a Massachusetts business trust, is registered as an open-end management investment company under the Investment Company Act of 1940, as amended;
WHEREAS, Natixis ETF Trust desires to employ NGAM Advisors to provide certain administrative services to Natixis ETF Trust in the manner and on the terms set forth in the Agreement and NGAM Advisors wishes to perform such services; and
WHEREAS, NGAM Advisors and Natixis ETF Trust desire to amend Schedule A of the Agreement to reflect the addition of Natixis ETF Trust.
NOW THEREFORE, in consideration of the premises and covenants contained herein, NGAM Advisors and the Trusts hereby agree as follows:
1. | A new Trust, the Natixis ETF Trust, shall be added to this Agreement. |
2. | Schedule A of the Agreement is deleted in its entirety and replaced with Schedule A attached hereto. |
3. | This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. |
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed as a sealed instrument in its name and behalf by its duly authorized representative as of the date first above written.
NGAM ADVISORS, L.P. | ||
By NGAM Distribution Corporation, its general partner | ||
By: | /s/ David L. Giunta | |
David L. Giunta, President and Chief Executive Officer |
NATIXIS FUNDS TRUST I | ||
NATIXIS FUNDS TRUST II | ||
NATIXIS FUNDS TRUST IV | ||
LOOMIS SAYLES FUNDS I | ||
LOOMIS SAYLES FUNDS II | ||
GATEWAY TRUST | ||
NATIXIS ETF TRUST | ||
By: | /s/ Michael C. Kardok | |
Michael C. Kardok, Treasurer |
Schedule A
Trust Portfolios
As of: October 14, 2016
Natixis Funds Trust I |
Loomis Sayles Core Plus Bond Fund |
Loomis Sayles Multi-Asset Income Fund |
Mirova Global Sustainable Equity Fund |
Natixis Oakmark International Fund |
Natixis U.S. Equity Opportunities Fund |
Vaughan Nelson Small Cap Value Fund |
Natixis Funds Trust II |
ASG Dynamic Allocation Fund |
ASG Global Alternatives Fund |
ASG Global Macro Fund |
ASG Managed Futures Strategy Fund |
ASG Tactical U.S. Market Fund |
Loomis Sayles Dividend Income Fund |
Loomis Sayles Emerging Markets Opportunities Fund |
Loomis Sayles Global Growth Fund |
Loomis Sayles Senior Floating Rate and Fixed Income Fund |
Loomis Sayles Strategic Alpha Fund |
McDonnell Intermediate Municipal Bond Fund |
Natixis Oakmark Fund |
Seeyond Multi-Asset Allocation Fund |
Vaughan Nelson Select Fund |
Vaughan Nelson Value Opportunity Fund |
Natixis Funds Trust IV |
AEW Real Estate Fund |
Loomis Sayles Funds I |
Loomis Sayles Bond Fund |
Loomis Sayles Fixed Income Fund |
Loomis Sayles Global Bond Fund |
Loomis Sayles High Income Opportunities Fund |
Loomis Sayles Inflation Protected Securities Fund |
Loomis Sayles Institutional High Income Fund |
Loomis Sayles Intermediate Duration Bond Fund |
Loomis Sayles Investment Grade Fixed Income Fund |
Loomis Sayles Securitized Asset Fund |
Loomis Sayles Small Cap Value Fund |
Loomis Sayles Funds II |
Loomis Sayles Global Equity and Income Fund |
Loomis Sayles Growth Fund |
Loomis Sayles High Income Fund |
Loomis Sayles Investment Grade Bond Fund |
Loomis Sayles Limited Term Government and Agency Fund |
Loomis Sayles Small Cap Growth Fund |
Loomis Sayles Small/Mid Cap Growth Fund |
Loomis Sayles Strategic Income Fund |
Loomis Sayles Value Fund |
Gateway Trust |
Gateway Equity Call Premium Fund |
Gateway Fund |
Natixis ETF Trust |
Natixis Seeyond International Minimum Volatility ETF |
Exhibit (h)(5)(xxxii)
THIRTY-FIRST AMENDMENT TO
ADMINISTRATIVE SERVICES AGREEMENT
This Amendment made as of November 30, 2016, by and between NGAM Advisors, L.P. (NGAM Advisors), Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV, Loomis Sayles Funds I, Loomis Sayles Funds II, Gateway Trust and the Natixis ETF Trust (collectively, the Trusts).
WHEREAS, NGAM Advisors and the Trusts are parties to an Administrative Services Agreement dated January 3, 2005, as amended November 1, 2005, January 1, 2006, July 1, 2007, September 17, 2007, February 1, 2008, February 19, 2008, July 1, 2008, September 29, 2008, October 31, 2008, January 9, 2009, July 27, 2009, February 25, 2010, July 1, 2010, September 21, 2010, December 14, 2010, July 1, 2011, September 16, 2011, March 28, 2012, June 29, 2012, November 16, 2012, September 26, 2013, February 10, 2014, July 1, 2014, July 10, 2014, September 30, 2014, December 1, 2014, June 30, 2015, November 30, 2015, March 31, 2016 and October 14, 2016 (together with the amendments, the Agreement), governing the terms and conditions under which NGAM Advisors provides certain administrative services to the series of the Trusts;
WHEREAS, Natixis ETF Trust, a Massachusetts business trust, is registered as an open-end management investment company under the Investment Company Act of 1940, as amended;
WHEREAS, Natixis ETF Trust desires to employ NGAM Advisors to provide certain administrative services to Natixis ETF Trust in the manner and on the terms set forth in the Agreement and NGAM Advisors wishes to perform such services; and
WHEREAS, NGAM Advisors and Natixis ETF Trust desire to amend Schedule A of the Agreement to reflect the addition of Natixis ETF Trust.
NOW THEREFORE, in consideration of the premises and covenants contained herein, NGAM Advisors and the Trusts hereby agree as follows:
1. | A new Trust, the Natixis ETF Trust, shall be added to this Agreement. |
2. | Schedule A of the Agreement is deleted in its entirety and replaced with Schedule A attached hereto. |
3. | This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. |
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed as a sealed instrument in its name and behalf by its duly authorized representative as of the date first above written.
NGAM ADVISORS, L.P. | ||
By NGAM Distribution Corporation, its general partner | ||
By: | /s/ David L. Giunta | |
David L. Giunta, President and Chief Executive Officer |
NATIXIS FUNDS TRUST I | ||
NATIXIS FUNDS TRUST II | ||
NATIXIS FUNDS TRUST IV | ||
LOOMIS SAYLES FUNDS I | ||
LOOMIS SAYLES FUNDS II | ||
GATEWAY TRUST | ||
NATIXIS ETF TRUST | ||
By: | /s/ Michael C. Kardok | |
Michael C. Kardok, Treasurer |
Schedule A
Trust Portfolios
As of: October 14, 2016
Natixis Funds Trust I |
Loomis Sayles Core Plus Bond Fund |
Loomis Sayles Multi-Asset Income Fund |
Mirova Global Sustainable Equity Fund |
Natixis Oakmark International Fund |
Natixis U.S. Equity Opportunities Fund |
Vaughan Nelson Small Cap Value Fund |
Natixis Funds Trust II |
ASG Dynamic Allocation Fund |
ASG Global Alternatives Fund |
ASG Global Macro Fund |
ASG Managed Futures Strategy Fund |
ASG Tactical U.S. Market Fund |
Loomis Sayles Dividend Income Fund |
Loomis Sayles Emerging Markets Opportunities Fund |
Loomis Sayles Global Growth Fund |
Loomis Sayles Senior Floating Rate and Fixed Income Fund |
Loomis Sayles Strategic Alpha Fund |
McDonnell Intermediate Municipal Bond Fund |
Natixis Oakmark Fund |
Seeyond Multi-Asset Allocation Fund |
Vaughan Nelson Select Fund |
Vaughan Nelson Value Opportunity Fund |
Natixis Funds Trust IV |
AEW Real Estate Fund |
Loomis Sayles Funds I |
Loomis Sayles Bond Fund |
Loomis Sayles Core Disciplined Alpha Bond Fund (Effective November 30, 2016) |
Loomis Sayles Fixed Income Fund |
Loomis Sayles Global Bond Fund |
Loomis Sayles High Income Opportunities Fund |
Loomis Sayles Inflation Protected Securities Fund |
Loomis Sayles Institutional High Income Fund |
Loomis Sayles Intermediate Duration Bond Fund |
Loomis Sayles Investment Grade Fixed Income Fund |
Loomis Sayles Securitized Asset Fund |
Loomis Sayles Small Cap Value Fund |
Loomis Sayles Funds II |
Loomis Sayles Global Equity and Income Fund |
Loomis Sayles Growth Fund |
Loomis Sayles High Income Fund |
Loomis Sayles Investment Grade Bond Fund |
Loomis Sayles Limited Term Government and Agency Fund |
Loomis Sayles Small Cap Growth Fund |
Loomis Sayles Small/Mid Cap Growth Fund |
Loomis Sayles Strategic Income Fund |
Loomis Sayles Value Fund |
Gateway Trust |
Gateway Equity Call Premium Fund |
Gateway Fund |
Natixis ETF Trust |
Natixis Seeyond International Minimum Volatility ETF |
Exhibit (o)(2)
Code of Ethics
NGAM Advisors, L.P.
NGAM Distribution, L.P.
As Amended
July 1, 2016
1
Introduction
This is the Code of Ethics (Code) of NGAM Advisors, L.P. (NGAMA) and NGAM Distribution, L.P. (NGAMD) (the Firms).
Statement of General Principles
It is the policy of the Firms that no Supervised Person shall engage in any act, practice, or course of conduct that would violate the Code, the fiduciary duty owed by the Firms and their personnel to Clients, or any applicable federal securities laws, including but not limited to certain sections of and rules promulgated under the Investment Advisers Act of 1940 (as amended; the Advisers Act) including Rule 204A-1 thereunder, the Employee Retirement Income Security Act of 1974 (as amended; ERISA), or the Investment Company Act of 1940 (as amended; the 1940 Act) including Rule 17j-1 thereunder. The fundamental position of the Firms is, and has been, that at all times the interests of their Clients are placed first. Accordingly, a Supervised Persons personal financial transactions (and those of members of their Family/Household) and related activities must be conducted consistently with this Code and in such a manner as to avoid any actual or potential conflict of interest or abuse of the Firms position of trust and responsibility.
It is not intended that the policies in this Code will specifically address every situation involving personal trading. These policies will be interpreted and applied, and exceptions and amendments will be made by the Compliance Officer in a manner considered fair and equitable, in all cases with the view of placing the Firms Clients interests paramount. It also bears emphasis that technical compliance with the procedures, prohibitions, and limitations of this Code will not automatically insulate a Supervised Person from scrutiny of, and sanctions for, securities transactions that indicate an abuse of the Firms fiduciary duty to any of its Clients.
Things You Need to Know to Use This Code
1. Terms Terms in boldface type have special meanings as used in this Code. To understand the Code, you need to read the definitions of these terms. The definitions are at the end of the Code.
2. Purpose of the Code The policies in this Code reflect the Firms desire to detect and prevent not only situations involving actual or potential conflicts of interest or unethical conduct, but also those situations involving even the appearance of these. This Code (i) sets forth standards of conduct expected of Supervised Persons (including compliance with the federal securities laws), (ii) is intended to safeguard material nonpublic information about Client transactions, and (iii) requires Access Persons to report personal securities transactions, including transactions in shares of certain investment companies managed by the Firms or any affiliate of any of the Firms (Covered Funds). A complete list of Covered Funds is maintained by the Compliance Officer and is posted on the Firms Intranet; a printed list is available upon request from the Compliance Officer.
3. Access Persons For purposes of this Code, all officers, directors, and employees of the Firms are considered Access Persons, except for any director who is not an officer or employee of the Firms and who meets all of the following conditions:
| He or she, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the purchase or sale of Covered Securities by a registered investment company, and whose functions do not relate to the making of recommendations with respect to such purchases or sales; |
2
| He or she does not have access to nonpublic information regarding any Clients purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any Covered Fund; and |
| He or she is not involved in making securities recommendations to Clients, and does not have access to such recommendations that are nonpublic. |
While many officers and employees of the Firms do not have regular access to information regarding the purchase and sale of securities by either Mutual Fund Clients or Separate Account Clients, they may have occasional access to mutual fund or separate account portfolio information that has not been aged 30 days. Therefore, all officers and employees of the Firms have been designated Access Persons.
4. Investment Persons All Access Persons (and employees of any company in a control relationship with the Firms) that have been specifically identified by the Compliance Department as having regular or periodic knowledge of material nonpublic information regarding the purchase and sale of securities by Mutual Fund Clients or Separate Account Clients are also considered Investment Persons. A complete list of Investment Persons is maintained by the Compliance Department.
5. Compliance Department and Compliance Officer This Code is administered by the Compliance Officer and his designee(s). Any significant issues, concerns, or findings identified by the Compliance Officer are reported to the Firms Ethics and Supervisory Committee.
The Compliance Officer has the authority to grant written waivers of certain provisions of this Code in appropriate instances. However, some provisions of the Code are mandated by Securities and Exchange Commission (SEC) rules and cannot be waived.
6. Ethics and Supervisory Committee (Committee) - The Committee is comprised of certain members of senior management of the Firms. The Committee is charged with ensuring the Code remains reasonably designed to prevent Supervised Persons from engaging in any act, practice, or course of conduct that would violate the fiduciary duty owed by the Firms and their personnel to Clients, any applicable federal securities laws, including but not limited to certain sections of and rules promulgated under the Advisers Act including Rule 204A-1 thereunder, ERISA, or the 1940 Act including Rule 17j-1 thereunder. The Committee will review the terms and provisions of this Code at least annually and make amendments as necessary.
The Committee meets quarterly to review any Code violations identified by the Compliance Officer to (i) make a determination of whether they are indeed violations under the Code; (ii) establish the degree of severity the violation represents; and (iii) if necessary mete out disciplinary actions as described in Section E of this Code.
The Compliance Officer will distribute the Code to all Supervised Persons annually and upon any amendment. You are required to acknowledge your receipt and understanding of the Code annually through Schwab Compliance Technologies.
7. Mutual Fund Clients Includes all investment companies for which NGAMA serves as adviser, or for which NGAMD is the Distributor. All investment company Clients are currently considered Mutual Fund Clients.
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8. Separate Account ClientsNGAMA markets the investment expertise of its advisory affiliates and other advisory firms to separate account platforms. While NGAMA primarily relies on model portfolios provided by affiliates or third party subadvisers to manage Client assets, it normally has investment discretion over Separate Account Client portfolios.
For purposes of this Code of Ethics, Mutual Fund Clients and Separate Account Clients are collectively referred to as Clients.
Specific Requirements of the Code
A. General Rules
It is improper for Supervised Persons to:
| use for his/her own benefit (or the benefit of anyone other than the Clients) information about the trading activity or holdings of Clients or recommendations of the advisers or subadvisers; or |
| take advantage of investment opportunities that would otherwise be available for the Clients; or |
| engage in insider trading or employ a manipulative and deceptive device; or |
| make any untrue statement of a material fact to any Client or omit to state a material fact necessary in order to make the statements made to any Client, in light of the circumstances under which they are made, not misleading. |
Also, as a matter of business policy, the Firms require that Supervised Persons adhere to a standard of conduct that: (i) reflects the fiduciary obligations of the Firms, including preventing access to material nonpublic information about Clients by Supervised Persons not needing such information to perform their duties; (ii) complies with all securities laws; and (iii) avoids even the appearance that Supervised Persons receive any improper benefit from information about trading activity or holdings of Clients, the advisers or subadvisers, or from our relationships with the brokerage and advisory communities.
The Firms expect all Supervised Persons to comply with the spirit of the Code, as well as the specific rules contained in the Code.
B. Designated Broker Requirement
Except as described in paragraphs (i)-(v) below, Access Persons who have personal accounts that hold or can hold securities, including Covered Securities or shares of Covered Funds in which they have Beneficial Ownership are required to maintain such accounts at one of the following firms: Charles Schwab, Fidelity Investments, Merrill Lynch, Morgan Stanley Smith Barney, T.D. Ameritrade, or UBS (collectively, the Designated Brokers). Unless they are granted an exception, new Access Persons must initiate movement of existing accounts to a Designated Broker within 30 days of being named an Access Person.
Exemptions to the Designated Broker Requirement:
(i) | Shares of the Natixis Funds, Loomis Sayles Funds, and Oakmark Funds purchased directly from the Covered Fund if such shares are held with the funds transfer agent. |
(ii) | Shares of Covered Funds purchased through one or more of the Firms retirement plans, including the Firms 401(k) plan. |
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(iii) | Certain accounts in which the Access Person has Beneficial Ownership, including retirement accounts with an Access Persons prior employer, retirement accounts of an Access Persons spouse, and DRIP and ESOP investment programs. |
(iv) | Accounts for which the Access Person has Beneficial Ownership but no investment influence or control may be eligible for an exemption from the Designated Broker Requirement. All such exemptions must be approved by the Compliance Officer. |
(v) | Accounts in which an Access Person may have Beneficial Ownership through a member of their Family/Household, which accounts are subject to a code of ethics or similar policy requiring the account be held at an entity other than a Designated Broker. |
For example, if the spouse of an Access Person is employed by a broker-dealer or registered investment adviser that has adopted a code of ethics that requires the spouse to maintain personal securities accounts at a non-designated broker-dealer (including the employer itself), the Firms will defer to that requirement as to that account so long as the Duplicate Confirmation Notice and Statement Requirement (see Section F.5. of this Code) is satisfied.
NOTE: Access Persons are required to report all accounts in which any securities are held (not just Covered Securities and Covered Funds).
For example, a 401(k) account from a prior employer must be reported even if there are no Covered Funds available in the plan.
NOTE: In instances in which the Compliance Officer grants an exemption from the Designated Broker Requirement to any accounts that hold or can hold Covered Securities and/or Covered Funds, the Duplicate Confirmation Notice and Statement Requirement shall apply instead.
C. Gifts to or from Brokers, Clients, or Others
No Access Person may accept, receive or give on his or her own behalf, or on behalf of the Firms, any gift or other accommodations from or to a vendor, broker, securities salesman, Client, or prospective Client (a business contact) that might create a conflict of interest or interfere with the impartial discharge of such Access Persons responsibilities to the Firms or the Clients, be construed as an improper attempt to influence the recipient, or place the recipient or the Firms in a difficult or embarrassing position. This prohibition applies equally to gifts to or from members of the Family/Household of Access Persons.
In no event should gifts to or from any one securities industry contact have a value that exceeds the annual limitation on the dollar value of gifts established by the Compliance Officer from time to time (currently $100). Extra care should be given when accepting any gifts or entertainment from Broker-Dealer or Research Provider Firms to ensure they are neither too frequent nor excessive in totality.
These policies are not intended to prohibit normal business entertainment such as meals or tickets to sporting events or the theatre. Please note that business entertainment is different than giving or receiving gifts. If you are unsure whether something is a gift or business entertainment, refer to the Firms Non-Cash Compensation Policy, the Policy Regarding Employee Political Contributions to Certain Government Officials, or ask the Compliance Officer.
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D. Service on the Board or as an Officer of Another Company
To avoid conflicts of interest, inside information concerns, and other compliance and business issues, the Firms prohibit all Access Persons from serving as officers or members of the board of any other entity, except with the advance written approval of the General Counsel or Compliance Officer. Approval must be obtained through the Compliance Officer, and could require consideration by the Ethics and Supervisory Committee. The Firms can deny approval for any reason or without providing a reason. This prohibition does not apply to service as an officer or board member of any parent, subsidiary, or affiliate of the Firms, nor does it apply to non-employee members of the Firms board (i.e. those board members who are not employees of the Firms).
E. Violations and Penalties
The Firms expect all Supervised Persons to comply with the spirit of the Code, as well as the specific rules contained in the Code. Any violations must be reported promptly to the Compliance Officer.
The Firms treat violations of this Code (including violations of the spirit of the Code) very seriously. If you violate either the letter or the spirit of this Code, the Firms (through the Ethics and Supervisory Committee) might take a variety of remedial measures. These may include imposing penalties or fines, cutting your compensation, demoting you, requiring disgorgement of trading gains, imposing a ban on your personal trading, suspending or terminating your employment, or reporting the matter to civil or criminal authorities. Sanction guidelines can be found in the Firms Code of Ethics Escalation Policy.
Improper trading activity may constitute a violation of this Code. You may also be considered in violation of this Code by failing to promptly report violations to the Compliance Officer, by failing to file required reports in a timely manner, or by making inaccurate or misleading reports or statements concerning trading activity or securities accounts. You may be considered in violation of this Code even if no harm results from your conduct.
If you have any doubt or uncertainty about what this Code requires or permits, you should ask the Compliance Officer. Do not just guess at the answer, since ignorance of the requirements of the Code or the legal regulations underlying the Code will not serve as an excuse for a violation.
F. Reporting Requirements Applies to All Access Persons
One of the more important aspects of complying with this Code is understanding which holdings, transactions, and accounts you must report and what accounts are subject to trading restrictions. For example, accounts of members of your Family/Household are covered, as are certain categories of trust accounts, certain investment pools in which you might participate, and certain accounts that others may be managing for you. To be sure you understand which holdings, transactions, and accounts are covered, it is essential that you carefully review the definitions of Covered Security, Covered Fund, Family/Household, and Beneficial Ownership in the Definitions section of this Code.
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NOTE: All reports specified in this Code must be submitted to the Compliance Department. You must file the reports described below, even if you have no holdings, transactions, or accounts to list in the reports, and whether or not your accounts are held at a Designated Broker or duplicate confirmation statements have been forwarded to the Compliance Department. With limited exceptions, reports are filed using Schwab Compliance Technologies.
1. Initial Holdings Report. No later than 10 days after you become an Access Person, you must file with the Compliance Officer an Initial Holdings Report.
The Initial Holdings Report requires you to list all Covered Securities and Covered Funds in which you (or members of your Family/Household) have Beneficial Ownership (including the title and type of security; as applicable, the exchange ticker symbol or CUSIP number; the number of shares; and principal amount). The information reported must be current as of a date no more than 45 days prior to becoming an Access Person.
The Initial Holdings Report also requires you to list all brokers, dealers, and banks where you maintained an account in which any securities, including Covered Funds or Covered Securities were held or could have been held for the direct or indirect benefit of you or a member of your Family/Household on the date you became an Access Person.
The Initial Holdings Report also requires you to confirm that you have read and understand this Code; that you understand that it applies to you and members of your Family/Household; and that you are considered an Access Person under the Code.
NOTE: It is important for new Access Persons to be familiar with the Designated Broker Requirement of this Code; any questions concerning this requirement should be directed to the Compliance Officer.
2. Quarterly Transaction Reports. No later than 15 days after the end of March, June, September, and December each year, you must file with the Compliance Officer a Quarterly Transaction Report. While compliance with this requirement will be monitored, a late report will not be considered a violation of the Code unless it is filed with the Compliance Officer more than 30 days after the end of the quarter.
The Quarterly Transaction Report requires you to report all transactions during the most recent calendar quarter in Covered Securities and Covered Funds (including the date of the transaction; the title and type of security; the exchange ticker symbol, CUSIP number, or interest rate and maturity date (as applicable); the number of shares; price; and principal amount), in which you (or a member of your Family/Household) had Beneficial Ownership. It also requires you to report the nature of the transaction (i.e. purchase, sale or any other type of acquisition or disposition) and the name of the broker, dealer or bank with or through which the transaction was effected.
The Quarterly Transaction Report also requires you to either confirm or amend your complete list of brokers, dealers, and banks with whom you or a member of your Family/Household established an account in which any securities, including Covered Funds or Covered Securities, were held or could have been held during the quarter for the direct or indirect benefit of you or a member of your Family/Household.
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3. Annual Holdings Reports. By January 30 of each year, you must file with the Compliance Officer an Annual Holdings Report as of December 31 of the preceding year.
The Annual Holdings Report requires you to list all Covered Securities and Covered Funds (including the title and type of security; as applicable, the exchange ticker symbol or CUSIP number; the number of shares; and principal amount) in which you (or a member of your Family/Household) had Beneficial Ownership as of December 31 of the prior year. It also requires you to list all brokers, dealers, and banks with whom you or a member of your Family/Household maintained an account in which any securities, including Covered Securities or Covered Funds were held, or could have been held, for the direct or indirect benefit of you or a member of your Family/Household on December 31 of the prior year.
The Annual Holdings Report also requires you to confirm that during the prior year, except as otherwise indicated therein, you have complied with all applicable requirements of the Code and have reported all accounts, holdings, and transactions required to be reported under the Code, that you understand that it applies to all members of your Family/Household, that you understand that you have been designated an Access Person, and whether you have been designated an Investment Person under the Code.
4. Annual Acknowledgement. You must acknowledge your receipt and understanding of the Code (and any amendments), along with the Firms Statement of Policies and Procedures with Respect to the Flow and Use of Material, Non-Public (Inside) Information, by submitting an electronic affirmation annually.
5. Duplicate Confirmation Notices and Statements. Any Access Person or member of his or her Family/Household that has a securities account (in which Covered Securities or shares of Covered Funds are held, or could be held) with any broker, dealer, or bank that is subject to an exemption from the Designated Broker Requirement under Sections B. (iii), (iv), or (v) of this Code, or has requested and received an exemption from the Compliance Officer, must direct that broker, dealer, or bank to send, directly to the Compliance Officer, contemporaneous duplicate copies of all transaction confirmation notices and statements relating to that account.
NOTE: In certain circumstances Covered Securities may be held in accounts that are exempt from the Designated Broker Requirement, but do not have the ability to generate duplicate confirmation notices and statements (i.e. ESOP, DRIP, and 401(k) Plans). In these limited circumstances, duplicate statements are not required.
G. Transaction Restrictions
1. Initial Public Offerings and Private Placements. Access Persons may not acquire securities in an Initial Public Offering (IPO) or Private Placement unless prior written approval is obtained from the Compliance Officer, and, in the determination of the Compliance Officer, participation does not present a conflict of interest with any Clients or impede the equitable distribution of the offering to the public. Any request for allocation of an IPO or a Private Placement to an Access Person that is in any way connected with his or her position in the Firms will be denied. Further, the Compliance Officer may deny requests for any reason or without providing a reason.
Access Persons must request approval for participation in an IPO or Private Placement by submitting a written request to the Compliance Officer. These requests must include:
| A brief description of the Private Placement or IPO opportunity |
| In the case of a Private Placement, the nature of the employees participation |
| A statement as to how and why the opportunity was offered to the Access Person and other factors relevant, from the perspective of the Firms, to the approval decision (e.g. whether participation in the Private Placement or IPO is connected with the Access Persons position with the Firms or will result in any conflicts of interest with Client portfolios.) |
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2. Futures and Related Options. No Access Person shall use derivatives, including futures, options on futures, or options on a Covered Security, to evade the restrictions of the Code. In other words, no Access Person may use derivative transactions with respect to a Covered Security if the Code would prohibit the Access Person from taking the same position directly in the Covered Security.
3. Blackout Period. No Access Person (including any member of the Family/Household of such Access Person) may purchase or sell any Covered Security within the seven calendar days immediately before or after a calendar day on which any Mutual Fund Client or a Separate Account Client purchases or sells that Covered Security (or any closely related security, such as an option or a related convertible or exchangeable security), unless the Access Person had no actual knowledge that the Covered Security (or any closely related security) was being considered for purchase or sale for any Mutual Fund Client or Separate Account Client. Note that the total blackout period is 15 days (the day of the Client trade, plus seven days before and seven days after).
The blackout period does not apply to Access Person transactions concurrent with Separate Account Client transactions intended merely to rebalance, liquidate, or open accounts for Separate Account Clients where NGAMA acts as the adviser, for the following reasons: NGAMA primarily relies on model portfolios supplied by investment advisory affiliates and third party investment advisory firms; due to the nature of NGAMAs separate account program, a number of these Separate Account Clients may add or withdraw funds, and open or close accounts, on a daily basis; the trades generated by these activities are unpredictable; they are not caused by a change in the investment opinion of NGAMA or any of its subadvisers; they tend to be small in size with little or no market impact; they are of an administrative nature; and if triggering a blackout period, they would likely have the effect of blacking out every security traded by Separate Account Clients of NGAMA on every trading day. The blackout period does apply, however, to transactions concurrent with Separate Account Client transactions related to implementation of changes to model portfolios or related to changes in the investment opinion of NGAMA or any of its subadvisers.
NOTE: All transactions for Access Persons subject to the Blackout Period will be compared to transactions executed by NGAMA or a subadviser on behalf of Mutual Fund Clients and Separate Account Clients. The fact that the Compliance Officer has precleared a trade does not mean that it is not in violation of the Code. When evaluating a preclearance request, trades executed on behalf of Separate Account Clients over the previous 7 days are considered. Changes to model portfolios on the day preclearance is requested, and over the subsequent 7 days may create a violation of the blackout period. Due to the nature of NGAMAs advisory activity with respect to Mutual Fund Clients it is impossible to consider trading by Mutual Fund Clients when granting preclearance. Transactions by Access Persons will be compared to transactions executed by both Separate Account Clients and Mutual Fund Clients at the end of the reporting period.
For example if an Access Person executes a trade in a Covered Security for which he or she has received proper preclearance on January 1st, and a subadviser changes a model portfolio which results in trades in the same Covered Security by Separate Account Clients any time before January 8th (the remainder of the 15 day blackout period), it may result in a violation of the Code, if the Access Person had knowledge that the Covered Security was being considered for purchase or sale for any Client account.
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Trading within the 15-day blackout period is not automatically considered a violation of the Code but is instead subject to the knowledge condition set forth above. The Compliance Officer will monitor personal securities trading activity and if a pattern appears to exist with respect to the trading activity of an Access Person and any Mutual Fund Client and/or Separate Account Client within the 15-day blackout periods, it will be investigated. If it is determined that a violation has occurred, the Firms will generally require any profits from the transactions to be disgorged and donated to charity, and may impose other sanctions as deemed necessary (see Section E of this Code).
4. Preclearance Requirement. Access Persons are required to request and receive preclearance by the Compliance Officer before executing the purchase or sale of Covered Securities. Given the nature of NGAMAs current advisory operations, which include oversight of other investment advisers, approving, and in some cases effecting, transactions for Client accounts, NGAMAs role as an administrator, and NGAMDs role as a distributor and underwriter, the Firms have incorporated several exemptions to the Preclearance Requirement that you should be familiar with.
a. | Preclearance. Unless specifically exempted by this Code, no Access Person shall purchase or sell any Covered Security for his or her own account (or the account of any member of his or her Family/Household) without proper preclearance. Unless specifically noted by the Compliance Officer, trades must be completed on the same day that preclearance is granted. This requirement applies to all trades in Covered Securities. Instruments representing an indirect interest in a Covered Security, such as options and warrants, must also be precleared. |
b. | Process. Access Persons are required to submit a preclearance request to the Compliance Officer and receive approval for the transaction before executing a trade for a Covered Security transaction requiring preclearance. Trades in Covered Securities cannot be executed until the Compliance Officer provides specific approval. Preclearance will not be granted for any trades that would violate the blackout period restriction as it applies to personal transactions effected within 7 days after a Separate Account Client trade. |
The Firms reserve the right to require any Access Person to preclear exempted transactions (discussed below) at any time and, if requested by the Firms, an Access Person must obtain the approval of the Compliance Officer before buying or selling any security, for such period (which may be indefinite) as the Compliance Officer shall determine.
5. Good Until Canceled and Limit Orders. No Access Person shall place a good until canceled, limit, or equivalent order with his/her broker for any Covered Security subject to the preclearance requirement except that an Access Person may utilize a day order with a limit so long as the transaction is consistent with provisions of this Code, including the preclearance procedures. All orders must expire at the end of the trading day on which they are precleared unless otherwise extended by the Compliance Officer.
6. Exempt Transactions. The blackout period and preclearance requirements do not apply to Covered Funds and the following categories of transactions in Covered Securities by all Access Persons:
| Transactions in accounts for which the Access Person has Beneficial Ownership but no investment influence or control and, if applicable, has been granted an exemption from the Designated Broker Requirement by the Compliance Officer. |
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| Transactions in any Covered Security guaranteed by the United States Government, or any state government or governmental agency of a municipality. |
| Transactions that occur by operation of law or under any other circumstance in which no investment discretion is exercised, and no recommendations are made, by the Access Person or any member of their Family/Household. |
| Purchases pursuant to the exercise of rights issued pro rata to all holders of the class of a Covered Security held by the Access Person (or Family/Household member) and received by the Access Person (or Family/Household member) from the issuer. |
| Purchases of a Covered Security pursuant to an automatic investment, withdrawal or dividend reinvestment plan. |
| Transactions in Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs) as well as any related options. |
| Transactions in futures and options contracts on interest rate instruments or indexes, and options on such contracts, so long as the transactions do not violate the knowledge provision in Section G.3. of this Code. |
Additionally, the preclearance and blackout requirements do not apply to the following transactions by all Access Persons unless he or she has been specifically designated an Investment Person:
| Transactions of 100 shares or less of common or preferred stocks of a class that is publicly traded on a national stock exchange. |
| Transactions with an aggregate dollar value (excluding commissions) of $10,000 or less. |
| Transactions in Covered Securities issued by a company with a market capitalization of at least $10 billion U.S. (or the equivalent in foreign currency). |
Further, the preclearance and blackout requirements do not apply to the following transactions by Investment Persons:
| Transactions of 100 shares or less of common or preferred stocks issued by a company with a market capitalization of at least $10 billion that reduce or add to a position in the security that has been held by the Investment Person for at least 12 months. |
NOTE: These transactions are not exempted from the reporting requirements of this Code.
H. Compliance Officer Approval
The Compliance Officer is charged with responsibility for ensuring that all Access Persons adhere to the reporting requirements of this Code of Ethics and that the review requirements of this Code are performed in a prompt manner.
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Definitions
The following terms have special meanings in this Code of Ethics:
| Access Person |
| Beneficial Ownership |
| Client |
| Compliance Officer |
| Covered Fund |
| Covered Security |
| Designated Broker |
| Family/Household |
| Initial Public Offering |
| Investment Person |
| Mutual Fund Client |
| Private Placement |
| Separate Account Client |
| Supervised Person |
The special meanings of these terms as used in this Code of Ethics are explained below. Some of these terms (such as Beneficial Ownership) are sometimes used in other contexts, not related to Code of Ethics, where they may have different meanings. For example, Beneficial Ownership has a different meaning in this Code of Ethics than it does in the SECs rules for proxy statement disclosure of corporate directors and officers stockholdings, or in determining whether an investor has to file 13D or 13G reports with the SEC.
IMPORTANT: If you have any doubt or question about whether an investment, account, or person is covered by any of these definitions, ask the Compliance Officer. Do not just guess at the answer.
Access Person means Access Person as defined in Rule 17j-1 under the 1940 Act and/or Rule 204A-1 under the Advisers Act, as those rules are amended from time to time. The elements of these definitions are outlined beginning on page 2 of this Code.
Due to the nature of the Firms activities and for the purposes of administering this Code, the Firms have designated all their officers, directors and employees as Access Persons (except for directors that satisfy the conditions listed above), whether or not such officers, directors and employees fall within the definition of Access Person as defined in Rule 17j-1 under the 1940 Act and/or Rule 204A-1 under the Advisers Act. An officer, director or employee becomes an Access Person on his or her hire date.
The term Access Person under this Code and relating to the Firms normally does not include an employee of a company in a control relationship to the Firms, who is not an employee, officer, or director of any of the Firms, where such company is required to have a Code of Ethics containing provisions reasonably necessary to prevent the Access Person from engaging in any act, practice, or course of business prohibited by Rule 17j-1(b) and such employee is required to report his or her transactions to such company. However, in certain instances a person may be an employee of both the Firms and an affiliated adviser, and may be subject to (and required to make required reports for) more than one Code of Ethics.
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Beneficial Ownership means beneficial ownership as defined in Rule 17j-1 under the 1940 Act, as amended from time to time. Currently this means any opportunity, directly or indirectly, to profit or share in the profit from any transaction in securities. Beneficial Ownership is a very broad concept. Some examples of forms of Beneficial Ownership include:
| securities held in a persons own name, or that are held for the persons benefit in nominee, custodial, or street name accounts. |
| securities owned by a member of your Family/Household. |
| securities owned by or for a partnership, in which the person is a general partner (whether the ownership is under the name of that partner, another partner, the partnership, or through a nominee, custodial, or street name account). |
| securities that are being managed for a persons benefit on a discretionary basis by an investment adviser, broker, bank, trust company, or other manager. |
| securities in a persons individual retirement account. |
| securities in a persons account in a 401(k) or similar retirement plan, even if the person has chosen to give someone else investment discretion over the account. |
| securities owned by a trust of which the person is either a trustee or a beneficiary. |
| securities owned by a corporation, partnership, or other entity that the person controls (whether the ownership is under the name of that person, under the name of the entity, or through a nominee, custodial, or street name account). |
| securities that are traded on behalf of an investment club of which an Access Person is a club member or in which a member of their Family/Household is a member. |
The above is not a complete list of the forms of ownership that could constitute Beneficial Ownership for purposes of this Code. You should ask the Compliance Officer if you have any questions or doubts at all about whether you or a member of your Family/Household would be considered to have Beneficial Ownership in any particular situation.
Client means any individual, entity, or registered investment company for which NGAMA serves as adviser or subadviser, or NGAMD serves as distributor. Client information includes information obtained from entities contracted by NGAMA as adviser to serve as subadviser for certain Mutual Fund Clients and Separate Account Clients.
Compliance Officer currently means the Chief Compliance Officer of NGAMD or another person that he has designated to perform the functions of Compliance Officer. For purposes of reviewing the Compliance Officers own transactions and reports under this Code, the functions of the Compliance Officer are performed by the General Counsel of the Firms.
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Covered Fund means (i) any registered investment company advised or subadvised by NGAMA, (ii) any registered investment company advised or subadvised by any investment adviser that controls NGAMA, is controlled by NGAMA or is under common control with NGAMA (e.g. Loomis Sayles, Harris Associates, etc.), (iii) any registered investment company administered by NGAMA, or (iv) any registered investment company distributed by NGAMD (or any principal underwriter that controls NGAMA, is controlled by NGAMA or is under common control with NGAMA). For clarification purposes, Covered Funds include, but are not limited to, the Natixis Funds, the Loomis Sayles Funds, and the Oakmark Funds and (v) Undertakings for the Collective Investment of Transferable Securities (UCITS) advised by any investment adviser that controls NGAMA, is controlled by NGAMA or is under common control with NGAMA (e.g. Loomis Sayles, Harris Associates, etc.) .
NOTE: Covered Funds do not include money market funds whether or not NGAMA (or any affiliate) serves as the investment adviser or subadviser.
NOTE: A 529 plan invested in underlying mutual funds will not be treated as a Covered Security or as an investment in Covered Funds, so long as the plan is not distributed, advised or subadvised by NGAMA, NGAMD or any affiliated firm, and your 529 plan investments are not in any portfolios distributed, advised or subadvised by NGAMA, NGAMD or any affiliated firm.
A complete list of Covered Funds may be obtained from the Compliance Officer or the Firms Intranet. The Compliance Officer may either add or remove funds from this list if he determines that there is either a heightened risk of access to portfolio information (in the case of funds that would not be considered Covered Funds under this definition), or no access to portfolio information about a fund (for those funds that would otherwise meet the above criteria of a Covered Fund).
Covered Security means a reportable security as defined in Rule 204A-1 under the Advisers Act, as amended from time to time. Currently this means anything that is considered a security under the Advisers Act, except:
| Direct obligations of the U.S. Government. |
| Bankers acceptances, bank certificates of deposit, commercial paper and high quality short-term debt obligations, including repurchase agreements. |
| Shares of money market funds that are registered under the 1940 Act. |
| Shares of open-end investment companies that are (i) registered under the 1940 Act (mutual funds) and (ii) not Covered Funds. |
| Shares of unit investment trusts that are invested exclusively in one or more mutual funds (none of which are Covered Funds). |
Security is a very broad term. It includes most kinds of investment instruments, including things that you might not ordinarily think of as securities, such as:
| Options on securities and currencies, and commodities. |
| Commodity interests. |
| Investments in all kinds of limited partnerships. |
| Investments in closed end funds and exchange traded funds. |
| Investments in foreign unit trusts, and foreign mutual funds. |
| Investments in private investment funds, hedge funds, and investment clubs. |
If you have any question or doubt about whether an investment is a considered a Covered Security or a Covered Fund under this Code, ask the Compliance Officer.
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Designated Broker means Charles Schwab, Fidelity Investments, Merrill Lynch, Morgan Stanley Smith Barney, T.D. Ameritrade, or UBS (collectively, the Designated Brokers).
Family/Household means:
| Your spouse or live-in partner who shares your household and combines his or her financial resources in a manner similar to that of married persons (unless he or she does not live in the same household as you and you do not contribute in any way to his or her support). |
| Your children under the age of 18. |
| Your children who are 18 or older (if they live in the same household as you or you contribute in any way to their support). |
| Any of these people who live in your household: your stepchildren, grandchildren, parents, stepparents, grandparents, brothers, sisters, parents-in-law, sons-in-law, daughters-in-law, brothers-in-law, and sisters-in-law, including adoptive relationships. |
| Any individual for whom you are exercising investment control. |
NOTE: There are a number of reasons why this Code covers transactions in which members of your Family/Household have Beneficial Ownership. First, the SEC regards any benefit to a person that you help support financially as indirectly benefiting you, because it could reduce the amount that you might otherwise need to contribute to that persons support. Second, members of your Family/Household could, in some circumstances, learn of information regarding the Firms trading or recommendations for Client accounts, and must not be allowed to benefit from that information.
Initial Public Offering (IPO) means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934.
Investment Persons Include all Access Persons (and employees of any company in a control relationship with the Firms) that have been specifically identified by the Compliance Department as having regular or periodic knowledge of material nonpublic information regarding the purchase and sale of securities by Mutual Fund Clients or Separate Account Clients.
In addition to exposure to Client trading information, an individual may be designated an Investment Person for any reason. A complete list of Investment Persons is maintained by the Compliance Department.
NOTE: All Investment Persons are also Access Persons and must satisfy all applicable Code requirements.
Mutual Fund Client includes all investment companies for which NGAMA serves as adviser, or for which NGAMD is the Distributor. All investment company Clients are currently considered Mutual Fund Clients.
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Private Placement means an offering of a stock or bond that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or Pursuant to Rule 504, 505, or 506 thereunder.
Separate Account Client includes all separately managed accounts for which NGAMA provides investment advisory services.
Although NGAMA has the ultimate investment decision-making authority with respect to securities to be purchased or sold, in most cases NGAMA generally follows the recommendations implicit in the model portfolios supplied by its subadvisers. While NGAMA relies primarily on these model portfolios to manage Client assets, it will retain discretionary authority over Client portfolios. This discretion will be primarily used to execute trades and manage accounts according to specific Client requirements.
Supervised Person means any partner, officer, director (or other person occupying a similar station or performing similar functions) or employee of a Firm, or other person who provides investment advice on behalf of NGAMA and is subject to the supervision and control of NGAMA. All Access Persons are also Supervised Persons.
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Exhibit (o)(4)
Harris Associates L.P., Harris Associates Securities L.P. and Harris Associates Investment Trust
Code of Ethics and Statement on Insider Trading
As Amended, Effective as of March 9, 2016
I. | DEFINITIONS |
A. | Firm or Harris. The term Firm or Harris shall include Harris Associates L.P. (HALP) and Harris Associates Securities L.P. (HASLP). |
B. | Trust. The term Trust shall mean Harris Associates Investment Trust, including any series of shares of beneficial interest of the Trust (each, a Fund). |
C. | Employee. The term Employee shall include any person employed by the Firm, whether on a full or part-time basis and all partners, officers, shareholders and directors (other than Non-Access Directors (as defined below)) of the Firm. |
D. | Access Person. The term Access Person shall have the meaning set forth in Section 17j-1(a)(1) of the Investment Company Act of 1940 and rules thereunder (the Act) and Section 204A-1(e)(1) of the Investment Advisers Act of 1940 (the Advisers Act). Accordingly, Access Person means any director, officer, general partner, or Advisory Person (as defined below) of the Trust or HALP, but shall not include (1) any trustee of the Trust who is not an interested person of the Trust; (2) any trustee of the Trust who is designated an interested person, as defined in Section 2(a)(19) of the Investment Company Act of 1940, but is not a director, officer, general partner or Advisory Person of HALP, HASLP or Harris Associates, Inc.; and (3) in the case of HALP, shall not include any Non-Access Director. |
E. | Advisory Person. The term Advisory Person shall have the meaning set forth in Section 17j-1(a)(2) of the Act. Accordingly, Advisory Person means any Employee of the Firm, who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities (as defined below) by a Client (as defined below), or whose functions relate to the making of any recommendations with respect to purchases and sales. For the purpose of this Code, each Employee of the Firm with an office at the Firms principal place of business shall be deemed to be an Advisory Person. |
F. | Persons Subject to this Code. Each Employee is subject to this Code. In addition, Non-Access Directors are subject to the following provisions of this Code: II.A, II.B, II.C.i, II.J, and III (except for III.B.3 (i), (ii) and (iv) and the last sentence of III.B.4). |
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G. | Covered Security. The term Covered Security shall have the meaning set forth in Section 2(a)(36) of the Act1, including any right to acquire such security, except that it shall not include securities which are direct obligations of the Government of the United States or any other country, bankers acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements), and shares issued by open-end investment companies other than Reportable Funds (defined below). In addition, all exchange-traded funds (ETFs), whether registered as open-end management companies or unit investment trusts, shall be treated as Covered Securities for reporting purposes only. |
H. | Reportable Fund. The term Reportable Fund shall have the meaning set forth in Section 204A-1(e)(9) of the Advisers Act. Reportable Fund means any investment company registered under the Act that is advised or sub-advised or distributed by the Firm or any affiliated company (e.g. Natixis Asset Management Advisers, Loomis Sayles). Reportable Funds include, for example, open-ended investment companies and closed-end funds2. A current list of Reportable Funds is maintained on the Compliance page of the Firms intranet site. |
I. | Beneficial Interest or Ownership. The term beneficial interest or ownership shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and rules thereunder, which includes any interest in which a person, directly or indirectly, has or shares a direct or indirect pecuniary interest. A pecuniary interest is the opportunity, directly or indirectly, to profit or share in any profit derived from any transaction. Each person will be assumed to have a pecuniary interest, and therefore, beneficial interest or ownership, in all securities held by that person, that persons spouse or live-in/domestic partner who shares your household and combines his or her financial resources in a manner similar to that of married persons, all members of that persons immediate family and adults sharing the same household with that person (other than mere roommates) and all minor children of that person and in all accounts subject to their direct or indirect influence or control and/or through which they obtain the substantial equivalent of ownership, such as trusts in which |
1 | Sec. 2(a)(36) Security means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. |
2 | Reportable Funds that are money market funds are not subject to the Codes reporting requirements (see Section II.G Procedures to Implement Trading Restrictions and Reporting Obligations). |
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they are a trustee or beneficiary, partnerships in which they are the general partner, corporations in which they are a controlling shareholder or any other similar arrangement. Any questions an Employee may have about whether an interest in a security or an account constitutes beneficial interest or ownership should be directed to the Firms General Counsel or Compliance Department. Examples of beneficial interest or ownership are attached as Appendix A. |
J. | Client. The term Client shall mean any client of HALP, including any Fund. |
K. | Non-Access Director. The term Non-Access Director shall mean any person who is a Director of Harris Associates, Inc., the corporate general partner of HALP and HASLP, but who is not an officer or employee of any of HALP, HASLP or Harris Associates, Inc. and who meets all of the following conditions: |
i. | He or she, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the purchase or sale of Covered Securities by a registered investment company, and whose functions do not relate to the making of recommendations with respect to such purchases or sales; |
ii. | He or she does not have access to nonpublic information regarding any Firm clients purchases or sales of securities (other than information contained in standard account statements or reports that the Firm may furnish to such person in his or her capacity as a client of the Firm), or nonpublic information regarding the portfolio holdings of any Reportable Fund; and |
iii. | He or she is not involved in making securities recommendations to Firm clients, and does not have access to such recommendations that are nonpublic (other than information contained in standard account statements or reports that the Firm may furnish to such person in his or her capacity as a client of the Firm). |
II. | CODE OF ETHICS |
A. | GENERAL STATEMENT |
Harris seeks to foster a reputation for integrity and professionalism. That reputation is a vital business asset. The confidence and trust placed in us by investors in mutual funds and clients with accounts advised by the Firm is something that is highly valued and must be protected. The Firm owes a fiduciary duty to its advisory clients, and the fundamental principle of the Firm is that at all times the interests of its Clients come first. As a result, any activity which creates even the suspicion of misuse of material non-public information by the Firm or any of its Employees, which gives rise to or appears to give rise to any breach of fiduciary duty owed to any Client, or which creates any actual or potential conflict of interest between any Client and the Firm or any of its Employees or even the appearance of any conflict of interest must be avoided and is prohibited.
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The Investment Company Act and rules make it illegal for any person covered by the Code, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by the Trust to:
i.) | employ any device, scheme, or artifice to defraud the Trust; |
ii.) | make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the Trust regarding a material fact; |
iii.) | engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Trust; or |
iv.) | engage in any manipulative practice with respect to the Trust. |
The restrictions on personal securities transactions contained in this Code are intended to help the Firm monitor for compliance with these prohibitions.
Additionally, the federal securities laws require that an investment adviser maintain a record of every transaction in any Covered Security and Reportable Fund in which an Access Person acquires any direct or indirect beneficial interest or ownership, except any transaction in an account in which the Access Person has no direct or indirect control or influence.
To attempt to ensure that each Person Subject to this Code satisfies this Code and these record keeping obligations, the Firm has developed the following rules relating to personal securities trading, outside employment, personal investments with external investment managers and confidentiality.
The General Counsel, President, and Chief Compliance Officer, acting in concert, have the authority to grant written waivers of the provisions of this Code in appropriate instances. However, the Firm expects that waivers will be granted only in rare instances, and some provisions of the Code that are mandated by the Act or the Advisers Act cannot be waived.
The Firm expects all Access Persons to comply with the spirit of the Code as well as the specific rules contained in the Code. Any violations of the Code must be reported promptly to the Firms Chief Compliance Officer.
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B. | COMPLIANCE WITH FEDERAL SECURITIES LAWS |
More generally, Firm personnel and Non-Access Directors are required to comply with applicable federal securities laws at all times. Examples of applicable federal securities laws include:
i.) | the Securities Act of 1933, Securities Act of 1934, Sarbanes-Oxley Act of 2002 and SEC rules thereunder; |
ii.) | the Investment Advisers Act of 1940 and SEC rules thereunder; |
iii.) | the Investment Company Act of 1940 and SEC rules thereunder; |
iv.) | Title V of the Gramm-Leach-Bliley Act of 1999 (privacy and security of client non-public information); and |
v.) | the Bank Secrecy Act, as it applies to mutual funds and investment advisers, and SEC and Department of the Treasury rules thereunder. |
C. | RESTRICTIONS ON EMPLOYEE TRADING |
No trading activity by an Employee in any security in which an Employee has any beneficial interest or ownership which is also the subject of a Client portfolio purchase or sale shall disadvantage or appear to disadvantage such Client transaction. Further, the following specific restrictions apply to all trading activity for Advisory Persons:
i.) | Any transaction in a security in anticipation of client orders (frontrunning) is prohibited, |
ii.) | Any transaction in a security which is the subject of approval by one of the Firms stock selection groups for addition to an approved list is prohibited until the tenth business day following the dissemination of that recommendation, or any longer period specified in this Code, |
iii.) | Any transaction in a security which the Advisory Person knows or has reason to believe is being purchased or sold or considered for purchase or sale3 by any investment company advised by the Firm is prohibited until the transaction by such investment company has been completed or consideration of such transaction has been abandoned,4 |
3 | A security is being considered for purchase or sale; the earlier of, when a recommendation to purchase or sell has been made and communicated or the security is placed on the research project list and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. |
4 | Among the clients of the Firm are private investment partnerships (partnerships) in which various Employees of the Firm have equity interests. This trading prohibition shall not restrict purchases or sales for the accounts of such partnerships provided that the Trust and such accounts are treated fairly and equitably in connection with such purchases and sales. |
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iv.) | Any transaction in a security on the same day or within two business days after any Client, including a registered investment company, advised by the Firm has a pending or actual transaction is prohibited. If an Advisory Person places a same day order for such security prior to the Client placing an order, the Employees order will be canceled, |
v.) | Any transaction involving options5, single stock futures, or other derivatives relating to any security on the Firms approved and project lists, or which are held by any investment company or other client account advised by the Firm that appears to evade the restrictions of the Code is prohibited, and |
vi.) | Any acquisition of an equity security in an initial public offering is prohibited. |
Additionally, no Employee of the Firm shall knowingly sell to or purchase from the Funds or the Trust any security or other property except, in the case of the Funds, securities issued by the Funds. Neither shall the Firm, HASL nor any Employee share in the profits or losses in any account of a customer carried by the Firm or HASL or any other FINRA member, except to the extent provided for by Rule 205-3 of the Investment Advisors Act of 1940 and/or NASD Rule 2330 and/or FINRA Rule 2150, as applicable.
D. | PRIVATE PLACEMENTS AND INVESTMENTS WITH EXTERNAL MONEY MANAGERS. |
No Advisory Person or Access Person shall acquire any security or interest in a private placement or commit initial capital to any account for which such person has any beneficial interest (other than non-affiliated mutual funds where the account is held directly at such fund) with an external investment manager without the prior written approval of the Firms President and Chief Compliance Officer. For purposes of this Code, private placement shall mean any limited offering that is generally not available to the public, including unregistered investment pool vehicles (e.g., hedge funds, commodity pools), Rule 144A securities, limited partnerships, etc.
5 | The only form of equity option trading that is permitted is writing covered calls on equity securities that are not held in clients accounts or on the Firms approved or project lists. Index option trading is permitted subject to having an approved option agreement on file with Pershing prior to trading. |
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In deciding whether to grant approval, consideration will be given to whether the investment is consistent with the Firms investment philosophy and guidelines and should be offered to Clients, and whether the investment creates an actual conflict or the appearance of a conflict of interest. An Advisory Person who has acquired a security in a private placement must disclose that investment to the Firms President and Chief Compliance Officer if such Advisory Person later participates in the consideration of that issuer for inclusion on any list of securities approved for purchase by Firm clients.
E. | ADDITIONAL RESTRICTION ON FUND MANAGERS OF INVESTMENT COMPANY ACCOUNTS. |
Any Access Person who is a fund manager of any registered investment company that is advised or subadvised by the Firm is prohibited from buying or selling a security for an account in which he or she has a beneficial interest within fifteen calendar days before and after the investment company that he/she manages trades in that security. Any profits realized on trades within the proscribed periods shall be required to be disgorged.6 Any losses realized on trades within the proscribed periods shall be borne by the fund manager if it was the managers actions which caused the violation.
F. | CERTAIN ACCOUNTS EXEMPT FROM REQUIREMENTS OF CODE. |
Any account (including open-end investment companies and limited partnerships) for which the Firm acts as investment adviser or general partner shall be managed in accordance with the Firms trading procedures for a Client account. Any such account shall be exempt from the provisions of Sections C and E of Part II of this Code if: (1) the account has been seeded by affiliated persons of the firm and is being managed in anticipation of investments by persons not affiliated with the Firm; or (2) unaffiliated persons of the Firm are also invested in the account; or (3) the account is operated as a model portfolio in contemplation of management of client accounts in the same or a similar strategy.
G. | PROCEDURES TO IMPLEMENT TRADING RESTRICTIONS AND REPORTING OBLIGATIONS. |
1. | Trading through Harris Trading Desk. |
All Advisory Persons who have personal accounts that hold or can hold Covered Securities are required to maintain such accounts at Pershing LLC (Pershing), the Firms prime broker. All transactions in Covered Securities in which an Advisory Person has any beneficial interest or ownership, or in any accounts in which an Advisory Person has discretion, other than fee paying accounts that are professionally managed on a discretionary basis, must be pre-approved through the Firms automated personal trading system.
6 | Any profits disgorged shall be taken as gains in Harriss error account at Pershing. |
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Transactions at brokers or banks other than Pershing are not permitted except in unusual circumstances and then only after the Advisory Person has: (i) provided a request in writing to his/her Supervisor and the Chief Compliance Officer prior to opening or placing an initial order in an account with such other broker or bank, (ii) obtained the written approval of his/her Supervisor and the Chief Compliance Officer prior to opening or placing an initial order in such account, (iii) provided such other broker or bank with a written notice of the Advisory Persons affiliation with Harris and request that copies of confirmations and statements be sent to the Firms Compliance Department, and provide a report to the Firm that includes the name of the broker or bank with whom the account was established, the date the account was established, and the date the report is submitted. A copy of such written notice and request should also be provided to his/her Supervisor and the Compliance Department.
Reportable Funds in which an Advisory Person has any beneficial interest or ownership may be held in a Pershing account, an approved outside brokerage account, directly with the Fund or through the Firms profit sharing and savings plan, and are subject to the reporting requirements described in Section II.G.6 below. Reportable Fund transactions effected pursuant to an automatic investment plan, or in any account over which the Access Person has no direct or indirect influence or control, do not need to be reported.
Even after an Advisory Person has obtained approval to open a non-discretionary account at a bank or broker to execute Covered Securities transactions, the Advisory Person must acquire approval through the automated personal trading system. The Advisory Person must promptly present Compliance with a confirmation reflecting the details of the transaction and clearly indicating that the transaction has been completed. Non-Pershing discretionary account transactions do not need to be presented to Trading for review and approval. Compliance will review these statements upon their receipt.
2. | Monitoring of Trades. |
Transactions for an account of an Advisory Person that are executed through the Firms trading desk are to be monitored by Compliance and reviewed and approved by the Chief Compliance Officer (or such party to whom he or she delegates). These transactions are non-discretionary transactions and may not be executed if they are in conflict with Harris discretionary orders.
The Firms Compliance Department will access Advisory Person trade information online from Pershing (including the title and exchange ticker symbol or CUSIP number of each Covered Security or Reportable Fund involved, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security or Reportable Fund involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected, and the date on which the report is submitted).
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Transactions at brokers other than Pershing are to be monitored by the Compliance Department. To accomplish this, all Access Persons shall submit to the Compliance Department within thirty days after the month end in which any transaction occurred a report which includes the title and exchange ticker or CUSIP number of the Covered Security or Reportable Fund, the date of the transaction, the interest rate and maturity rate (if applicable), the number of shares and principal amount of each Covered Security or Reportable Fund involved, the nature of the transaction (i.e. buy/sell), the price at which the transaction was effected, the name of the broker or bank through which the transaction was effected and the date on which the report is submitted. This requirement may be satisfied by having the broker or bank send the Firm duplicate copies of confirmations and statements, provided that such confirmations and statements contain all of the information otherwise required to be provided in the report. The Compliance Department will maintain copies of all such transaction reports.
3. | Cancellation of Trades. |
Any transaction for an account of an Access Person is subject to cancellation or reversal if it is determined by either the President or the CCO (or such party to whom he or she delegates) that the transaction is or was in conflict with or appeared to be in conflict with any Client transaction or any of the trading restrictions of this Code. Cancellations or reversals of transactions may be required after an extended period past the settlement date. A trader may also prevent the execution of orders for an Advisory Persons account if it appears that the trade may have to be canceled or reversed.
Client transactions include transactions for any investment company managed by the Firm, any other discretionary advisory clients or any other accounts managed or advised by Employees of the Firm for a fee.
The determination that a transaction of an Access Person may conflict with a Client transaction will be subjective and individualized and may include questions about timely and adequate dissemination of information, availability of bids and offers, as well as many other factors deemed pertinent for that transaction or series of transactions. It is possible that a cancellation or reversal of a transaction could be costly to an Access Person or his/her family. Therefore, great care is required to adhere to the Firms trading restrictions and avoid conflicts or the appearance of conflicts.
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4. | Participation in Dividend Reinvestment Plans and Systematic Purchase Plans. |
Advisory Persons may purchase Covered Securities through dividend reinvestment plans or systematic purchase plans without processing such transactions through the Firms automated personal trading system. Purchases are permitted only after the Advisory Person has: (i) provided notice in writing to his/her Supervisor and the Compliance Department prior to opening an account or placing an initial purchase, and (ii) obtained the written approval of his/her Supervisor and the Compliance Department prior to opening an account or placing an initial purchase. Notice and approval shall not be required in connection with purchase of shares or units of ETFs. Even after the Advisory Person has obtained approval to invest in such a plan, the Advisory Person must provide the Compliance Department with duplicate copies of statements within thirty days after the end of each calendar quarter. Such report or statements must contain all of the information required to be reported with respect to transactions in Covered Securities under II(F)(2) above. The Compliance Department will maintain copies of all such transaction reports.
5. | Reporting All Other Securities Transactions. |
Because the obligations of an investment adviser to maintain records of Employees personal securities transactions is broader than the type of transactions discussed above in this Section, all Employees have the following additional reporting obligations. Any transaction in a Covered Security not required to be placed through the Firms automated personal trading system in which an Employee has any beneficial interest or ownership (such as, real estate or oil and gas limited partnership interests and other privately placed securities and funds) must be reported to the Compliance Department. This report must be submitted within thirty days after the end of each calendar quarter and include: the title and exchange ticker symbol or CUSIP number, price, number of shares and principal amount of each Covered Security involved, the date and nature of the transaction (i.e. buy/sell), the name of the broker or bank used, if any, interest rate and maturity, if applicable, and the date on which the report is submitted. This report may be in any form, including a copy of a confirmation or monthly statement. However, no report is necessary for any transaction in an account in which the Employee has no control or influence.
6. | Initial, Quarterly and Annual Reporting Requirements. |
Each Access Person shall initially disclose in writing to the Compliance Department within ten days of becoming an Access Person, and annually thereafter, within forty-five days after each calendar year-end, the title and exchange ticker or CUSIP number, type of security, number of shares and principal amount of all Covered Securities and Reportable Funds beneficially owned by such Access Person, and the date the Access Person submits the report, with information as of a date that is no more than forty-five days from the date of becoming a Access Person, or as of the preceding December 31 for annual reporting, and the name of the broker or bank with whom the Access Person maintains an account in which he or she has beneficial ownership of any security. An Access Person need not make an Initial or Annual Report for Covered Securities held in any account over which the Employee has no direct or indirect influence or control.
Additionally, each Access Person shall submit quarterly transaction reports and responses to quarterly questionnaires no later than 30 days after the end of each calendar quarter.
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H. | CONFIDENTIALITY & OBLIGATIONS OF EMPLOYEES |
During the period of employment with the Firm an Employee will have access to certain confidential information concerning the Firm and its clients. This information is a valuable asset and the sole property of the Firm and may not be misappropriated and used outside of the Firm by an Employee or former Employee. Confidential Information, defined as all information not publicly available about the business of the Firm, may include, but is not limited to, Client and prospect names and records, research, trading and portfolio information and systems, information concerning externally managed entities or accounts which have been considered or made on behalf of fee paying clients, and the financial records of the Firm and/or its Employees. In order to protect the interests of the Firm, an Employee or ex-Employee shall not, without the express written consent of the Firms President, disclose directly or indirectly confidential information to anyone outside of the Firm. An Employee should be extremely careful to avoid inadvertent disclosures and to exercise maximum effort to keep confidential information confidential. Any questions concerning the confidentiality of information should be directed to the Chief Compliance Officer or the General Counsel. An abuse of the Firms policy of confidentiality could subject an Employee to immediate disciplinary action that may include dismissal from the Firm. Nothing in this Code is intended to prevent an Employee from reporting a violation of applicable laws or regulations to an appropriate regulatory authority.
I. | OUTSIDE EMPLOYMENT, ASSOCIATIONS AND BUSINESS ACTIVITIES7 |
1. | Outside Employment and Associations. |
Harris requires that all Advisory Persons make their positions with the Firm their primary employment. Except in the case of business entities managed or sponsored by the Firm, it is Harriss policy not to permit Advisory Persons to hold outside positions of authority, including that of being an officer, partner, director or employee, in another business entity. The approval of Harris, and in some cases the approval of FINRA, is required before any Advisory Person may hold any outside position with any business organization, regardless of whether such position is compensated or not. Any exception to this policy must be approved in writing by the Firms President or his or her designee and the Advisory Persons Supervisor, and a copy of such approval is maintained by the Compliance Department. Any change in the status of such approved position immediately must be reported in writing to the Compliance Department and the Advisory Persons Supervisor. Any income or compensation received by an Advisory Person for serving in such position must be paid in full to the Firm, unless a waiver is granted by the Firms President. Under no circumstance may an Advisory Person represent or suggest that Harris has approved or recommended the business activities of the outside organization or any person associated with it.
7 | As used in this section, the terms business entity and business organization include nonprofits such as charities, foundations, religious and arts organizations, universities, and other similar types of entities. |
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Certain types of associations with non-business entitiescharitable or volunteer organizations where the Advisory Person does not hold a position of authority (e.g., is not a member of the board or senior management), and the activity is voluntary in nature (e.g., Boy or Girl Scouts leader, Parent/Teacher Association), or involve random and infrequent participation in industry associations or marketing focus groups where an honorarium is paid, and other similarly situated positions are exempted from this sections restrictions and reporting.
2. | Outside Business Activities. |
To further avoid actual or potential conflicts of interest and to maintain impartial investment advice, and equally important, the appearance of impartial investment advice, each Advisory Person must disclose in writing to the Compliance Department any special relationships and/or investments or business activities that they or their families have which could influence the investment activities of the Firm. If an Employee has any questions about any activities and the need for disclosure, the Employee should be cautious and direct any questions to the Firms General Counsel or Compliance Department.
J. | Certification of Compliance by Access Persons. |
In addition to new-hire training on the Code, each Access Person will receive annual training over certain aspects of the Code. The Firm shall distribute the Code to each Employee and Non-Access Director upon inception of employment and whenever the Code is amended, but no less frequently than annually. Each Access Person and Non-Access Director is required to certify in writing annually that (i) he or she has read and understands the Code, (ii) recognizes that he or she is subject to the Code, and, in the case of Access Persons, (iii) he or she has disclosed or reported all Personal Securities Transactions required to be disclosed or reported under the Code.
Each Access Person who has not engaged in any personal securities transactions during the preceding year for which a report was required to be filed pursuant to the Code shall include a certification to that effect in his or her annual certification.
K. | Annual Report to the Trusts Board of Trustees. |
HALP, as the adviser to the Trust, shall prepare an annual report to the board of trustees of the Trust that:
i.) | summarizes existing procedures concerning personal investing and any changes in those procedures during the past year; |
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ii.) | describes issues that arose during the previous year under the Code or procedures concerning personal investing, including but not limited to information about material violations of the Code and sanctions imposed; |
iii.) | certifies to the board that the Trust, the Trusts adviser (HALP), and the Trusts principal distributor (HASLP) have adopted procedures reasonably necessary to prevent their Investment Personnel and Access Persons from violating the Code; and |
iv.) | identifies any recommended changes in existing restrictions or procedures based upon experience under the Code, evolving industry practices, or developments in applicable laws or regulations. |
III. | POLICY STATEMENT ON INSIDER TRADING |
A. | BACKGROUND |
Trading securities while in possession of material, nonpublic information or improperly communicating that information to others may expose you to stringent penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The Securities and Exchange Commission (SEC) can recover the profits gained or losses avoided through the violative trading, obtain a penalty of up to three times the illicit windfall and issue an order permanently barring you from the securities industry. Finally, you may be sued by investors seeking to recover damages for insider trading violations.
Regardless of whether a government inquiry occurs, Harris views seriously any violation of this Policy Statement. Such violations constitute grounds for disciplinary sanctions, including dismissal.
The law of insider trading is unsettled; an individual legitimately may be uncertain about the application of the Policy Statement in a particular circumstance. Often, a single question can forestall disciplinary action or complex legal problems. You should direct any questions relating to the Policy Statement to the General Counsel, the Chief Compliance Officer or, in their absence, their respective deputies. You also must notify the General Counsel, the Chief Compliance Officer or, in their absence, their respective deputies immediately if you have any reason to believe that a violation of the Policy Statement has occurred or is about to occur.
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B. | POLICY STATEMENT ON INSIDER TRADING |
No person to whom this Policy Statement applies may trade, either personally or on behalf of others (such as Clients), while in possession of material, nonpublic information; nor may such persons communicate material, nonpublic information to others in violation of the law. This Policy Statement is drafted broadly; it will be applied and interpreted in a similar manner. This Policy Statement applies to securities trading and information handling by all Access Persons (including their spouse or domestic/live-in partner, minor children and adult members of their households).
The section below reviews principles important to this Policy Statement.
1. | What is Material Information? |
Information is material when there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions. Generally, this is information whose disclosure will have a substantial effect on the price of a companys securities. No simple bright line test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry. For this reason, you should direct any questions about whether information is material to the General Counsel or Chief Compliance Officer, or, in their absence, the President of Harris.
Material information often relates to a companys results and operations including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.
Material information also may relate to the market for a companys securities. Information about a significant order to purchase or sell securities may, in some contexts, be deemed material. Similarly, prepublication information regarding reports in the financial press also may be deemed material.
2. | What is Nonpublic Information? |
Information is nonpublic until it has been disseminated broadly to investors in the marketplace. Tangible evidence of such dissemination is the best indication that the information is public. For example, information is public after it has become available to the general public through a public filing with the SEC or some other governmental agency, the Dow Jones tape or the WALL STREET JOURNAL or some other publication of general circulation, and after sufficient time has passed so that the information has been disseminated widely.
3. | Identifying Inside Information |
Before executing any trade for yourself or others, including Clients, you must determine whether you have access to material, nonpublic information. If you think that you might have access to material, nonpublic information, you should take the following steps:
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i.) | Immediately alert the Trading Department to restrict trading in the security. No reason or explanation should be given to the Trading Department for the restriction. |
ii.) | Report the information and proposed trade immediately to the General Counsel or the Chief Compliance Officer, or in their absence, the President of Harris. |
iii.) | Do not purchase or sell the securities on behalf of yourself or others, including Clients. |
iv.) | Do not communicate the information inside or outside Harris other than to the above individuals. |
v.) | After the above individuals have reviewed the issue, the Firm will determine whether the information is material and nonpublic and, if so, what action(s) the Firm should take. |
4. | Contacts with Public Companies |
For Harris, contacts with public companies represent an important part of our research efforts. Harris may make investment decisions on the basis of the Firms conclusions formed through such contacts and analysis of publicly-available information. Difficult legal issues arise, however, when, in the course of these contacts, an Access Person becomes aware of material, nonpublic information. This could happen, for example, if a companys Chief Financial Officer prematurely discloses quarterly results to an analyst or an investor relations representative makes a selective disclosure of adverse news to a handful of investors. In such situations, Harris must make a judgment as to its further conduct. To protect yourself, Clients and the Firm, you should contact the General Counsel the Chief Compliance Officer or, in their absence, the President of the Firm immediately if you believe that you may have received material, nonpublic information.
5. | Tender Offers |
Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary gyrations in the price of the target companys securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and tipping while in possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Employees should exercise particular caution any time they become aware of nonpublic information relating to a tender offer.
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C. | PROCEDURES TO IMPLEMENT THE POLICY STATEMENT ON INSIDER TRADING |
1. | Personal Securities Trading |
The restrictions on Employee trading and procedures to implement those restrictions and the Firms reporting obligations, which are set forth in Section II above and in the Procedures for Personal Trading by Employees, constitute the same procedures to implement this Policy Statement. Review those procedures carefully and direct any questions about their scope or applicability to the General Counsel or the Compliance Department.
2. | Restrictions on Disclosures |
Harris Employees shall not disclose any nonpublic information (whether or not it is material) relating to Harris or its securities transactions to any person outside Harris (unless such disclosure has been authorized by Harris). Material, nonpublic information may not be communicated to anyone, including persons within Harris, except as provided in Section III(B)(3) above. Such information must be secured. For example, access to files containing material, nonpublic information and computer files containing such information should be restricted, and conversations containing such information, if appropriate at all, should be conducted in private.
IV. | RETENTION OF RECORDS |
The Compliance Department or the Secretary of the Trust will maintain the records listed below for a period of five years. Such records shall be maintained at the Firms principal place of business in an easily accessible place:
i.) | a list of all persons subject to the Code during that period; |
ii.) | receipts signed by all persons subject to the Code acknowledging receipt of copies of the Code and acknowledging that they are subject to it; |
iii.) | a copy of each Code of Ethics that has been in effect at any time during the period; |
iv.) | a copy of each report filed pursuant to the Code and a record of any known violations and actions taken as a result thereof during the period as well as a record of all persons responsible for reviewing these reports; and |
v.) | a copy of any decision and the reasons supporting the decision, to approve the acquisition of Limited Offerings. |
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ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND STATEMENT ON INSIDER TRADING
Code of Ethics.
Harris Associates L.P. (HALP), Harris Associates Securities L.P. (HASLP) and Harris Associates Investment Trust (the Trust) have adopted a written Code of Ethics and Statement on Insider Trading (the Code) and Procedures for Personal Trading by Employees to avoid potential conflicts of interest by HALP and HASLP personnel and to govern the use and handling of material non-public information. A copy of the Code and Procedures for Personal Trading by Employees is attached to this acknowledgement. As a condition of your continued employment with HALP and HASLP, and/or the retention of your position, if any, as an officer of the Trust or a member of the board of HALPs general partner, you are required to read, understand and abide by the Code and Procedures for Personal Trading by Employees.
Compliance Program.
The Code requires that all personnel (other than Non-Access Directors) furnish to the Compliance Department information regarding any investment account in which you have a beneficial interest. You are also required to furnish to the Compliance Department copies of your monthly or quarterly account statements, or other documents, showing all purchases or sales of securities in any such account, or which are effected by you or for your benefit, or the benefit of any member of your household. Additionally, you are required to furnish a report of your personal securities holdings within ten calendar days of commencement of your employment with HALP or HASLP and annually thereafter. These requirements apply to any investment account, such as an account at a brokerage house, trust account at a bank, custodial account or similar types of accounts.
This compliance program also requires that employees report any contact with any securities issuer, government or its personnel, or others, that, in the usual course of business, might involve material non-public financial information. The Code requires that employees bring to the attention of the General Counsel any information they receive from any source, which might be material non-public information.
Any questions concerning the Code or Procedures for Personal Trading by Employees should be directed to the General Counsel or the Compliance Department.
I affirm that I have received new-hire training covering certain key aspects of the Code and Procedures for Personal Trading by Employees from Compliance, and have read and understand the Code and Procedures for Personal Trading by Employees. I agree to the terms and conditions set forth in the Code and Procedures for Personal Trading by Employees.
If I am acting in the capacity as a contractor, consultant, temporary employee or intern to Harris, I acknowledge that all references to employee in the Code and Procedures for Personal Trading by Employees shall be construed to mean agent. My agreement and affirmation are made in the capacity as an agent, and not as an employee of Harris, and are not intended to impact my status as an independent contractor.
Signature |
Date |
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ANNUAL AFFIRMATION OF COMPLIANCE
FOR ACCESS PERSONS AND NON-ACCESS DIRECTORS
I affirm that:
1. | I have received annual training pertaining to certain aspects of the Code of Ethics and Statement of Insider Trading (the Code) and Procedures for Personal Trading by Employees, and have again read and, to the best of my knowledge, have complied with provisions of the Code and Procedures for Personal Trading by Employees that pertain to me during the past year. |
2. | I have provided to the Compliance Department the names and addresses of each investment account that I have with any firm, including, but not limited to, broker-dealers, banks and others. (List of known accounts attached.) (Access Persons only) |
3. | I have provided to the Compliance Department copies of account statements or other reports showing each and every transaction in any security in which I have a beneficial interest, as defined in the Code, during the most recently ended calendar year |
or
during the most recent calendar year there were no transactions in any security in which I had a beneficial interest required to be reported pursuant to the Code. (Access Persons only)
4. | I have provided to the Compliance Department a report of my personal securities holdings as of the end of the most recent calendar year, including all required information for each security in which I have any direct or indirect beneficial ownership. (Access Persons only) |
5. | With respect to the activities conducted at Harris, I am unaware of any violations of applicable laws or regulations that have not otherwise been reported to the Chief Compliance Officer or an appropriate regulatory authority. |
6. | If I am acting in the capacity as a contractor, consultant, temporary employee or intern at Harris, I acknowledge that any reference to employee in the Code shall be construed to mean agent. My agreement and affirmation made herein are made in the capacity as an agent, and not as an employee of Harris, and are not intended to impact my independent contractor status. |
Signature |
Date |
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APPENDIX A
Examples of Beneficial Interest
For purposes of the Code, you will be deemed to have a beneficial interest in a security if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. Examples of beneficial ownership under this definition include:
| securities you own, no matter how they are registered, and including securities held for you by others (for example, by a custodian or broker, or by a relative, executor or administrator) or that you have pledged to another (as security for a loan, for example); |
| securities held by a trust of which you are a beneficiary (except that, if your interest is a remainder interest and you do not have or participate in investment control of trust assets, you will not be deemed to have a beneficial interest in securities held by the trust); |
| securities held by you as trustee or co-trustee, where either you or any member of your immediate family (i.e., spouse, domestic/live-in partner, children or descendants, stepchildren, parents and their ancestors, and stepparents, in each case treating a legal adoption as blood relationship) has a beneficial interest (using these rules) in the trust. |
| securities held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries and have or participate in investment control; |
| securities held by any partnership in which you are a general partner, to the extent of your interest in partnership capital or profits; |
| securities held by a personal holding company controlled by you alone or jointly with others; |
| securities held by (i) your spouse or domestic/live-in partner, unless legally separated, or you and your spouse or domestic/live-in partner jointly, or (ii) your minor children or any immediate family member of you or your spouse or domestic/live-in partner (including an adult relative), directly or through a trust, who is sharing your home, even if the securities were not received from you and the income from the securities is not actually used for the maintenance of your household; or |
| securities you have the right to acquire (for example, through the exercise of a derivative security), even if the right is not presently exercisable, or securities as to which, through any other type of arrangement, you obtain benefits substantially equivalent to those of ownership. |
You will not be deemed to have beneficial ownership of securities in the following situations:
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APPENDIX A
| securities held by a limited partnership in which you do not have a controlling interest and do not have or share investment control over the partnerships portfolio; and |
| securities held by a foundation of which you are a trustee and donor, provided that the beneficiaries are exclusively charitable and you have no right to revoke the gift. |
These examples are not exclusive. There are other circumstances in which you may be deemed to have a beneficial interest in a security. Any questions about whether you have a beneficial interest should be directed to the General Counsel or Compliance Department.
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Exhibit (o)(5)
Exhibit F VNIM Code of Ethics
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Vaughan Nelson Investment Management, L.P.
Code of Ethics
(Amended as of February 19, 2016)
This is the Code of Ethics of Vaughan Nelson Investment Management, L.P. ( the Firm).
Things You Need to Know to Use This Code
1. Terms in boldface type have special meanings as used in this Code. To understand the Code, you need to read the definitions of these terms. The definitions are at the end of the Code.
2. The Firm considers all employees to be Access Persons under this Code.
There are four (4) Reporting Forms that Access Persons have to fill out under this Code. You can get copies of the Reporting Forms from the Chief Compliance Officer.
Board members who are not employees of the Firm, do not have to comply with the trading restrictions and blackout provisions in Section B of part II.
Further, certain members of the Firms board may be classified as Non-Access Directors. See the Definitions section of this Code. Non-Access Directors are subject to Parts I.A. and I.B. of this Code, but not to Parts I.C., I.D. or II of the Code.
PART IApplies to All Personnel
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A. General PrinciplesThese Apply to All Personnel (including All Board Members)
The Firm is a fiduciary for its investment advisory and sub-advisory clients. Fiduciaries owe their clients a duty of honesty, good faith and fair dealing. As a fiduciary, an adviser must act at all times in the clients best interests and must avoid or disclose conflicts of interest. Because of this fiduciary relationship, it is generally improper for the Firm or its personnel to:
| use for their own benefit (or the benefit of anyone other than the client) information about the Firms trading or recommendations for client accounts; or |
| take advantage of investment opportunities that would otherwise be available for the Firms clients. |
As a matter of business policy, the Firm wants to avoid even the appearance that the Firm, its personnel or others receive any improper benefit from information about client trading or accounts, from our positions, or from relationships with our clients or with the brokerage community.
Privacy and Confidentiality
All personnel are required to keep any nonpublic information about clients (including former clients), the Firm or vendors in strict confidence. Employees should treat the following with confidentiality and discretion:
| A clients identity (unless the client consents), the clients financial circumstances, the securities investments made by the Firm on behalf of a client, information about contemplated securities transactions, or information regarding the firms trading strategies (except as required to effectuate securities transactions on behalf of a client or for other legitimate business purposes). |
| Non-public information regarding the Firm including but not limited to trading intentions, business plans and strategies, technology, business processes, customer relationships, and financial results |
Whenever dealing with confidential information personnel should:
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| Assume client or Firm information is confidential unless evidence exists to the contrary |
| Only use it for the purposes for which it was gathered |
| Not make disclosure to anyone outside of the Firm unless authorized to do so and only share information internally on a need-to-know basis |
| Not disclose information related to a former employer to anyone within the Firm |
Nothing in this Policy prohibits you from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. You do not need the prior authorization of the Firm to make any such reports or disclosures and you are not required to notify the Firm that you have made such reports or disclosures.
Personnel should stay informed and comply with Firm policies dealing with data access, information security, encryption standards, and other initiatives designed to protect the integrity and confidentiality of information.
Please refer also to the Firms Privacy Policies under Regulation S-P.
Books and Records
All personnel are required to keep accurate and truthful books and records which is critical for our business operations, compliance with legal requirements and the preparation of the Firms financial statements. In this pursuit, personnel should:
| Recognize their role and personal responsibility for the integrity of records, reports and information that they prepare or control |
| Comply with internal accounting and recordkeeping policies. Falsification of any books, records or accounts is prohibited |
| Provide complete and accurate information in connection with any regulatory filings or inquiries |
| Follow all record retention and destruction policies of the Firm |
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Computers and Communications
All personnel are to use the Firms computer and communications systems (Systems) solely for business purposes. Unauthorized access to, use of, interception or distribution of the Firms Systems is prohibited. Such conduct may also be a violation of law.
However, the Firm realizes that some personal use of these Systems is inevitable. Any personal use should be kept to a minimum. Excessive or inappropriate use of such Systems for personal use (e.g. time spent or content) as determined by the Firm in its sole discretion may be grounds for sanctions or termination.
| Any personal use must be lawful and not violate any Firm policy. As an example, an email communication or, accessing an internet site, with inappropriate content or material would violate Firm policy and is prohibited. |
| Personal use of the Firms Systems must not impose any incremental cost to the Firm, interfere with normal business operations, or otherwise adversely affect the interests of the Firm or an employees work. |
| Employees use of the Firms Systems, for either business or personal use, should have no expectation of privacy. |
Insider Trading
All personnel are prohibited from trading, either personally or on behalf of others, while in possession of material, nonpublic information about issuers and are also prohibited from communicating material, nonpublic information about issuers to others (other than for legitimate legal or business purposes such as informing the Chief Compliance Officer that they, or the firm, is in possession of such information).
Please refer to the Firms Insider Trading Policy for more detail.
Political Contributions
All personnel are required to obtain preclearance approval for any direct or indirect political contributions or payments to an Official or Political Action Committee (PAC) in order to evaluate and monitor any potential or ongoing impact to the firm. Additional restrictions and prohibitions apply to employees identified as Covered Associates involving monetary limitations and the coordination / solicitation of other individuals to make political contributions.
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Please refer to the Firms policy regarding Political Contributions by Certain Investment Advisers (Pay-to-Play) for more detail.
The Firm expects all personnel to comply with the spirit of the Code, as well as the applicable specific rules contained in the Code. You must promptly report any violations (not just of personal trading but of the overall requirements of this Code) to the Chief Compliance Officer.
The Firm treats violations of this Code (including violations of the spirit of the Code) very seriously. If you violate either the letter or the spirit of this Code, the Firm might impose penalties or fines, cut your compensation, demote you, require disgorgement of trading gains, suspend or terminate your employment, or any combination of the foregoing.
Improper trading activity can constitute a violation of this Code. But you can also violate this Code by failing to file required reports, or by making inaccurate or misleading reports or statements concerning trading activity or securities accounts. Your conduct can violate this Code, even if no clients are harmed by your conduct.
If you have any doubt or uncertainty about what this Code requires or permits, you should ask the Chief Compliance Officer. Dont just guess at the answer. Ignorance or lack of understanding is no excuse for a violation.
B. Compliance with the Federal Securities Laws
More generally, Firm personnel (including members of the Firms boards) are required to comply with applicable federal securities laws at all times. Examples of applicable federal securities laws include:
| the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the SEC rules thereunder; |
| the Investment Advisers Act of 1940 and the SEC rules thereunder; |
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| the Investment Company Act of 1940 and the SEC rules thereunder; |
| title V of the Gramm-Leach-Bliley Act of 1999 (privacy and security of client non-public information); and |
| the Bank Secrecy Act, as it applies to mutual funds and investment advisers, and the SEC and Department of the Treasury rules thereunder. |
All firm personnel are reminded that under these laws, all oral and written statements, including those made to clients, prospective clients, or their representatives must be professional, accurate, balanced, and not misleading in any way.
C. Gifts to or from Brokers, Clients or OthersThis Applies to All Access Persons
No personnel may accept or receive on their own behalf or on behalf of the Firm any gift or other accommodations from a vendor, broker, securities salesman, client or prospective client (a business contact) that might create a conflict of interest or interfere with the impartial discharge of such personnels responsibilities to the Firm or its clients or place the recipient or the Firm in a difficult or embarrassing position. This prohibition applies equally to gifts to members of the Family/Household of firm personnel.
No personnel may give on their own behalf or on behalf of the Firm any gift or other accommodation to a business contact that may be construed as an improper attempt to influence the recipient.
In no event should gifts to or from any one business contact have a value that exceeds the annual limitation on the dollar value of gifts (currently $200).
These policies are not intended to prohibit normal business entertainment (e.g. dinner, sporting event tickets, etc. all of a reasonable value). Any questions as to whether a particular gift or entertainment activity constitutes normal business entertainment should be directed to the Chief Compliance Officer.
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Please refer to the Firms Gift & Entertainment policy for a more detailed discussion and quarterly reporting requirements.
D. Service on the Board or as an Officer of Another CompanyThis Applies to All Personnel, Except Members of the
Firms Board Who Are Not Employees of the Firm
To avoid conflicts of interest, insider information and other compliance and business issues, the Firm prohibits all its employees from serving as officers or members of the board of any other for-profit entity, except with the advance written approval of the Firm. Approval must be obtained through the Chief Compliance Officer, and will ordinarily require consideration by the CEO or the board of the Firm. The Firm can deny approval for any reason. This prohibition does not apply to service as an officer or board member of any parent or subsidiary of the Firm, nor does it apply to members of the Firms board who are not employees of the Firm.
PART IIApplies to Access Persons
A. Reporting RequirementsThese Apply to All Access Persons
NOTE: One of the most complicated parts of complying with this Code is understanding what holdings, transactions and accounts you must report and what accounts are subject to trading restrictions. For example, accounts of certain members of your family and household are covered, as are certain categories of trust accounts, certain investment pools in which you might participate, and certain accounts that others may be managing for you. To be sure you understand what holdings, transactions and accounts are covered, it is essential that you carefully review the definitions of Covered Security, Reportable Funds, Family/Household and Beneficial Ownership in the Definitions section at the end of this Code.
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ALSO: You must file the reports described below, even if you have no holdings, transactions or accounts to list in the reports. Absent extenuating circumstances, only those involved with the internal review of personal transactions (i.e., the Chief Compliance Officer, those assisting the Chief Compliance Officer and the CEO) will have access to submitted reports. The reports are also required to be made available for certain other purposes, such as SEC inspections.
1. Initial Holdings Reports. No later than 10 days after you become an Access Person, you must file with the Chief Compliance Officer a Holdings Report on Form A (copies of all reporting forms are available from the Chief Compliance Officer).
Form A requires you to list all Covered Securities in which you (or members of your Family/Household) have Beneficial Ownership. It also requires you to list all brokers, dealers and banks where you maintain an account in which any securities (not just Covered Securities) are held for the direct or indirect benefit of you or a member of your Family/Household on the date you became an Access Person. The information contained in the report must be current as of a date no more than 45 days prior to the date you became an Access Person.
Form A also requires you to confirm that you have read and understand this Code, that you understand that it applies to you and members of your Family/Household and that you understand that you are an Access Person under the Code.
2. Quarterly Transaction Reports. No later than 30 days after the end of March, June, September and December each year, you must file with the Chief Compliance Officer a Quarterly Transactions Report on Form B.
Form B requires you to list all transactions during the most recent calendar quarter in Covered Securities, in which transactions you (or a member of your Family/Household) had Beneficial Ownership. It also requires you to list all brokers, dealers, investment managers and banks where you or a member of your Family/Household established, or closed an account in which any securities (not just Covered Securities) were held during the quarter for the direct or indirect benefit of you or a member of your Family/Household.
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3. Annual Holdings Reports. By January 31st of each year, you must file with the Chief Compliance Officer an Annual Holdings Report on Form C.
Form C requires you to list all Covered Securities in which you (or a member of your Family/Household) had Beneficial Ownership as of December 31st of the prior year. It also requires you to list all brokers, dealers and banks where you or a member of your Family/Household maintained an account in which any securities (not just Covered Securities) were held for the direct or indirect benefit of you or a member of your Family/Household on December 31 of the prior year.
Form C also requires you to confirm that you have read and understand this Code, that you understand that it applies to you and members of your Family/Household and that you understand that you are an Access Person under the Code.
4. Duplicate Confirmations and Periodic Statements. If you or any member of your Family/Household has a securities account that holds or will hold Covered Securities with any broker, dealer, investment manager or bank, you or your Family/Household member must direct that broker, dealer, investment manager or bank to send, directly to the Firms Chief Compliance Officer, contemporaneous duplicate copies of all transaction confirmation statements and all account statements relating to that account.
5. Outside Service Pre-Approval and Annual Certification. By January 31st of each year, you must file with the Chief Compliance Officer an Outside Service Annual Certification on Form D.
Form D requires that you list all for-profit entities for which you serve as either an Officer or member of the Board of Directors as of the previous year-end with an indication as to whether the entity is publicly traded or private.
Form D is also to be used in requesting pre-approval to serve as an Officer or member of the Board of Directors for any for-profit entity prior to accepting such a position.
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B. Transaction RestrictionsThese Apply to All Access Persons.
1. Preclearance. You and members of your Family/Household are prohibited from engaging in any transaction in a Covered Security for any account in which you or a member of your Family/Household has any Beneficial Ownership, unless you obtain, in advance of the transaction, written preclearance for that transaction from the Chief Compliance Officer or others as approved by the Chief Compliance Officer.
FORM E Personal Trade Sheet should be used for preclearance.
Once obtained, preclearance is valid only for the day on which it is granted and the following one (1) business day. The Chief Compliance Officer may revoke a preclearance any time after it is granted and before you execute the transaction. The Chief Compliance Officer may deny or revoke preclearance for any reason. In no event will preclearance be granted for any Covered Security if, to the knowledge of the Chief Compliance Officer, the Firm has purchased or sold that same security or a closely related security that day OR the Firm has a buy or sell order pending for that same security or a closely related security (such as an option relating to that security, or a related convertible or exchangeable security).
a.) Limit Orders
Limit Orders will be granted pre-clearance authorization to be placed on a Good-Til-Cancelled (GTC) basis as long as the security is NOT HELD within one of the firms strategies and will not potentially violate short-term trading restrictions.
| Any change you wish to make to an approved limit order (e.g. limit price) will require a new pre-clearance authorization prior to execution. Unapproved changes to a limit order which are executed will be a violation of the Code and subject to fines and/or sanctions |
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| Upon such time as the firm may begin to trade and hold a previously approved outstanding limit order security within one of the firms strategies you will be notified to cancel the limit order. Any desire to trade the security, after a notification to cancel a limit order is given to you, will require a new pre-clearance form and associated authorization. Execution of the original limit order for which notification to cancel has been given will be a violation of the Code and subject to fines and/or sanctions. |
b.) Preclearance Exceptions
The preclearance requirements do not apply to the following categories of transactions:
i. Shares of registered open-end investment companies (including Reportable Funds).
| However, Reportable Funds are reportable under this code in connection with Initial (Form A), Quarterly (Form B) and Annual forms (Form C). |
ii. Transactions in securities of collective investment vehicles (other than a fund sub-advised by Vaughan Nelson) for which the Firm serves as the investment adviser (for example, the purchase or redemption by you of an interest in a Firm-managed hedge fund would not be subject to pre-clearance).
iii. Transactions in Covered Securities by Firm-sponsored collective investment vehicles for which the Firm serves as investment adviser as to which you may be deemed to have Beneficial Ownership (for example, the purchase or sale by a Firm-managed hedge fund of a Covered Security would not be subject to pre-clearance, even though the portfolio manager of the hedge fund could be deemed to have a Beneficial Ownership of such Covered Security).
iv. Exchange Traded Funds (ETFs); other than those ETFs in which the firm trades. Please see Appendix A (attached) for a list of Exchange Traded Funds for which pre-clearance IS required.
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v. Transactions that occur by operation of law or under any other circumstance in which neither the Access Person nor any member of his or her Family/Household exercises any discretion to buy or sell or makes recommendations to a person who exercises such discretion.
vi. Transactions effected through an unaffiliated managed account are excluded only if the Access Person (or member of his or her Family/Household, as applicable) has not initiated the investment transaction, has not been consulted regarding any specific investment recommendations or decisions, and is not otherwise participating in the accounts investment process.
vii. Purchases of Covered Securities pursuant to an automatic dividend reinvestment plan.
viii. Purchases pursuant to the exercise of rights issued pro rata to all holders of the class of Covered Securities held by the Access Person (or Family/Household member) and received by the Access Person (or Family/Household member) from the issuer.
ix. Transactions in futures and options contracts on interest rate instruments or indexes, and options on such contracts.
c.) The following are NOT Covered Securities, and so are also not subject to the preclearance requirements:
| direct obligations of the U.S. Government; |
| bankers acceptances, bank certificates of deposit; |
| commercial paper and other high quality short-term debt obligations (including repurchase agreements); |
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| shares issued by money market funds and shares of registered open-end investment companies that are not Reportable Funds. |
2. | Initial Public Offerings and Private Placements. |
Neither you nor any member of your Family/Household may acquire any Beneficial Ownership in any Covered Security in an initial public offering. In addition, neither you nor any member of your Family/Household may acquire Beneficial Ownership in any Covered Security in a private placement, except with the specific, advance written approval of the Chief Compliance Officer, which the Chief Compliance Officer may deny for any reason.
3. | Prohibition on Short-Term Trading in Funds Sub-advised by Vaughan Nelson |
Neither you nor any member of your Family/Household may purchase and sell, or sell and purchase, shares of any fund sub-advised by Vaughan Nelson within any period of 30 calendar days for a profit. This prohibition applies to shares of funds advised / sub-advised by Vaughan Nelson held in retirement or 401(k) plan accounts, as well as in other accounts in which you or a member of your Family/Household has Beneficial Ownership. Note that an exchange of shares (i.e. into another retirement plan option) counts as a sale of shares for purposes of this prohibition.
a.) | This prohibition does not apply to the following categories of transactions: |
i. A fund sub-advised by an affiliate and on the Reportable Funds list.
ii. Transactions under automatic investment or withdrawal plans, including automatic 401(k) plan investments, and transactions under a fund sub-advised by Vaughan Nelsons dividend reinvestment plan.
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A.) For example, if you have established an automatic investment plan under which regular monthly investments are automatically made in a fund sub-advised by Vaughan Nelson, that investment will not be considered to begin or end a 30-day holding period.
iii. Transactions that occur by operation of law or under any other circumstance in which neither you nor any member of your Family/Household exercises any discretion to buy or sell or makes recommendations to a person who exercises such discretion.
b.) | In applying the prohibition on short-term trading in funds sub-advised by Vaughan Nelson, the Firm may take account of all purchase and sale transactions in the Vaughan Nelson sub-advised fund, even if the transactions were made in different accounts. For example, a purchase of shares of a fund sub-advised by Vaughan Nelson in a brokerage account, followed within 30 days by an exchange out of the same fund sub-advised by Vaughan Nelson in your 401(k) account, will be treated as a violation. |
In applying the 30-day holding period, the most recent purchase (or sale) will be measured against the sale (or purchase) in question. (That is, a last-in, first-out analysis will apply.) A violation will be deemed to have occurred even if the number of shares or the dollar value of the second trade was different from the number of shares or dollar value of the first trade.
4. | Prohibition on Short-Term Trading of Covered Securities Other Than Funds Sub-advised by Vaughan Nelson. |
Neither you nor any member of your Family/Household may purchase and sell, or sell and purchase, a Covered Security (or any closely related security, such as an option or a related convertible or exchangeable security) within any period of 60 calendar days for a profit. If any such transactions occur, the Firm will require any profits from the transactions to be disgorged for donation by the Firm to charity.
a.) | This prohibition on short-term trading does not apply to: |
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i. Transactions in securities of collective investment vehicles for which the Firm serves as an investment adviser, other than funds sub-advised by Vaughan Nelson. Note that Section 3 above contains separate prohibitions on short-term trading in funds sub-advised by Vaughan Nelson.
ii. Transactions in Covered Securities by Firm-sponsored collective investment vehicles for which the Firm serves as investment adviser as to which you may be deemed to have Beneficial Ownership (for example, the purchase or sale by a Firm-managed hedge fund of a Covered Security would not be subject to this prohibition, even though the portfolio manager of the hedge fund could be deemed to have a Beneficial Ownership of such Covered Security).
iii. Transactions that occur by operation of law or under any other circumstance in which neither you nor any member of your Family/Household exercises any discretion to buy or sell or makes recommendations to a person who exercises such discretion.
iv. Purchases of Covered Securities pursuant to an automatic dividend reinvestment plan.
v. Purchases pursuant to the exercise of rights issued pro rata to all holders of the class of Covered Securities and received by you (or Family/Household member) from the issuer.
vi. Transactions in common or preferred stocks of a class that is publicly-traded, has a 10 day average daily trading volume greater than 1 million shares (as indicated by Reuters or an equivalent source) and is issued by a company with a stock market capitalization of at least 5 billion U.S. dollars (or the equivalent in foreign currency)
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vii. Transactions in Exchange Traded Funds which are considered Covered Securities.
viii. Transactions effected through an unaffiliated managed account where the Access Person (or member of his or her Family/Household, as the case may be) has not initiated the investment transaction, has not been consulted regarding specific investment recommendations or decisions, and is not otherwise participating in the investment process.
ix. Transactions in municipal bonds, corporate bonds, mortgage-backed securities, and agency bonds (eg. Fannie Maes). (Reminder: Governments bonds are not considered Covered Securities).
5. 7-Day Blackout PeriodThis Applies to All Access Persons. No Access Person (including any member of the Family/Household of such Access Person) may purchase or sell any Covered Security within the three business days immediately before or after a business day on which any client account managed by the Firm purchases or sells that Covered Security (or any closely related security, such as an option or a related convertible or exchangeable security), unless the Access Person had no actual knowledge that the Covered Security (or any closely related security) was being considered for purchase or sale for any client account. If any such transactions occur, the Firm will generally require any profits from the transactions to be disgorged for donation by the Firm to charity.
Note that the total blackout period is 7 business days (the day of the client trade, plus three business days before and three business days after).
a. ) Hardship Exception: to the extent an individual desires to purchase or sell a security currently owned by that individual and is only precluded from selling the security due to an ongoing blackout period, the individual may request a hardship exception from the Chief Compliance Officer. Based upon all facts and circumstances surrounding the hardship, the
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Chief Compliance Officer may, in his/her sole discretion, formulate an objective plan to facilitate the individuals transaction in a manner which will not benefit from or impact transactions undertaken on behalf of the firms clients.
b.) Backside Blackout Period: The Firm will review situations where a personal trade has been approved (including a review of the frontside blackout period) and transacted and then the same Covered Security (or any closely related security, such as an option or a related convertible or exchangeable security) subsequently transacted by the Firm for client accounts during the backside blackout period. To the extent the Firms transactions during the backside blackout period consisted of re-balancing or flow trades, no violation will have been deemed to occur.
c.) It sometimes happens that an Access Person who is responsible for making investment recommendations or decisions for client accounts (such as a portfolio manager or analyst) determineswithin the three business days after the day he or she (or a member of his or her Family/Household) has purchased or sold for his or her own account a Covered Security that was not, to the Access Persons knowledge, then under consideration for purchase by any client accountthat it would be desirable for client accounts as to which the Access Person is responsible for making investment recommendations or decisions to purchase or sell the same Covered Security (or a closely related security). In this situation, the Access Person MUST put the clients interests first, and promptly make the investment recommendation or decision in the clients interest, rather than delaying the recommendation or decision for clients until after the third day following the day of the transaction for the Access Persons (or Family/Household members) own account to avoid conflict with the blackout provisions of this Code. The Firm recognizes that this situation may occur in entire good faith, and will not require disgorgement of profits in such instances if it appears that the Access Person acted in good faith and in the best interests of the Firms clients.
d.) | The blackout requirements do not apply to the following categories of transactions: |
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i. Transactions in futures and options contracts on interest rate instruments or indexes, and options on such contracts.
ii. Transactions that occur by operation of law or under any other circumstance in which neither the Access Person nor any member of his or her Family/Household exercises any discretion to buy or sell or makes recommendations to a person who exercises such discretion.
iii. Transactions effected through an unaffiliated managed account are excluded only if the Access Person (or member of his or her Family/Household, as applicable) has not initiated the investment transaction, has not been consulted regarding any specific investment recommendations or decisions, and is not otherwise participating in the accounts investment process.
iv. Purchases of Covered Securities pursuant to an automatic dividend reinvestment plan.
v. Purchases pursuant to the exercise of rights issued pro rata to all holders of the class of Covered Securities held by the Access Person (or Family/Household member) and received by the Access Person (or Family/Household member) from the issuer.
vi. Transactions in securities of collective investment vehicles for which the Firm serves as the investment adviser.
vii. Transactions in Covered Securities by Firm-sponsored collective investment vehicles for which the Firm serves as investment adviser as to which the Investment Person may be deemed to have Beneficial Ownership
viii. Transactions in common or preferred stocks of a class that is publicly-traded, has a 10 day average daily trading volume greater than 1 million shares (as indicated by Reuters or an equivalent source) AND is issued by a company with a stock market capitalization of at least 5 billion U.S. dollars (or the equivalent in foreign currency). Day of trade blackout is still applicable.
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ix. Transactions in Exchange Traded Funds which are considered Covered Securities. Day of trade blackout is still applicable.
x. Reportable Funds.
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Definitions
These terms have special meanings in this Code of Ethics:
Access Person
Beneficial Ownership
Chief Compliance Officer
Covered Security
Family/Household
Non-Access Director
Reportable Fund
The special meanings of these terms as used in this Code of Ethics are explained below. Some of these terms (such as beneficial ownership) are sometimes used in other contexts, not related to Codes of Ethics, where they have different meanings. For example, beneficial ownership has a different meaning in this Code of Ethics than it does in the SECs rules for proxy statement disclosure of corporate directors and officers stockholdings, or in determining whether an investor has to file 13D or 13G reports with the SEC.
IMPORTANT: If you have any doubt or question about whether an investment, account or person is covered by any of these definitions, ask the Chief Compliance Officer. Dont just guess at the answer.
Access Person includes:
| Every member of the board of the Firm or of the Firms general partner, Vaughan Nelson Investment Management, Inc., other than Non-Access Directors |
| Every employee of the Firm |
| Every employee of the Firm (or of any company that directly or indirectly has a 25% or greater interest in the Firm) who, in connection with his or her regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of a Covered Security for any client account, or whose functions relate to the making of any recommendations with respect to purchases and sales. |
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Beneficial ownership means any opportunity, directly or indirectly, to profit or share in the profit from any transaction in securities. It also includes transactions over which you exercise investment discretion (other than for a client of the Firm), even if you dont share in the profits.
Beneficial Ownership is a very broad concept. Some examples of forms of Beneficial Ownership include:
| Securities held in a persons own name, or that are held for the persons benefit in nominee, custodial or street name accounts. |
| Securities owned by or for a partnership in which the person is a general partner (whether the ownership is under the name of that partner, another partner or the partnership or through a nominee, custodial or street name account). |
| Securities that are being managed for a persons benefit on a discretionary basis by an investment adviser, broker, bank, trust company or other manager, unless the securities are held in a blind trust or similar arrangement under which the person is prohibited by contract from communicating with the manager of the account and the manager is prohibited from disclosing to the person what investments are held in the account. (Just putting securities into a discretionary account is not enough to remove them from a persons Beneficial Ownership. This is because, unless the arrangement is a blind trust, the owner of the account can still communicate with the manager about the account and potentially influence the managers investment decisions.) |
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| Securities in a persons individual retirement account. |
| Securities in a persons account in a 401(k) or similar retirement plan, even if the person has chosen to give someone else investment discretion over the account. |
| Securities owned by a trust of which the person is either a trustee or a beneficiary. |
| Securities owned by a corporation, partnership or other entity that the person controls (whether the ownership is under the name of that person, under the name of the entity or through a nominee, custodial or street name account). |
This is not a complete list of the forms of ownership that could constitute Beneficial Ownership for purposes of this Code. You should ask the Chief Compliance Officer if you have any questions or doubts at all about whether you or a member of your Family/Household would be considered to have Beneficial Ownership in any particular situation.
Chief Compliance Officer means Richard Faig, or another person that he or she designates to perform the functions of Chief Compliance Officer when he or she is not available. For purposes of reviewing the Chief Compliance Officers own transactions and reports under this Code, the functions of the Chief Compliance Officer are performed by the individual designated to perform such functions by the Chief Compliance Officer.
Covered Security means anything that is considered a security under the Investment Company Act of 1940, or the Investment Advisers Act of 1940, except:
| Direct obligations of the U.S. Government. (Note: This includes only securities supported by the full faith and credit of the U.S. Government, such as U.S. Treasury bonds, and does not include securities issued or guaranteed by federal agencies or government-sponsored enterprises that are not supported by the full faith and credit of the U.S. Government. ) |
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| Bankers acceptances, bank certificates of deposit, commercial paper and high quality short-term debt obligations, including repurchase agreements. |
| Shares of money market funds |
| Exchange Traded Funds (ETFs), (other than those ETFs in which the firm trades). Please see Appendix A (attached) for a list of Exchange Traded Funds which ARE considered Covered Securities. |
| Shares of open-end investment companies that are registered under the Investment Company Act (mutual funds) other than Reportable Funds. Please refer to the definition of and current listing of Reportable Funds. |
This is a very broad definition of security. It includes most kinds of investment instruments, including things that you might not ordinarily think of as securities, such as:
| options on securities, on indexes and on currencies. |
| investments in all kinds of limited partnerships. |
| investments in foreign unit trusts and foreign mutual funds. |
| investments in private investment funds, hedge funds (e.g., a fund managed by the Firm) and investment clubs. |
If you have any question or doubt about whether an investment is considered a security or a Covered Security under this Code, ask the Chief Compliance Officer.
Members of your Family/Household include:
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| Your spouse or domestic partner (unless they do not live in the same household as you and you do not contribute in any way to their support). |
| Your children under the age of 18. |
| Your children who are 18 or older (unless they do not live in the same household as you and you do not contribute in any way to their support). |
| Any of these people who live in your household: your stepchildren, grandchildren, parents, stepparents, grandparents, brothers, sisters, parents-in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-law, including adoptive relationships. |
CommentThere are a number of reasons why this Code covers transactions in which members of your Family/Household have Beneficial Ownership. First, the SEC regards any benefit to a person that you help support financially as indirectly benefiting you, because it could reduce the amount that you might otherwise need to contribute to that persons support. Second, members of your household could, in some circumstances, learn of information regarding the Firms trading or recommendations for client accounts, and must not be allowed to benefit from that information.
Non-Access Director means any person who is a director of Vaughan Nelson Trust Company or of the corporate general partner of Vaughan Nelson Investment Management, L.P. but who is not an officer or employee of the Firm or of such corporate general partner and who meets all of the following conditions:
| He or she, in connection with his or her regular functions or duties, does not make, participate in or obtain information regarding the purchase or sale of Covered Securities by a registered investment company, and whose functions do not relate to the making of recommendations with respect to such purchases or sales; |
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| He or she does not have access to nonpublic information regarding any Firm clients purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any Reportable Fund; and |
| He or she is not involved in making securities recommendations to Firm clients, and does not have access to such recommendations that are nonpublic. |
Reportable Fund means any investment companies (other than money market funds) that are registered under the Investment Company Act for which the Firm serves as an investment adviser or whose investment adviser or principal underwriter controls the Firm, is controlled by the Firm, or is under common control with the Firm. A Reportable Fund includes registered investment companies that are sub-advised by the Firm or any of the firms affiliates. See most current listing of Reportable Funds maintained by the Chief Compliance Officer.
Comment Regarding Reportable Funds
Reportable Funds are mutual funds for which the Firm or one of its affiliated companies serves as an investment adviser, sub-adviser or principal underwriter. Reportable Funds are included within the definition of Covered Securities. For a firm like ours that is part of a large organization where there are a number of firms under common control that advise, sub-advise or distribute mutual funds, the universe of Reportable Funds is large.
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Acknowledgment
I have received the Code of Ethics (the Code) of Vaughan Nelson Investment Management, L.P. (the Firm) and have read and understand the Code, understand that it applies to me and members of my Family/Household and that I am an Access Person under the Code. In addition, I have been trained with respect to such sections.
I understand that I am responsible for, and I certify that I have, to date, complied with and will continue to comply with, the policies and procedures in the Code. I understand that any violation of such policies and procedures may lead to sanctions, including dismissal.
Signature |
Date | |
Printed Name |
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Personal Trading Revised 12/31/2015
Appendix A List of Exchange Traded Funds (ETFs) in which Vaughan
Nelson Invests (preclearance is required):
IWN, I-Shares Russell 2000 Value
IWM, I-Shares Russell 2000 Index
IVV, I-Shares S&P 500 Index Fund
IWD, I-Shares Russell 1000 Value
IWV, I-Shares Russell 3000 Index
IWS, I-Shares Russell Midcap Value
IWW, I-Shares Russell 3000 Value
IWB, I-Shares Russell 1000
IWR, I-Shares Russell Midcap
IYH, I-Shares U.S. Healthcare
SUB, I-Shares Short-Term National AMT-Free Muni Bond
MUB, I-Shares S&P National AMT-Free Muni Bond
AAXJ, I-Shares MSCI All Country Asia ex Japan
ILF, I-Shares S&P Latin America 40
AGG, I-Shares Core Total US Bond Market ETF
VOO, Vanguard 500
MGC, Vanguard Mega Cap 300
VO, Vanguard Mid-Cap
VOE, Vanguard Mid-Cap Value
BSV, Vanguard Short-Term Bond
VCSH, Vanguard Short-Term Corporate Bond
VGSH, Vanguard Short-Term Government Bond
BIV, Vanguard Intermediate-Term Bond
VCIT, Vanguard Intermediate-Term Corporate Bond
VWO, Vanguard MSCI Emerging Markets
SHM, SPDR Nuveen Capital Short Term Muni Bond
MUNI, PIMCO Intermediate Muni Bond Strategy
A-28
Vaughan Nelson - CODE OF ETHICS
FORM AINITIAL HOLDINGS REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH COMPLIANCE NO LATER THAN 10 DAYS AFTER BECOMING AN ACCESS PERSON UNDER THE VAUGHAN NELSON INVESTMENT MANAGEMENT, L.P. CODE OF ETHICS (the CODE). TERMS IN BOLDFACE TYPE HAVE THE MEANINGS SET FORTH IN THE CODE.
Name of Access Person:
Date I Became an Access Person (the Reporting Date):
Date received by Compliance:
Initial Certification (check ONE of the following two boxes):
I understand that for purposes of the Code I am classified as:
☐ | an Access Person |
☐ | a Non-Access Person |
Initial Holdings Report (check ONE of the following two boxes):
☐ | Neither I, nor any member of my Family/Household, has Beneficial Ownership of any Covered Securities. |
☐ | Attached as APPENDIX A is a complete list of all Covered Securities in which I, and/or a member of my Family/Household, had Beneficial Ownership on the Reporting Date. |
A-1
Accounts with Brokers, Dealers, Investment Managers and/or Banks (check ONE of the following two boxes):
☐ | Neither I, nor any member of my Family/Household, had, as of the Reporting Date, any accounts with brokers, dealers, investment managers or banks in which any securities (including securities which are not Covered Securities) are held, and with respect to which I, or any member of my Family/Household, has Beneficial Ownership. |
☐ | All accounts that I, and/or any member of my Family/Household, maintain with brokers, dealers, investment managers or banks in which securities (including securities which are not Covered Securities) are held, and with respect to which I, and/or a member of my Family/Household, had Beneficial Ownership as of the Reporting Date are set forth below: |
Name(s) of Institution(s) |
Account # |
Holds Covered Securities (Y/N) | ||
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All information provided in this Form A is true and complete to the best of my knowledge.
I have read the Code, and will keep a copy for future reference. I understand my responsibilities under the Code and agree to comply with all of its terms and conditions. In particular, I understand that the Code applies to me and to all investments in which I have Beneficial Ownership, as well as investments in which members of my Family/Household have Beneficial Ownership.
Signed: | ||
Date: |
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Appendix AInitial Report of all Covered Securities
Name of Access Person:
Note: Copies of Broker/Account Statements may be attached in lieu of listing securities. All information should be reported as of a date within 45 days of your start date.
Please use additional sheets as needed.
Title/Type/Ticker of Covered Securities / Reportable Funds |
Number of Shares (or Principal Amount, if not a stock) |
A-3
Vaughan Nelson - CODE OF ETHICS
FORM BQUARTERLY TRANSACTION REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH COMPLIANCE NO LATER THAN 30 DAYS AFTER THE END OF MARCH, JUNE, SEPTEMBER AND DECEMBER OF EACH YEAR. TERMS IN BOLDFACE TYPE HAVE THE MEANINGS SET FORTH IN THE CODE.
Name of Access Person:
Reporting Period/Calendar Quarter End Date:
Date received by Compliance:
TRANSACTIONS REPORT (check ONE of the following two boxes):
☐ | There WERE NO transactions in Covered Securities* (including transactions in shares/units of Reportable Funds*) during the most recently completed calendar quarter in which I, or any member of my Family/Household*, had Beneficial Ownership*. (Continue to page 3.) |
☐ | There WERE transactions in Covered Securities (including transactions in shares/units of Reportable Funds) during the most recently completed calendar quarter in which I, and/or any member of my Family/Household, had Beneficial Ownership. (Continue to page 2.) |
* | See pg. 4 Appendix for definitions. |
All Access Persons must complete and sign page 3.
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All transactions in Covered Securities that I, or any member of my Family/Household undertook (check ONE or BOTH as applicable)
☐ | were through security accounts for which the firm is receiving duplicate confirmations and account statements. |
☐ | were effected OUTSIDE of security accounts for which the firm is receiving duplicate confirmations and account statements and are listed below: |
*** | Examples of transactions to list below: Investments in all kinds of limited partnerships, private investment funds, hedge funds, investment clubs, LLCs, private companies or businesses. |
Transaction Date |
Type (e.g., purchase, sale) |
Title of Securities |
# of Shares | Principal Amount |
Interest Rate/ Maturity Date (if applicable) |
Price | Institution through which transaction effected |
Note: Please use additional sheets as needed.
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CONTINUE TO PG. 3
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New/Closed Securities Accounts:
Did you or any member of your Family/Household open or close any accounts during the most recent quarter in which any securities (including securities which are NOT Covered Securities) are held with:
| Brokers |
| Dealers |
| Mutual Fund companies |
| Previous employers (retirement plans) |
| Banks |
| Etc. |
☐ | No |
☐ | Yes (Complete info below) |
Name(s) of Institution(s) |
Account # |
Date Established | Holds Covered Securities (Y/N) | |||
All information provided in this Form B is true and complete to the best of my knowledge.
Signed: |
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Date: |
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Definitions Appendix
Beneficial Ownership means any opportunity, directly or indirectly, to profit or share in the profit from any transaction in securities. It also includes transactions over which you exercise investment discretions (other than for a client of the Firm), even if you dont share in the profits. Beneficial Ownership is a very broad concept.
Covered Security means anything that is considered a security under the Investment Company Act of 1940, or the Investment Advisers Act of 1940.
Common examples of Covered Securities: equity stocks, options on securities, bonds (corporate, muni, agencies), Reportable Funds, Closed-End Funds, ETFs in which the Firm trades for clients.
Not Covered Securities: direct obligations of U.S. Govt., i.e., Treasuries, etc., bank CDs, Open- End Funds other than Reportable Funds (Mutual Funds), ETFs not traded by the Firm for clients, Money Market Funds.
Family/Household all of the following are considered members of your Family/Household:
| Your spouse or domestic partner (unless they do not live in the same household as you and you do not contribute in any way to their support). |
| Your children under the age of 18 |
| Your children who are 18 or older (unless they do not live in the same household as you and you do not contribute to their support in any meaningful way. |
| Any of these people who live in your household: your stepchildren, grandchildren, parents, stepparents, grandparents, brothers, sisters, parents-in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-law, including adoptive relationships. |
Reportable Funds are mutual funds for which the Firm or one of its affiliated companies serves as an investment adviser, sub-adviser or principal underwriter. Reportable Funds are included within the definition of Covered Securities. For a Firm like ours that is part of a large organization where there are a number of firms under common control that advise, sub-advise or distribute mutual funds, the universe of Reportable Funds is large. See the most current listing of Reportable Funds maintained by Compliance.
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Vaughan Nelson - CODE OF ETHICS
FORM C - ANNUAL CODE OF ETHICS CERTIFICATION;
ANNUAL HOLDINGS REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH THE CHIEF COMPLIANCE OFFICER NO LATER THAN JANUARY 31st OF EACH YEAR. TERMS IN BOLDFACE TYPE HAVE THE MEANINGS SET FORTH IN THE CODE.
Name of Access Person:
Calendar Year Covered by this Report:
Date received by Compliance:
Annual Certification
☐ | I hereby certify that during the year covered by this report I complied with all applicable requirements of the Code, and have reported to the Chief Compliance Officer all transactions required to be reported under the Code. |
Annual Holdings Report (check ONE of the following two boxes):
☐ | As of December 31 of the most recently completed calendar year, neither I, nor any member of my Family/Household, had Beneficial Ownership of any Covered Securities (including any shares of Reportable Funds). |
☐ | Attached as APPENDIX C is a complete list of all Covered Securities (including any shares of Reportable Funds). in which I, and/or any member of my Family/Household, had Beneficial Ownership as of December 31 of the most recently completed calendar year, other than Covered Securities held through securities accounts as to which a standing order was (and remains) in effect to provide duplicate broker confirmations and periodic account statements to the Chief Compliance Officer. |
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Accounts with Brokers, Dealers, Investment Managers and/or Banks (check ONE of the following two boxes):
☐ | Neither I, nor any member of my Family/Household, as of December 31 of the most recently completed calendar year, had any accounts with brokers, dealers, investment managers or banks in which any securities (including securities which are not Covered Securities) were held and with respect to which I, or a member of my Family/Household, had Beneficial Ownership. |
☐ | All accounts that I and/or any member of my Family/Household maintained, as of December 31 of the most recently completed calendar year, with brokers, dealers, investment managers or banks in which securities (including securities which are not Covered Securities) were held and with respect to which I, and/or any member of my Family/Household, had Beneficial Ownership are listed below: |
Name(s) of Institution(s) |
Account # |
Managed Account? (Y?N) |
Holds Covered Securities (Y/N) | |||
All information provided in this Form C is true and complete to the best of my knowledge.
Signed: |
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Date: |
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Appendix CAnnual Report of all Covered Securities
Name of Access Person:
☐ | OTHER THAN THOSE LISTED BELOW, ALL COVERED SECURITIES IN WHICH I,, AND/OR ANY MEMBER OF MY FAMILY/HOUSEHOLD, HAD BENEFICIAL OWNERSHIP AS OF DECEMBER 31 OF THE MOST RECENTLY COMPLETED CALENDAR YEAR WERE HELD IN SECURITIES ACCOUNTS AS TO WHICH A STANDING ORDER WAS (AND REMAINS) IN EFFECT TO PROVDE DUPLICATE BROKER CONFIRMATION STATEMENTS AND PERIODIC ACCOUNT STATEMENTS TO THE CHIEF COMPLIANCE OFFICER. |
Note: All information should be reported as of December 31 of the most recently completed calendar year. Please use additional sheets as needed.
Title/Type/Ticker of Covered Securities / Reportable Funds |
Number of Shares |
Principal Amount | ||
FORM D OUTSIDE SERVICE PRE-APPROVAL AND ANNUAL CERTIFICATION
(PART I, SECTION D)
NOTE: THE CERTIFICATION PORTION OF THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH COMPLIANCE NO LATER THAN JANUARY 31st OF EACH YEAR.
Name of Access Person:
Calendar Year Covered by this Report:
Date received by Compliance:
☐ | Annual Outside Service Certification |
☐ | I hereby certify that there are NO for-profit entities (public or private) for which I serve as either an Officer or member of the Board of Directors. |
☐ | I hereby certify that the following is a complete list of for-profit entities (public or private) for which I serve as either an Officer or member of the Board of Directors. |
Name of Entity |
Position |
Public? | ||
Signature |
Date |
☐ | Outside Service Pre-Approval Request |
I desire to serve in the capacity noted below for the following for-profit entity.
Name of Entity |
Position |
Public? | ||
Signature |
Date |
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Approved By |
Date |
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VAUGHAN NELSON INVESTMENT MANAGEMENT, L.P.
FORM E PERSONAL TRADE SHEET
FOR THE ACCOUNT OF: |
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NO. OF CONTRACTS |
SECURITY |
DATE SHARES PURCHASED? |
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TOTAL COST / PROCEEDS |
DEMINIMUS | ||||||||||
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NAME | DATE EXECUTED |
MARKET CAP |
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* | Or sold if originally sold short. |
BROKERAGE FIRM:
This trade is in accordance with the following:
Officers, principals and employees of Vaughan Nelson Investment Management, L.P. (the Company) may execute orders on behalf of the Company, its subsidiaries, their own accounts or other accounts, however, it is a policy of the Company that they must avoid security translations and activities for these accounts which might conflict with or be detrimental to the interests of clients, or which are designed to profit by market effect of the Companys advice to its clients. A specific policy for officers, principals and employees has been established whereby all trades must be approved by authorized compliance individuals of the Company. No sales or purchases may be made by the Company or and officer or employee in a security while it is being purchased of sold for a clients account aside from those considered to be deminimus. Officers, principals and employees of the Company may own the same securities as those held in clients accounts; however, the client would always receive preferential treatment on orders over those orders by officers, principals and employees of the Company.
Employee Signature:
APPROVED BY: |
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(Compliance Department Employee) |
Exhibit (p)(1)
NATIXIS FUNDS TRUST I
NATIXIS FUNDS TRUST II
NATIXIS FUNDS TRUST IV
LOOMIS SAYLES FUNDS I
LOOMIS SAYLES FUNDS II
GATEWAY TRUST
POWER OF ATTORNEY
Effective July 1, 2016, we, the undersigned, hereby constitute John M. Loder, Russell Kane, Rosa Licea-Mailloux and Michael Kardok, each of them singly, our true and lawful attorneys, with full power to them and each of them to sign for us, and in our names in the capacity indicated below, any and all registration statements and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time investment companies of which we are now or hereafter a Director or Trustee and to register the shares of such companies and generally to do all such things in our names and on our behalf to enable such registered investment companies to comply with the provisions of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys and any and all registration statements and amendments thereto.
Witness our hands on the 16th day of July, 2016.
/s/ Kenneth A. Drucker Kenneth A. Drucker |
/s/ Peter J. Smail Peter J. Smail | |||
/s/ Edmond J. English Edmond J. English |
/s/ Cynthia L. Walker Cynthia L. Walker | |||
/s/ Richard A. Goglia Richard A. Goglia |
/s/ James P. Palermo James P. Palermo | |||
/s/ Wendell J. Knox Wendell J. Knox |
/s/ Kevin P. Charleston Kevin P. Charleston | |||
/s/ Martin T. Meehan Martin T. Meehan |
/s/ David L. Giunta David L. Giunta | |||
/s/ Sandra O. Moose Sandra O. Moose |
/s/ John T. Hailer John T. Hailer | |||
/s/ Erik R. Sirri Erik R. Sirri |
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NATIXIS FUNDS TRUST I
December 9, 2016
Via EDGAR
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: | Natixis Funds Trust I |
Post-Effective Amendment No. 126
(File Nos.: 2-98326 and 811-04323)
Dear Sir or Madam:
On behalf of Natixis Funds Trust I (the Registrant), transmitted for filing is Post-Effective Amendment No. 126 (the Amendment) to the Registrants registration statement on Form N-1A. The attached Amendment is being filed pursuant to Rule 485(a) under the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and Rule 101(a)(1)(i) of Regulation S-T. It is proposed that the Amendment will become effective on February 24, 2017.
The Registrant is filing the Amendment to add a new series, Mirova Global Green Bond Fund. This amendment does not relate to any other series of the Registrant. It is anticipated that the Registrant will file a post-effective amendment to the registration statement pursuant to Rule 485(b) under the 1933 Act on or prior to the proposed effective date to make non-material changes to the disclosure and to incorporate any changes you may deem necessary.
Please direct any questions on the attached materials to me at (617) 449-2818.
Very truly yours, |
/s/ John DelPrete |
John DelPrete |
Assistant Secretary |