N-CSR 1 d692220dncsr.htm NATIXIS FUNDS TRUST II Natixis Funds Trust II
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-00242

 

 

Natixis Funds Trust II

(Exact name of Registrant as specified in charter)

 

 

 

888 Boylston Street, Suite 800, Boston, Massachusetts 02199-8197
(Address of principal executive offices) (Zip code)

 

 

Russell L. Kane, Esq.

Natixis Distribution, L.P.

888 Boylston Street, Suite 800

Boston, Massachusetts 02199-8197

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (617) 449-2822

Date of fiscal year end: December 31

Date of reporting period: December 31, 2018

 

 

 

 

 

Table of Contents
Item 1.

Reports to Stockholders.

The Registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:

Table of Contents

LOGO

 

LOGO

 

Annual Report

December 31, 2018

ASG Dynamic Allocation Fund

ASG Global Alternatives Fund

ASG Managed Futures Strategy Fund

ASG Tactical U.S. Market Fund

 

Table of Contents

Portfolio Review     1  
Portfolio of Investments     25  
Financial Statements     49  
Notes to Financial Statements     70  

 

IMPORTANT NOTICE TO SHAREHOLDERS

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you wish to continue receiving paper copies of your shareholder reports after January 1, 2021, you can inform the Fund at any time by calling 1-800-225-5478. If you hold your account with a financial intermediary and you wish to continue receiving paper copies after January 1, 2021, you should call your financial intermediary directly. Paper copies are provided free of charge, and your election to receive reports in paper will apply to all funds held with the Natixis Funds complex. If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You currently may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically at www.icsdelivery.com/natixisfunds.

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ASG DYNAMIC ALLOCATION FUND

 

Managers   Symbols
Alexander D. Healy, PhD   Class A    DAAFX
Robert S. Rickard   Class C    DACFX
Derek M. Schug, CFA®   Class Y    DAYFX
AlphaSimplex Group, LLC (Adviser)  

 

 

Investment Goal

The Fund seeks long-term capital appreciation. The secondary goal of the Fund is the protection of capital during unfavorable market conditions.

 

 

Market Conditions

Markets began 2018 with optimistic momentum carried over from 2017. Global equity volatility in the first quarter signaled an abrupt change in investor sentiment, weakening the outlook for steady, coordinated growth. A wave of negative fundamental factors in developed and emerging markets (EM), and in the Federal Reserve’s (the Fed) normalization policy, crested into an aggressive re-pricing of domestic equities and sharp outperformance of fixed income assets in the fourth quarter.

Global equity markets started the year bullish, with the S&P 500® up 5.73% in January and the MSCI World Index up 5.28%. But strong fundamental data in the US re-awakened concerns about inflation, causing marked increases in benchmark US Treasury rates in February. Tariff announcements and cabinet reshuffling in the White House in March raised investor fears of an inevitable trade war with China, and the Fed raised rates for the sixth time in March. These developments weighed on commodities and the dollar.

Following the first quarter’s significant spike in equity volatility, the second quarter of 2018 was comparatively quiet. Global economic and political developments still impacted markets and drove noteworthy repricing in the US dollar, EM debt and equity, commodities, and small-cap US stocks. Commodities showed sharp divergence in the second quarter, with energy prices jumping and agricultural commodities plummeting in reaction to the same factors.

Inflation and acute currency weakness in Turkey and Argentina drove headlines in the third quarter, while appreciation in the US dollar slowed and the dramatic risk-off sentiment in EM debt and currency markets ebbed. US equities appreciated on optimism in corporate earnings and economic data, especially in technology shares. The steady flattening of the yield curve transitioned to a more parallel shift upward in rates over the quarter. Energy prices stood out to the upside, while agricultural markets faced selling pressure on trade policy.

The fourth quarter of 2018 was materially different from the first three quarters, as financial conditions tightened sharply. Investors’ constructive outlook on sustainable US economic and corporate strength in a globally weak environment appeared to shift due to trade wars, partisan politics, and the Fed’s normalization policy and uncertainty in its economic outlook.

 

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As such, volatility in the equity market pushed higher; the S&P 500® dropped 6.84% in October alone, which kicked off the 13.52% give-back for the quarter. Despite the magnitude of the drop, it is worth noting that throughout the quarter, and indeed across most principal assets in 2018, the selling was orderly. The lack of panic in the markets was cold comfort, however, in a year when nearly every global stock index was down substantially. It appears the optimism that brought healthy returns on equities in prior years was overwhelmed by the possibility that US strength may not be immune to global weakness and political noise. During the fourth quarter, the US yield curve (a curve that shows the relationship among bond yields across the maturity spectrum) tipped into a slightly inverted position. Given its strong record for predicting recessions, the yield curve inversion attracted a lot of attention. The added uncertainty sparked debates about fundamental strength in the United States, which in turn likely contributed to the accelerated risk-off sentiment in December.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of ASG Dynamic Allocation Fund returned -9.39% at net asset value. Although the Fund does not seek to track any particular index, the Morningstar® Global Allocation IndexSM may be used as a benchmark for performance analysis. This benchmark returned -5.56% for the same period. It is important to note that there are material differences between the Fund and this benchmark.

Explanation of Fund Performance

The Fund uses a set of proprietary quantitative models to invest in global stock and fixed income markets. The Fund’s strategy is to overweight and/or underweight assets within this universe based on these models. The Fund uses exchange-traded funds and derivative instruments, such as futures contracts, to gain exposure to six classes of global assets: US stocks, developed international stocks, emerging market stocks, US bonds, developed international bonds, and emerging market bonds.

Marking a dramatic about-face compared to 2017, which saw gains across the board, each of the six asset groups in which the Fund invests posted losses during 2018. The biggest impact on Fund relative performance was its overweight to US and international developed stocks, which both detracted from returns. Stocks underperformed bonds, with emerging and international developed markets declining more than the United States. Within bonds, US short- and intermediate-duration bonds posted gains, while emerging market, developed international, and US long-term bonds declined. International developed bonds posted small gains.

After exhibiting positive trends with low volatility in 2017 and into January 2018, the Fund held overweight positions in all three stock groups when they suffered losses in February and March. While these overweights were reduced in the first half of the year, a quiet summer resulted in these weights increasing into the start of the year’s final quarter. As a result, the Fund performed poorly during October’s market decline but subsequently reduced its overall stock weight, which helped relative performance in December. The Fund’s average underweight to emerging market stocks throughout the year also helped relative performance.

 

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ASG DYNAMIC ALLOCATION FUND

 

Bonds performed poorly in the first 10 months of the year as US interest rates gradually rose. In early November, however, this trend reversed course and bonds posted gains in the final quarter. Despite the Fund’s average underweight in US and emerging market bonds, our decision to hold more credit exposure than the benchmark detracted from returns. The Fund’s international developed bond positions contributed a small positive return for the year.

The Fund relies primarily on a systematic process to identify trends and changes in the asset allocation of the broad hedge fund universe. The Fund has the ability to adjust its total exposure from 0% to 200%. Mostly as a result of volatility and trend changes observed across markets, the Fund enters 2019 positioned more defensively than it started 2018. Our stock weight ended the year at 25% compared to 97% at the beginning of 2018, while bonds started the year at a 46% weight and ended at 63%.

The Fund’s portfolio is adjusted on a daily basis to incorporate new information about trends and hedge fund positioning, and seeks to control risk by maintaining an annual standard deviation of daily returns below 20%. While volatility in 2018 was significantly higher compared to 2017, it was far from extreme. The benchmark’s annualized volatility was 7.8%, twice as high as in 2017 but still below its longer-term volatility of 9.1%.1 The Fund’s annualized volatility during 2018 was 12.0%, also higher than its experience in 2017 but well below 20%. While the Fund spent most of 2018 more aggressively positioned than the benchmark, it is important to note we anticipate that its exposure at year-end should result in lower overall volatility relative to the benchmark at the beginning of 2019.

Outlook

2018 was a clear reminder that corrections and drawdowns are normal occurrences in risk asset markets. Looking ahead to 2019, a slowdown in the US economy could push US equities into bear territory and compel the Fed to take rate action and pause the balance sheet runoff. This scenario, taken against growth slowing at a faster rate in Europe and China, would likely have second-order global effects on most asset classes, including lower yields.

At the same time, it’s important to note that the fundamental drivers of the most recent economic expansion and tighter labor market in the United States are still in place, namely lower corporate taxes and reduced regulation. Moreover, the global financial system, as measured by the strength of bank balance sheets, is robust, serving as a guardrail to prevent the likelihood of another global financial crisis. Nevertheless, confidence in the global economic environment may be more vulnerable to negative dynamics than it was last year.

Perhaps the most significant disrupting factor going into 2019 is the deeply partisan friction in political discourse, not only in the United States, but in Europe as well. Beyond core disagreement on the best course for the country, partisan politics will continue to meet structural risks, like the federal debt, that may drive real negative outcomes, as exemplified by the government shutdown. One can put a higher likelihood on more volatility in risk assets and weaker economic conditions.

 

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In Europe, the possibility of a re-emergence of sustained activity at a level that would pull the region’s economy into a second period of growth appears to be declining. A slowdown in European industrial production and lower inflation expectations will make it difficult for the European Central Bank to justify executing its current normalization plan. At the same time, deep uncertainties and complexities in the Brexit negotiations make handicapping the end result difficult. Further, should the United States and China reach a meaningfully broad bilateral trade agreement, risk assets would benefit materially. Conversely, deterioration of this important relationship could continue to impede growth and appreciation prospects in both regions and beyond.

Should these negative factors indeed compel a pullback in the US economy, we could expect a reversal of the Fed’s policy of achieving a neutral rate close to 3% and a slowdown, or pause, in the runoff of its balance sheet. This may cause a steepening of the yield curve and potentially put pressure on the US dollar. Indeed, at year-end the Eurodollar futures curve was inverted, implying that the market expects no more rate hikes in 2019.

 

1 

Annualized standard deviation of daily returns of Morningstar® Global Allocation IndexSM from 7/1/2002-12/31/2018.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

November 30, 2015 (inception) through December 31, 2018

 

LOGO

See notes to chart on page 5.

 

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ASG DYNAMIC ALLOCATION FUND

 

Average Annual Total Returns — December 31, 20184

 

       
    

1 Year

 

    

Life of Fund

 

     Expense Ratios5  
  Gross     Net  
     
Class Y (Inception 11/30/15)          
NAV     -9.39 %      3.50 %      1.56 %      0.98 % 
     
Class A (Inception 11/30/15)          
NAV     -9.61       3.25       1.80       1.23  
With 5.75% Maximum Sales Charge     -14.83       1.29        
     
Class C (Inception 11/30/15)          
NAV     -10.30       2.47       2.55       1.98  
With CDSC1     -11.18       2.47                  
   
Comparative Performance          
Morningstar® Global Allocation IndexSM2     -5.56       5.24        
Blended Index3     -5.07       4.21                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

The Morningstar® Global Allocation IndexSM represents a diverse multi-asset-class portfolio of liquid global asset classes that reflects the global investment opportunities available to an investor with a moderate risk tolerance.

 

3

The Blended Index is an unmanaged, blended index composed of the following weights: 60% MSCI World Index (Net)/40% Bloomberg Barclays U.S. Aggregate Bond Index. The weightings of the indices that compose the Blended Index are rebalanced on a monthly basis to maintain the allocations as described above. These rebalancings will not necessarily correspond to the rebalancing of the Fund’s investment portfolio, and the relative weightings of the asset classes in the Fund will generally differ to some extent from the weightings in the Blended Index.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ASG GLOBAL ALTERNATIVES FUND

 

Managers   Symbols
Alexander D. Healy, PhD   Class A    GAFAX
David E. Kuenzi, CFA®   Class C    GAFCX
Peter A. Lee   Class N    GAFNX
Philippe P. Lüdi, CFA®, PhD   Class Y    GAFYX
Robert S. Rickard  
AlphaSimplex Group, LLC (Adviser)  

 

 

Investment Goal

The Fund pursues an absolute return strategy that seeks to provide capital appreciation consistent with the risk-return characteristics of a diversified portfolio of hedge funds. The secondary goal of the Fund is to achieve these returns with less volatility than major equity indices.

 

 

Market Conditions

Markets began 2018 with optimistic momentum carried over from 2017. Global equity volatility in the first quarter signaled an abrupt change in investor sentiment, weakening the outlook for steady, coordinated growth. A wave of negative fundamental factors in developed and emerging markets (EM), and in the Federal Reserve’s (the Fed) normalization policy, crested into an aggressive re-pricing of domestic equities and sharp outperformance of fixed income assets in the fourth quarter.

Global equity markets started the year bullish, with the S&P 500® up 5.73% in January and the MSCI World Index up 5.28%. But strong fundamental data in the US re-awakened concerns about inflation, causing marked increases in benchmark US Treasury rates in February. Tariff announcements and cabinet reshuffling in the White House in March raised investor fears of an inevitable trade war with China, and the Fed raised rates for the sixth time in March. These developments weighed on commodities and the dollar.

Following the first quarter’s significant spike in equity volatility, the second quarter of 2018 was comparatively quiet. Global economic and political developments still impacted markets and drove noteworthy repricing in the US dollar, EM debt and equity, commodities, and small-cap US stocks. Commodities showed sharp divergence in the second quarter, with energy prices jumping and agricultural commodities plummeting in reaction to the same factors.

Inflation and acute currency weakness in Turkey and Argentina drove headlines in the third quarter, while appreciation in the US dollar slowed and the dramatic risk-off sentiment in EM debt and currency markets ebbed. US equities appreciated on optimism in corporate earnings and economic data, especially in technology shares. The steady flattening of the yield curve transitioned to a more parallel shift upward in rates over the quarter. Energy prices stood out to the upside, while agricultural markets faced selling pressure on trade policy.

 

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ASG GLOBAL ALTERNATIVES FUND

 

The fourth quarter of 2018 was materially different from the first three quarters, as financial conditions tightened sharply. Investors’ constructive outlook on sustainable US economic and corporate strength in a globally weak environment appeared to shift due to trade wars, partisan politics, and the Fed’s normalization policy and uncertainty in its economic outlook.

As such, volatility in the equity market pushed higher; the S&P 500® dropped 6.84% in October alone, which kicked off the 13.52% give-back for the quarter. Despite the magnitude of the drop, it is worth noting that throughout the quarter, and indeed across most principal assets in 2018, the selling was orderly. The lack of panic in the markets was cold comfort, however, in a year when nearly every global stock index was down substantially. It appears the optimism that brought healthy returns on equities in prior years was overwhelmed by the possibility that US strength may not be immune to global weakness and political noise. During the fourth quarter, the US yield curve (a curve that shows the relationship among bond yields across the maturity spectrum) tipped into a slightly inverted position. Given its strong record for predicting recessions, the yield curve inversion attracted a lot of attention. The added uncertainty sparked debates about fundamental strength in the United States, which in turn likely contributed to the accelerated risk-off sentiment in December.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of the ASG Global Alternatives Fund returned -6.04%. Although the Fund does not seek to track any particular index, the Barclay Fund of Funds Index may be used as a benchmark for performance analysis. This benchmark returned -4.56% for the same period. It is important to note that there are material differences between the Fund and this benchmark.

Explanation of Fund Performance

The Fund seeks to earn returns from sources like those that drive the typical diversified portfolio of hedge funds. Accordingly, the Fund seeks to take on exposures that reflect the liquid, broad market exposures of the hedge fund industry as estimated by a proprietary process that uses quantitative models. When the Fund takes on a “long” exposure to a market, the long exposure generally profits as the price of the underlying security rises but suffers losses when the price falls. When the Fund takes on a “short” exposure, the short exposure generally suffers losses as the price of the underlying security rises but profits as the price falls.

The Fund typically makes extensive use of futures and forward contracts on global stock indices, fixed income securities, currencies, and commodities, as well as long positions in individual equities. As market events unfold, these exposures result in a profit or loss for the Fund. Like hedge funds, the Fund also utilizes trading strategies designed to capture risk premia and other sources of systematic returns.

During 2018, the Fund, like hedge funds broadly, suffered losses. The largest driver of losses was the decline in equity prices, especially the sharp decline in international equities. Another contributor to losses for the Fund was the large decline in the prices of many

 

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metals and oil-related commodities. A third contributor was a pattern of repeated trend reversals. Trend following is among the hedge fund strategies represented in the Fund, and 2018 was a negative year for most hedge funds in this style category.

Despite the negative overall performance, the Fund’s performance in 2018 did include a few bright spots, including profiting from rising US interest rates and non-trend-following risk premia strategies.

The contribution from the Fund’s money market holdings was slightly more than 1%, as short-maturity interest rates have risen modestly due to actions from the Fed. The Fund’s portfolio is adjusted on a daily and monthly basis to incorporate new information about hedge funds’ exposures and changing market dynamics or to update risk premia positioning, and on a daily basis to control risk. The risk control mechanism is designed to target an average annual volatility of 9% or less — greater than the typical volatility of bonds, but less than the typical volatility of stocks. The Fund’s realized volatility in 2018 was 7.6%, which is in line with our expectations and consistent with the long-run average level. We continue to scale the size of the Fund’s positions to keep total portfolio risk at or below its target.

Outlook

2018 was a clear reminder that corrections and drawdowns are normal occurrences in risk asset markets. Looking ahead to 2019, a slowdown in the US economy could push US equities into bear territory and compel the Fed to take rate action and pause the balance sheet runoff. This scenario, taken against growth slowing at a faster rate in Europe and China, would likely have second-order global effects on most asset classes, including lower yields.

At the same time, it’s important to note that the fundamental drivers of the most recent economic expansion and tighter labor market in the United States are still in place, namely lower corporate taxes and reduced regulation. Moreover, the global financial system, as measured by the strength of bank balance sheets, is robust, serving as a guardrail to prevent the likelihood of another global financial crisis. Nevertheless, confidence in the global economic environment may be more vulnerable to negative dynamics than it was last year.

Perhaps the most significant disrupting factor going into 2019 is the deeply partisan friction in political discourse, not only in the United States, but in Europe as well. Beyond core disagreement on the best course for the country, partisan politics will continue to meet structural risks, like the federal debt, that may drive real negative outcomes, as exemplified by the government shutdown. One can put a higher likelihood on more volatility in risk assets and weaker economic conditions.

In Europe, the possibility of a re-emergence of sustained activity at a level that would pull the region’s economy into a second period of growth appears to be declining. A slowdown in European industrial production and lower inflation expectations will make it difficult for the European Central Bank to justify executing its current normalization plan. At the same time, deep uncertainties and complexities in the Brexit negotiations make handicapping the end result difficult. Further, should the United States and China reach a meaningfully

 

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ASG GLOBAL ALTERNATIVES FUND

 

broad bilateral trade agreement, risk assets would benefit materially. Conversely, deterioration of this important relationship could continue to impede growth and appreciation prospects in both regions and beyond.

Should these negative factors indeed compel a pullback in the US economy, we could expect a reversal of the Fed’s policy of achieving a neutral rate close to 3% and a slowdown, or pause, in the runoff of its balance sheet. This may cause a steepening of the yield curve and potentially put pressure on the US dollar. Indeed, at year-end the Eurodollar futures curve was inverted, implying that the market expects no more rate hikes in 2019.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares3,4

December 31, 2008 through December 31, 2018

 

LOGO

 

 

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Average Annual Total Returns — December 31, 20183

 

           
    

1 Year

 

    

5 Years

 

    

10 Years

 

    

Life of
Class N

 

     Expense Ratios5  
     Gross     Net  
     
Class Y (Inception 9/30/08)              
NAV     -6.04 %      0.22 %      3.28 %      — %      1.34 %      1.33 % 
     
Class A (Inception 9/30/08)              
NAV     -6.35       -0.04       3.02       —       1.59       1.58  
With 5.75% Maximum Sales Charge     -11.71       -1.21       2.42       —        
     
Class C (Inception 9/30/08)              
NAV     -7.09       -0.79       2.25       —       2.34       2.33  
With CDSC1     -8.01       -0.79       2.25       —        
     
Class N (Inception 5/1/13)              
NAV     -6.08       0.24       —       1.59       1.28       1.28  
   
Comparative Performance              
Barclay Fund of Funds Index2     -4.56       0.66       2.47       1.37                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

Barclay Fund of Funds Index is a measure of the average return of all Fund of Funds (“FoFs”) in the Barclay database. The index is simply the arithmetic average of the net returns of all the FoFs that have reported that month. Index returns are recalculated by BarclayHedge, Ltd. throughout each month. The fund does not expect to update the index returns provided if subsequent recalculations cause such returns to change. In addition, because of these recalculations, the Barclay Fund of Funds Index returns reported by the fund may differ from the index returns for the same period published by others.

 

3

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

4

The Fund revised its investment strategies on October 31, 2018; performance prior to October 31, 2018 reflects the Fund’s prior investment strategy and may have been different had the current investment strategies been in place for all periods shown.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/20. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ASG MANAGED FUTURES STRATEGY FUND

 

Managers   Symbols
Alexander D. Healy, PhD   Class A    AMFAX
Kathryn M. Kaminski, PhD   Class C    ASFCX
Philippe P. Lüdi, CFA®, PhD   Class N    AMFNX
Robert W. Sinnott   Class Y    ASFYX
John C. Perry, PhD  
Robert S. Rickard  
AlphaSimplex Group, LLC (Adviser)  

 

 

Investment Goal

The Fund pursues an absolute return strategy that seeks to provide capital appreciation.

 

 

Market Conditions

Markets began 2018 with optimistic momentum carried over from 2017. Global equity volatility in the first quarter signaled an abrupt change in investor sentiment, weakening the outlook for steady, coordinated growth. A wave of negative fundamental factors in developed and emerging markets (EM), and in the Federal Reserve’s (the Fed) normalization policy, crested into an aggressive re-pricing of domestic equities and sharp outperformance of fixed income assets in the fourth quarter.

Global equity markets started the year bullish, with the S&P 500® up 5.73% in January and the MSCI World Index up 5.28%. But strong fundamental data in the US re-awakened concerns about inflation, causing marked increases in benchmark US Treasury rates in February. Tariff announcements and cabinet reshuffling in the White House in March raised investor fears of an inevitable trade war with China, and the Fed raised rates for the sixth time in March. These developments weighed on commodities and the dollar.

Following the first quarter’s significant spike in equity volatility, the second quarter of 2018 was comparatively quiet. Global economic and political developments still impacted markets and drove noteworthy repricing in the US dollar, EM debt and equity, commodities, and small-cap US stocks. Commodities showed sharp divergence in the second quarter, with energy prices jumping and agricultural commodities plummeting in reaction to the same factors.

Inflation and acute currency weakness in Turkey and Argentina drove headlines in the third quarter, while appreciation in the US dollar slowed and the dramatic risk-off sentiment in EM debt and currency markets ebbed. US equities appreciated on optimism in corporate earnings and economic data, especially in technology shares. The steady flattening of the yield curve transitioned to a more parallel shift upward in rates over the quarter. Energy prices stood out to the upside, while agricultural markets faced selling pressure on trade policy.

 

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The fourth quarter of 2018 was materially different from the first three quarters, as financial conditions tightened sharply. Investors’ constructive outlook on sustainable US economic and corporate strength in a globally weak environment appeared to shift due to trade wars, partisan politics, and the Fed’s normalization policy and uncertainty in its economic outlook.

As such, volatility in the equity market pushed higher; the S&P 500® dropped 6.84% in October alone, which kicked off the 13.52% give-back for the quarter. Despite the magnitude of the drop, it is worth noting that throughout the quarter, and indeed across most principal assets in 2018, the selling was orderly. The lack of panic in the markets was cold comfort, however, in a year when nearly every global stock index was down substantially. It appears the optimism that brought healthy returns on equities in prior years was overwhelmed by the possibility that US strength may not be immune to global weakness and political noise. During the fourth quarter, the US yield curve (a curve that shows the relationship among bond yields across the maturity spectrum) tipped into a slightly inverted position. Given its strong record for predicting recessions, the yield curve inversion attracted a lot of attention. The added uncertainty sparked debates about fundamental strength in the United States, which in turn likely contributed to the accelerated risk-off sentiment in December.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of ASG Managed Futures Strategy Fund returned -12.35%. Although the Fund does not seek to track any particular index, the Credit Suisse Managed Futures Liquid Index may be used as a benchmark for performance analysis. This benchmark returned -4.40% over the same period. The SG Trend Index may also be used as a benchmark for performance analysis; this benchmark returned -8.11% over the same period. It is important to note that there are material differences between the Fund and these benchmarks.

Explanation of Fund Performance

The Fund uses a set of proprietary quantitative models to identify trends in global stock, fixed income, currency, and commodity markets. When the Fund takes on a “long” exposure to a market, that exposure generally profits as the price of the underlying security rises but suffers losses when its price falls; when it takes on a “short” exposure, that exposure generally suffers losses as the price of the underlying security rises but profits as its price falls. The Fund uses derivative instruments, such as futures and forward contracts, to capture these exposures.

For the 12-month period ended December 31, 2018, the Fund’s performance suffered from a number of market upsets that made for a difficult environment for trend followers. Losses came primarily from equity markets, although fixed income, currencies, and commodities also detracted. All geographic areas detracted from performance. In equities, the primary losses came from international developed equities, especially Japanese, British, and Canadian equities; US equities also detracted. Similarly, international bonds detracted most from fixed income performance, especially British and Australian bonds. The Eurodollar contributed positively to performance.

 

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ASG MANAGED FUTURES STRATEGY FUND

 

In currencies, the Fund experienced losses from some emerging market currencies (like the Mexican peso and South African rand), but the Turkish lira contributed positively. The primary detractor in currencies was the Japanese yen. Commodity losses were driven by base metals, especially aluminum and copper. Energies, especially crude oil and Brent crude oil, were positive contributors.

The contribution from the Fund’s money market holdings was slightly more than 1%, as short-maturity interest rates have risen modestly due to actions from the Fed. The Fund’s portfolio is adjusted on a daily basis to reflect market trends as well as to control risk. The risk control mechanism is designed to target an annualized portfolio volatility of 17% or less. The Fund’s realized volatility in 2018 was 13.7%, which is consistent with our risk management objectives. We continue to scale the size of the Fund’s positions to keep total portfolio risk at or below its target.

Outlook

2018 was a clear reminder that corrections and drawdowns are normal occurrences in risk asset markets. Looking ahead to 2019, a slowdown in the US economy could push US equities into bear territory and compel the Fed to take rate action and pause the balance sheet runoff. This scenario, taken against growth slowing at a faster rate in Europe and China, would likely have second-order global effects on most asset classes, including lower yields.

At the same time, it’s important to note that the fundamental drivers of the most recent economic expansion and tighter labor market in the United States are still in place, namely lower corporate taxes and reduced regulation. Moreover, the global financial system, as measured by the strength of bank balance sheets, is robust, serving as a guardrail to prevent the likelihood of another global financial crisis. Nevertheless, confidence in the global economic environment may be more vulnerable to negative dynamics than it was last year.

Perhaps the most significant disrupting factor going into 2019 is the deeply partisan friction in political discourse, not only in the United States, but in Europe as well. Beyond core disagreement on the best course for the country, partisan politics will continue to meet structural risks, like the federal debt, that may drive real negative outcomes, as exemplified by the government shutdown. One can put a higher likelihood on more volatility in risk assets and weaker economic conditions.

In Europe, the possibility of a re-emergence of sustained activity at a level that would pull the region’s economy into a second period of growth appears to be declining. A slowdown in European industrial production and lower inflation expectations will make it difficult for the European Central Bank to justify executing its current normalization plan. At the same time, deep uncertainties and complexities in the Brexit negotiations make handicapping the end result difficult. Further, should the United States and China reach a meaningfully broad bilateral trade agreement, risk assets would benefit materially. Conversely, deterioration of this important relationship could continue to impede growth and appreciation prospects in both regions and beyond.

 

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Should these negative factors indeed compel a pullback in the US economy, we could expect a reversal of the Fed’s policy of achieving a neutral rate close to 3% and a slowdown, or pause, in the runoff of its balance sheet. This may cause a steepening of the yield curve and potentially put pressure on the US dollar. Indeed, at year-end the Eurodollar futures curve was inverted, implying that the market expects no more rate hikes in 2019.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

July 30, 2010 (inception) through December 31, 2018

 

LOGO

See notes to chart on page 15.

 

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ASG MANAGED FUTURES STRATEGY FUND

 

Average Annual Total Returns — December 31, 20184

 

         
    

1 Year

 

    

5 Years

 

    

Life of Class

 

     Expense Ratios5  
  Gross     Net  
     
Class Y (Inception 7/30/10)         Class Y/A/C       Class N        
NAV     -12.35 %      1.27 %      2.39 %      — %      1.50 %      1.50 % 
     
Class A (Inception 7/30/10)              
NAV     -12.55       1.00       2.15       —       1.75       1.75  
With 5.75% Maximum Sales Charge     -17.55       -0.19       1.43       —        
     
Class C (Inception 7/30/10)              
NAV     -13.22       0.25       1.37       —       2.50       2.50  
With CDSC1     -14.08       0.25       1.37       —        
     
Class N (Inception 5/01/17)              
NAV     -12.26       —       —       -3.84       14.83       1.34  
   
Comparative Performance              
Credit Suisse Managed Futures Liquid Index2     -4.40       3.14       —       -0.71        
SG Trend Index3     -8.11       1.09       1.25       -2.40                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

Credit Suisse Managed Futures Liquid Index seeks to gain broad exposure to the Managed Futures strategy using a pre-defined quantitative methodology to invest in a range of asset classes including equities, fixed-income, commodities and currencies. Relative performance for the Credit Suisse Managed Futures Liquid Index is not available prior to January 31, 2011, which is the inception date of the index.

 

3

SG Trend Index is equal-weighted, reconstituted and rebalanced annually. The index calculates the net daily rate of return for a pool of Commodity Trading Advisors (CTAs) selected from the larger managers that are open to new investment. AlphaSimplex Group, LLC is part of this Index.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ASG TACTICAL U.S. MARKET FUND

 

Managers   Symbols
Alexander D. Healy, PhD   Class A    USMAX
Robert S. Rickard   Class C    USMCX
AlphaSimplex Group, LLC (Adviser)   Class Y    USMYX
Kevin H. Maeda  
Serena V. Stone, CFA®  
Active Index Advisors®, a division of Natixis Advisors, L.P. (Subadviser)

 

 

Investment Goal

The Fund seeks long-term capital appreciation, with emphasis on the protection of capital during unfavorable market conditions.

 

 

Market Conditions

Markets began 2018 with optimistic momentum carried over from 2017. Global equity volatility in the first quarter signaled an abrupt change in investor sentiment, weakening the outlook for steady, coordinated growth. A wave of negative fundamental factors in developed and emerging markets (EM), and in the Federal Reserve’s (the Fed) normalization policy, crested into an aggressive re-pricing of domestic equities and sharp outperformance of fixed income assets in the fourth quarter.

Global equity markets started the year bullish, with the S&P 500® up 5.73% in January and the MSCI World Index up 5.28%. But strong fundamental data in the US re-awakened concerns about inflation, causing marked increases in benchmark US Treasury rates in February. Tariff announcements and cabinet reshuffling in the White House in March raised investor fears of an inevitable trade war with China, and the Fed raised rates for the sixth time in March. These developments weighed on commodities and the dollar.

Following the first quarter’s significant spike in equity volatility, the second quarter of 2018 was comparatively quiet. Global economic and political developments still impacted markets and drove noteworthy repricing in the US dollar, EM debt and equity, commodities, and small-cap US stocks. Commodities showed sharp divergence in the second quarter, with energy prices jumping and agricultural commodities plummeting in reaction to the same factors.

Inflation and acute currency weakness in Turkey and Argentina drove headlines in the third quarter, while appreciation in the US dollar slowed and the dramatic risk-off sentiment in EM debt and currency markets ebbed. US equities appreciated on optimism in corporate earnings and economic data, especially in technology shares. The steady flattening of the yield curve transitioned to a more parallel shift upward in rates over the quarter. Energy prices stood out to the upside, while agricultural markets faced selling pressure on trade policy.

The fourth quarter of 2018 was materially different from the first three quarters, as financial conditions tightened sharply. Investors’ constructive outlook on sustainable US

 

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ASG TACTICAL U.S. MARKET FUND

 

economic and corporate strength in a globally weak environment appeared to shift due to trade wars, partisan politics, and the Fed’s normalization policy and uncertainty in its economic outlook.

As such, volatility in the equity market pushed higher; the S&P 500® dropped 6.84% in October alone, which kicked off the 13.52% give-back for the quarter. Despite the magnitude of the drop, it is worth noting that throughout the quarter, and indeed across most principal assets in 2018, the selling was orderly. The lack of panic in the markets was cold comfort, however, in a year when nearly every global stock index was down substantially. It appears the optimism that brought healthy returns on equities in prior years was overwhelmed by the possibility that US strength may not be immune to global weakness and political noise. During the fourth quarter, the US yield curve (a curve that shows the relationship among bond yields across the maturity spectrum) tipped into a slightly inverted position. Given its strong record for predicting recessions, the yield curve inversion attracted a lot of attention. The added uncertainty sparked debates about fundamental strength in the United States, which in turn likely contributed to the accelerated risk-off sentiment in December.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of ASG Tactical U.S. Market Fund returned -3.67% at net asset value. The Fund held up better than its benchmark, the S&P 500® Index, which returned -4.38%.

Explanation of Fund Performance

The Fund’s strategy is to manage a core portfolio of large-capitalization US equities and exchange-traded funds, together with an overlay of futures1 contracts that is designed to increase or decrease the portfolio’s overall equity market exposure based on a proprietary model of risk-of-loss. During periods when the risk-of-loss in the US equity market appears high, the futures overlay is employed to reduce the portfolio’s sensitivity to the market, and during more favorable periods the overlay is employed to increase the portfolio’s market participation.

During the 12-month period ended December 31, 2018, the core equity portfolio offered performance broadly consistent with the performance of US equity markets, slightly outperforming the benchmark for the period. In addition to the core equity portfolio, the Fund also held positions in futures contracts on the S&P 500® Index in order to adjust the Fund’s market participation based on market conditions.

At the beginning of 2018, the manager’s systematic, quantitative assessment of recent risk and return in US equity markets suggested that overall equity risk was low compared to historical norms, leading to a target equity exposure of 130%. As equities experienced several bouts of turbulence, the portfolio’s target equity exposure varied between 110% and 130% during the second and third quarters. While the Fund held a bullish target exposure of 130% entering the fourth quarter, the increased drawdowns and volatility of equity markets resulted in a target exposure of 100% by early November, and as low as 75% by the end of the month, a posture that was maintained through the end of the year. This reduced

 

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exposure during a period of negative equity performance, together with increased market exposure during the second and third quarters, accounts for the outperformance during the year. The remaining assets were held in money market positions, which allowed the portfolio to benefit from increased US interest rates.

Outlook

2018 was a clear reminder that corrections and drawdowns are normal occurrences in risk asset markets. Looking ahead to 2019, a slowdown in the US economy could push US equities into bear territory and compel the Fed to take rate action and pause the balance sheet runoff. This scenario, taken against growth slowing at a faster rate in Europe and China, would likely have second-order global effects on most asset classes, including lower yields.

At the same time, it’s important to note that the fundamental drivers of the most recent economic expansion and tighter labor market in the United States are still in place, namely lower corporate taxes and reduced regulation. Moreover, the global financial system, as measured by the strength of bank balance sheets, is robust, serving as a guardrail to prevent the likelihood of another global financial crisis. Nevertheless, confidence in the global economic environment may be more vulnerable to negative dynamics than it was last year.

Perhaps the most significant disrupting factor going into 2019 is the deeply partisan friction in political discourse, not only in the United States, but in Europe as well. Beyond core disagreement on the best course for the country, partisan politics will continue to meet structural risks, like the federal debt, that may drive real negative outcomes, as exemplified by the government shutdown. One can put a higher likelihood on more volatility in risk assets and weaker economic conditions.

In Europe, the possibility of a re-emergence of sustained activity at a level that would pull the region’s economy into a second period of growth appears to be declining. A slowdown in European industrial production and lower inflation expectations will make it difficult for the European Central Bank to justify executing its current normalization plan. At the same time, deep uncertainties and complexities in the Brexit negotiations make handicapping the end result difficult. Further, should the United States and China reach a meaningfully broad bilateral trade agreement, risk assets would benefit materially. Conversely, deterioration of this important relationship could continue to impede growth and appreciation prospects in both regions and beyond.

Should these negative factors indeed compel a pullback in the US economy, we could expect a reversal of the Fed’s policy of achieving a neutral rate close to 3% and a slowdown, or pause, in the runoff of its balance sheet. This may cause a steepening of the yield curve and potentially put pressure on the US dollar. Indeed, at year-end the Eurodollar futures curve was inverted, implying that the market expects no more rate hikes in 2019.

 

1 

A standardized contract using a clearinghouse to buy or sell an underlying commodity, security, currency or index at a predetermined price in the future.

 

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ASG TACTICAL U.S. MARKET FUND

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

September 30, 2013 (inception) through December 31, 2018

 

LOGO

Top Ten Holdings as of December 31, 2018

 

      Security name    % of
net assets		  
1    Microsoft Corp.      2.47 % 
2    Amazon.com, Inc.      2.23  
3    Berkshire Hathaway, Inc., Class B      1.70  
4    Apple, Inc.      1.70  
5    Chevron Corp.      1.19  
6    UnitedHealth Group, Inc.      1.18  
7    Merck & Co., Inc.      1.12  
8    Bank of America Corp.      1.08  
9    Verizon Communications, Inc.      1.07  
10    Boeing Co. (The)      1.04  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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Average Annual Total Returns — December 31, 20184

 

         
    

1 Year

 

    

5 Years

 

    

Life of Fund

 

     Expense Ratios5  
  Gross     Net  
     
Class Y (Inception 9/30/13)            
NAV     -3.67 %      7.16 %      9.33 %      1.20 %      1.00 % 
     
Class A (Inception 9/30/13)            
NAV     -3.88       6.89       9.05       1.45       1.25  
With 5.75% Maximum Sales Charge     -9.40       5.64       7.83        
     
Class C (Inception 9/30/13)            
NAV     -4.55       6.10       8.25       2.21       2.00  
With CDSC1     -5.48       6.10       8.25                  
     
Comparative Performance            
S&P 500® Index2     -4.38       8.49       10.15        
Barclay Equity Long/Short Index3     -3.33       2.38       3.16                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large cap segment of the US equities market.

 

3

Barclay Equity Long/Short Index is comprised of equity-oriented hedge funds which hold both long and short stock positions and tend to tactically vary their net market exposure, i.e., market beta, based on their assessment of market risk and expected return. Index returns are recalculated by BarclayHedge Ltd. throughout each month. The fund does not expect to update the index returns provided if subsequent recalculations cause such returns to change. In addition, because of these recalculations, the Barclay Equity Long/Short Index returns reported by the fund may differ from the index returns for the same period published by others.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ADDITIONAL INFORMATION

The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers’ views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because the Fund is actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned.

All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

ADDITIONAL INDEX INFORMATION

This document may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis Affiliates”) and does not sponsor, endorse or participate in the provision of any Natixis Affiliates services, funds or other financial products.

The index information contained herein 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.

PROXY VOTING INFORMATION

A description of the Natixis Funds proxy voting policies and procedures is available without charge, upon request, by calling Natixis Funds at 800-225-5478; on the Natixis Funds’ website at im.natixis.com; and on the Securities and Exchange Commission’s (“SEC’s”) website at www.sec.gov. Information regarding how the Natixis Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available from the Natixis Funds’ website and the SEC’s website.

QUARTERLY PORTFOLIO SCHEDULES

The Natixis Funds file complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

 

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UNDERSTANDING FUND EXPENSES

As a mutual fund shareholder, you incur different types of costs: transaction costs, including sales charges (loads) on purchases, contingent deferred sales charges on redemptions, and ongoing costs, including management fees, distribution and/or service fees (12b-1 fees), and other fund expenses. Certain exemptions may apply. These costs are described in more detail in the Funds’ prospectus. The following examples are intended to help you understand the ongoing costs of investing in the Funds and help you compare these with the ongoing costs of investing in other mutual funds.

The first line in the table for each class of Fund shares shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2018 through December 31, 2018. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, $8,600 account value divided by $1,000 = 8.60) and multiply the result by the number in the Expenses Paid During Period column as shown for your Class.

The second line for the table of each class provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs, such as sales charges. Therefore, the second line in the table of each Fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.

 

ASG DYNAMIC ALLOCATION FUND   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $933.00       $5.60  
Hypothetical (5% return before expenses)     $1,000.00       $1,019.41       $5.85  
Class C        
Actual     $1,000.00       $928.80       $9.24  
Hypothetical (5% return before expenses)     $1,000.00       $1,015.63       $9.65  
Class Y        
Actual     $1,000.00       $933.40       $4.39  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.67       $4.58  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.15%, 1.90% and 0.90% for Class A, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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ASG GLOBAL ALTERNATIVES FUND   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $947.80       $7.56  
Hypothetical (5% return before expenses)     $1,000.00       $1,017.44       $7.83  
Class C        
Actual     $1,000.00       $943.90       $11.22  
Hypothetical (5% return before expenses)     $1,000.00       $1,013.66       $11.62  
Class N        
Actual     $1,000.00       $948.70       $6.09  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.96       $6.31  
Class Y        
Actual     $1,000.00       $949.00       $6.34  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.70       $6.56  

 

*

Hypothetical expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.54%, 2.29%, 1.24% and 1.29% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

ASG MANAGED FUTURES STRATEGY FUND   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $935.30       $8.29  
Hypothetical (5% return before expenses)     $1,000.00       $1,016.64       $8.64  
Class C        
Actual     $1,000.00       $931.10       $11.97  
Hypothetical (5% return before expenses)     $1,000.00       $1,012.80       $12.48  
Class N        
Actual     $1,000.00       $937.00       $6.69  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.30       $6.97  
Class Y        
Actual     $1,000.00       $936.90       $7.13  
Hypothetical (5% return before expenses)     $1,000.00       $1,017.85       $7.43  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.70%, 2.46%, 1.37% and 1.46% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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ASG TACTICAL U.S. MARKET FUND   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $944.10       $6.08  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.96       $6.31  
Class C        
Actual     $1,000.00       $940.50       $9.73  
Hypothetical (5% return before expenses)     $1,000.00       $1,015.17       $10.11  
Class Y        
Actual     $1,000.00       $944.90       $4.85  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.22       $5.04  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.24%, 1.99% and 0.99% for Class A, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Portfolio of Investments – as of December 31, 2018

ASG Dynamic Allocation Fund

 

    
Shares		      Description    Value (†)  
  Exchange-Traded Funds — 42.3% of Net Assets  
  22,416      iShares® Core U.S. Aggregate Bond ETF    $ 2,387,080  
  651      iShares® Edge MSCI Min Vol Emerging Markets ETF      36,371  
  14,650      iShares® JP Morgan USD Emerging Markets Bond ETF      1,522,282  
  52,690      SPDR® Bloomberg Barclays International Treasury Bond ETF      1,454,771  
  3,194      Vanguard FTSE All World ex-U.S. Small-Cap ETF      302,408  
  8,124      Vanguard FTSE Developed Markets ETF      301,400  
  2,348      Vanguard FTSE Emerging Markets ETF      89,459  
  6,232      Vanguard FTSE Europe ETF      303,000  
  4,935      Vanguard FTSE Pacific ETF      299,209  
  28,378      Vanguard Intermediate-Term Corporate Bond ETF      2,351,401  
  14,463      Vanguard Mid-Cap ETF      1,998,497  
  25,769      Vanguard Total International Bond ETF      1,397,968  
  14,308      Vanguard Total Stock Market ETF      1,826,130  
  19,745      Vanguard Value ETF      1,934,023  
     

 

 

  
   Total Exchange-Traded Funds
(Identified Cost $16,120,305)		      16,203,999  
     

 

 

  
     
Principal
Amount		                
  Short-Term Investments — 54.1%  
   Certificates of Deposit — 32.6%

 

$ 500,000      Commonwealth Bank of Australia (NY), 1-month LIBOR + 0.260%, 2.609%, 1/03/2019(a)      500,009  
  500,000      Landesbank Hessen (NY), 2.420%, 1/10/2019      499,993  
  500,000      Bank of Montreal (IL), 1-month LIBOR + 0.210%, 2.597%, 1/10/2019(a)      500,021  
  500,000      Landesbank Hessen (NY), 2.430%, 1/16/2019      499,986  
  500,000      Toronto-Dominion Bank (NY), 2.455%, 2/11/2019      499,915  
  750,000      Mizuho Bank Ltd. (NY), 2.620%, 2/14/2019      750,036  
  500,000      DZ Bank (NY), 2.610%, 2/15/2019      499,976  
  500,000      Toronto-Dominion Bank (NY), 2.460%, 2/28/2019(b)      499,823  
  1,000,000      Banco Del Estado De Chile (NY), 1-month LIBOR + 0.210%, 2.557%, 3/04/2019(a)(b)      1,000,208  
  500,000      Sumitomo Mitsui Bank (NY), 2.760%, 3/07/2019      500,116  
  750,000      Nordea Bank AB (NY), 2.760%, 3/11/2019      750,139  
  1,000,000      Credit Industriel et Commercial (NY), 2.780%, 3/20/2019      1,000,111  
  750,000      Sumitomo Mitsui Trust Bank (NY), 2.790%, 3/20/2019      750,004  
  500,000      National Bank of Canada (NY), 1-month LIBOR + 0.150%, 2.537%, 4/10/2019(a)(b)      499,959  
  500,000      Dexia Credit Local S.A. (NY), (Credit Support: Belgium, France, Luxembourg), 3-month LIBOR + 0.100%, 2.740%, 5/17/2019(a)(b)      499,941  
  750,000      Westpac Banking Corp. (NY), 1-month LIBOR + 0.270%, 2.740%, 5/20/2019(a)      749,993  
  1,000,000      Svenska Handelsbanken (NY), 1-month LIBOR + 0.280%, 2.680%, 6/11/2019(a)      999,939  
  500,000      Royal Bank of Canada (NY), 1-month LIBOR + 0.310%, 2.731%, 6/12/2019(a)(b)      499,998  
  500,000      Royal Bank of Canada (NY), 3-month LIBOR + 0.130%, 2.544%, 7/10/2019(a)(b)      499,999  
  500,000      Bank of Montreal (IL), 3-month LIBOR + 0.110%, 2.518%, 10/04/2019(a)(b)      499,629  
     

 

 

  
        12,499,795  
     

 

 

  

 

See accompanying notes to financial statements.

 

25  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Dynamic Allocation Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Time Deposits — 11.4%

 

$ 950,000      Skandinaviska Enskilda Banken (NY), 2.340%, 1/02/2019(c)    $ 950,000  
  1,700,000      Canadian Imperial Bank of Commerce, 2.350%, 1/02/2019      1,700,000  
  1,700,000      National Bank of Kuwait, 2.370%, 1/02/2019(c)      1,700,000  
     

 

 

  
        4,350,000  
     

 

 

  
   Commercial Paper — 5.9%

 

  1,000,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.454%, 1/04/2019(d)      999,726  
  750,000      Santander UK PLC, 2.589%, 2/04/2019(d)      748,181  
  500,000      ING (U.S.) Funding LLC, 1-month LIBOR + 0.310%, 2.647%, 6/03/2019(a)      500,061  
     

 

 

  
        2,247,968  
     

 

 

  
   Other Notes — 2.6%

 

  1,000,000      Bank of America NA, 2.450%, 2/12/2019      999,964  
     

 

 

  
   Treasuries — 1.6%

 

  600,000      U.S. Treasury Bills, 2.215%-2.282%, 1/03/2019(d)(e)(f)      599,963  
     

 

 

  
   Total Short-Term Investments
(Identified Cost $20,697,907)		      20,697,690  
     

 

 

  
     
   Total Investments — 96.4%
(Identified Cost $36,818,212)		      36,901,689  
   Other assets less liabilities — 3.6%      1,389,944  
     

 

 

  
   Net Assets — 100.0%    $ 38,291,633  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Variable rate security. Rate as of December 31, 2018 is disclosed.

 

  (b)      Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

  (c)      Variable rate security. The interest rate adjusts periodically based on changes in current interest rates. Rate as of December 31, 2018 is disclosed.

 

  (d)      Interest rate represents discount rate at time of purchase; not a coupon rate.

 

  (e)      Security (or a portion thereof) has been pledged as collateral for open derivative contracts.

 

  (f)      The Fund’s investment in U.S. Government/Agency securities is comprised of various lots with differing discount rates. These separate investments, which have the same maturity date, have been aggregated for the purpose of presentation in the Portfolio of Investments.

 

     
  ETF      Exchange-Traded Fund

 

  LIBOR      London Interbank Offered Rate

 

  SPDR      Standard & Poor’s Depositary Receipt

 

 

See accompanying notes to financial statements.

 

|  26

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Dynamic Allocation Fund – (continued)

 

At December 31, 2018, open long futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

10 Year Australia Government Bond

      3/15/2019        29      $ 2,678,740      $ 2,710,038      $ 31,298  

10 Year U.S. Treasury Note

      3/20/2019        19        2,279,852        2,318,297        38,445  

30 Year U.S. Treasury Bond

      3/20/2019        16        2,268,711        2,336,000        67,289  

5 Year U.S. Treasury Note

      3/29/2019        20        2,265,801        2,293,750        27,949  

E-mini Dow

      3/15/2019        5        611,025        581,700        (29,325 ) 

E-mini NASDAQ 100

      3/15/2019        5        674,179        633,325        (40,854 ) 

E-mini Russell 2000

      3/15/2019        11        796,593        741,950        (54,643 ) 

E-mini S&P 500®

      3/15/2019        5        673,775        626,300        (47,475 ) 

German Euro Bund

      3/07/2019        14        2,602,135        2,623,263        21,128  

UK Long Gilt

      3/27/2019        17        2,650,416        2,668,872        18,456  
              

 

 

  

Total

 

    $ 32,268  
  

 

 

  

At December 31, 2018, open short futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

U.S. Dollar Index

      3/18/2019        100      $ 9,665,300      $ 9,573,500      $ 91,800  
              

 

 

  

Investment Summary at December 31, 2018

 

Exchange-Traded Funds

      42.3 % 

Certificates of Deposit

      32.6  

Time Deposits

      11.4  

Commercial Paper

      5.9  

Other Notes

      2.6  

Treasuries

      1.6  
  

 

 

  

Total Investments

      96.4  

Other assets less liabilities (including futures contracts)

      3.6  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

27  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund

 

    
Shares		      Description    Value (†)  
  Common Stocks — 7.8% of Net Assets  
   Aerospace & Defense — 0.2%   
  15,750      United Technologies Corp.    $ 1,677,060  
  48,462      Arconic, Inc.      817,069  
     

 

 

  
        2,494,129  
     

 

 

  
   Airlines — 0.1%   
  14,554      United Continental Holdings, Inc.(a)      1,218,606  
     

 

 

  
   Banks — 0.4%   
  28,446      Citigroup, Inc.      1,480,899  
  173,168      Investors Bancorp, Inc.      1,800,947  
  59,813      Bank of America Corp.      1,473,792  
     

 

 

  
        4,755,638  
     

 

 

  
   Building Products — 0.1%   
  28,035      Armstrong World Industries, Inc.      1,631,917  
     

 

 

  
   Capital Markets — 0.3%   
  28,762      Intercontinental Exchange, Inc.      2,166,642  
  36,405      Bank of New York Mellon Corp. (The)      1,713,583  
     

 

 

  
        3,880,225  
     

 

 

  
   Chemicals — 0.3%   
  47,936      Rayonier Advanced Materials, Inc.      510,518  
  102,178      Platform Specialty Products Corp.(a)      1,055,499  
  27,180      DowDuPont, Inc.      1,453,587  
     

 

 

  
        3,019,604  
     

 

 

  
   Communications Equipment — 0.1%   
  45,088      CommScope Holding Co., Inc.(a)      738,992  
     

 

 

  
   Diversified Telecommunication Services — 0.1%   
  50,671      Zayo Group Holdings, Inc.(a)      1,157,326  
     

 

 

  
   Electric Utilities — 0.2%   
  51,619      FirstEnergy Corp.      1,938,293  
     

 

 

  
   Electronic Equipment, Instruments & Components — 0.1%   
  25,329      Itron, Inc.(a)      1,197,808  
     

 

 

  
   Entertainment — 0.1%   
  3,263      Netflix, Inc.(a)      873,375  
  48,290      Lions Gate Entertainment Corp.      777,469  
     

 

 

  
        1,650,844  
     

 

 

  
   Food & Staples Retailing — 0.2%   
  38,590      US Foods Holding Corp.(a)      1,220,988  
  27,462      Sysco Corp.      1,720,769  
     

 

 

  
        2,941,757  
     

 

 

  
   Food Products — 0.4%   
  34,013      Campbell Soup Co.      1,122,089  
  54,182      Conagra Brands, Inc.      1,157,327  
  51,901      Mondelez International, Inc., Class A      2,077,597  
     

 

 

  
        4,357,013  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  28

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Health Care Equipment & Supplies — 0.3%   
  14,787      Zimmer Biomet Holdings, Inc.    $ 1,533,708  
  30,134      Baxter International, Inc.      1,983,420  
     

 

 

  
        3,517,128  
     

 

 

  
   Health Care Providers & Services — 0.1%   
  39,123      MEDNAX, Inc.(a)      1,291,059  
     

 

 

  
   Hotels, Restaurants & Leisure — 0.4%   
  46,115      MGM Resorts International      1,118,750  
  17,848      Jack in the Box, Inc.      1,385,540  
  95,779      Wendy’s Co. (The)      1,495,110  
  1,662      Chipotle Mexican Grill, Inc.(a)      717,635  
     

 

 

  
        4,717,035  
     

 

 

  
   Household Durables — 0.1%   
  8,180      Mohawk Industries, Inc.(a)      956,733  
     

 

 

  
   Household Products — 0.2%   
  25,165      Procter & Gamble Co. (The)      2,313,167  
     

 

 

  
   Industrial Conglomerates — 0.1%   
  110,385      General Electric Co.      835,614  
     

 

 

  
   Interactive Media & Services — 0.4%   
  6,190      IAC/InterActiveCorp(a)      1,133,018  
  6,960      Facebook, Inc., Class A(a)      912,386  
  45,676      Cars.com, Inc.(a)      982,034  
  1,446      Alphabet, Inc., Class A(a)      1,511,012  
     

 

 

  
        4,538,450  
     

 

 

  
   IT Services — 0.7%   
  17,054      PayPal Holdings, Inc.(a)      1,434,071  
  18,934      Worldpay, Inc., Class A(a)      1,447,126  
  51,958      First Data Corp., Class A(a)      878,610  
  21,550      DXC Technology Co.      1,145,813  
  14,596      Automatic Data Processing, Inc.      1,913,828  
  7,641      Alliance Data Systems Corp.      1,146,761  
     

 

 

  
        7,966,209  
     

 

 

  
   Machinery — 0.2%   
  57,658      Trinity Industries, Inc.      1,187,178  
  31,414      Terex Corp.      866,084  
     

 

 

  
        2,053,262  
     

 

 

  
   Media — 0.1%   
  11,217      Loral Space & Communications, Inc.(a)      417,833  
  21,380      AMC Networks, Inc., Class A(a)      1,173,334  
     

 

 

  
        1,591,167  
     

 

 

  
   Multi-Utilities — 0.1%   
  14,756      Sempra Energy      1,596,452  
     

 

 

  

 

See accompanying notes to financial statements.

 

29  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Oil, Gas & Consumable Fuels — 0.4%   
  35,513      Peabody Energy Corp.    $ 1,082,436  
  20,670      Hess Corp.      837,135  
  24,213      Cheniere Energy, Inc.(a)      1,433,168  
  28,607      CVR Energy, Inc.      986,369  
     

 

 

  
        4,339,108  
     

 

 

  
   Real Estate Management & Development — 0.3%   
  17,383      Howard Hughes Corp. (The)(a)      1,696,928  
  45,891      CBRE Group, Inc., Class A(a)      1,837,476  
     

 

 

  
        3,534,404  
     

 

 

  
   Road & Rail — 0.1%   
  20,646      Genesee & Wyoming, Inc., Class A(a)      1,528,217  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 0.2%   
  63,786      ON Semiconductor Corp.(a)      1,053,107  
  15,782      Xilinx, Inc.      1,344,153  
     

 

 

  
        2,397,260  
     

 

 

  
   Software — 0.8%   
  7,211      ServiceNow, Inc.(a)      1,283,919  
  8,961      Autodesk, Inc.(a)      1,152,474  
  10,507      salesforce.com, inc.(a)      1,439,144  
  47,095      Open Text Corp.      1,535,297  
  16,329      Microsoft Corp.      1,658,536  
  22,604      Citrix Systems, Inc.      2,316,006  
  39,504      Symantec Corp.      746,428  
     

 

 

  
        10,131,804  
     

 

 

  
   Specialty Retail — 0.3%   
  10,874      Tiffany & Co.      875,466  
  15,470      Lowe’s Cos., Inc.      1,428,809  
  6,896      Advance Auto Parts, Inc.      1,085,844  
     

 

 

  
        3,390,119  
     

 

 

  
   Trading Companies & Distributors — 0.3%   
  27,350      WESCO International, Inc.(a)      1,312,800  
  57,390      Univar, Inc.(a)      1,018,098  
  45,221      HD Supply Holdings, Inc.(a)      1,696,692  
     

 

 

  
        4,027,590  
     

 

 

  
   Wireless Telecommunication Services — 0.1%   
  23,885      T-Mobile US, Inc.(a)      1,519,325  
     

 

 

  
   Total Common Stocks
(Identified Cost $105,274,642)		      93,226,255  
     

 

 

  
  Exchange-Traded Funds — 4.3%  
  634,655      iShares® iBoxx $ High Yield Corporate Bond ETF (Identified Cost $54,816,167)      51,470,520  
     

 

 

  
  Closed-End Investment Companies — 0.1%  
  22,261      Altaba, Inc.(a) (Identified Cost $1,562,206)      1,289,802  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  30

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
  Short-Term Investments — 85.9%  
   Certificates of Deposit — 63.2%   
$ 20,000,000      Commonwealth Bank of Australia (NY), 1-month LIBOR + 0.260%, 2.609%, 1/03/2019(b)    $ 20,000,360  
  45,000,000      Landesbank Hessen (NY), 2.420%, 1/10/2019      44,999,369  
  40,000,000      Bank of Montreal (IL), 1-month LIBOR + 0.210%, 2.597%, 1/10/2019(b)      40,001,720  
  5,000,000      Landesbank Hessen (NY), 2.430%, 1/16/2019      4,999,863  
  25,000,000      Norinchukin Bank (NY), 2.480%, 1/17/2019      24,999,996  
  25,000,000      Banco Del Estado De Chile (NY), 2.490%, 1/17/2019      25,000,066  
  45,000,000      Oversea-Chinese Banking Corp. Ltd. (NY), 2.560%, 1/25/2019      44,998,115  
  45,000,000      Toronto-Dominion Bank (NY), 2.455%, 2/11/2019      44,992,333  
  25,000,000      DZ Bank (NY), 2.610%, 2/15/2019      24,998,797  
  50,000,000      Mizuho Bank Ltd. (NY), 2.620%, 2/15/2019      50,002,244  
  10,000,000      Toronto-Dominion Bank (NY), 2.460%, 2/28/2019      9,996,451  
  25,000,000      Banco Del Estado De Chile (NY), 1-month LIBOR + 0.210%, 2.557%, 3/04/2019(b)      25,005,200  
  25,000,000      Sumitomo Mitsui Bank (NY), 2.760%, 3/07/2019      25,005,791  
  50,000,000      Nordea Bank AB (NY), 2.760%, 3/11/2019      50,009,258  
  40,000,000      Credit Industriel et Commercial (NY), 2.780%, 3/20/2019      40,004,422  
  40,000,000      Sumitomo Mitsui Trust Bank (NY), 2.790%, 3/20/2019      40,000,189  
  50,000,000      National Bank of Canada (NY), 1-month LIBOR + 0.150%, 2.537%, 4/10/2019(b)(c)      49,995,953  
  50,000,000      Dexia Credit Local S.A. (NY), (Credit Support: Belgium, France, Luxembourg), 3-month LIBOR + 0.100%, 2.740%, 5/17/2019(b)(c)      49,994,147  
  40,000,000      Westpac Banking Corp. (NY), 1-month LIBOR + 0.270%, 2.740%, 5/20/2019(b)      39,999,640  
  36,000,000      Svenska Handelsbanken (NY), 1-month LIBOR + 0.280%, 2.680%, 6/11/2019(b)      35,997,804  
  25,000,000      Royal Bank of Canada (NY), 1-month LIBOR + 0.310%, 2.731%, 6/12/2019(b)(c)      24,999,925  
  25,000,000      Royal Bank of Canada (NY), 3-month LIBOR + 0.130%, 2.544%, 7/10/2019(b)(c)      24,999,950  
  15,000,000      Bank of Montreal (IL), 3-month LIBOR + 0.110%, 2.518%, 10/04/2019(b)(c)      14,988,872  
     

 

 

  
        755,990,465  
     

 

 

  
   Commercial Paper — 10.6%   
  10,150,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.445%, 1/03/2019(d)      10,147,915  
  42,200,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.575%, 1/22/2019(d)      42,134,677  
  45,000,000      Santander UK PLC, 2.589%, 2/04/2019(d)      44,890,844  
  30,000,000      ING (U.S.) Funding LLC, 1-month LIBOR + 0.310%, 2.647%, 6/03/2019(b)      30,003,690  
     

 

 

  
        127,177,126  
     

 

 

  
   Time Deposits — 9.7%   
  30,900,000      Skandinaviska Enskilda Banken (NY), 2.340%, 1/02/2019(e)      30,900,000  
  55,000,000      Canadian Imperial Bank of Commerce, 2.350%, 1/02/2019      55,000,000  
  30,000,000      National Bank of Kuwait, 2.370%, 1/02/2019(e)      30,000,000  
     

 

 

  
        115,900,000  
     

 

 

  

 

See accompanying notes to financial statements.

 

31  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Treasuries — 2.4%   
$ 10,000,000      U.S. Treasury Bills, 2.175%, 1/03/2019(d)(f)    $ 9,999,375  
  18,000,000      U.S. Treasury Bills, 2.279%-2.319%, 2/07/2019(d)(f)(g)      17,957,453  
     

 

 

  
        27,956,828  
     

 

 

  
   Total Short-Term Investments
(Identified Cost $1,027,032,721)		      1,027,024,419  
     

 

 

  
     
   Total Investments — 98.1%
(Identified Cost $1,188,685,736)		      1,173,010,996  
   Other assets less liabilities — 1.9%      22,609,985  
     

 

 

  
   Net Assets — 100.0%    $ 1,195,620,981  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

  (b)      Variable rate security. Rate as of December 31, 2018 is disclosed.

 

  (c)      Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

  (d)      Interest rate represents discount rate at time of purchase; not a coupon rate.

 

  (e)      Variable rate security. The interest rate adjusts periodically based on changes in current interest rates. Rate as of December 31, 2018 is disclosed.

 

  (f)      Security (or a portion thereof) has been pledged as collateral for open derivative contracts.

 

  (g)      The Fund’s investment in U.S. Government/Agency securities is comprised of various lots with differing discount rates. These separate investments, which have the same maturity date, have been aggregated for the purpose of presentation in the Portfolio of Investments.

 

     
  ETF      Exchange-Traded Fund

 

  LIBOR      London Interbank Offered Rate

 

     
  CHF      Swiss Franc

 

  NOK      Norwegian Krone

 

  NZD      New Zealand Dollar

 

  SEK      Swedish Krona

 

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty    Delivery
Date		      Currency
Bought/
Sold (B/S)		      Units
of
Currency		      In Exchange for      Notional
Value		      Unrealized
Appreciation
(Depreciation)		  

UBS AG

      3/20/2019        CHF        B        6,250,000      $ 6,386,362      $ 6,404,375      $ 18,013  

UBS AG

      3/20/2019        CHF        S        6,250,000        6,387,909        6,404,375        (16,466 ) 

UBS AG

      3/20/2019        NOK        S        158,000,000        18,606,722        18,335,330        271,392  

UBS AG

      3/20/2019        NOK        S        28,000,000        3,232,445        3,249,299        (16,854 ) 

UBS AG

      3/20/2019        NZD        S        42,500,000        29,304,303        28,564,274        740,029  

UBS AG

      3/20/2019        SEK        B        158,000,000        17,601,646        17,936,927        335,281  
                    

 

 

  

Total

 

    $ 1,331,395  
                    

 

 

  

 

See accompanying notes to financial statements.

 

|  32

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

At December 31, 2018, open long futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

2 Year U.S. Treasury Note

      3/29/2019        1,708      $ 360,320,000      $ 362,629,750      $ 2,309,750  

5 Year U.S. Treasury Note

      3/29/2019        192        21,777,183        22,020,000        242,817  

Australian Dollar

      3/18/2019        1,105        79,212,125        77,924,600        (1,287,525 ) 

British Pound

      3/18/2019        168        13,252,050        13,429,500        177,450  

Canadian Dollar

      3/19/2019        111        8,305,020        8,159,610        (145,410 ) 

DAX

      3/15/2019        155        48,406,921        46,890,736        (1,516,185 ) 

E-mini Russell 2000

      3/15/2019        271        19,625,143        18,278,950        (1,346,193 ) 

Euro Schatz

      3/07/2019        457        58,578,600        58,612,634        34,034  

Euro-BTP

      3/07/2019        491        69,419,609        71,906,814        2,487,205  

Euro-OAT

      3/07/2019        1,190        205,592,209        205,607,070        14,861  

FTSE 100 Index

      3/15/2019        88        7,584,022        7,469,053        (114,969 ) 

German Euro Bund

      3/07/2019        1,569        292,492,017        293,992,789        1,500,772  

Hang Seng Index®

      1/30/2019        53        8,704,585        8,749,518        44,933  

Japanese Yen

      3/18/2019        69        7,811,194        7,909,988        98,794  

MSCI Emerging Markets Index

      3/15/2019        311        15,348,625        15,033,740        (314,885 ) 

TOPIX

      3/07/2019        297        42,993,937        40,469,823        (2,524,114 ) 
              

 

 

  

Total

 

    $ (338,665 ) 
              

 

 

  
Commodity Futures1    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

Aluminum LME

      3/20/2019        78      $ 3,773,250      $ 3,603,600      $ (169,650 ) 

Brent Crude Oil

      1/31/2019        73        4,399,710        3,927,400        (472,310 ) 

Low Sulfur Gasoil

      2/12/2019        203        11,230,975        10,378,375        (852,600 ) 

Natural Gas

      1/29/2019        182        7,329,140        5,350,800        (1,978,340 ) 

New York Harbor ULSD

      1/31/2019        232        17,841,919        16,364,074        (1,477,845 ) 

Soybean Oil

      3/14/2019        252        4,336,968        4,210,920        (126,048 ) 

Wheat

      3/14/2019        150        3,888,413        3,774,375        (114,038 ) 

Zinc LME

      3/20/2019        172        10,454,240        10,623,150        168,910  
              

 

 

  

Total

 

    $ (5,021,921 ) 
  

 

 

  

 

See accompanying notes to financial statements.

 

33  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Global Alternatives Fund – (continued)

 

At December 31, 2018, open short futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

10 Year Australia Government Bond

      3/15/2019        292      $ 27,011,557      $ 27,287,280      $ (275,723 ) 

10 Year Canada Government Bond

      3/20/2019        980        97,497,612        98,179,461        (681,849 ) 

10 Year U.S. Treasury Note

      3/20/2019        1,021        123,214,438        124,577,953        (1,363,515 ) 

30 Year U.S. Treasury Bond

      3/20/2019        282        39,375,609        41,172,000        (1,796,391 ) 

ASX SPI 200™

      3/21/2019        17        1,677,251        1,664,677        12,574  

E-mini S&P 500®

      3/15/2019        73        8,979,275        9,143,980        (164,705 ) 

Euro

      3/18/2019        1,678        240,216,900        241,684,438        (1,467,538 ) 

EURO STOXX 50®

      3/15/2019        417        14,540,766        14,209,106        331,660  

Eurodollar

      6/17/2019        1,881        456,501,200        457,623,788        (1,122,588 ) 

S&P/TSX 60 Index

      3/14/2019        15        1,943,617        1,883,900        59,717  

UK Long Gilt

      3/27/2019        517        81,227,593        81,165,099        62,494  
              

 

 

  

Total

 

    $ (6,405,864 ) 
  

 

 

  
Commodity Futures1    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

Aluminum LME

      3/20/2019        112      $ 5,472,903      $ 5,174,401      $ 298,502  

Copper LME

      3/20/2019        379        57,924,796        56,563,381        1,361,415  

Corn

      3/14/2019        534        10,278,625        10,012,500        266,125  

Gold

      2/26/2019        567        69,937,990        72,649,710        (2,711,720 ) 

Nickel LME

      3/20/2019        34        2,219,112        2,179,026        40,086  

Soybean

      3/14/2019        108        4,766,475        4,833,000        (66,525 ) 

WTI Crude Oil

      1/22/2019        265        12,058,240        12,033,650        24,590  
              

 

 

  

Total

 

    $ (787,527 ) 
  

 

 

  

1 Commodity futures are held by ASG Global Alternatives Cayman Fund Ltd., a wholly-owned subsidiary. See Note 1 of Notes to Financial Statements.

Investment Summary at December 31, 2018

 

Certificates of Deposit

      63.2 % 

Commercial Paper

      10.6  

Time Deposits

      9.7  

Common Stocks

      7.8  

Exchange-Traded Funds

      4.3  

Treasuries

      2.4  

Closed-End Investment Companies

      0.1  
  

 

 

  

Total Investments

      98.1  

Other assets less liabilities (including forward foreign currency and futures contracts)

      1.9  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

|  34

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Managed Futures Strategy Fund

 

Principal
Amount		      Description    Value (†)  
  Short-Term Investments — 93.4% of Net Assets  
   Certificates of Deposit — 64.2%   
$ 60,000,000      Commonwealth Bank of Australia (NY), 1-month LIBOR + 0.260%, 2.609%, 1/03/2019(a)    $ 60,001,080  
  50,000,000      Landesbank Hessen (NY), 2.420%, 1/10/2019      49,999,299  
  45,000,000      Bank of Montreal (IL), 1-month LIBOR + 0.210%, 2.597%, 1/10/2019(a)      45,001,935  
  25,000,000      Landesbank Hessen (NY), 2.430%, 1/16/2019      24,999,315  
  45,000,000      Norinchukin Bank (NY), 2.480%, 1/17/2019      44,999,992  
  95,000,000      Oversea-Chinese Banking Corp. Ltd. (NY), 2.560%, 1/25/2019      94,996,020  
  90,000,000      Toronto-Dominion Bank (NY), 2.455%, 2/11/2019      89,984,667  
  50,000,000      Swedbank (NY), 1-month LIBOR + 0.200%, 2.621%, 2/12/2019(a)      50,008,900  
  35,750,000      Mizuho Bank Ltd. (NY), 2.620%, 2/14/2019      35,751,698  
  50,000,000      DZ Bank (NY), 2.610%, 2/15/2019      49,997,593  
  45,000,000      Mizuho Bank Ltd. (NY), 2.620%, 2/15/2019      45,002,020  
  30,000,000      Toronto-Dominion Bank (NY), 2.460%, 2/28/2019      29,989,353  
  75,000,000      Banco Del Estado De Chile (NY), 1-month LIBOR + 0.210%, 2.557%, 3/04/2019(a)      75,015,600  
  20,000,000      Sumitomo Mitsui Bank (NY), 2.760%, 3/07/2019      20,004,632  
  75,000,000      Nordea Bank AB (NY), 2.760%, 3/11/2019      75,013,887  
  65,000,000      Credit Industriel et Commercial (NY), 2.780%, 3/20/2019      65,007,186  
  50,000,000      Sumitomo Mitsui Trust Bank (NY), 2.790%, 3/20/2019      50,000,236  
  36,000,000      Royal Bank of Canada (NY), 3-month LIBOR + 0.250%, 3.072%, 3/27/2019(a)      36,014,701  
  31,500,000      National Bank of Canada (NY), 1-month LIBOR + 0.150%, 2.537%, 4/10/2019(a)      31,497,451  
  25,000,000      Mitsubishi UFJ Trust & Banking Corp. (NY), 2.860%, 4/11/2019      24,999,658  
  100,000,000      Dexia Credit Local S.A. (NY), (Credit Support: Belgium, France, Luxembourg), 3-month LIBOR + 0.100%, 2.740%, 5/17/2019(a)(b)      99,988,294  
  25,000,000      Westpac Banking Corp. (NY), 1-month LIBOR + 0.270%, 2.740%, 5/20/2019(a)      24,999,775  
  50,000,000      Westpac Banking Corp. (NY), 1-month LIBOR + 0.270%, 2.740%, 5/20/2019(a)      49,999,550  
  35,000,000      Royal Bank of Canada (NY), 1-month LIBOR + 0.310%, 2.731%, 6/12/2019(a)(b)      34,999,895  
  50,000,000      Royal Bank of Canada (NY), 3-month LIBOR + 0.130%, 2.544%, 7/10/2019(a)(b)      49,999,899  
  70,000,000      Bank of Montreal (IL), 3-month LIBOR + 0.110%, 2.518%, 10/04/2019(a)(b)      69,948,071  
     

 

 

  
        1,328,220,707  
     

 

 

  
   Commercial Paper — 12.4%   
  27,000,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.445%, 1/03/2019(c)      26,994,454  
  20,000,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.454%, 1/04/2019(c)      19,994,513  
  7,250,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.575%, 1/22/2019(c)      7,238,778  
  36,900,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.575%, 1/24/2019(c)      36,837,516  
  90,000,000      Santander UK PLC, 2.589%, 2/04/2019(c)      89,781,688  
  75,000,000      ING (U.S.) Funding LLC, 1-month LIBOR + 0.310%, 2.647%, 6/03/2019(a)      75,009,225  
     

 

 

  
        255,856,174  
     

 

 

  

 

See accompanying notes to financial statements.

 

35  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Managed Futures Strategy Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Time Deposits — 8.7%   
$ 42,000,000      Skandinaviska Enskilda Banken (NY), 2.340%, 1/02/2019(d)    $ 42,000,000  
  95,000,000      Canadian Imperial Bank of Commerce, 2.350%, 1/02/2019      95,000,000  
  42,450,000      National Bank of Kuwait, 2.370%, 1/02/2019(d)      42,450,000  
     

 

 

  
        179,450,000  
     

 

 

  
   Treasuries — 6.2%   
  32,000,000      U.S. Treasury Bills, 2.131%, 1/03/2019(c)(e)      31,998,000  
  41,000,000      U.S. Treasury Bills, 2.191%-2.319%, 2/07/2019(c)(e)(f)      40,903,086  
  35,500,000      U.S. Treasury Bills, 2.290%, 3/07/2019(c)(e)      35,349,717  
  20,000,000      U.S. Treasury Bills, 2.343%, 4/04/2019(c)(e)      19,875,992  
     

 

 

  
        128,126,795  
     

 

 

  
   Other Notes — 1.9%   
  40,000,000      Bank of America NA, 2.450%, 2/12/2019      39,998,548  
     

 

 

  
   Total Short-Term Investments
(Identified Cost $1,931,688,323)		      1,931,652,224  
     

 

 

  
     
   Total Investments — 93.4%
(Identified Cost $1,931,688,323)		      1,931,652,224  
   Other assets less liabilities — 6.6%      136,683,971  
     

 

 

  
   Net Assets — 100.0%    $ 2,068,336,195  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Variable rate security. Rate as of December 31, 2018 is disclosed.

 

  (b)      Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

  (c)      Interest rate represents discount rate at time of purchase; not a coupon rate.

 

  (d)      Variable rate security. The interest rate adjusts periodically based on changes in current interest rates. Rate as of December 31, 2018 is disclosed.

 

  (e)      Security (or a portion thereof) has been pledged as collateral for open derivative contracts.

 

  (f)      The Fund’s investment in U.S. Government/Agency securities is comprised of various lots with differing discount rates. These separate investments, which have the same maturity date, have been aggregated for the purpose of presentation in the Portfolio of Investments.

 

     
  LIBOR      London Interbank Offered Rate

 

     
  CHF      Swiss Franc

 

  MXN      Mexican Peso

 

  NOK      Norwegian Krone

 

  NZD      New Zealand Dollar

 

  PLN      Polish Zloty

 

  SGD      Singapore Dollar

 

  SEK      Swedish Krona

 

  TRY      Turkish Lira

 

  ZAR      South African Rand

 

 

See accompanying notes to financial statements.

 

|  36

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Managed Futures Strategy Fund – (continued)

 

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty    Delivery
Date		      Currency
Bought/
Sold (B/S)		      Units
of
Currency		      In Exchange for      Notional
Value		      Unrealized
Appreciation
(Depreciation)		  

UBS AG

      3/20/2019        CHF        B        44,125,000      $ 44,934,177      $ 45,214,882      $ 280,705  

UBS AG

      3/20/2019        CHF        S        143,500,000        146,630,862        147,044,435        (413,573 ) 

UBS AG

      3/20/2019        MXN        B        196,500,000        9,731,780        9,880,606        148,826  

UBS AG

      3/20/2019        MXN        S        116,000,000        5,647,280        5,832,826        (185,546 ) 

UBS AG

      3/20/2019        NOK        B        44,000,000        5,146,766        5,106,041        (40,725 ) 

UBS AG

      3/20/2019        NOK        S        1,322,000,000        155,684,089        153,413,331        2,270,758  

UBS AG

      3/20/2019        NOK        S        142,000,000        16,273,330        16,478,588        (205,258 ) 

UBS AG

      3/20/2019        NZD        B        31,500,000        21,719,659        21,171,167        (548,492 ) 

UBS AG

      3/20/2019        NZD        S        21,800,000        14,760,794        14,651,792        109,002  

UBS AG

      3/20/2019        NZD        S        9,800,000        6,571,762        6,586,585        (14,823 ) 

UBS AG

      3/20/2019        PLN        B        31,000,000        8,221,092        8,298,416        77,324  

UBS AG

      3/20/2019        PLN        S        301,000,000        79,945,690        80,574,943        (629,253 ) 

UBS AG

      3/20/2019        SEK        B        186,000,000        20,840,235        21,115,624        275,389  

UBS AG

      3/20/2019        SEK        S        1,348,000,000        150,171,009        153,031,511        (2,860,502 ) 

UBS AG

      3/20/2019        SGD        S        139,625,000        102,006,599        102,622,732        (616,133 ) 

UBS AG

      3/20/2019        TRY        B        18,000,000        3,171,310        3,264,884        93,574  

UBS AG

      3/20/2019        ZAR        S        258,000,000        17,820,034        17,768,371        51,663  

UBS AG

      3/20/2019        ZAR        S        228,000,000        15,571,654        15,702,281        (130,627 ) 
                    

 

 

  

Total

 

       $ (2,337,691 ) 
     

 

 

  

At December 31, 2018, open long futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

10 Year Australia Government Bond

      3/15/2019        3,182      $ 293,847,059      $ 297,356,591      $ 3,509,532  

10 Year Canada Government Bond

      3/20/2019        2,790        276,957,340        279,510,915        2,553,575  

10 Year U.S. Treasury Note

      3/20/2019        1,861        224,718,031        227,071,078        2,353,047  

2 Year U.S. Treasury Note

      3/29/2019        3,529        748,138,842        749,250,812        1,111,970  

3 Year Australia Government Bond

      3/15/2019        9,378        738,415,978        741,207,191        2,791,213  

30 Year U.S. Treasury Bond

      3/20/2019        669        96,549,844        97,674,000        1,124,156  

5 Year U.S. Treasury Note

      3/29/2019        3,401        387,579,070        390,052,188        2,473,118  

Euribor

      3/18/2019        2,550        732,440,957        732,570,140        129,183  

Euro Schatz

      3/07/2019        5,141        659,019,187        659,360,076        340,889  

Euro-BTP

      3/07/2019        93        13,388,394        13,619,824        231,430  

Euro-Buxl® 30 Year Bond

      3/07/2019        831        168,146,188        171,971,548        3,825,360  

Euro-OAT

      3/07/2019        1,972        340,718,603        340,720,287        1,684  

Eurodollar

      6/17/2019        3,683        895,791,188        896,027,863        236,675  

German Euro BOBL

      3/07/2019        2,412        365,276,613        366,225,409        948,796  

German Euro Bund

      3/07/2019        2,097        390,180,249        392,927,264        2,747,015  

Japanese Yen

      3/18/2019        305        34,660,513        34,964,438        303,925  

Short-Term Euro-BTP

      3/07/2019        2,104        265,123,048        266,907,977        1,784,929  

 

See accompanying notes to financial statements.

 

37  |

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Managed Futures Strategy Fund – (continued)

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

Sterling

      3/20/2019        1,343      $ 211,982,162      $ 211,962,087      $ (20,075 ) 

UK Long Gilt

      3/27/2019        1,247        194,834,200        195,769,591        935,391  

Ultra Long U.S. Treasury Bond

      3/20/2019        143        22,975,906        22,973,843        (2,063 ) 
              

 

 

  

Total

 

    $ 27,379,750  
  

 

 

  
Commodity Futures1    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

Aluminum LME

      3/20/2019        253      $ 12,435,681      $ 11,688,600      $ (747,081 ) 

Cocoa

      3/14/2019        101        2,346,670        2,440,160        93,490  

Copper LME

      3/20/2019        76        11,755,705        11,342,525        (413,180 ) 

Live Cattle

      2/28/2019        124        6,098,590        6,144,200        45,610  

Natural Gas

      1/29/2019        206        8,295,620        6,056,400        (2,239,220 ) 

Zinc LME

      3/20/2019        56        3,638,105        3,458,700        (179,405 ) 
              

 

 

  

Total

 

    $ (3,439,786 ) 
  

 

 

  

At December 31, 2018, open short futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

AEX-Index®

      1/18/2019        360      $ 41,163,371      $ 40,233,962      $ 929,409  

ASX SPI 200™

      3/21/2019        351        34,630,294        34,370,706        259,588  

Australian Dollar

      3/18/2019        1,057        75,498,725        74,539,640        959,085  

British Pound

      3/18/2019        1,228        96,931,425        98,163,250        (1,231,825 ) 

CAC 40®

      1/18/2019        745        41,116,129        40,361,696        754,433  

Canadian Dollar

      3/19/2019        3,260        242,207,535        239,642,600        2,564,935  

DAX

      3/15/2019        141        43,888,729        42,655,444        1,233,285  

E-mini Dow

      3/15/2019        110        12,411,610        12,797,400        (385,790 ) 

E-mini NASDAQ 100

      3/15/2019        41        5,106,060        5,193,265        (87,205 ) 

E-mini Russell 2000

      3/15/2019        446        31,078,660        30,082,700        995,960  

E-mini S&P 500®

      3/15/2019        163        20,066,138        20,417,381        (351,243 ) 

E-mini S&P MidCap 400®

      3/15/2019        179        30,541,710        29,753,380        788,330  

Euro

      3/18/2019        1,496        214,162,638        215,470,751        (1,308,113 ) 

EURO STOXX 50®

      3/15/2019        1,099        38,608,315        37,447,980        1,160,335  

FTSE 100 Index

      3/15/2019        461        39,635,375        39,127,651        507,724  

FTSE MIB

      3/15/2019        353        37,547,076        36,817,050        730,026  

FTSE/JSE Top 40 Index

      3/20/2019        580        18,235,739        18,970,384        (734,645 ) 

Hang Seng China Enterprises Index

      1/30/2019        384        24,842,149        24,769,606        72,543  

Hang Seng Index®

      1/30/2019        121        19,931,971        19,975,314        (43,343 ) 

IBEX 35

      1/18/2019        439        43,877,818        42,839,659        1,038,159  

MSCI EAFE Index

      3/15/2019        550        47,998,110        47,190,000        808,110  

MSCI Emerging Markets Index

      3/15/2019        716        35,339,850        34,611,440        728,410  

MSCI Singapore

      1/30/2019        808        20,166,000        20,257,060        (91,060 ) 

MSCI Taiwan Index

      1/29/2019        501        17,772,975        18,005,940        (232,965 ) 

Nikkei 225™

      3/07/2019        101        19,340,450        18,429,816        910,634  

 

See accompanying notes to financial statements.

 

|  38

Table of Contents

Consolidated Portfolio of Investments – as of December 31, 2018

ASG Managed Futures Strategy Fund – (continued)

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

OMXS30®

      1/18/2019        2,428      $ 39,493,823      $ 38,578,927      $ 914,896  

S&P/TSX 60 Index

      3/14/2019        370        47,404,624        46,469,529        935,095  

TOPIX

      3/07/2019        270        39,073,081        36,790,748        2,282,333  
              

 

 

  

Total

 

    $ 14,107,101  
  

 

 

  
Commodity Futures1    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

Aluminum LME

      3/20/2019        1,122      $ 54,276,750      $ 51,836,400      $ 2,440,350  

Brent Crude Oil

      1/31/2019        516        29,595,350        27,760,800        1,834,550  

Coffee

      3/19/2019        437        18,741,469        16,690,669        2,050,800  

Copper

      3/27/2019        473        32,724,025        31,111,575        1,612,450  

Copper LME

      3/20/2019        284        43,614,765        42,385,225        1,229,540  

Corn

      3/14/2019        1,295        24,741,025        24,281,250        459,775  

Cotton

      3/07/2019        321        11,673,190        11,588,100        85,090  

Gasoline

      1/31/2019        441        26,646,072        24,117,496        2,528,576  

Gold

      2/26/2019        235        28,906,110        30,110,550        (1,204,440 ) 

Low Sulfur Gasoil

      2/12/2019        820        43,785,250        41,922,500        1,862,750  

New York Harbor ULSD

      1/31/2019        436        33,597,392        30,753,173        2,844,219  

Nickel LME

      3/20/2019        389        25,389,252        24,930,621        458,631  

Silver

      3/27/2019        318        22,941,095        24,708,600        (1,767,505 ) 

Soybean

      3/14/2019        396        17,235,925        17,721,000        (485,075 ) 

Soybean Meal

      3/14/2019        723        22,409,300        22,405,770        3,530  

Soybean Oil

      3/14/2019        1,119        18,909,696        18,698,490        211,206  

Sugar

      2/28/2019        1,206        17,114,294        16,249,161        865,133  

Wheat

      3/14/2019        250        6,536,863        6,290,625        246,238  

WTI Crude Oil

      1/22/2019        593        29,976,840        26,928,130        3,048,710  

Zinc LME

      3/20/2019        230        13,943,750        14,205,375        (261,625 ) 
              

 

 

  

Total

 

    $ 18,062,903  
  

 

 

  

1 Commodity futures are held by ASG Managed Futures Strategy Cayman Fund Ltd., a wholly-owned subsidiary. See Note 1 of Notes to Financial Statements.

Investment Summary at December 31, 2018

 

Certificates of Deposit

      64.2 % 

Commercial Paper

      12.4  

Time Deposits

      8.7  

Treasuries

      6.2  

Other Notes

      1.9  
  

 

 

  

Total Investments

      93.4  

Other assets less liabilities (including forward foreign currency and futures contracts)

      6.6  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

39  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund

 

    
Shares		      Description    Value (†)  
  Common Stocks — 60.3% of Net Assets  
   Aerospace & Defense — 1.2%   
  4,601      Boeing Co. (The)    $ 1,483,823  
  626      Northrop Grumman Corp.      153,307  
  723      United Technologies Corp.      76,985  
     

 

 

  
        1,714,115  
     

 

 

  
   Air Freight & Logistics — 0.6%   
  2,013      FedEx Corp.      324,757  
  4,741      United Parcel Service, Inc., Class B      462,390  
     

 

 

  
        787,147  
     

 

 

  
   Banks — 2.3%   
  62,599      Bank of America Corp.      1,542,439  
  6,361      Fifth Third Bancorp      149,674  
  8,088      JPMorgan Chase & Co.      789,551  
  14,764      U.S. Bancorp      674,715  
  4,210      Wells Fargo & Co.      193,997  
     

 

 

  
        3,350,376  
     

 

 

  
   Beverages — 1.0%   
  16,590      Coca-Cola Co. (The)      785,537  
  5,298      PepsiCo, Inc.      585,323  
     

 

 

  
        1,370,860  
     

 

 

  
   Biotechnology — 0.9%   
  3,256      Amgen, Inc.      633,846  
  5,082      Gilead Sciences, Inc.      317,879  
  2,296      Vertex Pharmaceuticals, Inc.(a)      380,470  
     

 

 

  
        1,332,195  
     

 

 

  
   Building Products — 0.1%   
  2,599      Allegion PLC      207,166  
     

 

 

  
   Capital Markets — 2.4%   
  11,972      Bank of New York Mellon Corp. (The)      563,522  
  1,620      BlackRock, Inc.      636,368  
  4,308      CME Group, Inc.      810,421  
  8,480      Intercontinental Exchange, Inc.      638,799  
  1,629      Moody’s Corp.      228,125  
  2,069      MSCI, Inc.      305,033  
  1,764      S&P Global, Inc.      299,774  
     

 

 

  
        3,482,042  
     

 

 

  
   Chemicals — 1.3%   
  943      Air Products & Chemicals, Inc.      150,927  
  9,378      DowDuPont, Inc.      501,536  
  1,403      Eastman Chemical Co.      102,573  
  1,961      Ecolab, Inc.      288,953  
  1,573      Linde PLC      245,451  
  8,701      Mosaic Co. (The)      254,156  

 

See accompanying notes to financial statements.

 

|  40

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Chemicals — continued   
  1,333      PPG Industries, Inc.    $ 136,273  
  418      Sherwin-Williams Co. (The)      164,466  
     

 

 

  
        1,844,335  
     

 

 

  
   Commercial Services & Supplies — 0.9%   
  3,034      Cintas Corp.      509,682  
  7,957      Waste Management, Inc.      708,093  
     

 

 

  
        1,217,775  
     

 

 

  
   Communications Equipment — 0.8%   
  27,228      Cisco Systems, Inc.      1,179,789  
     

 

 

  
   Containers & Packaging — 0.1%   
  2,725      WestRock Co.      102,896  
     

 

 

  
   Distributors — 0.1%   
  1,878      Genuine Parts Co.      180,326  
     

 

 

  
   Diversified Financial Services — 1.7%   
  11,929      Berkshire Hathaway, Inc., Class B(a)      2,435,663  
     

 

 

  
   Diversified Telecommunication Services — 1.2%   
  6,483      AT&T, Inc.      185,025  
  27,126      Verizon Communications, Inc.      1,525,024  
     

 

 

  
        1,710,049  
     

 

 

  
   Electric Utilities — 1.1%   
  3,056      Alliant Energy Corp.      129,116  
  2,699      American Electric Power Co., Inc.      201,723  
  3,845      Duke Energy Corp.      331,824  
  5,881      Exelon Corp.      265,233  
  2,354      NextEra Energy, Inc.      409,172  
  8,299      PPL Corp.      235,111  
     

 

 

  
        1,572,179  
     

 

 

  
   Electrical Equipment — 0.2%   
  4,506      Eaton Corp. PLC      309,382  
     

 

 

  
   Energy Equipment & Services — 0.4%   
  16,386      Schlumberger Ltd.      591,207  
     

 

 

  
   Entertainment — 1.7%   
  2,125      Netflix, Inc.(a)      568,777  
  10,166      Twenty-First Century Fox, Inc., Class A      489,188  
  6,560      Twenty-First Century Fox, Inc., Class B      313,437  
  10,129      Walt Disney Co. (The)      1,110,645  
     

 

 

  
        2,482,047  
     

 

 

  
   Food & Staples Retailing — 1.6%   
  5,413      Costco Wholesale Corp.      1,102,682  
  10,320      Sysco Corp.      646,651  
  5,626      Walmart, Inc.      524,062  
     

 

 

  
        2,273,395  
     

 

 

  

 

See accompanying notes to financial statements.

 

41  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Food Products — 0.8%   
  13,459      Archer-Daniels-Midland Co.    $ 551,415  
  2,916      Kellogg Co.      166,241  
  1,494      McCormick & Co., Inc.      208,025  
  6,505      Mondelez International, Inc., Class A      260,395  
     

 

 

  
        1,186,076  
     

 

 

  
   Health Care Equipment & Supplies — 2.0%   
  3,146      Becton Dickinson and Co.      708,857  
  719      Cooper Cos., Inc. (The)      182,986  
  7,263      Danaher Corp.      748,961  
  7,041      Medtronic PLC      640,449  
  4,086      Stryker Corp.      640,480  
     

 

 

  
        2,921,733  
     

 

 

  
   Health Care Providers & Services — 1.8%   
  4,661      Centene Corp.(a)      537,413  
  6,232      CVS Health Corp.      408,321  
  6,762      UnitedHealth Group, Inc.      1,684,549  
     

 

 

  
        2,630,283  
     

 

 

  
   Hotels, Restaurants & Leisure — 0.9%   
  581      Chipotle Mexican Grill, Inc.(a)      250,870  
  2,241      Marriott International, Inc., Class A      243,283  
  3,316      McDonald’s Corp.      588,822  
  1,894      Royal Caribbean Cruises Ltd.      185,214  
     

 

 

  
        1,268,189  
     

 

 

  
   Household Durables — 0.3%   
  3,600      Garmin Ltd.      227,952  
  330      Lennar Corp., Class A      12,920  
  6,190      PulteGroup, Inc.      160,878  
     

 

 

  
        401,750  
     

 

 

  
   Household Products — 0.7%   
  2,184      Kimberly-Clark Corp.      248,845  
  8,862      Procter & Gamble Co. (The)      814,595  
     

 

 

  
        1,063,440  
     

 

 

  
   Independent Power & Renewable Electricity Producers — 0.1%   
  4,032      NRG Energy, Inc.      159,667  
     

 

 

  
   Industrial Conglomerates — 0.7%   
  3,423      3M Co.      652,218  
  2,565      Honeywell International, Inc.      338,888  
     

 

 

  
        991,106  
     

 

 

  
   Insurance — 1.6%   
  4,030      Aon PLC      585,801  
  3,465      Assurant, Inc.      309,910  
  5,042      Chubb Ltd.      651,325  
  2,487      Lincoln National Corp.      127,608  

 

See accompanying notes to financial statements.

 

|  42

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Insurance — continued   
  2,017      Torchmark Corp.    $ 150,327  
  2,881      Willis Towers Watson PLC      437,509  
     

 

 

  
        2,262,480  
     

 

 

  
   Interactive Media & Services — 2.4%   
  1,092      Alphabet, Inc., Class A(a)      1,141,096  
  1,124      Alphabet, Inc., Class C(a)      1,164,026  
  8,767      Facebook, Inc., Class A(a)      1,149,266  
     

 

 

  
        3,454,388  
     

 

 

  
   Internet & Direct Marketing Retail — 2.5%   
  2,125      Amazon.com, Inc.(a)      3,191,686  
  243      Booking Holdings, Inc.(a)      418,548  
     

 

 

  
        3,610,234  
     

 

 

  
   IT Services — 1.9%   
  3,160      Accenture PLC, Class A      445,591  
  7,974      Automatic Data Processing, Inc.      1,045,551  
  3,853      Paychex, Inc.      251,023  
  7,471      Visa, Inc., Class A      985,724  
     

 

 

  
        2,727,889  
     

 

 

  
   Life Sciences Tools & Services — 1.0%   
  5,015      Agilent Technologies, Inc.      338,312  
  4,031      Thermo Fisher Scientific, Inc.      902,098  
  994      Waters Corp.(a)      187,518  
     

 

 

  
        1,427,928  
     

 

 

  
   Machinery — 1.0%   
  1,305      Caterpillar, Inc.      165,826  
  2,367      Deere & Co.      353,086  
  4,003      Fortive Corp.      270,843  
  2,761      Illinois Tool Works, Inc.      349,791  
  1,527      Snap-on, Inc.      221,858  
     

 

 

  
        1,361,404  
     

 

 

  
   Media — 0.8%   
  31,408      Comcast Corp., Class A      1,069,442  
     

 

 

  
   Metals & Mining — 0.2%   
  10,064      Newmont Mining Corp.      348,718  
     

 

 

  
   Multi-Utilities — 0.8%   
  3,336      CMS Energy Corp.      165,633  
  7,422      Consolidated Edison, Inc.      567,486  
  2,803      Dominion Energy, Inc.      200,302  
  1,549      Sempra Energy      167,586  
     

 

 

  
        1,101,007  
     

 

 

  
   Multiline Retail — 0.2%   
  3,143      Dollar General Corp.      339,695  
     

 

 

  

 

See accompanying notes to financial statements.

 

43  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Oil, Gas & Consumable Fuels — 2.8%   
  14,458      Cabot Oil & Gas Corp.    $ 323,136  
  15,664      Chevron Corp.      1,704,087  
  308      Concho Resources, Inc.(a)      31,659  
  3,622      EOG Resources, Inc.      315,875  
  5,714      Exxon Mobil Corp.      389,638  
  7,341      Hess Corp.      297,310  
  6,599      ONEOK, Inc.      356,016  
  2,959      Phillips 66      254,918  
  3,420      Valero Energy Corp.      256,397  
     

 

 

  
        3,929,036  
     

 

 

  
   Pharmaceuticals — 3.7%   
  5,582      Eli Lilly & Co.      645,949  
  10,089      Johnson & Johnson      1,301,985  
  20,965      Merck & Co., Inc.      1,601,936  
  23,734      Pfizer, Inc.      1,035,989  
  7,424      Zoetis, Inc.      635,049  
     

 

 

  
        5,220,908  
     

 

 

  
   Professional Services — 0.2%   
  849      Equifax, Inc.      79,068  
  1,529      Verisk Analytics, Inc.(a)      166,722  
     

 

 

  
        245,790  
     

 

 

  
   REITs – Apartments — 0.4%   
  2,278      AvalonBay Communities, Inc.      396,486  
  513      Essex Property Trust, Inc.      125,793  
     

 

 

  
        522,279  
     

 

 

  
   REITs – Diversified — 0.8%   
  4,568      American Tower Corp.      722,612  
  1,003      Crown Castle International Corp.      108,956  
  446      Equinix, Inc.      157,242  
  2,356      Vornado Realty Trust      146,142  
     

 

 

  
        1,134,952  
     

 

 

  
   REITs – Office Property — 0.1%   
  1,112      Boston Properties, Inc.      125,156  
     

 

 

  
   REITs – Regional Malls — 0.2%   
  1,692      Simon Property Group, Inc.      284,239  
     

 

 

  
   REITs – Shopping Centers — 0.1%   
  854      Federal Realty Investment Trust      100,806  
  965      Regency Centers Corp.      56,626  
     

 

 

  
        157,432  
     

 

 

  
   REITs – Storage — 0.2%   
  1,563      Public Storage      316,367  
     

 

 

  
   Road & Rail — 0.7%   
  6,229      CSX Corp.      387,008  
  4,824      Union Pacific Corp.      666,821  
     

 

 

  
        1,053,829  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  44

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Semiconductors & Semiconductor Equipment — 2.1%   
  2,568      Analog Devices, Inc.    $ 220,411  
  2,335      Broadcom, Inc.      593,744  
  26,699      Intel Corp.      1,252,984  
  1,827      Lam Research Corp.      248,783  
  1,948      NVIDIA Corp.      260,058  
  8,569      QUALCOMM, Inc.      487,662  
     

 

 

  
        3,063,642  
     

 

 

  
   Software — 5.6%   
  6,202      Adobe, Inc.(a)      1,403,141  
  3,293      ANSYS, Inc.(a)      470,701  
  6,248      Citrix Systems, Inc.      640,170  
  1,631      Intuit, Inc.      321,062  
  34,775      Microsoft Corp.      3,532,097  
  1,570      Red Hat, Inc.(a)      275,755  
  9,722      salesforce.com, inc.(a)      1,331,622  
     

 

 

  
        7,974,548  
     

 

 

  
   Specialty Retail — 1.4%   
  234      AutoZone, Inc.(a)      196,172  
  5,025      Home Depot, Inc. (The)      863,395  
  4,409      Lowe’s Cos., Inc.      407,215  
  601      O’Reilly Automotive, Inc.(a)      206,942  
  6,020      TJX Cos., Inc. (The)      269,335  
     

 

 

  
        1,943,059  
     

 

 

  
   Technology Hardware, Storage & Peripherals — 1.7%   
  15,435      Apple, Inc.      2,434,717  
     

 

 

  
   Textiles, Apparel & Luxury Goods — 0.6%   
  9,110      NIKE, Inc., Class B      675,415  
  2,073      VF Corp.      147,888  
     

 

 

  
        823,303  
     

 

 

  
   Tobacco — 0.3%   
  7,221      Philip Morris International, Inc.      482,074  
     

 

 

  
   Water Utilities — 0.1%   
  1,746      American Water Works Co., Inc.      158,484  
     

 

 

  
   Total Common Stocks
(Identified Cost $75,280,605)		      86,338,188  
     

 

 

  
Principal
Amount		                
  Short-Term Investments — 38.3%  
   Certificates of Deposit — 24.1%   
$ 1,000,000      Commonwealth Bank of Australia (NY), 1-month LIBOR + 0.260%, 2.609%, 1/03/2019(b)      1,000,018  
  1,500,000      Landesbank Hessen (NY), 2.430%, 1/16/2019      1,499,959  
  5,000,000      Norinchukin Bank (NY), 2.480%, 1/17/2019      4,999,999  
  2,000,000      Oversea-Chinese Banking Corp. Ltd. (NY), 2.560%, 1/25/2019      1,999,916  

 

See accompanying notes to financial statements.

 

45  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Certificates of Deposit — continued   
$ 3,000,000      Toronto-Dominion Bank (NY), 2.455%, 2/11/2019(c)    $ 2,999,489  
  3,000,000      Swedbank (NY), 1-month LIBOR + 0.200%, 2.621%, 2/12/2019(b)(c)      3,000,534  
  3,000,000      Credit Industriel et Commercial (NY), 2.780%, 3/20/2019      3,000,332  
  3,000,000      National Bank of Canada (NY), 1-month LIBOR + 0.150%, 2.537%, 4/10/2019(b)      2,999,757  
  2,000,000      Dexia Credit Local S.A. (NY), (Credit Support: Belgium, France, Luxembourg), 3-month LIBOR + 0.100%, 2.740%, 5/17/2019(b)(c)      1,999,766  
  2,000,000      Westpac Banking Corp. (NY), 1-month LIBOR + 0.270%, 2.740%, 5/20/2019(b)(c)      1,999,982  
  2,000,000      Svenska Handelsbanken (NY), 1-month LIBOR + 0.280%, 2.680%, 6/11/2019(b)      1,999,878  
  1,000,000      Royal Bank of Canada (NY), 1-month LIBOR + 0.310%, 2.731%, 6/12/2019(b)(c)      999,997  
  2,000,000      Royal Bank of Canada (NY), 3-month LIBOR + 0.130%, 2.544%, 7/10/2019(b)(c)      1,999,996  
  4,000,000      Bank of Montreal (IL), 3-month LIBOR + 0.110%, 2.518%, 10/04/2019(b)(c)      3,997,033  
     

 

 

  
        34,496,656  
     

 

 

  
   Time Deposits — 10.6%   
  1,750,000      Skandinaviska Enskilda Banken (NY), 2.340%, 1/02/2019(d)      1,750,000  
  6,700,000      Canadian Imperial Bank of Commerce, 2.350%, 1/02/2019      6,700,000  
  6,700,000      National Bank of Kuwait, 2.370%, 1/02/2019(d)      6,700,000  
     

 

 

  
        15,150,000  
     

 

 

  
   Commercial Paper — 2.5%   
  1,600,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.575%, 1/24/2019(e)      1,597,290  
  1,000,000      Cofco Capital Corp., (Credit Support: Australian & New Zealand Banking Group Ltd.), 2.454%, 1/04/2019(e)      999,726  
  1,000,000      ING (U.S.) Funding LLC, 1-month LIBOR + 0.310%, 2.647%, 6/03/2019(b)      1,000,123  
     

 

 

  
        3,597,139  
     

 

 

  
   Other Notes — 0.7%   
  1,000,000      Bank of America NA, 2.450%, 2/12/2019(c)      999,964  
     

 

 

  
   Treasuries — 0.4%   
  525,000      U.S. Treasury Bills, 2.282%, 1/03/2019(e)(f)      524,967  
     

 

 

  
   Total Short-Term Investments
(Identified Cost $54,772,126)		      54,768,726  
     

 

 

  
     
   Total Investments — 98.6%
(Identified Cost $130,052,731)		      141,106,914  
   Other assets less liabilities — 1.4%      1,968,336  
     

 

 

  
   Net Assets — 100.0%    $ 143,075,250  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.   
  (a)      Non-income producing security.   
  (b)      Variable rate security. Rate as of December 31, 2018 is disclosed.

 

  (c)      Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

  (d)      Variable rate security. The interest rate adjusts periodically based on changes in current interest rates. Rate as of December 31, 2018 is disclosed.

 

  (e)      Interest rate represents discount rate at time of purchase; not a coupon rate.

 

 

See accompanying notes to financial statements.

 

|  46

Table of Contents

Portfolio of Investments – as of December 31, 2018

ASG Tactical U.S. Market Fund – (continued)

 

     
  (f)      Security (or a portion thereof) has been pledged as collateral for open derivative contracts.

 

     
  LIBOR      London Interbank Offered Rate

 

  REITs      Real Estate Investment Trusts

 

At December 31, 2018, open long futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

E-mini S&P 500®

      3/15/2019        178      $ 23,609,723      $ 22,296,280      $ (1,313,443 ) 
              

 

 

  

Industry Summary at December 31, 2018

 

Software

      5.6 % 

Pharmaceuticals

      3.7  

Oil, Gas & Consumable Fuels

      2.8  

Internet & Direct Marketing Retail

      2.5  

Capital Markets

      2.4  

Interactive Media & Services

      2.4  

Banks

      2.3  

Semiconductors & Semiconductor Equipment

      2.1  

Health Care Equipment & Supplies

      2.0  

Other Investments, less than 2% each

      34.5  

Short-Term Investments

      38.3  
  

 

 

  

Total Investments

      98.6  

Other assets less liabilities (including futures contracts)

      1.4  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

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|  48

Table of Contents

Statements of Assets and Liabilities

 

December 31, 2018

 

     ASG Dynamic
Allocation Fund		     ASG Global
Alternatives
Fund
(Consolidated*)		     ASG Managed
Futures Strategy
Fund
(Consolidated*)		  

ASSETS

       

Investments at cost

    $ 36,818,212     $ 1,188,685,736     $ 1,931,688,323  

Net unrealized appreciation (depreciation)

      83,477       (15,674,740 )      (36,099 ) 
  

 

 

    

 

 

    

 

 

  

Investments at value

      36,901,689       1,173,010,996       1,931,652,224  

Cash

      73,649       5,553,053       30,366,792  

Due from brokers (including variation margin on futures contracts) (Note 2)

      27,523       28,083,443       66,516,049  

Receivable for Fund shares sold

      326,406       7,520,048       39,303,804  

Receivable for securities sold

      955,457       186,029       —  

Dividends and interest receivable

      51,599       2,538,351       5,130,660  

Unrealized appreciation on forward foreign currency contracts (Note 2)

      —       1,364,715       3,307,241  

Unrealized appreciation on futures contracts (Note 2)

      296,365       9,536,689       67,895,826  

Prepaid expenses (Note 8)

      23       754       1,707  
  

 

 

    

 

 

    

 

 

  

TOTAL ASSETS

      38,632,711       1,227,794,078       2,144,174,303  
  

 

 

    

 

 

    

 

 

  

LIABILITIES

       

Payable for securities purchased

      —       45,186       —  

Payable for Fund shares redeemed

      32,793       8,266,333       26,721,661  

Unrealized depreciation on forward foreign currency contracts (Note 2)

      —       33,320       5,644,932  

Due to brokers (including variation margin on futures contracts) (Note 2)

      32,324       —       28,450,897  

Unrealized depreciation on futures contracts (Note 2)

      172,297       22,090,666       11,785,858  

Management fees payable (Note 6)

      10,015       1,207,696       2,298,579  

Deferred Trustees’ fees (Note 6)

      18,035       222,092       193,814  

Administrative fees payable (Note 6)

      1,348       61,656       143,578  

Payable to distributor (Note 6d)

      642       23,472       77,585  

Other accounts payable and accrued expenses

      73,624       222,676       521,204  
  

 

 

    

 

 

    

 

 

  

TOTAL LIABILITIES

      341,078       32,173,097       75,838,108  
  

 

 

    

 

 

    

 

 

  

NET ASSETS

    $ 38,291,633     $ 1,195,620,981     $ 2,068,336,195  
  

 

 

    

 

 

    

 

 

  

NET ASSETS CONSIST OF:

       

Paid-in capital

    $ 40,887,627     $ 1,362,625,876     $ 2,402,745,472  

Accumulated loss

      (2,595,994 )      (167,004,895 )      (334,409,277 ) 
  

 

 

    

 

 

    

 

 

  

NET ASSETS

    $ 38,291,633     $ 1,195,620,981     $ 2,068,336,195  
  

 

 

    

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

49  |

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

     ASG Dynamic
Allocation Fund		      ASG Global
Alternatives
Fund
(Consolidated*)		      ASG Managed
Futures Strategy
Fund
(Consolidated*)		  

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

         

Class A shares:

         

Net assets

    $ 322,957      $ 33,648,757      $ 133,995,883  
  

 

 

     

 

 

     

 

 

  

Shares of beneficial interest

      33,272        3,287,298        14,937,513  
  

 

 

     

 

 

     

 

 

  

Net asset value and redemption price per share

    $ 9.71      $ 10.24      $ 8.97  
  

 

 

     

 

 

     

 

 

  

Offering price per share (100/94.25 of net asset value) (Note 1)

    $ 10.30      $ 10.86      $ 9.52  
  

 

 

     

 

 

     

 

 

  

Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1)

         

Net assets

    $ 13,526      $ 15,536,573      $ 29,420,727  
  

 

 

     

 

 

     

 

 

  

Shares of beneficial interest

      1,400        1,620,633        3,455,913  
  

 

 

     

 

 

     

 

 

  

Net asset value and offering price per share

    $ 9.66      $ 9.59      $ 8.51  
  

 

 

     

 

 

     

 

 

  

Class N shares:

         

Net assets

    $ —      $ 14,377,452      $ 67,957,241  
  

 

 

     

 

 

     

 

 

  

Shares of beneficial interest

      —        1,382,825        7,490,270  
  

 

 

     

 

 

     

 

 

  

Net asset value, offering and redemption price per share

    $ —      $ 10.40      $ 9.07  
  

 

 

     

 

 

     

 

 

  

Class Y shares:

         

Net assets

    $ 37,955,150      $ 1,132,058,199      $ 1,836,962,344  
  

 

 

     

 

 

     

 

 

  

Shares of beneficial interest

      3,902,443        108,828,876        202,803,429  
  

 

 

     

 

 

     

 

 

  

Net asset value, offering and redemption price per share

    $ 9.73      $ 10.40      $ 9.06  
  

 

 

     

 

 

     

 

 

  

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  50

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

     ASG Tactical
U.S. Market
Fund		  

ASSETS

   

Investments at cost

    $ 130,052,731  

Net unrealized appreciation

      11,054,183  
  

 

 

  

Investments at value

      141,106,914  

Cash

      407,489  

Due from brokers (including variation margin on futures contracts) (Note 2)

      2,160,472  

Receivable for Fund shares sold

      966,129  

Dividends and interest receivable

      238,180  

Prepaid expenses (Note 8)

      86  
  

 

 

  

TOTAL ASSETS

      144,879,270  
  

 

 

  

LIABILITIES

   

Payable for securities purchased

      88,814  

Payable for Fund shares redeemed

      194,801  

Unrealized depreciation on futures contracts (Note 2)

      1,313,443  

Management fees payable (Note 6)

      88,142  

Deferred Trustees’ fees (Note 6)

      43,679  

Administrative fees payable (Note 6)

      5,203  

Payable to distributor (Note 6d)

      1,677  

Other accounts payable and accrued expenses

      68,261  
  

 

 

  

TOTAL LIABILITIES

      1,804,020  
  

 

 

  

NET ASSETS

    $ 143,075,250  
  

 

 

  

NET ASSETS CONSIST OF:

   

Paid-in capital

    $ 140,801,119  

Accumulated earnings

      2,274,131  
  

 

 

  

NET ASSETS

    $ 143,075,250  
  

 

 

  

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

   

Class A shares:

   

Net assets

    $ 18,978,122  
  

 

 

  

Shares of beneficial interest

      1,434,475  
  

 

 

  

Net asset value and redemption price per share

    $ 13.23  
  

 

 

  

Offering price per share (100/94.25 of net asset value) (Note 1)

    $ 14.04  
  

 

 

  

Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1)

   

Net assets

    $ 3,109,557  
  

 

 

  

Shares of beneficial interest

      242,160  
  

 

 

  

Net asset value and offering price per share

    $ 12.84  
  

 

 

  

Class Y shares:

   

Net assets

    $ 120,987,571  
  

 

 

  

Shares of beneficial interest

      9,121,651  
  

 

 

  

Net asset value, offering and redemption price per share

    $ 13.26  
  

 

 

  

 

See accompanying notes to financial statements.

 

51  |

Table of Contents

Statements of Operations

 

For the Year Ended December 31, 2018

 

     ASG Dynamic
Allocation Fund		     ASG Global
Alternatives
Fund
(Consolidated*)		     ASG Managed
Futures Strategy
Fund
(Consolidated*)		  

INVESTMENT INCOME

       

Interest

    $ 460,445     $ 26,366,274     $ 58,269,729  

Dividends

      500,637       3,774,378       —  

Less net foreign taxes withheld

      —       (4,420 )      —  
  

 

 

    

 

 

    

 

 

  
     961,082       30,136,232       58,269,729  
  

 

 

    

 

 

    

 

 

  

Expenses

       

Management fees (Note 6)

      291,230       16,203,602       37,230,373  

Service and distribution fees (Note 6)

      1,154       307,927       981,061  

Administrative fees (Note 6)

      18,267       684,046       1,520,976  

Trustees’ and directors’ fees and expenses (Note 6)

      16,007       67,471       109,129  

Transfer agent fees and expenses (Notes 6 and 7)

      58,227       830,358       3,181,196  

Audit and tax services fees

      60,057       75,633       76,651  

Custodian fees and expenses

      21,252       149,530       547,101  

Legal fees

      928       33,432       72,074  

Registration fees

      58,131       92,003       164,580  

Shareholder reporting expenses

      9,821       101,963       330,318  

Miscellaneous expenses (Note 8)

      27,198       102,706       262,966  
  

 

 

    

 

 

    

 

 

  

Total expenses

      562,272       18,648,671       44,476,425  

Less waiver and/or expense reimbursement (Note 6)

      (186,268 )      (149,756 )      (6,258 ) 
  

 

 

    

 

 

    

 

 

  

Net expenses

      376,004       18,498,915       44,470,167  
  

 

 

    

 

 

    

 

 

  

Net investment income

      585,078       11,637,317       13,799,562  
  

 

 

    

 

 

    

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS

       

Net realized gain (loss) on:

       

Investments

      155,408       2,303,027       (1,026 ) 

Futures contracts

      (2,766,922 )      (34,658,963 )      (412,036,796 ) 

Forward foreign currency contracts (Note 2e)

      —       (478,998 )      (7,591,404 ) 

Foreign currency transactions (Note 2d)

      27,889       168,181       1,287,378  

Net change in unrealized appreciation (depreciation) on:

       

Investments

      (1,853,980 )      (16,491,863 )      (193,822 ) 

Futures contracts

      (93,811 )      (39,961,856 )      (2,538,365 ) 

Forward foreign currency contracts (Note 2e)

      —       906,435       (3,986,882 ) 

Foreign currency translations (Note 2d)

      (5,925 )      (103,528 )      182,616  
  

 

 

    

 

 

    

 

 

  

Net realized and unrealized loss on investments, futures contracts, forward foreign currency contracts and foreign currency transactions

      (4,537,341 )      (88,317,565 )      (424,878,301 ) 
  

 

 

    

 

 

    

 

 

  

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ (3,952,263 )    $ (76,680,248 )    $ (411,078,739 ) 
  

 

 

    

 

 

    

 

 

  

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  52

Table of Contents

Statements of Operations (continued)

 

For the Year Ended December 31, 2018

 

     ASG Tactical
U.S. Market
Fund		  

INVESTMENT INCOME

   

Interest

    $ 1,209,596  

Dividends

      1,898,703  
  

 

 

  
     3,108,299  
  

 

 

  

Expenses

   

Management fees (Note 6)

      1,317,848  

Service and distribution fees (Note 6)

      104,678  

Administrative fees (Note 6)

      72,251  

Trustees’ fees and expenses (Note 6)

      19,240  

Transfer agent fees and expenses (Notes 6 and 7)

      162,371  

Audit and tax services fees

      47,303  

Custodian fees and expenses

      34,355  

Legal fees

      3,463  

Registration fees

      77,307  

Shareholder reporting expenses

      14,788  

Miscellaneous expenses (Note 8)

      19,595  
  

 

 

  

Total expenses

      1,873,199  

Less waiver and/or expense reimbursement (Note 6)

      (137,684 ) 
  

 

 

  

Net expenses

      1,735,515  
  

 

 

  

Net investment income

      1,372,784  
  

 

 

  

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FUTURES CONTRACTS

   

Net realized (loss) on:

   

Investments

      (4,779,512 ) 

Futures contracts

      (1,583,255 ) 

Net change in unrealized appreciation (depreciation) on:

   

Investments

      (2,326,165 ) 

Futures contracts

      (2,276,488 ) 
  

 

 

  

Net realized and unrealized loss on investments and futures contracts

      (10,965,420 ) 
  

 

 

  

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ (9,592,636 ) 
  

 

 

  

 

See accompanying notes to financial statements.

 

53  |

Table of Contents

Statements of Changes in Net Assets

 

 

    ASG Dynamic Allocation Fund     ASG Global Alternatives Fund
(Consolidated*)		  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2018		     Year Ended
December 31,
2017		  

FROM OPERATIONS:

        

Net investment income (loss)

   $ 585,078     $ 315,097     $ 11,637,317     $ (114,977 ) 

Net realized gain (loss) on investments, futures contracts, forward foreign currency contracts and foreign currency transactions

     (2,583,625 )      3,697,590       (32,666,753 )      138,187,432  

Net change in unrealized appreciation (depreciation) on investments, futures contracts, forward foreign currency contracts and foreign currency translations

     (1,953,716 )      2,086,286       (55,650,812 )      21,328,833  
 

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

     (3,952,263 )      6,098,973       (76,680,248 )      159,401,288  
 

 

 

    

 

 

    

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

        

Class A

     (8,397 )      (11,362 )(a)      (360,700 )      (218,658 )(a) 

Class C

     (1,104 )      (1,253 )(a)      (34,318 )      — (a) 

Class N

     —       —       (202,207 )      (81,222 )(a) 

Class Y

     (1,414,283 )      (3,533,823 )(a)      (15,628,566 )      (11,576,186 )(a) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions

     (1,423,784 )      (3,546,438 )      (16,225,791 )      (11,876,066 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

     3,947,444       14,795,679       (355,923,631 )      (131,973,372 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets

     (1,428,603 )      17,348,214       (448,829,670 )      15,551,850  

NET ASSETS

        

Beginning of the year

     39,720,236       22,372,022       1,644,450,651       1,628,898,801  
 

 

 

    

 

 

    

 

 

    

 

 

  

End of the year

   $ 38,291,633     $ 39,720,236     $ 1,195,620,981     $ 1,644,450,651  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

See Note 2h of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  54

Table of Contents

Statements of Changes in Net Assets (continued)

 

    ASG Managed Futures
Strategy Fund (Consolidated*)		     ASG Tactical U.S. Market
Fund		  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2018		     Year Ended
December 31,
2017		  

FROM OPERATIONS:

        

Net investment income (loss)

   $ 13,799,562     $ (11,995,451 )    $ 1,372,784     $ 536,023  

Net realized gain (loss) on investments, futures contracts, forward foreign currency contracts and foreign currency transactions

     (418,341,848 )      179,814,183       (6,362,767 )      8,950,892  

Net change in unrealized appreciation (depreciation) on investments, futures contracts, forward foreign currency contracts and foreign currency translations

     (6,536,453 )      32,396,435       (4,602,653 )      9,049,914  
 

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

     (411,078,739 )      200,215,167       (9,592,636 )      18,536,829  
 

 

 

    

 

 

    

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

        

Class A

     (2,716,878 )      — (a)      (981,219 )      (799,172 )(a) 

Class C

     (613,754 )      — (a)      (49,251 )      (101,661 )(a) 

Class N

     (127,823 )      (1 )(a)      —       —  

Class Y

     (34,974,523 )      (2,037,868 )(a)      (3,351,345 )      (4,275,295 )(a) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions

     (38,432,978 )      (2,037,869 )      (4,381,815 )      (5,176,128 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

     (938,960,031 )      94,291,257       53,688,562       21,173,988  
 

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets

     (1,388,471,748 )      292,468,555       39,714,111       34,534,689  

NET ASSETS

        

Beginning of the year

     3,456,807,943       3,164,339,388       103,361,139       68,826,450  
 

 

 

    

 

 

    

 

 

    

 

 

  

End of the year

   $ 2,068,336,195     $ 3,456,807,943     $ 143,075,250     $ 103,361,139  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

See Note 2h of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

55  |

Table of Contents

Financial Highlights

 

For a share outstanding throughout each period.

 

    ASG Dynamic Allocation Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Period Ended
December 31,
2015*		  

Net asset value, beginning of the period

   $ 11.10     $ 10.08     $ 9.86     $ 10.00  
 

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

        

Net investment income(a)

     0.14       0.10       0.03       0.01  

Net realized and unrealized gain (loss)

     (1.19 )      1.99       0.21       (0.14 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.05 )      2.09       0.24       (0.13 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

        

Net investment income

     (0.13 )      (0.07 )      (0.02 )      (0.01 ) 

Net realized capital gains

     (0.21 )      (1.00 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.34 )      (1.07 )      (0.02 )      (0.01 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.71     $ 11.10     $ 10.08     $ 9.86  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)(c)

     (9.61 )%      20.79 %      2.41 %      (1.28 )%(d) 

RATIOS TO AVERAGE NET ASSETS:

        

Net assets, end of the period (000’s)

   $ 323     $ 134     $ 29     $ 1  

Net expenses(e)

     1.15 %      1.17 %(f)      1.17 %(g)      1.15 %(h) 

Gross expenses

     1.62 %      1.74 %(f)      1.80 %(g)      3.96 %(h) 

Net investment income

     1.31 %      0.90 %      0.31 %      1.19 %(h) 

Portfolio turnover rate

     46 %      8 %      115 %(i)      11 % 

 

*

From commencement of operations on November 30, 2015 through December 31, 2015.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Periods less than one year, if applicable, are not annualized.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.15% and the ratio of gross expenses would have been 1.72%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.15% and the ratio of gross expenses would have been 1.78%.

(h)

Computed on an annualized basis for periods less than one year.

(i)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to sales of equity securities in early 2016 in an effort to reduce risk. By mid-2016, in an effort to gain more exposure, the Fund returned to its normal investment strategy.

 

See accompanying notes to financial statements.

 

|  56

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Dynamic Allocation Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Period Ended
December 31,
2015*		  

Net asset value, beginning of the period

   $ 10.99     $ 10.01     $ 9.85     $ 10.00  
 

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

        

Net investment income (loss)(a)

     0.04       (0.00 )(b)      (0.07 )      (0.00 )(b) 

Net realized and unrealized gain (loss)

     (1.16 )      1.99       0.23       (0.14 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.12 )      1.99       0.16       (0.14 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

        

Net investment income

     (0.00 )(b)      (0.01 )      (0.00 )(b)      (0.01 ) 

Net realized capital gains

     (0.21 )      (1.00 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.21 )      (1.01 )      (0.00 )      (0.01 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.66     $ 10.99     $ 10.01     $ 9.85  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)(d)

     (10.30 )%      19.92 %      1.63 %      (1.37 )%(e) 

RATIOS TO AVERAGE NET ASSETS:

        

Net assets, end of the period (000’s)

   $ 14     $ 15     $ 9     $ 8  

Net expenses(f)

     1.90 %      1.92 %(g)      1.91 %(h)      1.90 %(i) 

Gross expenses

     2.34 %      2.49 %(g)      2.51 %(h)      4.72 %(i) 

Net investment income (loss)

     0.37 %      (0.02 )%      (0.75 )%      (0.16 )%(i) 

Portfolio turnover rate

     46 %      8 %      115 %(j)      11 % 

 

*

From commencement of operations on November 30, 2015 through December 31, 2015.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

Periods less than one year, if applicable, are not annualized.

(f)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.90% and the ratio of gross expenses would have been 2.47%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.90% and the ratio of gross expenses would have been 2.50%.

(i)

Computed on an annualized basis for periods less than one year.

(j)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to sales of equity securities in early 2016 in an effort to reduce risk. By mid-2016, in an effort to gain more exposure, the Fund returned to its normal investment strategy.

 

See accompanying notes to financial statements.

 

57  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Dynamic Allocation Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Period Ended
December 31,
2015*		  

Net asset value, beginning of the period

   $ 11.12     $ 10.09     $ 9.86     $ 10.00  
 

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

        

Net investment income(a)

     0.15       0.11       0.03       0.01  

Net realized and unrealized gain (loss)

     (1.18 )      2.01       0.23       (0.14 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.03 )      2.12       0.26       (0.13 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

        

Net investment income

     (0.15 )      (0.09 )      (0.03 )      (0.01 ) 

Net realized capital gains

     (0.21 )      (1.00 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.36 )      (1.09 )      (0.03 )      (0.01 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.73     $ 11.12     $ 10.09     $ 9.86  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (9.39 )%      21.19 %      2.57 %      (1.26 )%(c) 

RATIOS TO AVERAGE NET ASSETS:

        

Net assets, end of the period (000’s)

   $ 37,955     $ 39,571     $ 22,334     $ 20,095  

Net expenses(d)

     0.90 %      0.92 %(e)      0.91 %(f)      0.90 %(g) 

Gross expenses

     1.35 %      1.50 %(e)      1.54 %(f)      3.72 %(g) 

Net investment income

     1.41 %      0.95 %      0.32 %      1.39 %(g) 

Portfolio turnover rate

     46 %      8 %      115 %(h)      11 % 

 

*

From commencement of operations on November 30, 2015 through December 31, 2015.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year, if applicable, are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Includes interest expense. Without this expense the ratio of net expenses would have been 0.90% and the ratio of gross expenses would have been 1.48%.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 0.90% and the ratio of gross expenses would have been 1.53%.

(g)

Computed on an annualized basis for periods less than one year.

(h)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to sales of equity securities in early 2016 in an effort to reduce risk. By mid-2016, in an effort to gain more exposure, the Fund returned to its normal investment strategy.

 

See accompanying notes to financial statements.

 

|  58

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Global Alternatives Fund (Consolidated*)—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 11.04     $ 10.02     $ 10.48     $ 11.12     $ 11.33  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.06       (0.03 )      (0.09 )      (0.14 )      (0.15 ) 

Net realized and unrealized gain (loss)

     (0.75 )      1.10       (0.37 )      (0.12 )      0.53  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.69 )      1.07       (0.46 )      (0.26 )      0.38  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.11 )      (0.05 )      —       —       —  

Net realized capital gains

     —       —       —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.11 )      (0.05 )      —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 10.24     $ 11.04     $ 10.02     $ 10.48     $ 11.12  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (6.35 )%(c)      10.66 %      (4.39 )%      (2.69 )%      3.53 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 33,649     $ 49,904     $ 76,207     $ 224,951     $ 150,462  

Net expenses

     1.54 %(d)      1.57 %(e)(f)      1.56 %(g)      1.53 %(h)      1.55 %(i) 

Gross expenses

     1.55 %      1.57 %(f)      1.56 %(g)      1.53 %(h)      1.55 %(i) 

Net investment income (loss)

     0.58 %      (0.26 )%      (0.93 )%      (1.27 )%      (1.34 )% 

Portfolio turnover rate(j)

     59 %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2017, the expense limit decreased from 1.60% to 1.54%.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.55% and the ratio of gross expenses would have been 1.56%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.54% and the ratio of gross expenses would have been 1.54%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.52% and the ratio of gross expenses would have been 1.52%.

(i)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.53% and the ratio of gross expenses would have been 1.53%.

(j)

Prior to 2018, the portfolio turnover rate was not reported due to the short term nature of the portfolio of investments.

 

See accompanying notes to financial statements.

 

59  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Global Alternatives Fund (Consolidated*)—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.33     $ 9.40     $ 9.91     $ 10.61     $ 10.92  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment loss(a)

     (0.02 )      (0.10 )      (0.15 )      (0.21 )      (0.22 ) 

Net realized and unrealized gain (loss)

     (0.70 )      1.03       (0.36 )      (0.11 )      0.50  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.72 )      0.93       (0.51 )      (0.32 )      0.28  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.02 )      —       —       —       —  

Net realized capital gains

     —       —       —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.02 )      —       —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.59     $ 10.33     $ 9.40     $ 9.91     $ 10.61  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (7.09 )%(c)      9.89 %      (5.15 )%      (3.40 )%      2.73 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 15,537     $ 24,521     $ 38,412     $ 95,885     $ 87,941  

Net expenses

     2.29 %(d)      2.32 %(e)(f)      2.31 %(g)      2.28 %(h)      2.31 %(i) 

Gross expenses

     2.30 %      2.32 %(f)      2.31 %(g)      2.28 %(h)      2.31 %(i) 

Net investment loss

     (0.17 )%      (1.00 )%      (1.68 )%      (2.03 )%      (2.10 )% 

Portfolio turnover rate(j)

     59 %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment loss has been calculated using the average shares outstanding during the period.

(b)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2017, the expense limit decreased from 2.35% to 2.29%.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.30% and the ratio of gross expenses would have been 2.31%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.29% and the ratio of gross expenses would have been 2.29%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.26% and the ratio of gross expenses would have been 2.26%.

(i)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.28% and the ratio of gross expenses would have been 2.28%.

(j)

Prior to 2018, the portfolio turnover rate was not reported due to the short term nature of the portfolio of investments.

 

See accompanying notes to financial statements.

 

|  60

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Global Alternatives Fund (Consolidated*)—Class N  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 11.22     $ 10.19     $ 10.63     $ 11.24     $ 11.42  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.10       0.01       (0.06 )      (0.11 )      (0.12 ) 

Net realized and unrealized gain (loss)

     (0.77 )      1.11       (0.38 )      (0.12 )      0.53  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.67 )      1.12       (0.44 )      (0.23 )      0.41  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.15 )      (0.09 )      —       —       —  

Net realized capital gains

     —       —       —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.15 )      (0.09 )      —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 10.40     $ 11.22     $ 10.19     $ 10.63     $ 11.24  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (6.08 )%(b)      10.98 %      (4.05 )%      (2.48 )%      3.77 %(b) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 14,377     $ 10,376     $ 9,639     $ 10,476     $ 1  

Net expenses

     1.24 %(c)      1.26 %(d)(e)      1.24 %(f)      1.23 %(g)      1.27 %(c)(h) 

Gross expenses

     1.25 %      1.26 %(e)      1.24 %(f)      1.23 %(g)      7.42 %(h) 

Net investment income (loss)

     0.94 %      0.09 %      (0.56 )%      (0.97 )%      (1.07 )% 

Portfolio turnover rate(i)

     59 %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(d)

Effective July 1, 2017, the expense limit decreased from 1.30% to 1.24%.

(e)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.24% and the ratio of gross expenses would have been 1.24%.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.22% and the ratio of gross expenses would have been 1.22%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.21% and the ratio of gross expenses would have been 1.21%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.25% and the ratio of gross expenses would have been 7.40%.

(i)

Prior to 2018, the portfolio turnover rate was not reported due to the short term nature of the portfolio of investments.

 

See accompanying notes to financial statements.

 

61  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Global Alternatives Fund (Consolidated*)—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 11.22     $ 10.19     $ 10.64     $ 11.25     $ 11.43  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.09       0.00 (b)      (0.07 )      (0.12 )      (0.12 ) 

Net realized and unrealized gain (loss)

     (0.77 )      1.11       (0.38 )      (0.11 )      0.53  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.68 )      1.11       (0.45 )      (0.23 )      0.41  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.14 )      (0.08 )      —       —       —  

Net realized capital gains

     —       —       —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.14 )      (0.08 )      —       (0.38 )      (0.59 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 10.40     $ 11.22     $ 10.19     $ 10.64     $ 11.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (6.04 )%(c)      10.93 %      (4.23 )%      (2.38 )%      3.77 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 1,132,058     $ 1,559,650     $ 1,504,641     $ 3,344,101     $ 2,786,510  

Net expenses

     1.29 %(d)      1.32 %(e)(f)      1.31 %(g)      1.28 %(h)      1.31 %(g) 

Gross expenses

     1.30 %      1.32 %(f)      1.31 %(g)      1.28 %(h)      1.31 %(g) 

Net investment income (loss)

     0.85 %      0.02 %      (0.67 )%      (1.03 )%      (1.10 )% 

Portfolio turnover rate(i)

     59 %      — %      — %      — %      — % 

 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2017, the expense limit decreased from 1.35% to 1.29%.

(f)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.30% and the ratio of gross expenses would have been 1.31%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.29% and the ratio of gross expenses would have been 1.29%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.26% and the ratio of gross expenses would have been 1.26%.

(i)

Prior to 2018, the portfolio turnover rate was not reported due to the short term nature of the portfolio of investments.

 

See accompanying notes to financial statements.

 

|  62

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Managed Futures Strategy Fund (Consolidated*)—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.38     $ 9.78     $ 10.37     $ 10.98     $ 10.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.02       (0.06 )      (0.12 )      (0.16 )      (0.16 ) 

Net realized and unrealized gain (loss)

     (1.31 )      0.66       (0.47 )      0.06 (b)      2.37  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.29 )      0.60       (0.59 )      (0.10 )      2.21  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       —       —       (0.22 )      (0.29 ) 

Net realized capital gains

     (0.12 )      —       —       (0.29 )      (1.19 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.12 )      —       —       (0.51 )      (1.48 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 8.97     $ 10.38     $ 9.78     $ 10.37     $ 10.98  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)

     (12.55 )%      6.13 %      (5.69 )%(d)      (1.38 )%      21.76 %(d) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 133,996     $ 299,505     $ 463,235     $ 486,160     $ 137,991  

Net expenses

     1.70 %      1.75 %(e)(f)      1.74 %(g)(h)      1.73 %(e)(i)      1.72 %(h)(j) 

Gross expenses

     1.70 %      1.75 %(e)(f)      1.75 %(g)      1.73 %(e)(i)      1.76 %(j) 

Net investment income (loss)

     0.21 %      (0.61 )%      (1.11 )%      (1.48 )%      (1.53 )% 

Portfolio turnover rate(k)

     — %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

The amount shown for a share outstanding does not correspond with the aggregate realized and unrealized gain (loss) on investments for the period due to the timing of sales and redemptions of fund shares in relation to fluctuating market values of investments of the Fund.

(c)

A sales charge for Class A shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.70% and the ratio of gross expenses would have been 1.70%.

(f)

Includes fee/expense recovery of 0.01%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.70% and the ratio of gross expenses would have been 1.71%.

(h)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(i)

Includes fee/expense recovery of less than 0.01%.

(j)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.70% and the ratio of gross expenses would have been 1.74%.

(k)

Due to the short-term nature of the portfolio of investments there is no portfolio turnover calculation.

 

See accompanying notes to financial statements.

 

63  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Managed Futures Strategy Fund (Consolidated*)—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 9.93     $ 9.42     $ 10.07     $ 10.69     $ 10.03  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment loss(a)

     (0.05 )      (0.13 )      (0.19 )      (0.24 )      (0.24 ) 

Net realized and unrealized gain (loss)

     (1.25 )      0.64       (0.46 )      0.05 (b)      2.32  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.30 )      0.51       (0.65 )      (0.19 )      2.08  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       —       —       (0.14 )      (0.23 ) 

Net realized capital gains

     (0.12 )      —       —       (0.29 )      (1.19 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.12 )      —       —       (0.43 )      (1.42 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 8.51     $ 9.93     $ 9.42     $ 10.07     $ 10.69  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)

     (13.22 )%      5.41 %      (6.45 )%(d)      (2.23 )%      21.01 %(d) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 29,421     $ 53,661     $ 71,184     $ 67,479     $ 33,945  

Net expenses

     2.45 %      2.50 %(e)(f)      2.49 %(g)(h)      2.48 %(e)(f)      2.47 %(h)(i) 

Gross expenses

     2.45 %      2.50 %(e)(f)      2.50 %(g)      2.48 %(e)(f)      2.51 %(i) 

Net investment loss

     (0.52 )%      (1.36 )%      (1.86 )%      (2.24 )%      (2.28 )% 

Portfolio turnover rate(j)

     — %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment loss has been calculated using the average shares outstanding during the period.

(b)

The amount shown for a share outstanding does not correspond with the aggregate realized and unrealized gain (loss) on investments for the period due to the timing of sales and redemptions of fund shares in relation to fluctuating market values of investments of the Fund.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.45% and the ratio of gross expenses would have been 2.45%.

(f)

Includes fee/expense recovery of 0.01%.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.45% and the ratio of gross expenses would have been 2.46%.

(h)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(i)

Includes interest expense. Without this expense the ratio of net expenses would have been 2.45% and the ratio of gross expenses would have been 2.49%.

(j)

Due to the short-term nature of the portfolio of investments there is no portfolio turnover calculation.

 

See accompanying notes to financial statements.

 

|  64

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Managed Futures Strategy Fund
(Consolidated*)—Class N		  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017**		  

Net asset value, beginning of the period

   $ 10.46     $ 9.81  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

    

Net investment income (loss)(a)

     0.08       (0.01 ) 

Net realized and unrealized gain (loss)

     (1.35 )      0.67  
 

 

 

    

 

 

  

Total from Investment Operations

     (1.27 )      0.66  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

    

Net investment income

     —       (0.01 ) 

Net realized capital gains

     (0.12 )      —  
 

 

 

    

 

 

  

Total Distributions

     (0.12 )      (0.01 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.07     $ 10.46  
 

 

 

    

 

 

  

Total return

     (12.26 )%      6.76 %(b) 

RATIOS TO AVERAGE NET ASSETS:

    

Net assets, end of the period (000’s)

   $ 67,957     $ 1,017  

Net expenses

     1.36 %      1.34 %(c)(d)(e) 

Gross expenses

     1.36 %      14.83 %(d)(e) 

Net investment income (loss)

     0.83 %      (0.17 )%(d) 

Portfolio turnover rate(f)

     — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

**

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. Periods less than one year are not annualized.

(c)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(d)

Computed on an annualized basis for periods less than one year.

(e)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.29% and the ratio of gross expenses would have been 14.78%.

(f)

Due to the short-term nature of the portfolio of investments there is no portfolio turnover calculation.

 

See accompanying notes to financial statements.

 

65  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Managed Futures Strategy Fund (Consolidated*)—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.46     $ 9.83     $ 10.40     $ 11.01     $ 10.26  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.05       (0.03 )      (0.09 )      (0.14 )      (0.14 ) 

Net realized and unrealized gain (loss)

     (1.33 )      0.67       (0.48 )      0.05 (b)      2.40  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.28 )      0.64       (0.57 )      (0.09 )      2.26  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       (0.01 )      —       (0.23 )      (0.32 ) 

Net realized capital gains

     (0.12 )      —       —       (0.29 )      (1.19 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.12 )      (0.01 )      —       (0.52 )      (1.51 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.06     $ 10.46     $ 9.83     $ 10.40     $ 11.01  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (12.35 )%      6.48 %      (5.47 )%(c)      (1.22 )%      22.21 %(c) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 1,836,962     $ 3,102,626     $ 2,629,920     $ 2,133,620     $ 1,363,162  

Net expenses

     1.45 %      1.50 %(d)(e)      1.49 %(f)(g)      1.48 %(d)(e)      1.47 %(f)(h) 

Gross expenses

     1.45 %      1.50 %(d)(e)      1.50 %(g)      1.48 %(d)(e)      1.51 %(h) 

Net investment income (loss)

     0.49 %      (0.34 )%      (0.85 )%      (1.24 )%      (1.28 )% 

Portfolio turnover rate(i)

     — %      — %      — %      — %      — % 

 

*

See Notes 1 and 2 of the Notes to Financial Statements.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

The amount shown for a share outstanding does not correspond with the aggregate realized and unrealized gain (loss) on investments for the period due to the timing of sales and redemptions of fund shares in relation to fluctuating market values of investments of the Fund.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.45% and the ratio of gross expenses would have been 1.45%.

(e)

Includes fee/expense recovery of 0.01%.

(f)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(g)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.45% and the ratio of gross expenses would have been 1.46%.

(h)

Includes interest expense. Without this expense the ratio of net expenses would have been 1.45% and the ratio of gross expenses would have been 1.49%.

(i)

Due to the short-term nature of the portfolio of investments there is no portfolio turnover calculation.

 

See accompanying notes to financial statements.

 

|  66

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Tactical U.S. Market Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 14.11     $ 11.83     $ 11.41     $ 11.85     $ 11.02  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.09       0.06       0.04       (0.00 )(b)      (0.01 ) 

Net realized and unrealized gain (loss)

     (0.63 )      2.95       0.43       (0.35 )      1.60  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.54 )      3.01       0.47       (0.35 )      1.59  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.08 )      (0.06 )      (0.05 )      —       —  

Net realized capital gains

     (0.26 )      (0.67 )      —       (0.09 )      (0.76 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.34 )      (0.73 )      (0.05 )      (0.09 )      (0.76 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 13.23     $ 14.11     $ 11.83     $ 11.41     $ 11.85  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)(d)

     (3.88 )%      25.37 %      4.09 %      (3.00 )%      14.69 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 18,978     $ 16,292     $ 8,365     $ 9,360     $ 3,089  

Net expenses(e)

     1.24 %      1.24 %(f)      1.25 %      1.32 %      1.40 % 

Gross expenses

     1.32 %      1.44 %      1.40 %      1.39 %      1.57 % 

Net investment income (loss)

     0.64 %      0.49 %      0.36 %      (0.03 )%      (0.09 )% 

Portfolio turnover rate

     88 %      18 %      42 %      149 %(g)      62 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

A sales charge for Class A shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Effective July 1, 2017, the expense limit decreased from 1.25% to 1.24%.

(g)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to sales of equity securities to take advantage of opportunities to harvest tax losses.

 

See accompanying notes to financial statements.

 

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Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Tactical U.S. Market Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 13.75     $ 11.59     $ 11.21     $ 11.73     $ 11.00  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment loss(a)

     (0.01 )      (0.04 )      (0.05 )      (0.09 )      (0.10 ) 

Net realized and unrealized gain (loss)

     (0.60 )      2.87       0.43       (0.34 )      1.59  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.61 )      2.83       0.38       (0.43 )      1.49  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.04 )      (0.00 )(b)      —       —       —  

Net realized capital gains

     (0.26 )      (0.67 )      —       (0.09 )      (0.76 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.30 )      (0.67 )      —       (0.09 )      (0.76 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 12.84     $ 13.75     $ 11.59     $ 11.21     $ 11.73  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)(d)

     (4.55 )%      24.37 %      3.39 %      (3.79 )%      13.88 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 3,110     $ 2,190     $ 1,973     $ 2,202     $ 1,468  

Net expenses(e)

     1.99 %      2.00 %(f)      2.00 %      2.07 %      2.15 % 

Gross expenses

     2.07 %      2.20 %      2.15 %      2.13 %      2.33 % 

Net investment loss

     (0.09 )%      (0.28 )%      (0.41 )%      (0.79 )%      (0.86 )% 

Portfolio turnover rate

     88 %      18 %      42 %      149 %(g)      62 % 

 

(a)

Per share net investment loss has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Effective July 1, 2017, the expense limit decreased from 2.00% to 1.99%.

(g)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to sales of equity securities to take advantage of opportunities to harvest tax losses.

 

See accompanying notes to financial statements.

 

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Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    ASG Tactical U.S. Market Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 14.17     $ 11.87     $ 11.45     $ 11.88     $ 11.03  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.13       0.10       0.07       0.02       0.01  

Net realized and unrealized gain (loss)

     (0.64 )      2.96       0.44       (0.34 )      1.61  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.51 )      3.06       0.51       (0.32 )      1.62  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.14 )      (0.09 )      (0.09 )      (0.02 )      (0.01 ) 

Net realized capital gains

     (0.26 )      (0.67 )      —       (0.09 )      (0.76 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.40 )      (0.76 )      (0.09 )      (0.11 )      (0.77 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 13.26     $ 14.17     $ 11.87     $ 11.45     $ 11.88  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (3.67 )%      25.67 %      4.41 %      (2.74 )%      14.92 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 120,988     $ 84,880     $ 58,488     $ 89,126     $ 65,042  

Net expenses(c)

     0.99 %      0.99 %(d)      1.00 %      1.07 %      1.15 % 

Gross expenses

     1.07 %      1.19 %      1.15 %      1.14 %      1.32 % 

Net investment income

     0.90 %      0.73 %      0.58 %      0.20 %      0.10 % 

Portfolio turnover rate

     88 %      18 %      42 %      149 %(e)      62 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(d)

Effective July 1, 2017, the expense limit decreased from 1.00% to 0.99%.

(e)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to sales of equity securities to take advantage of opportunities to harvest tax losses.

 

See accompanying notes to financial statements.

 

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Notes to Financial Statements

 

December 31, 2018

 

1.  Organization.  Natixis Funds Trust II (the “Trust”) is organized as a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series. The financial statements for certain funds of the Trust are presented in separate reports. The following funds (individually, a “Fund” and collectively, the “Funds”) are included in this report:

ASG Dynamic Allocation Fund (the “Dynamic Allocation Fund”)

ASG Global Alternatives Fund (the “Global Alternatives Fund”)

ASG Managed Futures Strategy Fund (the “Managed Futures Strategy Fund”)

ASG Tactical U.S. Market Fund (the “Tactical U.S. Market Fund”)

Each Fund is a diversified investment company, except for Dynamic Allocation Fund, which is a non-diversified investment company.

Each Fund offers Class A, Class C and Class Y shares. Global Alternatives Fund and Managed Futures Strategy Fund also offer Class N shares.

Class A shares are sold with a maximum front-end sales charge of 5.75%. Class C shares do not pay a front-end sales charge, pay higher Rule 12b-1 fees than Class A shares for ten years (at which point they automatically convert to Class A shares) and may be subject to a contingent deferred sales charge (“CDSC”) of 1.00% if those shares are redeemed within one year of acquisition, except for reinvested distributions. Class N and Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. Class N shares are offered with an initial minimum investment of $1,000,000. Class Y shares are offered with an initial minimum investment of $100,000. Certain categories of investors are exempted from the minimum investment amounts for Class N and Class Y as outlined in the relevant Fund’s prospectus.

Most expenses can be directly attributed to a Fund. Expenses which cannot be directly attributed to a Fund are generally apportioned based on the relative net assets of each of the funds in Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”) and Natixis ETF Trust. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (such as the Rule 12b-1 fees applicable to Class A and Class C), and transfer agent fees are borne collectively for Class A, Class C, Class Y, and individually for Class N. In addition, each class votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund if the Fund were liquidated. The Trustees approve separate distributions from net investment income on each class of shares.

Global Alternatives Fund and Managed Futures Strategy Fund invest in commodity-related instruments through ASG Global Alternatives Cayman Fund Ltd. and

 

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December 31, 2018

 

ASG Managed Futures Strategy Cayman Fund Ltd., wholly-owned subsidiaries (individually, a “Subsidiary” and collectively, the “Subsidiaries”) of Global Alternatives Fund and Managed Futures Strategy Fund, respectively, organized under the laws of the Cayman Islands. Subscription agreements were entered into between the Funds and their respective Subsidiaries with the intent that each Fund will remain the sole shareholder and primary beneficiary of its respective Subsidiary. The Subsidiaries are governed by a separate Board of Directors that is independent of the Funds’ Board of Trustees.

As of December 31, 2018, the value of each Fund’s investment in its respective Subsidiary was as follows:

 

Fund

   

Investment in

Subsidiary

     

Percentage of

Net Assets

  

Global Alternatives Fund

    $ 17,438,074        1.46 % 

Managed Futures Strategy Fund

      72,016,798        3.48 % 

2.  Significant Accounting Policies.  The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds’ financial statements follow the accounting and reporting guidelines provided for investment companies and are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Management has evaluated the events and transactions subsequent to year-end through the date the financial statements were issued and has determined that there were no material events that would require disclosure in the Funds’ financial statements.

a.  Consolidation.  The accompanying financial statements of Global Alternatives Fund and Managed Futures Strategy Fund present the consolidated accounts of the Funds and their respective Subsidiaries. All interfund accounts and transactions have been eliminated in consolidation.

b.  Valuation.  Fund securities and other investments are valued at market value based on market quotations obtained or determined by independent pricing services recommended by the adviser and approved by the Board of Trustees. 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 of Trustees, as described below. Market value is determined as follows:

Debt securities and unlisted preferred equity securities are valued based on evaluated bids furnished to the Funds by an independent pricing service or bid prices obtained from broker-dealers. Listed equity securities (including shares of closed-end investment companies and exchange-traded funds) are valued at the last sale price

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

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) 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 last 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. Broker-dealer bid prices may be used to value debt and unlisted equity securities where an independent pricing service is unable to price a security or where an independent pricing service does not provide a reliable price for the security. Forward foreign currency contracts are valued utilizing interpolated rates determined based on information provided by an independent pricing service. Futures contracts are valued at the most recent settlement price on the exchange on which the adviser or subadviser believes that, over time, they are traded most extensively.

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 of Trustees. The Funds 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 New York Stock Exchange. 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 Funds 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 net asset value (“NAV”) is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Fund’s NAV may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

As of December 31, 2018, futures contracts were fair valued pursuant to procedures approved by the Board of Trustees as events occurring after the close of the foreign market were believed to materially affect the value of the contracts, as follows:

 

    

Notional
Value

     

Unrealized

Appreciation/

Depreciation*

     

Unrealized as a

Percentage of

Net Assets

  

Global Alternatives Fund

    $ 123,907,482      $ 4,544,435        0.38 % 

Managed Futures Strategy Fund

      519,323,295        11,895,378        0.58 % 

 

*

Amounts represent gross unrealized appreciation/(depreciation) at absolute value.

c.  Investment Transactions and Related Investment Income.  Investment transactions are accounted for on a trade date plus one day basis for daily NAV calculation. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income (including income reinvested) and foreign withholding tax, if applicable, is recorded on ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium, if applicable. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. Investment income, non-class specific expenses and realized and unrealized gains and losses are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund.

d.  Foreign Currency Translation.  The books and records of the Funds are maintained in U.S. dollars. The values of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars on the respective dates of such transactions.

Net realized foreign exchange gains or losses arise from sales of foreign currency, changes in exchange rates between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investment securities, as of the end of the fiscal period, resulting from changes in exchange rates. Net realized foreign exchange gains or losses and the net change in unrealized foreign exchange gains or losses are disclosed in the Statements of Operations.

The values of investment securities are presented at the foreign exchange rates prevailing at the end of the period for financial reporting purposes. Net realized and unrealized gains or losses on investments reported in the Statements of Operations

 

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December 31, 2018

 

reflect gains or losses resulting from changes in exchange rates and fluctuations which arise due to changes in market prices of investment securities.

The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.

e.  Forward Foreign Currency Contracts.  The Funds may enter into forward foreign currency contracts including forward foreign cross currency contracts, to acquire exposure to foreign currencies or to hedge the Funds’ investments against currency fluctuation. A contract can also be used to offset a previous contract. These contracts involve market risk in excess of the unrealized appreciation (depreciation) reflected in the Funds’ Statements of Assets and Liabilities. The U.S. dollar value of the currencies a Fund has committed to buy or sell represents the aggregate exposure to each currency a Fund has acquired or hedged through currency contracts outstanding at period end. Gains or losses are recorded for financial statement purposes as unrealized until settlement date. Contracts are traded over-the-counter directly with a counterparty. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. When a Fund enters into a forward foreign currency contract, it is required to pledge cash or high-quality securities equal to a percentage of the notional amount of the contract to the counterparty as an independent amount of collateral. The Funds may pledge additional collateral to the counterparty to the extent of mark-to-market losses on open contracts.

f.  Futures Contracts.  The Funds and the Subsidiaries may enter into futures contracts. Futures contracts are agreements between two parties to buy and sell a particular commodity, instrument or index for a specified price on a specified future date.

When a Fund or a Subsidiary enters into a futures contract, it is required to deposit with (or for the benefit of) its broker an amount of cash or short-term high-quality securities as “initial margin.” As the value of the contract changes, the value of the futures contract position increases or declines. Subsequent payments, known as “variation margin,” are made or received by a Fund or the Subsidiary, depending on the price fluctuations in the fair value of the contract and the value of cash or securities on deposit with the broker. Gross unrealized appreciation (depreciation) on futures contracts is recorded in the Statements of Assets and Liabilities as an asset (liability). The aggregate principal amounts of the contracts are not recorded in the financial statements. Fluctuations in the value of the contracts are recorded in the Statements of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses). Realized gain or loss on a futures position is equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, minus brokerage commissions. When a Fund or a Subsidiary enters into a futures contract certain risks may arise, such as

 

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December 31, 2018

 

illiquidity in the futures market, which may limit a Fund’s or a Subsidiary’s ability to close out a futures contract prior to settlement date, and unanticipated movements in the value of securities, commodities or interest rates.

Futures contracts are exchange-traded. Exchange-traded futures contracts are standardized and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Funds and the Subsidiaries are reduced; however, in the event that a counterparty enters into bankruptcy, a Fund’s claim against initial/variation margin on deposit with the counterparty may be subject to terms of a final settlement in bankruptcy court.

g.  Due to/from Brokers.  Transactions and positions in certain futures and forward foreign currency contracts are maintained and cleared by registered U.S. broker/dealers pursuant to customer agreements between the Funds or the Subsidiaries and the various broker/dealers. The due from brokers’ balances in the Statements of Assets and Liabilities for the Funds represent cash and foreign currency on deposit with brokers for open futures contracts (including variation margin, as applicable) and cash pledged as collateral for forward foreign currency contracts. The due to brokers’ balances in the Statements of Assets and Liabilities for the Funds represent net cash and foreign currency debit balances related to futures contracts (including variation margin, as applicable). In certain circumstances the Funds’ or the Subsidiaries’ use of cash, and/or foreign currency held at brokers is restricted by regulation or broker mandated limits.

h.  New Disclosure Requirements.  In accordance with new reporting requirements pursuant to Regulation S-X of the Securities and Exchange Commission, presentation of certain amounts on the Statements of Changes in Net Assets for the year ended December 31, 2017 have been conformed to the new disclosure requirements. Where the prior disclosure of Distributions to Shareholders separately stated distributions from net investment income and from net realized capital gains for each share class of the Fund, they are now combined into a single line item for each respective share class. In addition, disclosure of Undistributed Net Investment Income and Distributions in Excess of Net Investment Income, where applicable, has been removed from the Statements of Changes in Net Assets.

The following is a summary of the previously disclosed amounts, as reported at December 31, 2017:

 

Dynamic Allocation Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (737 ) 

Class C

      (7 ) 

Class Y

      (282,918 ) 

Net realized capital gains

   

Class A

      (10,625 ) 

Class C

      (1,246 ) 

Class Y

      (3,250,905 ) 
  

 

 

  

Total distributions

    $ (3,546,438 ) 
  

 

 

  

UNDISTRIBUTED NET INVESTMENT INCOME

    $ 2,411  
  

 

 

  

 

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December 31, 2018

 

Global Alternatives Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (218,658 ) 

Class N

      (81,222 ) 

Class Y

      (11,576,186 ) 
  

 

 

  

Total distributions

    $ (11,876,066 ) 
  

 

 

  

UNDISTRIBUTED NET INVESTMENT INCOME

    $ 820,774  
  

 

 

  
Managed Futures Strategy Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class N

    $ (1 ) 

Class Y

      (2,037,868 ) 
  

 

 

  

Total distributions

    $ (2,037,869 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (2,315,438 ) 
  

 

 

  
Tactical U.S. Market Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (63,940 ) 

Class C

      (356 ) 

Class Y

      (482,520 ) 

Net realized capital gains

   

Class A

      (735,232 ) 

Class C

      (101,305 ) 

Class Y

      (3,792,775 ) 
  

 

 

  

Total distributions

    $ (5,176,128 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (36,891 ) 
  

 

 

  

i.  Federal and Foreign Income Taxes.  The Trust treats each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least annually. Management has performed an analysis of each Fund’s tax positions for the open tax years as of December 31, 2018 and has concluded that no provisions for income tax are required. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits significantly increasing or decreasing for the Funds. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and accounting regulations and interpretations thereof.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

A Fund may be subject to foreign withholding taxes on investment income and taxes on capital gains on investments that are accrued and paid based upon the Fund’s understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign withholding taxes on dividend and interest income are reflected on the Statements of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statements of Assets and Liabilities are net of foreign withholding taxes. Foreign withholding taxes where reclaims have been or will be filed are reflected on the Statements of Assets and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statements of Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statements of Assets and Liabilities, if applicable, and reduce unrealized gains on investments. In the event that realized gains on investments are subsequently offset by realized losses, taxes paid on realized gains may be returned to a Fund. Such amounts, if applicable, are reflected as foreign tax rebates receivable on the Statements of Assets and Liabilities and are recorded as a realized gain when received.

j.  Dividends and Distributions to Shareholders.  Dividends and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as net operating losses, foreign currency gains and losses, distribution re-designations, deferred Trustees’ fees and Cayman blocker adjustments. Permanent book and tax basis differences relating to shareholder distributions, net investment income and net realized gains will result in reclassifications to capital accounts reported on the Statements of Assets and Liabilities. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees’ fees, futures commissions, wash sales, return of capital distributions received, futures and forward foreign currency contract mark-to-market and Cayman blocker adjustments. Amounts of income and capital gain available to be distributed on a tax basis are determined annually, and at other times during the Funds’ fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions from net investment income and net realized short-term capital gains are reported as distributed from ordinary income for tax purposes.

The tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the years ended December 31, 2018 and 2017 were as follows:

 

    2018 Distributions Paid From:     2017 Distributions Paid From:  

Fund

  

Ordinary

Income

    

Long-Term
Capital Gains

    

Total

    

Ordinary

Income

    

Long-Term
Capital Gains

    

Total

  

Dynamic Allocation Fund

   $ 1,126,149     $ 297,635     $ 1,423,784     $ 1,985,636     $ 1,560,802     $   3,546,438  

Global Alternatives Fund

     16,225,791       —       16,225,791       11,876,066       —       11,876,066  

Managed Futures Strategy Fund

     36,963,582       1,469,396       38,432,978       2,037,869       —       2,037,869  

Tactical U.S. Market Fund

     2,196,408       2,185,407       4,381,815       546,816       4,629,312       5,176,128  

 

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December 31, 2018

 

For the year ended December 31, 2017, differences between these amounts and amounts disclosed in Note 2h of the Notes to Financial Statements are primarily attributable to different book and tax treatment for short-term capital gains.

Distributions paid to shareholders from net investment income and net realized capital gains, based on accounting principles generally accepted in the United States of America, are consolidated and reported on the Statements of Changes in Net Assets as Distributions to Shareholders. Distributions paid to shareholders from net investment income and net realized capital gains expressed in per-share amounts, based on accounting principles generally accepted in the United States of America, are separately stated and reported within the Financial Highlights.

As of December 31, 2018, the components of distributable earnings on a tax basis were as follows:

 

   

Dynamic
Allocation
Fund

    

Global
Alternatives
Fund

    

Managed
Futures
Strategy
Fund

    

Tactical
U.S. Market
Fund

  

Undistributed ordinary income

   $ 39,642     $ —     $ —     $ 7,077  
 

 

 

    

 

 

    

 

 

    

 

 

  

Capital loss carryforward:

 

Short-term:

 

No expiration date

     (1,488,695 )      (119,915,368 )      (229,192,727 )      (8,081,408 ) 

Long-term:

 

No expiration date

     (1,155,183 )      (12,947,398 )      (112,507,052 )      (571,240 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total capital loss carryforward

     (2,643,878 )      (132,862,766 )      (341,699,779 )      (8,652,648 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Late-year ordinary and post-October capital loss deferrals*

     —       (5,255,855 )      (11,646,072 )      —  
 

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation)

     26,277       (28,664,181 )      19,130,388       10,963,381  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total accumulated earnings (losses)

   $ (2,577,959 )    $ (166,782,802 )    $ (334,215,463 )    $ 2,317,810  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

*

Under current tax law, capital losses, foreign currency losses, and losses on passive foreign investment companies and contingent payment debt instruments after October 31 or December 31, as applicable, may be deferred and treated as occurring on the first day of the following taxable year. Global Alternatives Fund and Managed Futures Strategy Fund have deferred foreign currency losses.

 

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December 31, 2018

 

As of December 31, 2018, the cost of investments (including derivatives) and unrealized appreciation (depreciation) on a federal tax basis were as follows:

 

    

Dynamic
Allocation
Fund

    

Global
Alternatives
Fund

    

Managed
Futures
Strategy
Fund

    

Tactical
U.S. Market
Fund

  

Federal tax cost

    $ 36,904,575     $ 1,190,155,845     $ 1,931,689,996     $ 130,143,533  
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross tax appreciation

    $ 331,595     $ 2,013,773     $ 31,285,553     $ 12,136,969  

Gross tax depreciation

      (303,183 )      (28,335,291 )      (768,171 )      (1,173,588 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net tax appreciation (depreciation)

    $ 28,412     $ (26,321,518 )    $ 30,517,382     $ 10,963,381  
  

 

 

    

 

 

    

 

 

    

 

 

  

Differences between these amounts and those reported in the components of distributable earnings are primarily attributable to foreign currency mark-to-market and Cayman blocker adjustments.

k.  Indemnifications.  Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

3.  Fair Value Measurements.  In accordance with accounting standards related to fair value measurements and disclosures, the Funds have categorized the inputs utilized in determining the value of each Fund’s assets or liabilities. These inputs are summarized in the three broad levels listed below:

 

  •  

Level 1 – quoted prices in active markets for identical assets or liabilities;

 

  •  

Level 2 – prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); and

 

  •  

Level 3 – prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2018, at value:

Dynamic Allocation Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Exchange-Traded Funds

    $ 16,203,999      $ —      $   —      $ 16,203,999  

Short-Term Investments(a)

      —        20,697,690        —        20,697,690  

Futures Contracts (unrealized appreciation)

      296,365        —        —        296,365  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $   16,500,364      $     20,697,690      $   —      $       37,198,054  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liability Valuation Inputs

 

Description

   

Level 1

    

Level 2

     

Level 3

     

Total

  

Futures Contracts (unrealized depreciation)

    $       (172,297 )    $                 —      $   —      $         (172,297 ) 
  

 

 

    

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Global Alternatives Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 93,226,255      $ —      $   —      $ 93,226,255  

Exchange-Traded Funds

      51,470,520        —        —        51,470,520  

Closed-End Investment Companies

      1,289,802        —        —        1,289,802  

Short-Term Investments(a)

      —        1,027,024,419        —        1,027,024,419  

Forward Foreign Currency Contracts (unrealized appreciation)

      —        1,364,715        —        1,364,715  

Futures Contracts (unrealized appreciation)

      9,147,522        389,167        —        9,536,689  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 155,134,099      $ 1,028,778,301      $   —      $ 1,183,912,400  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

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December 31, 2018

 

Global Alternatives Fund (continued)

Liability Valuation Inputs

 

Description

   

Level 1

    

Level 2

    

Level 3

     

Total

  

Forward Foreign Currency Contracts (unrealized depreciation)

    $ —     $ (33,320 )    $   —      $ (33,320 ) 

Futures Contracts (unrealized depreciation)

      (17,935,398 )      (4,155,268 )      —        (22,090,666 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ (17,935,398 )    $       (4,188,588 )    $ —      $   (22,123,986 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Consolidated Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Managed Futures Strategy Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Short-Term Investments(a)

    $ —      $ 1,931,652,224      $ —      $ 1,931,652,224  

Forward Foreign Currency Contracts (unrealized appreciation)

      —        3,307,241        —        3,307,241  

Futures Contracts (unrealized appreciation)

      57,102,461        10,793,365        —        67,895,826  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 57,102,461      $ 1,945,752,830      $   —      $ 2,002,855,291  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liability Valuation Inputs

 

Description

   

Level 1

    

Level 2

    

Level 3

     

Total

  

Forward Foreign Currency Contracts (unrealized depreciation)

    $ —     $ (5,644,932 )    $ —      $ (5,644,932 ) 

Futures Contracts (unrealized depreciation)

      (10,683,845 )      (1,102,013 )      —        (11,785,858 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ (10,683,845 )    $     (6,746,945 )    $   —      $     (17,430,790 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Consolidated Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

 

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December 31, 2018

 

Tactical U.S. Market Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 86,338,188      $ —      $   —      $ 86,338,188  

Short-Term Investments(a)

      —        54,768,726        —        54,768,726  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 86,338,188      $ 54,768,726      $ —      $ 141,106,914  
  

 

 

     

 

 

     

 

 

     

 

 

  

Liability Valuation Inputs

 

Description

   

Level 1

    

Level 2

     

Level 3

     

Total

  

Futures Contracts (unrealized depreciation)

    $   (1,313,443 )    $             —      $   —      $  (1,313,443 ) 
  

 

 

    

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

4.  Derivatives.  Derivative instruments are defined as financial instruments whose value and performance are based on the value and performance of an underlying asset, reference rate or index. Derivative instruments that the Funds used during the period include forward foreign currency contracts and futures contracts.

Dynamic Allocation Fund tactically allocates its investments across a range of asset classes and global markets. The Fund will typically use a variety of derivative instruments, in particular long positions in futures and forward contracts, to achieve exposures to global equity and fixed income securities. The Fund may also hold short positions in derivatives for hedging purposes. During the year ended December 31, 2018, the Fund used long contracts on U.S. and foreign equity market indices and U.S. and foreign government bonds and short contracts on U.S. dollar index to gain investment exposures in accordance with its objectives.

Global Alternatives Fund seeks to achieve long and short exposure to global equity, bond, currency and commodity markets through a wide range of derivative instruments and direct investments. These investments are intended to provide the Fund with risk and return characteristics similar to those of a diversified portfolio of hedge funds. The Fund uses quantitative models to estimate the market exposures that drive the aggregate returns of a diverse set of hedge funds, and seeks to use a variety of derivative instruments to capture such exposures in the aggregate. Under normal market conditions, the Fund will make extensive use of derivative instruments, in particular futures and forward contracts on global equity and fixed income securities, securities indices, currencies, commodities and other instruments. During the year ended December 31, 2018, the Fund used long and short contracts on U.S. and foreign

 

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December 31, 2018

 

government bonds, U.S. and foreign equity market indices, foreign currencies, commodities (through investments in the Subsidiary), and short contracts on short-term interest rates in accordance with these objectives.

Managed Futures Strategy Fund seeks to generate positive absolute returns over time. The Fund uses a set of proprietary quantitative models to identify price trends in equity, fixed income, currency and commodity instruments, and may have both short and long exposures within an asset class based on an analysis of asset price trends. Under normal market conditions, the Fund will make extensive use of derivative instruments, in particular futures and forward contracts, to capture the exposures suggested by its absolute return strategy while also adding value through volatility management. These market exposures, which are expected to change over time, may include exposures to global equity and fixed income securities, securities indices, currencies, commodities and other instruments. During the year ended December 31, 2018, the Fund used long and short contracts on U.S. and foreign government bonds, U.S. and foreign equity market indices, foreign currencies, commodities (through investments in the Subsidiary) and short-term interest rates to capture the exposures suggested by the quantitative investment models.

Tactical U.S. Market Fund seeks long-term capital appreciation, with emphasis on the protection of capital during unfavorable market conditions. The Fund uses long futures contracts on U.S. equity indices to increase exposure to the U.S. equity market to up to 130% of the Fund’s total assets and short futures on U.S. equity indices to decrease exposure to the U.S. equity market to as low as 0% of the Fund’s total assets (to limit the effects of extreme market drawdowns). During the year ended December 31, 2018, the Fund used long contracts on U.S. equity market indices to increase exposure to the U.S. equity market.

The following is a summary of derivative instruments for Dynamic Allocation Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

   

Unrealized
appreciation on
futures contracts

  

Exchange-traded asset derivatives

 

Interest rate contracts

    $ 204,565  

Foreign exchange contracts

      91,800  
  

 

 

  

Total exchange-traded asset derivatives

    $ 296,365  
  

 

 

  

Liabilities

   

Unrealized
depreciation on
futures contracts

  

Exchange-traded liability derivatives

   

Equity contracts

    $ (172,297 ) 

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Transactions in derivative instruments for Dynamic Allocation Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Futures contracts

  

Interest rate contracts

    $ (172,100 ) 

Foreign exchange contracts

      (856,888 ) 

Equity contracts

      (1,737,934 ) 
  

 

 

  

Total

    $ (2,766,922 ) 
  

 

 

  

Net Change in Unrealized
Appreciation (Depreciation) on:

   

Futures contracts

  

Interest rate contracts

    $ 230,466  

Foreign exchange contracts

      55,733  

Equity contracts

      (380,010 ) 
  

 

 

  

Total

    $ (93,811 ) 
  

 

 

  

The following is a summary of derivative instruments for Global Alternatives Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

   

Unrealized
appreciation on
forward foreign
currency contracts

     

Unrealized
appreciation on
futures contracts

  

Over-the-counter asset derivatives

 

Foreign exchange contracts

    $ 1,364,715      $ —  
  

 

 

     

 

 

  

Exchange-traded asset derivatives

 

Interest rate contracts

    $ —      $ 6,651,933  

Foreign exchange contracts

      —        276,244  

Commodity contracts

      —        2,159,628  

Equity contracts

      —        448,884  
  

 

 

     

 

 

  

Total exchange-traded asset derivatives

    $ —      $ 9,536,689  
  

 

 

     

 

 

  

Total asset derivatives

    $ 1,364,715      $ 9,536,689  
  

 

 

     

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Liabilities

   

Unrealized
depreciation on
forward foreign
currency contracts

    

Unrealized
depreciation on
futures contracts

  

Over-the-counter liability derivatives

 

Foreign exchange contracts

    $ (33,320 )    $ —  
  

 

 

    

 

 

  

Exchange-traded liability derivatives

 

Interest rate contracts

    $ —     $ (5,240,066 ) 

Foreign exchange contracts

      —       (2,900,473 ) 

Commodity contracts

      —       (7,969,076 ) 

Equity contracts

      —       (5,981,051 ) 
  

 

 

    

 

 

  

Total exchange-traded liability derivatives

    $ —     $ (22,090,666 ) 
  

 

 

    

 

 

  

Total liability derivatives

    $ (33,320 )    $ (22,090,666 ) 
  

 

 

    

 

 

  

Transactions in derivative instruments for Global Alternatives Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Futures
contracts

     

Forward foreign
currency
transactions

  

Interest rate contracts

    $ (5,582,573 )     $ —  

Foreign exchange contracts

      3,753,648        (478,998 ) 

Commodity contracts

      (13,000,978 )       —  

Equity contracts

      (19,829,060 )       —  
  

 

 

     

 

 

  

Total

    $ (34,658,963 )     $ (478,998 ) 
  

 

 

     

 

 

  

Net Change in Unrealized
Appreciation (Depreciation) on:

   

Futures
contracts

     

Forward foreign
currency
transactions

  

Interest rate contracts

    $ 3,900,188      $ —  

Foreign exchange contracts

      (6,472,970 )       906,435  

Commodity contracts

      (21,184,405 )       —  

Equity contracts

      (16,204,669 )       —  
  

 

 

     

 

 

  

Total

    $ (39,961,856 )     $ 906,435  
  

 

 

     

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a summary of derivative instruments for Managed Futures Strategy Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

   

Unrealized
appreciation on
forward foreign
currency contracts

    

Unrealized
appreciation on
futures contracts

  

Over-the-counter asset derivatives

 

Foreign exchange contracts

    $ 3,307,241     $ —  
  

 

 

    

 

 

  

Exchange-traded asset derivatives

 

Interest rate contracts

    $ —     $ 27,097,963  

Foreign exchange contracts

      —       3,827,945  

Commodity contracts

      —       21,920,648  

Equity contracts

      —       15,049,270  
  

 

 

    

 

 

  

Total exchange-traded asset derivatives

    $ —     $ 67,895,826  
  

 

 

    

 

 

  

Total asset derivatives

    $ 3,307,241     $ 67,895,826  
  

 

 

    

 

 

  

Liabilities

   

Unrealized
depreciation on
forward foreign
currency contracts

    

Unrealized
depreciation on
futures contracts

  

Over-the-counter liability derivatives

 

Foreign exchange contracts

    $ (5,644,932 )    $ —  
  

 

 

    

 

 

  

Exchange-traded liability derivatives

 

Interest rate contracts

    $ —     $ (22,138 ) 

Foreign exchange contracts

      —       (2,539,938 ) 

Commodity contracts

      —       (7,297,531 ) 

Equity contracts

      —       (1,926,251 ) 
  

 

 

    

 

 

  

Total exchange-traded liability derivatives

    $ —     $ (11,785,858 ) 
  

 

 

    

 

 

  

Total liability derivatives

    $ (5,644,932 )    $ (11,785,858 ) 
  

 

 

    

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Transactions in derivative instruments for Managed Futures Strategy Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Futures
contracts

    

Forward foreign
currency
transactions

  

Interest rate contracts

    $ (134,893,473 )    $ —  

Foreign exchange contracts

      (24,555,151 )      (7,591,404 ) 

Commodity contracts

      (15,392,101 )      —  

Equity contracts

      (237,196,071 )      —  
  

 

 

    

 

 

  

Total

    $ (412,036,796 )    $ (7,591,404 ) 
  

 

 

    

 

 

  

Net Change in Unrealized
Appreciation (Depreciation) on:

   

Futures
contracts

    

Forward foreign
currency
transactions

  

Interest rate contracts

    $ 48,310,230     $ —  

Foreign exchange contracts

      (10,916,815 )      (3,986,882 ) 

Commodity contracts

      (35,425,215 )      —  

Equity contracts

      (4,506,565 )      —  
  

 

 

    

 

 

  

Total

    $ (2,538,365 )    $ (3,986,882 ) 
  

 

 

    

 

 

  

The following is a summary of derivative instruments for Tactical U.S. Market Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Liabilities

   

Unrealized
depreciation on
futures contracts

  

Exchange-traded liability derivatives

 

Equity contracts

    $ (1,313,443 ) 

Transactions in derivative instruments for Tactical U.S. Market Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Futures
contracts

  

Equity contracts

    $ (1,583,255 ) 

Net Change in Unrealized
Appreciation (Depreciation) on:

   

Futures
contracts

  

Equity contracts

    $ (2,276,488 ) 

 

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December 31, 2018

 

The volume of forward foreign currency contract and futures contract activity, as a percentage of net assets, based on gross month-end notional amounts outstanding during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2018:

 

Dynamic Allocation Fund

   

Futures

  

Average Notional Amount Outstanding

      87.17 % 

Highest Notional Amount Outstanding

      120.72 % 

Lowest Notional Amount Outstanding

      51.99 % 

Notional Amount Outstanding as of December 31, 2018

      70.79 % 

 

Global Alternatives Fund

   

Forwards

    

Futures

  

Average Notional Amount Outstanding

      3.64 %      196.80 % 

Highest Notional Amount Outstanding

      8.64 %      247.24 % 

Lowest Notional Amount Outstanding

      1.66 %      135.36 % 

Notional Amount Outstanding as of December 31, 2018

      6.77 %      215.73 % 

 

Managed Futures Strategy Fund

   

Forwards

    

Futures

  

Average Notional Amount Outstanding

      138.16 %      609.11 % 

Highest Notional Amount Outstanding

      326.48 %      836.92 % 

Lowest Notional Amount Outstanding

      40.02 %      435.03 % 

Notional Amount Outstanding as of December 31, 2018

      40.02 %      435.03 % 

 

Tactical U.S. Market Fund

   

Futures

  

Average Notional Amount Outstanding

      54.01 % 

Highest Notional Amount Outstanding

      75.35 % 

Lowest Notional Amount Outstanding

      7.96 % 

Notional Amount Outstanding as of December 31, 2018

      15.58 % 

Notional amounts outstanding at the end of the prior period, if applicable, are included in the average notional amount outstanding.

Unrealized gain and/or loss on open forwards and futures is recorded in the Statements of Assets and Liabilities. The aggregate notional values of forward and futures contracts are not recorded in the Statements of Assets and Liabilities, and therefore are not included in the Funds’ net assets.

Over-the-counter derivatives, including forward foreign currency contracts are entered into pursuant to International Swaps and Derivatives Association, Inc. (“ISDA”) agreements negotiated between the Funds and their counterparties. ISDA agreements typically contain, among other things, terms for the posting of collateral and master netting provisions in the event of a default or other termination event. Collateral is posted by a Fund or the counterparty to the extent of the net mark-to-market exposure to the other party of all open contracts under the agreement, subject to minimum transfer requirements. Master netting provisions allow the Funds and the counterparty,

 

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in the event of a default or other termination event, to offset amounts owed by each related to derivative contracts, including any posted collateral, to one net amount payable by either the Funds or the counterparty. The Funds’ ISDA agreements typically contain provisions that allow a counterparty to terminate open contracts early if the NAV of a Fund declines beyond a certain threshold. For financial reporting purposes, the Funds do not offset derivative assets and liabilities, and any related collateral received or pledged, on the Statements of Assets and Liabilities.

As of December 31, 2018, gross amounts of over-the-counter derivative assets and liabilities not offset in the Statements of Assets and Liabilities and the related net amounts after taking into account master netting arrangements, by counterparty, are as follows:

Global Alternatives Fund

 

Counterparty

   

Gross Amounts of
Assets

    

Offset
Amount

    

Net Asset
Balance

    

Collateral
(Received)/
Pledged

     

Net
Amount

  

UBS AG

    $ 1,364,715     $ (33,320 )    $ 1,331,395     $ —      $ 1,331,395  

Counterparty

   

Gross Amounts of
Liabilities

    

Offset
Amount

    

Net Liability
Balance

    

Collateral
(Received)/
Pledged

     

Net
Amount

  

UBS AG

    $ (33,320 )    $ 33,320     $ —     $ —      $ —  

Managed Futures Strategy Fund

                     

Counterparty

   

Gross Amounts of
Assets

    

Offset
Amount

    

Net Asset
Balance

    

Collateral
(Received)/
Pledged

     

Net
Amount

  

UBS AG

    $ 3,307,241     $ (3,307,241 )    $ —     $ —      $ —  

Counterparty

   

Gross Amounts of
Liabilities

    

Offset
Amount

    

Net Liability
Balance

    

Collateral
(Received)/
Pledged

     

Net
Amount

  

UBS AG

    $ (5,644,932 )    $ 3,307,241     $ (2,337,691 )    $ 2,337,691      $ —  

The Funds are required to pledge an independent amount of collateral to the counterparty for open forward foreign currency contracts. In addition to the independent amount, the amount of collateral pledged to the counterparty is subsequently increased (for losses) or decreased (for gains) based on the change in value of the contracts, as calculated by the counterparty under the terms of the Funds’

 

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ISDA agreements. As of December 31, 2018, amounts pledged to the counterparty (which may exceed the amounts shown in the table above) are as follows:

 

   

Independent
Amount of
Collateral

    

Increase
(Decrease)
For Change
in Value

    

Required
Collateral

    

Collateral
Pledged

    

Excess/
(Shortfall)

  

Global Alternatives Fund

   $ 2,981,528     $ (1,323,219 )    $ 1,658,309     $ 1,599,859     $ (58,450 ) 

Managed Futures Strategy Fund

     33,644,171       2,242,642       35,886,813       33,308,199       (2,578,614 ) 

Amounts in excess or short of the required collateral amount are received or paid by the Funds on the next business day, subject to collateral thresholds and minimum transfer requirements. The ISDA agreements include a tri-party control agreement under which collateral pledged from the Fund to the broker is held for the benefit of the broker, as secured party, at a third party custodian, State Street Bank and Trust Company (“State Street Bank”). Collateral pledged to the broker is reflected in “due from brokers” on the Statements of Assets and Liabilities.

Counterparty risk is managed based on policies and procedures established by each Fund’s adviser. Such policies and procedures may include, but are not limited to, minimum counterparty credit rating requirements, monitoring of counterparty credit default swap spreads and posting of collateral. A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the Fund’s aggregated unrealized gains and the amount of any collateral pledged to the counterparty, which may be offset by any collateral posted to the Fund by the counterparty. ISDA master agreements can help to manage counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under these ISDA agreements, collateral is routinely transferred if the total net exposure in respect of certain transactions, net of existing collateral already in place, exceeds a specified amount (typically $250,000, depending on the counterparty). With exchange-traded derivatives, there is minimal counterparty credit risk to the Fund because the exchange’s clearing house, as counterparty to these instruments, stands between the buyer and the seller of the contract. Credit risk still exists in exchange-traded derivatives with respect to initial and variation margin that is held in a broker’s customer accounts. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro rata basis across all of the broker’s customers, potentially resulting in losses to the Fund. Based on balances reflected on each Fund’s Statement of Assets and Liabilities, the following table shows (i) the maximum amount of loss due to credit risk that, based on the gross fair value of the

 

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financial instrument, the applicable Fund would incur if parties (including OTC derivative counterparties and brokers holding margin for exchange-traded derivatives) to the relevant financial instruments failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the Fund, and (ii) the amount of loss that the applicable Fund would incur after taking into account master netting provisions pursuant to ISDA agreements, as of December 31, 2018:

 

Fund

  

Maximum Amount

of Loss - Gross

    

Maximum Amount

of Loss - Net

  

Dynamic Allocation Fund

            

Exchange-traded counterparty credit risk

    

Futures contracts

   $ 296,365     $ 296,365  

Margin with brokers

     876,156       876,156  
 

 

 

    

 

 

  

Total exchange-traded counterparty credit risk

   $ 1,172,521     $ 1,172,521  
 

 

 

    

 

 

  

Global Alternatives Fund

            

Over-the-counter counterparty credit risk

    

Forward foreign currency contracts

   $ 1,364,715     $ 1,331,395  

Collateral pledged to UBS AG

     1,599,859       1,599,859  
 

 

 

    

 

 

  

Total over-the-counter counterparty credit risk

     2,964,574       2,931,254  
 

 

 

    

 

 

  

Exchange-traded counterparty credit risk

    

Futures contracts

     9,536,689       9,536,689  

Margin with brokers

     58,467,066       58,467,066  
 

 

 

    

 

 

  

Total exchange-traded counterparty credit risk

     68,003,755       68,003,755  
 

 

 

    

 

 

  

Total counterparty credit risk

   $ 70,968,329     $ 70,935,009  
 

 

 

    

 

 

  

Managed Futures Strategy Fund

            

Over-the-counter counterparty credit risk

    

Forward foreign currency contracts

   $ 3,307,241     $ —  

Collateral pledged to UBS AG

     33,308,199       33,308,199  
 

 

 

    

 

 

  

Total over-the-counter counterparty credit risk

     36,615,440       33,308,199  
 

 

 

    

 

 

  

Exchange-traded counterparty credit risk

    

Futures contracts

     67,895,826       67,895,826  

Margin with brokers

     161,647,810       161,647,810  
 

 

 

    

 

 

  

Total exchange-traded counterparty credit risk

     229,543,636       229,543,636  
 

 

 

    

 

 

  

Total counterparty credit risk

   $ 266,159,076     $ 262,851,835  
 

 

 

    

 

 

  

 

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December 31, 2018

 

Fund

  

Maximum Amount

of Loss - Gross

    

Maximum Amount

of Loss - Net

  

Tactical U.S. Market Fund

            

Exchange-traded counterparty credit risk

    

Futures contracts

   $ —     $ —  

Margin with brokers

     2,685,439       2,685,439  
 

 

 

    

 

 

  

Total exchange-traded counterparty credit risk

   $ 2,685,439     $ 2,685,439  
 

 

 

    

 

 

  

5.  Purchases and Sales of Securities.  For the year ended December 31, 2018, purchases and sales of securities (excluding short-term investments) were as follows:

 

Fund

   

Purchases

     

Sales

  

Dynamic Allocation Fund

    $ 8,868,107      $ 10,829,415  

Global Alternatives Fund

      172,352,949        76,740,398  

Tactical U.S. Market Fund

      130,402,758        90,804,415  

6.  Management Fees and Other Transactions with Affiliates.

a.  Management Fees.  AlphaSimplex Group, LLC (“AlphaSimplex”), which is a subsidiary of Natixis Investment Managers, L.P. (“Natixis”), serves as investment adviser to the Funds. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s average daily net assets.

 

     Percentage of
Average
Daily Net Assets		  

Fund

       

Dynamic Allocation Fund

      0.70 % 

Tactical U.S. Market Fund

      0.80 % 

Global Alternatives Fund pays a management fee at an annual rate of 1.15% on the first $2 billion of the Fund’s average daily net assets (less the net asset value of the Subsidiary), and 1.10% thereafter, calculated daily and payable monthly, less the management fees paid by the Subsidiary.

Managed Futures Strategy Fund pays a management fee at an annual rate of 1.25% on the first $2.5 billion of the Fund’s average daily net assets (less the net asset value of its Subsidiary), and 1.20% thereafter, calculated daily and payable monthly, less the management fees paid by the Subsidiary.

AlphaSimplex also serves as investment adviser to ASG Global Alternatives Cayman Fund Ltd. and ASG Managed Futures Strategy Cayman Fund Ltd., which pay

 

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AlphaSimplex a management fee at the annual rate of 1.15% and 1.25%, respectively, of its average daily net assets.

Additionally, AlphaSimplex has entered into a subadvisory agreement with Natixis Advisors, L.P. (“Natixis Advisors”), (through its division, Active Index Advisors), on behalf of Tactical U.S. Market Fund. Natixis Advisors is a wholly-owned subsidiary of Natixis. Under the terms of the subadvisory agreement, the Fund pays a subadvisory fee at the annual rate of 0.10% of the average daily net assets of the Fund that are allocated by AlphaSimplex to be managed by Natixis Advisors.

Payments to AlphaSimplex are reduced by the amount of payments to Natixis Advisors as described above.

AlphaSimplex has given binding undertakings to the Funds to waive management fees and/or reimburse certain expenses, including expenses of each Subsidiary, if applicable, to limit the Funds’ operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, substitute dividend expenses on securities sold short (Global Alternatives Fund only), taxes, organizational and extraordinary expenses, such as litigation and indemnification expenses. These undertakings are in effect until April 30, 2019, except for Global Alternatives Fund, which is in effect until April 30, 2020, may be terminated before then only with the consent of the Funds’ Board of Trustees, and are reevaluated on an annual basis. Management fees payable, as reflected on the Statements of Assets and Liabilities, is net of waivers and/or expense reimbursements, if any, pursuant to these undertakings. Waivers/reimbursements that exceed management fees payable are reflected on the Statements of Assets and Liabilities as receivable from investment adviser.

For the year ended December 31, 2018, the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:

 

     Expense Limit as a Percentage of
Average Daily Net Assets		  

Fund

   

Class A

    

Class C

    

Class N

    

Class Y

  

Dynamic Allocation Fund

      1.15 %      1.90 %      —       0.90 % 

Global Alternatives Fund

      1.54 %      2.29 %      1.24 %      1.29 % 

Managed Futures Strategy Fund

      1.70 %      2.45 %      1.40 %      1.45 % 

Tactical U.S. Market Fund

      1.24 %      1.99 %      —       0.99 % 

AlphaSimplex shall be permitted to recover expenses borne under the expense limitation agreements (whether through waiver of management fees or otherwise) on a class by class basis in later periods to the extent the annual operating expenses of a class fall below a class’ expense limits, provided, however, that a class is not obligated to pay such waived/reimbursed fees or expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed.

 

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December 31, 2018

 

For the year ended December 31, 2018, the management fees and waivers of management fees for each Fund were as follows:

 

Fund

  

Gross
Management
Fees

    

Contractual
Waivers of
Management
Fees1

    

Net
Management
Fees

    

Percentage of
Average Daily
Net Assets

  
 

Gross

    

Net

  

Dynamic Allocation Fund

   $ 291,230     $ 186,171     $ 105,059       0.70 %      0.25 % 

Global Alternatives Fund

     16,203,602       146,487       16,057,115       1.15 %      1.14 % 

Managed Futures Strategy Fund

     37,230,373       —       37,230,373       1.24 %      1.24 % 

Tactical U.S. Market Fund

     1,317,848       137,281       1,180,567       0.80 %      0.72 % 

 

1 

Management fee waiver is subject to possible recovery until December 31, 2019.

No expenses were recovered for any of the Funds during the year ended December 31, 2018 under the terms of the expense limitation agreements.

b.  Service and Distribution Fees.  Natixis Distribution, L.P. (“Natixis Distribution”), which is a wholly-owned subsidiary of Natixis, has entered into a distribution agreement with the Trust. Pursuant to this agreement, Natixis Distribution serves as principal underwriter of the Funds of the Trust.

Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to each Fund’s Class A shares (the “Class A Plans”) and a Distribution and Service Plan relating to each Fund’s Class C shares (the “Class C Plans”).

Under the Class A Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Funds’ Class A shares, as reimbursement for expenses incurred by Natixis Distribution in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts.

Under the Class C Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Funds’ Class C shares, as compensation for services provided by Natixis Distribution in providing personal services to investors in Class C shares and/or the maintenance of shareholder accounts.

Also under the Class C Plans, each Fund pays Natixis Distribution a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Funds’ Class C shares, as compensation for services provided by Natixis Distribution in connection with the marketing or sale of Class C shares.

 

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For the year ended December 31, 2018, the service and distribution fees for each Fund were as follows:

 

     Service Fees      Distribution Fees  

Fund

   

Class A

     

Class C

     

Class C

  

Dynamic Allocation Fund

    $ 706      $ 112      $ 336  

Global Alternatives Fund

      105,284        50,661        151,982  

Managed Futures Strategy Fund

      537,374        110,922        332,765  

Tactical U.S. Market Fund

      79,831        6,212        18,635  

c.  Administrative Fees.  Natixis Advisors provides certain administrative services for the Funds and contracts with State Street Bank to serve as sub-administrator. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts, Natixis ETF Trust and Natixis Advisors, each Fund pays Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which is reevaluated on an annual basis.

Natixis Advisors also provides certain administrative services to the Subsidiaries for which the Subsidiaries pay Natixis Advisors fees equal to an annual rate of 0.05% of the average daily net assets of each Subsidiary. Payments by the Funds are reduced by the amount of payments to Natixis Advisors by the Subsidiaries. In addition, Natixis Advisors and each Subsidiary contract with State Street Bank to serve as sub-administrator.

Prior to July 1, 2018, each Fund paid Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0350% of the next $30 billion and 0.0325% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which was reevaluated on an annual basis.

Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving as sub-administrator to the Funds. Also, effective October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Funds in an amount equal to the reduction in sub-administrative fees discussed above. The waiver is in effect through June 30, 2019, at which time it will be reevaluated as part of the annual review of the administrative fee contract, as noted above.

 

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For the year ended December 31, 2018, the administrative fees paid to Natixis Advisors for each Fund were as follows (exclusive of sub-administrative fees paid to State Street Bank by the Subsidiaries):

 

Fund

   

Administrative
Fees

     

Waiver of
Administrative
Fees

     

Net
Administrative
Fees

  

Dynamic Allocation Fund

    $ 18,267      $ 97      $ 18,170  

Global Alternatives Fund

      614,482        3,269        611,213  

Managed Futures Strategy Fund

      1,316,758        5,915        1,310,843  

Tactical U.S. Market Fund

      72,251        403        71,848  

d.  Sub-Transfer Agent Fees.  Natixis Distribution has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Funds and has agreed to compensate the intermediaries for providing those services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. These services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly at the Funds’ transfer agent. Accordingly, the Funds have agreed to reimburse Natixis Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts (sub-transfer agent fees) paid to Natixis Distribution are subject to a current per-account equivalent fee limit approved by the Funds’ Board of Trustees, which is based on fees for similar services paid to the Funds’ transfer agent and other service providers. Class N shares do not bear such expenses.

For the year ended December 31, 2018, the sub-transfer agent fees (which are reflected in transfer agent fees and expenses in the Statements of Operations) for each Fund were as follows:

 

Fund

   

Sub-Transfer
Agent Fees

  

Dynamic Allocation Fund

    $ 53,025  

Global Alternatives Fund

      467,813  

Managed Futures Strategy Fund

      2,181,670  

Tactical U.S. Market Fund

      147,447  

 

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As of December 31, 2018, the Funds owe Natixis Distribution the following reimbursements for sub-transfer agent fees (which are reflected in the Statements of Assets and Liabilities as payable to distributor):

 

Fund

   

Reimbursements
of Sub-Transfer
Agent Fees

  

Dynamic Allocation Fund

    $ 642  

Global Alternatives Fund

      23,472  

Managed Futures Strategy Fund

      77,585  

Tactical U.S. Market Fund

      1,677  

Sub-transfer agent fees attributable to Class A, Class C and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes.

e.  Commissions.  Commissions (including CDSCs) on Fund shares retained by Natixis Distribution during the year ended December 31, 2018 were as follows:

 

Fund

   

Commissions

  

Dynamic Allocation Fund

    $ 479  

Global Alternatives Fund

      5,275  

Managed Futures Strategy Fund

      26,427  

Tactical U.S. Market Fund

      6,729  

f.  Trustees Fees and Expenses.  The Trust does not pay any compensation directly to its officers or Trustees who are directors, officers or employees of Natixis Advisors, Natixis Distribution, Natixis or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $340,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that he attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $170,000. Each Independent Trustee also receives a meeting attendance fee of $10,000 for each meeting of the Board of Trustees that he or she attends in person and $5,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, the chairperson of the Contract Review Committee and the chairperson of the Audit Committee each receive an additional retainer fee at the annual rate of $20,000. The chairperson of the Governance Committee receives an additional retainer fee at the annual rate of $12,000. Each Contract Review Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. Each Audit Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust based on a

 

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formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings.

Effective January 1, 2019, the Chairperson of the Board will receive a retainer fee at the annual rate of $360,000, each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $190,000, and the chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $15,000. All other Trustee fees will remain unchanged.

A deferred compensation plan (the “Plan”) is available to the Trustees on a voluntary basis. Deferred amounts remain in the Funds until distributed in accordance with the provisions of the Plan. The value of a participating Trustee’s deferral account is based on theoretical investments of deferred amounts, on the normal payment dates, in certain funds of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust as designated by the participating Trustees. Changes in the value of participants’ deferral accounts are allocated pro rata among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, and are normally reflected as Trustees’ fees and expenses in the Statements of Operations. The portions of the accrued obligations allocated to the Funds under the Plan are reflected as Deferred Trustees’ fees in the Statements of Assets and Liabilities.

Certain officers and employees of Natixis Advisors and its affiliates are also officers and/or Trustees of the Trust.

g.  Affiliated Ownership.  As of December 31, 2018, AlphaSimplex and Natixis and affiliates held shares of the Dynamic Allocation Fund representing 4.72% of the Fund’s net assets. Investment activities of affiliated shareholders could have material impacts on the Funds.

h.  Reimbursement of Transfer Agent Fees and Expenses.  Natixis Advisors has given a binding contractual undertaking to the Managed Futures Strategy Fund to reimburse any and all transfer agency expenses for the Funds’ Class N shares. This undertaking is in effect through April 30, 2019 and is not subject to recovery under the expense limitation agreement described above.

For the year ended December 31, 2018, Natixis Advisors reimbursed the Fund $343 for transfer agency expenses related to Class N shares.

7.  Class-Specific Transfer Agent Fees and Expenses.  Transfer agent fees and expenses for Global Alternatives Fund and Managed Futures Strategy Fund attributable to Class A, Class C, and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes. Transfer agent fees and expenses attributable to Class N are allocated to Class N.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

All other Funds in this report allocate transfer agent fees and expenses on a pro rata basis based on the relative net assets of each class to the total net assets of those classes.

For the year ended December 31, 2018, Global Alternatives Fund and Managed Futures Strategy Fund incurred the following class-specific transfer agent fees and expenses (including sub-transfer agent fees, where applicable):

 

     Transfer Agent Fees and Expenses  

Fund

   

Class A

     

Class C

     

Class N

     

Class Y

  

Global Alternatives Fund

    $ 25,101      $ 12,079      $ 220      $ 792,958  

Managed Futures Strategy Fund

      232,205        47,937        343        2,900,711  

8.  Line of Credit.  Effective April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, entered into a $400,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to $350,000,000 under the line of credit agreement (as long as all borrowings by all Funds in the aggregate do not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest is charged to the Funds based upon the terms set forth in the agreement. In addition, a commitment fee of 0.15% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. The Funds paid an arrangement fee, an upfront fee, and other fees in connection with the new line of credit agreement, which are being amortized over a period of 364 days and are reflected as miscellaneous expenses on the Statements of Operations. The unamortized balance is reflected as prepaid expenses on the Statements of Assets and Liabilities.

Prior to April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, entered into a 364-day, $400,000,000 syndicated, committed, unsecured line of credit with Citibank, N.A. to be used for temporary or emergency purposes only. Any one Fund was able borrow up to the full $400,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate did not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest was charged to the Funds at a rate equal to the greater of the eurodollar or the federal funds rate plus 1.00%. In addition, a commitment fee of 0.15% per annum, payable on the last business day of each month, was accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit.

For the year ended December 31, 2018, none of the Funds had borrowings under these agreements.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

9.  Concentration of Risk.  Each Fund’s investments in foreign securities are subject to foreign currency fluctuations, higher volatility than U.S. securities, varying degrees of regulation and limited liquidity. Greater political, economic, credit and information risks are also associated with foreign securities.

The Funds’ (excluding Dynamic Allocation Fund and Tactical U.S. Market Fund) investments in commodity-related instruments may subject the Funds to greater volatility than investments in other securities. The value of these investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity.

Dynamic Allocation Fund is non-diversified, which means that it is not limited under the 1940 Act to a percentage of assets that it may invest in any one issuer. 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.

10.  Concentration of Ownership.  From time to time, a Fund may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of such accounts could have material impacts on the Funds. As of December 31, 2018, based on management’s evaluation of the shareholder account base, the Funds had accounts representing controlling ownership of more than 5% of the Funds’ total outstanding shares. The number of such accounts, based on accounts that represent more than 5% of an individual class of shares, and the aggregate percentage of net assets represented by such holdings were as follows:

 

Fund

   

Number of 5%
Non-Affiliated
Account Holders

     

Total
Percentage of
Ownership

  

Dynamic Allocation Fund

      2        83.22 %(a) 

Global Alternatives Fund

      2        61.29 % 

Managed Futures Strategy Fund

      3        36.14 % 

Tactical U.S. Market Fund

      3        64.45 %(a) 

Omnibus shareholder accounts for which Natixis Advisors understands that the intermediary has discretion over the underlying shareholder accounts or investment models where a shareholder account may be invested for a non-discretionary customer are included in the table above. For other omnibus accounts, the Funds do not have information on the individual shareholder accounts underlying the omnibus accounts; therefore, there could be other 5% shareholders in addition to those disclosed in the table above.

 

(a)

Certain Fund shareholders are invested in the Fund as a result of the Fund’s inclusion in an investment portfolio model, utilized by certain third party intermediaries, developed by an affiliate of the Fund (ASG). Without this model or as a result of changes in this model, these shareholder positions in the Fund may not exist or could change in a material amount. ASG has no involvement in the decisions to invest in the models provided.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares.  Each Fund may issue an unlimited number of shares of beneficial interest, without par value. Transactions in capital shares were as follows:

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Dynamic Allocation Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      27,942     $ 304,426       18,170     $ 199,184  

Issued in connection with the reinvestment of distributions

      821       8,397       1,022       11,362  

Redeemed

      (7,567 )      (75,114 )      (10,024 )      (111,297 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      21,196     $ 237,709       9,168     $ 99,249  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      5,292     $ 57,501       471     $ 5,412  

Issued in connection with the reinvestment of distributions

      103       1,103       114       1,253  

Redeemed

      (5,367 )      (53,756 )      (112 )      (1,242 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      28     $ 4,848       473     $ 5,423  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      1,430,846     $ 15,372,170       2,530,226     $ 27,301,599  

Issued in connection with the reinvestment of distributions

      136,189       1,409,865       316,727       3,520,335  

Redeemed

      (1,224,508 )      (13,077,148 )      (1,501,545 )      (16,130,927 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      342,527     $ 3,704,887       1,345,408     $ 14,691,007  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      363,751     $ 3,947,444       1,355,049     $ 14,795,679  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Global Alternatives Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      1,558,647     $ 16,799,968       832,324     $ 8,642,830  

Issued in connection with the reinvestment of distributions

      20,955       215,484       11,994       132,651  

Redeemed

      (2,812,492 )      (30,489,562 )      (3,928,172 )      (40,673,162 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (1,232,890 )    $ (13,474,110 )      (3,083,854 )    $ (31,897,681 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      99,780     $ 1,005,928       88,436     $ 863,455  

Issued in connection with the reinvestment of distributions

      2,403       23,673       —       —  

Redeemed

      (856,102 )      (8,678,104 )      (1,798,839 )      (17,472,539 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (753,919 )    $ (7,648,503 )      (1,710,403 )    $ (16,609,084 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      468,418     $ 5,171,757       6,473     $ 69,067  

Issued in connection with the reinvestment of distributions

      18,538       193,223       7,226       81,222  

Redeemed

      (28,845 )      (317,683 )      (34,965 )      (363,232 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      458,111     $ 5,047,297       (21,266 )    $ (212,943 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      24,509,906     $ 271,715,194       47,550,648     $ 511,054,855  

Issued in connection with the reinvestment of distributions

      494,794       5,163,790       379,459       4,265,122  

Redeemed

      (55,139,351 )      (616,727,299 )      (56,581,747 )      (598,573,641 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (30,134,651 )    $ (339,848,315 )      (8,651,640 )    $ (83,253,664 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (31,663,349 )    $ (355,923,631 )      (13,467,163 )    $ (131,973,372 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

Managed Futures Strategy Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      8,122,312     $ 80,225,077       12,582,328     $ 124,980,256  

Issued in connection with the reinvestment of distributions

      268,252       2,628,867       —       —  

Redeemed

      (22,300,655 )      (215,778,224 )      (31,118,290 )      (308,694,437 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (13,910,091 )    $ (132,924,280 )      (18,535,962 )    $ (183,714,181 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      474,479     $ 4,598,163       889,499     $ 8,507,515  

Issued in connection with the reinvestment of distributions

      56,165       525,143       —       —  

Redeemed

      (2,477,073 )      (22,307,151 )      (3,041,010 )      (28,951,138 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (1,946,429 )    $ (17,183,845 )      (2,151,511 )    $ (20,443,623 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      9,583,150     $ 93,545,369       97,180     $ 1,016,431  

Issued in connection with the reinvestment of distributions

      11,301       111,654       — (b)      1  

Redeemed

      (2,201,361 )      (19,921,137 )      —       —  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      7,393,090     $ 73,735,886       97,180     $ 1,016,432  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      112,485,619     $ 1,090,616,021       144,475,462     $ 1,449,195,807  

Issued in connection with the reinvestment of distributions

      2,496,084       24,661,369       151,552       1,589,790  

Redeemed

      (208,906,134 )      (1,977,865,182 )      (115,503,119 )      (1,153,352,968 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (93,924,431 )    $ (862,587,792 )      29,123,895     $ 297,432,629  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (102,387,861 )    $ (938,960,031 )      8,533,602     $ 94,291,257  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

Amount rounds to less than one share.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Tactical U.S. Market Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      4,267,693     $ 63,170,069       962,381     $ 12,703,924  

Issued in connection with the reinvestment of distributions

      70,389       959,679       51,553       730,828  

Redeemed

      (4,058,555 )      (57,521,161 )      (565,990 )      (7,459,636 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      279,527     $ 6,608,587       447,944     $ 5,975,116  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      119,177     $ 1,659,248       41,245     $ 547,111  

Issued in connection with the reinvestment of distributions

      3,746       49,554       7,240       100,086  

Redeemed

      (39,980 )      (557,580 )      (59,465 )      (760,319 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      82,943     $ 1,151,222       (10,980 )    $ (113,122 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      7,212,105     $ 103,884,842       2,707,292     $ 36,257,755  

Issued in connection with the reinvestment of distributions

      243,510       3,297,334       292,315       4,161,281  

Redeemed

      (4,325,790 )      (61,253,423 )      (1,934,749 )      (25,107,042 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      3,129,825     $ 45,928,753       1,064,858     $ 15,311,994  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      3,492,295     $ 53,688,562       1,501,822     $ 21,173,988  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

|  104

Table of Contents

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees of Natixis Funds Trust II and Shareholders of ASG Dynamic Allocation Fund, ASG Global Alternatives Fund, ASG Managed Futures Strategy Fund, and ASG Tactical U.S. Market Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of ASG Dynamic Allocation Fund, ASG Global Alternatives Fund, ASG Managed Futures Strategy Fund, and ASG Tactical U.S. Market Fund (four of the funds constituting Natixis Funds Trust II, hereafter collectively referred to as the “Funds”) as of December 31, 2018, the related statements of operations for the year ended December 31, 2018, the statements of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended December 31, 2018 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of

 

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Report of Independent Registered Public Accounting Firm

 

December 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 21, 2019

We have served as the auditor of one or more of the investment companies in the Natixis Investment Company Complex since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

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Table of Contents

2018 U.S. Tax Distribution Information to Shareholders (Unaudited)

 

Corporate Dividends Received Deduction.  For the fiscal year ended December 31, 2018, a percentage of dividends distributed by the Fund listed below qualifies for the dividends received deduction for corporate shareholders. This percentage is as follows:

 

Fund

   

Qualifying
Percentage

  

Global Alternatives Fund

      5.25 % 

Tactical U.S. Market Fund

      83.96 % 

Capital Gains Distributions.  Pursuant to Internal Revenue Section 852(b), the following Funds paid distributions, which have been designated as capital gains distributions for the fiscal year ended December 31, 2018.

 

Fund

   

Amount

  

Dynamic Allocation Fund

    $ 297,635  

Managed Futures Strategy Fund

      1,469,396  

Tactical U.S. Market Fund

      2,185,407  

Qualified Dividend Income.  For the fiscal year ended December 31, 2018, a percentage of the ordinary income dividends paid by the Fund are considered qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Fund paid a distribution during calendar year 2018, complete information will be reported in conjunction with Form 1099-DIV. This percentage is noted below:

 

Fund

   

Qualifying
Percentage

  

Global Alternatives Fund

      4.88 % 

Tactical U.S. Market Fund

      69.62 % 

 

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Table of Contents

Trustee and Officer Information

 

The tables below provide certain information regarding the trustees and officers of Natixis Funds Trust II (the “Trust”). Unless otherwise indicated, the address of all persons below is 888 Boylston Street, Suite 800, Boston, MA 02199-8197. The Funds’ Statement of Additional Information includes additional information about the trustees of the Trust and is available by calling Natixis Funds at 800-225-5478.

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

Kenneth A. Drucker

(1945)

  

Chairperson of the Board of Trustees since January 2017

Trustee since 2008

Ex Officio member of Audit Committee, Contract Review Committee and Governance Committee

   Retired  

52

None

   Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation)

Edmond J. English

(1953)

  

Trustee since 2013

Audit Committee Member and Governance Committee Member

   Executive Chairman; formerly, Chief Executive Officer of Bob’s Discount Furniture (retail)  

52

Director, Burlington Stores, Inc. (retail)

   Significant experience on the Board and significant experience on the boards of other business organizations (including retail companies and a bank); executive experience (including at a retail company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

continued

    

Richard A. Goglia

(1951)

  

Trustee since 2015

Audit Committee Member

   Retired; formerly Vice President and Treasurer of Raytheon Company (defense)  

52

None

   Experience on the Board and executive experience (including his role as vice president and treasurer of a defense company and experience at a financial services company)

Wendell J. Knox

(1948)

  

Trustee since 2009

Contract Review Committee

Member

and Governance Committee Member

   Director of Abt Associates Inc. (research and consulting)  

52

Director, The Hanover Insurance Group (property and casualty insurance); formerly, Director, Eastern Bank (bank)

   Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

continued

    

Martin T. Meehan

(1956)

  

Trustee since 2012

Audit Committee Member

   President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell  

52

None

   Significant experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience

Maureen B. Mitchell

(1951)

  

Trustee since 2017

Contract Review Committee Member

   Retired; formerly President, Global Sales and Marketing, GE Asset Management, Inc. (financial services)  

52

Director, Sterling Bancorp (Bank)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including role as president of global sales and marketing at a financial services company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

continued

    

James P. Palermo

(1955)

  

Trustee since 2016

Contract Review Committee Member

   Founding Partner, Breton Capital Management, LLC (private equity); Partner, STEP Partners, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation  

52

Director, FutureFuel Corp. (Chemicals and Biofuels)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including roles as chief executive officer of client management and asset servicing for a banking and financial services company)

Erik R. Sirri

(1958)

  

Trustee since 2009

Chairperson of the Audit Committee

   Professor of Finance at Babson College  

52

None

   Significant experience on the Board; experience as Director of the Division of Trading and Markets at the Securities and Exchange Commission; academic experience; training as an economist

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

continued

    

Peter J. Smail

(1952)

  

Trustee since 2009

Chairperson of the Contract Review Committee

and Governance Committee Member

   Retired  

52

None

   Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser)

Cynthia L. Walker

(1956)

  

Trustee since 2005

Chairperson of the Governance Committee and Audit Committee Member

   Deputy Dean for Finance and Administration, Yale University School of Medicine  

52

None

   Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration)
INTERESTED TRUSTEES

Kevin P. Charleston3

(1965)

One Financial Center

Boston, MA 02111

   Trustee since 2015   President, Chief Executive Officer and Chairman of the Board of Directors; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P.  

52

None

   Experience on the Board; continuing service as President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

|  112

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trust,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex

Overseen2

and Other

Directorships Held
During Past
5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INTERESTED TRUSTEES

continued

David L. Giunta4

(1965)

  

Trustee since 2011

President and Chief Executive Officer since 2008

   President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation  

52

None

   Significant experience on the Board; experience as President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation

 

1 

Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term.

 

2 

The trustees of the 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, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and 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 Chairman of the Board of Directors 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, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation.

 

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Trustee and Officer Information

 

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   Since 2016   Executive Vice President, General Counsel, Secretary and Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Michael C. Kardok

(1959)

   Treasurer, Principal Financial and Accounting Officer   Since 2004   Senior Vice President, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Kirk D. Johnson

(1981)

   Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer   Since 2018   Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Vice President and Counsel, Natixis Investment Managers, L.P.

 

1 

Each officer of the Trust serves for an indefinite term in accordance with the Trust’s 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 Natixis Distribution, L.P., Natixis Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from an officer’s current position with such entity.

 

|  114

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LOGO

 

LOGO

 

Annual Report

December 31, 2018

McDonnell Intermediate Municipal Bond Fund

Natixis Oakmark Fund

Natixis Oakmark International Fund

Vaughan Nelson Small Cap Value Fund

Vaughan Nelson Value Opportunity Fund

 

Table of Contents

Portfolio Review     1  
Portfolio of Investments     33  
Financial Statements     55  
Notes to Financial Statements     85  

 

IMPORTANT NOTICE TO SHAREHOLDERS

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you wish to continue receiving paper copies of your shareholder reports after January 1, 2021, you can inform the Fund at any time by calling 1-800-225-5478. If you hold your account with a financial intermediary and you wish to continue receiving paper copies after January 1, 2021, you should call your financial intermediary directly. Paper copies are provided free of charge, and your election to receive reports in paper will apply to all funds held with the Natixis Funds complex. If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You currently may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically at www.icsdelivery.com/natixisfunds.

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MCDONNELL INTERMEDIATE MUNICIPAL BOND FUND

 

Managers   Symbols
Dawn Mangerson   Class A    MIMAX
James Grabovac, CFA®   Class C    MIMCX
Lawrence Jones   Class Y    MIMYX
Steve Wlodarski, CFA®  
McDonnell Investment Management, LLC  

 

 

Investment Goal

The Fund seeks a high level of federal tax-exempt current income, consistent with the preservation of capital.

 

 

Market Conditions

Risk markets reeled during the fourth quarter, devoid of a specific catalyst but simmering in a stew of uncertainty over global growth prospects amid decelerating trade flows and intensifying trade rhetoric. What began the year amid unfettered optimism resulting from the corporate tax cut degenerated into a fiscal policy fizzle that fueled record stock buybacks but little in the way of long-term capital investment. Much of the capital market return differentiation for the year was determined during the fourth quarter as risk markets experienced a significant correction which, in turn, contributed to healthy rate market gains. The improved rate market tone helped mitigate the declines experienced during the first three quarters and left year-over-year yield increases beyond the 5-year portion of the curve contained within 30 basis points (one basis point (bp) is equal to 1/100 of 1%). The sharp increase in equity volatility contributed to significant credit spread (the difference in yield between 10-year US Treasury bonds and lower-rated bonds) widening in the corporate market, while municipals remained relatively well bid amid a steep downdraft in new issue supply.

 

·  

Rate markets recovered somewhat during the fourth quarter but ended the year with yields moderately higher, particularly on the shorter end of the yield curve (a curve that shows the relationship among bond yields across the maturity spectrum).

 

·  

The Treasury curve continued to flatten, with 2- to 10-year bonds ending the year roughly 30 basis points tighter at 20 basis points, and remained a focus of participants wary of an economic deceleration.

 

·  

Equity markets sold off sharply in the fourth quarter, taking most indices in both developed and emerging markets firmly into the red for the year.

 

·  

Energy markets collapsed during the last quarter as efforts to curtail production failed to arrest a relentless selloff that took crude prices down nearly 40% from their October highs.

 

·  

Credit spreads widened as risk markets endured a broad price correction and concomitant rise in volatility.

 

1  |

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·  

Monetary policy normalization continued apace during the year as the Federal Reserve boosted short rates by 100 bps and scaled back reinvestment of its balance sheet by $420 billion.

The signal economic event over the past year was the implementation of the Tax Cuts and Jobs Act that slashed the corporate tax rate from 35% to 21%. The tax plan was designed to incentivize business fixed investment, which legislators expected would result in stronger employment and wage growth. The Congressional Budget Office (CBO) estimated the cost of the package at $1.9 trillion over a 10-year period, and the CBO further expanded its deficit estimate when Congress added $300 billion of additional spending over 2018 and 2019. We were skeptical about implementing a pro-cyclical fiscal policy of significant proportion to an economy nine years into an expansion and nearing full employment.

While it is difficult to isolate the impact of the plan one year after implementation, we can at least evaluate the performance of the factors legislators were targeting. Employment growth improved, as expected, with nonfarm payrolls estimated to have averaged a monthly increase of 220,000 in 2018 versus 182,000 the prior year. Wage growth also edged higher, running at an annual rate of 3.2% versus 2.7% in 2017. However, business fixed investment through the first three quarters of 2018 is estimated to have been flat versus the pace measured during the same period for the year prior, while stock buybacks announced in 2018 are estimated to have topped $1 trillion. Clearly, the investment surge occurred, but in the form of financial investment rather than direct capital investment in property, plant and equipment. As such, there is likely to be minimal long-term enhancement to economic productivity or direct tangible benefit beyond the short-run boost to growth resulting from the tax cut. Meanwhile, the US economy will be approaching the longest expansion in the post-war era while running a fiscal deficit approaching $1 trillion (or nearly 5% of GDP).

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of the McDonnell Intermediate Municipal Bond Fund returned 0.58% at net asset value. The Fund underperformed its benchmark, the Bloomberg Barclays Municipal Bond Index, which returned 1.28%.

Explanation of Fund Performance

The municipal market environment was characterized by “supply constrained” conditions throughout most of 2018. New issue supply declined by 24% from the prior year as the prohibition of advance refunding issues contained in the tax legislation was implemented. We anticipated these conditions coming into the year, but the degree of shortfall was at the high end of expectations. Market conditions also featured continued quality spread compression as investors competed to access the reduced supply of available bonds. In addition, credit-specific spread tightening occurred across several large issuers as investors became more tolerant of underfunded long-term liabilities than they had been in a more discerning credit environment. Against the backdrop of a rising tide of spread tightening, we continued to focus on underlying credit quality fundamentals as the economic expansion enters its tenth year.

 

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MCDONNELL INTERMEDIATE MUNICIPAL BOND FUND

 

Security selection and sector weightings contributed negatively to performance, while yield curve posture and duration were additive. Non-callable, high quality, long duration structured securities hampered performance for the majority of the year given their longer effective duration, but significantly outperformed the general market in the fourth quarter. Additionally, underweight exposure to the Pre-refunded, State General Obligation and Lease sectors hampered performance, although this was somewhat offset by an overweight and outperformance in the Hospital and Water & Sewer sectors. With respect to curve positioning, an underweight on the longer end of the yield curve benefited performance as reduced investor demand caused the curve to steepen with long rates rising.

Outlook

Capital markets entered the new year with the prevailing balance having shifted considerably in recent months. With equities piercing a 20% drop from their highs, credit spreads widening 50 bps and scaled-back market expectations for further Fed tightening, investors now must assess whether the markets are signaling economic storm clouds on the horizon. The reversal of fortunes from the near-euphoria that prevailed at the outset of last year is notable. Clearly, the capital markets face manifest hurdles in the year ahead including China’s slowdown, the Brexit impasse, the government shutdown and the expected release of the special counsel’s report to note several. But while last year’s sentiment proved overly optimistic, we expect this year’s gloom may prove equally pessimistic as 2019 unfolds. The fundamental underpinnings of the expansion remain intact. It would be flippant to suggest that investors ignore the warnings embodied in the recent market turmoil, but one would be similarly ill-advised to not consider the underlying growth fundamentals of the real economy. Employment, consumption and investment remain solid and inflation below target. It is difficult to become excessively pessimistic about capital market prospects with economic fundamentals offering little in the way of negative confirmation. As such, we believe the current correction represents a more attractive entry point for risk investors with a longer-term timeframe. Conversely, we expect that the ratcheting back of Fed expectations may well prove premature.

While we do not expect the Fed will have to aggressively tighten policy over the medium term, we do anticipate eventual modest upward pressure on rates, particularly on the shorter end of the yield curve, as we move forward. We remain vigilant for signs that the expansion has run its course but do not expect that eventuality to loom large, at least over the first half of the year.

 

3  |

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Hypothetical Growth of $100,000 Investment in Class Y Shares1,4

December 31, 2012 (inception) through December 31, 2018

LOGO

See notes to chart on page 5.

 

|  4

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MCDONNELL INTERMEDIATE MUNICIPAL BOND FUND

 

Average Annual Total Returns — December 31, 20184

 

         
                       Expense Ratios5  
     1 Year     5 Years     Life of Fund     Gross     Net  
     
Class Y (Inception 12/31/12)1            
NAV     0.58 %      2.80 %      1.93 %      0.83 %      0.45 % 
     
Class A (Inception 12/31/12)1            
NAV     0.33       2.50       1.62       1.10       0.70  
With 3.00% Maximum Sales Charge     -2.64       1.87       1.10        
     
Class C (Inception 12/31/12)1            
NAV     -0.42       1.76       0.89       1.83       1.45  
With CDSC2     -1.40       1.76       0.89                  
   
Comparative Performance            
Bloomberg Barclays Municipal Bond Index3     1.28       3.82       2.73                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

December 31, 2012 represents the date shares were first registered for public sale under the Securities Act of 1933. November 16, 2012 represents commencement of operations for accounting and financial reporting purposes only.

 

2

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

3

Bloomberg Barclays Municipal Bond Index is a market value — weighted index of investment-grade municipal bonds with maturities of one year or more.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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NATIXIS OAKMARK FUND

 

Managers   Symbols
William C. Nygren, CFA®   Class A    NEFOX
Kevin G. Grant, CFA®   Class C    NECOX
M. Colin Hudson, CFA®   Class N    NOANX
Michael J. Mangan, CFA®   Class Y    NEOYX
Harris Associates L.P.  

 

 

Investment Goal

The Fund seeks long-term capital appreciation.

 

 

Market Conditions

Throughout the year, investor pessimism came from an array of issues, including unresolved trade wars, tariffs and interest rate increases. Compounding these fears, investors who were accustomed to a growing US economy became concerned over an impending recession given that economists predicted slowing growth ahead. Anxiety intensified further from erratic energy prices as supply/demand imbalances and other market factors caused key energy benchmarks to fall 40% by year-end from nearly four-year high levels reached in October. The year culminated in a government shutdown owing to an impasse over border security and immigration policy. These events, along with weak fourth-quarter asset manager performance across the industry, sparked portfolio redemptions and other de-risking actions and led to forced selling of equities in US and global markets, which sent some major benchmark indexes into bear market territory.

Amid this gloomy backdrop, some positive news emerged. Third-quarter gross domestic product grew a robust 3.5% and generated the fastest annual corporate profit increase since 2012. The unemployment rate fell to 3.7%, the lowest level in nearly 50 years, and has remained constant since September. The tight labor market caused upward pressure on weekly wages that rose 3.3% in the third quarter and outpaced inflation. Holiday retail sales, a metric the market watches closely, rose by 5.1% year-over-year to more than $850 billion, which was the strongest improvement in six years. Online holiday sales advanced 19.1%, while sales at physical department stores declined 1.3%. Even so, holiday online department store sales increased 10.2%, and this acceleration of online sales is expected to continue as businesses adapt to an evolving retail environment.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of Natixis Oakmark Fund returned -12.76% at net asset value. The Fund underperformed its benchmark, the S&P 500® Index, which returned -4.38%.

Explanation of Fund Performance

As value investors with an emphasis on individual stock selection, our sector weights are a byproduct of our bottom-up process. On an absolute-return basis, shares in the healthcare sector gained the most value, while holdings in the industrials sector detracted the most.

 

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General Electric (GE) and Citigroup were the largest detractors to fund performance for the calendar year. GE faced a succession of issues in 2018 that influenced its share price, which was especially volatile in the second half of the year, as market analysts reassessed key company estimates, both lower and higher. The company’s second-quarter results released in July included revenue and earnings per share that outpaced market forecasts, and management expressed that results were in line with the company’s expectations. GE later announced it was awarded a new $630.5 million contract with the US Navy for repair and maintenance of F414 aircraft engine components. Even so, in September, some influential market analysts lowered price targets for the company. Subsequently, H. Lawrence Culp, Jr., formerly CEO of Danaher, was unexpectedly named GE’s chairman and CEO. Along with this announcement, management lowered full-year guidance. Late in October, the company reported third-quarter revenues that largely met market expectations. Earnings per share, however, were roughly 30% lower than forecasts, and the company cut its quarterly dividend to $0.01 from $0.12. Management did not provide fourth quarter or 2019 guidance, and the lack of forecasts along with concerns over the company’s liquidity added to investor anxiety. To explain, Culp candidly pointed out that when discussing numbers on a forward-looking basis, he wants to do so with conviction and confidence, which was not possible at that time. He also stated that raising additional equity was not then necessary. We still concur with his assessment. According to our calculations, GE has sufficient liquidity from its industrial operations and the market has overlooked the supplemental liquidity provided by recent sale proceeds and equity positions. All these factors taken together lead us to believe that the company will reach its overall leverage targets without raising equity. In addition, its liquidity position remains steady. Lastly, in December, positive market analysts’ notes upgrading the company provided GE’s share price a modest boost. Management continues to adjust the company’s portfolio of businesses, and while the restructuring process may take some time, we believe this approach will work to benefit shareholders into the future. Overall, we believe that the stock has declined more than warranted and that GE’s intrinsic value is well above the current price quote.

Citigroup finished lower for the first quarter as its share price tracked US market movements. The company’s fourth-quarter earnings results largely aligned with market forecasts. Importantly, consistent with recent trends, the company’s underlying business performance matched our expectations. We were pleased that loan growth was healthy (+5% from last year), driven by core global consumer banking and international city bank segment growth of 7%. Deposits also increased 1% from a year earlier. Citigroup’s third-quarter results issued in October were solid, in our assessment, and generally aligned with our estimates. Earnings per share rose to $1.73, which reflects an increase of roughly 22% from a year earlier. We were especially pleased that expenses were well controlled, which helped improve the company’s efficiency ratio to 57.3%. In addition, Citigroup returned $6.4 billion to shareholders by way of share repurchases and dividend payments in the third quarter. However, at an analysts’ conference in December, CFO John Gerspach stated expectations that fourth-quarter revenue will be slightly lower than what the company had achieved in the year-ago quarter. Lower revenues could jeopardize the company’s ability to meet its efficiency targets within the desired timeframe. Gerspach indicated that while the

 

7  |

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equity business continues to perform well, a drop in fixed income market revenue prompted the reduced outlook. We did not find Gerspach’s announcement overly concerning, as we expect some degree of revenue fluctuation in the current macroeconomic environment. Overall, we remain satisfied with Citigroup’s fundamental performance.

The leading contributors to fund performance for the year were HCA Healthcare and Netflix. HCA Healthcare’s share price gained value in three of the past four quarters as the company’s results released during the reporting period showed positive growth momentum. Revenue, earnings and earnings per share for the first, second and third quarters of 2018 surpassed market expectations. Importantly, key operating metrics, such as same-facility equivalent admissions and same-facility revenue per equivalent admission, demonstrated strengthening trends over the course of the year. These developments provide us evidence that the company’s strategy of focusing on higher acuity visits is paying off. In addition, management stated that capital investments are now “yielding solid market share gains.” HCA paid $121 million worth of dividends and bought back $302 million worth of shares during the third quarter (year-to-date share repurchases total $1.195 billion), which aligns with our estimates. Along with its latest earnings release, management increased full-year revenue, earnings and earnings per share guidance ranges. Furthermore, management continues to seek out strategically sound acquisition opportunities to broaden the company’s scope. One such example was its purchase in August of Mission Health, a six-hospital health facility in North Carolina that allowed expansion across a state where it previously had no operations. Despite these positive outcomes, HCA’s share price dropped in December in conjunction with other hospital stocks as the future of the Affordable Care Act was called into question when a US District Court Judge ruled the law unconstitutional. The law currently remains intact, and we expect a succession of appeals will ensue, perhaps over a protracted period. In the meantime, we have not changed our valuation metrics for HCA as we remain pleased with the company’s fundamental performance.

Netflix ended 2018 quite strong, from our perspective, with the addition of 8.3 million subscriptions in the fourth quarter. Furthermore, average revenue per user in the United States increased 13% from last year (+26% internationally, including currency effects), amid this accelerated subscriber growth. In February, Netflix signed a five-year agreement with television producer Ryan Murphy, who is known for his work on hit shows, such as “Glee,” “American Horror Story” and “American Crime Story.” Under the terms of this deal, Murphy will create a number of new series and films exclusively for Netflix. In addition to Murphy, the company recently added Shonda Rhimes and Oscar-winning filmmakers Joel and Ethan Coen to its talent lineup for the production of original content. We think these alliances provide the company with considerable competitive advantages. Netflix’s first-quarter revenue and earnings per share slightly outpaced market estimates, while net subscriber additions in the United States and internationally were well ahead of market expectations. We were impressed with the acceleration in subscriber growth, especially as the company implemented a price increase in the previous quarter. Netflix issued second-quarter earnings per share that outpaced market expectations, while revenue was in line with projections. Later, third-quarter earnings per share were 30%

 

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NATIXIS OAKMARK FUND

 

higher than projections. Importantly, net subscriber additions for both domestic and international streaming handily outpaced market estimates along with management’s forecasts. The company’s global growth continues unabated as trailing 12-month paying subscriber net additions reached a record 26.4 million. Netflix predicts fourth-quarter net subscriber additions for domestic (1.80 million) and international (7.60 million) streaming that are far in excess of what the market anticipates. We believe the company is poised to benefit further from the transition to internet-provided TV, which we expect will prove advantageous for shareholders.

Outlook

As seasoned investors, we have witnessed similar times of uncertainty. Investors now appear to generally lack an appetite for risk and have gotten more defensive, moving from equity investments to cash and other seemingly safe haven instruments, as illustrated by large equity mutual fund outflows that occurred late in the fourth quarter. Investors may presently believe the best market gains are behind them and have lowered expectations moving into 2019. We adopt the opposite view. Market declines offer ripe opportunities for us to identify extraordinary investment candidates that we believe should reward shareholders going forward.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares3

December 31, 2008 through December 31, 2018

 

LOGO

See notes to chart on page 11.

 

9  |

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Top Ten Holdings as of December 31, 2018

 

Security name    % of
net assets		  
1    Alphabet, Inc., Class A      4.04 % 
2    Citigroup, Inc.      3.02  
3    Regeneron Pharmaceuticals, Inc.      2.87  
4    Bank of America Corp.      2.86  
5    Apple, Inc.      2.68  
6    Netflix, Inc.      2.65  
7    American International Group, Inc.      2.54  
8    Capital One Financial Corp.      2.52  
9    Fiat Chrysler Automobiles NV      2.48  
10    CVS Health Corp.      2.43  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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NATIXIS OAKMARK FUND

 

Average Annual Total Returns — December 31, 20183

 

                                

Expense  Ratios4

  
     1 Year     5 Years     10 Years     Life of
Class N		     Gross     Net  
     

Class Y (Inception 11/18/98)

              

NAV

     -12.76 %      5.86 %      13.29 %      — %      0.93 %      0.93 % 
     

Class A (Inception 5/6/31)

              

NAV

     -13.01       5.59       13.00       —       1.18       1.18  

With 5.75% Maximum Sales Charge

     -18.02       4.34       12.33       —        
     

Class C (Inception 5/1/95)

              

NAV

     -13.63       4.80       12.16       —       1.93       1.93  

With CDSC1

     -14.40       4.80       12.16       —        
     

Class N (Inception 5/1/17)

              

NAV

     -12.60       —       —       0.55       13.79       0.75  
   

Comparative Performance

              

S&P 500® Index2

     -4.38       8.49       13.12       5.03                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large cap segment of the US equities market.

 

3

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

4

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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Managers   Symbols
David G. Herro, CFA®   Class A    NOIAX
Michael L. Manelli, CFA®   Class C    NOICX
Harris Associates L.P.   Class N    NIONX
  Class Y    NOIYX

 

 

Investment Goal

The Fund seeks long-term capital appreciation.

 

 

Market Conditions

Volatility prevailed throughout 2018 as investors digested the implications of newly imposed tariffs. Trade wars began in earnest across the spectrum of US partners, especially the largest traders of Canada, Mexico and China. Along with import tariffs on steel and aluminum mainly aimed at Canada and Mexico, the United States enacted tariffs on Chinese imports. Retaliatory counter-tariffs soon ensued and many European Union countries also entered the fray. A threat was issued to impose a 20% tariff on European auto imports, which Moody’s Investors Service found would cause negative disruptions to the global supply chain across the auto industry and push vehicle prices higher. While a tentative agreement was reached with Mexico and talks persisted with the European Union, the United States and China continued to impose tit-for-tat tariffs. Taking the trade wars into consideration, the International Monetary Fund trimmed its outlook for 2019 economic growth by 0.2% for the US, China and the global economy to 2.5%, 6.2% and 3.7%, respectively. However, trade tensions were eased somewhat after a meeting between US President Trump and Chinese leader Xi Jinping resulted in a postponement of planned tariff increases scheduled for January 1.

Elsewhere, Brexit negotiations faltered, which prompted the resignation of UK Brexit Secretary Dominic Raab and the decline of the pound sterling. Despite the discord, UK Prime Minister Theresa May survived a vote of no confidence held by her own Conservative Party in December. In Japan, third-quarter gross domestic product growth was revised downward from -1.2% to -2.5% at an annualized rate, a sharp decrease from the 2.8% growth in the second quarter. Likewise, the pace of economic growth in China decelerated to 6.5% in the third quarter from 6.7% in the second quarter with fears that fourth-quarter growth could sink to an even lower rate.

Erratic energy prices also served as a source of concern during the reporting period. Supply/demand imbalances and other market factors caused key energy benchmarks to fall 40% by year-end from nearly four-year high levels reached in October. In response, the Organization of the Petroleum Exporting Countries and other countries agreed to a reduction in production of 1.2 million barrels a day effective for six months beginning in January.

 

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Performance Results

For the 12 months ended December 31, 2018, Class Y shares of Natixis Oakmark International Fund returned -23.93% at net asset value. The Fund underperformed its benchmark, the MSCI World ex USA Index (Net), which returned -14.09%.

Explanation of Fund Performance

Geographically, our average weightings for the year were 81% in Europe, 5% in Japan and 3% in Australia. The remaining positions are in South Africa, the United States, Indonesia, Mexico, India, Taiwan, China, South Korea and Canada. As value investors with an emphasis on individual stock selection, our country and sector weights are a byproduct of our bottom-up process.

On an absolute-return basis, shares in the consumer staples sector produced the lone positive collective return, while shares in the healthcare sector lost the most value.

The largest detractors from return were BNP Paribas and Daimler. Results from BNP Paribas for the first two quarters of 2018 were mixed, which caused investor concern early in the year. The company realized fiscal first-half year-over-year declines in revenue, pre-provision profit and operating income. Even so, the declines largely came from a number of one-time items, including outsized regulatory tax payments along with capital gains, credit costs and transformation expenses that were greater than in the year-ago period. In addition, results from corporate and institutional banking were especially robust in the same period last year, which made comparative results appear weaker than absolute performance indicated. Later, BNP issued third-quarter revenue, operating income and profit before tax that missed market forecasts, while net income exceeded projections. The company experienced negative leverage in all three of its operating divisions on an underlying basis, which management attributed to the persistent low interest rate environment, increased investment in the international financial services division, and, in particular, to sluggish trading conditions in the corporate and institutional banking division. However, the substandard operating results were not especially surprising to us, given the difficult end-market conditions coupled with costs invested to restructure parts of the business. In October, we met with CEO Jean-Laurent Bonnafé, who expressed confidence that BNP will reach its 2020 return on equity target of more than 10% and expects this ratio will approach 11% within the next five years if market conditions remain constant. Furthermore, BNP was pressured by fears about European politics, although these headlines have not reduced our assessment of the company’s long-term intrinsic value. The company possesses a dominant retail banking franchise along with a diversified business base, which allows for cost of funding, liquidity and scale advantages versus its smaller peers. BNP also improved its risk profile by exiting riskier business lines and increasing its capital level, which have worked to further strengthen its balance sheet. Looking forward, we believe the company will begin to generate greater net savings in 2019 and 2020 from its extensive cost transformation project currently under way. Overall, our investment thesis for this company is intact, as we believe BNP’s capital position is solid and its management team is working to enhance shareholder value.

 

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Daimler’s share price declined significantly in the second quarter after management announced a profit warning and indicated 2018 total earnings would be slightly below the 2017 level. The company cited challenges, such as higher raw material costs, adverse effects from currency movements and minor difficulties with US suppliers, as the cause of the adjustment. Management worked to mitigate these issues through cost cutting. As the year progressed, Daimler faced the threat of newly imposed tariffs from both the United States and China, vehicle recalls that stemmed from concerns surrounding manipulated emission control systems (management adamantly denies the use of defeat devices), and unexpected news that CEO Dieter Zetsche (age 65) will step down in May 2019. While these matters prompted investor anxiety, we remained confident that Daimler possessed the wherewithal to manage each of these situations successfully. Later, the company’s fiscal nine-month results illustrated that Daimler had encountered a difficult period as revenues from industrial operations remained unchanged and the earnings margin contracted. Full-period Mercedes-Benz revenue dropped 3.2% and unit sales declined 6.3% in the third quarter, primarily driven by a lack of product availability in the United States and significant issues pertaining to compliance with new European emissions regulations. Management again lowered full-year earnings guidance for Mercedes-Benz owing to increased diesel/regulatory provisions. However, the year ended on a positive note as global Mercedes-Benz sales increased 1.5% in November from a year earlier, which marked the brand’s best-ever November sales growth. In addition, Daimler delivered its first battery-powered electric commercial truck to US-based Penske Truck Leasing and also announced it is investing more than €1 billion to create a global battery production network. We think both of these developments will provide significant future advantages. Lastly, President Trump told German auto executives in December that he had no immediate plans to impose additional US vehicle tariffs. Overall, Daimler still meets our operational performance expectations and its shares are trading at a significant discount to our estimate of intrinsic value.

The top contributors to the yearly return were Axis Bank and Safran. We initiated a position in Axis Bank in the first quarter. In our view, the company’s fiscal first-quarter earnings results, released in late July, further solidified our thesis that asset quality improvement will drive a boost in earnings for the company. Later, Axis’ fiscal first-half earnings results exhibited a continued underlying improvement in asset quality. Despite slower loan growth, management believes activity should pick up in the second half, particularly on the corporate side, which accounts for over one-third of total loans. The company has also more than doubled its market share in credit card spending over the past five years to about 11%. As a whole, our investment thesis is driven by the normalization of credit costs where trends remain positive, in our estimation. We believe India’s strong economic growth, coupled with low financial penetration, should result in attractive long-term growth rates for the Indian banking sector. We have confidence that Axis is a solid investment that should reward shareholders into the future.

Safran delivered strong first-quarter earnings results as exhibited by revenues of EUR 4.22 billion that exceeded market expectations of EUR 4.07 billion. The company also reiterated its outlook for the full fiscal year, noting that one of the only reasons Safran did

 

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not raise guidance was due to it being so early in the year. Later, we sold out of our position as its share price approached our estimate of its true value.

Outlook

Geopolitical events have been and will always be part of the investing climate. Elections, trade disputes, wars and other forms of conflict tend to have large impacts on short-term stock prices. However, we believe that underlying value is largely unaffected by macro events. Instead, a company’s true worth is based on its ability to generate cash and create value for its owners over the long term, in our view. As value investors, this is what we study, analyze and price. We will remain focused on fundamental factors and use discipline to take advantage of the market’s volatility and investors’ impatience. We have faced numerous situations like this in the past and have been able to create long-term value for our investors. We remain confident that we can continue to deliver strong long-term results, especially given where valuations are today.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares1

December 15, 2010 through December 31, 2018

 

LOGO

See notes to chart on page 17.

 

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Top Ten Holdings as of December 31, 2018

 

Security name    % of
net assets		  
1    BNP Paribas S.A.      3.88 % 
2    Daimler AG, (Registered)      3.86  
3    Intesa Sanpaolo SpA      3.78  
4    Lloyds Banking Group PLC      3.76  
5    Credit Suisse Group AG, (Registered)      3.67  
6    Continental AG      3.56  
7    CNH Industrial NV      3.40  
8    Bayerische Motoren Werke AG      3.07  
9    Glencore PLC      3.02  
10    Naspers Ltd., N Shares      2.85  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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Average Annual Total Returns — December 31, 20184

 

           
                             Expense Ratios5  
     1 Year     5 Years     Life of Class     Gross     Net  
     

Class Y (Inception 5/1/17)

         Class A/C       Class Y/N        

NAV1

     -23.93 %      -1.03 %      — %      -8.77 %      1.07 %      1.07 % 
     

Class A (Inception 12/15/10)

              

NAV

     -24.15       -1.12       3.85       —       1.32       1.32  

With 5.75% Maximum Sales Charge

     -28.51       -2.28       3.08       —        
     

Class C (Inception 12/15/10)

              

NAV

     -24.74       -1.86       3.07       —       2.07       2.07  

With CDSC2

     -25.47       -1.86       3.07       —        
     

Class N (Inception 5/1/17)

              

NAV

     -23.94       —       —       -8.70       25.21       0.92  
   

Comparative Performance

              

MSCI World ex U.S. Index (Net)3

     -14.09       0.34       3.08       -1.47                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Prior to the inception of Class Y shares (5/1/2017), performance is that of Class A shares and reflects the higher net expenses of that share class.

 

2

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

3

MSCI World ex USA Index (Net) is an unmanaged index that is designed to measure the equity market performance of developed markets, excluding the United States.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Funds prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Funds expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Funds expense caps.

 

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VAUGHAN NELSON SMALL CAP VALUE FUND

 

Managers   Symbols
Dennis G. Alff, CFA®   Class A    NEFJX
Chad D. Fargason   Class C    NEJCX
Chris D. Wallis, CFA®   Class N    VSCNX
Scott J. Weber, CFA®   Class Y    NEJYX
Vaughan Nelson Investment Management, L.P.

Effective July 31, 2009, the fund was closed to new investors.

Effective January 18, 2019, Stephen Davis serves as portfolio manager of the Fund and Messrs. Alf, Fargason and Weber no longer serve as portfolio managers.

 

 

Investment Goal

The Fund seeks capital appreciation.

 

 

Market Conditions

Fiscal stimulus and regulatory relief in the United States led to accelerating domestic growth, which, combined with quantitative tightening by the Federal Reserve, fueled a rally in the US dollar. US dollar strength led to weakness in overseas markets, which were further pressured by trade war rhetoric between the United States and China. With the Federal Reserve raising interest rates throughout the year and the US economy producing strong nominal growth, global liquidity left international capital markets and sought the safety of US assets.

It is quite unusual to have material fiscal stimulus this late in a business cycle with little slack in labor markets. For the first time in several decades there are more job openings than people remaining in the labor pool. Accelerating economic growth is a welcome attribute; however, this late in the business cycle at a time when dollar liquidity is declining and margins are under pressure, the benefits will likely accrue to Main Street rather than Wall Street.

Market volatility returned as liquidity conditions tightened and interest rates increased due to a modest uptick in inflationary pressures and an anticipated increase in US Treasury issuance to fund expanding deficits. With the yield on the 2-year US Treasury now higher than the dividend yield for most stocks, further hikes in Treasury rates will likely continue to pressure stock valuations.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of Vaughan Nelson Small Cap Value Fund returned -14.61% at net asset value. The Fund underperformed its benchmark, the Russell 2000® Value Index, which returned -12.86%.

Explanation of Fund Performance

Small-cap stocks lagged the broad market for the year. The Fund underperformed the benchmark, primarily due to stock selection within the financials, materials, and industrials

 

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sectors. Stock selection within the healthcare and technology sectors contributed the most to returns, especially on a relative basis. Even though the portfolio was underweight the traditional defensive sectors such as consumer staples, REITs, and utilities, it was also underweight the most cyclical areas of the benchmark. As such, the Fund experienced better support during broad market selloffs but underperformed the benchmark during lower quality rallies like the one in the second quarter, the only quarter in 2018 that the Fund underperformed the benchmark.

Stock selection within the industrials sector detracted the most from relative performance. REV Group and Multi-Color Corporation had the greatest negative impact on returns. REV Group suffered from supply chain disruptions and tariff-related headwinds, which increased costs and delayed the production and shipment of vehicles from several of its product lines. Multi-Color, a provider of label solutions for consumer products, performed poorly due to slowing organic revenue growth and disappointing results from its Constantia acquisition. The company’s balance sheet is also more highly levered than peers, which had a negative impact on the stock’s performance as interest rates rose.

The materials sector performed poorly for the year as US dollar strength, trade tariffs, and slowing global growth negatively affected the sector. Berry Global Group and Venator Materials detracted the most from performance. Berry lagged the market as more highly leveraged companies underperformed as interest rates rose and sluggish volumes in South America affected overall volumes. In addition, higher resin costs driven by oil prices were a headwind for Berry most of the year. Venator traded lower due to softening TiO2 volumes and pricing in Europe and inventory destocking in Asia, which drove concerns that the current TiO2 cycle may be ending. The company also announced that it was shutting down its Pori, Finland plant following a fire that destroyed much of the facility.

Financials also performed poorly as the yield curve flattened and loan growth slowed. Regional banks including Chemical Financial and Pacific Premier Bancorp underperformed the market as investors began to factor in a slower growth environment and the potential for rising credit costs.

Real estate and utilities performed better than the market, especially in the fourth quarter selloff as investors sought safety. The Fund was underweight these sectors, which affected relative performance.

The technology sector contributed the most to the Fund’s performance for the year, primarily driven by stock selection. Even though the benchmark’s technology sector was down low double digits for the year, the Fund’s return in technology was positive. CyberArk Software and Integrated Device Technology were two of the best performing stocks. CyberArk benefited from brisk demand for cybersecurity software, which contributed to strong license growth during the year. Integrated Device, a semiconductor company, performed well due to steady growth in the communications, data center, and industrial markets. In addition, during the third quarter the company reached an agreement to be acquired by Renesas Electronics at an attractive premium.

The Fund’s healthcare stocks also performed well due to stock selection, materially outperforming the benchmark. Cotiviti and LivaNova were the best performing names.

 

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Cotiviti, a software provider to the healthcare industry, was purchased by a competitor, Verscend, at an attractive premium during the second quarter. LivaNova offers cardiac surgery, neuromodulation, and cardiac rhythm management products. The company benefited from accelerating revenue growth and from a potential material market expansion, pending CMS approval of vagus nerve stimulation (VNS) therapy for treatment-resistant depression.

Consumer staples was one of the worst performing sectors in the benchmark for the year. The Fund was underweight the sector and owned only one consumer staples stock, Performance Food Group, so relative performance in the sector was positive.

The energy sector was the worst performing sector for the year as oil prices declined 25%. Even though the Fund’s energy holdings were down for the year, the Fund was underweight energy and performed in line with the benchmark.

Outlook

Global synchronized growth peaked earlier this year, and it is imperative that US economic growth pull the rest of the world forward if further market appreciation is to be expected. With declining dollar liquidity, rising margin pressures, and elevated earnings growth expectations, we expect market volatility to remain elevated until there is either a reacceleration in global growth or a pause in Federal Reserve interest rate increases.

Despite strong economic growth in the US, the Fed’s monetary policy normalization is starting to affect certain sectors of the economy. Housing activity and home price appreciation are beginning to slow from the significant increase in mortgage rates over the last year. Housing is typically one of the first sectors to feel the effects of rising interest rates and typically leads a broader economic slowdown by approximately 12 to 18 months.

At this late stage in the economic cycle, the two primary threats to sustained economic growth and rising equity markets are further monetary policy normalization by global central banks and sustained pressure on global supply chains from trade tariffs. For US equity markets to remain attractive, it is critical for the Federal Reserve to allow enough time for capital markets to adjust to higher interest rates and declining liquidity before continuing with monetary policy normalization.

Our outlook remains balanced, stock-specific, and not reflective of opportunities in specific industries, regions of the world, or broader market indices.

 

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VAUGHAN NELSON SMALL CAP VALUE FUND

 

Hypothetical Growth of $100,000 Investment in Class Y Shares3

December 31, 2008 through December 31, 2018

 

LOGO

Top Ten Holdings as of December 31, 2018

 

      Security name    % of
net assets		  
1    Integrated Device Technology, Inc.      2.59 % 
2    Southwest Gas Holdings, Inc.      2.48  
3    Brink’s Co. (The)      2.47  
4    LPL Financial Holdings, Inc.      2.28  
5    Brown & Brown, Inc.      2.24  
6    Spire, Inc.      2.17  
7    Booz Allen Hamilton Holding Corp.      2.05  
8    Nexstar Media Group, Inc., Class A      2.04  
9    First Financial Bancorp      1.96  
10    CyberArk Software Ltd.      1.85  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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Average Annual Total Returns — December 31, 20183

 

                                

Expense  Ratios4

  
    

1 Year

    

5 Years

    

10 Years

    

Life of
Class N

    

Gross

    

Net

  
     

Class Y (Inception 8/31/06)

              

NAV

     -14.61 %      3.64 %      11.44 %      — %      1.27 %      1.27 % 
     

Class A (Inception 12/31/96)

              

NAV

     -14.84       3.37       11.16       —       1.52       1.52  

With 5.75% Maximum Sales Charge

     -19.73       2.16       10.50       —        
     

Class C (Inception 12/31/96)

              

NAV

     -15.51       2.59       10.32       —       2.27       2.27  

With CDSC1

     -16.06       2.59       10.32       —        
     

Class N (Inception 5/1/17)

              

NAV

     -14.48       —       —       -5.09       14.84       1.12  
   

Comparative Performance

              

Russell 2000® Value Index2

     -12.86       3.61       10.40       -4.06                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

Russell 2000® Value Index is an unmanaged index that measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values.

 

3

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

4

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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VAUGHAN NELSON VALUE OPPORTUNITY FUND

 

Managers   Symbols
Dennis G. Alff, CFA®   Class A    VNVAX
Chad D. Fargason   Class C    VNVCX
Chris D. Wallis, CFA®   Class N    VNVNX
Scott J. Weber, CFA®   Class Y    VNVYX

Vaughan Nelson Investment Management, L.P.

 

Effective January 18, 2019, Mr. Weber no longer serves as portfolio manager.

 

 

Investment Goal

The Fund seeks long-term capital appreciation.

 

 

Market Conditions

Fiscal stimulus and regulatory relief in the United States led to accelerating domestic growth, which combined with quantitative tightening by the Federal Reserve, fueled a rally in the US dollar. US dollar strength led to weakness in overseas markets, which were further pressured by trade war rhetoric between the United States and China. With the Federal Reserve raising interest rates throughout the year and the US economy producing strong nominal growth, global liquidity left international capital markets and sought the safety of US assets.

It is quite unusual to have material fiscal stimulus this late in a business cycle with little slack in labor markets. For the first time in several decades there are more job openings than people remaining in the labor pool. Accelerating economic growth is a welcome attribute; however, this late in the business cycle at a time when dollar liquidity is declining and margins are under pressure, the benefits will likely accrue to Main Street rather than Wall Street.

Market volatility returned as liquidity conditions tightened and interest rates increased due to a modest uptick in inflationary pressures and an anticipated increase in US Treasury issuance to fund expanding deficits. With the yield on the 2-year US Treasury now higher than the dividend yield for most stocks, further hikes in Treasury rates will likely continue to pressure stock valuations.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of Vaughan Nelson Value Opportunity Fund returned -15.85% at net asset value. The Fund underperformed its benchmark, the Russell Midcap® Value Index, which returned -12.29%.

Explanation of Fund Performance

The Fund underperformed the benchmark for the year due primarily to stock selection in the industrials, materials, energy, financials, and consumer discretionary sectors. Also, the Fund was underweight REITs, which negatively affected relative performance since REITs

 

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outperformed the market. Stock selection in the technology, healthcare, and utilities sectors contributed the most to relative returns. The Fund was materially overweight technology stocks during the year, which was a positive since technology was one of the best performing sectors for the year.

Stock selection within the industrials sector detracted the most from relative performance. Masonite, a manufacturer of doors for residential and non-residential markets, suffered as housing-related stocks declined due to rising interest rates slowing the demand for new homes. Willscot, a provider of modular workspace and storage solutions, declined due to concerns about an economic slowdown and the company’s higher leverage profile. Given the company’s solid execution, high revenue visibility, and solid free cash flow, we believe the selloff is overdone.

The Fund was materially underweight REITs during the year. This contributed positively to performance through the third quarter, as REITs underperformed the market as interest rates increased. However, as the market sold off in the fourth quarter, REITs performed relatively well in the risk-off environment and finished the year outperforming the benchmark by a wide margin. The Fund’s underweight to REITs was one of the primary detractors for the year.

Materials performed poorly for the year as US dollar strength, trade tariffs, and slowing global growth negatively affected the sector. Crown Holdings and Constellium detracted the most from performance. Packaging company Crown Holdings declined as investors feared that the acquisition of Signode made the company more cyclical and that the higher leverage from the deal would affect profitability as interest rates increased. Constellium, a specialty aluminum manufacturer, declined in the fourth quarter selloff as investors priced in a slower growth environment and sold companies with higher leverage ratios.

Energy was the worst performing sector in the benchmark for the year as oil prices declined 25%. As a result, the Fund’s oil and gas holdings performed poorly, with QEP Resources and Forum Energy Technologies detracting the most from results.

Consumer discretionary lagged the market most of the year and was one of the weakest sectors in the fourth quarter selloff. Mohawk Industries and Aramark were the sector’s worst performers. Mohawk Industries, a residential and commercial carpet provider, was affected by the slowdown in housing due to rising interest rates. Aramark, a provider of food and facilities services, fell after the company lowered organic growth guidance for 2019 and as investors feared margin compression due to rising interest rates and wage inflation.

Financials also lagged the market as the yield curve flattened, loan growth slowed, and investors began pricing in higher credit costs. Chemical Financial, a Michigan-based regional bank, was not spared and declined after reporting weaker net interest income and slower loan growth. Mr. Cooper, a residential mortgage servicer, declined due to the slowdown in housing affecting investors’ growth expectations for its businesses.

Information technology was one of the best relatively performing sectors in the benchmark for the year, despite it having a negative return. The Fund was materially overweight the

 

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VAUGHAN NELSON VALUE OPPORTUNITY FUND

 

sector, which was a positive contributor to relative returns. RingCentral, a provider of comprehensive communications solutions, benefited from the secular trends of cloud, mobile, and remote office locations that are increasingly pushing businesses toward SaaS communication providers. Fidelity Information Services, provider of core processing services for financial institutions, also performed well for the year. The company continues to benefit from regional and community banks modernizing their IT infrastructure for regulatory and competitive reasons.

The healthcare sector also performed relatively well for the year. Even though the benchmark’s healthcare sector was down low double digits for the year, the Fund’s return in healthcare was positive. Centene and IQVIA Holdings were the top performers. Centene, a managed care company, benefited from winning new business in Washington, Florida, and Kansas, and it also closed the acquisition of Fidelis Care. IQVIA, a contract research organization, continues to benefit from the QuintilesIMS merger synergies and from strong bookings growth in its Next-Gen platform. The company is also aggressively buying back shares.

Utilities was the strongest sector in the benchmark for the year, massively outperforming in the fourth quarter market selloff. The Fund’s utilities holdings performed well including Ameren, an electric and gas provider in Illinois and Missouri, and Eversource, a Boston-based electric and gas utility. Both benefited from strong base rate growth and an improved regulatory environment.

Outlook

Global synchronized growth peaked earlier this year, and it is imperative that US economic growth pull the rest of the world forward if further market appreciation is to be expected. With declining dollar liquidity, rising margin pressures, and elevated earnings growth expectations, we expect market volatility to remain elevated until there is either a reacceleration in global growth or a pause in Federal Reserve interest rate increases.

Despite strong economic growth in the US, the Fed’s monetary policy normalization is starting to affect certain sectors of the economy. Housing activity and home price appreciation are beginning to slow from the significant increase in mortgage rates over the last year. Housing is typically one of the first sectors to feel the effects of rising interest rates and typically leads a broader economic slowdown by approximately 12 to 18 months.

At this late stage in the economic cycle, the two primary threats to sustained economic growth and rising equity markets are further monetary policy normalization by global central banks and sustained pressure on global supply chains from trade tariffs. For US equity markets to remain attractive, it is critical for the Federal Reserve to allow enough time for capital markets to adjust to higher interest rates and declining liquidity before continuing with monetary policy normalization.

Our outlook remains balanced, stock-specific, and not reflective of opportunities in specific industries, regions of the world, or broader market indices.

 

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Hypothetical Growth of $100,000 Investment in Class Y Shares3

December 31, 2008 through December 31, 2018

 

LOGO

See notes to chart on page 27.

Top Ten Holdings as of December 31, 2018

 

      Security name    % of
net assets		  
1    Nexstar Media Group, Inc., Class A      2.95 % 
2    Ares Capital Corp.      2.74  
3    Bank of NT Butterfield & Son Ltd. (The)      2.60  
4    Fidelity National Information Services, Inc.      2.58  
5    New Residential Investment Corp.      2.49  
6    Atlantica Yield PLC      2.45  
7    Eversource Energy      2.41  
8    CyrusOne, Inc.      2.35  
9    Keysight Technologies, Inc.      2.34  
10    Ameren Corp.      2.32  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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Table of Contents

VAUGHAN NELSON VALUE OPPORTUNITY FUND

 

Average Annual Total Returns — December 31, 20183

 

                                

Expense  Ratios4

  
     1 Year     5 Years     10 Years       Life of
  Class N		     Gross     Net  
     

Class Y (Inception 10/31/08)

              

NAV

     -15.85 %      1.66 %      10.62 %      — %      1.22 %      1.22 % 
     

Class A (Inception 10/31/08)

              

NAV

     -16.10       1.39       10.34       —       1.47       1.47  

With 5.75% Maximum Sales Charge

     -20.92       0.20       9.68       —        
     

Class C (Inception 10/31/08)

              

NAV

     -16.71       0.64       9.52       —       2.22       2.22  

With CDSC1

     -17.47       0.64       9.52       —        
     

Class N (Inception 5/1/13)

              

NAV

     -15.78       1.73       —       5.56       1.13       1.13  
   

Comparative Performance

              

Russell Midcap® Value Index2

     -12.29       5.44       13.03       7.74                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

Russell Midcap® Value Index is an unmanaged index that measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with lower price-to-book ratios and lower forecasted growth values.

 

3

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

4

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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ADDITIONAL INFORMATION

 

The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers’ views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because the Funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned.

All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

ADDITIONAL INDEX INFORMATION

This document may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis Affiliates”) and does not sponsor, endorse or participate in the provision of any Natixis Affiliates services, funds or other financial products.

The index information contained herein 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.

PROXY VOTING INFORMATION

A description of the Natixis Funds proxy voting policies and procedures is available without charge, upon request, by calling Natixis Funds at 800-225-5478; on the Natixis Funds’ website at im.natixis.com; and on the Securities and Exchange Commission’s (“SEC’s”) website at www.sec.gov. Information regarding how the Natixis Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available from the Natixis Funds’ website and the SEC’s website.

QUARTERLY PORTFOLIO SCHEDULES

The Natixis Funds file complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

 

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Table of Contents

UNDERSTANDING FUND EXPENSES

 

As a mutual fund shareholder, you incur different costs: transaction costs, including sales charges (loads) on purchases and contingent deferred sales charges on redemptions, and ongoing costs, including management fees, distribution and/or service fees (12b-1 fees), and other fund expenses. Certain exemptions may apply. These costs are described in more detail in the Funds’ prospectus. The following examples are intended to help you understand the ongoing costs of investing in the Funds and help you compare these with the ongoing costs of investing in other mutual funds.

The first line in the table of each class of Fund shares shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2018 through December 31, 2018. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = 8.60) and multiply the result by the number in the Expenses Paid During Period column as shown for your class.

The second line in the table for each class of fund shares provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs, such as sales charges. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning funds. If transaction costs were included, total costs would be higher.

 

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MCDONNELL INTERMEDIATE MUNICIPAL
BOND FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $1,012.70       $3.55  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.68       $3.57  
Class C        
Actual     $1,000.00       $1,009.90       $7.35  
Hypothetical (5% return before expenses)     $1,000.00       $1,017.90       $7.38  
Class Y        
Actual     $1,000.00       $1,014.90       $2.29  
Hypothetical (5% return before expenses)     $1,000.00       $1,022.94       $2.29  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 0.70%, 1.45% and 0.45% for Class A, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

NATIXIS OAKMARK FUND   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $862.50       $5.26  
Hypothetical (5% return before expenses)     $1,000.00       $1,019.56       $5.70  
Class C        
Actual     $1,000.00       $859.20       $8.76  
Hypothetical (5% return before expenses)     $1,000.00       $1,015.78       $9.50  
Class N        
Actual     $1,000.00       $864.20       $3.57  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.37       $3.87  
Class Y        
Actual     $1,000.00       $863.90       $4.09  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.82       $4.43  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.12%, 1.87%, 0.76% and 0.87% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Table of Contents
NATIXIS OAKMARK INTERNATIONAL
FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $823.00       $6.16  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.45       $6.82  
Class C        
Actual     $1,000.00       $819.00       $9.58  
Hypothetical (5% return before expenses)     $1,000.00       $1,014.67       $10.61  
Class N        
Actual     $1,000.00       $823.50       $4.64  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.11       $5.14  
Class Y        
Actual     $1,000.00       $823.70       $5.06  
Hypothetical (5% return before expenses)     $1,000.00       $1,019.66       $5.60  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.34%, 2.09%, 1.01% and 1.10% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

VAUGHAN NELSON SMALL CAP VALUE
FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $841.00       $6.45  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.20       $7.07  
Class C        
Actual     $1,000.00       $837.30       $9.91  
Hypothetical (5% return before expenses)     $1,000.00       $1,014.42       $10.87  
Class N        
Actual     $1,000.00       $842.80       $4.37  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.47       $4.79  
Class Y        
Actual     $1,000.00       $842.30       $5.29  
Hypothetical (5% return before expenses)     $1,000.00       $1,019.46       $5.80  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.39%, 2.14%, 0.94% and 1.14% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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VAUGHAN NELSON VALUE
OPPORTUNITY FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $844.50       $5.76  
Hypothetical (5% return before expenses)     $1,000.00       $1,018.96       $6.31  
Class C        
Actual     $1,000.00       $841.50       $9.24  
Hypothetical (5% return before expenses)     $1,000.00       $1,015.17       $10.11  
Class N        
Actual     $1,000.00       $846.20       $4.10  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.77       $4.48  
Class Y        
Actual     $1,000.00       $845.90       $4.61  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.22       $5.04  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.24%, 1.99%, 0.88% and 0.99% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Portfolio of Investments – as of December 31, 2018

McDonnell Intermediate Municipal Bond Fund

 

Principal
Amount		      Description    Value (†)  
  Bonds and Notes — 90.4% of Net Assets  
  Municipals — 90.4%  
   Alabama — 2.2%

 

$ 500,000      UAB Medicine Finance Authority Revenue, UAB Medicine Obligated Group, Series B-2, 3.500%, 9/01/2035    $ 490,680  
     

 

 

  
   California — 7.6%

 

  500,000      California Municipal Finance Authority Revenue, California Lutheran University, 5.000%, 10/01/2034      571,660  
  250,000      California Statewide Communities Development Authority Revenue, Beverly Community Hospital Association, 4.000%, 11/01/2032      255,142  
  760,000      San Gorgonio Memorial Health Care District, GO, Refunding, 5.000%, 8/01/2024      854,544  
     

 

 

  
        1,681,346  
     

 

 

  
   Colorado — 9.3%

 

  260,000      Colorado Springs Utilities System Revenue, Series B-2, 5.000%, 11/15/2033      290,742  
  400,000      Colorado State Health Facilities Authority Revenue, Craig Hospital Project, 5.000%, 12/01/2028      433,456  
  400,000      Denver City & County School District No. 1, GO, Prerefunded 12/01/2022@100, Series B, (State Aid Withholding), 5.000%, 12/01/2026      445,560  
  250,000      Denver City & County, Airport System Revenue, Series A, AMT, 5.000%, 11/15/2030      288,875  
  500,000      Regional Transportation District Sales Tax Revenue, Fastracks Project, Refunding, Series A, 5.000%, 11/01/2028      609,765  
     

 

 

  
        2,068,398  
     

 

 

  
   Connecticut — 4.0%

 

  800,000      Connecticut State Health & Educational Facilities Authority, University of New Haven, Series K-1, 5.000%, 7/01/2033      883,976  
     

 

 

  
   Florida — 11.7%

 

  240,000      City of Cape Coral FL Utility Improvement Assessment, Various Areas, Water & Sewer Revenue, (AGM Insured), 3.000%, 9/01/2027      240,905  
  95,000      City of Cape Coral FL Utility Improvement Assessment, Various Areas, Water & Sewer Revenue, (AGM Insured), 3.000%, 9/01/2028      94,918  
  700,000      City of Cape Coral FL Water & Sewer Revenue, 5.000%, 10/01/2039      790,853  
  500,000      Fernandina Beach Utility System Revenue, Refunding, Series A, 5.000%, 9/01/2027      556,755  
  400,000      Sarasota County Utility System Revenue, 5.000%, 10/01/2023      453,464  
  400,000      Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University, Inc., Series B, 5.000%, 10/15/2025      459,804  
     

 

 

  
        2,596,699  
     

 

 

  
   Georgia — 1.3%

 

  250,000      Savannah Hospital Authority Revenue, St. Joseph’s/Candler Health System Obligated Group, Series A, 5.500%, 7/01/2027      283,860  
     

 

 

  
   Illinois — 5.5%

 

  540,000      Chicago Midway International Airport Revenue, Second Lien, Refunding, Series A, AMT, 5.000%, 1/01/2031      585,835  
  500,000      Illinois Finance Authority Revenue, Loyola University Chicago, Series B, 5.000%, 7/01/2020      520,995  

 

See accompanying notes to financial statements.

 

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Portfolio of Investments – as of December 31, 2018

McDonnell Intermediate Municipal Bond Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Illinois — continued

 

$ 100,000      Illinois Finance Authority Revenue, Loyola University Chicago, Series B, 5.000%, 7/01/2021    $ 107,062  
     

 

 

  
        1,213,892  
     

 

 

  
   Louisiana — 2.2%

 

  200,000      New Orleans Aviation Board, General Airport Revenue, North Terminal Project, Series B, AMT, 5.000%, 1/01/2035      221,498  
  250,000      New Orleans Aviation Board, General Airport Revenue, North Terminal Project, Series B, AMT, 5.000%, 1/01/2036      275,953  
     

 

 

  
        497,451  
     

 

 

  
   Missouri — 3.6%

 

  700,000      Missouri Joint Municipal Electric Utility Commission Power Project Revenue, Refunding, 5.000%, 1/01/2024      790,454  
     

 

 

  
   Nevada — 2.6%

 

  500,000      City of Henderson, GO, Various Purpose, Refunding, 5.000%, 6/01/2026      570,220  
     

 

 

  
   New Jersey — 6.4%

 

  265,000      New Jersey Health Care Facilities Financing Authority Revenue, Refunding, Virtua Health, Inc., 5.000%, 7/01/2023      297,433  
  500,000      New Jersey State Turnpike Authority Revenue, Series A, 5.000%, 1/01/2032      558,900  
  500,000      Rutgers The State University of New Jersey, Refunding, Series J, 5.000%, 5/01/2024      559,890  
     

 

 

  
        1,416,223  
     

 

 

  
   New Mexico — 2.5%

 

  500,000      New Mexico Hospital Equipment Loan Council Revenue, Presbyterian Healthcare Services Obligated Group, Refunding, 5.000%, 8/01/2031      566,620  
     

 

 

  
   Ohio — 5.1%

 

  500,000      Columbus, GO, Various Purpose, Series A, 5.000%, 8/15/2023      567,480  
  500,000      Hamilton County Hospital Facilities Revenue, UC Health Obligated Group, 5.000%, 2/01/2024      562,810  
     

 

 

  
        1,130,290  
     

 

 

  
   Pennsylvania — 1.3%

 

  285,000      Delaware River Joint Toll Bridge Commission Revenue, Refunding, Series A, 4.000%, 7/01/2027      298,050  
     

 

 

  
   Rhode Island — 2.6%

 

  500,000      Rhode Island Clean Water Finance Agency Pollution Control Agency Revolving Fund-Pooled Loan, Series A, 5.000%, 10/01/2024      567,800  
     

 

 

  
   South Dakota — 2.6%

 

  500,000      South Dakota Health & Educational Facilities Authority, Regional Health System Obligated Group, 5.000%, 9/01/2028      581,555  
     

 

 

  
   Tennessee — 5.6%

 

  500,000      Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue, Vanderbilt University Medical Center Obligated Group, Series A, 5.000%, 7/01/2030      562,385  

 

See accompanying notes to financial statements.

 

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Table of Contents

Portfolio of Investments – as of December 31, 2018

McDonnell Intermediate Municipal Bond Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
   Tennessee — continued

 

$ 615,000      Metropolitan Nashville Airport Authority (The) Revenue, Series B, AMT, 5.000%, 7/01/2023    $ 682,466  
     

 

 

  
        1,244,851  
     

 

 

  
   Texas — 5.7%

 

  700,000      Houston TX Airport System Revenue, Refunding, Series C, AMT, 5.000%, 7/01/2026      812,693  
  400,000      Tarrant County Cultural Education Facilities Finance Corp. Revenue, Methodist Hospitals of Dallas, 5.000%, 10/01/2024      450,376  
     

 

 

  
        1,263,069  
     

 

 

  
   Washington — 7.5%

 

  500,000      King County Public Hospital District No. 2, GO, Evergreen Healthcare, Series B, 5.000%, 12/01/2032      559,820  
  500,000      Port of Seattle Revenue, AMT, 5.000%, 7/01/2029      545,930  
  500,000      Snohomish County School District No. 15 Edmonds, GO, 5.000%, 12/01/2031      565,050  
     

 

 

  
        1,670,800  
     

 

 

  
   Wisconsin — 1.1%

 

  225,000      Wisconsin Health & Educational Facilities Authority Revenue, Aspirus, Inc. Obligated Group, Refunding, Series A, 5.000%, 8/15/2031      251,971  
     

 

 

  
   Total Bonds and Notes
(Identified Cost $19,570,369)		      20,068,205  
     

 

 

  
     
Shares                
  Exchange-Traded Funds — 3.6%   
  10,000      SPDR® Nuveen S&P High Yield Municipal Bond ETF      560,800  
  10,000      VanEck Vectors® Short High-Yield Municipal Index ETF      242,000  
     

 

 

  
   Total Exchange-Traded Funds
(Identified Cost $811,628)		      802,800  
     

 

 

  
     
   Total Investments — 94.0%
(Identified Cost $20,381,997)		      20,871,005  
   Other assets less liabilities — 6.0%      1,333,499  
     

 

 

  
   Net Assets — 100.0%    $ 22,204,504  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

     
  AGM      Assured Guaranty Municipal Corporation

 

  AMT      Alternative Minimum Tax

 

  ETF      Exchange-Traded Fund

 

  GO      General Obligation

 

  SPDR      Standard & Poor’s Depositary Receipt

 

 

See accompanying notes to financial statements.

 

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Portfolio of Investments – as of December 31, 2018

McDonnell Intermediate Municipal Bond Fund – (continued)

 

Holdings Summary at December 31, 2018

 

Transportation

      19.2 % 

Hospital

      18.8  

Education

      16.6  

Local General Obligation

      14.0  

Water & Sewer

      12.0  

Special Tax

      4.2  

Electric

      3.6  

Prerefunded

      2.0  

Exchange-Traded Funds

      3.6  
  

 

 

  

Total Investments

      94.0  

Other assets less liabilities

      6.0  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

|  36

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark Fund

 

Shares      Description    Value (†)  
  Common Stocks — 95.1% of Net Assets  
   Air Freight & Logistics — 1.1%

 

  18,785      FedEx Corp.    $ 3,030,584  
     

 

 

  
   Airlines — 1.6%

 

  137,400      American Airlines Group, Inc.      4,411,914  
     

 

 

  
   Auto Components — 1.2%

 

  36,300      Aptiv PLC      2,234,991  
  64,266      Delphi Technologies PLC      920,289  
     

 

 

  
        3,155,280  
     

 

 

  
   Automobiles — 4.4%

 

  466,700      Fiat Chrysler Automobiles NV(a)      6,748,482  
  159,900      General Motors Co.      5,348,655  
     

 

 

  
        12,097,137  
     

 

 

  
   Banks — 8.1%

 

  315,600      Bank of America Corp.      7,776,384  
  158,000      Citigroup, Inc.      8,225,480  
  131,145      Wells Fargo & Co.      6,043,162  
     

 

 

  
        22,045,026  
     

 

 

  
   Beverages — 1.4%

 

  26,445      Diageo PLC, Sponsored ADR      3,749,901  
     

 

 

  
   Biotechnology — 2.9%

 

  20,935      Regeneron Pharmaceuticals, Inc.(a)      7,819,222  
     

 

 

  
   Capital Markets — 9.4%

 

  115,000      Bank of New York Mellon Corp. (The)      5,413,050  
  159,100      Charles Schwab Corp. (The)      6,607,423  
  18,335      Goldman Sachs Group, Inc. (The)      3,062,862  
  28,285      Moody’s Corp.      3,961,031  
  102,900      State Street Corp.      6,489,903  
     

 

 

  
        25,534,269  
     

 

 

  
   Consumer Finance — 4.9%

 

  286,000      Ally Financial, Inc.      6,480,760  
  90,665      Capital One Financial Corp.      6,853,367  
     

 

 

  
        13,334,127  
     

 

 

  
   Electronic Equipment, Instruments & Components — 2.4%

 

  39,617      Flex Ltd.(a)      301,485  
  81,900      TE Connectivity Ltd.      6,194,097  
     

 

 

  
        6,495,582  
     

 

 

  
   Energy Equipment & Services — 1.9%

 

  96,100      Halliburton Co.      2,554,338  
  98,300      National Oilwell Varco, Inc.      2,526,310  
     

 

 

  
        5,080,648  
     

 

 

  
   Entertainment — 2.6%

 

  26,925      Netflix, Inc.(a)      7,206,745  
     

 

 

  

 

See accompanying notes to financial statements.

 

37  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark Fund – (continued)

 

Shares      Description    Value (†)  
   Health Care Equipment & Supplies — 1.7%

 

  71,200      Baxter International, Inc.    $ 4,686,384  
     

 

 

  
   Health Care Providers & Services — 3.6%

 

  101,085      CVS Health Corp.      6,623,089  
  24,707      HCA Healthcare, Inc.      3,074,786  
     

 

 

  
        9,697,875  
     

 

 

  
   Hotels, Restaurants & Leisure — 2.6%

 

  45,045      Hilton Worldwide Holdings, Inc.      3,234,231  
  155,900      MGM Resorts International      3,782,134  
     

 

 

  
        7,016,365  
     

 

 

  
   Industrial Conglomerates — 2.4%

 

  852,700      General Electric Co.      6,454,939  
     

 

 

  
   Insurance — 3.2%

 

  175,245      American International Group, Inc.      6,906,405  
  13,185      Aon PLC      1,916,572  
     

 

 

  
        8,822,977  
     

 

 

  
   Interactive Media & Services — 5.7%

 

  10,535      Alphabet, Inc., Class A(a)      11,008,654  
  34,990      Facebook, Inc., Class A(a)      4,586,839  
     

 

 

  
        15,595,493  
     

 

 

  
   Internet & Direct Marketing Retail — 4.2%

 

  2,650      Booking Holdings, Inc.(a)      4,564,413  
  107,600      eBay, Inc.(a)      3,020,332  
  199,200      Qurate Retail, Inc., Class A(a)      3,888,384  
     

 

 

  
        11,473,129  
     

 

 

  
   IT Services — 7.4%

 

  30,920      Automatic Data Processing, Inc.      4,054,230  
  43,200      DXC Technology Co.      2,296,944  
  29,965      Gartner, Inc.(a)      3,830,726  
  28,585      MasterCard, Inc., Class A      5,392,560  
  35,405      Visa, Inc., Class A      4,671,336  
     

 

 

  
        20,245,796  
     

 

 

  
   Machinery — 5.0%

 

  29,081      Caterpillar, Inc.      3,695,323  
  28,460      Cummins, Inc.      3,803,394  
  40,355      Parker Hannifin Corp.      6,018,545  
     

 

 

  
        13,517,262  
     

 

 

  
   Media — 5.5%

 

  19,940      Charter Communications, Inc., Class A(a)      5,682,302  
  190,000      Comcast Corp., Class A      6,469,500  
  256,000      News Corp., Class A      2,905,600  
     

 

 

  
        15,057,402  
     

 

 

  
   Oil, Gas & Consumable Fuels — 3.7%

 

  105,500      Anadarko Petroleum Corp.      4,625,120  

 

See accompanying notes to financial statements.

 

|  38

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark Fund – (continued)

 

Shares      Description    Value (†)  
   Oil, Gas & Consumable Fuels — continued

 

  178,100      Apache Corp.    $ 4,675,125  
  337,500      Chesapeake Energy Corp.(a)      708,750  
     

 

 

  
        10,008,995  
     

 

 

  
   Personal Products — 0.1%

 

  5,130      Unilever PLC, Sponsored ADR      268,043  
     

 

 

  
   Pharmaceuticals — 1.9%

 

  99,400      Bristol-Myers Squibb Co.      5,166,812  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 3.5%

 

  111,800      Intel Corp.      5,246,774  
  45,100      Texas Instruments, Inc.      4,261,950  
     

 

 

  
        9,508,724  
     

 

 

  
   Technology Hardware, Storage & Peripherals — 2.7%

 

  46,255      Apple, Inc.      7,296,264  
     

 

 

  
   Total Common Stocks
(Identified Cost $258,075,471)		      258,776,895  
     

 

 

  
     
Principal
Amount		                
  Short-Term Investments — 3.9%   
$ 10,622,673      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $10,623,558 on 1/02/2019 collateralized by $11,240,000 U.S. Treasury Bond, 2.750% due 8/15/2042 valued at $10,839,429 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $10,622,673)      10,622,673  
     

 

 

  
     
   Total Investments — 99.0%
(Identified Cost $268,698,144)		      269,399,568  
   Other assets less liabilities — 1.0%      2,793,219  
     

 

 

  
   Net Assets — 100.0%    $ 272,192,787  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

     
  ADR      An American Depositary Receipt is a certificate issued by a custodian bank representing the right to receive securities of the foreign issuer described. The values of ADRs may be significantly influenced by trading on exchanges not located in the United States.

 

 

See accompanying notes to financial statements.

 

39  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark Fund – (continued)

 

Industry Summary at December 31, 2018

 

Capital Markets

      9.4 % 

Banks

      8.1  

IT Services

      7.4  

Interactive Media & Services

      5.7  

Media

      5.5  

Machinery

      5.0  

Consumer Finance

      4.9  

Automobiles

      4.4  

Internet & Direct Marketing Retail

      4.2  

Oil, Gas & Consumable Fuels

      3.7  

Health Care Providers & Services

      3.6  

Semiconductors & Semiconductor Equipment

      3.5  

Insurance

      3.2  

Biotechnology

      2.9  

Technology Hardware, Storage & Peripherals

      2.7  

Entertainment

      2.6  

Hotels, Restaurants & Leisure

      2.6  

Electronic Equipment, Instruments & Components

      2.4  

Industrial Conglomerates

      2.4  

Other Investments, less than 2% each

      10.9  

Short-Term Investments

      3.9  
  

 

 

  

Total Investments

      99.0  

Other assets less liabilities

      1.0  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

|  40

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark International Fund

 

Shares      Description    Value (†)  
  Common Stocks — 100.9% of Net Assets  
   Australia — 2.7%

 

  4,318,350      AMP Ltd.    $ 7,454,628  
  235,300      Brambles Ltd.      1,683,489  
  781,158      Orica Ltd.      9,494,580  
     

 

 

  
        18,632,697  
     

 

 

  
   Canada — 1.7%

 

  41,000      Alimentation Couche-Tard, Inc., Class B      2,039,488  
  1,341,367      Cenovus Energy, Inc.      9,432,408  
     

 

 

  
        11,471,896  
     

 

 

  
   China — 1.0%

 

  39,730      Baidu, Inc., Sponsored ADR(a)      6,301,178  
  27,400      Ctrip.com International Ltd., ADR(a)      741,444  
     

 

 

  
        7,042,622  
     

 

 

  
   France — 10.8%

 

  245,900      Accor S.A.      10,456,746  
  589,000      BNP Paribas S.A.(b)      26,599,661  
  344,082      Bureau Veritas S.A.      7,011,483  
  52,851      Danone      3,725,076  
  5,440      Pernod-Ricard S.A.      892,815  
  234,545      Publicis Groupe S.A.      13,382,344  
  404,800      Valeo S.A.      11,806,228  
     

 

 

  
        73,874,353  
     

 

 

  
   Germany — 17.6%

 

  93,900      Allianz SE, (Registered)      18,869,689  
  254,230      Bayer AG, (Registered)      17,681,380  
  259,600      Bayerische Motoren Werke AG      21,054,886  
  175,550      Continental AG      24,442,847  
  502,314      Daimler AG, (Registered)      26,479,423  
  707,700      ThyssenKrupp AG      12,156,837  
     

 

 

  
        120,685,062  
     

 

 

  
   India — 0.7%

 

  520,775      Axis Bank Ltd.(a)      4,617,748  
     

 

 

  
   Indonesia — 1.8%

 

  23,486,100      Bank Mandiri Persero Tbk PT      12,047,682  
     

 

 

  
   Ireland — 2.2%

 

  212,402      Ryanair Holdings PLC, Sponsored ADR(a)      15,152,759  
     

 

 

  
   Italy — 3.8%

 

  11,652,200      Intesa Sanpaolo SpA      25,945,036  
     

 

 

  
   Japan — 5.2%

 

  484,400      Komatsu Ltd.      10,409,723  
  303,300      Olympus Corp.      9,276,357  
  86,700      Omron Corp.      3,143,039  
  224,000      Toyota Motor Corp.      12,966,589  
     

 

 

  
        35,795,708  
     

 

 

  

 

See accompanying notes to financial statements.

 

41  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark International Fund – (continued)

 

Shares      Description    Value (†)  
   Korea — 2.5%

 

  74,800      NHN Corp.(a)    $ 8,197,771  
  267,300      Samsung Electronics Co. Ltd.      9,305,164  
     

 

 

  
        17,502,935  
     

 

 

  
   Mexico — 1.2%

 

  681,400      Grupo Televisa SAB, Sponsored ADR      8,572,012  
     

 

 

  
   Netherlands — 4.1%

 

  33,331      Akzo Nobel NV      2,684,278  
  64,130      ASML Holding NV      10,046,571  
  285,282      EXOR NV      15,487,202  
     

 

 

  
        28,218,051  
     

 

 

  
   South Africa — 2.8%

 

  97,760      Naspers Ltd., N Shares      19,573,160  
     

 

 

  
   Sweden — 5.9%

 

  1,353,419      Hennes & Mauritz AB, B Shares      19,247,072  
  705,300      SKF AB, B Shares      10,719,600  
  789,300      Volvo AB, B Shares      10,335,135  
     

 

 

  
        40,301,807  
     

 

 

  
   Switzerland — 12.1%

 

  178,600      Cie Financiere Richemont S.A., (Registered)      11,517,486  
  2,304,536      Credit Suisse Group AG, (Registered)(b)      25,192,473  
  5,570,400      Glencore PLC(b)      20,711,109  
  56,805      Kuehne & Nagel International AG      7,312,314  
  339,495      LafargeHolcim Ltd., (Registered)      14,010,466  
  54,400      Nestle S.A., (Registered)      4,415,253  
     

 

 

  
        83,159,101  
     

 

 

  
   Taiwan — 1.3%

 

  1,221,000      Taiwan Semiconductor Manufacturing Co. Ltd.      8,865,961  
     

 

 

  
   United Kingdom — 22.2%

 

  601,239      Ashtead Group PLC      12,541,470  
  2,583,400      CNH Industrial NV      23,341,748  
  83,100      Diageo PLC      2,969,528  
  91,531      Experian PLC      2,218,886  
  128,556      Ferguson PLC      8,214,497  
  2,645,400      G4S PLC      6,677,824  
  360,800      Liberty Global PLC, Class A(a)      7,699,472  
  409,700      Liberty Global PLC, Series C(a)      8,456,208  
  39,092,000      Lloyds Banking Group PLC      25,768,652  
  273,604      Meggitt PLC      1,643,548  
  28,200      Reckitt Benckiser Group PLC      2,159,452  
  5,462,900      Royal Bank of Scotland Group PLC      15,154,388  
  500,489      Schroders PLC      15,587,128  
  100      Schroders PLC, (Non Voting)      2,634  
  378,800      Smiths Group PLC      6,594,514  
  1,223,100      WPP PLC      13,310,984  
     

 

 

  
        152,340,933  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  42

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark International Fund – (continued)

 

Shares      Description    Value (†)  
   United States — 1.3%

 

  57,092      Willis Towers Watson PLC    $ 8,669,991  
     

 

 

  
   Total Common Stocks
(Identified Cost $876,395,064)		      692,469,514  
     

 

 

  
     
   Total Investments — 100.9%
(Identified Cost $876,395,064)		      692,469,514  
   Other assets less liabilities — (0.9)%      (6,419,682 ) 
     

 

 

  
   Net Assets — 100.0%    $ 686,049,832  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

  (b)      Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.

 

     
  ADR      An American Depositary Receipt is a certificate issued by a custodian bank representing the right to receive securities of the foreign issuer described. The values of ADRs may be significantly influenced by trading on exchanges not located in the United States.

 

     
  CHF      Swiss Franc

 

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty    Delivery
Date		     

Currency
Bought/
Sold (B/S)

      Units
of
Currency		      In Exchange for
      Notional
Value		      Unrealized
Appreciation
(Depreciation)		  
State Street Bank and Trust Company      6/19/2019      CHF      B        6,902,000      $ 7,095,312      $ 7,135,771      $ 40,459  
State Street Bank and Trust Company      6/19/2019      CHF      S        18,348,000        19,420,189        18,969,448        450,741  
                    

 

 

  
Total

 

    $ 491,200  
                    

 

 

  

 

See accompanying notes to financial statements.

 

43  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis Oakmark International Fund – (continued)

 

Industry Summary at December 31, 2018

 

Banks

      16.2 % 

Media

      10.3  

Automobiles

      8.8  

Machinery

      8.0  

Capital Markets

      6.0  

Auto Components

      5.3  

Metals & Mining

      4.8  

Insurance

      4.0  

Diversified Financial Services

      3.3  

Trading Companies & Distributors

      3.0  

Specialty Retail

      2.8  

Semiconductors & Semiconductor Equipment

      2.8  

Pharmaceuticals

      2.6  

Airlines

      2.2  

Interactive Media & Services

      2.1  

Construction Materials

      2.0  

Other Investments, less than 2% each

      16.7  
  

 

 

  

Total Investments

      100.9  

Other assets less liabilities (including forward foreign currency contracts)

      (0.9 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

Currency Exposure Summary at December 31, 2018

 

Euro

      39.7 % 

British Pound

      19.5  

Swiss Franc

      9.1  

United States Dollar

      8.0  

Swedish Krona

      5.9  

Japanese Yen

      5.2  

South African Rand

      2.8  

Australian Dollar

      2.7  

South Korean Won

      2.5  

Other, less than 2% each

      5.5  
  

 

 

  

Total Investments

      100.9  

Other assets less liabilities (including forward foreign currency contracts)

      (0.9 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

 

See accompanying notes to financial statements.

 

|  44

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Small Cap Value Fund

 

Shares      Description    Value (†)  
  Common Stocks — 97.8% of Net Assets  
   Aerospace & Defense — 2.0%

 

  53,600      AAR Corp.    $ 2,001,424  
  7,725      Moog, Inc., Class A      598,533  
     

 

 

  
        2,599,957  
     

 

 

  
   Banks — 14.0%

 

  61,575      Chemical Financial Corp.      2,254,261  
  43,275      Enterprise Financial Services Corp.      1,628,438  
  46,275      First Bancorp      1,511,342  
  106,000      First Financial Bancorp      2,514,320  
  64,350      First Merchants Corp.      2,205,274  
  35,625      Lakeland Financial Corp.      1,430,700  
  76,350      Pacific Premier Bancorp, Inc.(a)      1,948,452  
  76,425      Union Bankshares Corp.      2,157,478  
  106,400      United Community Banks, Inc.      2,283,344  
     

 

 

  
        17,933,609  
     

 

 

  
   Building Products — 1.0%

 

  21,950      American Woodmark Corp.(a)      1,222,176  
     

 

 

  
   Capital Markets — 4.6%

 

  64,125      Blucora, Inc.(a)      1,708,290  
  48,000      LPL Financial Holdings, Inc.      2,931,840  
  47,350      Virtu Financial, Inc., Class A      1,219,736  
     

 

 

  
        5,859,866  
     

 

 

  
   Chemicals — 1.7%

 

  178,075      Platform Specialty Products Corp.(a)      1,839,515  
  69,250      Venator Materials PLC(a)      290,157  
     

 

 

  
        2,129,672  
     

 

 

  
   Commercial Services & Supplies — 7.0%

 

  54,500      Brady Corp., Class A      2,368,570  
  49,100      Brink’s Co. (The)      3,174,315  
  30,075      Casella Waste Systems, Inc., Class A(a)      856,837  
  39,375      KAR Auction Services, Inc.      1,878,975  
  20,200      Multi-Color Corp.      708,818  
     

 

 

  
        8,987,515  
     

 

 

  
   Consumer Finance — 1.7%

 

  15,875      FirstCash, Inc.      1,148,556  
  13,550      Green Dot Corp., Class A(a)      1,077,496  
     

 

 

  
        2,226,052  
     

 

 

  
   Containers & Packaging — 1.4%

 

  173,050      Graphic Packaging Holding Co.      1,841,252  
     

 

 

  
   Diversified Consumer Services — 1.6%

 

  44,450      Adtalem Global Education, Inc.(a)      2,103,374  
     

 

 

  
   Electrical Equipment — 1.2%

 

  136,500      GrafTech International Ltd.      1,561,560  
     

 

 

  

 

See accompanying notes to financial statements.

 

45  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Small Cap Value Fund – (continued)

 

Shares      Description    Value (†)  
   Electronic Equipment, Instruments & Components — 3.1%

 

  36,355      Fabrinet(a)    $ 1,865,375  
  12,660      Littelfuse, Inc.      2,170,937  
     

 

 

  
        4,036,312  
     

 

 

  
   Energy Equipment & Services — 1.7%

 

  134,875      Newpark Resources, Inc.(a)      926,591  
  25,525      Oil States International, Inc.(a)      364,497  
  35,600      ProPetro Holding Corp.(a)      438,592  
  32,275      Unit Corp.(a)      460,887  
     

 

 

  
        2,190,567  
     

 

 

  
   Food & Staples Retailing — 1.6%

 

  61,425      Performance Food Group Co.(a)      1,982,185  
     

 

 

  
   Gas Utilities — 4.6%

 

  41,575      Southwest Gas Holdings, Inc.      3,180,487  
  37,525      Spire, Inc.      2,779,852  
     

 

 

  
        5,960,339  
     

 

 

  
   Health Care Equipment & Supplies — 5.6%

 

  39,375      Integra LifeSciences Holdings Corp.(a)      1,775,812  
  64,650      Lantheus Holdings, Inc.(a)      1,011,772  
  17,325      LivaNova PLC(a)      1,584,718  
  33,225      Meridian Bioscience, Inc.      576,786  
  43,625      Natus Medical, Inc.(a)      1,484,559  
  14,225      NuVasive, Inc.(a)      704,991  
     

 

 

  
        7,138,638  
     

 

 

  
   Health Care Providers & Services — 1.0%

 

  22,250      AMN Healthcare Services, Inc.(a)      1,260,685  
     

 

 

  
   Hotels, Restaurants & Leisure — 1.1%

 

  22,050      Dunkin’ Brands Group, Inc.      1,413,846  
     

 

 

  
   Insurance — 4.1%

 

  104,150      Brown & Brown, Inc.      2,870,374  
  38,175      Selective Insurance Group, Inc.      2,326,384  
     

 

 

  
        5,196,758  
     

 

 

  
   IT Services — 7.2%

 

  58,400      Booz Allen Hamilton Holding Corp.      2,632,088  
  16,375      CACI International, Inc., Class A(a)      2,358,491  
  39,725      Luxoft Holding, Inc.(a)      1,208,435  
  104,625      Perspecta, Inc.      1,801,642  
  95,850      Presidio, Inc.      1,250,843  
     

 

 

  
        9,251,499  
     

 

 

  
   Life Sciences Tools & Services — 0.9%

 

  12,800      PRA Health Sciences, Inc.(a)      1,177,088  
     

 

 

  
   Machinery — 3.1%

 

  19,500      Albany International Corp., Class A      1,217,385  
  30,700      Franklin Electric Co., Inc.      1,316,416  

 

See accompanying notes to financial statements.

 

|  46

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Small Cap Value Fund – (continued)

 

Shares      Description    Value (†)  
   Machinery — continued

 

  30,025      Hillenbrand, Inc.    $ 1,138,848  
  43,775      REV Group, Inc.      328,750  
     

 

 

  
        4,001,399  
     

 

 

  
   Media — 3.6%

 

  33,300      Nexstar Media Group, Inc., Class A      2,618,712  
  178,025      TEGNA, Inc.      1,935,132  
     

 

 

  
        4,553,844  
     

 

 

  
   Oil, Gas & Consumable Fuels — 1.1%

 

  84,925      Callon Petroleum Co.(a)      551,163  
  210,700      Kosmos Energy Ltd.(a)      857,549  
     

 

 

  
        1,408,712  
     

 

 

  
   REITs – Diversified — 1.4%

 

  101,675      CoreCivic, Inc.      1,812,865  
     

 

 

  
   REITs – Mortgage — 1.6%

 

  155,475      Two Harbors Investment Corp.      1,996,299  
     

 

 

  
   REITs – Office Property — 0.4%

 

  43,875      Brandywine Realty Trust      564,671  
     

 

 

  
   REITs – Storage — 1.1%

 

  55,300      National Storage Affiliates Trust      1,463,238  
     

 

 

  
   Road & Rail — 1.8%

 

  20,550      Landstar System, Inc.      1,966,018  
  48,850      U.S. Xpress Enterprises, Inc., Class A(a)      274,049  
     

 

 

  
        2,240,067  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 7.3%

 

  38,700      Diodes, Inc.(a)      1,248,462  
  68,775      Integrated Device Technology, Inc.(a)      3,330,773  
  87,675      Lattice Semiconductor Corp.(a)      606,711  
  118,000      MaxLinear, Inc., Class A(a)      2,076,800  
  7,200      Power Integrations, Inc.      439,056  
  21,750      Silicon Laboratories, Inc.(a)      1,714,118  
     

 

 

  
        9,415,920  
     

 

 

  
   Software — 3.8%

 

  97,225      Cision Ltd.(a)      1,137,533  
  32,025      CyberArk Software Ltd.(a)      2,374,333  
  17,300      LogMeIn, Inc.      1,411,161  
     

 

 

  
        4,923,027  
     

 

 

  
   Specialty Retail — 1.3%

 

  40,050      Aaron’s, Inc.      1,684,103  
     

 

 

  
   Textiles, Apparel & Luxury Goods — 2.6%

 

  24,975      Carter’s, Inc.      2,038,460  
  40,775      Wolverine World Wide, Inc.      1,299,907  
     

 

 

  
        3,338,367  
     

 

 

  

 

See accompanying notes to financial statements.

 

47  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Small Cap Value Fund – (continued)

 

Shares      Description    Value (†)  
   Thrifts & Mortgage Finance — 1.6%

 

  200,225      MGIC Investment Corp.(a)    $ 2,094,354  
     

 

 

  
   Total Common Stocks
(Identified Cost $137,391,782)		      125,569,816  
     

 

 

  
     
  Closed-End Investment Companies — 0.5%   
  47,350      BlackRock TCP Capital Corp.
(Identified Cost $801,870)		      617,444  
     

 

 

  
     
Principal
Amount		                
  Short-Term Investments — 2.1%   
$ 2,711,881      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $2,712,107 on 1/02/2019 collateralized by $2,870,000 U.S. Treasury Bond, 2.750% due 8/15/2042 valued at $2,767,719 including accrued interest (Note 2 of Notes to Financial Statements)
(Identified Cost $2,711,881)		      2,711,881  
     

 

 

  
     
   Total Investments — 100.4%
(Identified Cost $140,905,533)		      128,899,141  
   Other assets less liabilities — (0.4)%      (504,757 ) 
     

 

 

  
   Net Assets — 100.0%    $ 128,394,384  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

     
  REITs      Real Estate Investment Trusts

 

 

See accompanying notes to financial statements.

 

|  48

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Small Cap Value Fund – (continued)

 

Industry Summary at December 31, 2018

 

Banks

      14.0 % 

Semiconductors & Semiconductor Equipment

      7.3  

IT Services

      7.2  

Commercial Services & Supplies

      7.0  

Health Care Equipment & Supplies

      5.6  

Gas Utilities

      4.6  

Capital Markets

      4.6  

Insurance

      4.1  

Software

      3.8  

Media

      3.6  

Electronic Equipment, Instruments & Components

      3.1  

Machinery

      3.1  

Textiles, Apparel & Luxury Goods

      2.6  

Aerospace & Defense

      2.0  

Other Investments, less than 2% each

      25.2  

Closed-End Investment Companies

      0.5  

Short-Term Investments

      2.1  
  

 

 

  

Total Investments

      100.4  

Other assets less liabilities

      (0.4 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

49  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Value Opportunity Fund

 

Shares      Description    Value (†)  
  Common Stocks — 95.0% of Net Assets  
   Banks — 6.2%

 

  490,775      Bank of NT Butterfield & Son Ltd. (The)    $ 15,385,796  
  365,300      Chemical Financial Corp.      13,373,633  
  233,225      PacWest Bancorp      7,761,728  
     

 

 

  
        36,521,157  
     

 

 

  
   Building Products — 2.2%

 

  98,550      Allegion PLC      7,855,420  
  111,700      Masonite International Corp.(a)      5,007,511  
     

 

 

  
        12,862,931  
     

 

 

  
   Capital Markets — 2.3%

 

  121,550      Nasdaq, Inc.      9,914,833  
  80,800      SEI Investments Co.      3,732,960  
     

 

 

  
        13,647,793  
     

 

 

  
   Chemicals — 2.4%

 

  149,150      FMC Corp.      11,031,134  
  111,025      PolyOne Corp.      3,175,315  
     

 

 

  
        14,206,449  
     

 

 

  
   Commercial Services & Supplies — 3.5%

 

  143,225      Brink’s Co. (The)      9,259,496  
  241,125      KAR Auction Services, Inc.      11,506,485  
     

 

 

  
        20,765,981  
     

 

 

  
   Construction & Engineering — 1.2%

 

  733,875      WillScot Corp.(a)      6,913,103  
     

 

 

  
   Consumer Finance — 0.9%

 

  222,075      Synchrony Financial      5,209,880  
     

 

 

  
   Containers & Packaging — 3.2%

 

  72,925      Avery Dennison Corp.      6,550,853  
  304,850      Crown Holdings, Inc.(a)      12,672,614  
     

 

 

  
        19,223,467  
     

 

 

  
   Diversified Consumer Services — 3.2%

 

  26,925      Bright Horizons Family Solutions, Inc.(a)      3,000,791  
  692,475      Laureate Education, Inc., Class A(a)      10,553,319  
  141,250      ServiceMaster Global Holdings, Inc.(a)      5,189,525  
     

 

 

  
        18,743,635  
     

 

 

  
   Electric Utilities — 2.4%

 

  219,450      Eversource Energy      14,273,028  
     

 

 

  
   Electrical Equipment — 1.4%

 

  49,925      Hubbell, Inc.      4,959,549  
  150,450      nVent Electric PLC      3,379,107  
     

 

 

  
        8,338,656  
     

 

 

  
   Electronic Equipment, Instruments & Components — 2.9%

 

  38,100      CDW Corp.      3,088,005  

 

See accompanying notes to financial statements.

 

|  50

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Value Opportunity Fund – (continued)

 

Shares      Description    Value (†)  
   Electronic Equipment, Instruments & Components — continued

 

  222,725      Keysight Technologies, Inc.(a)    $ 13,826,768  
     

 

 

  
        16,914,773  
     

 

 

  
   Energy Equipment & Services — 0.6%

 

  164,250      Baker Hughes, a GE Co.      3,531,375  
     

 

 

  
   Health Care Equipment & Supplies — 0.9%

 

  8,670      Cooper Cos., Inc. (The)      2,206,515  
  77,525      Hologic, Inc.(a)      3,186,278  
     

 

 

  
        5,392,793  
     

 

 

  
   Health Care Providers & Services — 1.8%

 

  90,000      Centene Corp.(a)      10,377,000  
     

 

 

  
   Hotels, Restaurants & Leisure — 2.5%

 

  249,650      Aramark      7,232,360  
  197,100      Extended Stay America, Inc.      3,055,050  
  84,100      Six Flags Entertainment Corp.      4,678,483  
     

 

 

  
        14,965,893  
     

 

 

  
   Household Durables — 2.0%

 

  57,825      Mohawk Industries, Inc.(a)      6,763,212  
  268,935      Newell Brands, Inc.      4,999,502  
     

 

 

  
        11,762,714  
     

 

 

  
   Independent Power & Renewable Electricity Producers — 4.5%

 

  739,125      Atlantica Yield PLC      14,486,850  
  526,925      Vistra Energy Corp.(a)      12,061,313  
     

 

 

  
        26,548,163  
     

 

 

  
   Insurance — 7.0%

 

  37,450      Allstate Corp. (The)      3,094,494  
  176,075      Arthur J. Gallagher & Co.      12,976,727  
  309,450      Athene Holding Ltd., Class A(a)      12,325,393  
  91,325      Reinsurance Group of America, Inc.      12,806,505  
     

 

 

  
        41,203,119  
     

 

 

  
   IT Services — 9.1%

 

  48,610      Alliance Data Systems Corp.      7,295,389  
  88,700      CACI International, Inc., Class A(a)      12,775,461  
  149,150      Fidelity National Information Services, Inc.      15,295,332  
  126,150      Fiserv, Inc.(a)      9,270,764  
  90,675      Global Payments, Inc.      9,351,313  
     

 

 

  
        53,988,259  
     

 

 

  
   Life Sciences Tools & Services — 1.9%

 

  99,362      IQVIA Holdings, Inc.(a)      11,542,884  
     

 

 

  
   Machinery — 2.4%

 

  98,550      Oshkosh Corp.      6,042,100  
  226,000      Timken Co. (The)      8,434,320  
     

 

 

  
        14,476,420  
     

 

 

  

 

See accompanying notes to financial statements.

 

51  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Value Opportunity Fund – (continued)

 

Shares      Description    Value (†)  
   Media — 2.9%

 

  222,075      Nexstar Media Group, Inc., Class A    $ 17,463,978  
     

 

 

  
   Metals & Mining — 1.4%

 

  1,158,300      Constellium NV, Class A(a)      8,096,517  
     

 

 

  
   Multi-Utilities — 6.9%

 

  210,250      Ameren Corp.      13,714,607  
  271,350      CMS Energy Corp.      13,472,528  
  197,750      WEC Energy Group, Inc.      13,696,165  
     

 

 

  
        40,883,300  
     

 

 

  
   Multiline Retail — 0.5%

 

  29,575      Dollar General Corp.      3,196,466  
     

 

 

  
   Oil, Gas & Consumable Fuels — 4.8%

 

  228,625      Continental Resources, Inc.(a)      9,188,439  
  1,085,350      QEP Resources, Inc.(a)      6,110,520  
  1,180,625      WPX Energy, Inc.(a)      13,400,094  
     

 

 

  
        28,699,053  
     

 

 

  
   REITs – Diversified — 4.8%

 

  262,800      CyrusOne, Inc.      13,896,864  
  1,034,775      New Residential Investment Corp.      14,704,153  
     

 

 

  
        28,601,017  
     

 

 

  
   Road & Rail — 0.8%

 

  177,400      Knight-Swift Transportation Holdings, Inc.      4,447,418  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 1.1%

 

  72,925      Analog Devices, Inc.      6,259,153  
     

 

 

  
   Software — 2.4%

 

  97,900      Check Point Software Technologies Ltd.(a)      10,049,435  
  53,225      RingCentral, Inc., Class A(a)      4,387,869  
     

 

 

  
        14,437,304  
     

 

 

  
   Specialty Retail — 0.5%

 

  84,750      Signet Jewelers Ltd.      2,692,508  
     

 

 

  
   Textiles, Apparel & Luxury Goods — 1.3%

 

  248,350      Gildan Activewear, Inc.      7,539,906  
     

 

 

  
   Thrifts & Mortgage Finance — 3.1%

 

  84,750      Essent Group Ltd.(a)      2,896,755  
  268,050      MGIC Investment Corp.(a)      2,803,803  
  819,370      Mr. Cooper Group, Inc.(a)      9,562,048  
  195,775      Radian Group, Inc.      3,202,879  
     

 

 

  
        18,465,485  
     

 

 

  
   Total Common Stocks
(Identified Cost $592,247,270)		      562,191,578  
     

 

 

  
     

 

See accompanying notes to financial statements.

 

|  52

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Value Opportunity Fund – (continued)

 

Shares      Description    Value (†)  
  Closed-End Investment Companies — 2.7%  
  1,042,000      Ares Capital Corp.
(Identified Cost $15,614,120)		    $ 16,234,360  
     

 

 

  
     
Principal
Amount		                
  Short-Term Investments — 1.3%  
$ 7,410,750      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $7,411,367 on 1/02/2019 collateralized by $5,525,000 U.S. Treasury Inflation Indexed Bond, 2.125% due 2/15/2041 valued at $7,562,974 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $7,410,750)      7,410,750  
     

 

 

  
     
   Total Investments — 99.0%
(Identified Cost $615,272,140)		      585,836,688  
   Other assets less liabilities — 1.0%      5,886,248  
     

 

 

  
   Net Assets — 100.0%    $ 591,722,936  
     

 

 

  
     
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

     
  REITs      Real Estate Investment Trusts

 

 

See accompanying notes to financial statements.

 

53  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Vaughan Nelson Value Opportunity Fund – (continued)

 

Industry Summary at December 31, 2018

 

IT Services

      9.1 % 

Insurance

      7.0  

Multi-Utilities

      6.9  

Banks

      6.2  

Oil, Gas & Consumable Fuels

      4.8  

REITs – Diversified

      4.8  

Independent Power & Renewable Electricity Producers

      4.5  

Commercial Services & Supplies

      3.5  

Containers & Packaging

      3.2  

Diversified Consumer Services

      3.2  

Thrifts & Mortgage Finance

      3.1  

Media

      2.9  

Electronic Equipment, Instruments & Components

      2.9  

Hotels, Restaurants & Leisure

      2.5  

Machinery

      2.4  

Software

      2.4  

Electric Utilities

      2.4  

Chemicals

      2.4  

Capital Markets

      2.3  

Building Products

      2.2  

Household Durables

      2.0  

Other Investments, less than 2% each

      14.3  

Closed-End Investment Companies

      2.7  

Short-Term Investments

      1.3  
  

 

 

  

Total Investments

      99.0  

Other assets less liabilities

      1.0  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

|  54

Table of Contents

Statements of Assets and Liabilities

 

December 31, 2018

 

     McDonnell
Intermediate
Municipal
Bond Fund		     Natixis
Oakmark
Fund		      Natixis
Oakmark
International
Fund		  

ASSETS

 

Investments at cost

    $ 20,381,997     $ 268,698,144      $ 876,395,064  

Net unrealized appreciation (depreciation)

      489,008       701,424        (183,925,550 ) 
  

 

 

    

 

 

     

 

 

  

Investments at value

      20,871,005       269,399,568        692,469,514  

Cash

      708,703       —        —  

Foreign currency at value (identified cost $0, $0 and $42,710, respectively)

      —       —        42,731  

Receivable for Fund shares sold

      16,685       4,439,762        2,259,699  

Receivable from investment adviser (Note 6)

      3,843       —        —  

Receivable for securities sold

      455,174       961,524        7,968,127  

Dividends and interest receivable

      299,021       167,881        34,255  

Unrealized appreciation on forward foreign currency contracts (Note 2)

      —       —        491,200  

Tax reclaims receivable

      —       95,775        1,759,141  

Prepaid expenses (Note 8)

      17       168        644  
  

 

 

    

 

 

     

 

 

  

TOTAL ASSETS

      22,354,448       275,064,678        705,025,311  
  

 

 

    

 

 

     

 

 

  

LIABILITIES

 

Payable for securities purchased

      —       71,153        201,572  

Payable for Fund shares redeemed

      6,301       2,015,171        17,226,873  

Foreign taxes payable (Note 2)

      —       —        189,247  

Distributions payable

      28,020       —        —  

Management fees payable (Note 6)

      —       172,379        548,621  

Deferred Trustees’ fees (Note 6)

      48,231       509,304        89,740  

Administrative fees payable (Note 6)

      779       10,428        26,629  

Payable to distributor (Note 6d)

      64       1,590        10,117  

Other accounts payable and accrued expenses

      66,549       91,866        682,680  
  

 

 

    

 

 

     

 

 

  

TOTAL LIABILITIES

      149,944       2,871,891        18,975,479  
  

 

 

    

 

 

     

 

 

  

NET ASSETS

    $ 22,204,504     $ 272,192,787      $ 686,049,832  
  

 

 

    

 

 

     

 

 

  

NET ASSETS CONSIST OF:

 

Paid-in capital

    $ 22,446,737     $ 261,246,771      $ 903,502,897  

Accumulated earnings (loss)

      (242,233 )      10,946,016        (217,453,065 ) 
  

 

 

    

 

 

     

 

 

  

NET ASSETS

    $ 22,204,504     $ 272,192,787      $ 686,049,832  
  

 

 

    

 

 

     

 

 

  

 

See accompanying notes to financial statements.

 

55  |

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

     McDonnell
Intermediate
Municipal
Bond Fund		      Natixis
Oakmark
Fund		     Natixis
Oakmark
International
Fund		  

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

        

Class A shares:

 

Net assets

    $ 6,019,458      $ 164,747,883     $ 257,551,296  
  

 

 

     

 

 

    

 

 

  

Shares of beneficial interest

      603,576        8,472,552       22,818,007  
  

 

 

     

 

 

    

 

 

  

Net asset value and redemption price per share

    $ 9.97      $ 19.44     $ 11.29  
  

 

 

     

 

 

    

 

 

  

Offering price per share (100/[100-maximum sales charge] of net asset value) (Note 1)

    $ 10.28      $ 20.63     $ 11.98  
  

 

 

     

 

 

    

 

 

  

Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1)

        

Net assets

    $ 1,674,745      $ 53,606,343     $ 212,618,178  
  

 

 

     

 

 

    

 

 

  

Shares of beneficial interest

      167,880        3,217,416       19,131,353  
  

 

 

     

 

 

    

 

 

  

Net asset value and offering price per share

    $ 9.98      $ 16.66     $ 11.11  
  

 

 

     

 

 

    

 

 

  

Class N shares:

 

Net assets

    $ —      $ 9,604     $ 757,696  
  

 

 

     

 

 

    

 

 

  

Shares of beneficial interest

      —        469       67,331  
  

 

 

     

 

 

    

 

 

  

Net asset value, offering and redemption price per share

    $ —      $ 20.49 *    $ 11.25  
  

 

 

     

 

 

    

 

 

  

Class Y shares:

 

Net assets

    $ 14,510,301      $ 53,828,957     $ 215,122,662  
  

 

 

     

 

 

    

 

 

  

Shares of beneficial interest

      1,452,892        2,630,753       19,128,862  
  

 

 

     

 

 

    

 

 

  

Net asset value, offering and redemption price per share

    $ 9.99      $ 20.46     $ 11.25  
  

 

 

     

 

 

    

 

 

  

 

*

Net asset value calculations have been determined utilizing fractional share and penny amounts.

 

See accompanying notes to financial statements.

 

|  56

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

     Vaughan Nelson
Small Cap
Value Fund		     Vaughan Nelson
Value
Opportunity
Fund		  

ASSETS

 

Investments at cost

    $ 140,905,533     $ 615,272,140  

Net unrealized depreciation

      (12,006,392 )      (29,435,452 ) 
  

 

 

    

 

 

  

Investments at value

      128,899,141       585,836,688  

Receivable for Fund shares sold

      633,496       2,878,321  

Receivable for securities sold

      2,509,090       13,757,989  

Dividends and interest receivable

      229,026       869,124  

Prepaid expenses (Note 8)

      128       510  
  

 

 

    

 

 

  

TOTAL ASSETS

      132,270,881       603,342,632  
  

 

 

    

 

 

  

LIABILITIES

 

Payable for Fund shares redeemed

      3,475,612       10,865,859  

Management fees payable (Note 6)

      111,962       462,030  

Deferred Trustees’ fees (Note 6)

      197,567       136,502  

Administrative fees payable (Note 6)

      4,955       23,056  

Payable to distributor (Note 6d)

      1,077       6,076  

Other accounts payable and accrued expenses

      85,324       126,173  
  

 

 

    

 

 

  

TOTAL LIABILITIES

      3,876,497       11,619,696  
  

 

 

    

 

 

  

NET ASSETS

    $ 128,394,384     $ 591,722,936  
  

 

 

    

 

 

  

NET ASSETS CONSIST OF:

 

Paid-in capital

    $ 144,981,421     $ 642,298,538  

Accumulated loss

      (16,587,037 )      (50,575,602 ) 
  

 

 

    

 

 

  

NET ASSETS

    $ 128,394,384     $ 591,722,936  
  

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

57  |

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

     Vaughan Nelson
Small Cap
Value Fund		     Vaughan Nelson
Value
Opportunity
Fund		  

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

     

Class A shares:

 

Net assets

    $ 66,375,891     $ 43,768,676  
  

 

 

    

 

 

  

Shares of beneficial interest

      5,317,169       2,519,551  
  

 

 

    

 

 

  

Net asset value and redemption price per share

    $ 12.48     $ 17.37  
  

 

 

    

 

 

  

Offering price per share (100/[100-maximum sales charge] of net asset value) (Note 1)

    $ 13.24     $ 18.43  
  

 

 

    

 

 

  

Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1)

     

Net assets

    $ 3,479,900     $ 23,966,658  
  

 

 

    

 

 

  

Shares of beneficial interest

      542,773       1,458,909  
  

 

 

    

 

 

  

Net asset value and offering price per share

    $ 6.41     $ 16.43  
  

 

 

    

 

 

  

Class N shares:

 

Net assets

    $ 917     $ 70,902,448  
  

 

 

    

 

 

  

Shares of beneficial interest

      70       4,042,273  
  

 

 

    

 

 

  

Net asset value, offering and redemption price per share

    $ 13.08 *    $ 17.54  
  

 

 

    

 

 

  

Class Y shares:

 

Net assets

    $ 58,537,676     $ 453,085,154  
  

 

 

    

 

 

  

Shares of beneficial interest

      4,476,199       25,792,309  
  

 

 

    

 

 

  

Net asset value, offering and redemption price per share

    $ 13.08     $ 17.57  
  

 

 

    

 

 

  

 

*

Net asset value calculations have been determined utilizing fractional share and penny amounts.

 

See accompanying notes to financial statements.

 

|  58

Table of Contents

Statements of Operations

 

For the Year Ended December 31, 2018

 

     McDonnell
Intermediate
Municipal
Bond Fund		     Natixis
Oakmark
Fund		     Natixis
Oakmark
International
Fund		  

INVESTMENT INCOME

       

Dividends

    $ 27,528     $ 5,033,264     $ 33,295,376  

Non-cash dividends (Note 2b)

      —       —       2,417,771  

Interest

      779,335       151,541       235,183  

Less net foreign taxes withheld

      —       (27,145 )      (3,569,520 ) 
  

 

 

    

 

 

    

 

 

  
     806,863       5,157,660       32,378,810  
  

 

 

    

 

 

    

 

 

  

Expenses

       

Management fees (Note 6)

      110,246       2,269,902       9,186,539  

Service and distribution fees (Note 6)

      36,247       1,158,634       4,584,519  

Administrative fees (Note 6)

      12,103       146,703       474,361  

Trustees’ fees and expenses (Note 6)

      15,517       22,031       42,293  

Transfer agent fees and expenses (Notes 6 and 7)

      12,819       281,297       1,012,909  

Audit and tax services fees

      53,212       41,443       42,894  

Custodian fees and expenses

      5,143       16,404       474,349  

Legal fees

      579       7,126       25,509  

Registration fees

      56,247       91,171       129,053  

Shareholder reporting expenses

      5,016       29,688       94,537  

Miscellaneous expenses (Note 8)

      16,558       24,546       54,329  
  

 

 

    

 

 

    

 

 

  

Total expenses

      323,687       4,088,945       16,121,292  

Less waiver and/or expense reimbursement (Note 6)

      (163,413 )      (959 )      (2,252 ) 
  

 

 

    

 

 

    

 

 

  

Net expenses

      160,274       4,087,986       16,119,040  
  

 

 

    

 

 

    

 

 

  

Net investment income

      646,589       1,069,674       16,259,770  
  

 

 

    

 

 

    

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS

       

Net realized gain (loss) on:

       

Investments

      (22,955 )      32,340,899       49,438,783  

Forward foreign currency contracts (Note 2d)

      —       —       948,366  

Foreign currency transactions (Note 2c)

      —       —       (311,716 ) 

Net change in unrealized appreciation (depreciation) on:

 

Investments

      (735,309 )      (79,134,938 )      (341,707,765 ) 

Forward foreign currency contracts (Note 2d)

      —       —       152,401  

Foreign currency translations (Note 2c)

      —       —       (63,566 ) 
  

 

 

    

 

 

    

 

 

  

Net realized and unrealized loss on investments, forward foreign currency contracts and foreign currency transactions

      (758,264 )      (46,794,039 )      (291,543,497 ) 
  

 

 

    

 

 

    

 

 

  

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ (111,675 )    $ (45,724,365 )    $ (275,283,727 ) 
  

 

 

    

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

59  |

Table of Contents

Statements of Operations (continued)

 

For the Year Ended December 31, 2018

 

     Vaughan Nelson
Small Cap
Value Fund		     Vaughan Nelson
Value
Opportunity
Fund		  

INVESTMENT INCOME

     

Dividends

    $ 3,075,322     $ 15,045,680  

Interest

      49,468       158,636  

Less net foreign taxes withheld

      —       (10,592 ) 
  

 

 

    

 

 

  
     3,124,790       15,193,724  
  

 

 

    

 

 

  

Expenses

     

Management fees (Note 6)

      2,059,281       7,376,974  

Service and distribution fees (Note 6)

      308,450       528,653  

Administrative fees (Note 6)

      100,598       403,699  

Trustees’ fees and expenses (Note 6)

      21,360       37,920  

Transfer agent fees and expenses (Notes 6 and 7)

      193,434       849,101  

Audit and tax services fees

      41,440       42,393  

Custodian fees and expenses

      23,803       32,832  

Legal fees

      5,287       20,144  

Registration fees

      74,302       90,867  

Shareholder reporting expenses

      23,888       79,403  

Miscellaneous expenses (Note 8)

      25,682       56,397  
  

 

 

    

 

 

  

Total expenses

      2,877,525       9,518,383  

Less waiver and/or expense reimbursement (Note 6)

      (574 )      (1,913 ) 
  

 

 

    

 

 

  

Net expenses

      2,876,951       9,516,470  
  

 

 

    

 

 

  

Net investment income

      247,839       5,677,254  
  

 

 

    

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

     

Net realized gain on:

     

Investments

      23,578,542       30,646,121  

Net change in unrealized appreciation (depreciation) on:

 

Investments

      (48,703,398 )      (163,168,095 ) 
  

 

 

    

 

 

  

Net realized and unrealized loss on investments

      (25,124,856 )      (132,521,974 ) 
  

 

 

    

 

 

  

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ (24,877,017 )    $ (126,844,720 ) 
  

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

|  60

Table of Contents

Statements of Changes in Net Assets

 

     McDonnell Intermediate
Municipal Bond Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017		  

FROM OPERATIONS:

 

Net investment income

    $ 646,589     $ 914,887  

Net realized gain (loss) on investments

      (22,955 )      97,698  

Net change in unrealized appreciation (depreciation) on investments

      (735,309 )      1,414,558  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (111,675 )      2,427,143  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (153,865 )      (99,522 )(a) 

Class C

      (30,521 )      (32,160 )(a) 

Class Y

      (484,050 )      (783,205 )(a) 
  

 

 

    

 

 

  

Total distributions

      (668,436 )      (914,887 ) 
  

 

 

    

 

 

  

NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      (14,374,067 )      (22,821,654 ) 
  

 

 

    

 

 

  

Net decrease in net assets

      (15,154,178 )      (21,309,398 ) 

NET ASSETS

 

Beginning of the year

      37,358,682       58,668,080  
  

 

 

    

 

 

  

End of the year

    $ 22,204,504     $ 37,358,682  
  

 

 

    

 

 

  

 

(a)

See Note 2e of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

61  |

Table of Contents

Statements of Changes in Net Assets (continued)

 

     Natixis Oakmark Fund  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 1,069,674     $ 989,926  

Net realized gain on investments

      32,340,899       13,670,587  

Net change in unrealized appreciation (depreciation) on investments

      (79,134,938 )      38,589,712  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (45,724,365 )      53,250,225  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (16,729,106 )      (8,304,419 )(b) 

Class C

      (5,776,265 )      (2,718,648 )(b) 

Class N

      (783 )      (34 )(b) 

Class Y

      (5,137,882 )      (1,901,451 )(b) 
  

 

 

    

 

 

  

Total distributions

      (27,644,036 )      (12,924,552 ) 
  

 

 

    

 

 

  

NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      29,541,538       20,495,702  
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      (43,826,863 )      60,821,375  

NET ASSETS

 

Beginning of the year

      316,019,650       255,198,275  
  

 

 

    

 

 

  

End of the year

    $ 272,192,787     $ 316,019,650  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

See Note 2e of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  62

Table of Contents

Statements of Changes in Net Assets (continued)

 

     Natixis Oakmark
International Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 16,259,770     $ 9,142,411  

Net realized gain on investments, forward foreign currency contracts and foreign currency transactions

      50,075,433       73,087,121  

Net change in unrealized appreciation (depreciation) on investments, forward foreign currency contracts and foreign currency translations

      (341,618,930 )      154,881,359  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (275,283,727 )      237,110,891  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (12,193,845 )      (6,211,826 )(b) 

Class C

      (7,685,820 )      (1,761,751 )(b) 

Class N

      (36,370 )      (15 )(b) 

Class Y

      (10,861,877 )      (2,269,896 )(b) 
  

 

 

    

 

 

  

Total distributions

      (30,777,912 )      (10,243,488 ) 
  

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      (147,874,002 )      124,756,585  
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      (453,935,641 )      351,623,988  

NET ASSETS

 

Beginning of the year

      1,139,985,473       788,361,485  
  

 

 

    

 

 

  

End of the year

    $ 686,049,832     $ 1,139,985,473  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N and Class Y shares.

(b)

See Note 2e of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

63  |

Table of Contents

Statements of Changes in Net Assets (continued)

 

     Vaughan Nelson
Small Cap Value Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 247,839     $ 264,100  

Net realized gain on investments

      23,578,542       29,836,014  

Net change in unrealized appreciation (depreciation) on investments

      (48,703,398 )      (11,434,967 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (24,877,017 )      18,665,147  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (15,434,632 )      (11,106,746 )(b) 

Class C

      (1,814,602 )      (2,933,429 )(b) 

Class N

      (200 )      (82 )(b) 

Class Y

      (16,863,125 )      (20,862,083 )(b) 
  

 

 

    

 

 

  

Total distributions

      (34,112,559 )      (34,902,340 ) 
  

 

 

    

 

 

  

NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      (99,064,102 )      (7,286,538 ) 
  

 

 

    

 

 

  

Net decrease in net assets

      (158,053,678 )      (23,523,731 ) 

NET ASSETS

 

Beginning of the year

      286,448,062       309,971,793  
  

 

 

    

 

 

  

End of the year

    $ 128,394,384     $ 286,448,062  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

See Note 2e of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  64

Table of Contents

Statements of Changes in Net Assets (continued)

 

     Vaughan Nelson
Value Opportunity Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 5,677,254     $ 10,626,323  

Net realized gain on investments

      30,646,121       64,998,167  

Net change in unrealized appreciation (depreciation) on investments

      (163,168,095 )      55,298,171  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (126,844,720 )      130,922,661  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

     

Class A

      (4,208,463 )      (1,624,259 )(b) 

Class C

      (2,370,741 )      (814,625 )(b) 

Class N

      (6,683,144 )      (3,662,639 )(b) 

Class Y

      (47,408,833 )      (20,633,085 )(b) 
  

 

 

    

 

 

  

Total distributions

      (60,671,181 )      (26,734,608 ) 
  

 

 

    

 

 

  

NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      (244,014,953 )      (289,302,758 ) 
  

 

 

    

 

 

  

Net decrease in net assets

      (431,530,854 )      (185,114,705 ) 

NET ASSETS

 

Beginning of the year

      1,023,253,790       1,208,368,495  
  

 

 

    

 

 

  

End of the year

    $ 591,722,936     $ 1,023,253,790  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

See Note 2e of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

65  |

Table of Contents

Financial Highlights

 

For a share outstanding throughout each period.

 

    McDonnell Intermediate Municipal Bond Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.17     $ 9.89     $ 10.09     $ 10.00     $ 9.54  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.22       0.19       0.12       0.13       0.11  

Net realized and unrealized gain (loss)

     (0.19 )      0.28       (0.20 )      0.10       0.47  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     0.03       0.47       (0.08 )      0.23       0.58  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.23 )      (0.19 )      (0.12 )      (0.14 )      (0.12 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.97     $ 10.17     $ 9.89     $ 10.09     $ 10.00  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)(c)

     0.33 %      4.77 %      (0.79 )%      2.28 %      6.08 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 6,019     $ 6,004     $ 5,474     $ 6,427     $ 2,399  

Net expenses(d)

     0.70 %      0.70 %      0.70 %      0.74 %(e)      0.80 % 

Gross expenses

     1.30 %      1.10 %      0.88 %      1.12 %      1.26 % 

Net investment income

     2.24 %      1.87 %      1.19 %      1.27 %      1.15 % 

Portfolio turnover rate

     65 %      34 %      48 %      20 %      10 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

A sales charge for Class A shares is not reflected in total return calculations.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2015, the expense limit decreased from 0.80% to 0.70%.

 

See accompanying notes to financial statements.

 

|  66

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    McDonnell Intermediate Municipal Bond Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.18     $ 9.90     $ 10.09     $ 9.99     $ 9.54  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.15       0.11       0.04       0.05       0.04  

Net realized and unrealized gain (loss)

     (0.19 )      0.28       (0.18 )      0.11       0.45  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.04 )      0.39       (0.14 )      0.16       0.49  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.16 )      (0.11 )      (0.05 )      (0.06 )      (0.04 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.98     $ 10.18     $ 9.90     $ 10.09     $ 9.99  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)(c)

     (0.42 )%      3.98 %      (1.44 )%      1.63 %      5.18 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 1,675     $ 2,395     $ 4,015     $ 6,355     $ 2,223  

Net expenses(d)

     1.45 %      1.45 %      1.45 %      1.49 %(e)      1.55 % 

Gross expenses

     2.05 %      1.83 %      1.63 %      1.88 %      2.04 % 

Net investment income

     1.49 %      1.10 %      0.44 %      0.52 %      0.41 % 

Portfolio turnover rate

     65 %      34 %      48 %      20 %      10 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2015, the expense limit decreased from 1.55% to 1.45%.

 

See accompanying notes to financial statements.

 

67  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    McDonnell Intermediate Municipal Bond Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 10.19     $ 9.90     $ 10.10     $ 10.00     $ 9.54  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.25       0.21       0.15       0.15       0.14  

Net realized and unrealized gain (loss)

     (0.20 )      0.29       (0.20 )      0.11       0.46  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     0.05       0.50       (0.05 )      0.26       0.60  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.25 )      (0.21 )      (0.15 )      (0.16 )      (0.14 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.99     $ 10.19     $ 9.90     $ 10.10     $ 10.00  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     0.58 %      5.13 %      (0.55 )%      2.63 %      6.36 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 14,510     $ 28,960     $ 49,179     $ 66,713     $ 28,314  

Net expenses(c)

     0.45 %      0.45 %      0.45 %      0.49 %(d)      0.55 % 

Gross expenses

     1.04 %      0.83 %      0.63 %      0.85 %      1.02 % 

Net investment income

     2.47 %      2.09 %      1.44 %      1.48 %      1.46 % 

Portfolio turnover rate

     65 %      34 %      48 %      20 %      10 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(d)

Effective July 1, 2015, the expense limit decreased from 0.55% to 0.45%.

 

See accompanying notes to financial statements.

 

|  68

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 24.72     $ 21.37     $ 18.79     $ 20.43     $ 21.40  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.10       0.11       0.16       0.14       0.10  

Net realized and unrealized gain (loss)

     (3.28 )      4.28       3.20       (1.02 )      2.11  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.18 )      4.39       3.36       (0.88 )      2.21  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.08 )      (0.10 )      (0.16 )      (0.13 )      (0.07 ) 

Net realized capital gains

     (2.02 )      (0.94 )      (0.62 )      (0.63 )      (3.11 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (2.10 )      (1.04 )      (0.78 )      (0.76 )      (3.18 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 19.44     $ 24.72     $ 21.37     $ 18.79     $ 20.43  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (13.01 )%      20.75 %      18.37 %      (4.41 )%      10.43 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 164,748     $ 203,792     $ 173,036     $ 173,925     $ 195,061  

Net expenses

     1.13 %      1.18 %      1.18 %      1.14 %      1.22 % 

Gross expenses

     1.13 %      1.18 %      1.18 %      1.14 %      1.22 % 

Net investment income

     0.41 %      0.48 %      0.82 %      0.68 %      0.44 % 

Portfolio turnover rate

     39 %      16 %      16 %      23 %      64 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

69  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 21.58     $ 18.83     $ 16.65     $ 18.19     $ 19.48  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     (0.07 )      (0.05 )      0.01       (0.01 )      (0.06 ) 

Net realized and unrealized gain (loss)

     (2.83 )      3.74       2.80       (0.90 )      1.90  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (2.90 )      3.69       2.81       (0.91 )      1.84  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       (0.00 )(b)      (0.01 )      (0.00 )(b)      (0.02 ) 

Net realized capital gains

     (2.02 )      (0.94 )      (0.62 )      (0.63 )      (3.11 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (2.02 )      (0.94 )      (0.63 )      (0.63 )      (3.13 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 16.66     $ 21.58     $ 18.83     $ 16.65     $ 18.19  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)

     (13.63 )%      19.85 %      17.45 %      (5.07 )%      9.55 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 53,606     $ 62,272     $ 55,910     $ 70,616     $ 62,941  

Net expenses

     1.88 %      1.93 %      1.93 %      1.89 %      1.97 % 

Gross expenses

     1.88 %      1.93 %      1.93 %      1.89 %      1.97 % 

Net investment income (loss)

     (0.33 )%      (0.27 )%      0.09 %      (0.07 )%      (0.30 )% 

Portfolio turnover rate

     39 %      16 %      16 %      23 %      64 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

|  70

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark
Fund—Class N		  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

   $ 25.91     $ 23.13  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

 

Net investment income(a)

     0.22       0.14  

Net realized and unrealized gain (loss)

     (3.45 )      3.44  
 

 

 

    

 

 

  

Total from Investment Operations

     (3.23 )      3.58  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

 

Net investment income

     (0.17 )      (0.17 ) 

Net realized capital gains

     (2.02 )      (0.63 ) 
 

 

 

    

 

 

  

Total Distributions

     (2.19 )      (0.80 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 20.49     $ 25.91  
 

 

 

    

 

 

  

Total return(b)

     (12.60 )%      15.46 %(c) 

RATIOS TO AVERAGE NET ASSETS:

 

Net assets, end of the period (000’s)

   $ 10     $ 1  

Net expenses(d)

     0.75 %      0.75 %(e) 

Gross expenses

     3.79 %      13.79 %(e) 

Net investment income

     0.88 %      0.84 %(e) 

Portfolio turnover rate

     39 %      16 %(f) 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

71  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 25.90     $ 22.34     $ 19.60     $ 21.28     $ 22.16  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.17       0.17       0.21       0.19       0.15  

Net realized and unrealized gain (loss)

     (3.44 )      4.48       3.36       (1.06 )      2.20  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.27 )      4.65       3.57       (0.87 )      2.35  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.15 )      (0.15 )      (0.21 )      (0.18 )      (0.12 ) 

Net realized capital gains

     (2.02 )      (0.94 )      (0.62 )      (0.63 )      (3.11 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (2.17 )      (1.09 )      (0.83 )      (0.81 )      (3.23 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 20.46     $ 25.90     $ 22.34     $ 19.60     $ 21.28  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (12.76 )%      21.05 %      18.69 %      (4.18 )%      10.70 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 53,829     $ 49,955     $ 26,252     $ 21,696     $ 26,694  

Net expenses

     0.88 %      0.93 %      0.92 %      0.89 %      0.97 % 

Gross expenses

     0.88 %      0.93 %      0.92 %      0.89 %      0.97 % 

Net investment income

     0.68 %      0.71 %      1.05 %      0.92 %      0.67 % 

Portfolio turnover rate

     39 %      16 %      16 %      23 %      64 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

 

See accompanying notes to financial statements.

 

|  72

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark International Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 15.58     $ 12.15     $ 11.47     $ 12.44     $ 13.74  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.25       0.18       0.17       0.15       0.18  

Net realized and unrealized gain (loss)

     (4.02 )      3.41       0.76       (0.80 )      (1.01 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.77 )      3.59       0.93       (0.65 )      (0.83 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.29 )      (0.16 )      (0.21 )      (0.20 )      (0.25 ) 

Net realized capital gains

     (0.23 )      —       (0.04 )      (0.12 )      (0.22 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.52 )      (0.16 )      (0.25 )      (0.32 )      (0.47 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.29     $ 15.58     $ 12.15     $ 11.47     $ 12.44  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (24.15 )%      29.56 %      8.19 %      (5.35 )%      (6.05 )% 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 257,551     $ 603,988     $ 533,112     $ 722,805     $ 617,383  

Net expenses

     1.31 %      1.32 %      1.34 %      1.31 %      1.31 % 

Gross expenses

     1.31 %      1.32 %      1.34 %      1.31 %      1.31 % 

Net investment income

     1.72 %      1.28 %      1.54 %      1.17 %      1.34 % 

Portfolio turnover rate

     50 %      40 %      41 %      51 %      31 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

73  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark International Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 15.30     $ 11.96     $ 11.29     $ 12.25     $ 13.53  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.13       0.06       0.08       0.05       0.08  

Net realized and unrealized gain (loss)

     (3.92 )      3.35       0.74       (0.78 )      (0.98 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.79 )      3.41       0.82       (0.73 )      (0.90 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.17 )      (0.07 )      (0.11 )      (0.11 )      (0.16 ) 

Net realized capital gains

     (0.23 )      —       (0.04 )      (0.12 )      (0.22 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.40 )      (0.07 )      (0.15 )      (0.23 )      (0.38 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.11     $ 15.30     $ 11.96     $ 11.29     $ 12.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (24.74 )%      28.55 %      7.36 %      (6.08 )%      (6.67 )% 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 212,618     $ 363,018     $ 255,249     $ 341,959     $ 327,319  

Net expenses

     2.07 %      2.07 %      2.09 %      2.06 %      2.05 % 

Gross expenses

     2.07 %      2.07 %      2.09 %      2.06 %      2.05 % 

Net investment income

     0.94 %      0.42 %      0.73 %      0.39 %      0.61 % 

Portfolio turnover rate

     50 %      40 %      41 %      51 %      31 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

|  74

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark
International Fund—Class N		  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

   $ 15.58     $ 13.98  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

    

Net investment income(a)

     0.28       0.15  

Net realized and unrealized gain (loss)

     (4.02 )      1.66  
 

 

 

    

 

 

  

Total from Investment Operations

     (3.74 )      1.81  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

    

Net investment income

     (0.36 )      (0.21 ) 

Net realized capital gains

     (0.23 )      —  
 

 

 

    

 

 

  

Total Distributions

     (0.59 )      (0.21 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.25     $ 15.58  
 

 

 

    

 

 

  

Total return(b)

     (23.94 )%      12.96 %(c) 

RATIOS TO AVERAGE NET ASSETS:

    

Net assets, end of the period (000’s)

   $ 758     $ 1  

Net expenses(d)

     0.99 %      0.92 %(e) 

Gross expenses

     1.02 %      25.21 %(e) 

Net investment income

     2.04 %      1.54 %(e) 

Portfolio turnover rate

     50 %      40 %(f) 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

75  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis Oakmark
International Fund—Class Y		  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

   $ 15.56     $ 13.98  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

    

Net investment income(a)

     0.26       0.00 (b) 

Net realized and unrealized gain (loss)

     (3.99 )      1.79  
 

 

 

    

 

 

  

Total from Investment Operations

     (3.73 )      1.79  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

    

Net investment income

     (0.35 )      (0.21 ) 

Net realized capital gains

     (0.23 )      —  
 

 

 

    

 

 

  

Total Distributions

     (0.58 )      (0.21 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.25     $ 15.56  
 

 

 

    

 

 

  

Total return

     (23.93 )%      12.79 %(c) 

RATIOS TO AVERAGE NET ASSETS:

    

Net assets, end of the period (000’s)

   $ 215,123     $ 172,978  

Net expenses

     1.07 %      1.07 %(d) 

Gross expenses

     1.07 %      1.07 %(d) 

Net investment income

     1.85 %      0.03 %(d) 

Portfolio turnover rate

     50 %      40 %(e) 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

Periods less than one year are not annualized.

(d)

Computed on an annualized basis for periods less than one year.

(e)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

|  76

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Small Cap Value Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 18.71     $ 19.79     $ 17.74     $ 20.65     $ 22.34  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.01       (0.01 )      0.02       0.06 (b)      (0.06 ) 

Net realized and unrealized gain (loss)

     (2.76 )      1.21       3.49       (0.07 )      1.95  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (2.75 )      1.20       3.51       (0.01 )      1.89  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.00 )(c)      (0.00 )(c)      (0.01 )      (0.04 )      —  

Net realized capital gains

     (3.48 )      (2.28 )      (1.45 )      (2.86 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.48 )      (2.28 )      (1.46 )      (2.90 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 12.48     $ 18.71     $ 19.79     $ 17.74     $ 20.65  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(d)

     (14.84 )%      6.28 %      20.24 %      (0.29 )%(b)      8.79 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 66,376     $ 93,751     $ 106,447     $ 103,092     $ 125,201  

Net expenses

     1.38 %      1.36 %      1.35 %      1.35 %      1.37 % 

Gross expenses

     1.38 %      1.36 %      1.35 %      1.35 %      1.37 % 

Net investment income (loss)

     0.03 %      (0.03 )%      0.11 %      0.26 %(b)      (0.27 )% 

Portfolio turnover rate

     70 %      92 %      74 %      62 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.04), total return would have been (0.77)% and the ratio of net investment loss to average net assets would have been (0.20)%.

(c)

Amount rounds to less than $0.01 per share.

(d)

A sales charge for Class A shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

77  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Small Cap Value Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 11.67     $ 13.26     $ 12.39     $ 15.36     $ 17.61  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment loss(a)

     (0.09 )      (0.10 )      (0.08 )      (0.08 )(b)      (0.18 ) 

Net realized and unrealized gain (loss)

     (1.69 )      0.79       2.40       (0.03 )      1.51  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.78 )      0.69       2.32       (0.11 )      1.33  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.00 )(c)      (0.00 )(c)      —       —       —  

Net realized capital gains

     (3.48 )      (2.28 )      (1.45 )      (2.86 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.48 )      (2.28 )      (1.45 )      (2.86 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 6.41     $ 11.67     $ 13.26     $ 12.39     $ 15.36  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(d)

     (15.51 )%      5.50 %      19.32 %      (1.02 )%(b)      7.94 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 3,480     $ 15,756     $ 20,379     $ 21,188     $ 27,292  

Net expenses

     2.12 %      2.11 %      2.10 %      2.10 %      2.12 % 

Gross expenses

     2.12 %      2.11 %      2.10 %      2.10 %      2.12 % 

Net investment loss

     (0.83 )%      (0.79 )%      (0.64 )%      (0.48 )%(b)      (1.02 )% 

Portfolio turnover rate

     70 %      92 %      74 %      62 %      58 % 

 

(a)

Per share net investment loss has been calculated using the average shares outstanding during the period.

(b)

Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.15), total return would have been (1.48)% and the ratio of net investment loss to average net assets would have been (0.96)%.

(c)

Amount rounds to less than $0.01 per share.

(d)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

|  78

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Small Cap
Value Fund—Class N		  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

   $ 19.37     $ 19.55  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

    

Net investment income(a)

     0.08       0.07  

Net realized and unrealized gain (loss)

     (2.86 )      1.35  
 

 

 

    

 

 

  

Total from Investment Operations

     (2.78 )      1.42  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

    

Net investment income

     (0.03 )      (0.02 ) 

Net realized capital gains

     (3.48 )      (1.58 ) 
 

 

 

    

 

 

  

Total Distributions

     (3.51 )      (1.60 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 13.08     $ 19.37  
 

 

 

    

 

 

  

Total return(b)

     (14.48 )%      7.17 %(c) 

RATIOS TO AVERAGE NET ASSETS:

    

Net assets, end of the period (000’s)

   $ 1     $ 1  

Net expenses(d)

     0.96 %      0.96 %(e) 

Gross expenses

     15.17 %      14.68 %(e) 

Net investment income

     0.43 %      0.56 %(e) 

Portfolio turnover rate

     70 %      92 %(f) 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

79  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Small Cap Value Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 19.37     $ 20.36     $ 18.21     $ 21.13     $ 22.73  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.04       0.05       0.07       0.11 (b)      (0.00 )(c) 

Net realized and unrealized gain (loss)

     (2.84 )      1.25       3.59       (0.07 )      1.98  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (2.80 )      1.30       3.66       0.04       1.98  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.01 )      (0.01 )      (0.06 )      (0.10 )      —  

Net realized capital gains

     (3.48 )      (2.28 )      (1.45 )      (2.86 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.49 )      (2.29 )      (1.51 )      (2.96 )      (3.58 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 13.08     $ 19.37     $ 20.36     $ 18.21     $ 21.13  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (14.61 )%      6.60 %      20.53 %      (0.05 )%(b)      9.04 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 58,538     $ 176,940     $ 183,145     $ 179,322     $ 176,905  

Net expenses

     1.12 %      1.11 %      1.10 %      1.10 %      1.12 % 

Gross expenses

     1.12 %      1.11 %      1.10 %      1.10 %      1.12 % 

Net investment income (loss)

     0.22 %      0.23 %      0.36 %      0.50 %(b)      (0.01 )% 

Portfolio turnover rate

     70 %      92 %      74 %      62 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.02, total return would have been (0.53)% and the ratio of net investment income to average net assets would have been 0.07%.

(c)

Amount rounds to less than $0.01 per share.

 

See accompanying notes to financial statements.

 

|  80

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Value Opportunity Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 22.65     $ 20.55     $ 20.04     $ 21.29     $ 20.63  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.09       0.17 (b)      0.07       0.03 (c)      (0.08 ) 

Net realized and unrealized gain (loss)

     (3.71 )      2.48       1.05       (0.79 )      2.31  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.62 )      2.65       1.12       (0.76 )      2.23  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.15 )      (0.18 )      (0.05 )      (0.02 )      —  

Net realized capital gains

     (1.51 )      (0.37 )      (0.56 )      (0.47 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (1.66 )      (0.55 )      (0.61 )      (0.49 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 17.37     $ 22.65     $ 20.55     $ 20.04     $ 21.29  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(d)

     (16.10 )%      12.93 %(b)      5.85 %      (3.66 )%(c)      10.92 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 43,769     $ 67,186     $ 87,536     $ 142,833     $ 73,237  

Net expenses

     1.24 %      1.22 %      1.23 %      1.23 %      1.25 % 

Gross expenses

     1.24 %      1.22 %      1.23 %      1.23 %      1.25 % 

Net investment income (loss)

     0.42 %      0.77 %(b)      0.35 %      0.16 %(c)      (0.37 )% 

Portfolio turnover rate

     44 %      42 %      57 %      32 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.09, total return would have been 12.53% and the ratio of net investment income to average net assets would have been 0.41%.

(c)

Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.01), total return would have been (3.94)% and the ratio of net investment loss to average net assets would have been (0.04)%.

(d)

A sales charge for Class A shares is not reflected in total return calculations.

 

See accompanying notes to financial statements.

 

81  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Value Opportunity Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 21.50     $ 19.51     $ 19.16     $ 20.51     $ 20.07  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     (0.08 )      0.00 (b)(c)      (0.07 )      (0.13 )(d)      (0.23 ) 

Net realized and unrealized gain (loss)

     (3.48 )      2.36       0.98       (0.75 )      2.24  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.56 )      2.36       0.91       (0.88 )      2.01  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       —       (0.00 )(b)      —       —  

Net realized capital gains

     (1.51 )      (0.37 )      (0.56 )      (0.47 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (1.51 )      (0.37 )      (0.56 )      (0.47 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 16.43     $ 21.50     $ 19.51     $ 19.16     $ 20.51  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(e)

     (16.71 )%      12.11 %(c)      5.03 %      (4.39 )%(d)      10.12 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 23,967     $ 47,559     $ 68,923     $ 89,284     $ 35,894  

Net expenses

     1.98 %      1.97 %      1.98 %      1.98 %      2.00 % 

Gross expenses

     1.98 %      1.97 %      1.98 %      1.98 %      2.00 % 

Net investment income (loss)

     (0.36 )%      0.00 %(c)(f)      (0.38 )%      (0.61 )%(d)      (1.10 )% 

Portfolio turnover rate

     44 %      42 %      57 %      32 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.07), total return would have been 11.70% and the ratio of net investment loss to average net assets would have been (0.35)%.

(d)

Includes a non-recurring dividend. Without this dividend, net investment loss per share would have been $(0.16), total return would have been (4.68)% and the ratio of net investment loss to average net assets would have been (0.77)%.

(e)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(f)

Amount rounds to less than 0.01%.

 

See accompanying notes to financial statements.

 

|  82

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Value Opportunity Fund—Class N  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 22.87     $ 20.75     $ 20.26     $ 21.50     $ 20.76  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.17       0.25 (b)      0.16       0.11 (c)      (0.00 )(d) 

Net realized and unrealized gain (loss)

     (3.75 )      2.51       1.04       (0.81 )      2.31  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.58 )      2.76       1.20       (0.70 )      2.31  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.24 )      (0.27 )      (0.15 )      (0.07 )      —  

Net realized capital gains

     (1.51 )      (0.37 )      (0.56 )      (0.47 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (1.75 )      (0.64 )      (0.71 )      (0.54 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 17.54     $ 22.87     $ 20.75     $ 20.26     $ 21.50  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (15.78 )%      13.31 %(b)      6.21 %      (3.35 )%(c)      11.24 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 70,902     $ 134,205     $ 148,365     $ 65,010     $ 12,024  

Net expenses

     0.88 %      0.88 %      0.88 %      0.89 %      0.91 %(e) 

Gross expenses

     0.88 %      0.88 %      0.88 %      0.89 %      0.91 %(e) 

Net investment income (loss)

     0.76 %      1.16 %(b)      0.78 %      0.50 %(c)      (0.00 )%(f) 

Portfolio turnover rate

     44 %      42 %      57 %      32 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.17, total return would have been 12.92% and the ratio of net investment income to average net assets would have been 0.76%.

(c)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.08, total return would have been (3.59)% and the ratio of net investment income to average net assets would have been 0.35%.

(d)

Amount rounds to less than $0.01 per share.

(e)

Includes fee/expense recovery of less than 0.01%.

(f)

Amount rounds to less than 0.01%.

 

See accompanying notes to financial statements.

 

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Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Vaughan Nelson Value Opportunity Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 22.89     $ 20.77     $ 20.27     $ 21.52     $ 20.78  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income (loss)(a)

     0.15       0.23 (b)      0.12       0.09 (c)      (0.02 ) 

Net realized and unrealized gain (loss)

     (3.75 )      2.51       1.07       (0.82 )      2.33  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (3.60 )      2.74       1.19       (0.73 )      2.31  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.21 )      (0.25 )      (0.13 )      (0.05 )      —  

Net realized capital gains

     (1.51 )      (0.37 )      (0.56 )      (0.47 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (1.72 )      (0.62 )      (0.69 )      (0.52 )      (1.57 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 17.57     $ 22.89     $ 20.77     $ 20.27     $ 21.52  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (15.85 )%      13.19 %(b)      6.14 %      (3.47 )%(c)      11.23 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 453,085     $ 774,304     $ 903,545     $ 1,133,634     $ 656,071  

Net expenses

     0.99 %      0.97 %      0.98 %      0.98 %      1.00 % 

Gross expenses

     0.99 %      0.97 %      0.98 %      0.98 %      1.00 % 

Net investment income (loss)

     0.66 %      1.04 %(b)      0.62 %      0.39 %(c)      (0.10 )% 

Portfolio turnover rate

     44 %      42 %      57 %      32 %      58 % 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.15, total return would have been 12.80% and the ratio of net investment income to average net assets would have been 0.67%.

(c)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.05, total return would have been (3.70)% and the ratio of net investment income to average net assets would have been 0.20%.

 

See accompanying notes to financial statements.

 

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Notes to Financial Statements

 

December 31, 2018

 

1.  Organization.  Natixis Funds Trust I and Natixis Funds Trust II (the “Trusts” and each a “Trust”) are each organized as a Massachusetts business trust. Each Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Each Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series. The financial statements for certain funds of the Trusts are presented in separate reports. The following funds (individually, a “Fund” and collectively, the “Funds”) are included in this report:

Natixis Funds Trust I:

Natixis Oakmark International Fund

Vaughan Nelson Small Cap Value Fund (the “Small Cap Value Fund”)

Natixis Funds Trust II:

McDonnell Intermediate Municipal Bond Fund (the “Intermediate Municipal Bond Fund”)

Natixis Oakmark Fund

Vaughan Nelson Value Opportunity Fund (the “Value Opportunity Fund”)

Each Fund is a diversified investment company.

Each Fund offers Class A shares, Class C shares and Class Y shares. Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund and Value Opportunity Fund also offer Class N shares.

Effective July 31, 2009, the Small Cap Value Fund was closed to new investors. The Fund, in its sole discretion, may permit an investor in another Vaughan Nelson-managed fund or product that follows the same investment strategy as the Fund to transfer assets from that fund or product into the Fund.

Class A shares are sold with a maximum front-end sales charge of 3.00% for Intermediate Municipal Bond Fund and 5.75% for Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund and Value Opportunity Fund. Class C shares do not pay a front-end sales charge, pay higher Rule 12b-1 fees than Class A shares for ten years (at which point they automatically convert to Class A shares) and may be subject to a contingent deferred sales charge (“CDSC”) of 1.00% if those shares are redeemed within one year of acquisition, except for reinvested distributions. Class N and Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. Class N shares are offered with an initial minimum investment of $1,000,000. Class Y shares are offered with an initial minimum investment of $100,000. Certain categories of investors are exempted from the minimum investment amounts for Class N and Class Y as outlined in the relevant Fund’s prospectus.

Most expenses can be directly attributed to a Fund. Expenses which cannot be directly attributed to a Fund are generally apportioned based on the relative net assets of each of the funds in Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”) and Natixis ETF Trust. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to the class (such as the Rule 12b-1 fees applicable to Class A and Class C) and transfer agent fees for each Fund are borne collectively for Class A, Class C and Class Y and individually for Class N. In addition, each class votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund if the Fund were liquidated. The Trustees approve separate distributions from net investment income on each class of shares.

2.  Significant Accounting Policies.  The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds’ financial statements follow the accounting and reporting guidelines provided for investment companies and are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Management has evaluated the events and transactions subsequent to year-end through the date the financial statements were issued and has determined that there were no material events that would require disclosure in the Funds’ financial statements.

a.  Valuation.  Fund securities and other investments are valued at market value based on market quotations obtained or determined by independent pricing services recommended by the adviser or subadviser and approved by the Board of Trustees. Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser or subadviser pursuant to procedures approved by the Board of Trustees, as described below. Market value is determined as follows:

Listed equity securities (including shares of closed-end investment companies and exchange-traded funds) 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) 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 last 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

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

price and a last sale price may be available from the foreign exchange or market. In those cases, the official close price is used. Debt securities and unlisted preferred equity securities are valued based on evaluated bids furnished to the Funds by an independent pricing service or bid prices obtained from broker-dealers. Broker-dealer bid prices may be used to value debt and unlisted equity securities where an independent pricing service is unable to price a security or where an independent pricing service does not provide a reliable price for the security. Forward foreign currency contracts are valued utilizing interpolated rates determined based on information provided 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 of Trustees. The Funds 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 New York Stock Exchange. 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 Funds 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 net asset value (“NAV”) is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Fund’s NAV may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.

As of December 31, 2018, securities held by Natixis Oakmark International Fund were fair valued as follows:

 

Equity
securities1

   

Percentage of
Net Assets

  
$625,404,554      91.2 % 

 

1

Certain foreign equity securities were fair valued pursuant to procedures approved by the Board of Trustees as events occurring after the close of the foreign market were believed to materially affect the value of those securities.

b.  Investment Transactions and Related Investment Income.  Investment transactions are accounted for on a trade date plus one day basis for daily NAV calculation. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income (including income reinvested) and foreign withholding tax, if applicable, is recorded on ex-dividend date, or in the case of certain foreign

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

securities, as soon as a Fund is notified, and interest income is recorded on an accrual basis. Dividends reinvested are reflected as non-cash dividends on the Statements of Operations. Interest income is increased by the accretion of discount and decreased by the amortization of premium, if applicable. Distributions received from investments in securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments or as a realized gain, respectively. The calendar year-end amounts of ordinary income, capital gains, and return of capital included in distributions received from the Funds’ investments in real estate investment trusts (“REITs”) are reported to the Funds after the end of the fiscal year; accordingly, the Funds estimate these amounts for accounting purposes until the characterization of REIT distributions is reported to the Funds after the end of the fiscal year. Estimates are based on the most recent REIT distribution information available. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. Investment income, non-class specific expenses and realized and unrealized gains and losses are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund.

c.  Foreign Currency Translation.  The books and records of the Funds are maintained in U.S. dollars. The values of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars on the respective dates of such transactions.

Net realized foreign exchange gains or losses arise from sales of foreign currency, changes in exchange rates between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investment securities, as of the end of the fiscal period, resulting from changes in exchange rates. Net realized foreign exchange gains or losses and the net change in unrealized foreign exchange gains or losses are disclosed in the Statements of Operations. For federal income tax purposes, net realized foreign exchange gains or losses are characterized as ordinary income, and may, if the Funds have net losses, reduce the amount of income available to be distributed by the Funds.

The values of investment securities are presented at the foreign exchange rates prevailing at the end of the period for financial reporting purposes. Net realized and unrealized gains or losses on investments reported in the Statements of Operations reflect gains or losses resulting from changes in exchange rates and fluctuations which arise due to changes in market prices of investment securities.

 

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December 31, 2018

 

The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.

d.  Forward Foreign Currency Contracts.  Certain Funds may enter into forward foreign currency contracts, including forward foreign cross currency contracts, to acquire exposure to foreign currencies or to hedge the Fund’s investments against currency fluctuation. A contract can also be used to offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Funds’ Statements of Assets and Liabilities. The U.S. dollar value of the currencies a Fund has committed to buy or sell represents the aggregate exposure to each currency a Fund has acquired or hedged through currency contracts outstanding at period end. Gains or losses are recorded for financial statement purposes as unrealized until settlement date. Contracts are traded over-the-counter directly with a counterparty. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Certain contracts may require the movement of cash and/or securities as collateral for the Fund’s or counterparty’s net obligations under the contracts.

e.  New Disclosure Requirements.  In accordance with new reporting requirements pursuant to Regulation S-X of the Securities and Exchange Commission, presentation of certain amounts on the Statements of Changes in Net Assets for the year ended December 31, 2017 have been conformed to the new disclosure requirements. Where the prior disclosure of Distributions to Shareholders separately stated distributions from net investment income and from net realized capital gains for each share class of the Fund, they are now combined into a single line item for each respective share class. In addition, disclosure of Undistributed Net Investment Income and Distributions in Excess of Net Investment Income, where applicable, has been removed from the Statements of Changes in Net Assets.

The following is a summary of the previously disclosed amounts, as reported at December 31, 2017:

 

Intermediate Municipal Bond Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (99,522 ) 

Class C

      (32,160 ) 

Class Y

      (783,205 ) 
  

 

 

  

Total distributions

    $ (914,887 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (23,503 ) 
  

 

 

  

 

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December 31, 2018

 

 

Natixis Oakmark Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (769,107 ) 

Class C

      (3,958 ) 

Class N

      (7 ) 

Class Y

      (287,219 ) 

Net realized capital gains

   

Class A

      (7,535,312 ) 

Class C

      (2,714,690 ) 

Class N

      (27 ) 

Class Y

      (1,614,232 ) 
  

 

 

  

Total distributions

    $ (12,924,552 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (512,990 ) 
  

 

 

  
Natixis Oakmark International Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (6,211,826 ) 

Class C

      (1,761,751 ) 

Class N

      (15 ) 

Class Y

      (2,269,896 ) 
  

 

 

  

Total distributions

    $ (10,243,488 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (719,613 ) 
  

 

 

  
Small Cap Value Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (8,822 ) 

Class C

      (1,998 ) 

Class N

      (1 ) 

Class Y

      (93,925 ) 

Net realized capital gains

   

Class A

      (11,097,924 ) 

Class C

      (2,931,431 ) 

Class N

      (81 ) 

Class Y

      (20,768,158 ) 
  

 

 

  

Total distributions

    $ (34,902,340 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (195,110 ) 
  

 

 

  

 

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Value Opportunity Fund  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Net investment income

   

Class A

    $ (533,727 ) 

Class N

      (1,534,603 ) 

Class Y

      (8,225,980 ) 

Net realized capital gains

   

Class A

      (1,090,532 ) 

Class C

      (814,625 ) 

Class N

      (2,128,036 ) 

Class Y

      (12,407,105 ) 
  

 

 

  

Total distributions

    $ (26,734,608 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (105,127 ) 
  

 

 

  

f.  Federal and Foreign Income Taxes.  The Trusts treat each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least annually. Management has performed an analysis of each Fund’s tax positions for the open tax years as of December 31, 2018 and has concluded that no provisions for income tax are required. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits significantly increasing or decreasing for the Funds. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and accounting regulations and interpretations thereof.

A Fund may be subject to foreign withholding taxes on investment income and taxes on capital gains on investments that are accrued and paid based upon the Fund’s understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign withholding taxes on dividend and interest income are reflected on the Statements of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statements of Assets and Liabilities are net of foreign withholding taxes. Foreign withholding taxes where reclaims have been or will be filed are reflected on the Statements of Assets and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statements of Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statements of Assets and Liabilities, if applicable, and reduce unrealized gains on investments. In the event that realized gains on investments are subsequently offset by realized losses, taxes paid on realized gains may be returned to a Fund. Such amounts, if applicable,

 

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December 31, 2018

 

are reflected as foreign tax rebates receivable on the Statements of Assets and Liabilities and are recorded as a realized gain when received.

g.  Dividends and Distributions to Shareholders.  Dividends and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as taxable over-distribution, capital gains taxes, deferred Trustees’ fees, distribution redesignations and foreign currency gains and losses. Permanent book and tax basis differences relating to shareholder distributions, net investment income and net realized gains will result in reclassifications to capital accounts reported on the Statements of Assets and Liabilities. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees’ fees, wash sales, forward foreign currency contract mark-to-market and return of capital distributions received. Amounts of income and capital gain available to be distributed on a tax basis are determined annually, and at other times during the Funds’ fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions from net investment income and net realized short-term capital gains are reported as distributed from ordinary income for tax purposes.

The tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the years ended December 31, 2018 and 2017 were as follows:

 

     2018 Distributions Paid From:  

Fund

   

Ordinary
Income

     

Tax Exempt
Income

     

Long-Term
Capital Gains

     

Total

  

Intermediate Municipal Bond Fund

    $ 5,716      $ 662,720      $ —      $ 668,436  

Natixis Oakmark Fund

      2,211,730        —        25,432,306        27,644,036  

Natixis Oakmark International Fund

      16,730,811        —        14,047,101        30,777,912  

Small Cap Value Fund

      6,205,741        —        27,906,818        34,112,559  

Value Opportunity Fund

      6,805,023        —        53,866,158        60,671,181  

 

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     2017 Distributions Paid From:  

Fund

   

Ordinary
Income

     

Tax Exempt
Income

     

Long-Term
Capital Gains

     

Total

  

Intermediate Municipal Bond Fund

    $ 5,473      $ 909,414      $ —      $ 914,887  

Natixis Oakmark Fund

      1,117,535        —        11,807,017        12,924,552  

Natixis Oakmark International Fund

      10,227,398        —        —        10,227,398  

Small Cap Value Fund

      3,400,416        —        31,501,924        34,902,340  

Value Opportunity Fund

      10,294,310        —        16,440,298        26,734,608  

For the year ended December 31, 2017, differences between these amounts and amounts disclosed in Note 2e of the Notes to Financial Statements are primarily attributable to different book and tax treatment for short-term capital gains.

Distributions paid to shareholders from net investment income and net realized capital gains, based on accounting principles generally accepted in the United States of America, are consolidated and reported on the Statements of Changes in Net Assets as Distributions to Shareholders. Distributions paid to shareholders from net investment income and net realized capital gains expressed in per-share amounts, based on accounting principles generally accepted in the United States of America, are separately stated and reported within the Financial Highlights.

As of December 31, 2018, the components of distributable earnings on a tax basis were as follows:

 

   

Intermediate
Municipal
Bond Fund

    

Natixis
Oakmark
Fund

    

Natixis
Oakmark
International
Fund

    

Small Cap
Value
Fund

    

Value
Opportunity
Fund

  

Undistributed ordinary income

   $ —     $ 10,745     $   —     $ 186,618     $ 35,751  

Undistributed tax exempt income

     1,207       —       —       —       —  

Undistributed long-term capital gains

     —       15,145,306       —       —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total undistributed earnings

     1,207       15,156,051       —       186,618       35,751  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

   

Intermediate
Municipal
Bond Fund

    

Natixis
Oakmark
Fund

    

Natixis
Oakmark
International
Fund

    

Small Cap
Value
Fund

    

Value
Opportunity
Fund

  

Capital loss carryforward:

          

Short-term:

 

No expiration date

   $ (684,217 )    $ —     $ —     $ —     $ —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Late-year ordinary and post-October capital loss deferrals*

     —       (3,155,958 )      (18,604,946 )      (1,651,386 )      (9,183,228 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation)

     489,008       (544,773 )      (198,758,380 )      (14,924,702 )      (41,291,623 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total accumulated earnings (losses)

   $ (194,002 )    $ 11,455,320     $ (217,363,326 )    $ (16,389,470 )    $ (50,439,100 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Capital loss carryforward utilized in the current year

   $ —     $ —     $ 47,544,781     $ —     $ —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

*

Under current tax law, capital losses, foreign currency losses, and losses on passive foreign investment companies and contingent payment debt instruments after October 31 or December 31, as applicable, may be deferred and treated as occurring on the first day of the following taxable year. Natixis Oakmark International Fund is deferring foreign currency losses. Natixis Oakmark Fund, Small Cap Value Fund and Value Opportunity Fund are deferring capital losses.

As of December 31, 2018, the cost of investments (including derivatives, if applicable) and unrealized appreciation (depreciation) on a federal tax basis were as follows:

 

   

Intermediate
Municipal
Bond Fund

    

Natixis
Oakmark
Fund

    

Natixis
Oakmark
International
Fund

    

Small Cap
Value Fund

    

Value
Opportunity
Fund

  

Federal tax cost

   $ 20,381,997     $ 269,944,341     $ 891,040,862     $ 143,823,843     $ 627,128,311  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Gross tax appreciation

   $ 536,980     $ 32,480,621     $ 5,936,030     $ 6,866,394     $ 51,873,624  

Gross tax depreciation

     (47,972 )      (33,025,394 )      (204,503,152 )      (21,791,096 )      (93,165,247 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net tax appreciation (depreciation)

   $ 489,008     $ (544,773 )    $ (198,567,122 )    $ (14,924,702 )    $ (41,291,623 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

Differences between these amounts and those reported in the components of distributable earnings are primarily attributable to foreign currency mark-to-market.

h.  Repurchase Agreements.  Each Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, under which each Fund acquires securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. It is each Fund’s policy that the market value of the collateral for repurchase agreements be at least equal to 102% of the repurchase price, including interest. Certain repurchase agreements are tri-party arrangements whereby the collateral is held in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty, including possible delays or restrictions upon a Fund’s ability to dispose of the underlying securities. As of December 31, 2018, each Fund, as applicable, had investments in repurchase agreements for which the value of the related collateral exceeded the value of the repurchase agreement. The gross value of repurchase agreements is included in the Statements of Assets and Liabilities for financial reporting purposes.

i.  Securities Lending.  Certain Funds have entered into an agreement with State Street Bank and Trust Company (“State Street Bank”), as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized with cash or securities in an amount equal to at least 105% or 102% of the market value (including accrued interest) of the loaned international or domestic securities, respectively, when the loan is initiated. Thereafter, the value of the collateral must remain at least 102% of the market value (including accrued interest) of loaned securities for U.S. equities and U.S. corporate debt; at least 105% of the market value (including accrued interest) of loaned securities for non-U.S. equities; and at least 100% of the market value (including accrued interest) of loaned securities for U.S. Government securities, sovereign debt issued by non-U.S. Governments and non-U.S. corporate debt. In the event that the market value of the collateral falls below the required percentages described above, the borrower will deliver additional collateral on the next business day. As with other extensions of credit, the Funds may bear the risk of loss with respect to the investment of the collateral. The Funds invest cash collateral in short-term investments, a portion of the income from which is remitted to the borrowers and the remainder allocated between the Funds and State Street Bank as lending agent.

For the year ended December 31, 2018, none of the Funds had loaned securities under this agreement.

j.  Indemnifications.  Under the Trusts’ organizational documents, their officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

k.  New Accounting Pronouncement.  In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

3.  Fair Value Measurements.  In accordance with accounting standards related to fair value measurements and disclosures, the Funds have categorized the inputs utilized in determining the value of each Fund’s assets or liabilities. These inputs are summarized in the three broad levels listed below:

 

  •  

Level 1 – quoted prices in active markets for identical assets or liabilities;

 

  •  

Level 2 – prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); and

 

  •  

Level 3 – prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2018, at value:

Intermediate Municipal Bond Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Bonds and Notes(a)

    $ —      $ 20,068,205      $   —      $ 20,068,205  

Exchange-Traded Funds

      802,800        —        —        802,800  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 802,800      $ 20,068,205      $   —      $ 20,871,005  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Natixis Oakmark Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 258,776,895      $ —      $   —      $ 258,776,895  

Short-Term Investments

      —        10,622,673        —        10,622,673  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 258,776,895      $ 10,622,673      $   —      $ 269,399,568  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Natixis Oakmark International Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks

            

Australia

    $ —      $ 18,632,697      $   —      $ 18,632,697  

France

      —        73,874,353        —        73,874,353  

Germany

      —        120,685,062        —        120,685,062  

India

      —        4,617,748        —        4,617,748  

Indonesia

      —        12,047,682        —        12,047,682  

Italy

      —        25,945,036        —        25,945,036  

Japan

      —        35,795,708        —        35,795,708  

Korea

      —        17,502,935        —        17,502,935  

Netherlands

      —        28,218,051        —        28,218,051  

South Africa

      —        19,573,160        —        19,573,160  

Sweden

      —        40,301,807        —        40,301,807  

Switzerland

      —        83,159,101        —        83,159,101  

Taiwan

      —        8,865,961        —        8,865,961  

United Kingdom

      16,155,680        136,185,253        —        152,340,933  

All Other Common Stocks(a)

      50,909,280        —        —        50,909,280  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Common Stocks

      67,064,960        625,404,554        —        692,469,514  
  

 

 

     

 

 

     

 

 

     

 

 

  

Forward Foreign Currency Contracts (unrealized appreciation)

      —        491,200        —        491,200  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 67,064,960      $ 625,895,754      $ —      $ 692,960,714  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Small Cap Value Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 125,569,816      $ —      $   —      $ 125,569,816  

Closed-End Investment Companies

      617,444        —        —        617,444  

Short-Term Investments

      —        2,711,881        —        2,711,881  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 126,187,260      $ 2,711,881      $ —      $ 128,899,141  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

Value Opportunity Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 562,191,578      $ —      $   —      $ 562,191,578  

Closed-End Investment Companies

      16,234,360        —        —        16,234,360  

Short-Term Investments

      —        7,410,750        —        7,410,750  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 578,425,938      $ 7,410,750      $ —      $ 585,836,688  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

4.  Derivatives.  Derivative instruments are defined as financial instruments whose value and performance are based on the value and performance of an underlying asset, reference rate or index. Derivative instruments that Natixis Oakmark International Fund used during the period include forward foreign currency contracts.

The Fund is subject to the risk that changes in foreign currency exchange rates will have an unfavorable effect on the value of Fund assets denominated in foreign currencies. The Fund may enter into forward foreign currency contracts for hedging purposes to protect the value of the Fund’s holdings of foreign securities. During the year ended December 31, 2018, the Fund engaged in forward foreign currency transactions for hedging purposes.

 

|  98

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a summary of derivative instruments for Natixis Oakmark International Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

  

Unrealized
appreciation on
forward foreign
currency contracts

  

Over-the-counter asset derivatives

  

Foreign exchange contracts

   $ 491,200  

Transactions in derivative instruments for Natixis Oakmark International Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Forward foreign
currency
contracts

Foreign exchange contracts    $948,366

Net Change in Unrealized
Appreciation (Depreciation) on:

   

Forward foreign
currency
contracts

Foreign exchange contracts    $152,401

As the Fund values its derivatives at fair value and recognizes changes in fair value through the Statements of Operations, it does not qualify for hedge accounting under authoritative guidance for derivative instruments. The Fund’s investments in derivatives may represent an economic hedge; however, they are considered to be non-hedge transactions for the purpose of these disclosures.

The volume of forward foreign currency contract activity, as a percentage of net assets, for Natixis Oakmark International Fund, based on gross month-end notional amounts outstanding during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2018:

 

Natixis Oakmark International Fund

   

Forwards

Average Notional Amount Outstanding    2.06%
Highest Notional Amount Outstanding    3.81%
Lowest Notional Amount Outstanding    1.36%
Notional Amount Outstanding as of December 31, 2018    3.81%

Notional amounts outstanding at the end of the prior period are included in the average notional amount outstanding.

 

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December 31, 2018

 

Unrealized gain and/or loss on open forwards is recorded in the Statements of Assets and Liabilities. The aggregate notional values of forward contracts are not recorded in the Statements of Assets and Liabilities, and therefore are not included in the Fund’s net assets.

The Fund enters into over-the-counter derivatives, including forward foreign currency contracts, pursuant to an International Swaps and Derivatives Association, Inc. (“ISDA”) agreement between the Fund and its counterparty. ISDA agreements typically contain master netting provisions in the event of a default or other termination event. Master netting provisions allow the Fund and the counterparty, in the event of a default or other termination event, to offset amounts owed by each related to derivative contracts to one net amount payable by either the Fund or the counterparty. For financial reporting purposes, the Fund does not offset derivative assets and liabilities on the Statements of Assets and Liabilities.

As of December 31, 2018, gross amounts of derivative assets and liabilities not offset in the Statement of Assets and Liabilities and the related net amounts after taking into account master netting arrangements, by counterparty, are as follows:

Natixis Oakmark International Fund

 

Counterparty

   

Gross Amounts of
Assets

     

Offset
Amount

     

Net
Amount

  

State Street Bank and Trust Company

    $ 491,200      $   —      $ 491,200  

Counterparty risk is managed based on policies and procedures established by each Fund’s adviser. Such policies and procedures may include, but are not limited to, minimum counterparty credit rating requirements and monitoring of counterparty credit default swap spreads. Based on balances reflected on the Fund’s Statement of Assets and Liabilities, the following table shows (i) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the Fund would incur if parties to the relevant financial instruments failed completely to perform according to the terms of the contracts and ii) the amount of loss that the Fund would incur after taking into account master netting provisions pursuant to ISDA agreements, as of December 31, 2018:

 

Fund

   

Maximum Amount
of Loss - Gross

     

Maximum Amount
of Loss - Net

  

Natixis Oakmark International Fund

    $ 491,200      $ 491,200  

 

|  100

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Notes to Financial Statements (continued)

 

December 31, 2018

 

5.  Purchases and Sales of Securities.  For the year ended December 31, 2018, purchases and sales of securities (excluding short-term investments and U.S. Government/Agency securities and including paydowns) were as follows:

 

Fund

   

Purchases

     

Sales

  

Intermediate Municipal Bond Fund

    $ 17,127,567      $ 30,709,059  

Natixis Oakmark Fund

      130,903,028        123,641,350  

Natixis Oakmark International Fund

      517,109,986        615,224,853  

Small Cap Value Fund

      155,228,936        283,175,423  

Value Opportunity Fund

      389,825,349        686,778,769  

6.  Management Fees and Other Transactions with Affiliates.

a.  Management Fees.  Natixis Advisors, L.P. (“Natixis Advisors”), serves as investment adviser to each Fund. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s average daily net assets:

 

    Percentage of Average Daily Net Assets  

Fund

  

First

$200 million

    

Next

$300 million

    

Next

$500 million

    

Next

$500 million

    

Next

$500 million

    

Over

$2 billion

  

Intermediate Municipal Bond Fund

     0.40 %      0.40 %      0.40 %      0.40 %      0.40 %      0.40 % 

Natixis Oakmark Fund

     0.70 %      0.65 %      0.60 %      0.60 %      0.60 %      0.60 % 

Natixis Oakmark International Fund

     0.85 %      0.85 %      0.85 %      0.85 %      0.85 %      0.85 % 

Small Cap Value Fund

     0.90 %      0.90 %      0.90 %      0.90 %      0.90 %      0.90 % 

Value Opportunity Fund

     0.80 %      0.80 %      0.80 %      0.80 %      0.75 %      0.75 % 

Natixis Advisors has entered into subadvisory agreements for each Fund as listed below.

 

Intermediate Municipal Bond Fund

  

McDonnell Investment Management, LLC (“McDonnell”)

Natixis Oakmark Fund

  

Harris Associates L.P. (“Harris”)

Natixis Oakmark International Fund

  

Harris

Small Cap Value Fund

  

Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”)

Value Opportunity Fund

  

Vaughan Nelson

 

101  |

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Natixis Advisors, McDonnell, Harris and Vaughan Nelson are subsidiaries of Natixis Investment Managers, L.P. (“Natixis”), which is part of Natixis Investment Managers, an international asset management group based in Paris, France. Effective January 1, 2019, Natixis transferred ownership of McDonnell to Loomis, Sayles & Company, Incorporated (“Loomis Sayles”). Loomis Sayles is indirectly owned by Natixis.

Under the terms of the subadvisory agreements, each Fund has agreed to pay its respective subadviser a subadvisory fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s average daily net assets:

 

        Percentage of Average
Daily Net Assets		  

Fund

  

Subadviser

  

First

$200 million

    

Next

$1.3 billion

    

Over

$1.5 billion

  

Intermediate Municipal Bond Fund

   McDonnell     0.20 %      0.20 %      0.20 % 

Natixis Oakmark Fund

   Harris     0.52 %      0.50 %      0.50 % 

Natixis Oakmark International Fund

   Harris     0.60 %      0.60 %      0.60 % 

Small Cap Value Fund

   Vaughan Nelson     0.55 %      0.55 %      0.55 % 

Value Opportunity Fund

   Vaughan Nelson     0.50 %      0.50 %      0.47 % 

Natixis Advisors has given binding undertakings to the Funds to waive management fees and/or reimburse certain expenses to limit the Funds’ operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, substitute dividend expenses on securities sold short, taxes, organizational and extraordinary expenses, such as litigation and indemnification expenses. These undertakings are in effect until April 30, 2019, may be terminated before then only with the consent of the Funds’ Board of Trustees, and are reevaluated on an annual basis. Management fees payable, as reflected on the Statements of Assets and Liabilities, is net of waivers and/or expense reimbursements, if any, pursuant to these undertakings. Waivers/reimbursements that exceed management fees payable are reflected on the Statements of Assets and Liabilities as receivable from investment adviser.

For the year ended December 31, 2018 the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:

 

     Expense Limit as a Percentage of
Average Daily Net Assets		  

Fund

   

Class A

    

Class C

    

Class N

    

Class Y

  

Intermediate Municipal Bond Fund

      0.70 %      1.45 %      —       0.45 % 

Natixis Oakmark Fund

      1.30 %      2.05 %      1.00 %      1.05 % 

Natixis Oakmark International Fund

      1.45 %      2.20 %      1.15 %      1.20 % 

Small Cap Value Fund

      1.45 %      2.20 %      1.15 %      1.20 % 

Value Opportunity Fund

      1.40 %      2.15 %      1.10 %      1.15 % 

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Natixis Advisors shall be permitted to recover expenses borne under the expense limitation agreements (whether through waiver of management fees or otherwise) on a class by class basis in later periods to the extent the annual operating expenses of a class fall below a class’ expense limits, provided, however, that a class is not obligated to pay such waived/reimbursed fees or expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed.

For the year ended December 31, 2018, the management fees and waivers of management fees for each Fund were as follows:

 

Fund

  

Gross
Management
Fees

    

Contractual
Waivers of
Management
Fees1

    

Net
Management
Fees

    

Percentage of
Average Daily
Net Assets

  
 

Gross

    

Net

  

Intermediate Municipal Bond Fund

   $ 110,246     $ 110,246     $ —       0.40 %      — % 

Natixis Oakmark Fund

     2,269,902       —       2,269,902       0.68 %      0.68 % 

Natixis Oakmark International Fund

     9,186,539       —       9,186,539       0.85 %      0.85 % 

Small Cap Value Fund

     2,059,281       —       2,059,281       0.90 %      0.90 % 

Value Opportunity Fund

     7,376,974       —       7,376,974       0.80 %      0.80 % 

 

1 

Management fee waivers are subject to possible recovery until December 31, 2019.

For the year ended December 31, 2018, expenses have been reimbursed as follows:

 

Fund

   

Reimbursement

  

Intermediate Municipal Bond Fund

    $ 53,111  

No expenses were recovered during the year ended December 31, 2018 under the terms of the expense limitation agreement.

b.  Service and Distribution Fees.  Natixis Distribution, L.P. (“Natixis Distribution”), which is a wholly-owned subsidiary of Natixis, has entered into a distribution agreement with the Trusts. Pursuant to this agreement, Natixis Distribution serves as principal underwriter of the Funds of the Trusts.

Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service Plan relating to each Fund’s Class A shares (the “Class A Plans”) and a Distribution and Service Plan relating to each Fund’s Class C shares (the “Class C Plans”).

Under the Class A Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Funds’ Class A shares, as reimbursement for expenses incurred by Natixis Distribution in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts.

 

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Under the Class C Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Funds’ Class C shares, as compensation for services provided by Natixis Distribution in providing personal services to investors in Class C shares and/or the maintenance of shareholder accounts.

Also under the Class C Plans, each Fund pays Natixis Distribution a monthly distribution fee at an annual rate of 0.75% of the average daily net assets attributable to the Funds’ Class C shares, as compensation for services provided by Natixis Distribution in connection with the marketing or sale of Class C shares.

For the year ended December 31, 2018, the service and distribution fees for each Fund were as follows:

 

     Service Fees      Distribution Fees  

Fund

   

Class A

     

Class C

     

Class C

  

Intermediate Municipal Bond Fund

    $ 16,675      $ 4,893      $ 14,679  

Natixis Oakmark Fund

      520,086        159,637        478,911  

Natixis Oakmark International Fund

      1,212,722        842,949        2,528,848  

Small Cap Value Fund

      213,758        23,673        71,019  

Value Opportunity Fund

      151,108        94,386        283,159  

c.  Administrative Fees.  Natixis Advisors provides certain administrative services for the Funds and contracts with State Street Bank to serve as sub-administrator. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts, Natixis ETF Trust and Natixis Advisors, each Fund pays Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which is reevaluated on an annual basis.

Prior to July 1, 2018, each Fund paid Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0350% of the next $30 billion and 0.0325% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which was reevaluated on an annual basis.

Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving as sub-administrator to the Funds. Also, effective October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Funds in an amount equal to the reduction in sub-administrative fees discussed above. The

 

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waiver is in effect through June 30, 2019, at which time it will be reevaluated as part of the annual review of the administrative fee contract, as noted above.

For the year ended December 31, 2018, the administrative fees for each Fund were as follows:

 

Fund

   

Administrative
Fees

     

Waiver of
Administrative
Fees

     

Net
Administrative
Fees

  

Intermediate Municipal Bond Fund

    $ 12,103      $ 56      $ 12,047  

Natixis Oakmark Fund

      146,703        803        145,900  

Natixis Oakmark International Fund

      474,361        2,120        472,241  

Small Cap Value Fund

      100,598        422        100,176  

Value Opportunity Fund

      403,699        1,913        401,786  

d.  Sub-Transfer Agent Fees.  Natixis Distribution has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Funds and has agreed to compensate the intermediaries for providing those services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. These services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly at the Funds’ transfer agent. Accordingly, the Funds have agreed to reimburse Natixis Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts (sub-transfer agent fees) paid to Natixis Distribution are subject to a current per-account equivalent fee limit approved by the Funds’ Board of Trustees, which is based on fees for similar services paid to the Funds’ transfer agent and other service providers. Class N shares do not bear such expenses.

For the year ended December 31, 2018, the sub-transfer agent fees (which are reflected in transfer agent fees and expenses in the Statements of Operations) for each Fund were as follows:

 

Fund

   

Sub-Transfer
Agent Fees

  

Intermediate Municipal Bond Fund

    $ 6,789  

Natixis Oakmark Fund

      150,152  

Natixis Oakmark International Fund

      944,593  

Small Cap Value Fund

      129,441  

Value Opportunity Fund

      784,427  

 

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As of December 31, 2018, the Funds owe Natixis Distribution the following reimbursements for sub-transfer agent fees (which are reflected in the Statements of Assets and Liabilities as payable to distributor):

 

Fund

   

Reimbursements
of Sub-Transfer
Agent Fees

  

Intermediate Municipal Bond Fund

    $ 64  

Natixis Oakmark Fund

      1,590  

Natixis Oakmark International Fund

      10,117  

Small Cap Value Fund

      1,077  

Value Opportunity Fund

      6,076  

Sub-transfer agent fees attributable to Class A, Class C and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes.

e.   Commissions.   Commissions (including CDSCs) on Fund shares retained by Natixis Distribution during the year ended December 31, 2018, were as follows:

 

Fund

   

Commissions

  

Intermediate Municipal Bond Fund

    $ 735  

Natixis Oakmark Fund

      38,553  

Natixis Oakmark International Fund

      334,659  

Small Cap Value Fund

      5,251  

Value Opportunity Fund

      3,073  

f.  Trustees Fees and Expenses.  The Trusts do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of Natixis Advisors, Natixis Distribution, Natixis or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $340,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that he attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $170,000. Each Independent Trustee also receives a meeting attendance fee of $10,000 for each meeting of the Board of Trustees that he or she attends in person and $5,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, the chairperson of the Contract Review Committee and the chairperson of the Audit Committee each receive an additional retainer fee at the annual rate of $20,000. The chairperson of the Governance Committee receives an additional retainer fee at the annual rate of $12,000. Each Contract Review Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. Each Audit Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that

 

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he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust based on a formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings.

Effective January 1, 2019, the Chairperson of the Board will receive a retainer fee at the annual rate of $360,000, each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $190,000, and the chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $15,000. All other Trustee fees will remain unchanged.

A deferred compensation plan (the “Plan”) is available to the Trustees on a voluntary basis. Deferred amounts remain in the Funds until distributed in accordance with the provisions of the Plan. The value of a participating Trustee’s deferral account is based on theoretical investments of deferred amounts, on the normal payment dates, in certain funds of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust as designated by the participating Trustees. Changes in the value of participants’ deferral accounts are allocated pro rata among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, and are normally reflected as Trustees’ fees and expenses in the Statements of Operations. The portions of the accrued obligations allocated to the Funds under the Plan are reflected as Deferred Trustees’ fees in the Statements of Assets and Liabilities.

Certain officers and employees of Natixis Advisors and affiliates are also officers and/or Trustees of the Trust.

g.  Affiliated Ownership.  As of December 31, 2018, Natixis US and affiliates held shares of Natixis Oakmark Fund and Small Cap Value Fund both representing less than 0.01% of the Funds’ net assets.

Investment activities of affiliated shareholders could have material impacts on the Funds.

h.  Reimbursement of Transfer Agent Fees and Expenses.  Natixis Advisors has given a binding contractual undertaking to Natixis Oakmark Fund, Natixis Oakmark International Fund and Small Cap Value Fund to reimburse any and all transfer agency expenses for the Funds’ Class N shares. This undertaking is in effect through April 30, 2019 and is not subject to recovery under the expense limitation agreement described above.

 

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For the year ended December 31, 2018, Natixis Advisors reimbursed the Funds for transfer agency expenses as follows:

 

Fund

   

Reimbursement of
Transfer Agency
Expenses Class N

  

Natixis Oakmark Fund

    $ 156  

Natixis Oakmark International Fund

      132  

Small Cap Value Fund

      152  

i.  Interfund Transactions.  A Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common Trustees. For the year ended December 31, 2018, the Natixis Oakmark Fund engaged in purchase transactions of $457,262 with an affiliate of Natixis in compliance with Rule 17a-7 of the 1940 Act pursuant to procedures adopted by the Board of Trustees.

7.  Class-Specific Transfer Agent Fees and Expenses.  Transfer agent fees and expenses for Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund and Value Opportunity Fund attributable to Class A, Class C and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes. Transfer agent fees and expenses attributable to Class N are allocated to Class N.

Intermediate Municipal Bond Fund allocates transfer agent fees and expenses on a pro rata basis based on the relative net assets of each class to the total net assets of those classes.

For the year ended December 31, 2018, Natixis Oakmark Fund, Natixis Oakmark International Fund, Small Cap Value Fund and Value Opportunity Fund incurred the following class-specific transfer agent fees and expenses (including sub-transfer agent fees, where applicable):

 

    

Transfer Agent Fees and Expenses

  

Fund

   

Class A

     

Class C

     

Class N

     

Class Y

  

Natixis Oakmark Fund

      175,348        53,950        156        51,843  

Natixis Oakmark International Fund

      451,242        315,631        132        245,904  

Small Cap Value Fund

      72,734        7,885        152        112,663  

Value Opportunity Fund

      62,407        38,773        615        747,306  

8.  Line of Credit.  Effective April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, entered into a $400,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to $350,000,000 under the line of credit agreement (as long as all borrowings by all Funds in the aggregate do not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations

 

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under the line of credit. Interest is charged to the Funds based upon the terms set forth in the agreement. In addition, a commitment fee of 0.15% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. The Funds paid an arrangement fee, an upfront fee, and other fees in connection with the new line of credit agreement, which are being amortized over a period of 364 days and are reflected as miscellaneous expenses on the Statements of Operations. The unamortized balance is reflected as prepaid expenses on the Statements of Assets and Liabilities.

Prior to April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, entered into a 364-day, $400,000,000 syndicated, committed, unsecured line of credit with Citibank, N.A. to be used for temporary or emergency purposes only. Any one Fund was able borrow up to the full $400,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate did not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest was charged to the Funds at a rate equal to the greater of the eurodollar or the federal funds rate plus 1.00%. In addition, a commitment fee of 0.15% per annum, payable on the last business day of each month, was accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit.

For the year ended December 31, 2018, Value Opportunity Fund had an average daily balance on the line of credit (for those days on which there were borrowings) of $18,871,478 at a weighted average interest rate of 4.24%. Interest expense incurred (which is reflected in miscellaneous expenses in the Statements of Operations) was $8,815.

9.  Concentration of Risk.  The Natixis Oakmark International Fund’s investments in foreign securities are subject to foreign currency fluctuations, higher volatility than U.S. securities, varying degrees of regulation and limited liquidity. Greater political, economic, credit and information risks are also associated with foreign securities.

10.  Concentration of Ownership.  From time to time, a Fund may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of such accounts could have material impacts on the Funds. As of December 31, 2018, based on management’s evaluation of the shareholder account base, the Funds had accounts representing controlling ownership of more than 5% of the Funds’ total outstanding shares. The number of such accounts, based on accounts that represent more than 5% of an individual class of shares, and the aggregate percentage of net assets represented by such holdings were as follows:

 

Fund

    Number of 5%
Account Holders		      Percentage of
Ownership		  

Intermediate Municipal Bond Fund

      4        29.25 % 

Value Opportunity Fund

      1        29.60 % 

 

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Omnibus shareholder accounts for which Natixis Advisors understands that the intermediary has discretion over the underlying shareholder accounts or investment models where a shareholder account may be invested for a non-discretionary customer are included in the table above. For other omnibus accounts, the Funds do not have information on the individual shareholder accounts underlying the omnibus accounts; therefore, there could be other 5% shareholders in addition to those disclosed in the table above.

11.  Capital Shares.  Each Fund may issue an unlimited number of shares of beneficial interest, without par value. Transactions in capital shares were as follows:

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Intermediate Municipal Bond Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      275,455     $ 2,764,015       229,798     $ 2,338,481  

Issued in connection with the reinvestment of distributions

      12,617       125,269       8,554       86,576  

Redeemed

      (274,616 )      (2,717,698 )      (201,533 )      (2,035,102 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      13,456     $ 171,586       36,819     $ 389,955  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      10,557     $ 105,987       37,992     $ 384,316  

Issued in connection with the reinvestment of distributions

      1,243       12,351       1,041       10,527  

Redeemed

      (79,290 )      (790,619 )      (209,349 )      (2,113,286 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (67,490 )    $ (672,281 )      (170,316 )    $ (1,718,443 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      422,343     $ 4,210,756       1,561,548     $ 15,699,674  

Issued in connection with the reinvestment of distributions

      14,182       141,017       16,163       163,646  

Redeemed

      (1,826,504 )      (18,225,145 )      (3,700,092 )      (37,356,486 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (1,389,979 )    $ (13,873,372 )      (2,122,381 )    $ (21,493,166 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (1,444,013 )    $ (14,374,067 )      (2,255,878 )    $ (22,821,654 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

Natixis Oakmark Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      1,710,227     $ 42,259,538       1,097,333     $ 25,510,597  

Issued in connection with the reinvestment of distributions

      759,153       15,279,946       319,749       7,630,446  

Redeemed

      (2,242,255 )      (53,142,329 )      (1,269,544 )      (29,162,674 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      227,125     $ 4,397,155       147,538     $ 3,978,369  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      1,327,534     $ 27,139,192       745,200     $ 14,845,455  

Issued in connection with the reinvestment of distributions

      277,335       4,799,814       103,719       2,154,363  

Redeemed

      (1,273,226 )      (26,235,921 )      (932,134 )      (18,618,843 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      331,643     $ 5,703,085       (83,215 )    $ (1,619,025 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      386     $ 10,194       43     $ 1,001  

Issued in connection with the reinvestment of distributions

      38       783       2       35  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      424     $ 10,977       45     $ 1,036  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      2,241,985     $ 58,092,396       1,112,569     $ 26,658,228  

Issued in connection with the reinvestment of distributions

      190,395       4,001,696       56,023       1,413,926  

Redeemed

      (1,730,567 )      (42,663,771 )      (414,820 )      (9,936,832 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      701,813     $ 19,430,321       753,772     $ 18,135,322  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      1,261,005     $ 29,541,538       818,140     $ 20,495,702  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

 

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11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

Natixis Oakmark International Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      8,614,434     $ 129,879,929       17,257,564     $ 244,429,519  

Issued in connection with the reinvestment of distributions

      995,963       10,965,551       358,244       5,570,701  

Redeemed

      (25,557,109 )      (364,431,088 )      (22,730,001 )      (331,480,871 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (15,946,712 )    $ (223,585,608 )      (5,114,193 )    $ (81,480,651 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      4,347,532     $ 64,671,210       8,154,803     $ 116,119,552  

Issued in connection with the reinvestment of distributions

      567,617       6,152,971       92,603       1,414,038  

Redeemed

      (9,503,667 )      (126,163,655 )      (5,871,161 )      (80,942,584 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (4,588,518 )    $ (55,339,474 )      2,376,245     $ 36,591,006  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      92,040     $ 1,342,548       72     $ 1,001  

Issued in connection with the reinvestment of distributions

      3,315       36,370       1       15  

Redeemed

      (28,097 )      (387,970 )      —       —  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      67,258     $ 990,948       73     $ 1,016  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      18,731,471     $ 276,949,870       11,434,503     $ 174,563,797  

Issued in connection with the reinvestment of distributions

      965,209       10,588,341       145,443       2,258,734  

Redeemed

      (11,681,703 )      (157,478,079 )      (466,061 )      (7,177,317 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      8,014,977     $ 130,060,132       11,113,885     $ 169,645,214  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (12,452,995 )    $ (147,874,002 )      8,376,010     $ 124,756,585  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N and Class Y shares.

 

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11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

Small Cap Value Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      712,683     $ 12,873,039       528,606     $ 10,288,324  

Issued in connection with the reinvestment of distributions

      1,087,949       14,101,401       524,190       9,889,735  

Redeemed

      (1,494,118 )      (27,125,775 )      (1,421,549 )      (27,416,197 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      306,514     $ (151,335 )      (368,753 )    $ (7,238,138 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      67,032     $ 586,716       55,927     $ 696,634  

Issued in connection with the reinvestment of distributions

      201,322       1,524,443       216,985       2,595,862  

Redeemed

      (1,075,636 )      (12,147,004 )      (459,714 )      (5,852,124 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (807,282 )    $ (10,035,845 )      (186,802 )    $ (2,559,628 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      —     $ —       51     $ 1,001  

Issued in connection with the reinvestment of distributions

      15       200       4       82  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      15     $ 200       55     $ 1,083  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      441,361     $ 8,044,129       2,498,754     $ 49,774,371  

Issued in connection with the reinvestment of distributions

      1,132,316       15,826,362       1,011,202       19,723,081  

Redeemed

      (6,233,772 )      (112,747,613 )      (3,367,033 )      (66,987,307 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (4,660,095 )    $ (88,877,122 )      142,923     $ 2,510,145  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (5,160,848 )    $ (99,064,102 )      (412,577 )    $ (7,286,538 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Value Opportunity Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      495,715     $ 10,630,321       507,412     $ 10,847,723  

Issued in connection with the reinvestment of distributions

      171,431       3,074,190       53,873       1,220,217  

Redeemed

      (1,114,049 )      (23,838,889 )      (1,855,342 )      (39,766,540 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (446,903 )    $ (10,134,378 )      (1,294,057 )    $ (27,698,600 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      74,034     $ 1,500,519       126,549     $ 2,575,468  

Issued in connection with the reinvestment of distributions

      121,282       2,078,925       32,929       708,304  

Redeemed

      (948,504 )      (19,327,431 )      (1,479,508 )      (29,990,166 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (753,188 )    $ (15,747,987 )      (1,320,030 )    $ (26,706,394 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      1,690,373     $ 38,824,913       1,429,409     $ 30,969,311  

Issued in connection with the reinvestment of distributions

      369,511       6,683,144       160,150       3,662,639  

Redeemed

      (3,884,820 )      (89,963,901 )      (2,872,239 )      (62,808,162 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (1,824,936 )    $ (44,455,844 )      (1,282,680 )    $ (28,176,212 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      7,576,178     $ 168,906,227       7,066,393     $ 154,672,829  

Issued in connection with the reinvestment of distributions

      2,423,432       44,084,799       854,159       19,560,236  

Redeemed

      (18,028,194 )      (386,667,770 )      (17,603,866 )      (380,954,617 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (8,028,584 )    $ (173,676,744 )      (9,683,314 )    $ (206,721,552 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (11,053,611 )    $ (244,014,953 )      (13,580,081 )    $ (289,302,758 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Table of Contents

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees of Natixis Funds Trust I and Natixis Funds Trust II and Shareholders of Natixis Oakmark International Fund, Vaughan Nelson Small Cap Value Fund, McDonnell Intermediate Municipal Bond Fund, Natixis Oakmark Fund, and Vaughan Nelson Value Opportunity Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Natixis Oakmark International Fund and Vaughan Nelson Small Cap Value Fund (two of the funds constituting the Natixis Funds Trust I), and McDonnell Intermediate Municipal Bond Fund, Natixis Oakmark Fund, and Vaughan Nelson Value Opportunity Fund (three of the funds constituting the Natixis Funds Trust II) (hereafter collectively referred to as the “Funds”) as of December 31, 2018, the related statements of operations for the year ended December 31, 2018, the statements of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended December 31, 2018 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant

 

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Report of Independent Registered Public Accounting Firm

 

estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Boston, Massachusetts

February 21, 2019

We have served as the auditor of one or more of the investment companies in the Natixis Investment Company Complex since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

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Table of Contents

2018 U.S. Tax Distribution Information to Shareholders (Unaudited)

 

Corporate Dividends Received Deduction.  For the fiscal year ended December 31, 2018, a percentage of dividends distributed by the Funds listed below qualify for the dividends received deduction for corporate shareholders. These percentages are as follows:

 

Fund

   

Qualifying
Percentage

  

Natixis Oakmark Fund

      100.00 % 

Small Cap Value Fund

      58.85 % 

Value Opportunity Fund

      100.00 % 

Capital Gains Distributions.  Pursuant to Internal Revenue Section 852(b), the following Funds paid distributions, which have been designated as capital gains distributions for the fiscal year ended December 31, 2018.

 

Fund

   

Amount

  

Natixis Oakmark Fund

    $ 25,432,306  

Natixis Oakmark International Fund

      14,047,101  

Small Cap Value Fund

      27,906,818  

Value Opportunity Fund

      55,048,953  

Qualified Dividend Income.  For the fiscal year ended December 31, 2018, a percentage of the ordinary income dividends paid by the Funds are considered qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Funds paid a distribution during calendar year 2018, complete information will be reported in conjunction with Form 1099-DIV. These percentages are noted below:

 

Fund

   

Qualifying
Percentage

  

Natixis Oakmark Fund

      100.00 % 

Natixis Oakmark International Fund

      100.00 % 

Small Cap Value Fund

      35.91 % 

Value Opportunity Fund

      100.00 % 

Foreign Tax Credit.  For the year ended December 31, 2018, the Fund intends to pass through foreign tax credits and have derived gross income from sources within foreign countries amounting to:

 

Fund

   

Foreign Tax
Credit Pass-Through

     

Foreign Source
Income

  

Natixis Oakmark International Fund

    $ 3,298,494      $ 35,713,147  

Exempt Interest Dividends

During the year ended December 31, 2018, Intermediate Municipal Bond paid dividends to shareholders from net investment income, of which 99.14% are designated as exempt interest dividends for federal tax purposes. However, state and local taxes differ from state to state and a portion of the dividends may be subject to the individual Alternative Minimum Tax, so it is suggested that you consult your own tax adviser.

 

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Table of Contents

Trustee and Officer Information

 

The tables below provide certain information regarding the trustees and officers of Natixis Funds Trust I and Natixis Funds Trust II, (the “Trusts”). Unless otherwise indicated, the address of all persons below is 888 Boylston Street, Suite 800, Boston, MA 02199-8197. The Funds’ Statements of Additional Information include additional information about the trustees of the Trusts and are available by calling Natixis Funds at 800-225-5478.

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in

Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES      

Kenneth A. Drucker

(1945)

  

Chairperson of the Board of Trustees since January 2017

Trustee since 2008

Ex Officio member of Audit Committee, Contract Review Committee and Governance Committee

   Retired  

52

None

   Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation)
Edmond J. English
(1953)		  

Trustee since 2013

Audit Committee Member and Governance Committee Member

   Executive Chairman; formerly, Chief Executive Officer of Bob’s Discount Furniture (retail)  

52

Director, Burlington Stores, Inc. (retail)

   Significant experience on the Board and significant experience on the boards of other business organizations (including retail companies and a bank); executive experience (including at a retail company)

 

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Table of Contents

Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in

Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES continued      

Richard A. Goglia

(1951)

  

Trustee since 2015

Audit Committee Member

   Retired; formerly Vice President and Treasurer of Raytheon Company (defense)  

52

None

   Experience on the Board and executive experience (including his role as vice president and treasurer of a defense company and experience at a financial services company)

Wendell J. Knox

(1948)

  

Trustee since 2009

Contract Review Committee

Member

and Governance Committee Member

   Director of Abt Associates Inc. (research and consulting)  

52

Director, The Hanover Insurance Group (property and casualty insurance); formerly, Director, Eastern Bank (bank)

   Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in

Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES continued      
Martin T. Meehan (1956)  

Trustee since 2012

Audit Committee Member

   President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell  

52

None

   Significant experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience

Maureen B. Mitchell

(1951)

  

Trustee since 2017

Contract Review Committee Member

   Retired; formerly President, Global Sales and Marketing, GE Asset Management, Inc. (financial services)  

52

Director, Sterling Bancorp (Bank)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including role as president of global sales and marketing at a financial services company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in

Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES continued      

James P. Palermo

(1955)

  

Trustee since 2016

Contract Review Committee Member

   Founding Partner, Breton Capital Management, LLC (private equity); Partner, STEP Partners, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation  

52

Director, FutureFuel Corp. (Chemicals and Biofuels)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including roles as chief executive officer of client management and asset servicing for a banking and financial services company)

Erik R. Sirri

(1958)

  

Trustee since 2009

Chairperson of the Audit Committee

   Professor of Finance at Babson College  

52

None

   Significant experience on the Board; experience as Director of the Division of Trading and Markets at the Securities and Exchange Commission; academic experience; training as an economist

Peter J. Smail

(1952)

  

Trustee since 2009

Chairperson of the Contract Review Committee

and Governance Committee Member

   Retired  

52

None

   Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in

Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES continued      

Cynthia L. Walker

(1956)

  

Trustee since 2005

Chairperson of the Governance Committee and Audit Committee Member

   Deputy Dean for Finance and Administration, Yale University School of Medicine  

52

None

   Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration)
INTERESTED TRUSTEES      

Kevin P. Charleston3

(1965)

One Financial Center

Boston, MA 02111

   Trustee since 2015   President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P.  

52

None

   Experience on the Board; continuing service as President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.
David L. Giunta4
(1965)		  

Trustee since 2011

President and Chief Executive Officer since 2008

   President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation  

52

None

   Significant experience on the Board; experience as President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation

 

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Table of Contents

Trustee and Officer Information

 

 

1 

Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term.

 

2 

The trustees of the Trusts serve as trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis ETF Trust (collectively, the “Fund Complex”).

 

3 

Mr. Charleston is deemed an “interested person” of the Trusts because he holds the following positions with an affiliated person of the Trusts: President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

4 

Mr. Giunta is deemed an “interested person” of the Trusts because he holds the following positions with an affiliated person of the Trusts: President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation.

 

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Trustee and Officer Information

 

Name and Year of Birth

  

Position(s) Held

with the Trusts

  

Term of Office1 and

Length of Time Served

  

Principal Occupation(s)

During Past 5 Years2

OFFICERS OF THE TRUSTS    

Russell L. Kane

(1969)

   Secretary, Clerk and Chief Legal Officer   Since 2016   Executive Vice President, General Counsel, Secretary and Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Michael C. Kardok

(1959)

   Treasurer, Principal Financial and Accounting Officer   Since 2004   Senior Vice President, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Kirk D. Johnson

(1981)

   Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer   Since 2018   Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Vice President and Counsel, Natixis Investment Managers, L.P.

 

1 

Each officer of the Trusts serves for an indefinite term in accordance with the Trusts’ current by-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified.

 

2 

Each person listed above, except as noted, holds the same position(s) with the Fund Complex. Previous positions during the past five years with Natixis Distribution, L.P., Natixis Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from an officer’s current position with such entity.

 

|  124

Table of Contents

LOGO

 

LOGO

 

Annual Report

December 31, 2018

Loomis Sayles Multi-Asset Income Fund

Loomis Sayles Strategic Alpha Fund

Natixis U.S. Equity Opportunities Fund

 

Table of Contents

Portfolio Review     1  
Portfolio of Investments     22  
Financial Statements     75  
Notes to Financial Statements     93  

 

 

IMPORTANT NOTICE TO SHAREHOLDERS

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Funds’ website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you wish to continue receiving paper copies of your shareholder reports after January 1, 2021, you can inform the Fund at any time by calling 1-800-225-5478. If you hold your account with a financial intermediary and you wish to continue receiving paper copies after January 1, 2021, you should call your financial intermediary directly. Paper copies are provided free of charge, and your election to receive reports in paper will apply to all funds held with the Natixis Funds complex. If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You currently may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically at www.icsdelivery.com/natixisfunds.

Table of Contents

LOOMIS SAYLES MULTI-ASSET INCOME FUND

 

Managers   Symbols
Thomas Fahey   Class A     IIDPX
Kevin P. Kearns   Class C     CIDPX
Maura T. Murphy, CFA®   Class N     LMINX
Loomis, Sayles & Company, L.P.   Class Y     YIDPX

 

 

Investment Goal

The Fund seeks current income with a secondary objective of capital appreciation.

 

 

Market Conditions

Global growth has decelerated and appears to have become less synchronized. Although the US economic expansion has continued, certain manufacturing- and sentiment-based indicators have begun to signal softer activity going forward. Growth abroad has exhibited signs of decelerating as well. The unstable political climate in Italy has begun to weigh on domestic demand amid weaker consumer spending and business investment. Lack of progress on the resolution for Brexit has curbed business sentiment, and the UK economy has also seen weaker-than-expected data in construction and manufacturing.

In December, the US Federal Reserve (Fed) Open Market Committee increased its policy rate by 25 basis points, in keeping with Loomis Sayles, consensus and market expectations. This puts the new range for the Fed funds target rate at between 2.25% and 2.50%. The hike was the tenth of this current cycle and left the target at its highest level since March 2008.

An increase in equity market volatility played a large role in the widening of credit spreads. Ongoing concerns over trade conflict, lower oil prices and the still unresolved Brexit situation dampened risk sentiment and prompted investors to seek out higher quality alternatives.

Oil prices decisively reversed beginning in October, as fears of Iranian sanctions cutting global oil supply proved greatly overstated, leading to the unwinding of speculative long positions. Even OPEC production cuts announced in December failed to reverse the bearish sentiment with respect to the commodity.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of the Loomis Sayles Multi-Asset Income Fund returned -9.13% at net asset value. The Fund underperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, which returned 0.01%.

Explanation of Fund Performance

US equities were supported over the year by generally positive macroeconomic data, strong corporate earnings and a strong US dollar. However, escalating trade tensions and concerns about Fed policy led to increased market volatility in the fourth quarter. Sentiment deteriorated further into year-end with a newly divided US Congress leading to political

 

1  |

Table of Contents

gridlock. Within US equities, the Fund’s holdings in the financial, energy and consumer non-cyclical sectors detracted the most from return.

Exposure to global equities also had a negative impact during the period as global growth became less synchronized. Trade tensions weighed on China sentiment. In addition, concerns about a slowdown in the rate of growth in Europe, political volatility in Italy and Brexit uncertainty provided headwinds for global equities over the year. The Fund’s holdings within the global financial, consumer non-cyclical, and technology sectors weighed most heavily on return.

Finally, the Fund’s exposure to master limited partnerships (MLPs), expressed through exchange-traded funds (ETFs) and exchange-traded notes (ETNs), detracted from performance as energy prices fell sharply during the period.

The Fund’s holdings of cash and cash equivalents led positive contributions to performance for the 12 months. In a volatile year for risk assets, the US dollar was the top performing asset in 2018.

An allocation to real estate investment trusts (REITs) bolstered returns for the year, despite worries about the magnitude and pace of Fed rate hikes. Rising Treasury yields were initially a source of concern. However, a low level of inflation, despite stable growth and solid corporate earnings, has benefited interest rate sensitive assets.

The Fund’s positioning with respect to securitized assets added modestly to return relative to the benchmark, with positive contributions led by a select issue within commercial mortgage-backed securities (CMBS).

Outlook

The market is now priced for several risks, including slower global growth, Fed tightening, US/China trade relations, global political disruptions and lower-than-anticipated oil prices. These risks are likely to suppress risk asset valuations unless positive resolutions emerge.

Fed tightening is likely to continue in 2019, with hikes expected at mid-year and at year-end based on an environment of arguably full employment and the Fed’s 2% inflation target. However, the Fed may opt to scale back its rate hikes if macro risks continue to escalate. Slowing the pace of hikes would support interest rate-sensitive areas of the US economy, where higher borrowing costs have already started to curtail activity.

Equities could have upside if the macro backdrop becomes a bit more supportive. We believe US stocks are most likely to lead any equity recovery. Emerging markets could also present an attractive opportunity, especially if the US dollar remains range-bound or trends lower.

We expect mid- to high-single-digit earnings growth across the US and several global economies in 2019. Higher interest expenses and labor costs could slowly erode profit margins, but price hikes may soften the blow.

Global growth should remain modestly positive, 2019 corporate earnings are likely to rise between 5% and 9% in aggregate, and default rates are expected to remain low. However, these supportive factors do not mean credit spreads are likely to revisit the lows seen earlier in the cycle.

 

|  2

Table of Contents

LOOMIS SAYLES MULTI-ASSET INCOME FUND

 

Hypothetical Growth of $100,000 Investment in Class Y Shares1,5,6

December 31, 2008 through December 31, 2018

 

LOGO

Top Ten Holdings as of December 31, 2018

 

      Security name    % of
net assets		  
1    Alerian MLP ETF      4.43 % 
2    JPMorgan Alerian MLP Index ETN      2.43  
3    Abbott Laboratories      1.99  
4    Bank of America Corp.      1.94  
5    Microsoft Corp.      1.90  
6    AbbVie, Inc.      1.89  
7    Gol LuxCo S.A., 1st Lien Term Loan, 6.500%, 8/31/2020      1.77  
8    Banco Santander S.A., (fixed rate to 5/19/2019, variable rate thereafter), 6.375%      1.60  
9    Standard Chartered PLC, (fixed rate to 4/02/2023, variable rate thereafter), 7.750%      1.48  
10    UnitedHealth Group, Inc.      1.43  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

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Average Annual Total Returns — December 31, 20185,6

 

           
                       Life of
Class N		     Expense Ratios7  
     1 Year     5 Years     10 Years     Gross     Net  
     
Class Y (Inception 12/3/12)1              
NAV     -9.13 %      4.68 %      9.67 %      — %      0.91 %      0.73 % 
     
Class A (Inception 11/17/05)              
NAV     -9.24       4.49       9.56       —       1.16       0.98  
With 4.25% Maximum Sales Charge     -13.12       3.59       9.08       —        
     
Class C (Inception 11/17/05)              
NAV     -9.96       3.72       8.73       —       1.91       1.73  
With CDSC2     -10.81       3.72       8.73       —        
     
Class N (Inception 8/31/15)              
NAV     -9.02       —       —       4.45       1.38       0.68  
   
Comparative Performance              
Bloomberg Barclays U.S. Aggregate Bond Index3     0.01       2.52       3.48       1.88        
S&P 500® Index4     -4.38       8.49       13.12       9.70                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Prior to the inception of Class Y shares (12/3/2012), performance is that of Class A shares and reflects the higher net expenses of that share class.

 

2

Class C share performance assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

3

The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index that covers the U.S.-dollar denominated, investment grade, fixed-rate, taxable bond market of SEC-registered securities. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed securities, asset-backed securities, and collateralized mortgage-backed securities sectors.

 

4

S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors.

 

5

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

6

Prior to the stock market close August 31, 2015, the Fund had multiple subadvisers. The performance results shown above for the periods prior to the stock market close August 31, 2015 reflect results achieved by those subadvisers using different investment strategies.

 

7

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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LOOMIS SAYLES STRATEGIC ALPHA FUND

 

Managers   Symbols
Matthew J. Eagan, CFA®   Class A    LABAX
Kevin P. Kearns   Class C    LABCX
Todd P. Vandam, CFA®   Class N    LASNX
Loomis, Sayles & Company, L.P.   Class Y    LASYX

 

 

Investment Goal

The Fund seeks to provide an attractive absolute total return, complemented by prudent investment management designed to manage risks and protect investor capital. The secondary goal of the Fund is to achieve these returns with relatively low volatility.

 

 

Market Conditions

Global growth has decelerated and appears to have become less synchronized. Although the US economic expansion has continued, certain manufacturing- and sentiment-based indicators have begun to signal softer activity going forward. Growth abroad has exhibited signs of decelerating as well. The unstable political climate in Italy has begun to weigh on domestic demand amid weaker consumer spending and business investment. Lack of progress on the resolution for Brexit has curbed business sentiment, and the UK economy has also seen weaker-than-expected data in construction and manufacturing.

An increase in equity market volatility played a large role in the widening of credit spreads. Ongoing concerns over trade conflict, lower oil prices and the still unresolved Brexit situation dampened risk sentiment and prompted investors to seek out higher quality alternatives.

In December, the US Federal Reserve (Fed) Open Market Committee increased its policy rate by 25 basis points, in keeping with Loomis Sayles, consensus and market expectations. This puts the new range for the fed funds target rate at 2.25% to 2.50%. The hike was the tenth of the current cycle and left the target at its highest level since March 2008.

The US dollar continued to receive support as US Treasury yields remain significantly higher than government bond yields in other developed markets. While early December saw the declaration of a temporary truce in the trade war between the US and China, global trade tensions remain elevated. In a more risk-averse atmosphere, the dollar advanced against its developed market peers.

Performance Results

For the 12 months ended December 31, 2018, the Class Y shares of the Loomis Sayles Strategic Alpha Fund returned 0.53% at net asset value. The Fund underperformed its benchmark, the 3-month LIBOR, which returned 2.08%. The Fund follows an absolute return strategy and is not managed to an index.

 

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Explanation of Fund Performance

The Fund’s exposure to global corporate credit detracted from performance for the year. In particular, South American issues weighed on performance, with Argentine holdings having the largest negative impact. Argentina experienced economic issues characterized by significant inflation and rapid currency devaluation for much of the year. A late-September deal with the International Monetary Fund (IMF) on a further extension of credit, coupled with austerity measures, has allowed the Argentine economy to show signs that it may be in the late stages of recession.

Emerging markets also detracted from performance during the year, with Argentine issues responsible for the largest negative impact due to the aforementioned economic woes. Exposure to Brazilian and Mexican issues also impacted return adversely. Continued US dollar strength created a difficult environment for emerging markets throughout the period.

The Fund’s allocation to high yield corporate bonds dampened return as spreads (the difference in yield between 10-year US Treasury bonds and lower-rated bonds) widened substantially late in the year amid increased volatility in risk assets, particularly within equity markets. Strong earnings and an optimistic economic outlook have allowed investors to earn a decent return based on the incremental yield of the asset class, but outflows from high yield funds during much of the year continued to indicate investor uneasiness. We have reduced our exposure to high yield based on our research and as performance for the asset class declined, especially late in the year. The decline in energy prices provided a strong headwind during the year, given the large weight to energy within the high yield market. High yield names within the energy, capital goods and technology sectors weighed most heavily on the Fund’s return for the period.

An allocation to securitized assets contributed positively to return during the period. The Fund’s holdings of asset-backed securities (ABS), the largest of our securitized positions, saw positive results from many of the sub-sectors including subprime auto loans, aircraft-related and personal loans. Residential mortgage-backed securities also added to return as housing sentiment was supported by attractive lending rates, despite signs of a slowing in activity.

The Fund’s allocation to investment grade corporate bonds added to performance as well. We reduced exposure to the asset class in terms of both size and duration (price sensitivity to interest rates) as the yield curve flattened over the year (the yield curve reflects the relationship among bond yields across the maturity spectrum). Performance benefited in particular from the shorter-term, higher quality issues which make up most of the portfolio’s investment grade exposure. Positive contributions were led by holdings within the consumer, banking and capital goods sectors.

Currency positioning aided performance as the US dollar strengthened versus most developed market currencies. The dollar weakened in early 2018 before rebounding in the second quarter on the prospect of future Fed rate hikes. Many of our positions were paired non-US dollar holdings, which mitigated the impact of a strong US dollar. Some

 

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directional currency positions contributed positively, in particular a short forward position in the euro and a long forward position in the Mexican peso.

The Fund’s exposure to interest rate futures used for investment purposes bolstered performance for the fiscal period.

Outlook

The market is now priced for several risks, including slower global growth, Fed tightening, US/China trade relations, global political disruptions and lower-than-anticipated oil prices. These risks are likely to suppress risk asset valuations unless positive resolutions emerge.

Fed tightening is likely to continue in 2019, with hikes expected at mid-year and at year-end based on an environment of arguably full employment and the Fed’s 2% inflation target. However, the Fed may opt to scale back its rate hikes if macro risks continue to escalate. Slowing the pace of hikes would support interest rate-sensitive areas of the US economy, where higher borrowing costs have already started to curtail activity.

Global growth should remain modestly positive, 2019 corporate earnings are likely to rise between 5% and 9% in aggregate, and default rates are expected to remain low. However, these supportive factors do not mean credit spreads are likely to revisit the lows seen earlier in the cycle.

Wider spreads have restored a meaningful risk premium to credit markets, increasing the value proposition of the asset class. This constructive outlook would be at risk if corporate profitability expectations prove too lofty.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

December 15, 2010 (inception) through December 31, 2018

 

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Average Annual Total Returns — December 31, 20184

 

           
                             Expense Ratios5  
     1 Year     5 Years     Life of Class     Gross     Net  
     
Class Y (Inception 12/15/10)         Class Y/A/C       Class N        
NAV     0.53 %      2.33 %      2.66 %      — %      0.76 %      0.75 % 
     
Class A (Inception 12/15/10)              
NAV     0.39       2.09       2.42       —       1.01       1.00  
With 4.25% Maximum Sales Charge     -3.88       1.20       1.88       —        
     
Class C (Inception 12/15/10)              
NAV     -0.42       1.31       1.64       —       1.76       1.75  
With CDSC1     -1.39       1.31       1.64       —        
     
Class N (Inception 5/1/17)              
NAV     0.68       —       —       1.61       0.71       0.70  
   
Comparative Performance              
3-Month LIBOR2     2.08       0.86       0.67       1.72        
3-Month LIBOR + 300 basis points3     5.18       3.93       3.73       4.81                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

3-Month LIBOR, or the London Interbank Offered Rate, represents the average rate at which a leading bank, for a given currency (in this case U.S. dollars), can obtain unsecured funding, and is representative of short-term interest rates.

 

3

3-Month LIBOR +300 basis points is created by adding 3.00% to the annual return of 3-Month LIBOR. The calculation is performed on a monthly basis and is subject to the effects of compounding.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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NATIXIS U.S. EQUITY OPPORTUNITIES FUND

 

Managers   Symbols
Large Cap Value Segment   Class A    NEFSX
Harris Associates L.P.   Class C    NECCX
All Cap Growth Segment   Class N    NESNX
Loomis, Sayles & Company, L.P.   Class Y    NESYX

 

 

Investment Goal

The Fund seeks long-term growth of capital.

 

 

Market Conditions

The U.S. economy entered 2018 on a high note, with corporations and individuals anticipating relief from the second largest tax cut in U.S. history, which passed at the end of 2017. The unemployment rate continued to fall as the economy moved towards full employment. During the year, unemployment fluctuated between 4.1 to 3.7 percent while more previously unemployed people rejoined the workforce and layoffs declined to near an all-time low. Buoyed by strong employment, wage growth finally began to accelerate, reaching a 3.2 percent clip. With more states and metro areas increasing the minimum wage, consumer spending stayed steady. Retailers experienced their best Christmas shopping season in six years, with retail sales climbing in 2018 by 5.1 percent, according to Mastercard SpendingPulse.

Despite four Federal Reserve Board interest rate hikes, the pace of inflation remained moderate, providing support for economic growth. The strong economy and the Trump tax cut drove significant corporate capital investment. The strength of the U.S. economy was a bright spot in the global economic picture, as China experienced slower growth rates and emerging markets were impacted by rising rates and a strong dollar. In Europe, Brexit continued to challenge economic forecasts in Europe and the U.K. due to Britain’s inability to pass legislation surrounding the terms of the divorce from the European Union.

Equities took a steep dive in December amid worries about the duration of the lengthy bull market. In fact, December losses pushed the Dow, S&P 500 and Nasdaq into bear market territory. Concerns around over-leveraging by businesses and consumers sparked some fears; however, the Fed lowered its projection of 2019 rate hikes from three to two in an effort to ease business concerns around the impact of higher rates on economic growth. As 2018 drew to a close, worries about slowing global growth and a looming government shut down created uncertainty after a year of mostly strong economic growth and positive momentum.

Performance Results

For the 12 months ended December 31, 2018, Class Y shares of Natixis U.S. Equity Opportunities Fund returned -6.24% at net asset value. The Fund underperformed its primary benchmark, the S&P 500® Index, which returned -4.38%. The Fund also underperformed its secondary benchmark, the Russell 1000® Index, which returned -4.78%.

 

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Explanation of Fund Performance

Each of the portfolio’s segments uses a distinct investment style, providing shareholders with exposure to a variety of different stocks:

 

·  

The Harris Associates L.P. Large Cap Value segment invests primarily in the common stocks of larger-capitalization companies that Harris Associates believes are trading at a substantial discount to the company’s “true business value.”

 

·  

The Loomis, Sayles & Company, L.P. All Cap Growth segment invests in equity securities, including common stocks, preferred stocks, convertible securities and warrants. This segment may invest in companies of any size.

Neither segment contributed positively to the overall return of the Fund during the year.

Harris Associates Large Cap Value Segment

As value investors with an emphasis on individual stock selection, our sector weights are a byproduct of our bottom-up process. General Electric (GE) was the largest detractor to segment performance in the calendar year. GE faced a succession of issues in 2018 that influenced its share price, which was especially volatile in the second half of the year, as market analysts reassessed key company estimates, both lower and higher. The company’s second-quarter results released in July included revenue and earnings per share that outpaced market forecasts and management expressed that results were in line with the company’s expectations. GE later announced it was awarded a new $630.5 million contract with the U.S. Navy for repair and maintenance of F414 aircraft engine components. Even so, in September, some influential market analysts lowered price targets for the company. Subsequently, H. Lawrence Culp, Jr., formerly CEO of Danaher, was unexpectedly named GE’s chairman and CEO. Along with this announcement, management lowered full-year guidance. Late in October, the company reported third-quarter revenues that largely met market expectations. Earnings per share, however, were roughly 30% lower than forecasts and the company cut its quarterly dividend to $0.01 from $0.12. Management did not provide fourth quarter or 2019 guidance and the lack of forecasts along with concerns over the company’s liquidity added to investor anxiety. To explain, Culp candidly pointed out that when discussing numbers on a forward-looking basis, he wants to do so with conviction and confidence, which was not possible at that time. He also stated that raising additional equity was not then necessary. We still concur with his assessment. According to our calculations, GE has sufficient liquidity from its industrial operations and the market has overlooked the supplemental liquidity provided by recent sale proceeds and equity positions. All these factors taken together lead us to believe that the company will reach its overall leverage targets without raising equity. In addition, its liquidity position remains steady. Lastly, in December, positive market analysts’ notes upgrading the company provided GE’s share price a modest boost. Management continues to adjust the company’s portfolio of businesses and while the restructuring process may take some time, we believe this approach will work to benefit shareholders into the future. Overall, we believe the stock has declined more than warranted and that GE’s intrinsic value is well above the current price quote.

 

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On an absolute-return basis, shares in the health care sector gained the most value, while holdings in the industrials sector lost the most value. The largest contributor to segment performance for the year was HCA Healthcare. HCA’s share price gained value in three of the past four quarters as the company’s results released during the reporting period showed positive growth momentum. Revenue, earnings and earnings per share for the first, second and third quarters of 2018 surpassed market expectations. Importantly, key operating metrics, such as same-facility equivalent admissions and same-facility revenue per equivalent admission, demonstrated strengthening trends over the course of the year. These developments provide us evidence that the company’s strategy of focusing on higher acuity visits is paying off. In addition, management stated that capital investments are now “yielding solid market share gains.” HCA paid $121 million worth of dividends and bought back $302 million worth of shares during the third quarter (year-to-date share repurchases total $1.195 billion), which aligns with our estimates. Along with its latest earnings release, management increased full-year revenue, earnings and earnings per share guidance ranges. Furthermore, management continues to seek out strategically sound acquisition opportunities to broaden the company’s scope. One such example was its purchase in August of Mission Health, a six-hospital health facility in North Carolina that allowed expansion across a state where it previously had no operations. Despite these positive outcomes, HCA’s share price dropped in December in conjunction with other hospital stocks as the future of the Affordable Care Act was called into question when a U.S. District Court Judge ruled the law unconstitutional. The law currently remains intact, and we expect a succession of appeals will ensue, perhaps over a protracted period. In the meantime, we have not changed our valuation metrics for HCA as we remain pleased with the company’s fundamental performance.

Loomis, Sayles and Company All Cap Growth Segment

We are an active manager with a long-term, private equity approach to investing. Through our proprietary bottom-up research framework, we look to invest in those few high-quality businesses with sustainable competitive advantages and profitable growth when they trade at a significant discount to intrinsic value. For the period, the All Cap Growth segment posted a negative absolute return. Our holdings in the communication services, consumer staples, energy, financials, materials and healthcare sectors detracted from the segment’s performance. Our holdings in the information technology, consumer discretionary and industrials sectors contributed positively to results.

Facebook, Schlumberger and Monster Beverage were the largest detractors during the period. Social media company Facebook provides an online platform that allows people to connect, share, and interact with friends and communities. A holding since its IPO in 2012, Facebook reported solid overall growth and market share gains versus the prior-year period. However, shares reacted negatively to management’s mid-year guidance for a near-term deceleration in revenue growth, coupled with a multi-year acceleration in investments. The company noted that revenue in the second half of 2018 would be negatively impacted by its decisions to provide users with more choices around privacy and to increase focus on Instagram and FB Stories – “experience” products that the company believes will drive improved engagement but where monetization is currently lower. Facebook also announced

 

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a 50% — 55% increase in investments for 2018 and a further 40% — 50% increase in 2019, targeting core product development, safety and security, virtual reality, marketing, and content acquisition. As a result, expenses will increase faster than revenue over the near term, pressuring margins, before moderating and growing in line with revenues. We believe Facebook is a unique, high-quality company, benefiting from the secular shift from traditional advertising to online advertising, and positioned for strong and sustainable growth over our investment horizon. We believe management’s decisions and actions illustrate their commitment to preserve platform integrity and to sustain the company’s leadership and long-term growth. With 2.6 billion people worldwide using its apps — Facebook, Messenger, WhatsApp, and Instagram — and more than 90 million global businesses with Facebook pages, the scale and reach of Facebook’s network is unrivaled. We believe that corporations will continue to allocate an increasing proportion of their advertising spending online, and Facebook remains one of very few platforms where advertisers can reach consumers at such scale. We believe Facebook is selling at a significant discount to our estimate of intrinsic value and offers a compelling reward-to-risk opportunity.

Schlumberger is the world’s leading supplier of technology, equipment, integrated project management, and information solutions to the international oil and gas exploration and production industry. Over its 90 year history, Schlumberger has built a brand and reputation for delivering consistent service and product excellence across the spectrum of exploration, drilling, and production. Only a few companies can compete with the scope of Schlumberger’s integrated suite of products and services, and even fewer can compete with the scale and depth of its technology and service execution. The company reported global sales that rose 12% compared with the year-ago period, but stocks in the oil services sector came under pressure on short-term concerns around slowing activity in North America, where stronger-than-expected production, coupled with insufficient takeaway capacity in the Permian basin, is leading operators to delay well completions. More recently, concerns over global demand growth have contributed to falling oil prices, impacting expectations for global service activity in 2019. In markets outside of North America, which have historically accounted for approximately 75% of revenue, the company continued to experience low demand for its services. Customer spending has lagged the rebound in oil prices over the past few years as companies continued to repair their balance sheets following years of low prices. However, North America revenues grew over 40% during the period as the company redeployed idle capacity to accommodate growing drilling and well completion activity. While management has been prematurely optimistic about a recovery outside of the US, based on contracts Schlumberger has already won, management indicated that international growth in 2019 would be in the double digits. Over a two-year period which began in 2014 and saw industry spending fall by over 50%, Schlumberger gained share and maintained leading margins, while several competitors posted losses or very thin margins. Schlumberger was one of the few companies to generate positive free cash flow during the downturn, and continued to invest to strengthen its ability to offer integrated solutions to clients. The need to replace naturally-depleting reservoirs creates long-term secular growth in the demand for oil and the need to extract hydrocarbons from harsher environments. Oilfield services like those Schlumberger provides are key to

 

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accessing difficult-to-reach resources. Thanks to its superior products and services and its competitive advantages, we believe Schlumberger is well positioned to weather the current environment and capitalize on the growth in oilfield services as market supply-demand normalizes. We believe the shares of Schlumberger are selling at a significant discount to our estimate of intrinsic value and offer a compelling reward-to-risk opportunity.

Monster Beverage is a leading marketer and distributor of energy drinks, globally. The energy drink industry is effectively a duopoly, creating strong competitive advantages for Monster and Red Bull, which command a combined share of approximately 75% — 80% of the US market, and an estimated 50% of the $42 billion global energy drink market. In 2014, Monster entered a partnership with Coca-Cola in which Coca-Cola purchased a 16.7% stake in the company, and Monster became its exclusive energy drink partner. The partnership gives Monster access to an unmatched global distribution system, accelerating its pace of international expansion, and extending its benefits of scale. During the period, Monster reported uneven financial results that were generally below consensus expectations due to temporary inventory reductions outside the US, higher raw material costs, and continued investments in advance of scale in China and India. The company announced it would raise prices on its Monster brands beginning November 1, 2018, to cover higher input and shipping costs, which it did successfully in 2015 without sacrificing market share. Monster has made great progress transitioning its distribution operations to Coca-Cola partners, globally. Sales outside the US have grown from approximately 20% of total revenues in 2013 to approximately 30% today, and we believe they can grow to exceed 50% over the next decade. The company continues to take share in most markets, including the US, where the Monster brand continues to reach record highs in market share as reported by Nielsen. We believe energy drinks are here to stay and their continued penetration around the world is the primary long-term business driver for the company. Monster’s large presence in North America and its expansion into international markets make it well positioned to benefit from this long-term secular growth driver. With its shares selling at a significant discount to our estimate of intrinsic value, we believe Monster offers a compelling reward-to-risk opportunity.

Amazon, Autodesk and Visa were the largest contributors during the period. Online retailer Amazon offers millions of products — sold by Amazon or by third parties — with the value proposition to consumers of selection, price, and convenience. Amazon’s enterprise IT business, Amazon Web Services (AWS), offers a suite of secure, on-demand cloud-computing services, with a value proposition to clients of speed, agility, and savings. In both of its core markets, we believe Amazon possesses strong and sustainable competitive advantages that would be difficult for competitors to replicate. In e-commerce these include its brand, scale, network advantage, technology platform, and logistics and distribution systems. The AWS business benefits from its brand, technology platform, and massive scale, which allows it to pass along cost savings while continuing to innovate. Amazon reported healthy fundamentals and strong growth in revenue during the period. With gross merchandise volume (GMV) growing, by our estimates, above growth in the teens for US e-commerce and low single-digit growth in global retail sales, the company continued to take market share. AWS also posted strong revenue growth, approaching a

 

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$27 billion annual run rate, that was many multiples higher than our estimate of single-digit growth in overall enterprise IT spending. Under the thoughtful leadership of founder Jeff Bezos, Amazon continued rapid investment in key areas that capitalize on its strength, focusing on businesses with high, durable growth prospects and strong financial returns. With an increasing shift to higher-margin product categories such as third-party sales, AWS, and advertising, gross margins expanded during the period. Amazon is one of the best-positioned companies in e-commerce and enterprise IT — each addressing large, underpenetrated markets. The secular shift in consumer preference from traditional brick-and-mortar retail to online retail and e-commerce spending is the primary growth driver for Amazon, but both markets benefit from secular growth that is still in its early stages. We believe the current share price shows a lack of appreciation for Amazon’s significant long-term growth opportunities and the sustainability of its business model.

Autodesk, a global leader in 3D design software and services, is synonymous with computer-aided design — a degree of brand recognition that takes years, if not decades, to develop. The company’s broad suite of products are viewed as mission critical among its clients in the architecture, engineering, construction and manufacturing industries, and create high switching costs for its global installed user base. In early 2016, the company began transitioning its business model from an up-front, licensing-plus-maintenance model to a cloud-delivered, subscription-based model where fees are recognized ratably over the life of the customer relationship. Although the transition causes near-term income statement and cash flow metrics to remain depressed, we believe the subscription model will result in increased visibility of future revenue streams and higher lifetime customer value, leading to increased revenue, profitability and free cash flow. The company reported solid results during the period with annualized recurring revenue (ARR) and earnings per share that exceeded consensus expectations. Importantly, Autodesk demonstrated continued progress in its model transition, returning to positive free cash flow in its last two earnings releases after reporting negative free cash flow in its prior fiscal year, and reporting that ARR grew to 96% of the revenue mix. Following the trough from the effects of the model change, we believe profitability and cash flow will increasingly improve over our investment time horizon. We believe Autodesk can generate attractive and sustainable revenue growth and faster operating margin expansion and free cash flow growth that is not currently reflected in the share price.

Visa is the largest payments technology company in the world, with a comprehensive offering of digital payment products including credit cards, debit cards — which Visa invented — and transaction security services known as tokenization. Visa has one of the world’s most recognized brands, which took decades and significant investment to build. Through its open-loop, multi-party system, Visa has built a massive global network, orchestrating transaction settlements between merchants, merchants’ banks, card-issuer banks and cardholders in more than 200 countries. A growing global network with 3.3 billion Visa-branded cards outstanding that are accepted by 54 million merchants worldwide creates a powerful virtuous cycle, reinforcing Visa’s difficult-to-replicate competitive advantages. During the period, Visa reported revenue and earnings that were strong and in-line with or better than market expectations. Payment volume growth in the

 

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low double digits benefited from stronger global growth, but was twice the rate of growth in the approximately $45 trillion of global personal consumer expenditures, reflecting the strength of the ongoing, long-term secular shift from cash to electronic payments. Other areas of growth for Visa include expansion of its network capabilities into new segments such as person-to-person payments, business-to-business payments, and government and corporate disbursements to consumers. In aggregate, these new segments represent an estimated $30 trillion of addressable spending. We estimate Visa can generate double-digit cash flow growth over our forecast period. As the company continues to scale its businesses in regions around the world, we expect it will be able to increase cash flow growth, expand margins, and improve its return on invested capital. We believe the shares of Amazon, Autodesk and Visa trade at significant discounts to our estimates of intrinsic value and offer compelling reward-to-risk opportunities.

 

 

Hypothetical Growth of $100,000 Investment in Class Y Shares4

December 31, 2008 through December 31, 2018

 

LOGO

See notes to chart on page 17.

 

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Table of Contents

Top Ten Holdings as of December 31, 2018

 

      Security name    % of
net assets		  
1    Alphabet, Inc., Class A      4.09 % 
2    Regeneron Pharmaceuticals, Inc.      3.86  
3    Visa, Inc., Class A      3.83  
4    Amazon.com, Inc.      3.65  
5    Alibaba Group Holding Ltd., Sponsored ADR      2.82  
6    Oracle Corp.      2.8  
7    Facebook, Inc., Class A      2.54  
8    Monster Beverage Corp.      2.38  
9    Autodesk, Inc.      2.35  
10    Expeditors International of Washington, Inc.      2.26  

The portfolio is actively managed and holdings are subject to change. There is no guarantee the Fund continues to invest in the securities referenced. The holdings listed exclude any temporary cash investments.

 

|  16

Table of Contents

NATIXIS U.S. EQUITY OPPORTUNITIES FUND

 

Average Annual Total Returns — December 31, 20184

 

           
                       Life of
Class N		     Expense Ratios5  
     1 Year     5 Years     10 Years     Gross     Net  
     
Class Y (Inception 11/15/94)              
NAV     -6.24 %      9.85 %      15.39 %      — %      0.93 %      0.93 % 
     
Class A (Inception 7/7/94)              
NAV     -6.48       9.57       15.10       —       1.19       1.19  
With 5.75% Maximum Sales Charge     -11.85       8.28       14.43       —        
     
Class C (Inception 7/7/94)              
NAV     -7.18       8.76       14.25       —       1.94       1.94  
With CDSC1     -7.97       8.76       14.25       —        
     
Class N (Inception 5/1/17)              
NAV     -6.11       —       —       5.67       13.39       0.76  
   
Comparative Performance              
S&P 500® Index2     -4.38       8.49       13.12       5.03        
Russell 1000® Index3     -4.78       8.21       13.28       4.68                  

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Total return and value will vary, and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month-end performance, visit im.natixis.com/performance. Performance for other share classes will be greater or less than shown based on differences in fees and sales charges. You may not invest directly in an index. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends and capital gains, if any. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares.

 

1

Performance for Class C shares assumes a 1.00% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase.

 

2

S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors.

 

3

Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® Index represents approximately 92% of the U.S. market and is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected.

 

4

Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower.

 

5

Expense ratios are as shown in the Fund’s prospectus in effect as of the date of this report. The expense ratios for the current reporting period can be found in the Financial Highlights section of this report under Ratios to Average Net Assets. Net expenses reflect contractual expense caps set to expire on 4/30/19. When a Fund’s expenses are below the cap, gross and net expense ratios will be the same. See Note 6 of the Notes to Financial Statements for more information about the Fund’s expense caps.

 

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Table of Contents

ADDITIONAL INFORMATION

The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers’ views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because the Fund is actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned.

All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

ADDITIONAL INDEX INFORMATION

This document may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis affiliates”) and does not sponsor, endorse or participate in the provision of any Natixis affiliates services, funds or other financial products.

The index information contained herein 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.

PROXY VOTING INFORMATION

A description of the Natixis Funds’ proxy voting policies and procedures is available without charge, upon request, by calling Natixis Funds at 800-225-5478; on Natixis Funds’ website at im.natixis.com; and on the Securities and Exchange Commission’s (SEC) website at www.sec.gov. Information regarding how Natixis Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available from Natixis Funds’ website and the SEC’s website.

QUARTERLY PORTFOLIO SCHEDULES

Natixis Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

 

|  18

Table of Contents

UNDERSTANDING FUND EXPENSES

As a mutual fund shareholder, you incur different costs: transaction costs, including sales charges (loads) on purchases and contingent deferred sales charges on redemptions, and ongoing costs, including management fees, distribution and/or service fees (12b-1 fees), and other fund expenses. Certain exemptions may apply. These costs are described in more detail in the Funds’ prospectus. The following examples are intended to help you understand the ongoing costs of investing in the Funds and help you compare these with the ongoing costs of investing in other mutual funds.

The first line in the table of each class of Fund shares shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2018 through December 31, 2018. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = 8.60) and multiply the result by the number in the Expenses Paid During Period column as shown for your class.

The second line in the table for each class of Fund shares provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs, such as sales charges. Therefore, the second line in the table of each Fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.

 

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Table of Contents
LOOMIS SAYLES MULTI-ASSET INCOME
FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $928.90       $4.62  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.42       $4.84  
Class C        
Actual     $1,000.00       $925.70       $8.25  
Hypothetical (5% return before expenses)     $1,000.00       $1,016.64       $8.64  
Class N        
Actual     $1,000.00       $929.90       $3.16  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.93       $3.31  
Class Y        
Actual     $1,000.00       $929.70       $3.40  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.68       $3.57  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 0.95%, 1.70%, 0.65% and 0.70% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

LOOMIS SAYLES STRATEGIC ALPHA
FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $993.90       $5.03  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.16       $5.09  
Class C        
Actual     $1,000.00       $989.80       $8.78  
Hypothetical (5% return before expenses)     $1,000.00       $1,016.38       $8.89  
Class N        
Actual     $1,000.00       $995.30       $3.57  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.63       $3.62  
Class Y        
Actual     $1,000.00       $994.00       $3.77  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.43       $3.82  

 

*

Expenses are equal to the Fund’s annualized expense ratio: 1.00%, 1.75%, 0.71% and 0.75% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Table of Contents
NATIXIS U.S. EQUITY OPPORTUNITIES
FUND		   BEGINNING
ACCOUNT VALUE
7/1/2018		     ENDING
ACCOUNT VALUE
12/31/2018		     EXPENSES PAID
DURING PERIOD*
7/1/2018 – 12/31/2018		  
Class A        
Actual     $1,000.00       $899.10       $5.50  
Hypothetical (5% return before expenses)     $1,000.00       $1,019.41       $5.85  
Class C        
Actual     $1,000.00       $895.80       $9.08  
Hypothetical (5% return before expenses)     $1,000.00       $1,015.63       $9.65  
Class N        
Actual     $1,000.00       $900.80       $3.64  
Hypothetical (5% return before expenses)     $1,000.00       $1,021.37       $3.87  
Class Y        
Actual     $1,000.00       $900.30       $4.31  
Hypothetical (5% return before expenses)     $1,000.00       $1,020.67       $4.58  

 

*

Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.15%, 1.90%, 0.76% and 0.90% for Class A, C, N and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), divided by 365 (to reflect the half-year period).

 

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Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund

 

Principal
Amount (‡)		      Description    Value (†)  
  Bonds and Notes — 44.9% of Net Assets  
  Non-Convertible Bonds — 44.5%  
   Banking — 14.6%

 

$ 610,000      Australia & New Zealand Banking Group Ltd., (fixed rate to 6/15/2026, variable rate thereafter), 6.750%, 144A(a)    $ 598,563  
  1,400,000      Banco Bilbao Vizcaya Argentaria S.A., (fixed rate to 11/16/2027, variable rate thereafter), 6.125%(a)      1,172,500  
  2,000,000      Banco Santander S.A., (fixed rate to 5/19/2019, variable rate thereafter), 6.375%(a)      1,910,572  
  650,000      BB&T Corp., MTN, 3.750%, 12/06/2023      655,469  
  1,600,000      BNP Paribas S.A., (fixed rate to 11/15/2027, variable rate thereafter), 5.125%, 144A(a)      1,384,000  
  1,400,000      Credit Agricole S.A., (fixed rate to 1/23/2024, variable rate thereafter), 7.875%, 144A(a)      1,398,172  
  580,000      Credit Suisse Group AG, (fixed rate to 12/11/2023, variable rate thereafter), 7.500%, 144A(a)      589,570  
  1,100,000      Credit Suisse Group AG, (fixed rate to 9/12/2025, variable rate thereafter), 7.250%, 144A(a)      1,037,685  
  1,560,000      HSBC Holdings PLC, (fixed rate to 3/23/2023, variable rate thereafter), 6.250%(a)      1,462,500  
  315,000      Intesa Sanpaolo SpA., (fixed rate to 5/16/2024, variable rate thereafter), 6.250%, (EUR)(a)      343,206  
  675,000      Lloyds Banking Group PLC, 3.750%, 1/11/2027      620,121  
  1,500,000      Macquarie Bank Ltd., (fixed rate to 3/08/2027, variable rate thereafter), 6.125%, 144A(a)      1,280,625  
  1,405,000      Royal Bank of Scotland Group PLC, (fixed rate to 8/10/2025, variable rate thereafter), 8.000%(a)      1,405,815  
  1,510,000      Societe Generale S.A., (fixed rate to 12/18/2023, variable rate thereafter), 7.875%, 144A(a)      1,493,012  
  1,800,000      Standard Chartered PLC, (fixed rate to 4/02/2023, variable rate thereafter), 7.750%, 144A(a)      1,773,000  
  310,000      UniCredit SpA., (fixed rate to 6/03/2023, variable rate thereafter), 6.625%, (EUR)(a)      333,585  
     

 

 

  
        17,458,395  
     

 

 

  
   Cable Satellite — 2.9%

 

  625,000      CCO Holdings LLC/CCO Holdings Capital Corp., 5.125%, 5/01/2027, 144A      582,125  
  1,700,000      DISH DBS Corp., 5.000%, 3/15/2023      1,415,250  
  1,600,000      Telenet Finance Luxembourg Notes S.a.r.l., 5.500%, 3/01/2028, 144A      1,450,416  
     

 

 

  
        3,447,791  
     

 

 

  
   Chemicals — 0.8%

 

  330,000      Dow Chemical Co. (The), 5.550%, 11/30/2048, 144A      334,604  
  650,000      Hercules LLC, 6.500%, 6/30/2029      648,375  
     

 

 

  
        982,979  
     

 

 

  
   Electric — 0.6%

 

  640,000      Niagara Mohawk Power Corp., 4.278%, 12/15/2028, 144A      661,880  
     

 

 

  

 

See accompanying notes to financial statements.

 

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Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Finance Companies — 0.8%

 

$ 960,000      Aviation Capital Group LLC, 4.375%, 1/30/2024, 144A    $ 961,238  
     

 

 

  
   Government Owned – No Guarantee — 1.2%

 

  715,000      YPF S.A., 8.500%, 3/23/2021, 144A      707,714  
  740,000      YPF S.A., 8.750%, 4/04/2024, 144A      695,600  
     

 

 

  
        1,403,314  
     

 

 

  
   Healthcare — 0.6%

 

  680,000      Vizient, Inc., 10.375%, 3/01/2024, 144A      720,800  
     

 

 

  
   Independent Energy — 3.9%

 

  1,170,000      Chesapeake Energy Corp., 8.000%, 6/15/2027      982,800  
  1,580,000      Gulfport Energy Corp., 6.375%, 1/15/2026      1,366,700  
  540,000      MEG Energy Corp., 6.375%, 1/30/2023, 144A      510,300  
  1,165,000      MEG Energy Corp., 7.000%, 3/31/2024, 144A      1,112,575  
  810,000      SM Energy Co., 6.750%, 9/15/2026      724,950  
     

 

 

  
        4,697,325  
     

 

 

  
   Life Insurance — 0.9%

 

  1,095,000      Prudential Financial, Inc., (fixed rate to 9/15/2028, variable rate thereafter), 5.700%, 9/15/2048      1,018,350  
     

 

 

  
   Metals & Mining — 1.9%

 

  1,035,000      Alliance Resource Operating Partners LP/Alliance Resource Finance Corp., 7.500%, 5/01/2025, 144A      1,037,587  
  625,000      First Quantum Minerals Ltd., 7.500%, 4/01/2025, 144A      515,625  
  820,000      Stillwater Mining Co., 7.125%, 6/27/2025, 144A      754,925  
     

 

 

  
        2,308,137  
     

 

 

  
   Midstream — 2.7%

 

  640,000      AmeriGas Partners LP/AmeriGas Finance Corp., 5.875%, 8/20/2026      584,000  
  1,120,000      EQM Midstream Partners LP, Series 10Y, 5.500%, 7/15/2028      1,096,927  
  1,020,000      Plains All American Pipeline LP, Series B, (fixed rate to 11/15/2022, variable rate thereafter), 6.125%(a)      856,800  
  730,000      Summit Midstream Partners LP, Series A, (fixed rate to 12/15/2022, variable rate thereafter), 9.500%(a)      674,710  
     

 

 

  
        3,212,437  
     

 

 

  
   Non-Agency Commercial Mortgage-Backed Securities — 0.3%

 

  370,000      Commercial Mortgage Trust, Series 2016-SAVA, Class C, 1-month LIBOR + 3.000%, 5.349%, 10/15/2034, 144A(b)      369,789  
     

 

 

  
   Oil Field Services — 1.5%

 

  735,000      Noble Holding International Ltd., 7.875%, 2/01/2026, 144A      626,587  
  870,000      Transocean, Inc., 6.800%, 3/15/2038      578,550  
  625,000      Transocean, Inc., 8.375%, 12/15/2021      620,313  
     

 

 

  
        1,825,450  
     

 

 

  
   Property & Casualty Insurance — 1.6%

 

  635,000      AON Corp., 4.500%, 12/15/2028      642,816  
  510,000      Ardonagh Midco 3 PLC, 8.375%, 7/15/2023, 144A, (GBP)      547,066  

 

See accompanying notes to financial statements.

 

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Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Property & Casualty Insurance — continued

 

$ 770,000      Assurant, Inc., (fixed rate to 3/27/2028, variable rate thereafter), 7.000%, 3/27/2048    $ 731,500  
     

 

 

  
        1,921,382  
     

 

 

  
   Sovereigns — 3.6%

 

  19,205,000      Argentina Politica Monetaria, Argentina Central Bank 7-day Repo Reference Rate, 65.509%, 6/21/2020, (ARS)(c)      552,713  
  380,000      Ecuador Government International Bond, 7.875%, 1/23/2028      308,750  
  860,000      Kingdom of Bahrain, 6.125%, 7/05/2022, 144A      876,340  
  315,000      Kingdom of Bahrain, 6.125%, 8/01/2023      320,902  
  930,000      Republic of Argentina, 6.875%, 1/11/2048      647,513  
  1,105,000      Republic of Argentina, 6.875%, 4/22/2021      998,379  
  745,000      Republic of Oman, 5.625%, 1/17/2028, 144A      655,880  
     

 

 

  
        4,360,477  
     

 

 

  
   Technology — 0.6%

 

  410,000      Dell International LLC/EMC Corp., 8.100%, 7/15/2036, 144A      445,608  
  290,000      Dell International LLC/EMC Corp., 8.350%, 7/15/2046, 144A      314,009  
     

 

 

  
        759,617  
     

 

 

  
   Treasuries — 4.6%

 

  4,472(††)      Brazil Notas do Tesouro Nacional, 10.000%, 1/01/2029, (BRL)      1,154,648  
  18,000,000,000      Indonesia Treasury Bond, 7.000%, 5/15/2027, (IDR)      1,171,627  
  206,984(†††)      Mexican Fixed Rate Bonds, Series M-20, 7.500%, 6/03/2027, (MXN)      978,236  
  2,279,800,000      Republic of Colombia, Series B, 6.000%, 4/28/2028, (COP)      665,310  
  7,300,000      South Africa Government International Bond, Series R186, 10.500%, 12/21/2026, (ZAR)      551,946  
  895,000      U.S. Treasury Note, 3.125%, 11/15/2028      928,353  
     

 

 

  
        5,450,120  
     

 

 

  
   Utility Other — 0.4%

 

  460,000      ACWA Power Management And Investments One Ltd., 5.950%, 12/15/2039, 144A      432,087  
     

 

 

  
   Wireless — 0.5%

 

  565,000      Sprint Corp., 7.625%, 3/01/2026      557,938  
     

 

 

  
   Wirelines — 0.5%

 

  640,000      British Telecommunications PLC, 5.125%, 12/04/2028      643,603  
     

 

 

  
   Total Non-Convertible Bonds
(Identified Cost $56,436,535)		      53,193,109  
     

 

 

  
     
  Convertible Bonds — 0.4%  
   Cable Satellite — 0.3%

 

  400,000      DISH Network Corp., 3.375%, 8/15/2026      323,006  
     

 

 

  
   Independent Energy — 0.0%

 

  25,000      Whiting Petroleum Corp., 1.250%, 4/01/2020      23,635  
     

 

 

  

 

See accompanying notes to financial statements.

 

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Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Technology — 0.1%

 

$ 120,000      Nuance Communications, Inc., 1.250%, 4/01/2025    $ 105,209  
     

 

 

  
   Total Convertible Bonds
(Identified Cost $591,547)		      451,850  
     

 

 

  
     
   Total Bonds and Notes
(Identified Cost $57,028,082)		      53,644,959  
     

 

 

  
     
Shares                
  Common Stocks — 33.0%  
   Air Freight & Logistics — 0.1%

 

  3,260      Oesterreichische Post AG      112,024  
     

 

 

  
   Airlines — 0.2%

 

  3,219      Delta Air Lines, Inc.      160,628  
  3,400      Japan Airlines Co. Ltd.      120,500  
     

 

 

  
        281,128  
     

 

 

  
   Automobiles — 0.5%

 

  17,174      General Motors Co.      574,470  
     

 

 

  
   Banks — 2.8%

 

  93,793      Bank of America Corp.      2,311,060  
  1,272      BB&T Corp.      55,103  
  1,500      Canadian Imperial Bank of Commerce      111,720  
  5,030      Citigroup, Inc.      261,862  
  4,824      First Hawaiian, Inc.      108,588  
  1,508      JPMorgan Chase & Co.      147,211  
  39,100      Mizuho Financial Group, Inc.      60,497  
  2,700      National Bank of Canada      110,852  
  3,400      Sumitomo Mitsui Financial Group, Inc.      112,081  
  900      Toronto-Dominion Bank (The)      44,736  
     

 

 

  
        3,323,710  
     

 

 

  
   Beverages — 0.3%

 

  1,600      Asahi Group Holdings Ltd.      62,006  
  1,093      Carlsberg AS, Class B      116,272  
  2,488      Molson Coors Brewing Co., Class B      139,726  
     

 

 

  
        318,004  
     

 

 

  
   Biotechnology — 2.9%

 

  24,475      AbbVie, Inc.      2,256,350  
  5,614      Amgen, Inc.      1,092,878  
  2,669      Gilead Sciences, Inc.      166,946  
     

 

 

  
        3,516,174  
     

 

 

  
   Capital Markets — 0.2%

 

  7,023      AllianceBernstein Holding LP      191,868  
     

 

 

  
   Chemicals — 0.7%

 

  7,984      Eastman Chemical Co.      583,710  
  2,421      LyondellBasell Industries NV, Class A      201,331  
     

 

 

  
        785,041  
     

 

 

  

 

See accompanying notes to financial statements.

 

25  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Commercial Services & Supplies — 0.0%

 

  1,003      KAR Auction Services, Inc.    $ 47,863  
     

 

 

  
   Communications Equipment — 0.2%

 

  6,412      Cisco Systems, Inc.      277,832  
     

 

 

  
   Construction & Engineering — 0.2%

 

  3,268      ACS Actividades de Construccion y Servicios S.A.      126,495  
  869      Hochtief AG      117,360  
     

 

 

  
        243,855  
     

 

 

  
   Consumer Finance — 0.2%

 

  3,000      Capital One Financial Corp.      226,770  
     

 

 

  
   Containers & Packaging — 0.1%

 

  4,161      International Paper Co.      167,938  
     

 

 

  
   Diversified Telecommunication Services — 0.5%

 

  21,125      AT&T, Inc.      602,907  
     

 

 

  
   Electric Utilities — 1.4%

 

  16,000      CK Infrastructure Holdings Ltd.      121,083  
  11,635      Contact Energy Ltd.      46,125  
  1,034      Duke Energy Corp.      89,234  
  1,449      Endesa S.A.      33,415  
  10,669      Enel SpA      61,851  
  1,799      Entergy Corp.      154,840  
  13,087      Exelon Corp.      590,224  
  3,494      FirstEnergy Corp.      131,200  
  48,410      Mercury NZ Ltd.      118,533  
  10,064      PPL Corp.      285,113  
     

 

 

  
        1,631,618  
     

 

 

  
   Entertainment — 0.8%

 

  915      Cinemark Holdings, Inc.      32,757  
  10,212      Viacom, Inc., Class B      262,448  
  5,621      Walt Disney Co. (The)      616,343  
     

 

 

  
        911,548  
     

 

 

  
   Food & Staples Retailing — 0.2%

 

  3,706      Walgreens Boots Alliance, Inc.      253,231  
     

 

 

  
   Food Products — 0.1%

 

  1,115      Hershey Co. (The)      119,506  
     

 

 

  
   Gas Utilities — 0.1%

 

  2,208      National Fuel Gas Co.      113,005  
     

 

 

  
   Health Care Equipment & Supplies — 3.8%

 

  32,872      Abbott Laboratories      2,377,632  
  12,515      Medtronic PLC      1,138,364  
  6,511      Stryker Corp.      1,020,599  
     

 

 

  
        4,536,595  
     

 

 

  
   Health Care Providers & Services — 1.8%

 

  2,183      AmerisourceBergen Corp.      162,415  

 

See accompanying notes to financial statements.

 

|  26

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Health Care Providers & Services — continued

 

  3,039      CVS Health Corp.    $ 199,115  
  377      Encompass Health Corp.      23,261  
  6,866      UnitedHealth Group, Inc.      1,710,458  
     

 

 

  
        2,095,249  
     

 

 

  
   Hotels, Restaurants & Leisure — 1.1%

 

  621      Darden Restaurants, Inc.      62,013  
  6,606      McDonald’s Corp.      1,173,028  
  703      Starbucks Corp.      45,273  
     

 

 

  
        1,280,314  
     

 

 

  
   Household Durables — 0.1%

 

  4,800      Nikon Corp.      71,496  
  2,374      Persimmon PLC      58,462  
     

 

 

  
        129,958  
     

 

 

  
   Independent Power & Renewable Electricity Producers — 0.9%

 

  76,321      AES Corp. (The)      1,103,602  
     

 

 

  
   Industrial Conglomerates — 0.1%

 

  59,000      NWS Holdings Ltd.      121,149  
     

 

 

  
   Industrial Other — 0.0%

 

  943      Iron Mountain, Inc.      30,563  
     

 

 

  
   Insurance — 0.3%

 

  4,444      MetLife, Inc.      182,471  
  2,080      Prudential Financial, Inc.      169,624  
     

 

 

  
        352,095  
     

 

 

  
   IT Services — 1.6%

 

  1,915      Accenture PLC, Class A      270,034  
  1,903      Automatic Data Processing, Inc.      249,521  
  3,165      Booz Allen Hamilton Holding Corp.      142,647  
  1,900      Broadridge Financial Solutions, Inc.      182,875  
  5,221      Leidos Holdings, Inc.      275,251  
  927      MasterCard, Inc., Class A      174,879  
  4,456      Paychex, Inc.      290,308  
  7,335      Sabre Corp.      158,729  
  1,335      Visa, Inc., Class A      176,140  
     

 

 

  
        1,920,384  
     

 

 

  
   Leisure Products — 0.1%

 

  3,000      Sankyo Co. Ltd.      114,091  
     

 

 

  
   Machinery — 0.7%

 

  4,126      Allison Transmission Holdings, Inc.      181,173  
  1,514      Cummins, Inc.      202,331  
  381      Hillenbrand, Inc.      14,451  
  1,421      Illinois Tool Works, Inc.      180,026  
  5,376      PACCAR, Inc.      307,185  
     

 

 

  
        885,166  
     

 

 

  

 

See accompanying notes to financial statements.

 

27  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Media — 1.5%

 

  33,392      Comcast Corp., Class A    $ 1,136,998  
  11,755      Interpublic Group of Cos., Inc. (The)      242,506  
  4,034      Omnicom Group, Inc.      295,450  
  3,763      Sinclair Broadcast Group, Inc., Class A      99,117  
     

 

 

  
        1,774,071  
     

 

 

  
   Multi-Utilities — 0.6%

 

  8,465      AGL Energy Ltd.      122,930  
  10,912      CenterPoint Energy, Inc.      308,046  
  2,510      Dominion Energy, Inc.      179,365  
  1,876      NorthWestern Corp.      111,509  
     

 

 

  
        721,850  
     

 

 

  
   Multiline Retail — 0.6%

 

  4,210      Kohl’s Corp.      279,291  
  9,176      Macy’s, Inc.      273,261  
  1,553      Target Corp.      102,638  
     

 

 

  
        655,190  
     

 

 

  
   Oil, Gas & Consumable Fuels — 1.0%

 

  1,626      Chevron Corp.      176,893  
  2,837      ConocoPhillips      176,887  
  1,938      CVR Energy, Inc.      66,822  
  2,693      Enagas S.A.      72,797  
  3,150      HollyFrontier Corp.      161,028  
  2,970      Marathon Petroleum Corp.      175,260  
  3,196      Occidental Petroleum Corp.      196,170  
  8,907      Plains GP Holdings LP, Class A(d)      179,031  
  899      Targa Resources Corp.      32,382  
     

 

 

  
        1,237,270  
     

 

 

  
   Paper & Forest Products — 0.2%

 

  6,225      Domtar Corp.      218,684  
     

 

 

  
   Pharmaceuticals — 2.0%

 

  8,100      Astellas Pharma, Inc.      103,491  
  5,732      Bristol-Myers Squibb Co.      297,949  
  2,119      Johnson & Johnson      273,457  
  18,594      Merck & Co., Inc.      1,420,768  
  6,865      Pfizer, Inc.      299,657  
     

 

 

  
        2,395,322  
     

 

 

  
   Professional Services — 0.2%

 

  4,995      Robert Half International, Inc.      285,714  
     

 

 

  
   Real Estate Management & Development — 0.2%

 

  1,310      Aroundtown S.A.      10,868  
  1,216      Castellum AB      22,470  
  3,500      CK Asset Holdings Ltd.      25,608  
  1,000      Daiwa House Industry Co. Ltd.      31,898  
  1,184      Entra ASA, 144A      15,769  
  2,513      Fabege AB      33,589  

 

See accompanying notes to financial statements.

 

|  28

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Real Estate Management & Development — continued

 

  454      Grand City Properties S.A.    $ 9,868  
  4,900      Hongkong Land Holdings Ltd.      30,890  
  10,000      K Wah International Holdings Ltd.      4,750  
  2,000      Kerry Properties Ltd.      6,826  
  4,800      Swire Properties Ltd.      16,866  
  242      TLG Immobilien AG      6,695  
  43      Vonovia SE      1,938  
     

 

 

  
        218,035  
     

 

 

  
   REITs – Apartments — 0.0%

 

  78      Invincible Investment Corp.      32,170  
     

 

 

  
   REITs – Diversified — 0.1%

 

  76      Equinix, Inc.      26,795  
  2,300      Mapletree Logistics Trust      2,128  
  288      NexPoint Residential Trust, Inc.      10,094  
  1,849      Preferred Apartment Communities, Inc., Class A      25,997  
  233      PS Business Parks, Inc.      30,523  
  2,111      UMH Properties, Inc.      24,994  
     

 

 

  
        120,531  
     

 

 

  
   REITs – Health Care — 0.0%

 

  662      CareTrust REIT, Inc.      12,221  
  847      Omega Healthcare Investors, Inc.      29,772  
     

 

 

  
        41,993  
     

 

 

  
   REITs – Hotels — 0.1%

 

  3,296      Braemar Hotels & Resorts, Inc.      29,434  
  1,152      Hersha Hospitality Trust      20,206  
  525      Hospitality Properties Trust      12,537  
  44      Japan Hotel REIT Investment Corp.      31,406  
  1,306      Xenia Hotels & Resorts, Inc.      22,463  
     

 

 

  
        116,046  
     

 

 

  
   REITs – Manufactured Homes — 0.0%

 

  317      Equity Lifestyle Properties, Inc.      30,790  
     

 

 

  
   REITs – Office Property — 0.1%

 

  46,000      Champion REIT      31,473  
  18,361      Green REIT PLC      28,395  
  5      Mori Trust Sogo REIT, Inc.      7,280  
  5      One REIT, Inc.      12,142  
  2,281      VEREIT, Inc.      16,309  
     

 

 

  
        95,599  
     

 

 

  
   REITs – Regional Malls — 0.0%

 

  244      Taubman Centers, Inc.      11,100  
  550      Washington Prime Group, Inc.      2,673  
     

 

 

  
        13,773  
     

 

 

  
   REITs – Shopping Centers — 0.1%

 

  23      AEON REIT Investment Corp.      26,476  

 

See accompanying notes to financial statements.

 

29  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   REITs – Shopping Centers — continued

 

  7      Frontier Real Estate Investment Corp.    $ 27,788  
  3,000      Link REIT      30,413  
  369      Retail Value, Inc.      9,443  
  312      Urstadt Biddle Properties, Inc., Class A      5,996  
     

 

 

  
        100,116  
     

 

 

  
   REITs – Single Tenant — 0.1%

 

  301      National Retail Properties, Inc.      14,602  
  271      Realty Income Corp.      17,084  
  192      Spirit Realty Capital, Inc.      6,768  
  1,059      STORE Capital Corp.      29,980  
     

 

 

  
        68,434  
     

 

 

  
   REITs – Storage — 0.1%

 

  326      Extra Space Storage, Inc.      29,497  
  322      Life Storage, Inc.      29,943  
  1,101      National Storage Affiliates Trust      29,132  
  145      Public Storage      29,349  
     

 

 

  
        117,921  
     

 

 

  
   REITs – Warehouse/Industrials — 0.0%

 

  24      EastGroup Properties, Inc.      2,202  
  300      Granite Real Estate Investment Trust      11,693  
  13,950      Hansteen Holdings PLC      16,474  
  67      Rexford Industrial Realty, Inc.      1,974  
     

 

 

  
        32,343  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 0.1%

 

  1,095      KLA-Tencor Corp.      97,991  
     

 

 

  
   Software — 2.1%

 

  4,234      j2 Global, Inc.      293,755  
  22,282      Microsoft Corp.      2,263,183  
     

 

 

  
        2,556,938  
     

 

 

  
   Specialty Retail — 0.5%

 

  4,742      Best Buy Co., Inc.      251,136  
  503      Dick’s Sporting Goods, Inc.      15,694  
  3,999      Foot Locker, Inc.      212,747  
  1,214      Williams-Sonoma, Inc.      61,246  
     

 

 

  
        540,823  
     

 

 

  
   Technology Hardware, Storage & Peripherals — 0.2%

 

  4,942      Hewlett Packard Enterprise Co.      65,284  
  5,349      HP, Inc.      109,440  
     

 

 

  
        174,724  
     

 

 

  
   Textiles, Apparel & Luxury Goods — 0.1%

 

  1,641      Ralph Lauren Corp.      169,778  
     

 

 

  
   Thrifts & Mortgage Finance — 0.1%

 

  3,800      Genworth MI Canada, Inc.      111,896  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  30

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Tobacco — 0.6%

 

  5,667      Altria Group, Inc.    $ 279,893  
  3,073      British American Tobacco PLC      97,780  
  3,827      Imperial Brands PLC      116,156  
  3,610      Philip Morris International, Inc.      241,004  
     

 

 

  
        734,833  
     

 

 

  
   Trading Companies & Distributors — 0.3%

 

  16,200      Marubeni Corp.      113,667  
  2,800      Mitsubishi Corp.      76,766  
  7,300      Mitsui & Co. Ltd.      112,152  
  7,600      Sumitomo Corp.      107,835  
     

 

 

  
        410,420  
     

 

 

  
   Wireless Telecommunication Services — 0.1%

 

  4,500      NTT DOCOMO, Inc.      101,111  
     

 

 

  
   Total Common Stocks
(Identified Cost $42,882,558)		      39,442,024  
     

 

 

  
     
Principal
Amount (‡)		                
  Senior Loans — 8.2%  
   Airlines — 1.8%

 

$ 2,063,636      Gol LuxCo S.A., 1st Lien Term Loan, 6.500%, 8/31/2020      2,110,068  
     

 

 

  
   Building Materials — 0.9%

 

  1,126,401      CPG International, Inc., 2017 Term Loan, 6-month LIBOR + 3.750%, 6.633%, 5/05/2024(b)      1,078,529  
     

 

 

  
   Chemicals — 0.5%

 

  332,384      ASP Chromaflo Dutch I BV, Term Loan B2, 1-month LIBOR + 3.500%, 6.022%, 11/20/2023(b)      322,827  
  255,617      ASP Chromaflo Intermediate Holdings, Inc., Term Loan B1, 1-month LIBOR + 3.500%, 6.022%, 11/18/2023(b)      248,268  
     

 

 

  
        571,095  
     

 

 

  
   Financial Other — 0.9%

 

  1,138,482      Wall Street Systems Delaware, Inc., 2017 Term Loan B, 1-month LIBOR + 3.000%, 5.522%, 11/21/2024(b)      1,056,887  
     

 

 

  
   Independent Energy — 0.7%

 

  1,100,000      Gavilan Resources LLC, 2nd Lien Term Loan, 1-month LIBOR + 6.000%, 8.504%, 3/01/2024(b)      833,250  
  27,214      MEG Energy Corp., 2017 Term Loan B, 1-month LIBOR + 3.500%, 6.030%, 12/31/2023(b)      26,567  
     

 

 

  
        859,817  
     

 

 

  
   Lodging — 0.5%

 

  606,700      Hilton Worldwide Finance LLC, Term Loan B2, 1-month LIBOR + 1.750%, 4.256%, 10/25/2023(b)      583,949  
     

 

 

  

 

See accompanying notes to financial statements.

 

31  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Media Entertainment — 0.5%

 

$ 668,869      LSC Communications, Inc., 2017 Term Loan B, 1-month LIBOR + 5.500%, 8.022%, 9/30/2022(b)    $ 658,836  
     

 

 

  
   Refining — 0.3%

 

  401,963      Delek U.S. Holdings, Inc., 2018 Term Loan B, 1-month LIBOR + 2.250%, 4.772%, 3/31/2025(b)      391,580  
     

 

 

  
   Retailers — 0.9%

 

  1,103,763      Staples, Inc., 2017 Term Loan B, 3-month LIBOR + 4.000%, 6.541%, 9/12/2024(b)      1,055,937  
     

 

 

  
   Wireless — 1.2%

 

  1,492,500      Asurion LLC, 2018 Term Loan B7, 1-month LIBOR + 3.000%, 5.522%, 11/03/2024(b)      1,424,875  
     

 

 

  
   Total Senior Loans
(Identified Cost $10,280,056)		      9,791,573  
     

 

 

  
     
Shares                
  Exchange Traded Funds & Notes — 6.9%  
  606,468      Alerian MLP ETF      5,294,466  
  130,000      JPMorgan Alerian MLP Index ETN      2,901,600  
     

 

 

  
   Total Exchange Traded Funds & Notes
(Identified Cost $9,915,646)		      8,196,066  
     

 

 

  
     
  Preferred Stocks — 1.3%  
  Non-Convertible Preferred Stocks — 0.9%  
   Midstream — 0.3%

 

  14,215      Energy Transfer Operating LP, Series C, (fixed rate to 5/15/2023, variable rate thereafter), 7.375%      312,872  
     

 

 

  
   Property & Casualty Insurance — 0.6%

 

  30,000      Allstate Corp. (The), Series G, 5.625%      718,500  
     

 

 

  
   Total Non-Convertible Preferred Stocks
(Identified Cost $1,105,375)		      1,031,372  
     

 

 

  
     
  Convertible Preferred Stock — 0.4%  
   Midstream — 0.4%

 

  932      Chesapeake Energy Corp., 5.750% (Identified Cost $631,845)      480,774  
     

 

 

  
   Total Preferred Stocks
(Identified Cost $1,737,220)		      1,512,146  
     

 

 

  
     

 

See accompanying notes to financial statements.

 

|  32

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
  Short-Term Investments — 6.8%  
$ 8,096,724      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $8,097,399 on 1/02/2019 collateralized by $6,035,000 U.S. Treasury Inflation Indexed Bond, 2.125% due 2/15/2041 valued at $8,261,094 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $8,096,724)    $ 8,096,724  
     

 

 

  
     
   Total Investments — 101.1%
(Identified Cost $129,940,286)		      120,683,492  
   Other assets less liabilities — (1.1)%      (1,263,050 ) 
     

 

 

  
   Net Assets — 100.0%    $ 119,420,442  
     

 

 

  
     
  (‡)      Principal Amount stated in U.S. dollars unless otherwise noted.

 

  (†)      See Note 2 of Notes to Financial Statements.

 

  (††)      Amount shown represents units. One unit represents a principal amount of 1,000.

 

  (†††)      Amount shown represents units. One unit represents a principal amount of 100.

 

  (a)      Perpetual bond with no specified maturity date.

 

  (b)      Variable rate security. Rate as of December 31, 2018 is disclosed.

 

  (c)      Variable rate security. The interest rate adjusts periodically based on; (i) changes in current interest rates and/or prepayments on underlying pools of assets, if applicable, (ii) reference to a base lending rate plus or minus a margin, and/or (iii) reference to a base lending rate adjusted by a multiplier and/or subject to certain floors or caps. Rate as of December 31, 2018 is disclosed.

 

  (d)      Non-income producing security.

 

     
  144A      All or a portion of these securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2018, the value of Rule 144A holdings amounted to $23,883,151 or 20.0% of net assets.

 

  ETF      Exchange-Traded Fund

 

  ETN      Exchange-Traded Note

 

  LIBOR      London Interbank Offered Rate

 

  MTN      Medium Term Note

 

  REITs      Real Estate Investment Trusts

 

     
  ARS      Argentine Peso

 

  BRL      Brazilian Real

 

  COP      Colombian Peso

 

  EUR      Euro

 

  GBP      British Pound

 

  IDR      Indonesian Rupiah

 

  MXN      Mexican Peso

 

  ZAR      South African Rand

 

 

See accompanying notes to financial statements.

 

33  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Multi-Asset Income Fund – (continued)

 

Industry Summary at December 31, 2018

 

Banking

      14.6 % 

Independent Energy

      4.6  

Treasuries

      4.6  

Health Care Equipment & Supplies

      3.8  

Sovereigns

      3.6  

Midstream

      3.4  

Cable Satellite

      3.2  

Biotechnology

      2.9  

Banks

      2.8  

Integrated Energy

      2.4  

Property & Casualty Insurance

      2.2  

Software

      2.1  

Pharmaceuticals

      2.0  

Airlines

      2.0  

Chemicals

      2.0  

Other Investments, less than 2% each

      33.6  

Short-Term Investments

      6.8  

Exchange-Traded Funds

      4.5  
  

 

 

  

Total Investments

      101.1  

Other assets less liabilities

      (1.1 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

Currency Exposure Summary at December 31, 2018

 

United States Dollar

      92.6 % 

Other, less than 2% each

      8.5  
  

 

 

  

Total Investments

      101.1  

Other assets less liabilities

      (1.1 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

|  34

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund

 

Principal
Amount (‡)		      Description    Value (†)  
  Bonds and Notes — 64.7% of Net Assets  
  Non-Convertible Bonds — 63.1%  
   ABS Car Loan — 11.4%

 

$ 447,112      ACC Trust, Series 2018-1, Class A, 3.700%, 12/21/2020, 144A    $ 447,314  
  510,199      Ally Auto Receivables Trust, Series 2016-3, Class A3, 1.440%, 8/17/2020(a)      508,378  
  1,455,000      AmeriCredit Automobile Receivables Trust, Series 2015-4, Class D,
3.720%, 12/08/2021(a)		      1,461,995  
  295,000      AmeriCredit Automobile Receivables Trust, Series 2016-2, Class D,
3.650%, 5/09/2022(a)		      297,417  
  5,478,849      AmeriCredit Automobile Receivables Trust, Series 2017-3, Class A2B,
1-month LIBOR + 0.240%, 2.695%, 12/18/2020(b)		      5,479,725  
  2,805,000      AmeriCredit Automobile Receivables Trust, Series 2018-2, Class D,
4.010%, 7/18/2024		      2,842,559  
  4,320,000      AmeriCredit Automobile Receivables Trust, Series 2018-3, Class A2B,
1-month LIBOR + 0.250%, 2.705%, 1/18/2022(b)		      4,320,099  
  3,845,000      AmeriCredit Automobile Receivables Trust, Series 2018-3, Class D,
4.040%, 11/18/2024		      3,892,624  
  1,451,321      BMW Vehicle Owner Trust, Series 2018-A, Class A2B, 1-month LIBOR + 0.007%, 2.576%, 11/25/2020(a)(b)      1,451,058  
  1,785,000      California Republic Auto Receivables Trust, Series 2018-1, Class D,
4.330%, 4/15/2025		      1,807,006  
  1,001,886      CarMax Auto Owner Trust, Series 2018-1, Class A2B, 1-month LIBOR + 0.150%, 2.605%, 5/17/2021(a)(b)      1,001,415  
  1,435,000      CarMax Auto Owner Trust, Series 2018-2, Class D, 3.990%, 4/15/2025      1,449,280  
  6,700,000      CarMax Auto Owner Trust, Series 2018-3, Class A2B, 1-month LIBOR + 0.200%, 2.655%, 10/15/2021(b)      6,696,365  
  5,075,000      CarMax Auto Owner Trust, Series 2018-4, Class A2B, 1-month LIBOR + 0.200%, 2.655%, 2/15/2022(b)      5,075,168  
  1,125,000      CarMax Auto Owner Trust, Series 2018-4, Class D, 4.150%, 4/15/2025      1,147,569  
  284,085      CIG Auto Receivables Trust, Series 2017-1A, Class A, 2.710%, 5/15/2023, 144A(a)      282,358  
  550,193      CPS Auto Receivables Trust, Series 2014-D, Class C, 4.350%, 11/16/2020, 144A(a)      552,270  
  815,000      CPS Auto Receivables Trust, Series 2017-D, Class D, 3.730%, 9/15/2023, 144A(a)      813,159  
  230,000      CPS Auto Receivables Trust, Series 2018-A, Class C, 3.050%, 12/15/2023, 144A(a)      228,311  
  1,795,000      CPS Auto Trust, Series 2018-D, Class C, 3.830%, 9/15/2023, 144A      1,814,078  
  1,205,000      Credit Acceptance Auto Loan Trust, Series 2018-2A, Class C,
4.160%, 9/15/2027, 144A		      1,222,645  
  1,672,084      Drive Auto Receivables Trust, Series 2016-CA, Class C, 3.020%, 11/15/2021, 144A(a)      1,671,102  
  2,955,000      Drive Auto Receivables Trust, Series 2018-1, Class D, 3.810%, 5/15/2024(a)      2,959,787  
  5,320,000      Drive Auto Receivables Trust, Series 2018-4, Class A2B, 1-month LIBOR + 0.270%, 2.725%, 10/15/2020(b)      5,316,828  

 

See accompanying notes to financial statements.

 

35  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Car Loan — continued

 

$ 5,755,000      Drive Auto Receivables Trust, Series 2018-5, Class A2B, 1-month LIBOR + 0.320%, 2.775%, 7/15/2021(b)    $ 5,746,636  
  2,395,000      Drive Auto Receivables Trust, Series 2018-5, Class D, 4.300%, 4/15/2026      2,425,920  
  2,155,000      DT Auto Owner Trust, Series 2018-3A, Class C, 3.790%, 7/15/2024, 144A      2,163,928  
  733,849      DT Auto Owner Trust, Series 2015-2A, Class D, 4.250%, 2/15/2022, 144A(a)      735,443  
  4,014,517      DT Auto Owner Trust, Series 2016-1A, Class D, 4.660%, 12/15/2022, 144A(a)      4,037,995  
  3,045,000      DT Auto Owner Trust, Series 2016-2A, Class D, 5.430%, 11/15/2022, 144A(a)      3,076,776  
  1,390,000      DT Auto Owner Trust, Series 2018-2A, Class D, 4.150%, 3/15/2024, 144A      1,398,485  
  440,000      First Investors Auto Owner Trust, Series 2014-2A, Class D,
3.470%, 2/15/2021, 144A(a)		      439,982  
  345,000      First Investors Auto Owner Trust, Series 2015-1A, Class D,
3.590%, 1/18/2022, 144A(a)		      344,967  
  1,710,000      First Investors Auto Owner Trust, Series 2015-2A, Class D,
4.220%, 12/15/2021, 144A(a)		      1,720,315  
  220,000      First Investors Auto Owner Trust, Series 2016-2A, Class D,
3.350%, 11/15/2022, 144A(a)		      218,364  
  605,000      Flagship Credit Auto Trust, Series 2015-1, Class C, 3.760%, 6/15/2021, 144A(a)      606,954  
  650,000      Flagship Credit Auto Trust, Series 2016-3, Class D, 3.890%, 11/15/2022, 144A(a)      653,150  
  4,120,000      Ford Credit Auto Lease Trust, Series 2018-B, Class A2B, 1-month LIBOR + 0.160%, 2.615%, 4/15/2021(b)      4,113,258  
  1,260,000      GLS Auto Receivables Trust, Series 2018-3A, Class B, 3.780%, 8/15/2023, 144A      1,265,573  
  5,495,000      GM Financial Automobile Leasing Trust, Series 2018-3, Class A2B,
1-month LIBOR + 0.170%, 2.640%, 9/21/2020(b)		      5,488,319  
  5,610,000      GM Financial Consumer Automobile Receivables Trust, Series 2018-3, Class A2B, 1-month LIBOR + 0.110%, 2.565%, 7/16/2021(b)      5,610,794  
  1,362,000      Hertz Vehicle Financing II LP, Series 2017-2A, Class A, 3.290%, 10/25/2023, 144A(a)      1,344,640  
  532,363      Honda Auto Receivables Owner Trust, Series 2016-2, Class A3, 1.390%, 4/15/2020(a)      530,256  
  1,059,824      Honda Auto Receivables Owner Trust, Series 2017-1, Class A3, 1.720%, 7/21/2021(a)      1,050,712  
  5,095,000      Honda Auto Receivables Owner Trust, Series 2018-1, Class A3, 2.640%, 2/15/2022(a)      5,064,703  
  3,045,000      NextGear Floorplan Master Owner Trust, Series 2017-1A, Class A1,
1-month LIBOR + 0.850%, 3.305%, 4/18/2022, 144A(a)(b)		      3,061,861  
  4,355,000      NextGear Floorplan Master Owner Trust, Series 2017-2A, Class A1,
1-month LIBOR + 0.680%, 3.135%, 10/17/2022, 144A(a)(b)		      4,364,009  
  2,590,000      NextGear Floorplan Master Owner Trust, Series 2018-1A, Class A1,
1-month LIBOR + 0.640%, 3.095%, 2/15/2023, 144A(a)(b)		      2,587,705  
  2,820,000      NextGear Floorplan Master Owner trust, Series 2018-2A, Class A1,
1-month LIBOR + 0.600%, 3.055%, 10/16/2023, 144A(b)		      2,821,347  

 

See accompanying notes to financial statements.

 

|  36

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Car Loan — continued

 

$ 582,137      Nissan Auto Receivables Owner Trust, Series 2016-C, Class A3, 1.180%, 1/15/2021(a)    $ 576,675  
  54,337      Nissan Auto Receivables Owner Trust, Series 2017-A, Class A2B,
1-month LIBOR + 0.060%, 2.515%, 1/15/2020(a)(b)		      54,338  
  1,525,000      Nissan Auto Receivables Owner Trust, Series 2017-A, Class A3,
1.740%, 8/16/2021(a)		      1,510,813  
  3,220,000      Nissan Auto Receivables Owner Trust, Series 2018-A, Class A3,
2.650%, 5/16/2022(a)		      3,204,671  
  3,285,000      Nissan Auto Receivables Owner Trust, Series 2018-B, Class A2B,
1-month LIBOR + 0.100%, 2.555%, 7/15/2021(b)		      3,283,177  
  6,465,000      Nissan Auto Receivables Owner Trust, Series 2018-C, Class A2B,
1-month LIBOR + 0.170%, 2.485%, 10/15/2021(b)		      6,459,007  
  3,045,000      Prestige Auto Receivables Trust, Series 2016-1A, Class D,
5.150%, 11/15/2021, 144A(a)		      3,101,594  
  3,585,000      Santander Drive Auto Receivables Trust, Series 2018-2, Class D, 3.880%, 2/15/2024      3,615,074  
  5,125,000      Santander Drive Auto Receivables Trust, Series 2018-5, Class A2B,
1-month LIBOR + 0.230%, 2.685%, 7/15/2021(b)		      5,125,203  
  2,720,000      Santander Drive Auto Receivables Trust, Series 2018-5, Class C, 3.810%, 12/16/2024      2,738,841  
  353,000      Tidewater Auto Receivables Trust, Series 2018-AA, Class D,
4.300%, 11/15/2024, 144A		      355,357  
  331,633      Toyota Auto Receivables Owner Trust, Series 2016-C, Class A3,
1.140%, 8/17/2020(a)		      329,456  
  338,154      Toyota Auto Receivables Owner Trust, Series 2017-B, Class A2B,
1-month LIBOR + 0.060%, 2.515%, 1/15/2020(a)(b)		      338,154  
  4,970,000      Toyota Auto Receivables Owner Trust, Series 2018-C, Class A2B,
1-month LIBOR + 0.120%, 2.575%, 8/16/2021(b)		      4,970,111  
  233,124      USAA Auto Owner Trust, Series 2016-1, Class A3, 1.200%, 6/15/2020(a)      232,653  
  454,624      Veros Automobile Receivables Trust, Series 2017-1, Class A,
2.840%, 4/17/2023, 144A(a)		      453,270  
  3,400,000      Volkswagen Auto Loan Enhanced Trust, Series 2018-1, Class A2B,
1-month LIBOR + 0.180%, 2.650%, 7/20/2021(b)		      3,400,970  
  4,605,000      Volvo Financial Equipment Master Owner Trust, Series 2018-A, Class A,
1-month LIBOR + 0.520%, 2.975%, 7/17/2023, 144A(b)		      4,653,398  
  595,000      Westlake Automobile Receivables Trust, Series 2017-1A, Class D,
3.460%, 10/17/2022, 144A(a)		      592,716  
  740,000      Westlake Automobile Receivables Trust, Series 2018-1A, Class D,
3.410%, 5/15/2023, 144A(a)		      734,729  
  5,705,000      Westlake Automobile Receivables Trust, Series 2018-3A, Class A2B,
1-month LIBOR + 0.350%, 2.805%, 1/18/2022, 144A(b)		      5,706,296  
  1,140,000      Westlake Automobile Receivables Trust, Series 2018-3A, Class D,
4.000%, 10/16/2023, 144A		      1,143,803  
  4,865,000      World Omni Automobile Lease Securitization Trust, Series 18-B, Class A2B, 1-month LIBOR + 0.180%, 2.635%, 6/15/2021(b)      4,858,780  
     

 

 

  
        171,049,688  
     

 

 

  

 

See accompanying notes to financial statements.

 

37  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Credit Card — 4.1%

 

$ 5,420,000      American Express Credit Account Master Trust, Series 2017-6, Class A,
2.040%, 5/15/2023(a)		    $ 5,336,425  
  3,790,000      American Express Credit Account Master Trust, Series 2018-8, Class A,
3.180%, 4/15/2024		      3,820,396  
  2,050,000      BA Credit Card Trust, Series 2014-A1, Class A, 1-month LIBOR + 0.380%, 2.835%, 6/15/2021(a)(b)      2,050,153  
  995,000      Bank of America Credit Card Trust, Series 2016-A1, Class A,
1-month LIBOR + 0.390%, 2.845%, 10/15/2021(a)(b)		      995,644  
  4,385,000      Bank of America Credit Card Trust, Series 2017-A1, Class A1, 1.950%, 8/15/2022(a)      4,332,664  
  5,875,000      Bank of America Credit Card Trust, Series 2018-A1, Class A1, 2.700%, 7/17/2023(a)      5,853,904  
  2,585,000      Capital One Multi-Asset Execution Trust, Series 2017-A1, Class A1,
2.000%, 1/17/2023(a)		      2,556,579  
  3,500,000      Chase Issuance Trust, Series 2015-A4, Class A4, 1.840%, 4/15/2022(a)      3,447,698  
  3,120,000      Chase Issuance Trust, Series 2016-A2, Class A, 1.370%, 6/15/2021(a)      3,096,538  
  5,800,000      Citibank Credit Card Issuance Trust, Series 2016-A1, Class A1, 1.750%, 11/19/2021(a)      5,738,454  
  5,520,000      Citibank Credit Card Issuance Trust, Series 2017-A8, Class A8, 1.860%, 8/08/2022(a)      5,430,047  
  6,025,000      Citibank Credit Card Issuance Trust, Series 2018-A1, Class A1, 2.490%, 1/20/2023(a)      5,976,415  
  6,880,000      Discover Card Execution Note Trust, Series 2018-A5, Class A5, 3.320%, 3/15/2024(a)      6,963,783  
  5,425,000      Discover Card Execution Note Trust, Series 2018-A3, Class A3,
1-month LIBOR + 0.230%, 2.685%, 12/15/2023(b)		      5,406,751  
     

 

 

  
        61,005,451  
     

 

 

  
   ABS Home Equity — 8.8%

 

  493,951      Adjustable Rate Mortgage Trust, Series 2004-4, Class 3A1, 4.234%, 3/25/2035(a)(c)      492,543  
  1,001,991      Adjustable Rate Mortgage Trust, Series 2005-1, Class 3A1, 4.242%, 5/25/2035(a)(c)      1,008,493  
  1,046,314      Ajax Mortgage Loan Trust, Series 2016-C, Class A, 4.000%, 10/25/2057, 144A(a)(c)      1,045,078  
  332,364      Ajax Mortgage Loan Trust, Series 2017-A, Class A, 3.470%, 4/25/2057, 144A(a)(c)      329,662  
  1,392,094      Ajax Mortgage Loan Trust, Series 2017-B, Class A, 3.163%, 9/25/2056, 144A(a)(c)      1,374,067  
  390,220      Alternative Loan Trust, Series 2004-16CB, Class 1A1, 5.500%, 7/25/2034(a)      400,141  
  444,065      Alternative Loan Trust, Series 2004-16CB, Class 3A1, 5.500%, 8/25/2034(a)      454,660  
  303,858      Alternative Loan Trust, Series 2004-28CB, Class 5A1, 5.750%, 1/25/2035      301,382  
  764,719      Alternative Loan Trust, Series 2005-J1, Class 2A1, 5.500%, 2/25/2025      777,466  
  300,000      American Homes 4 Rent, Series 2014-SFR2, Class D, 5.149%, 10/17/2036, 144A(a)      317,722  
  2,170,000      American Homes 4 Rent, Series 2014-SFR2, Class E, 6.231%, 10/17/2036, 144A(a)      2,389,370  

 

See accompanying notes to financial statements.

 

|  38

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Home Equity — continued

 

$ 1,200,000      American Homes 4 Rent, Series 2014-SFR3, Class E, 6.418%, 12/17/2036, 144A(a)    $ 1,335,973  
  605,028      Banc of America Alternative Loan Trust, Series 2003-8, Class 1CB1,
5.500%, 10/25/2033		      617,355  
  1,154,137      Banc of America Funding Trust, Series 2004-B, Class 4A2, 4.285%, 11/20/2034(c)      1,132,356  
  328,160      Banc of America Funding Trust, Series 2005-5, Class 1A1, 5.500%, 9/25/2035      348,173  
  687,122      Banc of America Funding Trust, Series 2005-7, Class 3A1, 5.750%, 11/25/2035      724,270  
  467,097      Banc of America Funding Trust, Series 2007-4, Class 5A1, 5.500%, 11/25/2034      460,786  
  1,182,923      Banc of America Mortgage Trust, Series 2005-I, Class 4A1, 4.099%, 10/25/2035(c)      1,134,525  
  439,179      Bayview Opportunity Master Fund IIIa Trust, Series 2017-RN8, Class A1,
3.352%, 11/28/2032, 144A(c)		      437,279  
  529,639      Bayview Opportunity Master Fund IV Trust, Series 2018-RN2, Class A1,
3.598%, 2/25/2033, 144A(a)(c)		      525,545  
  227,428      Bayview Opportunity Master Fund IVa Trust, Series 2018-RN1, Class A1,
3.278%, 1/28/2033, 144A(a)(c)		      227,491  
  2,383,712      Bayview Opportunity Master Fund IVb Trust, Series 2018-RN9, Class A1,
4.213%, 10/29/2033, 144A(c)		      2,385,269  
  747,927      Bayview Opportunity Master Fund Trust, Series 2018-RN3, Class A1,
3.672%, 3/28/2033, 144A(a)(c)		      747,248  
  480,264      Bayview Opportunity Master Fund Trust, Series 2018-RN5, Class A1,
3.820%, 4/28/2033, 144A(c)		      479,608  
  1,184,893      Bayview Opportunity Master Fund Trust, Series 2018-RN8, Class A1,
4.066%, 9/28/2033, 144A(c)		      1,186,114  
  420,233      BCAP LLC Trust, Series 2007-AA2, Class 22A1, 6.000%, 3/25/2022      417,438  
  377,662      CAM Mortgage Trust, Series 2018-1, Class A1, 3.960%, 12/01/2065, 144A(c)      380,193  
  421,011      CHL Mortgage Pass-Through Trust, Series 2004-12, Class 8A1, 4.441%, 8/25/2034(c)      414,107  
  1,230,746      Citigroup Mortgage Loan Trust, Series 2018-A, Class A1, 4.000%, 1/25/2068, 144A(c)      1,231,920  
  2,991,220      Citigroup Mortgage Loan Trust, Series 2018-C, Class A1, 4.125%, 3/25/2059, 144A(c)      3,017,733  
  1,254,329      Citigroup Mortgage Loan Trust, Inc., Series 2005-3, Class 2A3, 4.539%, 8/25/2035(c)      1,239,257  
  2,200,000      Colony American Finance Ltd., Series 2015-1, Class D, 5.649%, 10/15/2047, 144A      2,205,982  
  1,065,000      Colony American Finance Ltd., Series 2016-1, Class C, 4.638%, 6/15/2048, 144A(a)(c)      1,061,361  
  1,045,096      Colony Starwood Homes Trust, Series 2016-2A, Class E, 1-month LIBOR + 3.350%, 5.805%, 12/17/2033, 144A(b)      1,050,756  
  580,013      Countrywide Alternative Loan Trust, Series 2003-22CB, Class 1A1,
5.750%, 12/25/2033(a)		      586,776  

 

See accompanying notes to financial statements.

 

39  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Home Equity — continued

 

$ 529,321      Countrywide Alternative Loan Trust, Series 2004-14T2, Class A11, 5.500%, 8/25/2034    $ 546,154  
  1,047,989      Countrywide Alternative Loan Trust, Series 2004-J10, Class 2CB1, 6.000%, 9/25/2034      1,084,372  
  503,163      Countrywide Alternative Loan Trust, Series 2004-J3, Class 1A1, 5.500%, 4/25/2034(a)      510,168  
  1      Countrywide Alternative Loan Trust, Series 2004-J7, Class 1A5,
4.867%, 8/25/2034(a)(c)(d)(e)		      1  
  71,476      Countrywide Home Loan Mortgage Pass Through Trust, Series 2004-HYB4, Class 2A1, 4.172%, 9/20/2034(a)(c)      69,071  
  523,707      Credit Suisse First Boston Mortgage Securities Corp., Series 2003-AR26, Class 7A1, 4.350%, 11/25/2033(a)(c)      526,070  
  297,526      Credit Suisse First Boston Mortgage Securities Corp., Series 2003-AR28, Class 4A1, 4.567%, 12/25/2033(a)(c)      300,554  
  2,878,375      Credit Suisse Mortgage Trust, Series 2018-RPL2, Class A1, 4.030%, 8/25/2062, 144A(c)      2,866,391  
  1,199,558      Credit Suisse Mortgage Trust, Series 2018-RPL7, Class A1, 4.000%, 8/26/2058, 144A      1,197,548  
  197,782      CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-27, Class 4A4, 5.750%, 11/25/2033(a)      200,750  
  722,542      Deutsche Mortgage Securities, Inc., Series 2004-4, Class 7AR1,
1-month LIBOR + 0.350%, 2.856%, 6/25/2034(b)		      702,108  
  600,906      DSLA Mortgage Loan Trust, Series 2005-AR5, Class 2A1A, 1-month LIBOR + 0.330%, 2.800%, 9/19/2045(b)      488,486  
  1,581,480      Dukinfield II PLC, Series 2, Class A, GBP 3-month LIBOR + 1.250%, 2.158%, 12/20/2052, (GBP)(a)(b)      2,022,241  
  565,585      Eurosail PLC, Series 2007-2X, Class A3C, GBP 3-month LIBOR + 0.150%, 1.050%, 3/13/2045, (GBP)(a)(b)      698,363  
  1,505,000      Federal National Mortgage Association, Series 2017-C05, Class 1M2,
1-month LIBOR + 2.200%, 4.706%, 1/25/2030(b)		      1,507,921  
  320,000      Federal National Mortgage Association, Series 2017-C07, Class 1M2,
1-month LIBOR + 2.400%, 4.906%, 5/25/2030(b)		      322,287  
  1,269,744      Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2014-DN1, Class M2, 1-month LIBOR + 2.200%, 4.706%, 2/25/2024(a)(b)      1,293,097  
  666,332      Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2014-DN2, Class M2, 1-month LIBOR + 1.650%, 4.156%, 4/25/2024(a)(b)      671,282  
  2,079,540      Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2015-DNA1, Class M2, 1-month LIBOR + 1.850%, 4.356%, 10/25/2027(a)(b)      2,105,179  
  130,000      Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2018-DNA1, Class M2, 1-month LIBOR + 1.800%, 4.306%, 7/25/2030(b)      124,857  
  565,126      GCAT LLC, Series 2017-2, Class A1, 3.500%, 4/25/2047, 144A(a)(c)      560,535  
  956,481      GCAT LLC, Series 2018-1, Class A1, 3.844%, 6/25/2048, 144A(c)      949,070  
  2,091,433      GCAT LLC, Series 2018-2, Class A1, 4.090%, 6/26/2023, 144A(c)      2,093,548  

 

See accompanying notes to financial statements.

 

|  40

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Home Equity — continued

 

$ 267,920      GMAC Mortgage Corp. Loan Trust, Series 2005-AR4, Class 3A1, 4.268%, 7/19/2035(c)    $ 260,013  
  1,948,972      Gosforth Funding PLC, Series 2018-1A, Class A1, 3-month LIBOR + 0.450%, 3.139%, 8/25/2060, 144A(b)      1,940,837  
  234,619      GSR Mortgage Loan Trust, Series 2005-AR4, Class 4A1, 4.202%, 7/25/2035(c)      229,727  
  1,115,000      Home Partners of America Trust, Series 2016-2, Class E, 1-month LIBOR + 3.780%, 6.235%, 10/17/2033, 144A(b)      1,117,945  
  1,123,000      Home Partners of America Trust, Series 2016-2, Class F, 1-month LIBOR + 4.700%, 7.155%, 10/17/2033, 144A(b)      1,123,001  
  2,154,510      IndyMac Index Mortgage Loan Trust, Series 2004-AR12, Class A1,
1-month LIBOR + 0.780%, 3.286%, 12/25/2034(b)		      1,909,917  
  2,525,087      IndyMac Index Mortgage Loan Trust, Series 2004-AR6, Class 4A,
4.558%, 10/25/2034(c)		      2,598,635  
  718,219      IndyMac Index Mortgage Loan Trust, Series 2004-AR7, Class A5,
1-month LIBOR + 1.220%, 3.726%, 9/25/2034(b)		      653,846  
  1,243,171      IndyMac Index Mortgage Loan Trust, Series 2005-16IP, Class A1,
1-month LIBOR + 0.640%, 3.146%, 7/25/2045(b)		      1,198,643  
  3,016,011      IndyMac Index Mortgage Loan Trust, Series 2006-AR2, Class 2A1,
1-month LIBOR + 0.210%, 2.716%, 2/25/2046(b)		      2,540,990  
  2,615,000      Invitation Homes Trust, Series 2018-SFR1, Class E, 1-month LIBOR + 2.000%, 4.455%, 3/17/2037, 144A(b)      2,580,585  
  4,475,000      Invitation Homes Trust, Series 2018-SFR2, Class E, 1-month LIBOR + 2.000%, 4.455%, 6/17/2037, 144A(b)      4,423,110  
  449,418      JPMorgan Mortgage Trust, Series 2003-A2, Class 3A1, 4.115%, 11/25/2033(a)(c)      452,802  
  1,461,762      JPMorgan Mortgage Trust, Series 2004-S1, Class 2A1, 6.000%, 9/25/2034      1,516,241  
  1,039,862      JPMorgan Mortgage Trust, Series 2005-A2, Class 3A2, 3.807%, 4/25/2035(a)(c)      1,045,733  
  207,226      JPMorgan Mortgage Trust, Series 2005-A3, Class 4A1, 4.714%, 6/25/2035(a)(c)      209,076  
  764,683      JPMorgan Mortgage Trust, Series 2006-A1, Class 1A2, 4.688%, 2/25/2036(c)      706,213  
  442,534      Lehman XS Trust, Series 2005-7N, Class 3A1, 1-month LIBOR + 0.280%, 2.786%, 12/25/2035(b)      386,266  
  565,812      Lehman XS Trust, Series 2006-2N, Class 1A1, 1-month LIBOR + 0.260%, 2.766%, 2/25/2046(b)      517,465  
  486,868      Ludgate Funding PLC, Series 2007-1, Class A2B, 3-month EURIBOR + 0.160%, Zero Coupon, 1/01/2061, (EUR)(a)(b)      518,657  
  1,769,312      Ludgate Funding PLC, Series 2008-W1X, Class A1, GBP 3-month LIBOR + 0.600%, 1.399%, 1/01/2061, (GBP)(a)(b)      2,143,109  
  343,025      MASTR Adjustable Rate Mortgages Trust, Series 2004-4, Class 5A1,
4.759%, 5/25/2034(a)(c)		      338,232  
  1,172,322      MASTR Adjustable Rate Mortgages Trust, Series 2004-7, Class 3A1,
4.201%, 7/25/2034(a)(c)		      1,144,003  
  249,951      MASTR Adjustable Rate Mortgages Trust, Series 2006-2, Class 1A1,
4.361%, 4/25/2036(c)		      248,362  

 

See accompanying notes to financial statements.

 

41  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Home Equity — continued

 

$ 376,694      MASTR Alternative Loan Trust, Series 2003-9, Class 4A1, 5.250%, 11/25/2033(a)    $ 388,763  
  399,459      MASTR Alternative Loan Trust, Series 2004-5, Class 1A1, 5.500%, 6/25/2034(a)      409,607  
  499,436      MASTR Alternative Loan Trust, Series 2004-5, Class 2A1, 6.000%, 6/25/2034(a)      517,347  
  1,365,349      MASTR Alternative Loan Trust, Series 2004-8, Class 2A1, 6.000%, 9/25/2034      1,454,128  
  140,460      MLCC Mortgage Investors, Inc., Series 2006-2, Class 2A, 4.185%, 5/25/2036(a)(c)      141,571  
  541,421      Morgan Stanley Mortgage Loan Trust, Series 2005-7, Class 4A2, 5.500%, 11/25/2035      499,001  
  1,005,591      Morgan Stanley Mortgage Loan Trust, Series 2005-7, Class 7A5, 5.500%, 11/25/2035      1,023,548  
  699,726      Newgate Funding PLC, Series 2007-3X, Class A2B, 3-month EURIBOR + 0.600%, 0.289%, 12/15/2050, (EUR)(a)(b)      767,956  
  73,432      NYMT Residential LLC, Series 2016-RP1A, Class A, 4.000%, 3/25/2021, 144A(a)(c)      73,253  
  1,153,345      Oak Hill Advisors Residential Loan Trust, Series 2017-NPL1, Class A1,
3.000%, 6/25/2057, 144A(a)(c)		      1,130,045  
  2,296,635      Oak Hill Advisors Residential Loan Trust, Series 2017-NPL2, Class A1,
3.000%, 7/25/2057, 144A(a)(c)		      2,245,758  
  2,512,920      Preston Ridge Partners Mortgage LLC, Series 2017-2A, Class A1,
3.470%, 9/25/2022, 144A(a)(c)		      2,490,742  
  1,165,000      Preston Ridge Partners Mortgage LLC, Series 2017-2A, Class A2,
5.000%, 9/25/2022, 144A(c)		      1,154,409  
  1,089,254      Preston Ridge Partners Mortgage LLC, Series 2017-3A, Class A1,
3.470%, 11/25/2022, 144A(a)(c)		      1,082,119  
  405,000      Preston Ridge Partners Mortgage LLC, Series 2017-3A, Class A2,
5.000%, 11/25/2022, 144A(c)		      397,506  
  895,000      Preston Ridge Partners Mortgage LLC, Series 2018-1A, Class A2,
5.000%, 4/25/2023, 144A(c)		      877,251  
  1,560,781      RCO Mortgage LLC, Series 2017-1, Class A1, 3.375%, 8/25/2022, 144A(a)(c)      1,551,616  
  863,300      Residential Accredit Loans, Inc. Trust, Series 2006-QO4, Class 2A1,
1-month LIBOR + 0.190%, 2.696%, 4/25/2046(b)		      800,911  
  1,331,525      Residential Asset Securitization Trust, Series 2005-A8CB, Class A9,
5.375%, 7/25/2035		      1,145,879  
  399,684      Residential Funding Mortgage Securities, Series 2006-S1, Class 1A3,
5.750%, 1/25/2036		      376,850  
  1,609,396      Residential Funding Mortgage Securities, Series 2006-SA2, Class 3A1,
4.959%, 8/25/2036(c)		      1,496,164  
  394,829      RMAC Securities No. 1 PLC, Series 2006-NS1X, Class A2C, 3-month EURIBOR + 0.150%, Zero Coupon, 6/12/2044, (EUR)(a)(b)      422,410  
  300,394      RMAC Securities No. 1 PLC, Series 2007-NS1X, Class A2A,
GBP 3-month LIBOR + 0.150%, 1.050%, 6/12/2044, (GBP)(a)(b)		      355,720  
  1,837,040      RMAT, Series 18-NPL1, Class A1, 4.090%, 5/25/2048, 144A(c)      1,832,494  

 

See accompanying notes to financial statements.

 

|  42

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Home Equity — continued

 

$ 2,776,745      Stanwich Mortgage Loan Trust, Series 2018-NPB1, Class A1,
4.016%, 5/16/2023, 144A(c)		    $ 2,762,997  
  3,376,852      Structured Adjustable Rate Mortgage Loan Trust, Series 2005-14, Class A1, 1-month LIBOR + 0.310%, 2.816%, 7/25/2035(b)      2,654,939  
  281,392      Structured Asset Securities Corp. Trust, Series 2005-1, Class 7A7, 5.500%, 2/25/2035      281,105  
  1,200,000      Towd Point Mortgage Funding PLC, Series 2016-GR1X, Class B, GBP 3-month LIBOR + 1.400%, 2.205%, 7/20/2046, (GBP)(a)(b)      1,531,955  
  1,796,287      Vericrest Opportunity Loan Trust, Series 2018-NPL4, Class A1A,
4.336%, 7/27/2048, 144A(c)		      1,796,109  
  1,128,128      Vericrest Opportunity Loan Trust, Series 2018-NPL7, Class A1A,
3.967%, 9/25/2048, 144A(c)		      1,122,017  
  9,749,170      Vericrest Opportunity Loan Trust, Series 2018-NPL8, Class A1A,
4.213%, 10/26/2048, 144A(c)		      9,730,565  
  1,878,243      VOLT LXX LLC, Series 2018-NPL6, Class A1A, 4.115%, 9/25/2048, 144A(c)      1,875,822  
  1,318,723      Wells Fargo Mortgage Backed Securitie Trust, Series 2006-3, Class A11,
5.500%, 3/25/2036		      1,310,130  
  1,292,565      Wells Fargo Mortgage Backed Securities Trust, Series 2004-I, Class 2A1,
4.324%, 7/25/2034(a)(c)		      1,313,505  
  227,813      Wells Fargo Mortgage Backed Securities Trust, Series 2004-O, Class A1,
4.679%, 8/25/2034(a)(c)		      233,727  
  121,954      Wells Fargo Mortgage Backed Securities Trust, Series 2005-11, Class 2A3, 5.500%, 11/25/2035      122,412  
  642,502      Wells Fargo Mortgage Backed Securities Trust, Series 2005-16, Class A18, 6.000%, 12/25/2035      638,531  
  309,458      Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR10, Class 2A4, 4.513%, 5/01/2035(a)(c)      317,827  
  381,035      Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR12, Class 2A5, 4.503%, 6/25/2035(a)(c)      389,402  
  758,013      Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR2, Class 3A1, 3.994%, 3/25/2035(c)      770,779  
     

 

 

  
        132,368,430  
     

 

 

  
   ABS Other — 5.0%

 

  997,596      Accelerated Assets LLC, Series 18-1, Class B, 4.510%, 12/02/2033, 144A      1,005,690  
  2,930,105      AIM Aviation Finance Ltd., Series 2015-1A, Class B1, 5.072%, 2/15/2040, 144A(a)(c)      2,927,587  
  336,918      Apollo Aviation Securitization Equity Trust, Series 2018-1A, Class B,
5.437%, 1/16/2038, 144A(a)		      344,247  
  350,000      Ascentium Equipment Receivables Trust, Series 2017-2A, Class C,
2.870%, 8/10/2022, 144A(a)		      347,249  
  1,091,458      Blackbird Capital Aircraft Lease Securitization Ltd., Series 2016-1A, Class A, 4.213%, 12/16/2041, 144A(a)(c)      1,111,568  
  1,245,495      Blackbird Capital Aircraft Lease Securitization Ltd., Series 2016-1A, Class B, 5.682%, 12/16/2041, 144A(a)(c)      1,307,092  
  1,378,949      Castlelake Aircraft Securitization Trust, Series 18-1, Class B,
5.300%, 6/15/2043, 144A		      1,396,282  

 

See accompanying notes to financial statements.

 

43  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Other — continued

 

$ 250,000      CCG Receivables Trust, Series 2018-1, Class C, 3.420%, 6/16/2025, 144A(a)    $ 249,013  
  580,000      Chesapeake Funding II LLC, Series 2017-2A, Class D, 3.710%, 5/15/2029, 144A      581,832  
  790,000      Chesapeake Funding II LLC, Series 2018-1A, Class C, 3.570%, 4/15/2030, 144A      791,544  
  2,025,000      Chesapeake Funding II LLC, Series 2018-1A, Class D, 3.920%, 4/15/2030, 144A      2,029,155  
  230,199      CLUB Credit Trust, Series 2017-P1, Class A, 2.420%, 9/15/2023, 144A(a)      229,552  
  601,133      Diamond Resorts Owner Trust, Series 2017-1A, Class C, 6.070%, 10/22/2029, 144A      609,767  
  2,603,193      Diamond Resorts Owner Trust, Series 2018-1, Class C, 4.530%, 1/21/2031, 144A      2,623,099  
  2,189,482      GCA2014 Holdings Ltd., Series 2014-1, Class C, 6.000%, 1/05/2030, 144A(d)(e)(f)(g)      1,673,859  
  884,735      GCA2014 Holdings Ltd., Series 2014-1, Class D, 7.500%, 1/05/2030, 144A(d)(e)(f)(g)      428,831  
  3,410,000      GCA2014 Holdings Ltd., Series 2014-1, Class E,
Zero Coupon, 1/05/2030, 144A(d)(e)(f)(g)(h)		      —  
  1,080,586      Global Container Assets Ltd., Series 2015-1A, Class B, 4.500%, 2/05/2030, 144A(g)(i)      1,035,544  
  5,025,000      Horizon Aircraft Finance I Ltd., Series 2018-1, Class A, 4.458%, 12/15/2038, 144A      5,122,116  
  2,435,000      Kestrel Aircraft Funding Ltd., Series 2018-1A, Class A, 4.250%, 12/15/2038, 144A(d)      2,366,135  
  1,233,310      MAPS Ltd., Series 2018-1A, Class B, 5.193%, 5/15/2043, 144A      1,252,927  
  1,100,000      Navistar Financial Dealer Note Master Owner Trust II, Series 2018-1, Class A, 1-month LIBOR + 0.630%, 3.136%, 9/25/2023, 144A(b)      1,099,587  
  245,897      OneMain Financial Issuance Trust, Series 2015-1A, Class A,
3.190%, 3/18/2026, 144A(a)		      245,698  
  2,670,000     

OneMain Financial Issuance Trust, Series 2015-2A, Class D,

5.640%, 7/18/2025, 144A(a)

      2,689,349  
  3,120,000      OneMain Financial Issuance Trust, Series 2015-3A, Class B,
4.160%, 11/20/2028, 144A(a)		      3,160,309  
  3,100,000      OneMain Financial Issuance Trust, Series 2016-1A, Class C,
6.000%, 2/20/2029, 144A(a)		      3,169,341  
  2,685,000      OneMain Financial Issuance Trust, Series 2016-2A, Class B,
5.940%, 3/20/2028, 144A(a)		      2,726,916  
  4,765,111      S-Jets Ltd., Series 2017-1, Class A, 3.967%, 8/15/2042, 144A(a)      4,807,213  
  3,718,000      SCF Equipment Trust LLC, Series 2018-1A, Class C, 4.210%, 4/20/2027, 144A      3,794,569  
  1,604,436      Shenton Aircraft Investment I Ltd., Series 2015-1A, Class A,
4.750%, 10/15/2042, 144A(a)		      1,624,400  
  1,410,000      SoFi Consumer Loan Program Trust, Series 2018-2, Class A2, 3.350%, 4/26/2027, 144A      1,408,033  
  569,029      SpringCastle America Funding LLC, Series 2016-AA, Class A,
3.050%, 4/25/2029, 144A(a)		      563,526  
  2,929,785      Sprite Ltd., Series 2017-1, Class B, 5.750%, 12/15/2037, 144A(a)      2,922,029  

 

See accompanying notes to financial statements.

 

|  44

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Other — continued

 

$ 1,824,083      TAL Advantage V LLC, Series 2013-2A, Class A, 3.550%, 11/20/2038, 144A(a)    $ 1,816,535  
  262,360      Thunderbolt Aircraft Lease Ltd., Series 2017-A, Class B, 5.750%, 5/17/2032, 144A(c)      269,687  
  1,212,946      Thunderbolt II Aircraft Lease Ltd., Series 2018-A, Class A, 4.147%, 9/15/2038, 144A(c)      1,223,738  
  1,511,509      Tidewater Sales Finance Master Trust, Series 2017-AA, Class A,
4.550%, 4/15/2021, 144A(g)(i)		      1,509,108  
  5,770,000      Verizon Owner Trust, Series 2017-3A, Class A1B, 1-month LIBOR + 0.270%, 2.740%, 4/20/2022, 144A(b)      5,768,268  
  2,295,000      Verizon Owner Trust, Series 2018-1A, Class A1B, 1-month LIBOR + 0.260%, 2.730%, 9/20/2022, 144A(a)(b)      2,291,543  
  5,940,000      Verizon Owner Trust, Series 2018-A, Class A1B, 1-month LIBOR + 0.240%, 2.710%, 4/20/2023(b)      5,936,114  
  1,196,294      Wave LLC, Series 2017-1A, Class B, 5.682%, 11/15/2042, 144A(a)      1,241,804  
     

 

 

  
        75,700,856  
     

 

 

  
   ABS Student Loan – 1.0%

 

  3,662,077      Massachusetts Educational Financing Authority, Series 2018-A, Class A,
3.850%, 5/25/2033		      3,705,583  
  1,692,872      Navient Student Loan Trust, Series 18-4A, Class A1, 1-month LIBOR + 0.250%, 2.756%, 6/27/2067, 144A(b)      1,689,499  
  1,075,000      SLM Private Credit Student Loan Trust, Series 2003-A, Class A3, 28-day ARS, 4.750%, 6/15/2032(a)(b)(d)      1,074,785  
  2,918,000      SLM Private Credit Student Loan Trust, Series 2003-B, Class A3, 28-day ARS, 4.750%, 3/15/2033(a)(b)(d)      2,917,416  
  315,000      SLM Private Credit Student Loan Trust, Series 2003-B, Class A4, 28-day ARS, 4.810%, 3/15/2033(b)(d)      314,937  
  1,527,089      SMB Private Education Loan Trust, Series 18-C, Class A1, 1-month LIBOR + 0.300%, 2.755%, 9/15/2025, 144A(b)      1,524,518  
  1,350,000      SMB Private Education Loan Trust, Series 2017-B, Class A2B, 1-month LIBOR + 0.750%, 3.205%, 10/15/2035, 144A(a)(b)      1,341,695  
  103,931      SoFi Professional Loan Program LLC, Series 2014-B, Class A1, 1-month LIBOR + 1.250%, 3.756%, 8/25/2032, 144A(a)(b)      104,743  
  518,063      SoFi Professional Loan Program LLC, Series 2015-A, Class A1, 1-month LIBOR + 1.200%, 3.706%, 3/25/2033, 144A(a)(b)      522,265  
  1,373,358      SoFi Professional Loan Program LLC, Series 2016-A, Class B,
3.570%, 1/26/2038, 144A(a)		      1,346,441  
     

 

 

  
        14,541,882  
     

 

 

  
   ABS Whole Business — 0.9%

 

  3,460,866      Adams Outdoor Advertising LP, Series 2018-1, Class A, 4.810%, 11/15/2048, 144A      3,559,393  
  3,068,275      Coinstar Funding LLC, Series 2017-1A, Class A2, 5.216%, 4/25/2047, 144A(a)      3,102,150  
  746,250      Driven Brands Funding LLC, Series 2018-1A, Class A2, 4.739%, 4/20/2048, 144A      759,668  
  2,168,613      Five Guys Funding LLC, Series 2017-1A, Class A2, 4.600%, 7/25/2047, 144A      2,211,587  

 

See accompanying notes to financial statements.

 

45  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   ABS Whole Business — continued

 

$ 3,017,438      Planet Fitness Master Issuer LLC, Series 2018-1A, Class A2I,
4.262%, 9/05/2048, 144A		    $ 3,029,990  
  900,000      Wingstop Funding LLC, Series 2018-1, Class A2, 4.970%, 12/05/2048, 144A      920,385  
     

 

 

  
        13,583,173  
     

 

 

  
   Aerospace & Defense — 0.6%

 

  3,425,000      General Dynamics Corp., 3-month LIBOR + 0.290%, 2.908%, 5/11/2020(b)      3,420,448  
  3,425,000      General Dynamics Corp., 3-month LIBOR + 0.380%, 2.998%, 5/11/2021(b)      3,413,405  
  2,550,000      Leonardo U.S. Holdings, Inc., 6.250%, 1/15/2040, 144A      2,378,819  
     

 

 

  
        9,212,672  
     

 

 

  
   Agency Commercial Mortgage-Backed Securities — 0.1%

 

  50,099,630      Government National Mortgage Association, Series 2012-135, Class IO,
0.579%, 1/16/2053(a)(c)(j)		      1,802,920  
     

 

 

  
   Airlines — 0.3%

 

  4,349,693      Latam Airlines Pass Through Trust, Series 2015-1, Class B, 4.500%, 8/15/2025      4,167,441  
     

 

 

  
   Automotive — 4.5%

 

  10,090,000      American Honda Finance Corp., 3-month LIBOR + 0.260%, 3.048%, 6/16/2020(b)      10,055,076  
  6,045,000      BMW U.S. Capital LLC, 3-month LIBOR + 0.380%, 2.788%, 4/06/2020, 144A(a)(b)      6,013,385  
  5,985,000      BMW U.S. Capital LLC, 3-month LIBOR + 0.410%, 2.835%, 4/12/2021, 144A(a)(b)      5,926,754  
  5,785,000      BMW U.S. Capital LLC, 3-month LIBOR + 0.410%, 3.198%, 9/13/2019, 144A(a)(b)      5,782,570  
  3,135,000      Daimler Finance North America LLC, 3.100%, 5/04/2020, 144A      3,117,659  
  3,585,000      General Motors Financial Co., Inc., 3-month LIBOR + 0.850%, 3.258%, 4/09/2021(b)      3,503,405  
  5,955,000      Nissan Motor Acceptance Corp., 3-month LIBOR + 0.580%,
3.016%, 1/13/2020, 144A(a)(b)		      5,942,682  
  6,165,000      Nissan Motor Acceptance Corp., 3-month LIBOR + 0.520%,
3.308%, 3/15/2021, 144A(a)(b)		      6,070,583  
  6,865,000      Nissan Motor Acceptance Corp., 3.650%, 9/21/2021, 144A      6,832,108  
  12,395,000      Toyota Motor Credit Corp., MTN, 3-month LIBOR + 0.270%, 2.716%, 4/13/2021(a)(b)      12,293,354  
  2,955,000      Toyota Motor Credit Corp., MTN, 3-month LIBOR + 0.440%, 2.885%, 10/18/2019(a)(b)      2,957,058  
     

 

 

  
        68,494,634  
     

 

 

  
   Banking — 6.2%

 

  4,910,000      American Express Co., 3-month LIBOR + 0.600%, 3.192%, 11/05/2021(b)      4,890,669  
  44,895,000      Banco Hipotecario S.A., Argentina Deposit Rates Badlar Pvt Banks + 2.500%, 51.792%, 1/12/2020, 144A, (ARS)(b)      1,131,035  
  44,570,000      Banco Hipotecario S.A., Argentina Deposit Rates Badlar Pvt Banks + 4.000%, 52.250%, 11/07/2022, 144A, (ARS)(b)      1,056,080  
  21,970,000      Banco Macro S.A., 17.500%, 5/08/2022, 144A, (ARS)      379,195  
  46,000,000      Banco Supervielle S.A., Argentina Deposit Rates Badlar Pvt Banks + 4.500%, 56.625%, 8/09/2020, 144A, (ARS)(b)      1,121,404  

 

See accompanying notes to financial statements.

 

|  46

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Banking — continued

 

$ 13,705,000      Bank of America NA, 3-month LIBOR + 0.250%, 2.957%, 8/28/2020(b)    $ 13,655,610  
  7,325,000      Bank of New York Mellon Corp. (The), 3-month EURIBOR + 0.300%, 3.036%, 12/04/2020(b)      7,312,694  
  5,895,000      Citibank NA, 3-month LIBOR + 0.350%, 2.968%, 2/12/2021(a)(b)      5,832,490  
  6,860,000      HSBC Holdings PLC, 3-month LIBOR + 0.650%, 3.426%, 9/11/2021(b)      6,769,301  
  2,550,000      JPMorgan Chase & Co., 3-month LIBOR + 0.680%, 3.418%, 6/01/2021(a)(b)      2,535,567  
  5,895,000      JPMorgan Chase Bank NA, 3-month LIBOR + 0.250%, 2.868%, 2/13/2020(a)(b)      5,887,192  
  3,755,000      JPMorgan Chase Bank NA, 3-month LIBOR + 0.230%, 2.968%, 9/01/2020(b)      3,740,463  
  5,800,000      JPMorgan Chase Bank NA, 3-month LIBOR + 0.590%, 3.414%, 9/23/2019(a)(b)      5,801,748  
  6,720,000      Mitsubishi UFJ Financial Group, Inc., 3-month LIBOR + 0.650%, 3.158%, 7/26/2021(b)      6,694,865  
  6,720,000      Mitsubishi UFJ Financial Group, Inc., 3.535%, 7/26/2021      6,745,256  
  3,460,000      Standard Chartered PLC, 3-month LIBOR + 1.150%, 3.558%, 1/20/2023, 144A(b)      3,414,086  
  3,460,000      Standard Chartered PLC, (fixed rate to 1/20/2022, variable rate thereafter), 4.247%, 1/20/2023, 144A      3,422,597  
  6,000,000      Sumitomo Mitsui Banking Corp., Series 2FRN, 3-month LIBOR + 0.540%, 2.960%, 1/11/2019(a)(b)      6,000,075  
  3,000,000      Toronto-Dominion Bank (The), MTN, 3-month LIBOR + 0.420%, 2.865%, 1/18/2019(a)(b)      3,000,149  
  3,510,000      Wells Fargo Bank NA, 3.625%, 10/22/2021      3,530,771  
     

 

 

  
        92,921,247  
     

 

 

  
   Collateralized Mortgage Obligations — 0.1%

 

  1,155,569      GMACM Mortgage Loan Trust, Series 2005-AR1, Class 3A, 4.052%, 3/18/2035(c)      1,163,068  
     

 

 

  
   Construction Machinery — 1.9%

 

  3,050,000      Caterpillar Financial Services Corp., GMTN, 3-month LIBOR + 0.290%, 3.026%, 9/04/2020(a)(b)      3,040,353  
  3,065,000      Caterpillar Financial Services Corp., MTN, 3-month LIBOR + 0.230%, 3.018%, 3/15/2021(a)(b)      3,044,296  
  2,400,000      Caterpillar Financial Services Corp., MTN, 3.150%, 9/07/2021      2,406,324  
  7,045,000      John Deere Capital Corp., 3-month LIBOR + 0.170%, 2.595%, 10/09/2020(b)      7,011,255  
  6,350,000      John Deere Capital Corp., MTN, 3-month LIBOR + 0.240%, 3.016%, 3/12/2021(a)(b)      6,322,316  
  6,875,000      John Deere Capital Corp., MTN, 3.125%, 9/10/2021      6,887,757  
     

 

 

  
        28,712,301  
     

 

 

  
   Consumer Products — 0.5%

 

  7,040,000      Unilever Capital Corp., 3.000%, 3/07/2022      6,985,862  
     

 

 

  
   Diversified Manufacturing — 0.4%

 

  5,915,000      United Technologies Corp., 3-month LIBOR + 0.350%, 2.891%, 11/01/2019(a)(b)      5,909,322  
     

 

 

  

 

See accompanying notes to financial statements.

 

47  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Electric — 0.4%

 

$ 6,455,000      Enel SpA, (fixed rate to 9/24/2023, variable rate thereafter), 8.750%, 9/24/2073, 144A(a)    $ 6,584,100  
     

 

 

  
   Finance Companies — 0.8%

 

  6,100,000      USAA Capital Corp., 3-month LIBOR + 0.230%, 2.771%, 2/01/2019, 144A(a)(b)      6,100,061  
  6,500,000      USAA Capital Corp., 3.000%, 7/01/2020, 144A      6,493,547  
     

 

 

  
        12,593,608  
     

 

 

  
   Financial Other — 0.0%

 

  370,000      Yanlord Land (HK) Co. Ltd., 5.875%, 1/23/2022      362,548  
     

 

 

  
   Food & Beverage — 0.5%

 

  3,065,000      Campbell Soup Co., 3-month LIBOR + 0.500%, 3.288%, 3/16/2020(a)(b)      3,037,737  
  1,935,000      Diageo Capital PLC, 3.000%, 5/18/2020      1,936,715  
  2,900,000      PepsiCo, Inc., 3-month LIBOR + 0.270%, 2.678%, 10/04/2019(a)(b)      2,900,360  
     

 

 

  
        7,874,812  
     

 

 

  
   Government Owned – No Guarantee — 1.5%

 

  18,670,000,000      Financiera de Desarrollo Territorial S.A.,
7.875%, 8/12/2024, 144A, (COP)(a)		      5,827,800  
  2,545,000      Petrobras Global Finance BV, 5.625%, 5/20/2043      2,132,735  
  4,935,000      Petrobras Global Finance BV, 5.750%, 2/01/2029      4,564,875  
  6,390,000      Petrobras Global Finance BV, 5.999%, 1/27/2028      6,016,249  
  950,000      Petrobras Global Finance BV, 7.250%, 3/17/2044      936,235  
  3,525,000      YPF S.A., 6.950%, 7/21/2027, 144A      2,872,875  
  1,930,000      YPF S.A., Argentina Deposit Rates Badlar Pvt Banks + 4.000%, 47.833%, 7/07/2020, 144A(b)      691,078  
     

 

 

  
        23,041,847  
     

 

 

  
   Health Insurance — 0.5%

 

  6,900,000      Cigna Corp., 3-month LIBOR + 0.650%, 3.438%, 9/17/2021, 144A(b)      6,802,536  
     

 

 

  
   Healthcare — 0.8%

 

  6,065,000      CVS Health Corp., 3-month LIBOR + 0.630%, 3.397%, 3/09/2020(a)(b)      6,053,986  
  6,065,000      CVS Health Corp., 3-month LIBOR + 0.720%, 3.487%, 3/09/2021(a)(b)      6,016,106  
     

 

 

  
        12,070,092  
     

 

 

  
   Home Construction — 0.2%

 

  370,000      CIFI Holdings Group Co. Ltd., 5.500%, 1/23/2022      336,098  
  740,000      Country Garden Holdings Co. Ltd., 8.000%, 1/27/2024      714,490  
  740,000      New Metro Global Ltd., 6.500%, 4/23/2021      715,991  
  740,000      Shimao Property Holdings Ltd., 4.750%, 7/03/2022      696,135  
  370,000      Sunac China Holdings Ltd., 7.350%, 7/19/2021      353,475  
     

 

 

  
        2,816,189  
     

 

 

  
   Independent Energy — 1.4%

 

  3,845,000      Bellatrix Exploration Ltd., 8.500%, 5/15/2020, 144A      2,153,200  
  8,670,000      California Resources Corp., 8.000%, 12/15/2022, 144A      5,873,925  
  1,360,000      Callon Petroleum Co., 6.125%, 10/01/2024      1,264,800  
  3,080,000      Gulfport Energy Corp., 6.375%, 5/15/2025      2,725,800  
  2,315,000      Jagged Peak Energy LLC, 5.875%, 5/01/2026, 144A      2,152,950  

 

See accompanying notes to financial statements.

 

|  48

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Independent Energy — continued

 

$ 1,265,000      MEG Energy Corp., 6.375%, 1/30/2023, 144A    $ 1,195,425  
  835,000      MEG Energy Corp., 7.000%, 3/31/2024, 144A      797,425  
  7,460,000      OGX Austria GmbH, 8.375%, 4/01/2022(d)(e)(k)      —  
  4,420,000      OGX Austria GmbH, 8.500%, 6/01/2018(d)(e)(k)      —  
  3,465,000      Vine Oil & Gas LP/Vine Oil Gas Finance Corp., 9.750%, 4/15/2023, 144A      2,772,000  
  3,620,000      Vine Oil & Gas LP/Vine Oil & Gas Finance Corp., 8.750%, 4/15/2023, 144A      2,859,800  
     

 

 

  
        21,795,325  
     

 

 

  
   Industrial Other — 0.0%

 

  740,000      CFLD Cayman Investment Ltd., 6.500%, 12/21/2020      653,930  
     

 

 

  
   Integrated Energy — 0.6%

 

  3,335,000      Gran Tierra Energy International Holdings Ltd., 6.250%, 2/15/2025, 144A      3,097,381  
  5,795,000      Shell International Finance BV, 3-month LIBOR + 0.350%, 3.126%, 9/12/2019(a)(b)      5,800,053  
     

 

 

  
        8,897,434  
     

 

 

  
   Life Insurance — 1.1%

 

  2,770,000      AIA Group Ltd., 3-month LIBOR + 0.520%, 3.312%, 9/20/2021, 144A(b)      2,756,657  
  6,780,000      New York Life Global Funding, 3-month LIBOR + 0.320%, 2.912%, 8/06/2021, 144A(b)      6,770,563  
  6,940,000      New York Life Global Funding, 3-month LIBOR + 0.160%, 2.556%, 10/01/2020, 144A(a)(b)      6,907,535  
     

 

 

  
        16,434,755  
     

 

 

  
   Local Authorities — 0.6%

 

  2,280,000      Provincia de Buenos Aires, 6.500%, 2/15/2023, 144A      1,834,009  
  216,360,000      Provincia de Buenos Aires, Argentina Deposit Rates Badlar Pvt Banks + 3.830%, 52.516%, 5/31/2022, (ARS)(b)      5,420,433  
  67,000,000      Provincia de Buenos Aires, 3-month EURIBOR + 3.75%, 53.852%, 4/12/2025, 144A, (ARS)(b)      1,534,480  
     

 

 

  
        8,788,922  
     

 

 

  
   Media Entertainment — 0.4%

 

  5,725,000      Clear Channel Worldwide Holdings, Inc., Series B, 7.625%, 3/15/2020      5,581,875  
  27,290,000      Grupo Televisa SAB, EMTN, 7.250%, 5/14/2043, (MXN)(a)      901,629  
     

 

 

  
        6,483,504  
     

 

 

  
   Midstream — 0.2%

 

  800,000      Tennessee Gas Pipeline Co. LLC, 7.000%, 3/15/2027      904,297  
  2,160,000      Transportadora de Gas del Sur S.A., 6.750%, 5/02/2025, 144A      1,967,133  
     

 

 

  
        2,871,430  
     

 

 

  
   Non-Agency Commercial Mortgage-Backed Securities — 2.0%

 

  4,565,000      CFCRE Commercial Mortgage Trust, Series 2011-C1, Class D, 6.070%, 4/15/2044, 144A(a)(c)      4,712,586  
  1,900,000      Commercial Mortgage Trust, Series 2016-SAVA, Class C, 1-month LIBOR + 3.000%, 5.349%, 10/15/2034, 144A(a)(b)      1,898,914  
  3,635,000      Credit Suisse Mortgage Trust, Series 2014-USA, Class E, 4.373%, 9/15/2037, 144A      3,252,851  

 

See accompanying notes to financial statements.

 

49  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Non-Agency Commercial Mortgage-Backed Securities — continued

 

$ 2,552,340      DBUBS Mortgage Trust, Series 2011-LC1A, Class E, 5.698%, 11/10/2046, 144A(a)(c)    $ 2,624,237  
  227,433      GS Mortgage Securities Trust, Series 2007-GG10, Class AM, 5.780%, 8/10/2045(c)      230,375  
  222,253      JPMorgan Chase Commercial Mortgage Securities Trust, Series 2007-LDPX, Class AM, 5.464%, 1/15/2049(c)      222,384  
  1,570,000      Morgan Stanley Capital I Trust, Series 2011-C2, Class D, 5.485%, 6/15/2044, 144A(a)(c)      1,564,938  
  2,515,000      Morgan Stanley Capital I Trust, Series 2011-C2, Class E, 5.485%, 6/15/2044, 144A(c)      2,412,397  
  5,797,912      Motel 6 Trust, Series 2017-M6MZ, Class M, 1-month LIBOR + 6.927%, 9.382%, 8/15/2019, 144A(b)      5,853,343  
  3,575,000      Starwood Retail Property Trust, Series 2014-STAR, Class E, 1-month LIBOR + 4.150%, 6.605%, 11/15/2027, 144A(b)      2,693,343  
  2,587,500      WFRBS Commercial Mortgage Trust, Series 2011-C2, Class D, 5.652%, 2/15/2044, 144A(a)(c)      2,607,210  
  1,809,189      WFRBS Commercial Mortgage Trust, Series 2011-C3, Class D, 5.683%, 3/15/2044, 144A(c)      1,643,641  
  950,000      WFRBS Commercial Mortgage Trust, Series 2012-C7, Class E, 4.821%, 6/15/2045, 144A(c)      790,954  
     

 

 

  
        30,507,173  
     

 

 

  
   Pharmaceuticals — 0.6%

 

  6,860,000      Pfizer, Inc., 3.000%, 9/15/2021      6,900,968  
  1,315,000      Teva Pharmaceutical Finance Netherlands III BV, 2.800%, 7/21/2023      1,132,538  
  780,000      Teva Pharmaceutical Finance Netherlands III BV, 3.150%, 10/01/2026      595,307  
     

 

 

  
        8,628,813  
     

 

 

  
   Property & Casualty Insurance — 0.4%

 

  6,000,000      Berkshire Hathaway Finance Corp., 3-month LIBOR + 0.320%, 2.734%, 1/10/2020(a)(b)      5,997,908  
     

 

 

  
   Real Estate Operations/Development — 0.1%

 

  600,000      Easy Tactic Ltd., 7.000%, 4/25/2021      579,011  
  370,000      Logan Property Holdings Co. Ltd., 5.250%, 2/23/2023      319,104  
     

 

 

  
        898,115  
     

 

 

  
   Retailers — 1.0%

 

  2,915,000      Alimentation Couche-Tard, Inc., 3-month LIBOR + 0.500%, 3.279%, 12/13/2019, 144A(a)(b)      2,907,247  
  5,955,000      Home Depot, Inc. (The), 3-month LIBOR + 0.310%, 3.049%, 3/01/2022(b)      5,895,063  
  6,635,000      Walmart, Inc., 3-month LIBOR + 0.230%, 3.054%, 6/23/2021(b)      6,615,294  
     

 

 

  
        15,417,604  
     

 

 

  
   Sovereigns — 0.1%

 

  29,460,000      Argentina Politica Monetaria, Argentina Central Bank 7-day Repo Reference Rate, 65.509%, 6/21/2020, (ARS)(c)      847,849  
     

 

 

  
   Technology — 2.5%

 

  6,045,000      Apple, Inc., 3-month LIBOR + 0.070%, 2.685%, 5/11/2020(a)(b)      6,030,737  
  6,325,000      Apple, Inc., 3-month LIBOR + 0.250%, 2.851%, 2/07/2020(b)      6,325,367  

 

See accompanying notes to financial statements.

 

|  50

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Technology — continued

 

$ 6,955,000      Cisco Systems, Inc., 3-month LIBOR + 0.340%, 3.132%, 9/20/2019(a)(b)    $ 6,956,366  
  5,825,000      IBM Credit LLC, 3-month LIBOR + 0.160%, 2.742%, 2/05/2021(a)(b)      5,762,296  
  6,000,000      International Business Machines Corp., 3-month LIBOR + 0.230%, 2.739%, 1/27/2020(a)(b)      5,991,647  
  3,500,000      Uber Technologies, Inc., 7.500%, 11/01/2023      3,386,250  
  3,420,000      Uber Technologies, Inc., 8.000%, 11/01/2026      3,300,300  
     

 

 

  
        37,752,963  
     

 

 

  
   Treasuries — 1.6%

 

  380,700,000      Republic of South Africa Government Bond, 8.500%, 1/31/2037, (ZAR)(a)      23,504,650  
     

 

 

  
   Total Non-Convertible Bonds
(Identified Cost $1,001,619,976)		      949,245,054  
     

 

 

  
     
  Convertible Bonds — 1.6%   
   Cable Satellite — 0.4%   
  4,280,000      DISH Network Corp., 2.375%, 3/15/2024      3,407,591  
  2,995,000      DISH Network Corp., 3.375%, 8/15/2026      2,418,510  
     

 

 

  
        5,826,101  
     

 

 

  
   Diversified Operations — 0.1%   
  775,000      RWT Holdings, Inc., 5.625%, 11/15/2019      778,394  
     

 

 

  
   Independent Energy — 0.1%   
  1,280,000      Chesapeake Energy Corp., 5.500%, 9/15/2026      1,030,223  
  1,075,000      Whiting Petroleum Corp., 1.250%, 4/01/2020      1,016,321  
     

 

 

  
        2,046,544  
     

 

 

  
   Industrial Other — 0.1%   
  1,140,000      Tutor Perini Corp., 2.875%, 6/15/2021      1,049,312  
     

 

 

  
   Leisure — 0.0%   
  650,000      Rovi Corp., 0.500%, 3/01/2020      609,446  
     

 

 

  
   Media Entertainment — 0.0%   
  575,000      Liberty Media Corp., 2.250%, 9/30/2046      272,033  
     

 

 

  
   Midstream — 0.0%   
  385,000      SM Energy Co., 1.500%, 7/01/2021      357,863  
     

 

 

  
   Oil Field Services — 0.1%   
  1,760,000      Nabors Industries, Inc., 0.750%, 1/15/2024      1,087,205  
     

 

 

  
   Pharmaceuticals — 0.3%   
  2,535,000      BioMarin Pharmaceutical, Inc., 0.599%, 8/01/2024      2,520,801  
  710,000      Flexion Therapeutics, Inc., 3.375%, 5/01/2024      583,818  
  1,445,000      Ionis Pharmaceuticals, Inc., 1.000%, 11/15/2021      1,546,299  
     

 

 

  
        4,650,918  
     

 

 

  
   Railroads — 0.0%   
  600,000      Greenbrier Cos., Inc. (The), 2.875%, 2/01/2024      589,586  
     

 

 

  
   REITs – Diversified — 0.2%   
  3,220,000      iStar, Inc., 3.125%, 9/15/2022      2,901,349  
     

 

 

  

 

See accompanying notes to financial statements.

 

51  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Technology — 0.3%   
$ 3,435,000      Finisar Corp., 0.500%, 12/15/2036    $ 3,260,571  
  1,500,000      Verint Systems, Inc., 1.500%, 6/01/2021      1,451,076  
     

 

 

  
        4,711,647  
     

 

 

  
   Total Convertible Bonds
(Identified Cost $27,999,381)		      24,880,398  
     

 

 

  
     
   Total Bonds and Notes
(Identified Cost $1,029,619,357)		      974,125,452  
     

 

 

  
     
  Senior Loans — 12.9%   
   Aerospace & Defense — 0.6%   
  1,017,652      Engility Corp., Term Loan B2, 1-month LIBOR + 2.750%, 5.272%, 8/12/2023(b)      1,009,704  
  1,500,000      Science Applications International Corp., 2018 Term Loan B, 10/31/2025(l)      1,428,750  
  2,925,000      Science Applications International Corp., 2018 Term Loan B, 1-month LIBOR + 1.750%, 4.272%, 10/31/2025(b)      2,786,063  
  586,908      TransDigm, Inc., 2018 Term Loan E, 1-month LIBOR + 2.500%, 5.022%, 5/30/2025(b)      552,521  
  2,350,482      TransDigm, Inc., 2018 Term Loan F, 1-month LIBOR + 2.500%, 5.022%, 6/09/2023(b)      2,212,391  
  659,983      TransDigm, Inc., 2018 Term Loan G, 1-month LIBOR + 2.500%, 5.022%, 8/22/2024(b)      621,447  
     

 

 

  
        8,610,876  
     

 

 

  
   Automotive — 0.3%   
  2,299,237      BBB Industries U.S. Holdings, Inc., 2018 1st Lien Term Loan, 1-month LIBOR + 4.500%, 6.879%, 8/01/2025(b)      2,247,505  
  2,742,292      Truck Hero, Inc., 1st Lien Term Loan, 1-month LIBOR + 3.750%, 6.256%, 4/21/2024(b)      2,647,463  
     

 

 

  
        4,894,968  
     

 

 

  
   Building Materials — 1.3%

 

  3,319,659      American Builders & Contractors Supply Co., Inc., 2018 Term Loan B, 1-month LIBOR + 2.000%, 4.522%, 10/31/2023(b)      3,151,319  
  3,295,060      Hamilton Holdco LLC, 2018 Term Loan B, 3-month LIBOR + 2.000%, 4.810%, 7/02/2025(b)      3,146,783  
  5,166,883      Jeld-Wen, Inc., 2017 1st Lien Term Loan, 3-month LIBOR + 2.000%, 4.803%, 12/14/2024(b)      4,904,250  
  3,546,438      Quikrete Holdings, Inc., 2016 1st Lien Term Loan, 1-month LIBOR + 2.750%, 5.272%, 11/15/2023(b)      3,371,351  
  5,062,217      Summit Materials Cos. I, LLC, 2017 Term Loan B, 1-month LIBOR + 2.000%, 4.522%, 11/21/2024(b)      4,844,946  
     

 

 

  
        19,418,649  
     

 

 

  
   Cable Satellite — 1.6%

 

  2,139,597      Charter Communications Operating, LLC, 2017 Term Loan B, 1-month LIBOR + 2.000%, 4.530%, 4/30/2025(b)      2,046,268  

 

See accompanying notes to financial statements.

 

|  52

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Cable Satellite — continued

 

$ 2,844,586      CSC Holdings LLC, 2017 1st Lien Term Loan, 1-month LIBOR + 2.250%,
4.705%, 7/17/2025(b)		    $ 2,692,401  
  1,288,124      CSC Holdings LLC, 2018 Incremental Term Loan, 3-month LIBOR + 2.250%, 4.745%, 1/15/2026(b)      1,217,277  
  3,930,000      Telenet Financing USD LLC, USD Term Loan AN, 1-month LIBOR + 2.250%, 4.705%, 8/15/2026(b)      3,730,828  
  4,350,409      Unitymedia Finance LLC, Term Loan B, 1-month LIBOR + 2.250%, 4.705%, 9/30/2025(b)      4,193,794  
  1,500,000      Unitymedia Hessen GmbH & Co. KG, 2018 Term Loan E, 6/01/2023(l)      1,452,615  
  1,340,000      Unitymedia Hessen GmbH & Co. KG, 2018 Term Loan E, 1-month LIBOR + 2.000%, 4.455%, 6/01/2023(b)      1,297,669  
  4,695,000      Virgin Media Bristol LLC, Term Loan K, 1-month LIBOR + 2.500%,
4.955%, 1/15/2026(b)		      4,436,211  
  3,999,734      Ziggo Secured Finance Partnership, USD Term Loan E, 1-month LIBOR + 2.500%, 4.955%, 4/15/2025(b)      3,759,750  
     

 

 

  
        24,826,813  
     

 

 

  
   Chemicals — 0.7%   
  1,496,231      Axalta Coating Systems US Holdings, Inc., USD Term Loan B3, 6/01/2024(l)      1,406,457  
  1,885,088      Axalta Coating Systems US Holdings, Inc., USD Term Loan B3, 3-month LIBOR + 1.750%, 4.553%, 6/01/2024(b)      1,771,983  
  3,930,250      Consolidated Energy Finance, S.A., Term Loan B, 1-month LIBOR + 2.500%, 4.932%, 5/07/2025(b)      3,802,517  
  1,375,000      Messer Industries LLC, 2018 USD Term Loan, 10/01/2025(l)      1,301,671  
  708,228      WR Grace & Co., Term Loan B1, 3-month LIBOR + 1.750%, 4.553%, 4/03/2025(b)      683,440  
  1,214,105      WR Grace & Co., Term Loan B2, 3-month LIBOR + 1.750%, 4.563%, 4/03/2025(b)      1,171,611  
     

 

 

  
        10,137,679  
     

 

 

  
   Construction Machinery — 0.3%   
  2,509,710      United Rentals, Inc., Term Loan B, 10/31/2025(l)      2,451,987  
  2,034,900      United Rentals, Inc., Term Loan B, 1-month LIBOR + 1.750%, 4.272%, 10/31/2025(b)      1,988,097  
     

 

 

  
   Total Construction Machinery
(Identified Cost $4,501,694)		      4,440,084  
     

 

 

  
   Consumer Cyclical Services — 0.1%

 

  860,675      Trans Union LLC, 2018 Term Loan B4, 1-month LIBOR + 2.000%, 4.522%, 6/19/2025(b)      828,400  
     

 

 

  
   Consumer Products — 0.2%

 

  3,139,225      Coty, Inc., 2018 USD Term Loan B, 1-month LIBOR + 2.250%, 4.633%, 4/07/2025(b)      2,892,011  
     

 

 

  
   Electric — 0.6%

 

  1,061,155      AES Corp., 2018 Term Loan B, 5/31/2022(l)      1,035,295  
  2,950,251      AES Corp., 2018 Term Loan B, 3-month LIBOR + 1.750%, 4.456%, 5/31/2022(b)      2,878,353  

 

See accompanying notes to financial statements.

 

53  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Electric — continued

 

$ 3,315,228      Plantronics, Inc., 2018 Term Loan B, 1-month LIBOR + 2.500%, 5.022%, 7/02/2025(b)    $ 3,183,448  
  2,952,642      Vistra Energy Corp., 1st Lien Term Loan B3, 1-month LIBOR + 2.000%,
4.473%, 12/31/2025(m)		      2,834,949  
     

 

 

  
        9,932,045  
     

 

 

  
   Environmental — 0.1%

 

  137,511      GFL Environmental, Inc., 2018 Delayed Draw Term Loan, 1-month LIBOR + 3.000%, 5.345%, 5/30/2025(b)      127,954  
  1,101,428      GFL Environmental, Inc., 2018 USD Term Loan B, 1-month LIBOR + 3.000%, 5.522%, 5/30/2025(b)      1,024,878  
     

 

 

  
        1,152,832  
     

 

 

  
   Financial Other — 0.1%

 

  1,750,000      Global Payments, Inc., 2018 Term Loan B4, 1-month LIBOR + 1.750%,
4.272%, 10/17/2025(b)		      1,663,953  
     

 

 

  
   Food & Beverage — 0.8%

 

  4,474,701      Aramark Services, Inc., 2018 Term Loan B3, 1-month LIBOR + 1.750%,
4.272%, 3/11/2025(b)		      4,336,746  
  4,064,163      JBS USA LLC, 2017 Term Loan B, 5.260%, 10/30/2022(c)      3,901,596  
  3,329,351      Post Holdings, Inc., 2017 Series A Incremental Term Loan, 1-month LIBOR + 2.000%, 4.510%, 5/24/2024(b)      3,201,737  
     

 

 

  
        11,440,079  
     

 

 

  
   Healthcare — 0.4%

 

  1,125,750      IQVIA, Inc., 2017 USD Term Loan B2, 3-month LIBOR + 2.000%, 4.522%, 1/17/2025(b)      1,090,097  
  4,720,041      IQVIA, Inc., 2018 USD Term Loan B3, 1-month LIBOR + 1.750%, 4.272%, 6/11/2025(b)      4,546,013  
  875,000      Universal Health Services, Inc., Term Loan B, 1-month LIBOR + 1.750%, 4.272%, 10/31/2025(b)      859,688  
     

 

 

  
        6,495,798  
     

 

 

  
   Independent Energy — 0.2%

 

  811,000      California Resources Corp., 2017 1st Lien Term Loan, 1-month LIBOR + 4.750%, 7.256%, 12/31/2022(b)      783,969  
  3,740,000      Gavilan Resources LLC, 2nd Lien Term Loan, 1-month LIBOR + 6.000%,
8.504%, 3/01/2024(b)		      2,833,050  
     

 

 

  
        3,617,019  
     

 

 

  
   Industrial Other — 0.3%

 

  861,940      Altra Industrial Motion Corp., 2018 Term Loan B, 1-month LIBOR + 2.000%, 4.522%, 10/01/2025(b)      816,689  
  545,730      ASGN, Inc., 2018 Term Loan B2, 1-month LIBOR + 2.000%, 4.522%, 4/02/2025(b)      525,947  
  3,516,121      Diamond (BC) B.V., USD Term Loan, 3-month LIBOR + 3.000%, 5.527%, 9/06/2024(b)      3,234,831  
     

 

 

  
        4,577,467  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  54

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Internet & Data — 0.1%

 

$ 1,338,063      NeuStar, Inc., 2018 Term Loan B4, 1-month LIBOR + 3.500%, 6.022%, 8/08/2024(b)    $ 1,282,867  
     

 

 

  
   Lodging — 0.1%

 

  852,863      Wyndham Hotels & Resorts, Inc., Term Loan B, 1-month LIBOR + 1.750%,
4.272%, 5/30/2025(b)		      818,748  
     

 

 

  
   Media Entertainment — 0.6%

 

  1,451,757      Camelot UK Holdco Ltd., 2017 Repriced Term Loan, 1-month LIBOR + 3.250%, 5.772%, 10/03/2023(b)      1,379,169  
  3,075,609      CBS Radio, Inc., 2017 Term Loan B, 1-month LIBOR + 2.750%, 5.256%, 11/18/2024(b)      2,891,073  
  264,107      Donnelley Financial Solutions, Inc., 2017 Term Loan B, 1 Week LIBOR + 3.000%, 5.420%, 10/02/2023(b)      257,671  
  1,496,231      Lamar Media Corp., 2018 Term Loan B, 3/14/2025(l)      1,452,586  
  535,950      Lamar Media Corp., 2018 Term Loan B, 1-month LIBOR + 1.750%, 4.313%, 3/14/2025(b)      520,316  
  3,258,291      Meredith Corp., 2018 Term Loan B, 1-month LIBOR + 2.750%, 5.272%, 1/31/2025(b)      3,157,838  
     

 

 

  
        9,658,653  
     

 

 

  
   Metals & Mining — 0.3%

 

  2,701,515      GrafTech Finance, Inc., 2018 Term Loan B, 1-month LIBOR + 3.500%,
6.022%, 2/12/2025(b)		      2,552,932  
  3,136,300      U.S. Silica Co., 2018 Term Loan B, 1-month LIBOR + 4.000%, 6.563%, 5/01/2025(b)      2,732,501  
     

 

 

  
        5,285,433  
     

 

 

  
   Midstream — 0.5%

 

  3,489,830      BCP Raptor LLC, Term Loan B, 2-month LIBOR + 4.250%, 6.869%, 6/24/2024(b)      3,249,904  
  623,438      NorthRiver Midstream Finance LP, 2018 Term Loan B, 10/01/2025(l)      607,852  
  3,182,025      NorthRiver Midstream Finance LP, 2018 Term Loan B, 3-month LIBOR + 3.250%, 5.646%, 10/01/2025(b)      3,102,474  
     

 

 

  
        6,960,230  
     

 

 

  
   Packaging — 0.2%

 

  2,989,475      BWAY Holding Co., 2017 Term Loan B, 3-month LIBOR + 3.250%, 5.658%, 4/03/2024(b)      2,805,114  
     

 

 

  
   Pharmaceuticals — 0.6%

 

  1,994,819      Change Healthcare Holdings LLC, 2017 Term Loan B, 3/01/2024(l)      1,887,597  
  1,884,357      Change Healthcare Holdings LLC, 2017 Term Loan B, 1-month LIBOR + 2.750%, 5.272%, 3/01/2024(b)      1,783,073  
  2,458,744      Grifols Worldwide Operations USA, Inc., 2017 Acquisition Term Loan, 1/31/2025(l)      2,354,591  
  1,441,332      Grifols Worldwide Operations USA, Inc., 2017 Acquisition Term Loan, 1 Week LIBOR + 2.250%, 4.669%, 1/31/2025(b)      1,380,278  
  2,137,938      Valeant Pharmaceuticals International, Inc., Term Loan B, 1-month LIBOR + 2.750%, 5.129%, 11/27/2025(b)      2,024,370  
     

 

 

  
        9,429,909  
     

 

 

  

 

See accompanying notes to financial statements.

 

55  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Property & Casualty Insurance — 0.2%

 

$ 557,766      Hyperion Insurance Group Ltd., 2017 Repriced Term Loan, 1-month LIBOR + 3.500%, 6.063%, 12/20/2024(b)    $ 538,941  
  3,226,227      USI, Inc., 2017 Repriced Term Loan, 3-month LIBOR + 3.000%, 5.803%, 5/16/2024(b)      3,036,686  
     

 

 

  
        3,575,627  
     

 

 

  
   Restaurants — 0.4%

 

  5,147,863      1011778 B.C. Unlimited Liability Co., Term Loan B3, 1-month LIBOR + 2.250%, 4.772%, 2/16/2024(b)      4,894,743  
  917,688      IRB Holding Corp., 1st Lien Term Loan, 1-month LIBOR + 3.250%, 5.682%, 2/05/2025(b)      873,181  
     

 

 

  
        5,767,924  
     

 

 

  
   Retailers — 0.3%

 

  1,445,625      Hanesbrands, Inc., 2017 Term Loan B, 12/15/2024(l)      1,428,755  
  1,039,500      Hanesbrands, Inc., 2017 Term Loan B, 1-month LIBOR + 1.750%, 4.272%, 12/15/2024(b)      1,027,369  
  1,308,842      Harbor Freight Tools USA, Inc., 2018 Term Loan B, 1-month LIBOR + 2.500%, 5.022%, 8/18/2023(b)      1,231,542  
  384,868      J.C. Penney Corp., Inc., 2016 Term Loan B, 3-month LIBOR + 4.250%, 6.956%, 6/23/2023(b)      327,138  
     

 

 

  
        4,014,804  
     

 

 

  
   Technology — 1.3%

 

  2,356,714      Dell International LLC, 2017 Term Loan A2, 1-month LIBOR + 1.750%, 4.280%, 9/07/2021(b)      2,285,518  
  4,752,517      First Data Corp., 2017 USD Term Loan, 1-month LIBOR + 2.000%, 4.504%, 7/08/2022(b)      4,556,476  
  4,627,569      Iron Mountain, Inc., 2018 Term Loan B, 1-month LIBOR + 1.750%, 4.272%, 1/02/2026(b)      4,388,462  
  436,377      MA FinanceCo. LLC, USD Term Loan B3, 1-month LIBOR + 2.500%, 5.022%, 6/21/2024(b)      405,468  
  1,455,977      Microchip Technology, Inc., 2018 Term Loan B, 1-month LIBOR + 2.000%, 4.530%, 5/29/2025(b)      1,377,106  
  2,946,961      Seattle Spinco, Inc., USD Term Loan B3, 1-month LIBOR + 2.500%, 5.022%, 6/21/2024(b)      2,738,228  
  374,443      SS&C Technologies Holdings Europe S.A.R.L., 2018 Term Loan B4, 1-month LIBOR + 2.250%, 4.772%, 4/16/2025(b)      352,512  
  2,548,432      SS&C Technologies, Inc., 2018 Term Loan B5, 1-month LIBOR + 2.250%, 4.772%, 4/16/2025(b)      2,400,317  
  987,158      SS&C Technologies, Inc., 2018 Term Loan B3, 1-month LIBOR + 2.250%, 4.772%, 4/16/2025(b)      929,340  
     

 

 

  
        19,433,427  
     

 

 

  
   Transportation Services — 0.3%

 

  4,193,155      Uber Technologies, Inc., 2018 Incremental Term Loan, 1-month LIBOR + 3.500%, 5.955%, 7/13/2023(b)      4,012,346  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  56

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Principal
Amount (‡)		      Description    Value (†)  
   Wireless — 0.4%

 

$ 3,224      GTT Communications, Inc., 2018 USD Term Loan B, 1-month LIBOR + 2.750%, 5.270%, 5/31/2025(b)    $ 3,027  
  2,775,563      Sprint Communications, Inc., 1st Lien Term Loan B, 1-month LIBOR + 2.500%, 5.063%, 2/02/2024(b)      2,634,481  
  3,908,961      UPC Financing Partnership, USD Term Loan AR, 1-month LIBOR + 2.500%, 4.955%, 1/15/2026(b)      3,710,581  
     

 

 

  
        6,348,089  
     

 

 

  
   Total Senior Loans
(Identified Cost $203,403,781)		      194,321,844  
     

 

 

  
     
  Loan Participations — 0.5%  
   ABS Other — 0.5%

 

  5,347,210      Harbour Aircraft Investments Ltd., Series 2017-1, Class C, 8.000%, 11/15/2037(d)      5,346,529  
  1,429,671      Rise Ltd., Term Loan A, 4.750%, 2/15/2039(a)(c)(d)      1,386,781  
     

 

 

  
   Total Loan Participations
(Identified Cost $6,775,374)		      6,733,310  
     

 

 

  
     
Shares                
  Preferred Stocks — 0.6%  
  Non-Convertible Preferred Stocks — 0.3%  
   Cable Satellite — 0.3%

 

  4,040,000      NBCUniversal Enterprise, Inc., 5.250%, 144A(a) (Identified Cost $4,040,000)      4,090,500  
     

 

 

  
     
  Convertible Preferred Stocks — 0.3%  
   Food & Beverage — 0.2%

 

  32,272      Bunge Ltd., 4.875%      3,133,985  
     

 

 

  
   Midstream — 0.1%

 

  1,714      Chesapeake Energy Corp., 5.750%      884,170  
     

 

 

  
   Total Convertible Preferred Stocks
(Identified Cost $4,135,098)		      4,018,155  
     

 

 

  
     
   Total Preferred Stocks
(Identified Cost $8,175,098)		      8,108,655  
     

 

 

  
     
  Common Stocks — 3.0%  
   Airlines — 0.0%

 

  11,123      Delta Air Lines, Inc.      555,038  
     

 

 

  
   Banks — 0.1%

 

  10,785      Citigroup, Inc.      561,467  
  5,807      JPMorgan Chase & Co.      566,880  
  7,912      SunTrust Banks, Inc.      399,081  
     

 

 

  
        1,527,428  
     

 

 

  

 

See accompanying notes to financial statements.

 

57  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Beverages — 0.0%

 

  9,751      Molson Coors Brewing Co., Class B    $ 547,616  
     

 

 

  
   Biotechnology — 0.1%

 

  7,146      AbbVie, Inc.      658,790  
  3,117      Amgen, Inc.      606,786  
  8,868      Gilead Sciences, Inc.      554,693  
     

 

 

  
        1,820,269  
     

 

 

  
   Capital Markets — 0.0%

 

  1,899      Morgan Stanley      75,295  
     

 

 

  
   Chemicals — 0.0%

 

  12,744      CF Industries Holdings, Inc.      554,491  
     

 

 

  
   Commercial Services & Supplies — 0.0%

 

  3,794      Waste Management, Inc.      337,628  
     

 

 

  
   Communications Equipment — 0.0%

 

  13,325      Cisco Systems, Inc.      577,372  
     

 

 

  
   Construction Materials — 0.2%

 

  673,076      Cemex SAB de CV, Sponsored ADR(h)      3,244,226  
     

 

 

  
   Consumer Finance — 0.1%

 

  7,713      Capital One Financial Corp.      583,026  
     

 

 

  
   Containers & Packaging — 0.0%

 

  14,176      International Paper Co.      572,143  
     

 

 

  
   Electric Utilities — 0.1%

 

  15,710      FirstEnergy Corp.      589,911  
  20,176      PPL Corp.      571,586  
     

 

 

  
        1,161,497  
     

 

 

  
   Electrical Equipment — 0.1%

 

  7,050      Eaton Corp. PLC      484,053  
  3,808      Rockwell Automation, Inc.      573,028  
     

 

 

  
        1,057,081  
     

 

 

  
   Electronic Equipment, Instruments & Components — 0.0%

 

  6,964      CDW Corp.      564,432  
     

 

 

  
   Entertainment — 0.0%

 

  21,613      Viacom, Inc., Class B      555,454  
     

 

 

  
   Food & Staples Retailing — 0.0%

 

  7,751      Walgreens Boots Alliance, Inc.      529,626  
     

 

 

  
   Health Care Equipment & Supplies — 0.0%

 

  1,933      Medtronic PLC      175,826  
     

 

 

  
   Health Care Providers & Services — 0.2%

 

  2,948      Cigna Corp.(h)      559,884  
  8,403      CVS Health Corp.      550,565  
  4,896      McKesson Corp.      540,861  
  2,351      UnitedHealth Group, Inc.      585,681  
     

 

 

  
        2,236,991  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  58

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Hotels, Restaurants & Leisure — 0.1%

 

  9,073      Starbucks Corp.    $ 584,301  
  6,477      Yum! Brands, Inc.      595,366  
     

 

 

  
        1,179,667  
     

 

 

  
   Insurance — 0.1%

 

  13,167      Aflac, Inc.      599,889  
  14,024      MetLife, Inc.      575,825  
  7,089      Prudential Financial, Inc.      578,108  
     

 

 

  
        1,753,822  
     

 

 

  
   IT Services — 0.3%

 

  3,935      Accenture PLC, Class A      554,874  
  4,407      Automatic Data Processing, Inc.      577,846  
  6,052      Broadridge Financial Solutions, Inc.      582,505  
  3,064      MasterCard, Inc., Class A      578,024  
  9,014      Paychex, Inc.      587,262  
  25,327      Sabre Corp.      548,076  
  4,390      Visa, Inc., Class A      579,217  
     

 

 

  
        4,007,804  
     

 

 

  
   Life Sciences Tools & Services — 0.0%

 

  2,541      Thermo Fisher Scientific, Inc.      568,650  
     

 

 

  
   Machinery — 0.1%

 

  4,386      Cummins, Inc.      586,145  
  4,598      Illinois Tool Works, Inc.      582,521  
  10,438      PACCAR, Inc.      596,427  
     

 

 

  
        1,765,093  
     

 

 

  
   Media — 0.2%

 

  16,845      Comcast Corp., Class A      573,572  
  7,902      Omnicom Group, Inc.      578,743  
  20,330      Sinclair Broadcast Group, Inc., Class A      535,492  
  95,501      Sirius XM Holdings, Inc.      545,311  
     

 

 

  
        2,233,118  
     

 

 

  
   Multi-Utilities — 0.0%

 

  7,993      Dominion Energy, Inc.      571,180  
     

 

 

  
   Multiline Retail — 0.1%

 

  9,386      Kohl’s Corp.      622,667  
     

 

 

  
   Oil, Gas & Consumable Fuels — 0.4%

 

  34,950      Canadian Natural Resources Ltd.      843,285  
  1,884      Dommo Energia S.A., Sponsored ADR(h)      44,557  
  99,386      Encana Corp.      574,451  
  9,861      Marathon Petroleum Corp.      581,898  
  14,386      Murphy Oil Corp.      336,488  
  8,958      Occidental Petroleum Corp.      549,842  
  27,058      Plains GP Holdings LP, Class A(h)      543,866  
  73,856      Whiting Petroleum Corp.(h)      1,675,793  
     

 

 

  
        5,150,180  
     

 

 

  

 

See accompanying notes to financial statements.

 

59  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Pharmaceuticals — 0.2%

 

  4,281      Allergan PLC    $ 572,199  
  11,529      Bristol-Myers Squibb Co.      599,277  
  4,399      Johnson & Johnson      567,691  
  7,929      Merck & Co., Inc.      605,855  
     

 

 

  
        2,345,022  
     

 

 

  
   Professional Services — 0.0%

 

  10,085      Robert Half International, Inc.      576,862  
     

 

 

  
   REITs – Diversified — 0.1%

 

  17,476      Gaming and Leisure Properties, Inc.      564,649  
  36,563      Uniti Group, Inc.      569,286  
     

 

 

  
        1,133,935  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 0.1%

 

  2,335      Broadcom, Inc.      593,744  
  12,538      Intel Corp.      588,408  
  2,372      Texas Instruments, Inc.      224,154  
     

 

 

  
        1,406,306  
     

 

 

  
   Software — 0.1%

 

  2,993      Intuit, Inc.      589,172  
  5,605      Microsoft Corp.      569,300  
     

 

 

  
        1,158,472  
     

 

 

  
   Specialty Retail — 0.2%

 

  30,699      American Eagle Outfitters, Inc.      593,412  
  9,525      Best Buy Co., Inc.      504,444  
  17,627      Dick’s Sporting Goods, Inc.      549,962  
  3,425      Home Depot, Inc. (The)      588,484  
     

 

 

  
        2,236,302  
     

 

 

  
   Technology Hardware, Storage & Peripherals — 0.1%

 

  2,556      Apple, Inc.      403,184  
  41,720      Hewlett Packard Enterprise Co.      551,121  
     

 

 

  
        954,305  
     

 

 

  
   Tobacco — 0.0%

 

  11,608      Altria Group, Inc.      573,319  
     

 

 

  
   Total Common Stocks
(Identified Cost $50,681,076)		      44,912,143  
     

 

 

  
     
  Exchange-Traded Funds — 0.7%  
  30,500      Invesco QQQ Trust, Series 1      4,704,930  
  82,282      iShares® China Large-Cap ETF      3,215,581  
  128,943      Financial Select Sector SPDR® Fund      3,071,422  
     

 

 

  
   Total Exchange-Traded Funds
(Identified Cost $11,278,581)		      10,991,933  
     

 

 

  
     

 

See accompanying notes to financial statements.

 

|  60

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

    
Shares		      Description    Value (†)  
  Other Investments — 0.5%  
   Aircraft ABS — 0.5%

 

  900      ECAF I Blocker Ltd.(d)(e)(f)(g)
(Identified Cost $9,000,000)		    $ 7,790,625  
     

 

 

  
  Total Purchased Options — 0.0%   
   (Identified Cost $346,401) (see detail below)      69,433  
  

 

 

  
     
Principal
Amount (‡)		                
  Short-Term Investments — 15.1%  
$ 57,870,338      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $57,875,160 on 1/02/2019 collateralized by $57,825,000 U.S. Treasury Note, 2.875% due 9/30/2023 valued at $59,031,923 including accrued interest (Note 2 of Notes to Financial Statements)      57,870,338  
  18,400,000      U.S. Treasury Bills, 1.895%, 1/03/2019(n)      18,398,850  
  18,400,000      U.S. Treasury Bills, 1.960%, 1/31/2019(a)(n)      18,366,057  
  16,620,000      U.S. Treasury Bills, 2.093%, 3/28/2019(a)(n)      16,526,948  
  6,850,000      U.S. Treasury Bills, 2.126%, 1/24/2019(n)      6,840,445  
  26,150,000      U.S. Treasury Bills, 2.209%, 4/25/2019(n)      25,952,490  
  19,070,000      U.S. Treasury Bills, 2.336%-2.521%, 7/18/2019(n)(o)      18,811,851  
  19,100,000      U.S. Treasury Bills, 2.540%, 8/15/2019(n)(p)      18,799,623  
  15,500,000      U.S. Treasury Bills, 2.551%, 9/12/2019(n)      15,226,176  
  15,500,000      U.S. Treasury Bills, 2.584%, 10/10/2019(n)      15,195,266  
  15,500,000      U.S. Treasury Bills, 2.615%, 11/07/2019(n)      15,161,742  
     

 

 

  
   Total Short-Term Investments
(Identified Cost $227,149,535)		      227,149,786  
     

 

 

  
     
   Total Investments — 98.0%
(Identified Cost $1,546,429,203)		      1,474,203,181  
   Other assets less liabilities — 2.0%      30,756,036  
     

 

 

  
   Net Assets — 100.0%    $ 1,504,959,217  
     

 

 

  

 

Purchased Options — 0.0%

 

      
           
Description   Expiration
Date		   Exercise
Price		     Shares/Units of
Currency(†††)		     Notional
Amount		     Cost     Value (†)  

Over-the-Counter Cross Currency Options — 0.0%

 

EUR Put/GBP Call(h)(q)   01/14/2019     0.90       9,928,000  EUR    $ 11,382,477     $ 346,401     $ 69,433  
         

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

61  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Written Options — (0.0%)

 

      
           
Description   Expiration
Date		   Exercise
Price		     Shares     Notional
Amount		     Premiums
(Received)		     Value (†)  

Options on Securities — (0.0%)

 

AbbVie, Inc., Call   01/18/2019     95.00       (2,300 )    $ (212,037 )    $ (2,270 )    $ (2,749 ) 
AbbVie, Inc., Call   02/15/2019     97.50       (2,400 )      (221,256 )      (2,945 )      (4,500 ) 
AbbVie, Inc., Call   02/15/2019     92.50       (2,300 )      (212,037 )      (5,238 )      (8,740 ) 
Accenture PLC, Call   01/18/2019     170.00       (1,300 )      (183,313 )      (3,480 )      (32 ) 
Accenture PLC, Call   02/15/2019     175.00       (1,300 )      (183,313 )      (2,960 )      (97 ) 
Accenture PLC, Call   02/15/2019     165.00       (1,200 )      (169,212 )      (345 )      (150 ) 
Aflac, Inc., Call   01/18/2019     47.50       (4,300 )      (195,908 )      (977 )      (1,139 ) 
Aflac, Inc., Call   02/15/2019     47.50       (4,300 )      (195,908 )      (2,482 )      (3,311 ) 
Allergan PLC, Call   01/18/2019     175.00       (1,400 )      (187,124 )      (2,017 )      (84 ) 
Allergan PLC, Call   02/15/2019     150.00       (1,400 )      (187,124 )      (3,412 )      (2,037 ) 
Altria Group, Inc., Call   03/15/2019     65.00       (3,500 )      (172,865 )      (3,525 )      (560 ) 
Altria Group, Inc., Call   01/18/2019     65.00       (3,400 )      (167,926 )      (1,656 )      (34 ) 
Altria Group, Inc., Call   01/18/2019     52.50       (3,800 )      (187,682 )      (1,471 )      (1,159 ) 
American Eagle Outfitters, Inc., Call   01/18/2019     25.00       (10,200 )      (197,166 )      (3,541 )      (255 ) 
American Eagle Outfitters, Inc., Call   02/15/2019     26.00       (10,200 )      (197,166 )      (3,541 )      (510 ) 
American Eagle Outfitters, Inc., Call   01/18/2019     20.00       (10,200 )      (197,166 )      (1,093 )      (5,610 ) 
Amgen, Inc., Call   01/18/2019     200.00       (1,000 )      (194,670 )      (3,117 )      (2,985 ) 
Amgen, Inc., Call   02/15/2019     220.00       (1,000 )      (194,670 )      (1,917 )      (890 ) 
Amgen, Inc., Call   03/15/2019     210.00       (1,000 )      (194,670 )      (2,157 )      (3,550 ) 
Apple, Inc., Call   02/15/2019     180.00       (800 )      (126,192 )      (1,366 )      (1,292 ) 
Apple, Inc., Call   03/15/2019     185.00       (800 )      (126,192 )      (1,534 )      (1,452 ) 
Automatic Data Processing, Inc., Call   01/18/2019     155.00       (1,400 )      (183,568 )      (1,354 )      (105 ) 
Automatic Data Processing, Inc., Call   01/18/2019     140.00       (1,400 )      (183,568 )      (1,233 )      (1,225 ) 
Automatic Data Processing, Inc., Call   02/15/2019     145.00       (1,400 )      (183,568 )      (1,998 )      (2,205 ) 
Best Buy Co., Inc., Call   01/18/2019     57.50       (3,100 )      (164,176 )      (1,014 )      (1,814 ) 
Best Buy Co., Inc., Call   02/15/2019     57.50       (3,100 )      (164,176 )      (2,657 )      (4,340 ) 
Bristol-Myers Squibb Co., Call   01/18/2019     57.50       (3,800 )      (197,524 )      (2,269 )      (456 ) 
Bristol-Myers Squibb Co., Call   03/15/2019     55.00       (3,800 )      (197,524 )      (4,093 )      (4,940 ) 
Broadcom Ltd., Call   01/18/2019     270.00       (700 )      (177,996 )      (1,869 )      (1,943 ) 
Broadcom Ltd., Call   04/18/2019     280.00       (700 )      (177,996 )      (5,976 )      (6,825 ) 
Broadridge Financial Solutions, Inc., Call   01/18/2019     105.00       (1,900 )      (182,875 )      (1,116 )      (570 ) 
Capital One Financial Corp., Call   01/18/2019     97.50       (2,300 )      (173,857 )      (1,580 )      (80 ) 
Capital One Financial Corp., Call   03/15/2019     97.50       (2,400 )      (181,416 )      (4,145 )      (144 ) 
Capital One Financial Corp., Call   01/18/2019     82.50       (2,500 )      (188,975 )      (893 )      (712 ) 
CF Industries Holdings, Inc., Call   01/18/2019     45.00       (4,200 )      (182,742 )      (3,138 )      (4,326 ) 
CF Industries Holdings, Inc., Call   02/15/2019     47.50       (4,200 )      (182,742 )      (3,726 )      (4,998 ) 
Cigna Corp. Call   01/18/2019     230.00       (900 )      (170,928 )      (2,427 )      (211 ) 
Cisco Systems, Inc., Call   01/18/2019     46.00       (6,600 )      (285,978 )      (2,291 )      (1,518 ) 
Citigroup, Inc., Call   01/18/2019     70.00       (3,200 )      (166,592 )      (2,839 )      (32 ) 
Citigroup, Inc., Call   03/15/2019     70.00       (3,300 )      (171,798 )      (5,106 )      (99 ) 
Citigroup, Inc., Call   02/15/2019     60.00       (3,500 )      (182,210 )      (1,670 )      (1,172 ) 
Comcast Corp., Call   02/15/2019     42.50       (5,600 )      (190,680 )      (3,064 )      (168 ) 
Comcast Corp., Call   01/18/2019     37.50       (5,500 )      (187,275 )      (974 )      (302 ) 
Cummins, Inc., Call   03/15/2019     155.00       (1,500 )      (200,460 )      (7,751 )      (1,388 ) 
Cummins, Inc., Call   03/15/2019     160.00       (1,400 )      (187,096 )      (5,134 )      (770 ) 

 

See accompanying notes to financial statements.

 

|  62

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Description   Expiration
Date		   Exercise
Price		     Shares     Notional
Amount		     Premiums
(Received)		     Value (†)  
Cummins, Inc., Call   01/18/2019     155.00       (1,400 )    $ (187,096 )    $ (4,434 )    $ (35 ) 
CVS Health Corp., Call   01/18/2019     75.00       (2,700 )      (176,904 )      (370 )      (162 ) 
CVS Health Corp., Call   02/15/2019     77.50       (2,700 )      (176,904 )      (694 )      (499 ) 
Delta Air Lines, Inc., Call   01/18/2019     55.00       (3,600 )      (179,640 )      (2,042 )      (1,080 ) 
Delta Air Lines, Inc., Call   03/15/2019     62.50       (3,700 )      (184,630 )      (4,318 )      (555 ) 
Delta Air Lines, Inc., Call   01/18/2019     60.00       (3,700 )      (184,630 )      (3,578 )      (203 ) 
Dick’s Sporting Goods, Inc., Call   01/18/2019     35.00       (5,800 )      (180,960 )      (1,375 )      (1,160 ) 
Dick’s Sporting Goods, Inc., Call   01/18/2019     36.00       (5,800 )      (180,960 )      (737 )      (580 ) 
Dominion Energy, Inc., Call   01/18/2019     80.00       (2,600 )      (185,796 )      (825 )      (195 ) 
Dominion Energy, Inc., Call   04/18/2019     80.00       (2,600 )      (185,796 )      (3,711 )      (1,625 ) 
Eaton Corp. PLC, Call   01/18/2019     77.50       (2,400 )      (164,784 )      (2,825 )      (120 ) 
Eaton Corp. PLC, Call   01/18/2019     72.50       (2,300 )      (157,918 )      (987 )      (1,035 ) 
Eaton Corp. PLC, Call   04/18/2019     77.50       (2,300 )      (157,918 )      (1,925 )      (1,783 ) 
FirstEnergry Corp., Call   01/18/2019     41.00       (5,200 )      (195,260 )      (1,233 )      (260 ) 
FirstEnergy Corp., Call   04/18/2019     41.00       (5,200 )      (195,260 )      (2,793 )      (2,470 ) 
Gilead Sciences, Inc., Call   01/18/2019     77.50       (2,900 )      (181,395 )      (2,109 )      (58 ) 
Gilead Sciences, Inc., Call   02/15/2019     77.50       (3,000 )      (187,650 )      (3,861 )      (465 ) 
Gilead Sciences, Inc., Call   02/15/2019     70.00       (2,900 )      (181,395 )      (4,719 )      (2,277 ) 
HewLett Packard Enterprise Co., Call   01/18/2019     14.00       (13,700 )      (180,977 )      (1,879 )      (1,987 ) 
HewLett Packard Enterprise Co., Call   02/15/2019     15.00       (13,800 )      (182,298 )      (1,065 )      (1,449 ) 
Home Depot, Inc. (The), Call   01/18/2019     180.00       (1,100 )      (189,002 )      (811 )      (1,546 ) 
Home Depot, Inc. (The), Call   02/15/2019     185.00       (1,100 )      (189,002 )      (1,207 )      (2,068 ) 
Home Depot, Inc. (The), Call   01/18/2019     195.00       (1,100 )      (189,002 )      (1,306 )      (66 ) 
Illinois Tool Works, Inc., Call   03/15/2019     135.00       (1,500 )      (190,035 )      (3,761 )      (4,425 ) 
Intel Corp., Call   01/18/2019     52.50       (4,100 )      (192,413 )      (2,366 )      (205 ) 
Intel Corp., Call   02/15/2019     52.50       (4,100 )      (192,413 )      (2,038 )      (2,112 ) 
Intel Corp., Call   01/18/2019     49.00       (4,100 )      (192,413 )      (2,325 )      (2,255 ) 
International Paper Co., Call   01/18/2019     45.00       (4,700 )      (189,692 )      (786 )      (423 ) 
Intuit, Inc., Call   01/18/2019     210.00       (900 )      (177,165 )      (1,131 )      (1,170 ) 
Intuit, Inc., Call   04/18/2019     220.00       (900 )      (177,165 )      (3,908 )      (4,320 ) 
Johnson & Johnson, Call   02/15/2019     140.00       (1,400 )      (180,670 )      (2,110 )      (1,309 ) 
Johnson & Johnson, Call   01/18/2019     135.00       (1,400 )      (180,670 )      (1,928 )      (903 ) 
JPMorgan Chase & Co., Call   01/18/2019     105.00       (1,900 )      (185,478 )      (1,059 )      (684 ) 
JPMorgan Chase & Co., Call   02/15/2019     105.00       (1,900 )      (185,478 )      (2,408 )      (2,157 ) 
Kohl’s Corp., Call   04/18/2019     95.00       (2,600 )      (172,484 )      (4,048 )      (650 ) 
Kohl’s Corp., Call   01/18/2019     67.50       (3,100 )      (205,654 )      (2,290 )      (7,440 ) 
Kohl’s Corp., Call   03/15/2019     70.00       (3,100 )      (205,654 )      (5,137 )      (11,315 ) 
Marathon Petroleum Corp., Call   01/18/2019     72.50       (3,200 )      (188,832 )      (4,407 )      (80 ) 
Marathon Petroleum Corp., Call   01/18/2019     65.00       (3,200 )      (188,832 )      (1,303 )      (1,008 ) 
MasterCard, Inc., Call   01/18/2019     220.00       (1,000 )      (188,650 )      (1,867 )      (110 ) 
MasterCard, Inc., Call   01/18/2019     200.00       (1,000 )      (188,650 )      (1,117 )      (1,800 ) 
McKesson Corp., Call   01/18/2019     120.00       (1,600 )      (176,752 )      (1,387 )      (800 ) 
McKesson Corp., Call   02/15/2019     125.00       (1,600 )      (176,752 )      (2,197 )      (1,720 ) 
Medtronic PLC, Call   01/18/2019     100.00       (600 )      (54,576 )      (262 )      (60 ) 
Medtronic PLC, Call   02/15/2019     97.50       (600 )      (54,576 )      (364 )      (477 ) 
Merck & Co., Inc., Call   01/18/2019     80.00       (2,600 )      (198,666 )      (695 )      (611 ) 
Merck & Co., Inc., Call   02/15/2019     82.50       (2,600 )      (198,666 )      (2,567 )      (1,079 ) 
MetLife, Inc., Call   01/18/2019     50.00       (4,600 )      (188,876 )      (1,551 )      (230 ) 

 

See accompanying notes to financial statements.

 

63  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Description   Expiration
Date		   Exercise
Price		     Shares     Notional
Amount		     Premiums
(Received)		     Value (†)  
MetLife, Inc., Call   02/15/2019     45.00       (4,600 )    $ (188,876 )    $ (1,367 )    $ (1,771 ) 
Microsoft Corp., Call   01/18/2019     115.00       (1,800 )      (182,826 )      (2,574 )      (135 ) 
Microsoft Corp., Call   02/15/2019     115.00       (1,800 )      (182,826 )      (1,993 )      (1,800 ) 
Microsoft Corp., Call   03/15/2019     115.00       (1,800 )      (182,826 )      (2,983 )      (2,727 ) 
Molson Coors Brewing Co., Call   01/18/2019     70.00       (3,200 )      (179,712 )      (2,039 )      (80 ) 
Molson Coors Brewing Co., Call   04/18/2019     65.00       (3,200 )      (179,712 )      (3,319 )      (2,640 ) 
Molson Coors Brewing Co., Call   01/18/2019     62.50       (3,200 )      (179,712 )      (663 )      (320 ) 
Morgan Stanley, Call   01/18/2019     49.00       (600 )      (23,790 )      (298 )      (18 ) 
Morgan Stanley, Call   01/18/2019     42.00       (600 )      (23,790 )      (310 )      (351 ) 
Murphy Oil Corp., Call   01/18/2019     35.00       (4,700 )      (109,933 )      (4,217 )      (117 ) 
Murphy Oil Corp., Call   01/18/2019     27.50       (4,700 )      (109,933 )      (1,021 )      (470 ) 
Occidental Petroleum Corp., Call   01/18/2019     77.50       (2,900 )      (178,002 )      (3,008 )      (58 ) 
Occidental Petroleum Corp., Call   01/18/2019     67.50       (2,900 )      (178,002 )      (1,181 )      (565 ) 
Omnicom Group, Inc., Call   01/18/2019     82.50       (2,600 )      (190,424 )      (1,787 )      (130 ) 
Omnicom Group, Inc., Call   04/18/2019     82.50       (2,600 )      (190,424 )      (2,125 )      (2,665 ) 
Omnicom Group, Inc., Call   01/18/2019     77.50       (2,600 )      (190,424 )      (669 )      (715 ) 
PACCAR, Inc., Call   01/18/2019     61.20       (3,400 )      (194,276 )      (4,512 )      (1,360 ) 
PACCAR, Inc., Call   02/15/2019     60.50       (3,400 )      (194,276 )      (3,356 )      (4,845 ) 
Paychex, Inc., Call   01/18/2019     70.00       (3,000 )      (195,450 )      (651 )      (450 ) 
Paychex, Inc., Call   03/15/2019     70.00       (3,000 )      (195,450 )      (2,901 )      (2,475 ) 
Plains GP Holdings LP, Call   02/15/2019     23.00       (9,000 )      (180,900 )      (3,761 )      (2,025 ) 
PPL Corp., Call   01/18/2019     30.00       (6,700 )      (189,811 )      (1,924 )      (670 ) 
Prudential Financial, Inc., Call   03/15/2019     105.00       (2,300 )      (187,565 )      (2,891 )      (207 ) 
Prudential Financial, Inc., Call   01/18/2019     87.50       (2,300 )      (187,565 )      (1,396 )      (1,185 ) 
Robert Half International, Inc., Call   01/18/2019     60.00       (3,300 )      (188,760 )      (1,773 )      (2,475 ) 
Rockwell Automation, Inc., Call   04/18/2019     165.00       (1,200 )      (180,576 )      (5,168 )      (5,280 ) 
Rockwell Automation, Inc., Call   01/18/2019     160.00       (1,200 )      (180,576 )      (1,785 )      (1,560 ) 
Sabre Corp., Call   04/18/2019     25.00       (12,600 )      (272,664 )      (6,642 )      (6,615 ) 
Sinclair Broadcast Group, Inc., Call   01/18/2019     34.00       (6,700 )      (176,478 )      (3,398 )      (837 ) 
Starbucks Corp., Call   02/15/2019     70.00       (3,000 )      (193,200 )      (1,131 )      (1,710 ) 
Starbucks Corp., Call   01/18/2019     67.50       (3,000 )      (193,200 )      (621 )      (945 ) 
SunTrust Banks, Inc., Call   01/18/2019     55.00       (2,600 )      (131,144 )      (695 )      (546 ) 
Texas Instruments, Inc., Call   01/18/2019     105.00       (700 )      (66,150 )      (908 )      (157 ) 
Texas Instruments, Inc., Call   04/18/2019     105.00       (700 )      (66,150 )      (1,559 )      (1,722 ) 
Texas Instruments, Inc., Call   01/18/2019     97.50       (700 )      (66,150 )      (1,022 )      (1,222 ) 
Thermo Fisher Scientific, Inc., Call   01/18/2019     250.00       (800 )      (179,032 )      (1,694 )      (80 ) 
Thermo Fisher Scientific, Inc., Call   03/15/2019     250.00       (800 )      (179,032 )      (1,598 )      (1,820 ) 
UnitedHealth Group, Inc., Call   01/18/2019     290.00       (700 )      (174,384 )      (894 )      (63 ) 
UnitedHealth Group, Inc., Call   01/18/2019     260.00       (700 )      (174,384 )      (1,552 )      (2,062 ) 
Uniti Group, Inc., Call   02/15/2019     17.50       (12,100 )      (188,397 )      (5,410 )      (6,050 ) 
Visa, Inc., Call   01/18/2019     140.00       (1,400 )      (184,716 )      (866 )      (1,267 ) 
Visa, Inc., Call   03/15/2019     145.00       (1,400 )      (184,716 )      (2,040 )      (2,905 ) 
Walgreens Boots Alliance, Inc., Call   04/18/2019     90.00       (3,900 )      (266,487 )      (8,257 )      (546 ) 
Walgreens Boots Alliance, Inc., Call   01/18/2019     77.50       (3,800 )      (259,654 )      (407 )      (228 ) 
Waste Management, Inc., Call   01/18/2019     92.50       (1,200 )      (106,788 )      (513 )      (360 ) 
Yum Brands, Inc., Call   01/18/2019     95.00       (2,100 )      (193,032 )      (1,821 )      (1,481 ) 
Yum Brands, Inc., Call   04/18/2019     97.50       (2,100 )      (193,032 )      (3,291 )      (5,103 ) 
         

 

 

    

 

 

  
Total           $ (325,168 )    $ (223,313 ) 
         

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

|  64

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

   
  (‡)     Principal Amount stated in U.S. dollars unless otherwise noted.
  (†)     See Note 2 of Notes to Financial Statements.
  (†††)     Options on securities are expressed as shares. Options on currency are expressed as units of currency.
  (a)     Security (or a portion thereof) has been designated to cover the Fund’s obligations under open derivative contracts.
  (b)     Variable rate security. Rate as of December 31, 2018 is disclosed.
  (c)     Variable rate security. The interest rate adjusts periodically based on; (i) changes in current interest rates and/or prepayments on underlying pools of assets, if applicable, (ii) reference to a base lending rate plus or minus a margin, and/or (iii) reference to a base lending rate adjusted by a multiplier and/or subject to certain floors or caps. Rate as of December 31, 2018 is disclosed.
  (d)     Level 3 security. Value has been determined using significant unobservable inputs. See Note 3 of Notes to Financial Statements.
  (e)     Fair valued by the Fund’s adviser. At December 31, 2018, the value of these securities amounted to $9,893,316 or 0.7% of net assets. See Note 2 of Notes to Financial Statements.
  (f)     Securities subject to restriction on resale. At December 31, 2018, the restricted securities held by the Fund are as follows:
       
    Acquisition
Date		   Acquisition
Cost		     Value     % of
Net Assets		  
ECAF I Blocker Ltd.   June 18, 2015   $ 9,000,000     $ 7,790,625       0.5%  
GCA2014 Holdings Ltd., Series 2014-1, Class C   December 18, 2014     2,069,787       1,673,859       0.1%  
GCA2014 Holdings Ltd., Series 2014-1, Class D   December 18, 2014     820,999       428,831       Less than 0.1%  
GCA2014 Holdings Ltd., Series 2014-1, Class E   December 18, 2014     2,657,606       —       —  
     
  (g)      Illiquid security. (Unaudited)
  (h)      Non-income producing security.
  (i)      Securities classified as fair valued pursuant to the Fund’s pricing policies and procedures. At December 31, 2018, the value of these securities amounted to $2,544,652 or 0.2% of net assets. See Note 2 of Notes to Financial Statements.
  (j)      Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the outstanding par amount of the pool held as of the end of the period.
  (k)      The issuer is in default with respect to interest and/or principal payments. Income is not being accrued.
  (l)      Position is unsettled. Contract rate was not determined at December 31, 2018 and does not take effect until settlement date. Maturity date is not finalized until settlement date.
  (m)      Variable rate security. Rate shown represents the weighted average rate of underlying contracts at December 31, 2018.
  (n)      Interest rate represents discount rate at time of purchase; not a coupon rate.
  (o)      The Fund’s investment in U.S. Government/Agency securities is comprised of various lots with differing discount rates. These separate investments, which have the same maturity date, have been aggregated for the purpose of presentation in the Portfolio of Investments.
  (p)      Security (or a portion thereof) has been pledged as collateral for open derivative contracts.
  (q)      Counterparty is Deutsche Bank AG.
     
  144A      All or a portion of these securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2018, the value of Rule 144A holdings amounted to $382,880,212 or 25.4% of net assets.

 

See accompanying notes to financial statements.

 

65  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

     
  ABS      Asset-Backed Securities
  ADR      An American Depositary Receipt is a certificate issued by a custodian bank representing the right to receive securities of the foreign issuer described. The values of ADRs may be significantly influenced by trading on exchanges not located in the United States.
  ARS      Auction Rate Security
  CDOR      Canadian Dollar Offered Rate
  EMTN      Euro Medium Term Note
  ETF      Exchange-Traded Fund
  EURIBOR      Euro Interbank Offered Rate
  GMTN      Global Medium Term Note
  LIBOR      London Interbank Offered Rate
  MTN      Medium Term Note
  REITs      Real Estate Investment Trusts
  SLM      Sallie Mae
     
  ARS      Argentine Peso
  BRL      Brazilian Real
  CAD      Canadian Dollar
  CNY      Chinese Yuan Renminbi
  COP      Colombian Peso
  EUR      Euro
  GBP      British Pound
  HUF      Hungarian Forint
  IDR      Indonesian Rupiah
  ILS      Israeli Shekel
  MXN      Mexican Peso
  NOK      Norwegian Krone
  NZD      New Zealand Dollar
  PEN      Peruvian Sol
  PHP      Philippine Peso
  RUB      New Russian Ruble
  SGD      Singapore Dollar
  THB      Thai Baht
  TRY      Turkish Lira
  USD      U.S. Dollar
  ZAR      South African Rand

At December 31, 2018, the Fund had the following open bilateral credit default swap agreements:

 

Buy Protection              
Counterparty   Reference
Obligation		   (Pay)/
Receive
Fixed Rate1		   Expiration
Date		     Notional
Value(‡)		     Unamortized
Up Front
Premium
Paid/
(Received)		     Market
Value		     Unrealized
Appreciation
(Depreciation)		  
Bank of America, N.A.   Enel SpA   (1.00%)     6/20/2023       6,100,000 EUR     $ (3,117 )    $ 47,214     $ 50,331  
Morgan Stanley Capital Services, Inc.   Enel SpA   (1.00%)     12/20/2023       6,115,000 EUR       40,349       92,109       51,760  
           

 

 

    

 

 

  
Total

 

   $ 139,323     $ 102,091  
 

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

|  66

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

At December 31, 2018, the Fund had the following open centrally cleared interest rate swap agreements:

 

Notional
Value		     Currency     Expiration
Date		     Fund Pays   Fund Receives   Market
Value		     Unrealized
Appreciation
(Depreciation)3 		 
  76,460,000       CAD       9/19/2021     3-month CDOR2   2.070%2   $ (228,904 )    $ (228,158 ) 
  26,784,000       CAD       4/9/2028     2.564%2   3-month CDOR2     (198,303 )      (198,303 ) 
  19,565,000       USD       4/11/2028     2.826%2   3-month LIBOR1     (220,136 )      (220,136 ) 
  89,205,000       CAD       4/9/2022     3-month CDOR2   2.365%2     268,559       268,559  
  158,670,000       USD       4/13/2020     3-month LIBOR1   2.601%2     (256,400 )      (256,400 ) 
  161,300,000       USD       7/16/2028     2.930%2   3-month LIBOR1     (3,184,891 )      (3,184,891 ) 
  729,650,000       USD       7/16/2020     3-month LIBOR1   2.826%2     1,450,566       1,450,566  
  153,000,000       USD       7/24/2020     3-month LIBOR1   2.829%2     328,165       328,165  
  42,000,000       CAD       10/18/2028     2.897%2   3-month CDOR2     (1,184,029 )      (1,184,701 ) 
  182,522,400       USD       10/22/2020     3-month LIBOR1   3.097%2     1,381,408       1,381,408  
  217,497,600       USD       10/22/2020     3-month LIBOR1   3.094%2     1,635,789       1,635,789  
  47,150,000       USD       10/22/2028     3.239%2   3-month LIBOR1     (2,192,054 )      (2,192,054 ) 
  137,250,000       CAD       10/18/2022     3-month CDOR2   2.752%2     1,848,855       1,850,543  
  16,700,000       CAD       9/14/2027     2.351%2   3-month CDOR2     69,947       69,611  
  39,700,000       CAD       9/15/2027     2.365%2   3-month CDOR2     133,836       133,025  
  39,700,000       CAD       9/15/2027     2.360%2   3-month CDOR2     145,441       144,634  
  39,700,000       CAD       9/18/2027     2.386%2   3-month CDOR2     86,205       85,377  
  30,950,000       CAD       9/19/2027     2.363%2   3-month CDOR2     109,743       109,106  
  41,000,000       CAD       9/14/2021     3-month CDOR2   2.095%2     (102,753 )      (102,345 ) 
  97,600,000       CAD       9/15/2021     3-month CDOR2   2.115%2     (206,796 )      (205,792 ) 
  97,600,000       CAD       9/15/2021     3-month CDOR2   2.110%2     (216,191 )      (215,195 ) 
  97,600,000       CAD       9/18/2021     3-month CDOR2   2.120%2     (197,940 )      (196,930 ) 
  133,420,000       USD       1/5/2028     2.432%2   3-month LIBOR1     2,705,240       2,705,240  
  673,470,000       USD       1/5/2020     3-month LIBOR1   2.110%2     (4,260,634 )      (4,260,634 ) 
         

 

 

    

 

 

  
 

Total

   $ (2,285,277 )    $ (2,283,516 ) 
         

 

 

    

 

 

  

At December 31, 2018, the Fund had the following open centrally cleared credit default swap agreements:

 

Sell Protection            
Reference Obligation   (Pay)/
Receive
Fixed Rate		     Expiration
Date		   Implied Credit
Spread^		     Notional
Value(‡)		     Market
Value		     Unrealized
Appreciation
(Depreciation)		  
CDX.HY Series 31, 5-Year     5.00 %    12/20/2023     4.51 %      15,000,000     $ 298,995     $ 54,478  
CDX.HY Series 31, 5-Year     5.00 %    12/20/2023     4.51 %      14,300,000       285,042       (210,422 ) 
         

 

 

    

 

 

  

Total

 

   $ 584,037     $ (155,944 ) 
         

 

 

    

 

 

  

 

(‡)

Notional value stated in U.S. dollars unless otherwise noted.

1

Payments are made quarterly.

2

Payments are made semiannually.

3

Differences between unrealized appreciation (depreciation) and market value, if any, are due to interest booked as part of the initial trades.

 

See accompanying notes to financial statements.

 

67  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

^

Implied credit spreads, represented in absolute terms, serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

At December 31, 2018, the Fund had the following open forward foreign currency contracts:

 

Counterparty   Delivery
Date		     Currency
Bought/
Sold (B/S)		          Units
of
Currency		     In Exchange for     Notional
Value		     Unrealized
Appreciation
(Depreciation)		  
Bank of America, N.A.     1/07/2019     ARS     B       11,120,000     $ 282,234     $ 293,617     $ 11,383  
Bank of America, N.A.     1/10/2019     CNY     B       7,575,000       1,107,537       1,103,338       (4,199 ) 
Bank of America, N.A.     1/10/2019     CNY     S       7,575,000       1,103,262       1,103,338       (76 ) 
Bank of America, N.A.     1/07/2019     EUR     S       795,000       905,055       911,171       (6,116 ) 
Bank of America, N.A.     1/07/2019     HUF     S       127,955,000       450,118       456,773       (6,655 ) 
Bank of America, N.A.     1/07/2019     IDR     B       21,463,920,000       1,482,827       1,492,060       9,233  
Bank of America, N.A.     1/14/2019     NZD     B       1,310,000       897,875       879,437       (18,438 ) 
Bank of America, N.A.     1/14/2019     NZD     S       1,310,000       901,934       879,437       22,497  
Barclays Bank plc     1/07/2019     ILS     S       3,915,000       1,052,325       1,047,332       4,993  
Barclays Bank plc     1/14/2019     SGD     S       1,035,000       753,482       759,571       (6,089 ) 
Barclays Bank plc     1/07/2019     TRY     B       1,620,000       299,326       305,249       5,923  
Credit Suisse International     1/28/2019     COP     S       18,400,000,000       5,668,515       5,658,712       9,803  
Deutsche Bank AG     1/31/2019     EUR     S       2,000,000       2,285,420       2,296,850       (11,430 ) 
Deutsche Bank AG     1/31/2019     GBP     S       5,095,000       6,448,308       6,503,088       (54,780 ) 
Deutsche Bank AG     1/03/2019     MXN     B       16,730,000       813,668       851,323       37,655  
Deutsche Bank AG     1/03/2019     MXN     S       16,730,000       823,659       851,324       (27,665 ) 
HSBC Bank USA     1/10/2019     BRL     S       2,665,000       693,072       687,157       5,915  
HSBC Bank USA     1/11/2019     THB     B       23,410,000       719,909       718,971       (938 ) 
HSBC Bank USA     1/11/2019     THB     S       23,410,000       713,132       718,971       (5,839 ) 
Morgan Stanley Capital Services, Inc.     1/22/2019     CAD     B       1,235,000       917,376       905,097       (12,279 ) 
Morgan Stanley Capital Services, Inc.     1/22/2019     CAD     S       1,235,000       910,125       905,097       5,028  
Morgan Stanley Capital Services, Inc.     1/24/2019     GBP     S       1,225,000       1,553,034       1,563,007       (9,973 ) 
Morgan Stanley Capital Services, Inc.     1/07/2019     HUF     S       115,070,000       406,249       410,777       (4,528 ) 
Morgan Stanley Capital Services, Inc.     1/22/2019     NOK     B       7,825,000       899,422       905,784       6,362  
Morgan Stanley Capital Services, Inc.     1/22/2019     NOK     S       7,825,000       892,795       905,784       (12,989 ) 
Morgan Stanley Capital Services, Inc.     1/10/2019     PEN     B       3,570,000       1,053,221       1,059,504       6,283  
Morgan Stanley Capital Services, Inc.     1/10/2019     PEN     S       3,570,000       1,055,588       1,059,504       (3,916 ) 
Morgan Stanley Capital Services, Inc.     1/10/2019     PHP     B       46,980,000       890,195       892,732       2,537  
Morgan Stanley Capital Services, Inc.     1/10/2019     PHP     S       46,980,000       888,091       892,732       (4,641 ) 

 

See accompanying notes to financial statements.

 

|  68

Table of Contents

Portfolio of Investments – as of December 31, 2018

Loomis Sayles Strategic Alpha Fund – (continued)

 

Counterparty   Delivery
Date		     Currency
Bought/
Sold (B/S)		          Units
of
Currency		     In Exchange for     Notional
Value		     Unrealized
Appreciation
(Depreciation)		  
Morgan Stanley Capital Services, Inc.     1/10/2019     RUB     B       46,905,000     $ 696,954     $ 673,104     $ (23,850 ) 
Morgan Stanley Capital Services, Inc.     1/10/2019     RUB     S       46,905,000       702,229       673,104       29,125  
Morgan Stanley Capital Services, Inc.     1/28/2019     RUB     S       62,465,000       902,217       894,175       8,042  
Morgan Stanley Capital Services, Inc.     1/31/2019     ZAR     S       361,810,000       25,126,218       25,063,735       62,483  
UBS AG     1/07/2019     CAD     B       1,185,000       898,731       868,127       (30,604 ) 
UBS AG     1/07/2019     CAD     S       1,185,000       883,864       868,127       15,737  
UBS AG     1/31/2019     HUF     S       5,983,080,000       21,268,560       21,392,691       (124,131 ) 
UBS AG     1/29/2019     NZD     S       1,340,000       903,060       899,820       3,240  
UBS AG     1/14/2019     ZAR     B       12,925,000       899,506       897,224       (2,282 ) 
UBS AG     1/14/2019     ZAR     S       12,925,000       896,668       897,224       (556 ) 
             

 

 

  
Total

 

   $ (125,735 ) 
             

 

 

  

At December 31, 2018, open short futures contracts were as follows:

 

Financial Futures    Expiration
Date		      Contracts      Notional
Amount		      Value      Unrealized
Appreciation
(Depreciation)		  

E-mini S&P 500®

      3/15/2019        132      $ 16,862,022      $ 16,534,320      $ 327,702  

Ultra 10 Year U.S. Treasury Note

      3/20/2019        345        44,885,336        44,876,954        8,382  

Ultra Long U.S. Treasury Bond

      3/20/2019        134        21,548,799        21,527,937        20,862  
              

 

 

  

Total

 

    $ 356,946  
  

 

 

  

Industry Summary at December 31, 2018

 

ABS Car Loan

      11.4 % 

ABS Home Equity

      8.8  

Banking

      6.2  

ABS Other

      5.5  

Automotive

      4.8  

Technology

      4.1  

ABS Credit Card

      4.1  

Cable Satellite

      2.3  

Construction Machinery

      2.2  

Non-Agency Commercial Mortgage-Backed Securities

      2.0  

Other Investments, less than 2% each

      30.8  

Short-Term Investments

      15.1  

Exchange-Traded Funds

      0.7  
  

 

 

  

Total Investments

      98.0  

Other assets less liabilities (including open written options, swap agreements, forward foreign currency and futures contracts)

      2.0  
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

69  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis U.S. Equity Opportunities Fund

 

    
Shares		      Description    Value (†)  
  Common Stocks — 98.8% of Net Assets  
   Air Freight & Logistics — 2.6%

 

  298,416      Expeditors International of Washington, Inc.    $ 20,319,145  
  35,881      United Parcel Service, Inc., Class B      3,499,474  
     

 

 

  
        23,818,619  
     

 

 

  
   Airlines — 1.1%

 

  311,500      American Airlines Group, Inc.      10,002,265  
     

 

 

  
   Automobiles — 3.1%

 

  1,079,800      Fiat Chrysler Automobiles NV(a)      15,613,908  
  363,100      General Motors Co.      12,145,695  
     

 

 

  
        27,759,603  
     

 

 

  
   Banks — 5.6%

 

  714,870      Bank of America Corp.      17,614,397  
  366,100      Citigroup, Inc.      19,059,166  
  302,800      Wells Fargo & Co.      13,953,024  
     

 

 

  
        50,626,587  
     

 

 

  
   Beverages — 4.0%

 

  187,056      Coca-Cola Co. (The)      8,857,101  
  41,810      Diageo PLC, Sponsored ADR      5,928,658  
  434,913      Monster Beverage Corp.(a)      21,406,418  
     

 

 

  
        36,192,177  
     

 

 

  
   Biotechnology — 5.7%

 

  32,767      Amgen, Inc.      6,378,752  
  119,172      BioMarin Pharmaceutical, Inc.(a)      10,147,496  
  92,778      Regeneron Pharmaceuticals, Inc.(a)      34,652,583  
     

 

 

  
        51,178,831  
     

 

 

  
   Capital Markets — 6.7%

 

  361,300      Charles Schwab Corp. (The)      15,004,789  
  46,367      FactSet Research Systems, Inc.      9,279,428  
  63,343      MSCI, Inc.      9,338,659  
  256,122      SEI Investments Co.      11,832,836  
  237,800      State Street Corp.      14,998,046  
     

 

 

  
        60,453,758  
     

 

 

  
   Communications Equipment — 1.4%

 

  293,802      Cisco Systems, Inc.      12,730,441  
     

 

 

  
   Consumer Finance — 2.4%

 

  63,386      American Express Co.      6,041,954  
  204,700      Capital One Financial Corp.      15,473,273  
     

 

 

  
        21,515,227  
     

 

 

  
   Energy Equipment & Services — 1.6%

 

  231,100      National Oilwell Varco, Inc.      5,939,270  
  228,193      Schlumberger Ltd.      8,233,203  
     

 

 

  
        14,172,473  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  70

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis U.S. Equity Opportunities Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Entertainment — 1.9%

 

  62,290      Netflix, Inc.(a)    $ 16,672,541  
     

 

 

  
   Food Products — 1.1%

 

  709,813      Danone S.A., Sponsored ADR      9,923,186  
     

 

 

  
   Health Care Equipment & Supplies — 2.2%

 

  161,820      Baxter International, Inc.      10,650,993  
  77,149      Varian Medical Systems, Inc.(a)      8,741,753  
     

 

 

  
        19,392,746  
     

 

 

  
   Health Care Providers & Services — 2.5%

 

  228,200      CVS Health Corp.      14,951,664  
  57,200      HCA Healthcare, Inc.      7,118,540  
     

 

 

  
        22,070,204  
     

 

 

  
   Health Care Technology — 1.3%

 

  226,590      Cerner Corp.(a)      11,882,380  
     

 

 

  
   Hotels, Restaurants & Leisure — 5.0%

 

  100,900      Hilton Worldwide Holdings, Inc.      7,244,620  
  227,605      Starbucks Corp.      14,657,762  
  431,627      Yum China Holdings, Inc.      14,472,453  
  92,724      Yum! Brands, Inc.      8,523,190  
     

 

 

  
        44,898,025  
     

 

 

  
   Household Products — 1.8%

 

  125,535      Colgate-Palmolive Co.      7,471,843  
  95,827      Procter & Gamble Co. (The)      8,808,418  
     

 

 

  
        16,280,261  
     

 

 

  
   Industrial Conglomerates — 1.7%

 

  1,974,250      General Electric Co.      14,945,072  
     

 

 

  
   Insurance — 1.7%

 

  398,555      American International Group, Inc.      15,707,053  
     

 

 

  
   Interactive Media & Services — 7.9%

 

  35,148      Alphabet, Inc., Class A(a)      36,728,254  
  11,356      Alphabet, Inc., Class C(a)      11,760,387  
  174,229      Facebook, Inc., Class A(a)      22,839,680  
     

 

 

  
        71,328,321  
     

 

 

  
   Internet & Direct Marketing Retail — 7.4%

 

  184,615      Alibaba Group Holding Ltd., Sponsored ADR(a)      25,305,178  
  21,822      Amazon.com, Inc.(a)      32,775,989  
  453,100      Qurate Retail, Inc., Class A(a)      8,844,512  
     

 

 

  
        66,925,679  
     

 

 

  
   IT Services — 5.8%

 

  38,096      Automatic Data Processing, Inc.      4,995,148  
  65,800      MasterCard, Inc., Class A      12,413,170  
  261,064      Visa, Inc., Class A      34,444,784  
     

 

 

  
        51,853,102  
     

 

 

  

 

See accompanying notes to financial statements.

 

71  |

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis U.S. Equity Opportunities Fund – (continued)

 

    
Shares		      Description    Value (†)  
   Machinery — 2.3%

 

  65,600      Caterpillar, Inc.    $ 8,335,792  
  84,332      Deere & Co.      12,579,804  
     

 

 

  
        20,915,596  
     

 

 

  
   Media — 3.2%

 

  46,815      Charter Communications, Inc., Class A(a)      13,340,871  
  445,400      Comcast Corp., Class A      15,165,870  
     

 

 

  
        28,506,741  
     

 

 

  
   Metals & Mining — 0.2%

 

  38,165      Compass Minerals International, Inc.      1,591,099  
     

 

 

  
   Oil, Gas & Consumable Fuels — 2.3%

 

  239,800      Anadarko Petroleum Corp.      10,512,832  
  395,900      Apache Corp.      10,392,375  
     

 

 

  
        20,905,207  
     

 

 

  
   Pharmaceuticals — 2.7%

 

  53,042      Merck & Co., Inc.      4,052,939  
  78,818      Novartis AG, Sponsored ADR      6,763,373  
  284,034      Novo Nordisk AS, Sponsored ADR      13,085,446  
     

 

 

  
        23,901,758  
     

 

 

  
   Semiconductors & Semiconductor Equipment — 3.9%

 

  256,030      Intel Corp.      12,015,488  
  229,413      QUALCOMM, Inc.      13,055,894  
  102,965      Texas Instruments, Inc.      9,730,192  
     

 

 

  
        34,801,574  
     

 

 

  
   Software — 6.4%

 

  163,940      Autodesk, Inc.(a)      21,084,323  
  111,421      Microsoft Corp.      11,317,031  
  556,551      Oracle Corp.      25,128,278  
     

 

 

  
        57,529,632  
     

 

 

  
   Technology Hardware, Storage & Peripherals — 1.9%

 

  109,055      Apple, Inc.      17,202,336  
     

 

 

  
   Textiles, Apparel & Luxury Goods — 1.4%

 

  688,435      Under Armour, Inc., Class A(a)      12,164,646  
     

 

 

  
   Total Common Stocks
(Identified Cost $777,311,456)		      887,847,140  
     

 

 

  

 

See accompanying notes to financial statements.

 

|  72

Table of Contents

Portfolio of Investments – as of December 31, 2018

Natixis U.S. Equity Opportunities Fund – (continued)

 

Principal
Amount		      Description    Value (†)  
  Short-Term Investments – 1.9%  
$ 17,582,298      Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2018 at 1.500% to be repurchased at $17,583,763 on 1/02/2019 collateralized by $18,600,000 U.S. Treasury Bond, 2.750% due 8/15/2042 valued at $17,937,133 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $17,582,298)    $ 17,582,298  
     

 

 

  
     
   Total Investments — 100.7%
(Identified Cost $794,893,754)		      905,429,438  
   Other assets less liabilities — (0.7)%      (6,725,608 ) 
     

 

 

  
   Net Assets — 100.0%    $ 898,703,830  
     

 

 

  
  (†)      See Note 2 of Notes to Financial Statements.

 

  (a)      Non-income producing security.

 

     
  ADR      An American Depositary Receipt is a certificate issued by a custodian bank representing the right to receive securities of the foreign issuer described. The values of ADRs may be significantly influenced by trading on exchanges not located in the United States.

 

Industry Summary at December 31, 2018

 

Interactive Media & Services

      7.9 % 

Internet & Direct Marketing Retail

      7.4  

Capital Markets

      6.7  

Software

      6.4  

IT Services

      5.8  

Biotechnology

      5.7  

Banks

      5.6  

Hotels, Restaurants & Leisure

      5.0  

Beverages

      4.0  

Semiconductors & Semiconductor Equipment

      3.9  

Media

      3.2  

Automobiles

      3.1  

Pharmaceuticals

      2.7  

Air Freight & Logistics

      2.6  

Health Care Providers & Services

      2.5  

Consumer Finance

      2.4  

Machinery

      2.3  

Oil, Gas & Consumable Fuels

      2.3  

Health Care Equipment & Supplies

      2.2  

Other Investments, less than 2% each

      17.1  

Short-Term Investments

      1.9  
  

 

 

  

Total Investments

      100.7  

Other assets less liabilities

      (0.7 ) 
  

 

 

  

Net Assets

      100.0 % 
  

 

 

  

 

See accompanying notes to financial statements.

 

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|  74

Table of Contents

Statements of Assets and Liabilities

 

December 31, 2018

 

    Loomis Sayles
Multi-Asset
Income Fund		     Loomis Sayles
Strategic
Alpha Fund		     Natixis
U.S. Equity
Opportunities
Fund		  

ASSETS

 

Investments at cost

   $ 129,940,286     $ 1,546,429,203     $ 794,893,754  

Net unrealized appreciation (depreciation)

     (9,256,794 )      (72,226,022 )      110,535,684  
 

 

 

    

 

 

    

 

 

  

Investments at value

     120,683,492       1,474,203,181       905,429,438  

Cash

     130,530       3,615,526       117  

Due from brokers (Note 2)

     —       26,977,500       —  

Foreign currency at value (identified cost $6,023, $11,013,130 and $0, respectively)

     6,063       10,887,659       —  

Receivable for Fund shares sold

     3,200,634       8,706,605       3,259,643  

Receivable for securities sold

     —       1,252,447       6,586,262  

Collateral received for open forward foreign currency contracts, options or swap agreements (Notes 2 and 4)

     —       982,132       —  

Dividends and interest receivable

     1,074,067       6,665,032       586,325  

Unrealized appreciation on bilateral swap agreements (Note 2)

     —       102,091       —  

Unrealized appreciation on forward foreign currency contracts (Note 2)

     —       246,239       —  

Tax reclaims receivable

     26,197       18,759       272,239  

Receivable for variation margin on futures contracts (Note 2)

     —       179,948       —  

Unamortized upfront premiums paid on bilateral swap agreements (Note 2)

     —       40,349       —  

Prepaid expenses (Note 8)

     82       670       547  
 

 

 

    

 

 

    

 

 

  

TOTAL ASSETS

     125,121,065       1,533,878,138       916,134,571  
 

 

 

    

 

 

    

 

 

  

LIABILITIES

 

Options written, at value (premiums received $0, $325,168 and $0, respectively) (Note 2)

     —       223,313       —  

Payable for securities purchased

     4,377,597       18,304,087       9,101,021  

Payable for Fund shares redeemed

     1,083,493       6,858,118       7,060,998  

Unrealized depreciation on forward foreign currency contracts (Note 2)

     —       371,974       —  

Unamortized upfront premiums received on bilateral swap agreements (Note 2)

     —       3,117       —  

Payable for variation margin on centrally cleared swap agreements (Note 2)

     —       913,447       —  

Due to brokers (Note 2)

     —       982,132       —  

Fees payable on swap agreements (Note 2)

     —       4,646       —  

Management fees payable (Note 6)

     42,646       838,762       607,233  

Deferred Trustees’ fees (Note 6)

     100,467       131,717       443,093  

Administrative fees payable (Note 6)

     4,097       51,474       33,425  

Payable to distributor (Note 6d)

     920       8,129       4,641  

Other accounts payable and accrued expenses

     91,403       228,005       180,330  
 

 

 

    

 

 

    

 

 

  

TOTAL LIABILITIES

     5,700,623       28,918,921       17,430,741  
 

 

 

    

 

 

    

 

 

  

NET ASSETS

   $ 119,420,442     $ 1,504,959,217     $ 898,703,830  
 

 

 

    

 

 

    

 

 

  

NET ASSETS CONSIST OF:

 

Paid-in capital

   $ 132,204,302     $ 1,621,234,581     $ 760,939,588  

Accumulated earnings (loss)

     (12,783,860 )      (116,275,364 )      137,764,242  
 

 

 

    

 

 

    

 

 

  

NET ASSETS

   $ 119,420,442     $ 1,504,959,217     $ 898,703,830  
 

 

 

    

 

 

    

 

 

  

 

See accompanying notes to financial statements.

 

75  |

Table of Contents

Statements of Assets and Liabilities (continued)

 

December 31, 2018

 

    Loomis Sayles
Multi-Asset
Income Fund		     Loomis Sayles
Strategic
Alpha Fund		     Natixis
U.S. Equity
Opportunities
Fund		  

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:

      

Class A shares:

 

Net assets

   $ 51,027,657     $ 36,527,534     $ 523,664,975  
 

 

 

    

 

 

    

 

 

  

Shares of beneficial interest

     4,333,202       3,797,616       16,895,091  
 

 

 

    

 

 

    

 

 

  

Net asset value and redemption price per share

   $ 11.78     $ 9.62     $ 31.00  
 

 

 

    

 

 

    

 

 

  

Offering price per share (100/[100-maximum sales charge] of net asset value) (Note 1)

   $ 12.30     $ 10.05     $ 32.89  
 

 

 

    

 

 

    

 

 

  

Class C shares: (redemption price per share is equal to
net asset value less any applicable contingent deferred sales charge) (Note 1)

      

Net assets

   $ 24,057,621     $ 26,882,936     $ 78,783,155  
 

 

 

    

 

 

    

 

 

  

Shares of beneficial interest

     2,051,799       2,806,326       3,857,703  
 

 

 

    

 

 

    

 

 

  

Net asset value and offering price per share

   $ 11.73     $ 9.58     $ 20.42  
 

 

 

    

 

 

    

 

 

  

Class N shares:

 

Net assets

   $ 31,874     $ 255,226,253     $ 1,098  
 

 

 

    

 

 

    

 

 

  

Shares of beneficial interest

     2,724       26,588,594       30  
 

 

 

    

 

 

    

 

 

  

Net asset value, offering and redemption price per share

   $ 11.70     $ 9.60     $ 36.37 * 
 

 

 

    

 

 

    

 

 

  

Class Y shares:

 

Net assets

   $ 44,303,290     $ 1,186,322,494     $ 296,254,602  
 

 

 

    

 

 

    

 

 

  

Shares of beneficial interest

     3,785,473       123,644,089       8,153,431  
 

 

 

    

 

 

    

 

 

  

Net asset value, offering and redemption price per share

   $ 11.70     $ 9.59     $ 36.33  
 

 

 

    

 

 

    

 

 

  

 

*    Net

asset value calculations have been determined utilizing fractional share and penny amounts.

 

See accompanying notes to financial statements.

 

|  76

Table of Contents

Statements of Operations

 

For the Year Ended December 31, 2018

 

    Loomis Sayles
Multi-Asset
Income Fund		     Loomis Sayles
Strategic
Alpha Fund		     Natixis
U.S. Equity
Opportunities
Fund		  

INVESTMENT INCOME

 

Dividends

   $ 2,661,543     $ 2,114,662     $ 14,281,245  

Interest

     4,098,749       54,011,380       278,064  

Less net foreign taxes withheld

     (64,568 )      (23,730 )      (206,115 ) 
 

 

 

    

 

 

    

 

 

  
    6,695,724       56,102,312       14,353,194  
 

 

 

    

 

 

    

 

 

  

Expenses

 

Management fees (Note 6)

     805,940       7,895,864       7,916,621  

Service and distribution fees (Note 6)

     462,607       361,254       2,585,690  

Administrative fees (Note 6)

     64,293       578,591       463,021  

Trustees’ fees and expenses (Note 6)

     19,046       48,899       43,527  

Transfer agent fees and expenses (Notes 6 and 7)

     102,869       641,346       792,040  

Audit and tax services fees

     49,016       84,675       42,461  

Custodian fees and expenses

     104,286       249,347       42,907  

Legal fees

     3,240       26,467       22,995  

Registration fees

     72,017       107,441       90,381  

Shareholder reporting expenses

     15,168       41,070       115,764  

Miscellaneous expenses (Note 8)

     28,786       68,139       44,487  
 

 

 

    

 

 

    

 

 

  

Total expenses

     1,727,268       10,103,093       12,159,894  

Fee/expense recovery (Note 6)

     —       84,330       —  

Less waiver and/or expense reimbursement (Note 6)

     (238,691 )      (4,216 )      (2,663 ) 
 

 

 

    

 

 

    

 

 

  

Net expenses

     1,488,577       10,183,207       12,157,231  
 

 

 

    

 

 

    

 

 

  

Net investment income

     5,207,147       45,919,105       2,195,963  
 

 

 

    

 

 

    

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, OPTIONS/SWAPTIONS WRITTEN, SWAP AGREEMENTS, FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS

      

Net realized gain (loss) on:

      

Investments

     (1,711,849 )      10,120,328       99,574,323  

Futures contracts

     —       1,414,612       —  

Options/swaptions written

     26,824       (1,367,676 )      —  

Swap agreements

     —       (5,082,692 )      —  

Forward foreign currency contracts (Note 2d)

     145,895       6,766,605       —  

Foreign currency transactions (Note 2c)

     (2,007 )      (1,089,649 )      —  

Net change in unrealized appreciation (depreciation) on:

      

Investments

     (16,769,391 )      (61,727,950 )      (167,182,286 ) 

Futures contracts

     —       758,489       —  

Options written

     —       (37,560 )      —  

Swap agreements

     —       5,790,997       —  

Forward foreign currency contracts (Note 2d)

     —       2,221,098       —  

Foreign currency translations (Note 2c)

     (1,538 )      (352,410 )      —  
 

 

 

    

 

 

    

 

 

  

Net realized and unrealized loss on investments, futures contracts, options/swaptions written, swap agreements, forward foreign currency contracts and foreign currency transactions

     (18,312,066 )      (42,585,808 )      (67,607,963 ) 
 

 

 

    

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS

   $ (13,104,919 )    $ 3,333,297     $ (65,412,000 ) 
 

 

 

    

 

 

    

 

 

  

 

 

See accompanying notes to financial statements.

 

77  |

Table of Contents

Statements of Changes in Net Assets

 

 

     Loomis Sayles Multi-Asset
Income Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017		  

FROM OPERATIONS:

 

Net investment income

    $ 5,207,147     $ 4,243,430  

Net realized gain (loss) on investments, options written, forward foreign currency contracts and foreign currency transactions

      (1,541,137 )      8,625,586  

Net change in unrealized appreciation (depreciation) on investments and foreign currency translations

      (16,770,929 )      2,552,012  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (13,104,919 )      15,421,028  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (3,689,139 )      (4,059,923 )(a) 

Class C

      (1,796,319 )      (2,402,024 )(a) 

Class N

      (2,353 )      (2,422 )(a) 

Class Y

      (3,691,567 )      (3,097,659 )(a) 
  

 

 

    

 

 

  

Total distributions

      (9,179,378 )      (9,562,028 ) 
  

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      (2,836,090 )      14,908,519  
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      (25,120,387 )      20,767,519  

NET ASSETS

 

Beginning of the year

      144,540,829       123,773,310  
  

 

 

    

 

 

  

End of the year

    $ 119,420,442     $ 144,540,829  
  

 

 

    

 

 

  

 

(a)

See Note 2j of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  78

Table of Contents

Statements of Changes in Net Assets (continued)

 

 

     Loomis Sayles Strategic
Alpha Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 45,919,105     $ 42,366,116  

Net realized gain (loss) on investments, futures contracts, options/swaptions written, swap agreements, forward foreign currency contracts and foreign currency transactions

      10,761,528       (8,145,922 ) 

Net change in unrealized appreciation (depreciation) on investments, futures contracts, options written, swap agreements, forward foreign currency contracts and foreign currency translations

      (53,347,336 )      6,481,112  
  

 

 

    

 

 

  

Net increase in net assets resulting from operations

      3,333,297       40,701,306  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (974,914 )      (1,506,001 )(b) 

Class C

      (700,709 )      (713,500 )(b) 

Class N

      (9,315,262 )      (744,780 )(b) 

Class Y

      (38,722,335 )      (31,576,383 )(b) 
  

 

 

    

 

 

  

Total distributions

      (49,713,220 )      (34,540,664 ) 
  

 

 

    

 

 

  

NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      398,742,039       (50,510,564 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      352,362,116       (44,349,922 ) 

NET ASSETS

 

Beginning of the year

      1,152,597,101       1,196,947,023  
  

 

 

    

 

 

  

End of the year

    $ 1,504,959,217     $ 1,152,597,101  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

See Note 2j of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

79  |

Table of Contents

Statements of Changes in Net Assets (continued)

 

 

     Natixis U.S. Equity
Opportunities Fund		  
     Year Ended
December 31,
2018		     Year Ended
December 31,
2017(a)		  

FROM OPERATIONS:

 

Net investment income

    $ 2,195,963     $ 1,259,611  

Net realized gain on investments

      99,574,323       52,738,987  

Net change in unrealized appreciation (depreciation) on investments

      (167,182,286 )      148,227,693  
  

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      (65,412,000 )      202,226,291  
  

 

 

    

 

 

  

FROM DISTRIBUTIONS TO SHAREHOLDERS:

 

Class A

      (55,296,627 )      (20,921,926 )(b) 

Class C

      (12,571,844 )      (5,206,138 )(b) 

Class N

      (100 )      (35 )(b) 

Class Y

      (27,216,994 )      (8,924,659 )(b) 
  

 

 

    

 

 

  

Total distributions

      (95,085,565 )      (35,052,758 ) 
  

 

 

    

 

 

  

NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 11)

      57,246,243       146,345,807  
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      (103,251,322 )      313,519,340  

NET ASSETS

 

Beginning of the year

      1,001,955,152       688,435,812  
  

 

 

    

 

 

  

End of the year

    $ 898,703,830     $ 1,001,955,152  
  

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

(b)

See Note 2j of Notes to Financial Statements.

 

See accompanying notes to financial statements.

 

|  80

Table of Contents

Financial Highlights

 

For a share outstanding throughout each period.

 

    Loomis Sayles Multi-Asset Income Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 13.87     $ 13.24     $ 12.85     $ 13.45     $ 12.21  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.48       0.47       0.49       0.32       0.32  

Net realized and unrealized gain (loss)

     (1.71 )      1.15       0.80       (0.58 )      1.26  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.23 )      1.62       1.29       (0.26 )      1.58  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.42 )      (0.45 )      (0.40 )      (0.34 )      (0.34 ) 

Net realized capital gains

     (0.44 )      (0.54 )      (0.50 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.86 )      (0.99 )      (0.90 )      (0.34 )      (0.34 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.78     $ 13.87     $ 13.24     $ 12.85     $ 13.45  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (9.24 )%(c)      12.41 %(c)      10.14 %(c)      (1.96 )%(c)      13.08 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 51,028     $ 54,754     $ 57,320     $ 63,254     $ 110,874  

Net expenses

     0.95 %(d)      0.95 %(d)      0.95 %(d)      1.04 %(d)(e)      1.06 % 

Gross expenses

     1.11 %      1.13 %      1.09 %      1.11 %      1.06 % 

Net investment income

     3.63 %      3.37 %      3.70 %      2.40 %      2.46 % 

Portfolio turnover rate

     282 %      221 %      341 %(f)      93 %(g)      41 % 

 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective September 1, 2015, the expense limit decreased from 1.25% to 0.95%.

(f)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015.

(g)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

81  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Multi-Asset Income Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 13.82     $ 13.18     $ 12.80     $ 13.41     $ 12.17  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.38       0.36       0.39       0.24       0.22  

Net realized and unrealized gain (loss)

     (1.71 )      1.16       0.79       (0.60 )      1.27  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.33 )      1.52       1.18       (0.36 )      1.49  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.32 )      (0.34 )      (0.30 )      (0.25 )      (0.25 ) 

Net realized capital gains

     (0.44 )      (0.54 )      (0.50 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.76 )      (0.88 )      (0.80 )      (0.25 )      (0.25 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.73     $ 13.82     $ 13.18     $ 12.80     $ 13.41  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (9.96 )%(c)      11.70 %(c)      9.27 %(c)      (2.73 )%(c)      12.28 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 24,058     $ 36,814     $ 46,351     $ 47,791     $ 53,074  

Net expenses

     1.70 %(d)      1.70 %(d)      1.70 %(d)      1.80 %(d)(e)      1.81 % 

Gross expenses

     1.86 %      1.88 %      1.84 %      1.87 %      1.81 % 

Net investment income

     2.83 %      2.65 %      2.96 %      1.78 %      1.70 % 

Portfolio turnover rate

     282 %      221 %      341 %(f)      93 %(g)      41 % 

 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective September 1, 2015, the expense limit decreased from 2.00% to 1.70%.

(f)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015.

(g)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

|  82

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Multi-Asset Income Fund—Class N  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Period Ended
December 31,
2015*		  

Net asset value, beginning of the period

   $ 13.79     $ 13.16     $ 12.77     $ 12.70  
 

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

        

Net investment income(a)

     0.52       0.51       0.53       0.14  

Net realized and unrealized gain (loss)

     (1.71 )      1.15       0.80       0.10  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.19 )      1.66       1.33       0.24  
 

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

        

Net investment income

     (0.46 )      (0.49 )      (0.44 )      (0.17 ) 

Net realized capital gains

     (0.44 )      (0.54 )      (0.50 )      —  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.90 )      (1.03 )      (0.94 )      (0.17 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.70     $ 13.79     $ 13.16     $ 12.77  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (9.02 )%      12.83 %      10.53 %      1.91 %(c) 

RATIOS TO AVERAGE NET ASSETS:

        

Net assets, end of the period (000’s)

   $ 32     $ 35     $ 1     $ 1  

Net expenses(d)

     0.65 %      0.65 %      0.65 %      0.65 %(e) 

Gross expenses

     1.35 %      1.35 %      13.53 %      13.66 %(e) 

Net investment income

     3.93 %      3.71 %      4.02 %      3.22 %(e) 

Portfolio turnover rate

     282 %      221 %      341 %(f)      93 % 

 

 

*

From commencement of Class operations on August 31, 2015 through December 31, 2015.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Computed on an annualized basis for periods less than one year.

(f)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015.

 

See accompanying notes to financial statements.

 

83  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Multi-Asset Income Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 13.80     $ 13.17     $ 12.79     $ 13.39     $ 12.19  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.52       0.49       0.53       0.36       0.38  

Net realized and unrealized gain (loss)

     (1.73 )      1.16       0.78       (0.59 )      1.19  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.21 )      1.65       1.31       (0.23 )      1.57  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.45 )      (0.48 )      (0.43 )      (0.37 )      (0.37 ) 

Net realized capital gains

     (0.44 )      (0.54 )      (0.50 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (0.89 )      (1.02 )      (0.93 )      (0.37 )      (0.37 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 11.70     $ 13.80     $ 13.17     $ 12.79     $ 13.39  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (9.13 )%(b)      12.77 %(b)      10.38 %(b)      (1.72 )%(b)      13.05 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 44,303     $ 52,938     $ 20,101     $ 11,272     $ 14,428  

Net expenses

     0.70 %(c)      0.70 %(c)      0.70 %(c)      0.80 %(c)(d)      0.82 % 

Gross expenses

     0.86 %      0.88 %      0.84 %      0.86 %      0.82 % 

Net investment income

     3.88 %      3.53 %      4.00 %      2.73 %      2.92 % 

Portfolio turnover rate

     282 %      221 %      341 %(e)      93 %(f)      41 % 

 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(d)

Effective September 1, 2015, the expense limit decreased from 1.00% to 0.70%.

(e)

The variation in the Fund’s turnover rate from 2015 to 2016 was primarily due to a repositioning of the portfolio as well as sales of additional securities as a result of a change in investment strategy in 2015.

(f)

The variation in the Fund’s turnover rate from 2014 to 2015 was primarily due to a change in the investment strategy and management structure of the Fund.

 

See accompanying notes to financial statements.

 

|  84

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Strategic Alpha Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 9.92     $ 9.86     $ 9.45     $ 9.96     $ 10.06  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.33       0.32       0.30       0.26       0.29 (b) 

Net realized and unrealized gain (loss)

     (0.30 )      (0.01 )      0.31       (0.42 )      (0.07 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     0.03       0.31       0.61       (0.16 )      0.22  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.33 )      (0.25 )      (0.20 )      (0.35 )      (0.32 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.62     $ 9.92     $ 9.86     $ 9.45     $ 9.96  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)

     0.39 %      3.22 %(d)      6.57 %      (1.68 )%      2.24 %(b) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 36,528     $ 28,020     $ 67,746     $ 116,055     $ 104,056  

Net expenses

     1.00 %(e)      1.05 %(f)(g)      1.10 %      1.10 %      1.10 % 

Gross expenses

     1.00 %(e)      1.06 %      1.10 %      1.10 %      1.10 % 

Net investment income

     3.29 %      3.26 %      3.14 %      2.66 %      2.90 %(b) 

Portfolio turnover rate

     379 %(h)      178 %(i)      72 %      72 %      87 % 

 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.28, total return would have been 2.14% and the ratio of net investment income to average net assets would have been 2.81%.

(c)

A sales charge for Class A shares is not reflected in total return calculations.

(d)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(e)

Includes fee/expense recovery of less than 0.01%.

(f)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(g)

Effective July 1, 2017, the expense limit decreased from 1.30% to 1.00%.

(h)

The variation in the Fund’s turnover rate from 2017 to 2018 was primarily due to a repositioning of the portfolio.

(i)

The variation in the Fund’s turnover rate from 2016 to 2017 was primarily due to a repositioning of the portfolio.

 

See accompanying notes to financial statements.

 

85  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Strategic Alpha Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 9.88     $ 9.82     $ 9.42     $ 9.93     $ 10.03  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.26       0.25       0.23       0.19       0.21 (b) 

Net realized and unrealized gain (loss)

     (0.31 )      0.00 (c)(d)      0.30       (0.43 )      (0.06 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (0.05 )      0.25       0.53       (0.24 )      0.15  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.25 )      (0.19 )      (0.13 )      (0.27 )      (0.25 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.58     $ 9.88     $ 9.82     $ 9.42     $ 9.93  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(e)

     (0.42 )%      2.53 %      5.70 %      (2.44 )%      1.47 %(b) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 26,883     $ 33,759     $ 45,674     $ 62,453     $ 71,215  

Net expenses

     1.75 %(f)      1.81 %(g)      1.85 %      1.85 %      1.85 % 

Gross expenses

     1.75 %(f)      1.81 %      1.85 %      1.85 %      1.85 % 

Net investment income

     2.61 %      2.52 %      2.40 %      1.91 %      2.13 %(b) 

Portfolio turnover rate

     379 %(h)      178 %(i)      72 %      72 %      87 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.21, total return would have been 1.37% and the ratio of net investment income to average net assets would have been 2.05%.

(c)

Amount rounds to less than $0.01 per share.

(d)

The amount shown for a share outstanding does not correspond with the aggregate realized and unrealized gain (loss) on investments for the period due to the timing of sales and redemptions of fund shares in relation to fluctuating market values of investments of the Fund.

(e)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(f)

Includes fee/expense recovery of less than 0.01%.

(g)

Effective July 1, 2017, the expense limit decreased from 2.05% to 1.75%.

(h)

The variation in the Fund’s turnover rate from 2017 to 2018 was primarily due to a repositioning of the portfolio.

(i)

The variation in the Fund’s turnover rate from 2016 to 2017 was primarily due to a repositioning of the portfolio.

 

See accompanying notes to financial statements.

 

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Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Strategic Alpha Fund—Class N  
    Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

   $ 9.90     $ 9.90  
 

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

    

Net investment income(a)

     0.34       0.25  

Net realized and unrealized gain (loss)

     (0.28 )      (0.04 ) 
 

 

 

    

 

 

  

Total from Investment Operations

     0.06       0.21  
 

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

    

Net investment income

     (0.36 )      (0.21 ) 
 

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.60     $ 9.90  
 

 

 

    

 

 

  

Total return

     0.68 %      2.11 %(b)(c) 

RATIOS TO AVERAGE NET ASSETS:

    

Net assets, end of the period (000’s)

   $ 255,226     $ 59,282  

Net expenses

     0.70 %(d)      0.70 %(e)(f)(g) 

Gross expenses

     0.70 %(d)      0.72 %(f) 

Net investment income

     3.44 %      3.83 %(f) 

Portfolio turnover rate

     379 %(h)      178 %(i) 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

Includes fee/expense recovery of 0.01%.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Effective July 1, 2017, the expense limit decreased from 1.00% to 0.70%.

(h)

The variation in the Fund’s turnover rate from 2017 to 2018 was primarily due to a repositioning of the portfolio.

(i)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

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Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Loomis Sayles Strategic Alpha Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 9.90     $ 9.85     $ 9.44     $ 9.95     $ 10.05  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.35       0.35       0.32       0.29       0.31 (b) 

Net realized and unrealized gain (loss)

     (0.31 )      (0.01 )      0.32       (0.43 )      (0.06 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     0.04       0.34       0.64       (0.14 )      0.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.35 )      (0.29 )      (0.23 )      (0.37 )      (0.35 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 9.59     $ 9.90     $ 9.85     $ 9.44     $ 9.95  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     0.53 %      3.48 %(c)      6.86 %      (1.43 )%      2.52 %(b) 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 1,186,322     $ 1,031,537     $ 1,083,527     $ 1,183,723     $ 1,188,605  

Net expenses

     0.75 %(d)      0.80 %(e)(f)      0.85 %      0.85 %      0.85 % 

Gross expenses

     0.75 %(d)      0.81 %      0.85 %      0.85 %      0.85 % 

Net investment income

     3.51 %      3.53 %      3.39 %      2.91 %      3.10 %(b) 

Portfolio turnover rate

     379 %(g)      178 %(h)      72 %      72 %      87 % 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Includes a non-recurring dividend. Without this dividend, net investment income per share would have been $0.31, total return would have been 2.42% and the ratio of net investment income to average net assets would have been 3.03%.

(c)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(d)

Includes fee/expense recovery of less than 0.01%.

(e)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(f)

Effective July 1, 2017, the expense limit decreased from 1.05% to 0.75%.

(g)

The variation in the Fund’s turnover rate from 2017 to 2018 was primarily due to a repositioning of the portfolio.

(h)

The variation in the Fund’s turnover rate from 2016 to 2017 was primarily due to a repositioning of the portfolio.

 

See accompanying notes to financial statements.

 

|  88

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis U.S. Equity Opportunities Fund—Class A  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 36.90     $ 30.27     $ 27.60     $ 27.40     $ 33.07  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.08       0.06       0.12       0.06       0.02  

Net realized and unrealized gain (loss)

     (2.51 )      7.88       3.12       1.55       4.31  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (2.43 )      7.94       3.24       1.61       4.33  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.05 )      (0.06 )      (0.12 )      —       —  

Net realized capital gains

     (3.42 )      (1.25 )      (0.45 )      (1.41 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.47 )      (1.31 )      (0.57 )      (1.41 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 31.00     $ 36.90     $ 30.27     $ 27.60     $ 27.40  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(b)

     (6.48 )%      26.28 %      11.86 %      5.86 %      12.94 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 523,665     $ 604,330     $ 472,436     $ 422,069     $ 400,678  

Net expenses

     1.16 %      1.21 %(c)      1.23 %(d)      1.25 %(e)      1.29 %(f) 

Gross expenses

     1.16 %      1.21 %      1.23 %(d)      1.25 %      1.29 %(f) 

Net investment income

     0.20 %      0.16 %      0.42 %      0.21 %      0.07 % 

Portfolio turnover rate

     23 %      17 %      17 %      20 %      93 %(g) 

 

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

A sales charge for Class A shares is not reflected in total return calculations.

(c)

Effective July 1, 2017, the expense limit decreased from 1.25% to 1.20%.

(d)

Includes fee/expense recovery of less than 0.01%.

(e)

Effective July 1, 2015, the expense limit decreased from 1.30% to 1.25%.

(f)

Includes fee/expense recovery of 0.02%.

(g)

The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments.

 

See accompanying notes to financial statements.

 

89  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis U.S. Equity Opportunities Fund—Class C  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 25.73     $ 21.54     $ 19.86     $ 20.24     $ 26.92  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment loss(a)

     (0.14 )      (0.14 )      (0.07 )      (0.11 )      (0.19 ) 

Net realized and unrealized gain (loss)

     (1.75 )      5.58       2.22       1.14       3.51  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (1.89 )      5.44       2.15       1.03       3.32  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     —       (0.00 )(b)      (0.02 )      —       —  

Net realized capital gains

     (3.42 )      (1.25 )      (0.45 )      (1.41 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.42 )      (1.25 )      (0.47 )      (1.41 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 20.42     $ 25.73     $ 21.54     $ 19.86     $ 20.24  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return(c)

     (7.18 )%      25.35 %      11.02 %      5.06 %      12.12 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 78,783     $ 112,615     $ 72,768     $ 61,864     $ 53,925  

Net expenses

     1.91 %      1.96 %(d)      1.98 %(e)      2.00 %(f)      2.04 %(g) 

Gross expenses

     1.91 %      1.96 %      1.98 %(e)      2.00 %      2.04 %(g) 

Net investment loss

     (0.54 )%      (0.59 )%      (0.33 )%      (0.54 )%      (0.68 )% 

Portfolio turnover rate

     23 %      17 %      17 %      20 %      93 %(h) 

 

(a)

Per share net investment loss has been calculated using the average shares outstanding during the period.

(b)

Amount rounds to less than $0.01 per share.

(c)

A contingent deferred sales charge for Class C shares is not reflected in total return calculations.

(d)

Effective July 1, 2017, the expense limit decreased from 2.00% to 1.95%.

(e)

Includes fee/expense recovery of less than 0.01%.

(f)

Effective July 1, 2015, the expense limit decreased from 2.05% to 2.00%.

(g)

Includes fee/expense recovery of 0.01%.

(h)

The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments.

 

See accompanying notes to financial statements.

 

|  90

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

     Natixis U.S. Equity Opportunities Fund—Class N  
     Year Ended
December 31,
2018		     Period Ended
December 31,
2017*		  

Net asset value, beginning of the period

    $ 42.63     $ 37.62  
  

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

     

Net investment income(a)

      0.25       0.12  

Net realized and unrealized gain (loss)

      (2.91 )      6.20  
  

 

 

    

 

 

  

Total from Investment Operations

      (2.66 )      6.32  
  

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

     

Net investment income

      (0.18 )      (0.16 ) 

Net realized capital gains

      (3.42 )      (1.15 ) 
  

 

 

    

 

 

  

Total Distributions

      (3.60 )      (1.31 ) 
  

 

 

    

 

 

  

Net asset value, end of the period

    $ 36.37     $ 42.63  
  

 

 

    

 

 

  

Total return(b)

      (6.11 )%      16.78 %(c) 

RATIOS TO AVERAGE NET ASSETS:

     

Net assets, end of the period (000’s)

    $ 1     $ 1  

Net expenses(d)

      0.76 %      0.78 %(e)(f) 

Gross expenses

      13.35 %      13.41 %(f) 

Net investment income

      0.56 %      0.44 %(f) 

Portfolio turnover rate

      23 %      17 %(g) 

 

 

*

From commencement of Class operations on May 1, 2017 through December 31, 2017.

(a)

Per share net investment income (loss) has been calculated using the average shares outstanding during the period.

(b)

Had certain expenses not been waived/reimbursed during the period, total returns would have been lower.

(c)

Periods less than one year are not annualized.

(d)

The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher.

(e)

Effective July 1, 2017, the expense limit decreased from 0.95% to 0.90%.

(f)

Computed on an annualized basis for periods less than one year.

(g)

Represents the Fund’s portfolio turnover rate for the year ended December 31, 2017.

 

See accompanying notes to financial statements.

 

91  |

Table of Contents

Financial Highlights (continued)

 

For a share outstanding throughout each period.

 

    Natixis U.S. Equity Opportunities Fund—Class Y  
    Year Ended
December 31,
2018		     Year Ended
December 31,
2017		     Year Ended
December 31,
2016		     Year Ended
December 31,
2015		     Year Ended
December 31,
2014		  

Net asset value, beginning of the period

   $ 42.61     $ 34.77     $ 31.61     $ 31.18     $ 36.32  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

          

Net investment income(a)

     0.20       0.16       0.21       0.15       0.12  

Net realized and unrealized gain (loss)

     (2.92 )      9.07       3.59       1.76       4.74  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from Investment Operations

     (2.72 )      9.23       3.80       1.91       4.86  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

LESS DISTRIBUTIONS FROM:

          

Net investment income

     (0.14 )      (0.14 )      (0.19 )      (0.07 )      —  

Net realized capital gains

     (3.42 )      (1.25 )      (0.45 )      (1.41 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Distributions

     (3.56 )      (1.39 )      (0.64 )      (1.48 )      (10.00 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value, end of the period

   $ 36.33     $ 42.61     $ 34.77     $ 31.61     $ 31.18  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return

     (6.24 )%      26.60 %      12.13 %      6.11 %      13.25 % 

RATIOS TO AVERAGE NET ASSETS:

          

Net assets, end of the period (000’s)

   $ 296,255     $ 285,008     $ 143,231     $ 70,643     $ 37,636  

Net expenses

     0.91 %      0.95 %(b)      0.98 %(c)      1.00 %(d)      1.05 %(e) 

Gross expenses

     0.91 %      0.95 %      0.98 %(c)      1.00 %      1.05 %(e) 

Net investment income

     0.45 %      0.40 %      0.63 %      0.46 %      0.32 % 

Portfolio turnover rate

     23 %      17 %      17 %      20 %      93 %(f) 

 

(a)

Per share net investment income has been calculated using the average shares outstanding during the period.

(b)

Effective July 1, 2017, the expense limit decreased from 1.00% to 0.95%.

(c)

Includes fee/expense recovery of less than 0.01%.

(d)

Effective July 1, 2015, the expense limit decreased from 1.05% to 1.00%.

(e)

Includes fee/expense recovery of 0.01%.

(f)

The variation in the Fund’s turnover rate from 2013 to 2014 was primarily due to the change in the structure of the Fund from four segments to two segments.

 

See accompanying notes to financial statements.

 

|  92

Table of Contents

Notes to Financial Statements

 

December 31, 2018

 

1.  Organization.  Natixis Funds Trust I and Natixis Funds Trust II (the “Trusts” and each a “Trust”) are each organized as a Massachusetts business trust. Each Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Each Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series. The financial statements for certain funds of the Trusts are presented in separate reports. The following funds (individually, a “Fund” and collectively, the “Funds”) are included in this report:

Natixis Funds Trust I:

Loomis Sayles Multi-Asset Income Fund (the “Multi-Asset Income Fund”)

Natixis U.S. Equity Opportunities Fund (the “U.S. Equity Opportunities Fund”)

Natixis Funds Trust II:

Loomis Sayles Strategic Alpha Fund (the “Strategic Alpha Fund”)

Each Fund is a diversified investment company, except for the Strategic Alpha Fund, which is a non-diversified investment company.

Each Fund offers Class A, Class C, Class N and Class Y shares.

Class A shares are sold with a maximum front-end sales charge of 4.25% for Multi-Asset Income Fund and Strategic Alpha Fund and 5.75% for U.S. Equity Opportunities Fund. Class C shares do not pay a front-end sales charge, pay higher Rule 12b-1 fees than Class A shares for ten years (at which point they automatically convert to Class A shares) and may be subject to a contingent deferred sales charge (“CDSC”) of 1.00% if those shares are redeemed within one year of acquisition, except for reinvested distributions. Class N and Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. Class N shares are offered with an initial minimum investment of $1,000,000. Class Y shares are offered with an initial minimum investment of $100,000. Certain categories of investors are exempted from the minimum investment amounts for Class N and Class Y as outlined in the relevant Funds’ prospectus.

Most expenses can be directly attributed to a Fund. Expenses which cannot be directly attributed to a Fund are generally apportioned based on the relative net assets of each of the funds in Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”), and Natixis ETF Trust. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (such as the Rule 12b-1 fee applicable to Class A and Class C) and transfer agent fees are borne collectively for Class A, Class C and Class Y, and individually for Class N. In addition, each class votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund if the Fund were liquidated. The Trustees approve separate distributions from net investment income on each class of shares.

 

93  |

Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

2.  Significant Accounting Policies.  The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds’ financial statements follow the accounting and reporting guidelines provided for investment companies and are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Management has evaluated the events and transactions subsequent to year-end through the date the financial statements were issued and has determined that there were no material events that would require disclosure in the Funds’ financial statements.

a.  Valuation.  Fund securities and other investments are valued at market value based on market quotations obtained or determined by independent pricing services recommended by the adviser or subadviser and approved by the Board of Trustees. Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser or subadviser pursuant to procedures approved by the Board of Trustees, as described below. Market value is determined as follows:

Listed equity securities (including shares of closed-end investment companies and exchange-traded funds) 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) 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 last 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. Debt securities and unlisted preferred equity securities are valued based on evaluated bids furnished to the Fund by an independent pricing service or bid prices obtained from broker-dealers. Senior loans are valued at bid prices supplied by an independent pricing service, if available. Broker-dealer bid prices may be used to value debt and unlisted equity securities and senior loans where an independent pricing service is unable to price a security or where an independent pricing service does not provide a reliable price for the security. Forward foreign currency contracts are valued utilizing interpolated rates determined based on information provided by an independent pricing service. Futures contracts

 

|  94

Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

are valued at the most recent settlement price on the exchange on which the adviser believes that, over time, they are traded most extensively. Centrally cleared swap agreements are valued at settlement prices of the clearing house on which the contracts were traded or prices obtained from broker-dealers. 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 are valued based on prices supplied by an independent pricing source. Domestic exchange-traded single name equity option contracts are valued at the mean of the National Best Bid and Offer quotations. Options on futures contracts are valued using the current settlement price on the exchange on which, over time, they are traded most extensively. Option contracts on domestic indices are valued at the average of the closing bid and ask quotations as of the close of trading on the Chicago Board Options Exchange (“CBOE”). Option contracts on foreign indices are priced at the most recent settlement price. 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 option contracts (including currency options and swaptions not priced through an independent pricing service) are valued based on quotations obtained from broker-dealers.

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 of Trustees. The Funds 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 New York Stock Exchange. 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 Funds 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 net asset value (“NAV”) is calculated. Fair value pricing may require subjective determinations about the value of a security, and fair values used to determine a Fund’s NAV may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.

Illiquid securities for which market quotations are readily available and have been evaluated by the adviser are considered and classified as fair valued securities pursuant to the Funds’ pricing policies and procedures.

 

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As of December 31, 2018, securities and other investments of the funds included in net assets were fair valued as follows:

 

Fund

  

Equity
securities1

    

Percentage
of

Net
Assets

    

Securities
classified
as fair
valued

    

Percentage
of

Net
Assets

    

Securities
fair
valued by
the Fund’s
adviser

    

Percentage
of

Net
Assets

  

Multi-Asset Income Fund

   $ 3,045,831       2.6 %    $ —       — %    $ —       — % 

Strategic Alpha Fund

     —       — %      2,544,652       0.2 %      9,893,316       0.7 % 

 

1 

Certain foreign equity securities were fair valued pursuant to procedures approved by the Board of Trustees as events occurring after the close of the foreign market were believed to materially affect the value of those securities.

b.  Investment Transactions and Related Investment Income.  Investment transactions are accounted for on a trade date plus one day basis for daily NAV calculation. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income (including income reinvested) and foreign withholding tax, if applicable, is recorded on ex-dividend date, or in the case of certain foreign securities, as soon as a Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium, if applicable. Periodic principal adjustments for inflation-protected securities are recorded to interest income. Negative principal adjustments (in the event of deflation) are recorded as reductions of interest income to the extent of interest income earned, not to exceed the amount of positive principal adjustments on a cumulative basis. Distributions received from investments in securities that represent a return of capital or capital gain are recorded as a reduction of cost of the investments or as a realized gain, respectively. The calendar year-end amounts of ordinary income, capital gains, and return of capital included in distributions received from the Funds’ investments in real estate investment trusts (“REITs”) are reported to the Funds after the end of the fiscal year; accordingly, the Funds estimate these amounts for accounting purposes until the characterization of REIT distributions is reported to the Funds after the end of the fiscal year. Estimates are based on the most recent REIT distribution information available. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. Investment income, non-class specific expenses and realized and unrealized gains and losses are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund.

c.  Foreign Currency Translation.  The books and records of the Funds are maintained in U.S. dollars. The values of securities, currencies and other assets and liabilities

 

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denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars on the respective dates of such transactions.

Net realized foreign exchange gains or losses arise from sales of foreign currency, changes in exchange rates between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investment securities, as of the end of the fiscal period, resulting from changes in exchange rates. Net realized foreign exchange gains or losses and the net change in unrealized foreign exchange gains or losses are disclosed in the Statements of Operations. For federal income tax purposes, net realized foreign exchange gains or losses are characterized as ordinary income, and may, if the Funds have net losses, reduce the amount of income available to be distributed by the Funds.

The values of investment securities are presented at the foreign exchange rates prevailing at the end of the period for financial reporting purposes. Net realized and unrealized gains or losses on investments reported in the Statements of Operations reflect gains or losses resulting from changes in exchange rates and fluctuations which arise due to changes in market prices of investment securities. For federal income tax purposes, a portion of the net realized gain or loss on investments arising from changes in exchange rates, which is reflected in the Statements of Operations, may be characterized as ordinary income and may, if the Funds have net losses, reduce the amount of income available to be distributed by the Funds.

For the year ended December 31, 2018, the amount of income available to be distributed has been reduced by the following amounts as a result of losses arising from changes in exchange rates:

 

Multi-Asset Income Fund

    $ 429,926  

The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.

d.  Forward Foreign Currency Contracts.  The Funds may enter into forward foreign currency contracts, including forward foreign cross currency contracts, to acquire exposure to foreign currencies or to hedge the Fund’s investments against currency fluctuation. A contract can also be used to offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Funds’ Statements of Assets and Liabilities. The U.S. dollar value of the currencies a Fund has committed to buy or sell represents the aggregate exposure to each currency a Fund

 

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has acquired or hedged through currency contracts outstanding at period end. Gains or losses are recorded for financial statement purposes as unrealized until settlement date. Contracts are traded over-the-counter directly with a counterparty. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Certain contracts may require the movement of cash and/or securities as collateral for the Fund’s or counterparty’s net obligations under the contracts.

e.  Futures Contracts.  The Funds may enter into futures contracts. Futures contracts are agreements between two parties to buy and sell a particular instrument or index for a specified price on a specified future date.

When a Fund enters into a futures contract, it is required to deposit with (or for the benefit of) its broker an amount of cash or short-term high-quality securities as “initial margin.” As the value of the contract changes, the value of the futures contract position increases or declines. Subsequent payments, known as “variation margin,” are made or received by a Fund, depending on the price fluctuations in the fair value of the contract and the value of cash or securities on deposit with the broker. The aggregate principal amounts of the contracts are not recorded in the financial statements. Fluctuations in the value of the contracts are recorded in the Statements of Assets and Liabilities as an asset (liability) and in the Statements of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses). Realized gain or loss on a futures position is equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed, minus brokerage commissions. When a Fund enters into a futures contract certain risks may arise, such as illiquidity in the futures market, which may limit a Fund’s ability to close out a futures contract prior to settlement date, and unanticipated movements in the value of securities or interest rates.

Futures contracts are exchange-traded. Exchange-traded futures contracts are standardized and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Funds are reduced; however, in the event that a counterparty enters into bankruptcy, a Fund’s claim against initial/variation margin on deposit with the counterparty may be subject to terms of a final settlement in bankruptcy court.

f.  Option Contracts.  The Funds may enter into option contracts. When a Fund purchases an option, it pays a premium and the option is subsequently marked-to-market to reflect current value. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised are added to the cost or deducted from the proceeds on the underlying instrument to determine the realized gain or loss. If the Fund enters into a closing sale transaction, the difference between the premium paid and the proceeds of the closing

 

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sale transaction is treated as a realized gain or loss. The risk associated with purchasing options is limited to the premium paid.

When a Fund writes an option, an amount equal to the net premium received (the premium less commission) is recorded as a liability and is subsequently adjusted to the current value. Net premiums received for written options which expire are treated as realized gains. Net premiums received for written options which are exercised are deducted from the cost or added to the proceeds on the underlying instrument to determine the realized gain or loss. If the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid on effecting a closing purchase transaction, including commissions, is treated as a realized gain or, if the net premium received is less than the amount paid, as a realized loss. The Fund, as writer of a written option, bears the risk of an unfavorable change in the market value of the instrument or index underlying the written option.

Exchange-traded options contracts are standardized and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Funds are reduced. OTC options are subject to the risk that the counterparty is unable or unwilling to meet its obligations under the option.

g.  Swaptions.  The Funds may enter into interest rate swaptions. An interest rate swaption gives the holder the right, but not the obligation, to enter into or cancel an interest rate swap agreement at a future date. Interest rate swaptions may be either purchased or written. The buyer of an interest rate swaption may purchase either the right to receive a fixed rate in the underlying swap (known as a “receiver swaption”) or to pay a fixed rate (known as a “payer swaption”), based on the notional amount of the swap agreement, in exchange for a floating rate. The notional amounts of swaptions are not recorded in the financial statements.

When a Fund purchases an interest rate swaption, it pays a premium and the swaption is subsequently marked-to-market to reflect current value. Premiums paid for purchasing interest rate swaptions which expire are treated as realized losses. Premiums paid for purchasing interest rate swaptions which are exercised are added to the cost or deducted from the proceeds on the underlying swap to determine the realized gain or loss. If a Fund enters into a closing sale transaction, the difference between the premium paid and the proceeds of the closing sale transaction is treated as a realized gain or loss. The risk associated with purchasing interest rate swaptions is limited to the premium paid.

When a Fund writes an interest rate swaption, an amount equal to the premium received is recorded as a liability and is subsequently adjusted to the current value. Premiums received for written interest rate swaptions which expire are treated as realized gains. Premiums received for written interest rate swaptions which are exercised are deducted from the cost or added to the proceeds on the underlying swap

 

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to determine the realized gain or loss. If a Fund enters into a closing purchase transaction, the difference between the premium received and any amount paid on effecting a closing purchase transaction, including commission, is treated as a realized gain or, if the premium received is less than the amount paid, as a realized loss. A Fund, as writer of a written interest rate swaption, bears the risk of an unfavorable change in the market value of the swap underlying the written interest rate swaption.

OTC interest rate swaptions are subject to the risk that the counterparty is unable or unwilling to meet its obligations under the swaption.

There were no swaptions held by the Funds as of December 31, 2018.

h.  Swap Agreements.  The Funds may enter into credit default and interest rate swaps. A credit default swap is an agreement between two parties (the “protection buyer” and “protection seller”) to exchange the credit risk of an issuer (“reference obligation”) for a specified time period. The reference obligation may be one or more debt securities or an index of such securities. The Funds may be either the protection buyer or the protection seller. As a protection buyer, the Funds have the ability to hedge the downside risk of an issuer or group of issuers. As a protection seller, the Funds have the ability to gain exposure to an issuer or group of issuers whose bonds are unavailable or in short supply in the cash bond market, as well as realize additional income in the form of fees paid by the protection buyer. The protection buyer is obligated to pay the protection seller a stream of payments (“fees”) 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. The Funds may also pay or receive upfront premiums. If a credit event occurs, the protection seller must pay the protection buyer the difference between the agreed upon notional value and market value of the reference obligation. Market value in this case is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the value. The maximum potential amount of undiscounted future payments that a Fund as the protection seller could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement.

Implied credit spreads, represented in absolute terms, are disclosed in the Portfolio of Investments for those agreements for which the Fund is the protection seller. Implied credit spreads serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

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An interest rate swap is an agreement with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect themselves from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

The notional amounts of swap agreements are not recorded in the financial statements. Swap agreements are valued daily, and fluctuations in value are recorded in the Statements of Operations as change in unrealized appreciation (depreciation) on swap agreements. Fees are accrued in accordance with the terms of the agreement and are recorded in the Statements of Assets and Liabilities as fees receivable or payable. When received or paid, fees are recorded in the Statements of Operations as realized gain or loss. Upfront premiums paid or received by the Funds are recorded on the Statements of Assets and Liabilities as an asset or liability, respectively, and are amortized or accreted over the term of the agreement and recorded as realized gain or loss. Payments made or received by the Funds as a result of a credit event or termination of the agreement are recorded as realized gain or loss.

Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract or centrally cleared (“centrally cleared swaps”). Bilateral swap agreements are traded between counterparties and, as such, are subject to the risk that a party to the agreement will not be able to meet its obligations. In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Funds face the CCP through a broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Subsequent payments, known as “variation margin,” are made or received by the Funds based on the daily change in the value of the centrally cleared swap agreement. For centrally cleared swaps, the Funds’ counterparty credit risk is reduced as the CCP stands between the Funds and the counterparty. The Funds cover their net obligations under outstanding swap agreements by segregating or earmarking cash or securities.

i.  Due to/from Brokers.  Transactions and positions in certain options, futures, forward foreign currency contracts and swap agreements are maintained and cleared by registered U.S. broker/dealers pursuant to customer agreements between the Funds and the various broker/dealers. The due from brokers balance in the Statements of Assets and Liabilities for Strategic Alpha Fund represents cash pledged as collateral for forward foreign currency contracts, options and as initial margin for futures contracts and centrally cleared swap agreements. The due to brokers balance in the Statements of Assets and Liabilities for Strategic Alpha Fund represents cash and securities received as collateral for forward foreign currency contracts, options and

 

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bilateral swap agreements. In certain circumstances the Funds’ use of cash, securities and/or foreign currency held at brokers is restricted by regulation or broker mandated limits.

j.  New Disclosure Requirements.  In accordance with new reporting requirements pursuant to Regulation S-X of the Securities and Exchange Commission, presentation of certain amounts on the Statements of Changes in Net Assets for the year ended December 31, 2017 have been conformed to the new disclosure requirements. Where the prior disclosure of Distributions to Shareholders separately stated distributions from net investment income and from net realized capital gains for each share class of the Fund, they are now combined into a single line item for each respective share class. In addition, disclosure of Distributions in Excess of Net Investment Income has been removed from the Statements of Changes in Net Assets.

The following is a summary of the previously disclosed amounts, as reported at December 31, 2017:

 

Multi-Asset Income Fund       

FROM DISTRIBUTIONS TO SHAREHOLDERS:

   

Net investment income

   

Class A

    $ (2,006,749 ) 

Class C

      (1,027,055 ) 

Class N

      (1,118 ) 

Class Y

      (1,113,225 ) 

Net realized capital gains

   

Class A

      (2,053,174 ) 

Class C

      (1,374,969 ) 

Class N

      (1,304 ) 

Class Y

      (1,984,434 ) 
  

 

 

  

Total distributions

    $ (9,562,028 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (179,118 ) 
  

 

 

  
Strategic Alpha Fund       

FROM DISTRIBUTIONS TO SHAREHOLDERS:

   

Net investment income

   

Class A

    $ (1,506,001 ) 

Class C

      (713,500 ) 

Class N

      (744,780 ) 

Class Y

      (31,576,383 ) 
  

 

 

  

Total distributions

    $ (34,540,664 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (4,984,069 ) 
  

 

 

  

 

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U.S. Equity Opportunities Fund       

FROM DISTRIBUTIONS TO SHAREHOLDERS:

   

Net investment income

   

Class A

    $ (901,914 ) 

Class C

      (6,490 ) 

Class N

      (4 ) 

Class Y

      (920,407 ) 

Net realized capital gains

   

Class A

      (20,020,012 ) 

Class C

      (5,199,648 ) 

Class N

      (31 ) 

Class Y

      (8,004,252 ) 
  

 

 

  

Total distributions

    $ (35,052,758 ) 
  

 

 

  

DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME

    $ (534,108 ) 
  

 

 

  

k.  Federal and Foreign Income Taxes.  The Trusts treat each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least annually. Management has performed an analysis of each Fund’s tax positions for the open tax years as of December 31, 2018 and has concluded that no provisions for income tax are required. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits significantly increasing or decreasing for the Funds. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and accounting regulations and interpretations thereof.

A Fund may be subject to foreign withholding taxes on investment income and taxes on capital gains on investments that are accrued and paid based upon the Fund’s understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign withholding taxes on dividend and interest income are reflected on the Statements of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statements of Assets and Liabilities are net of foreign withholding taxes. Foreign withholding taxes where reclaims have been or will be filed are reflected on the Statements of Assets and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statements of Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statements of Assets and Liabilities, if applicable, and reduce unrealized gains on investments. In the event that realized gains on investments are subsequently offset by realized losses, taxes paid on realized gains may be returned to a Fund. Such amounts, if applicable,

 

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are reflected as foreign tax rebates receivable on the Statements of Assets and Liabilities and are recorded as a realized gain when received.

l.  Dividends and Distributions to Shareholders.  Dividends and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as paydown gains and losses, controlled foreign corporations, defaulted and/or non-income producing securities, deferred Trustees’ fees, partnership basis adjustments, return of capital distributions received, swap adjustments, passive foreign investment company adjustments, foreign currency gains and losses, convertible bond adjustments, distribution redesignations and premium amortization. Permanent book and tax basis differences relating to shareholder distributions, net investment income and net realized gains will result in reclassifications to capital accounts reported on the Statements of Assets and Liabilities. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees’ fees, premium amortization, partnership basis adjustments, defaulted and/or non-income producing securities, swap adjustments, wash sales, convertible bond adjustments, perpetual bond adjustments, forward foreign currency contract mark-to-market, straddle loss deferrals and futures contracts mark-to-market. Amounts of income and capital gain available to be distributed on a tax basis are determined annually, and at other times during the Funds’ fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions from net investment income and net realized short-term capital gains are reported as distributed from ordinary income for tax purposes.

The tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the years ended December 31, 2018 and 2017 were as follows:

 

    2018 Distributions Paid From:     2017 Distributions Paid From:  

Fund

  

Ordinary
Income

    

Long-Term
Capital
Gains

    

Total

    

Ordinary
Income

    

Long-Term
Capital
Gains

    

Total

  

Multi-Asset Income Fund

   $ 6,314,655     $ 2,864,723     $ 9,179,378     $ 6,743,242     $ 2,818,786     $ 9,562,028  

Strategic Alpha Fund

     49,713,220       —       49,713,220       34,540,664       —       34,540,664  

U.S. Equity Opportunities Fund

     7,917,360       87,168,205       95,085,565       5,656,689       29,396,069       35,052,758  

 

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For the year ended December 31, 2017, differences between these amounts and amounts disclosed in Note 2j of the Notes to Financial Statements are primarily attributable to different book and tax treatment for short-term capital gains.

Distributions paid to shareholders from net investment income and net realized capital gains, based on accounting principles generally accepted in the United States of America, are consolidated and reported on the Statements of Changes in Net Assets as Distributions to Shareholders. Distributions paid to shareholders from net investment income and net realized capital gains expressed in per-share amounts, based on accounting principles generally accepted in the United States of America, are separately stated and reported within the Financial Highlights.

As of December 31, 2018, the components of distributable earnings on a tax basis were as follows:

 

    

Multi-Asset
Income Fund

    

Strategic
Alpha Fund

    

U.S. Equity
Opportunities
Fund

  

Undistributed ordinary income

    $ 269,103     $ —     $ 970,392  

Undistributed long-term capital gains

      —       —       27,476,039  
  

 

 

    

 

 

    

 

 

  

Total undistributed earnings

      269,103       —       28,446,431  
  

 

 

    

 

 

    

 

 

  

Capital loss carryforward:

 

Short-term:

 

No expiration date

      —       (36,014,163 )      —  

Long-term:

 

No expiration date

      —       (4,070,186 )      —  
  

 

 

    

 

 

    

 

 

  

Total capital loss carryforward

      —       (40,084,349 )      —  
  

 

 

    

 

 

    

 

 

  

Late-year ordinary and post-October capital loss deferrals*

      (3,172,650 )      (578,810 )      —  
  

 

 

    

 

 

    

 

 

  

Unrealized appreciation (depreciation)

      (9,790,564 )      (74,955,715 )      109,760,904  
  

 

 

    

 

 

    

 

 

  

Total accumulated earnings (losses)

    $ (12,694,111 )    $ (115,618,874 )    $ 138,207,335  
  

 

 

    

 

 

    

 

 

  

Capital loss carryforward utilized in the current year

    $ —     $ 12,234,528     $ —  
  

 

 

    

 

 

    

 

 

  

 

*

Under current tax law, capital losses, foreign currency losses, and losses on passive foreign investment companies and contingent payment debt instruments after October 31 or December 31, as applicable, may be deferred and treated as occurring on the first day of the following taxable year. Multi-Asset Income Fund is deferring capital losses. Strategic Alpha Fund is deferring foreign currency losses.

 

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As of December 31, 2018, unrealized appreciation (depreciation) as a component of distributable earnings was as follows:

 

    

Multi-Asset

Income Fund

    

Strategic

Alpha Fund

    

U.S. Equity

Opportunities

Fund

  

Unrealized appreciation (depreciation)

       

Investments

    $ (9,675,925 )    $ (48,858,451 )    $ 109,760,904  

Foreign currency translations

      (114,639 )      (26,097,264 )      —  
  

 

 

    

 

 

    

 

 

  

Total unrealized appreciation (depreciation)

    $ (9,790,564 )    $ (74,955,715 )    $ 109,760,904  
  

 

 

    

 

 

    

 

 

  

As of December 31, 2018, the cost of investments (including derivatives, if applicable) and unrealized appreciation (depreciation) on a federal tax basis were as follows:

 

    

Multi-Asset
Income Fund

    

Strategic
Alpha Fund

    

U.S. Equity
Opportunities
Fund

  

Federal tax cost

    $ 130,472,748     $ 1,547,554,093     $ 795,668,534  
  

 

 

    

 

 

    

 

 

  

Gross tax appreciation

    $ 714,774     $ 22,865,149     $ 185,686,598  

Gross tax depreciation

      (10,504,035 )      (97,668,110 )      (75,925,694 ) 
  

 

 

    

 

 

    

 

 

  

Net tax appreciation (depreciation)

    $ (9,789,261 )    $ (74,802,961 )    $ 109,760,904  
  

 

 

    

 

 

    

 

 

  

Differences between these amounts and those reported in the components of distributable earnings are primarily attributable to foreign currency mark-to-market.

m.  Loan Participations.  Strategic Alpha Fund may invest in loans to corporate, governmental or other borrowers. The Fund’s investments in loans may be in the form of participations in loans or assignments of all or a portion of loans. A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, (i) a Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the party from whom the Fund has purchased the participation and only upon receipt by that party of payments from the borrower and (ii) a Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement or to vote on matters arising under the loan agreement. Thus, a Fund may be subject to credit risk both of the party from whom it purchased the loan participation and the borrower and the Fund may have minimal control over the terms of any loan modification. When a Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan. Loan agreements and participations outstanding at the end of the period, if any, are listed in each applicable Fund’s Schedule of Investments.

 

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n.  Repurchase Agreements.  Each Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, under which each Fund acquires securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. It is each Fund’s policy that the market value of the collateral for repurchase agreements be at least equal to 102% of the repurchase price, including interest. Certain repurchase agreements are tri-party arrangements whereby the collateral is held in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty, including possible delays or restrictions upon a Fund’s ability to dispose of the underlying securities. As of December 31, 2018, each Fund had investments in repurchase agreements for which the value of the related collateral exceeded the value of the repurchase agreement. The gross value of repurchase agreements is included in the Statements of Assets and Liabilities for financial reporting purposes.

o.  When-Issued and Delayed Delivery Transactions.  The Funds may enter into when-issued or delayed delivery transactions. When-issued refers to transactions made conditionally because a security, although authorized, has not been issued. Delayed delivery refers to transactions for which delivery or payment will occur at a later date, beyond the normal settlement period. The price of when-issued and delayed delivery securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The security and the obligation to pay for it are recorded by the Funds at the time the commitment is entered into. The value of the security may vary with market fluctuations during the time before the Funds take delivery of the security. No interest accrues to the Funds until the transaction settles.

Delayed delivery transactions include those designated as To Be Announced (“TBAs”) in the Portfolios of Investments. For TBAs, the actual security that will be delivered to fulfill the transaction is not designated at the time of the trade. The security is “to be announced” 48 hours prior to the established trade settlement date. Certain transactions require the Funds or counterparty to post cash and/or securities as collateral for the net mark-to-market exposure to the other party. The Funds cover their net obligations under outstanding delayed delivery commitments by segregating or earmarking cash or securities at the custodian.

Purchases of when-issued or delayed delivery securities may have a similar effect on the Funds’ NAV as if the Funds’ had created a degree of leverage in the portfolio. Risks may arise upon entering into such transactions from the potential inability of counterparties to meet their obligations under the transactions. Additionally, losses may arise due to changes in the value of the underlying securities.

There were no when-issued or delayed delivery securities held by the Funds as of December 31, 2018.

 

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p.  Stripped Securities.  Each 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. or foreign government securities or mortgage assets. In some cases, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). Stripped securities commonly have greater market volatility than other types of fixed-income securities. In the case of stripped mortgage securities, if the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to recoup fully its investments in IOs.

q.  Securities Lending.  The Funds have entered into an agreement with State Street Bank and Trust Company (“State Street Bank”), as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized with cash or securities in an amount equal to at least 105% or 102% of the market value (including accrued interest) of the loaned international or domestic securities, respectively, when the loan is initiated. Thereafter, the value of the collateral must remain at least 102% of the market value (including accrued interest) of loaned securities for U.S. equities and U.S. corporate debt; at least 105% of the market value (including accrued interest) of loaned securities for non-U.S. equities; and at least 100% of the market value (including accrued interest) of loaned securities for U.S. Government securities, sovereign debt issued by non-U.S. Governments and non-U.S. corporate debt. In the event that the market value of the collateral falls below the required percentages described above, the borrower will deliver additional collateral on the next business day. As with other extensions of credit, the Funds may bear the risk of loss with respect to the investment of the collateral. The Funds invest cash collateral in short-term investments, a portion of the income from which is remitted to the borrowers and the remainder allocated between the Funds and State Street Bank as lending agent.

For the year ended December 31, 2018, the Funds did not loan securities under this agreement.

r.  Unfunded Loan Commitments.  The Funds may enter into unfunded loan commitments, which are contractual obligations for future funding at the option of the borrower. Unfunded loan commitments represent a future obligation, in full, even though a percentage of the committed amount may not be utilized by the borrower. Unfunded loan commitments, and the obligation for future funding, are recorded as a liability on the Statements of Assets and Liabilities at par value at the time the commitment is entered into. Purchases of unfunded loan commitments may have a similar effect on the Fund’s NAV as if the Fund had created a degree of leverage in the portfolio. Market risk exists on purchases of these commitments to the same extent as if the securities were owned on a settled basis. Losses may arise due to changes in the value of the unfunded loan commitments.

As of December 31, 2018, the Funds did not have any unfunded loan commitments.

 

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s.  Indemnifications.  Under the Trusts’ organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

t.  New Accounting Pronouncement.  In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

3.  Fair Value Measurements.  In accordance with accounting standards related to fair value measurements and disclosures, the Funds have categorized the inputs utilized in determining the value of each Fund’s assets or liabilities. These inputs are summarized in the three broad levels listed below:

 

  •  

Level 1 – quoted prices in active markets for identical assets or liabilities;

 

  •  

Level 2 – prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); and

 

  •  

Level 3 – prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The Funds’ pricing policies and procedures are recommended by the adviser and approved by the Board of Trustees. Debt securities are valued based on evaluated bids furnished to the Funds by an independent pricing service. Broker-dealer bid prices may be used if an independent pricing service either is unable to price a security or does not provide a reliable price for a security. Broker-dealer bid prices for which the Funds do not have knowledge of the inputs used by the broker-dealer are categorized in

 

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Level 3. All security prices, including those obtained from an independent pricing service and broker-dealer bid prices, are reviewed on a daily basis by the adviser, subject to oversight by Fund management and the Board of Trustees. If the adviser, in good faith, believes that the price provided by an independent pricing service is unreliable, broker-dealer bid prices may be used until the price provided by the independent pricing service is considered to be reliable. Reliability of all security prices, including those obtained from an independent pricing service and broker-dealer bid prices, is tested in a variety of ways, including comparison to recent transaction prices and daily fluctuations, amongst other validation procedures in place. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Funds’ adviser pursuant to procedures approved by the Board of Trustees. Fair valued securities may be categorized in Level 3.

The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2018, at value:

Multi-Asset Income Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Bonds and Notes(a)

    $ —      $ 53,644,959      $   —      $ 53,644,959  

Common Stocks

            

Air Freight & Logistics

      —        112,024        —        112,024  

Airlines

      160,628        120,500        —        281,128  

Banks

      3,151,132        172,578        —        3,323,710  

Beverages

      139,726        178,278        —        318,004  

Construction & Engineering

      —        243,855        —        243,855  

Electric Utilities

      1,250,611        381,007        —        1,631,618  

Household Durables

      —        129,958        —        129,958  

Industrial Conglomerates

      —        121,149        —        121,149  

Leisure Products

      —        114,091        —        114,091  

Multi-Utilities

      598,920        122,930        —        721,850  

Oil, Gas & Consumable Fuels

      1,164,473        72,797        —        1,237,270  

Pharmaceuticals

      2,291,831        103,491        —        2,395,322  

Real Estate Management & Development

      —        218,035        —        218,035  

REITs - Apartments

      —        32,170        —        32,170  

REITs - Diversified

      118,403        2,128        —        120,531  

REITs - Hotels

      84,640        31,406        —        116,046  

REITs - Office Property

      16,309        79,290        —        95,599  

REITs - Shopping Centers

      15,439        84,677        —        100,116  

Tobacco

      520,897        213,936        —        734,833  

Trading Companies & Distributors

      —        410,420        —        410,420  

 

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Multi-Asset Income Fund (continued)

Asset Valuation Inputs (continued)

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Wireless Telecommunication Services

    $ —      $ 101,111      $   —      $ 101,111  

All Other Common Stocks(a)

      26,883,184        —        —        26,883,184  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Common Stocks

      36,396,193        3,045,831        —        39,442,024  
  

 

 

     

 

 

     

 

 

     

 

 

  

Senior Loans(a)

      —        9,791,573        —        9,791,573  

Exchange-Traded Funds & Notes

      8,196,066        —        —        8,196,066  

Preferred Stocks

            

Non-Convertible Preferred Stocks(a)

      1,031,372        —        —        1,031,372  

Convertible Preferred Stocks(a)

      —        480,774        —        480,774  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Preferred Stocks

      1,031,372        480,774        —        1,512,146  
  

 

 

     

 

 

     

 

 

     

 

 

  

Short-Term Investments

      —        8,096,724        —        8,096,724  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 45,623,631      $ 75,059,861      $ —      $ 120,683,492  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

A common stock valued at $175,936 was transferred from Level 1 to Level 2 during the period ended December 31, 2018. At December 31, 2017, this security was valued at the market price in the foreign market in accordance with the Fund’s valuation policies. At December 31, 2018 this security was fair valued pursuant to procedures approved by the Board of Trustees as events occurring after the close of the foreign market were believed to materially affect the value of the security.

All transfers are recognized as of the beginning of the reporting period.

Strategic Alpha Fund

Asset Valuation Inputs

 

Description

  

Level 1

    

Level 2

    

Level 3

    

Total

  

Non-Convertible Bonds

        

ABS Home Equity

   $   —     $ 132,368,429     $ 1 (b)    $ 132,368,430  

ABS Other

     —       71,232,031       4,468,825 (c)(d)      75,700,856  

ABS Student Loan

     —       10,234,744       4,307,138 (e)      14,541,882  

Independent Energy

     —       21,795,325       — (d)      21,795,325  

All Other Non-Convertible Bonds(a)

     —       704,838,561       —       704,838,561  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Non-Convertible Bonds

     —       940,469,090       8,775,964       949,245,054  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

Strategic Alpha Fund (continued)

Asset Valuation Inputs (continued)

 

Description

  

Level 1

    

Level 2

    

Level 3

    

Total

  

Convertible Bonds(a)

   $ —     $ 24,880,398     $ —     $ 24,880,398  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Bonds and Notes

     —       965,349,488       8,775,964       974,125,452  
 

 

 

    

 

 

    

 

 

    

 

 

  

Senior Loans(a)

     —       194,321,844       —       194,321,844  

Loan Participations(a)

     —       —       6,733,310 (e)      6,733,310  

Preferred Stocks(a)

     —       8,108,655       —       8,108,655  

Common Stocks(a)

     44,912,143       —       —       44,912,143  

Exchange-Traded Funds

     10,991,933       —       —       10,991,933  

Other Investments(a)

     —       —       7,790,625 (f)      7,790,625  

Short-Term Investments

     —       227,149,786       —       227,149,786  

Purchased Options(a)

     —       69,433       —       69,433  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Investments

   $ 55,904,076     $ 1,394,999,206     $ 23,299,899     $ 1,474,203,181  
 

 

 

    

 

 

    

 

 

    

 

 

  

Bilateral Credit Default Swap Agreements (unrealized appreciation)

     —       102,091       —       102,091  

Centrally Cleared Interest Rate Swap Agreements (unrealized appreciation)

     —       10,162,023       —       10,162,023  

Centrally Cleared Credit Default Swap Agreements (unrealized appreciation)

     —       54,478       —       54,478  

Forward Foreign Currency Contracts (unrealized appreciation)

     —       246,239       —       246,239  

Futures Contracts (unrealized appreciation)

     356,946       —       —       356,946  
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 56,261,022     $ 1,405,564,037     $ 23,299,899     $ 1,485,124,958  
 

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

Strategic Alpha Fund (continued)

 

Liability Valuation Inputs                          

Description

   

Level 1

    

Level 2

    

Level 3

     

Total

  

Written Options(a)

    $ (223,313 )    $ —     $   —      $ (223,313 ) 

Centrally Cleared Interest Rate Swap Agreements (unrealized depreciation)

      —       (12,445,539 )      —        (12,445,539 ) 

Centrally Cleared Credit Default Swap Agreements (unrealized depreciation)

      —       (210,422 )      —        (210,422 ) 

Forward Foreign Currency Contracts (unrealized depreciation)

      —       (371,974 )      —        (371,974 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ (223,313 )    $ (13,027,935 )    $ —      $ (13,251,248 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

(b)

Fair valued by the Fund’s adviser.

(c)

Fair valued by the Fund’s adviser using broker dealer bid prices for which inputs are unobservable to the Fund ($1,673,859) or fair valued by the Fund’s adviser ($428,831) or valued using broker-dealer bid prices ($2,366,135).

(d)

Includes securities fair valued at zero using level 3 inputs.

(e)

Valued using broker-dealer bid prices.

(f)

Fair valued by the Fund’s adviser using broker-dealer bid prices for which the inputs are unobservable to the Fund.

U.S. Equity Opportunities Fund

Asset Valuation Inputs

 

Description

   

Level 1

     

Level 2

     

Level 3

     

Total

  

Common Stocks(a)

    $ 887,847,140      $ —      $   —      $ 887,847,140  

Short-Term Investments

      —        17,582,298        —        17,582,298  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 887,847,140      $ 17,582,298      $ —      $ 905,429,438  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a)

Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.

For the year ended December 31, 2018, there were no transfers among Levels 1, 2 and 3.

 

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December 31, 2018

 

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value as of December 31, 2017 and/or December 31, 2018:

Strategic Alpha Fund

Asset Valuation Inputs

 

Investments in Securities

  

Balance as of
December 31,
2017

    

Accrued
Discounts
(Premiums)

    

Realized
Gain
(Loss)

    

Change in
Unrealized
Appreciation
(Depreciation)

    

Purchases

  

Bonds and Notes

          

Non-Convertible Bonds

          

ABS Home Equity

   $ 1,615,466     $ —     $ 5,434     $ 12     $ 11,246  

ABS Other

     2,992,445       —       —       223,278       2,549,735  

ABS Student Loan

     4,900,039       —       1,136       (37 )      350,000  

Independent Energy

     — (a)      272,128       —       (272,128 )      —  

Non-Agency Commercial Mortgage-Backed Securities

     542,412       —       —       —       —  

Loan Participations

     13,637,785       434       192       (22,126 )      —  

Other Investments

          

Aircraft ABS

     14,411,624       —       —       (6,620,999 )      —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 38,099,771     $ 272,562     $ 6,762     $ (6,692,000 )    $ 2,910,981  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

Strategic Alpha Fund (continued)

Asset Valuation Inputs (continued)

 

Investments in Securities

  

Sales

    

Transfers
into Level 3

    

Transfers
out of

Level 3

    

Balance as of
December 31,
2018

    

Change in
Unrealized
Appreciation
(Depreciation)
from
Investments
Still Held at
December 31,
2018

  

Bonds and Notes

          

Non-Convertible Bonds

          

ABS Home Equity

   $ (17,162 )    $   —     $ (1,614,995 )    $ 1     $ —  

ABS Other

     —       —       (1,296,633 )      4,468,825       223,278  

ABS Student Loan

     (944,000 )      —       —       4,307,138       735  

Independent Energy

     —       —       —       — (a)      (272,128 ) 

Non-Agency Commercial Mortgage-Backed Securities

     —       —       (542,412 )      —       —  

Loan Participations

     (6,882,975 )      —       —       6,733,310       (24,809 ) 

Other Investments

          

Aircraft ABS

     —       —       —       7,790,625       (1,122,084 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (7,844,137 )    $ —     $ (3,454,040 )    $ 23,299,899     $ (1,195,008 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

Includes securities fair valued at zero using level 3 inputs.

Debt securities valued at $3,454,040 were transferred from Level 3 to Level 2 during the period ended December 31, 2018. At December 31, 2017, these securities were valued using broker-dealer bid prices based on inputs unobservable to the Fund as an independent pricing service was unable to price the securities. At December 31, 2018, these securities were valued on the basis of evaluated bids furnished to the Fund by an independent pricing service in accordance with the Fund’s valuation policies.

All transfers are recognized as of the beginning of the reporting period.

4.  Derivatives.  Derivative instruments are defined as financial instruments whose value and performance are based on the value and performance of an underlying asset, reference rate or index. Derivative instruments that the Funds used during the period include forward foreign currency contracts, futures contracts, option contracts, swaptions and swap agreements.

 

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Multi-Asset Income Fund is subject to the risk that changes in foreign currency exchange rates will have an unfavorable effect on the value of Fund assets denominated in foreign currencies. The Fund may enter into forward foreign currency exchange contracts for hedging purposes to protect the value of the Fund’s holdings of foreign securities. During the year ended December 31, 2018, the Fund engaged in forward foreign currency for hedging purposes.

Multi-Asset Income Fund is subject to the risk of unpredictable declines in the value of individual equity securities and periods of below average performance in individual securities or in the equity market as a whole. The Fund may use purchased put options and written call options to hedge against a decline in value of an equity security that it owns and may use written put options to offset the cost of options used for hedging purposes. The Fund may also use purchased call options, written call options and written put options for investment purposes. During the year ended December 31, 2018, the Fund engaged in written put and call options for both hedging and investment purposes.

Strategic Alpha Fund seeks to achieve positive total returns over a full market cycle. The Fund pursues its objective by utilizing a flexible investment approach that allocates investments across a global range of investment opportunities related to credit, currencies and interest rates, while employing risk management techniques to mitigate downside risk. At times, the Fund expects to gain its investment exposure substantially through the use of derivatives, including forward foreign currency contracts, futures and option contracts, interest rate swaptions and swap agreements. During the year ended December 31, 2018, the Fund used futures, forward foreign currency contracts, option contracts, swaptions, interest rate swap agreements and credit default swap agreements (as a protection seller) to gain investment exposures in accordance with its objective.

Strategic Alpha Fund is subject to the risk that changes in interest rates will affect the value of the Fund’s investments in fixed-income securities. The Fund will be subject to increased interest rate risk to the extent that it invests in fixed-income securities with longer maturities or durations, as compared to investing in fixed-income securities with shorter maturities or durations. The Fund may use futures contracts, interest rate swap agreements and interest rate swaptions to hedge against changes in interest rates and to manage duration without having to buy or sell portfolio securities. During the year ended December 31, 2018, the Fund engaged in swaptions for hedging purposes.

Strategic Alpha Fund is subject to the risk that changes in foreign currency exchange rates will have an unfavorable effect on the value of Fund assets denominated in foreign currencies. The Fund may enter into forward foreign currency exchange contracts and option contracts for hedging purposes to protect the value of the Fund’s holdings of foreign securities. During the year ended December 31, 2018, the Fund engaged in forward foreign currency and option contracts for hedging purposes.

 

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Strategic Alpha Fund is subject to the risk that companies in which the Fund invests will fail financially or otherwise be unwilling or unable to meet their obligations to the Fund. The Fund may use credit default swaps, as a protection buyer, to hedge its credit exposure to issuers of bonds it holds without having to sell the bonds. During the year ended December 31, 2018, the Fund engaged in credit default swap transactions (as a protection buyer) to hedge its credit exposure.

Strategic Alpha Fund is subject to the risk of unpredictable declines in the value of individual equity securities and periods of below-average performance in individual securities or in the equity market as a whole. The Fund may use futures contracts, purchased put options and written call options to hedge against a decline in value of an equity security that it owns. The Fund may also write put options to offset the cost of options used for hedging purposes. During the year ended December 31, 2018, the Fund engaged in futures and option contracts for hedging purposes.

Transactions in derivative instruments for Multi-Asset Income Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

   

Options
written

     

Forward foreign
currency
transactions

  

Foreign exchange contracts

    $ —      $ 145,895  

Equity contracts

      26,824        —  
  

 

 

     

 

 

  

Total

    $ 26,824      $ 145,895  
  

 

 

     

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The following is a summary of derivative instruments for Strategic Alpha Fund as of December 31, 2018, as reflected within the Statements of Assets and Liabilities:

 

Assets

  

Investments
at value1

    

Unrealized
appreciation
on forward
foreign
currency
contracts

    

Unrealized
appreciation
on futures
contracts2

    

Swap
agreements
at value3

    

Total

  

Over-the-counter asset derivatives

          

Foreign exchange contracts

   $ 69,433     $ 246,239     $ —     $ —     $ 315,672  

Credit contracts

     —       —       —       139,323       139,323  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total over-the counter asset derivatives

   $ 69,433     $ 246,239     $ —     $ 139,323     $ 454,995  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Exchange-traded/cleared asset derivatives

          

Interest rate contracts

   $ —     $ —     $ 29,244     $ 10,163,754     $ 10,192,998  

Credit contracts

     —       —       —       584,037       584,037  

Equity contracts

     —       —       327,702       —       327,702  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total exchange-traded/cleared asset derivatives

   $ —     $ —     $ 356,946     $ 10,747,791     $ 11,104,737  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total asset derivatives

   $ 69,433     $ 246,239     $ 356,946     $ 10,887,114     $ 11,559,732  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

  

Options
written
at value

    

Unrealized
depreciation
on forward
foreign
currency
contracts

    

Unrealized
depreciation
on futures
contracts2

    

Swap
agreements
at value3

    

Total

  

Over-the-counter liability derivatives

          

Foreign exchange contracts

   $ —     $ (371,974 )    $ —     $ —     $ (371,974 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Exchange-traded/cleared liability derivatives

          

Interest rate contracts

   $ —     $ —     $ —     $ (12,449,031 )    $ (12,449,031 ) 

Equity contracts

     (223,313 )      —       —       —       (223,313 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total exchange-traded/cleared liability derivatives

   $ (223,313 )    $ —     $ —     $ (12,449,031 )    $ (12,672,344 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liability derivatives

   $ (223,313 )    $ (371,974 )    $ —     $ (12,449,031 )    $ (13,044,318 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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December 31, 2018

 

 

1 

Represents purchased options, at value.

2 

Represents cumulative unrealized appreciation (depreciation) on futures contracts. Only the current day’s variation margin on futures contracts is reported within the Statements of Assets and Liabilities as receivable or payable for variation margin, as applicable.

3 

Represents swap agreements, at value. Market value of swap agreements is reported in the Portfolio of Investments along with the unamortized upfront premium paid (received), if any, and unrealized appreciation (depreciation) on each individual contract. Unrealized appreciation (depreciation) and upfront premiums paid (received) for bilateral swap agreements are reported within the Statements of Assets and Liabilities.

Transactions in derivative instruments for Strategic Alpha Fund during the year ended December 31, 2018, as reflected within the Statements of Operations were as follows:

 

Net Realized Gain (Loss) on:

  

Investments4

    

Futures
contracts

    

Options/

swaptions
written

    

Swap
agreements

    

Forward foreign
currency
contracts

  

Interest rate contracts

   $ (910,701 )    $ 1,306,750     $ 241,454     $ (5,614,267 )    $ —  

Foreign exchange contracts

     35,215       —       —       —       6,766,605  

Credit contracts

     —       —       —       531,575       —  

Equity contracts

     748,930       107,862       (1,609,130 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (126,556 )    $ 1,414,612     $ (1,367,676 )    $ (5,082,692 )    $ 6,766,605  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net Change in Unrealized
Appreciation (Depreciation) on:

  

Investments4

    

Futures
contracts

    

Options
written

    

Swap
agreements

    

Forward foreign
currency
contracts

  

Interest rate contracts

   $ —     $ 287,940     $ —     $ 4,939,850     $ —  

Foreign exchange contracts

     364,626       —       —       —       2,221,098  

Credit contracts

     —       —       —       851,147       —  

Equity contracts

     47,985       470,549       (37,560 )      —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 412,611     $ 758,489     $ (37,560 )    $ 5,790,997     $ 2,221,098  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

4  

Represents realized gain/loss and change in unrealized appreciation (depreciation), respectively, for purchased options/swaptions during the period.

As the Funds value their derivatives at fair value and recognize changes in fair value through the Statements of Operations, they do not qualify for hedge accounting under authoritative guidance for derivative instruments. The Funds’ investments in derivatives may represent an economic hedge; however, they are considered to be non-hedge transactions for the purpose of these disclosures.

The volume of forward foreign currency contract activity, as a percentage of net assets, for Multi-Asset Income Fund based on gross month-end or daily (as applicable)

 

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December 31, 2018

 

notional amounts outstanding during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2018:

 

Multi-Asset Income Fund

   

Forwards

  

Average Notional Amount Outstanding

      1.01 % 

Highest Notional Amount Outstanding

      9.49 % 

Lowest Notional Amount Outstanding

      0.00 % 

Notional Amount Outstanding as of December 31, 2018

      0.00 % 

The volume of option contract activity, as a percentage of net assets, for Multi-Asset Income Fund, based on month-end or daily (as applicable) market values of instruments underlying purchased and written options, at absolute value, was as follows for the year ended December 31, 2018:

 

Multi-Asset Income Fund

   

Call Options

Written*

    

Put Options

Written*

  

Average Market Value of Underlying Instruments

      0.36 %      0.05 % 

Highest Market Value of Underlying Instruments

      1.02 %      0.31 % 

Lowest Market Value of Underlying Instruments

      0.00 %      0.00 % 

Market Value of Underlying Instruments as of December 31, 2018

      0.00 %      0.00 % 

 

*

Market value of underlying instruments is determined by multiplying option shares by the price of the option’s underlying security.

The volume of forward foreign currency contract, futures contract and swap agreement activity, as a percentage of net assets for Strategic Alpha Fund, based on gross month-end notional amounts outstanding during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2018:

 

Strategic Alpha Fund

   

Forwards

    

Futures

    

Credit

Default

Swaps

    

Interest

Rate

Swaps

  

Average Notional Amount Outstanding

      17.86 %      9.25 %      3.71 %      150.33 % 

Highest Notional Amount Outstanding

      36.66 %      16.23 %      5.10 %      220.75 % 

Lowest Notional Amount Outstanding

      5.32 %      5.51 %      2.88 %      101.53 % 

Notional Amount Outstanding as of December 31, 2018

      5.99 %      5.51 %      2.88 %      206.99 % 

Unrealized gain and/or loss on open forwards, futures and swaps is recorded in the Statements of Assets and Liabilities. The aggregate notional values of forward, futures and swap contracts are not recorded in the Statements of Assets and Liabilities, and therefore are not included in the Fund’s net assets.

 

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December 31, 2018

 

The volume of option contract activity, as a percentage of net assets for Strategic Alpha Fund, based on the month-end market values of instruments underlying purchased and written options, at absolute value, was as follows for the year ended December 31, 2018:

 

Strategic Alpha Fund

   

Call Options
Purchased*

    

Put Options

Purchased*

    

Call Options

Written*

    

Put Options

Written*

  

Average Market Value of Underlying Instruments

      1.46 %      2.11 %      0.92 %      0.62 % 

Highest Market Value of Underlying Instruments

      2.28 %      6.09 %      1.66 %      3.48 % 

Lowest Market Value of Underlying Instruments

      0.76 %      0.00 %      0.00 %      0.00 % 

Market Value of Underlying Instruments as of December 31, 2018

      0.76 %      0.00 %      1.66 %      0.00 % 

 

*

Market value of underlying instruments is determined as follows: for securities by multiplying option shares by the price of the option’s underlying security, for currencies by multiplying par value by the strike price and dividing by the foreign currency exchange rate, for foreign indices by multiplying the number of contracts by the contract multiplier by the price of the underlying index and dividing by the foreign currency exchange rate and for futures by multiplying the number of contracts by the contract multiplier by the price of the underlying futures contract.

The volume of interest rate swaption activity, as a percentage of net assets for Strategic Alpha Fund, based on average premiums paid or received during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2018:

 

Strategic Alpha Fund

  

Interest Rate Call
Swaptions
Purchased

    

Interest Rate Call
Swaptions

Written

  

Average Premium Paid/Received

     0.02 %      0.01 % 

Highest Premium Paid/Received

     0.07 %      0.02 % 

Lowest Premium Paid/Received

     0.00 %      0.00 % 

Premium Paid/Received as of December 31, 2018

     0.00 %      0.00 % 

Over-the-counter derivatives, including forward foreign currency contracts, options and swap agreements are entered into pursuant to International Swaps and Derivatives Association, Inc. (“ISDA”) agreements negotiated between the Funds and their counterparties. ISDA agreements typically contain, among other things, terms for the posting of collateral and master netting provisions in the event of a default or other termination event. Collateral is posted by a Fund or the counterparty to the extent of the net mark-to-market exposure to the other party of all open contracts under the agreement, subject to minimum transfer requirements. Master netting provisions allow

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

the Funds and the counterparty, in the event of a default or other termination event, to offset amounts owed by each related to derivative contracts, including any posted collateral, to one net amount payable by either the Funds or the counterparty. The Funds’ ISDA agreements typically contain provisions that allow a counterparty to terminate open contracts early if the NAV of a Fund declines beyond a certain threshold. For financial reporting purposes, the Funds do not offset derivative assets and liabilities, and any related collateral received or pledged, on the Statements of Assets and Liabilities.

As of December 31, 2018, gross amounts of over-the-counter derivative assets and liabilities not offset in the Statements of Assets and Liabilities and the related net amounts after taking into account master netting arrangements, by counterparty, are as follows:

Strategic Alpha Fund

 

Counterparty

  

Gross Amounts of
Assets

    

Offset
Amount

    

Net
Asset
Balance

    

Collateral
(Received)/
Pledged

    

Net
Amount

  

Bank of America, N.A.

   $ 90,327     $ (35,484 )    $ 54,843     $ —     $ 54,843  

Barclays Bank plc

     10,916       (6,089 )      4,827       —       4,827  

Credit Suisse International

     9,803       —       9,803       —       9,803  

Deutsche Bank AG

     107,088       (93,875 )      13,213       (13,213 )      —  

HSBC Bank USA

     5,915       (5,915 )      —       —       —  

Morgan Stanley Capital Services, Inc.

     211,969       (72,176 )      139,793       (139,793 )      —  

UBS AG

     18,977       (18,977 )      —       —       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $ 454,995     $ (232,516 )    $ 222,479     $ (153,006 )    $ 69,473  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Counterparty

  

Gross Amounts of
Liabilities

    

Offset
Amount

    

Net
Liability
Balance

    

Collateral
(Received)/
Pledged

    

Net
Amount

  

Bank of America, N.A.

   $ (35,484 )    $ 35,484     $ —     $ —     $ —  

Barclays Bank plc

     (6,089 )      6,089       —       —       —  

Deutsche Bank AG

     (93,875 )      93,875       —       —       —  

HSBC Bank USA

     (6,777 )      5,915       (862 )      —       (862 ) 

Morgan Stanley Capital Services, Inc.

     (72,176 )      72,176       —       —       —  

UBS AG

     (157,573 )      18,977       (138,596 )      138,596       —  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $ (371,974 )    $ 232,516     $ (139,458 )    $ 138,596     $ (862 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

The actual collateral received or pledged, if any, may exceed the amounts shown in the table due to overcollateralization. Timing differences may exist between when contracts under the ISDA agreements are marked-to-market and when collateral moves. The ISDA agreements include tri-party control agreements under which collateral is held for the benefit of the secured party at a third party custodian, State Street Bank.

Counterparty risk is managed based on policies and procedures established by each Fund’s adviser. Such policies and procedures may include, but are not limited to, minimum counterparty credit rating requirements, monitoring of counterparty credit default swap spreads and posting of collateral. A Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the Fund’s aggregated unrealized gains and the amount of any collateral pledged to the counterparty, which may be offset by any collateral posted to the Fund by the counterparty. ISDA master agreements can help to manage counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under these ISDA agreements, collateral is routinely transferred if the total net exposure in respect of certain transactions, net of existing collateral already in place, exceeds a specified amount (typically $250,000, depending on the counterparty). With exchange-traded derivatives, there is minimal counterparty credit risk to the Fund because the exchange’s clearing house, as counterparty to these instruments, stands between the buyer and the seller of the contract. Credit risk still exists in exchange-traded derivatives with respect to initial and variation margin that is held in a broker’s customer accounts. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro rata basis across all of the broker’s customers, potentially resulting in losses to the Fund. Based on balances reflected on each Fund’s Statement of Assets and Liabilities, the following table shows (i) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the Fund would incur if parties (including OTC derivative counterparties and brokers holding margin for exchange-traded derivatives) to the relevant financial instruments failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the Fund, and (ii) the amount of loss that the Fund would incur after taking into account master netting provisions pursuant to ISDA agreements, as of December 31, 2018:

 

Fund

   

Maximum Amount

of Loss - Gross

     

Maximum Amount

of Loss - Net

  

Strategic Alpha Fund

    $ 32,927,520      $ 32,403,402  

Net loss amount reflects cash and securities received as collateral of $982,132, which is recorded on the Statements of Assets and Liabilities. Securities received as collateral are valued in accordance with the Fund’s valuation policies.

 

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December 31, 2018

 

5.  Purchases and Sales of Securities.   For the year ended December 31, 2018, purchases and sales of securities (excluding short-term investments and option/swaption contracts and including paydowns) were as follows:

 

    U.S. Government/Agency
Securities		     Other Securities  

Fund

  

Purchases

    

Sales

    

Purchases

    

Sales

  

Multi-Asset Income Fund

   $ 13,459,501     $ 12,543,939     $ 383,778,230     $ 394,140,720  

Strategic Alpha Fund

     3,511,220,061       3,512,151,393       1,041,097,786       813,669,804  

U.S. Equity Opportunities Fund

     —       —       230,117,939       250,303,656  

6. Management Fees and Other Transactions with Affiliates.

a.  Management Fees.  Natixis Advisors, L.P. (“Natixis Advisors”) serves as investment adviser to Multi-Asset Income Fund and U.S. Equity Opportunities Fund. Natixis Advisors is a wholly-owned subsidiary of Natixis Investment Managers, L.P. (“Natixis”), which is part of Natixis Investment Managers, an international asset management group based in Paris, France. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s average daily net assets:

 

     Percentage of Average
Daily Net Assets		  

Fund

    First
$1 billion		     Over
$1 billion		  

Multi-Asset Income Fund

      0.55 %      0.50 % 

U.S. Equity Opportunities Fund

      0.75 %      0.75 % 

Natixis Advisors has entered into subadvisory agreements for each Fund as listed below.

 

Multi-Asset Income Fund

    Loomis, Sayles & Company, L.P. (“Loomis Sayles”)

U.S. Equity Opportunities Fund

   

Harris Associates L.P. (“Harris”)

  

Loomis Sayles

Loomis Sayles is a limited partnership whose sole general partner, Loomis, Sayles & Company, Inc., is indirectly owned by Natixis. Harris is a wholly-owned subsidiary of Natixis.

 

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December 31, 2018

 

Under the terms of the subadvisory agreements, each Fund has agreed to pay its respective subadviser(s) a subadvisory fee at the following annual rates, calculated daily and payable monthly, based on each Fund’s/Segment’s average daily net assets:

 

          Percentage of Average
Daily Net Assets		  

Fund

   

Subadviser

   

First

$1 billion

    

Over

$1 billion

  

Multi-Asset Income Fund

    Loomis Sayles      0.325 %      0.30 % 

U.S. Equity Opportunities Fund

        

Large Cap Growth Segment

    Harris      0.52 %      0.52 % 

All Cap Growth Segment

    Loomis Sayles      0.35 %      0.35 % 

Payments to Natixis Advisors are reduced by the amounts of payments to the subadvisers, as calculated based on the table above.

Loomis Sayles is the investment adviser to Strategic Alpha Fund. Under the terms of the management agreement, the Fund pays a management fee at the annual rate of 0.60% of the first $1.25 billion and 0.55% in excess of $1.25 billion of the Fund’s average daily net assets, calculated daily and payable monthly.

Natixis Advisors and Loomis Sayles have given binding undertakings to the Funds to waive management fees and/or reimburse certain expenses to limit the Funds’ operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes, organizational and extraordinary expenses such as litigation and indemnification expenses. These undertakings are in effect until April 30, 2019, may be terminated before then only with the consent of the Funds’ Board of Trustees, and are reevaluated on an annual basis. Management fees payable, as reflected on the Statements of Assets and Liabilities, is net of waivers and/or expense reimbursements, if any, pursuant to these undertakings. Waivers/reimbursements that exceed management fees payable are reflected on the Statements of Assets and Liabilities as receivable from investment adviser.

For the year ended December 31, 2018, the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:

 

     Expense Limit as a Percentage of
Average Daily Net Assets		  

Fund

   

Class A

    

Class C

    

Class N

    

Class Y

  

Multi-Asset Income Fund

      0.95 %      1.70 %      0.65 %      0.70 % 

Strategic Alpha Fund

      1.00 %      1.75 %      0.70 %      0.75 % 

U.S. Equity Opportunities Fund

      1.20 %      1.95 %      0.90 %      0.95 % 

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Natixis Advisors and Loomis Sayles shall be permitted to recover expenses borne under the expense limitation agreements (whether through waiver of management fees or otherwise) on a class by class basis in later periods to the extent the annual operating expenses of a class fall below a class’ expense limits, provided, however, that a class is not obligated to pay such waived/reimbursed fees or expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed.

For the year ended December 31, 2018, the management fees and waivers of management fees for each Fund were as follows:

 

Fund

   Gross
Management
Fees		     Contractual
Waivers of
Management
Fees1		     Net
Management
Fees		     Percentage of
Average
Daily Net Assets		  
  Gross     Net  

Multi-Asset Income Fund

   $ 805,940     $ 238,172     $ 567,768       0.55 %      0.39 % 

Strategic Alpha Fund

     7,895,864       —       7,895,864       0.60 %      0.60 % 

U.S. Equity Opportunities Fund

     7,916,621       —       7,916,621       0.75 %      0.75 % 

 

1 

Management fee waivers are subject to possible recovery until December 31, 2019.

For the year ended December 31, 2018, expense reimbursements related to the prior fiscal year were recovered as follows:

 

Fund

   

Recovered Expenses

  

Strategic Alpha Fund

    $ 84,330  

b.  Service and Distribution Fees.  Natixis Distribution, L.P. (“Natixis Distribution”), which is a wholly-owned subsidiary of Natixis, has entered into a distribution agreement with the Trusts. Pursuant to this agreement, Natixis Distribution serves as principal underwriter of the Funds of the Trusts.

Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service Plan relating to each Fund’s Class A shares (the “Class A Plans”) and a Distribution and Service Plan relating to each Fund’s Class C shares (the “Class C Plans”).

Under the Class A Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund’s Class A shares, as reimbursement for expenses incurred by Natixis Distribution in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts.

Under the Class C Plans, each Fund pays Natixis Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund’s Class C shares, as compensation for services provided by Natixis Distribution in providing personal services to investors in Class C shares and/or the maintenance of shareholder accounts.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Also under the Class C Plans, each Fund pays Natixis Distribution a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Fund’s Class C shares, as compensation for services provided by Natixis Distribution in connection with the marketing or sale of Class C shares.

For the year ended December 31, 2018, the service and distribution fees for each Fund were as follows:

 

     Service Fees      Distribution Fees  

Fund

   

Class A

     

Class C

     

Class C

  

Multi-Asset Income Fund

    $ 144,708      $ 79,475      $ 238,424  

Strategic Alpha Fund

      69,714        72,885        218,655  

U.S. Equity Opportunities Fund

      1,540,530        261,290        783,870  

c.  Administrative Fees.  Natixis Advisors provides certain administrative services for the Funds and contracts with State Street Bank to serve as sub-administrator. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts, Natixis ETF Trust and Natixis Advisors, each Fund pays Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which is reevaluated on an annual basis.

Prior to July 1, 2018, each Fund paid Natixis Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, 0.0500% of the next $15 billion, 0.0400% of the next $30 billion, 0.0350% of the next $30 billion and 0.0325% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust of $10 million, which was reevaluated on an annual basis.

Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving as sub-administrator to the Fund. Also, effective October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Fund in an amount equal to the reduction in sub-administrative fees discussed above. The waiver is in effect through June 30, 2019, at which time it will be reevaluated as part of the annual review of the administrative fee contract, as noted above.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

For the year ended December 31, 2018, the administrative fees for each Fund were as follows:

 

Fund

   

Gross
Administrative
Fees

     

Waiver of
Administrative
Fees

     

Net
Administrative
Fees

  

Multi-Asset Income Fund

    $ 64,293      $ 326      $ 63,967  

Strategic Alpha Fund

      578,591        3,603        574,988  

U.S. Equity Opportunities Fund

      463,021        2,509        460,512  

d.  Sub-Transfer Agent Fees.  Natixis Distribution has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Funds and has agreed to compensate the intermediaries for providing those services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. These services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly at the Funds’ transfer agent. Accordingly, the Funds have agreed to reimburse Natixis Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts (sub-transfer agent fees) paid to Natixis Distribution are subject to a current per-account equivalent fee limit approved by the Funds’ Board of Trustees, which is based on fees for similar services paid to the Funds’ transfer agent and other service providers. Class N shares do not bear such expenses.

For the year ended December 31, 2018, the sub-transfer agent fees (which are reflected in transfer agent fees and expenses in the Statements of Operations) for each Fund were as follows:

 

Fund

   

Sub-Transfer
Agent Fees

  

Multi-Asset Income Fund

    $ 84,756  

Strategic Alpha Fund

      618,962  

U.S. Equity Opportunities Fund

      481,661  

As of December 31, 2018, the Funds owe Natixis Distribution the following reimbursements for sub-transfer agent fees (which are reflected in the Statements of Assets and Liabilities as payable to distributor):

 

Fund

   

Reimbursements of
Sub-Transfer
Agent Fees

  

Multi-Asset Income Fund

    $ 920  

Strategic Alpha Fund

      8,129  

U.S. Equity Opportunities Fund

      4,641  

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Sub-transfer agent fees attributable to Class A, Class C and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes.

e.  Commissions.  Commissions (including CDSCs) on Fund shares retained by Natixis Distribution during the year ended December 31, 2018 were as follows:

 

Fund

   

Commissions

  

Multi-Asset Income Fund

    $ 10,482  

Strategic Alpha Fund

      2,604  

U.S. Equity Opportunities Fund

      66,865  

f.  Trustees Fees and Expenses.  The Trusts do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of Natixis Advisors, Natixis Distribution, Natixis or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $340,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that he attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $170,000. Each Independent Trustee also receives a meeting attendance fee of $10,000 for each meeting of the Board of Trustees that he or she attends in person and $5,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, the chairperson of the Contract Review Committee and the chairperson of the Audit Committee each receive an additional retainer fee at the annual rate of $20,000. The chairperson of the Governance Committee receives an additional retainer fee at the annual rate of $12,000. Each Contract Review Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. Each Audit Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust based on a formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings.

Effective January 1, 2019, the Chairperson of the Board will receive a retainer fee at the annual rate of $360,000, each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $190,000, and the chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $15,000. All other Trustee fees will remain unchanged.

A deferred compensation plan (the “Plan”) is available to the Trustees on a voluntary basis. Deferred amounts remain in the Funds until distributed in accordance with the provisions of the Plan. The value of a participating Trustee’s deferral account is based on theoretical investments of deferred amounts, on the normal payment dates, in certain funds of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Trust as designated by the participating Trustees. Changes in the value of participants’ deferral accounts are allocated pro rata among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, and are normally reflected as Trustees’ fees and expenses in the Statements of Operations. The portions of the accrued obligations allocated to the Funds under the Plan are reflected as Deferred Trustees’ fees in the Statements of Assets and Liabilities.

Certain officers and employees of Natixis Advisors and Loomis Sayles are also officers and/or Trustees of the Trusts.

g.  Reimbursement of Transfer Agent Fees and Expenses.  Natixis Advisors has given a binding contractual undertaking to the Funds to reimburse any and all transfer agency expenses for the Funds’ Class N shares. This undertaking is in effect through April 30, 2019 and is not subject to recovery under the expense limitation agreement described above.

 

    

Reimbursement of
Transfer Agent
Fees and Expenses

  

Fund

   

Class N

  

Multi-Asset Income Fund

    $ 193  

Strategic Alpha Fund

      613  

U.S. Equity Opportunities Fund

      153  

h.  Affiliated Ownership.  As of December 31, 2018, the Loomis Sayles Employees’ Profit Sharing Retirement Plan held shares of Multi-Asset Income Fund and Strategic Alpha Fund representing 0.76% and 0.15% respectively, of the Funds’ net assets. Natixis US and affiliates held shares of U.S. Equity Opportunities Fund representing less than 0.01% of the Fund’s net assets.

i.  Payment by Affiliates.  For the year ended December 31, 2018, Loomis Sayles reimbursed Multi-Asset Income Fund $387 and Strategic Alpha Fund $99,621 and Harris reimbursed U.S. Equity Opportunities Fund $9,389 for losses incurred in connection with trading errors.

j.  Interfund Transactions.  A Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common Trustees. For the year ended December 31, 2018, the U.S. Equity Opportunities Fund engaged in purchase transactions of $568,905 with an affiliate of Natixis in compliance with Rule 17a-7 of the 1940 Act pursuant to procedures adopted by the Board of Trustees.

7.  Class-Specific Transfer Agent Fees and Expenses.  Transfer agent fees and expenses attributable to Class A, Class C, and Class Y are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of those classes. Transfer agent fees and expenses attributable to Class N are allocated to Class N.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

For the year ended December 31, 2018, the Funds incurred the following class-specific transfer agent fees and expenses (including sub-transfer agent fees, where applicable):

 

     Transfer Agent Fees and Expenses  

Fund

   

Class A

     

Class C

     

Class N

     

Class Y

  

Multi-Asset Income Fund

    $ 40,617      $ 22,199      $ 193      $ 39,860  

Strategic Alpha Fund

      16,660        17,499        613        606,574  

U.S. Equity Opportunities Fund

      462,264        78,571        153        251,052  

8.  Line of Credit.  Effective April 12, 2108, each Fund, together with certain other funds of Natixis Funds Trusts, Loomis Sayles Funds Trusts and Natixis ETF Trust, entered into a $400,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to $350,000,000 under the line of credit agreement (as long as all borrowings by all Funds in the aggregate do not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest is charged to the Funds based upon the terms set forth in the agreement. In addition, a commitment fee of 0.15% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. The Funds paid an arrangement fee, an upfront fee, and other fees in connection with the new line of credit agreement, which are being amortized over a period of 364 days and are reflected as miscellaneous expenses on the Statements of Operations. The unamortized balance is reflected as prepaid expenses on the Statements of Assets and Liabilities.

Prior to April 12, 2018, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, entered into a 364-day, $400,000,000 syndicated, committed, unsecured line of credit with Citibank, N.A. to be used for temporary or emergency purposes only. Any one Fund was able borrow up to the full $400,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate did not exceed the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest was charged to the Funds at a rate equal to the greater of the eurodollar or the federal funds rate plus 1.00%. In addition, a commitment fee of 0.15% per annum, payable on the last business day of each month, was accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit.

For the year ended December 31, 2018, none of the Funds had borrowings under these agreements.

9.  Brokerage Commission Recapture.  Certain Funds have entered into agreements with certain brokers whereby the brokers will rebate a portion of brokerage commissions. All amounts rebated by the brokers are returned to the Funds under such agreements and are included in realized gains on investments in the Statements of

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

Operations. For the year ended December 31, 2018, amounts rebated under these agreements were as follows:

 

Fund

   

Rebates

  

Multi-Asset Income Fund

    $ 444  

U.S. Equity Opportunities Fund

      1,635  

Effective March 9, 2018, the brokerage commission recapture program was terminated.

10.  Concentration of Risk.  Each Fund’s investments in foreign securities are subject to foreign currency fluctuations, higher volatility than U.S. securities, varying degrees of regulation and limited liquidity. Greater political, economic, credit and information risks are also associated with foreign securities.

Strategic Alpha Fund is non-diversified, which means it is not limited under the 1940 Act to a percentage of assets that it may invest in any one issuer. 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.

11.  Capital Shares.  Each Fund may issue an unlimited number of shares of beneficial interest, without par value. Transactions in capital shares were as follows:

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017
 

Multi-Asset Income Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      1,636,199     $ 21,887,217       1,702,656     $ 23,493,500  

Issued in connection with the reinvestment of distributions

      246,032       3,167,673       233,713       3,230,966  

Redeemed

      (1,495,395 )      (19,584,653 )      (2,320,403 )      (32,491,498 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      386,836     $ 5,470,237       (384,034 )    $ (5,767,032 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      610,774     $ 8,033,966       319,241     $ 4,385,407  

Issued in connection with the reinvestment of distributions

      102,629       1,321,750       128,351       1,767,902  

Redeemed

      (1,326,399 )      (17,492,118 )      (1,298,794 )      (17,826,010 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (612,996 )    $ (8,136,402 )      (851,202 )    $ (11,672,701 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      —     $ —       2,278     $ 30,680  

Issued in connection with the reinvestment of distributions

      184       2,352       176       2,422  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      184     $ 2,352       2,454     $ 33,102  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      1,950,280     $ 25,895,828       2,592,244     $ 36,192,848  

Issued in connection with the reinvestment of distributions

      213,365       2,746,556       182,515       2,511,877  

Redeemed

      (2,215,349 )      (28,814,661 )      (464,288 )      (6,389,575 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (51,704 )    $ (172,277 )      2,310,471     $ 32,315,150  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      (277,680 )    $ (2,836,090 )      1,077,689     $ 14,908,519  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Table of Contents

Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

Strategic Alpha Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      1,902,859     $ 18,643,184       1,948,117     $ 19,283,141  

Issued in connection with the reinvestment of distributions

      87,934       860,102       105,767       1,044,208  

Redeemed

      (1,018,074 )      (10,074,904 )      (6,100,848 )      (60,665,342 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      972,719     $ 9,428,382       (4,046,964 )    $ (40,337,993 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      632,600     $ 6,161,447       316,552     $ 3,122,878  

Issued in connection with the reinvestment of distributions

      51,094       498,519       48,399       475,946  

Redeemed

      (1,295,865 )      (12,777,946 )      (1,595,852 )      (15,731,090 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (612,171 )    $ (6,117,980 )      (1,230,901 )    $ (12,132,266 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      22,029,860     $ 218,736,227       5,928,692     $ 58,808,207  

Issued in connection with the reinvestment of distributions

      952,881       9,315,262       75,346       744,780  

Redeemed

      (2,385,120 )      (23,546,282 )      (13,065 )      (130,000 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      20,597,621     $ 204,505,207       5,990,973     $ 59,422,987  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      60,785,713     $ 599,944,907       34,490,858     $ 341,479,931  

Issued in connection with the reinvestment of distributions

      2,375,280       23,181,067       2,221,504       21,892,730  

Redeemed

      (43,762,727 )      (432,199,544 )      (42,506,371 )      (420,835,953 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      19,398,266     $ 190,926,430       (5,794,009 )    $ (57,463,292 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      40,356,435     $ 398,742,039       (5,080,901 )    $ (50,510,564 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

 

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Notes to Financial Statements (continued)

 

December 31, 2018

 

11.  Capital Shares (continued).

 

    
 Year Ended
December 31, 2018
 		    
 Year Ended
December 31, 2017(a)
 

U.S. Equity Opportunities Fund

      Shares       Amount       Shares       Amount  
Class A

 

Issued from the sale of shares

      2,296,546     $ 86,556,990       3,144,209     $ 104,303,464  

Issued in connection with the reinvestment of distributions

      1,653,093       51,341,261       540,145       19,749,734  

Redeemed

      (3,432,504 )      (126,242,869 )      (2,915,369 )      (99,731,079 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      517,135     $ 11,655,382       768,985     $ 24,322,119  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class C

 

Issued from the sale of shares

      1,030,778     $ 25,786,943       1,565,056     $ 37,342,545  

Issued in connection with the reinvestment of distributions

      503,353       10,537,724       175,190       4,480,476  

Redeemed

      (2,053,605 )      (52,913,322 )      (741,641 )      (17,783,250 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      (519,474 )    $ (16,588,655 )      998,605     $ 24,039,771  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class N

 

Issued from the sale of shares

      —     $ —       26     $ 1,001  

Issued in connection with the reinvestment of distributions

      3       100       1       35  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      3     $ 100       27     $ 1,036  
  

 

 

    

 

 

    

 

 

    

 

 

  
Class Y

 

Issued from the sale of shares

      3,676,417     $ 160,325,492       4,351,889     $ 168,730,051  

Issued in connection with the reinvestment of distributions

      628,147       22,760,558       179,584       7,609,993  

Redeemed

      (2,840,359 )      (120,906,634 )      (1,961,859 )      (78,357,163 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net change

      1,464,205     $ 62,179,416       2,569,614     $ 97,982,881  
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) from capital share transactions

      1,461,869     $ 57,246,243       4,337,231     $ 146,345,807  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(a)

From commencement of operations on May 1, 2017 through December 31, 2017 for Class N shares.

 

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Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees of Natixis Funds Trust I and Natixis Funds Trust II and Shareholders of Loomis Sayles Multi-Asset Income Fund, Natixis U.S. Equity Opportunities Fund and Loomis Sayles Strategic Alpha Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Loomis Sayles Multi-Asset Income Fund and Natixis U.S. Equity Opportunities Fund (two of the funds constituting the Natixis Funds Trust I), and Loomis Sayles Strategic Alpha Fund (one of the funds constituting the Natixis Funds II) (hereafter collectively referred to as the “Funds”) as of December 31, 2018, the related statements of operations for the year ended December 31, 2018, the statements of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended December 31, 2018 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of

 

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Report of Independent Registered Public Accounting Firm

 

December 31, 2018 by correspondence with the custodian, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Boston, Massachusetts

February 21, 2019

We have served as the auditor of one or more of the investment companies in the Natixis Investment Company Complex since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

|  136

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2018 U.S. Tax Distribution Information to Shareholders (Unaudited)

 

Corporate Dividends Received Deduction.  For the fiscal year ended December 31, 2018, a percentage of dividends distributed by the Funds listed below qualify for the dividends received deduction for corporate shareholders. These percentages are as follows:

 

Fund

   

Qualifying
Percentage

  

Multi-Asset Income Fund

      22.63 % 

Strategic Alpha Fund

      2.23 % 

U.S. Equity Opportunities Fund

      100.00 % 

Capital Gains Distributions.  Pursuant to Internal Revenue Section 852(b), the following Funds paid distributions, which have been designated as capital gains distributions for the fiscal year ended December 31, 2018.

 

Fund

   

Amount

  

Multi-Asset Income Fund

    $ 2,864,723  

U.S. Equity Opportunities Fund

      87,168,205  

Qualified Dividend Income.  For the fiscal year ended December 31, 2018, a percentage of the ordinary income dividends paid by the Fund are considered qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Fund paid a distribution during calendar year 2018, complete information will be reported in conjunction with Form 1099-DIV. This percentage is noted below:

 

Fund

   

Qualifying
Percentage

  

Multi-Asset Income Fund

      27.06 % 

Strategic Alpha Fund

      2.81 % 

U.S. Equity Opportunities Fund

      100.00 % 

 

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Trustee and Officer Information

 

The tables below provide certain information regarding the trustees and officers of Natixis Funds Trust I and Natixis Funds Trust II, (the “Trusts”). Unless otherwise indicated, the address of all persons below is 888 Boylston Street, Suite 800, Boston, MA 02199-8197. The Funds’ Statements of Additional Information include additional information about the trustees of the Trusts and are available by calling Natixis Funds at 800-225-5478.

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

INDEPENDENT TRUSTEES

Kenneth A. Drucker

(1945)

  

Chairperson of the Board of Trustees since January 2017

Trustee since 2008

Ex Officio member of Audit Committee, Contract Review Committee and Governance Committee

   Retired  

52

None

   Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation)

Edmond J. English

(1953)

  

Trustee since 2013

Audit Committee Member and Governance Committee Member

   Executive Chairman; formerly, Chief Executive Officer of Bob’s Discount Furniture (retail)  

52

Director, Burlington Stores, Inc. (retail)

   Significant experience on the Board and significant experience on the boards of other business organizations (including retail companies and a bank); executive experience (including at a retail company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

 

INDEPENDENT TRUSTEES

continued

      

Richard A. Goglia

(1951)

  

Trustee since 2015

Audit Committee Member

   Retired; formerly Vice President and Treasurer of Raytheon Company (defense)  

52

None

   Experience on the Board and executive experience (including his role as vice president and treasurer of a defense company and experience at a financial services company)

Wendell J. Knox

(1948)

  

Trustee since 2009

Contract Review Committee

Member

and Governance Committee Member

   Director of Abt Associates Inc. (research and consulting)  

52

Director, The Hanover Insurance Group (property and casualty insurance); formerly, Director, Eastern Bank (bank)

   Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

 

INDEPENDENT TRUSTEES

continued

      

Martin T. Meehan

(1956)

  

Trustee since 2012

Audit Committee Member

   President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell  

52

None

   Significant experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience

Maureen B. Mitchell

(1951)

  

Trustee since 2017

Contract Review Committee Member

   Retired; formerly President, Global Sales and Marketing, GE Asset Management, Inc. (financial services)  

52

Director, Sterling Bancorp (Bank)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including role as president of global sales and marketing at a financial services company)

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

 

INDEPENDENT TRUSTEES

continued

      

James P. Palermo

(1955)

  

Trustee since 2016

Contract Review Committee Member

   Founding Partner, Breton Capital Management, LLC (private equity); Partner, STEP Partners, LLC (private equity); formerly, Chief Executive Officer of Global Client Management of The Bank of New York Mellon Corporation  

52

Director, FutureFuel Corp. (Chemicals and Biofuels)

   Experience on the Board and on the boards of other business organizations; financial services industry and executive experience (including roles as chief executive officer of client management and asset servicing for a banking and financial services company)

Erik R. Sirri

(1958)

  

Trustee since 2009

Chairperson of the Audit Committee

   Professor of Finance at Babson College  

52

None

   Significant experience on the Board; experience as Director of the Division of Trading and Markets at the Securities and Exchange Commission; academic experience; training as an economist

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

 

INDEPENDENT TRUSTEES

continued

      

Peter J. Smail

(1952)

  

Trustee since 2009

Chairperson of the Contract Review Committee

and Governance Committee Member

   Retired  

52

None

   Significant experience on the Board; mutual fund industry and executive experience (including roles as president and chief executive officer for an investment adviser)

Cynthia L. Walker

(1956)

  

Trustee since 2005

Chairperson of the Governance Committee and Audit Committee Member

   Deputy Dean for Finance and Administration, Yale University School of Medicine  

52

None

   Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration)
INTERESTED TRUSTEES

Kevin P. Charleston3

(1965)

One Financial Center

Boston, MA 02111

   Trustee since 2015   President, Chief Executive Officer and Chairman of the Board of Directors; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P.  

52

None

   Experience on the Board; continuing service as President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

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Trustee and Officer Information

 

Name and Year of

Birth

  

Position(s) Held
with the Trusts,
Length of Time
Served and Term

of Office1

  

Principal
Occupation(s)
During Past

5 Years

  

Number of
Portfolios in
Fund Complex
Overseen2

and Other
Directorships Held
During Past

5 Years

  

Experience,
Qualifications,
Attributes, Skills
for Board

Membership

 

INTERESTED TRUSTEES

continued

      

David L. Giunta4

(1965)

  

Trustee since 2011

President and Chief Executive Officer since 2008

   President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation  

52

None

   Significant experience on the Board; experience as President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation

 

1 

Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term.

 

2 

The trustees of the Trusts serve as trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV, Gateway Trust, Loomis Sayles Funds I, Loomis Sayles Funds II and Natixis ETF Trust (collectively, the “Fund Complex”).

 

3 

Mr. Charleston is deemed an “interested person” of the Trusts because he holds the following positions with an affiliated person of the Trusts: President, Chief Executive Officer and Chairman of the Board of Directors of Loomis, Sayles & Company, L.P.

 

4 

Mr. Giunta is deemed an “interested person” of the Trusts because he holds the following positions with an affiliated person of the Trusts: President and Chief Executive Officer, Natixis Advisors, L.P., Natixis Distribution, L.P., Natixis Distribution Corporation and Chairman of the Board of Natixis Distribution Corporation.

 

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Trustee and Officer Information

 

Name and Year of Birth

  

Position(s) Held

with the Trusts

  

Term of Office1 and

Length of Time Served

  

Principal Occupation(s)

During Past 5 Years2

OFFICERS OF THE TRUSTS

Russell L. Kane

(1969)

   Secretary, Clerk and Chief Legal Officer   Since 2016   Executive Vice President, General Counsel, Secretary and Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Michael C. Kardok

(1959)

   Treasurer, Principal Financial and Accounting Officer   Since 2004   Senior Vice President, Natixis Advisors, L.P. and Natixis Distribution, L.P.

Kirk Johnson

(1981)

   Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer   Since 2018   Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, Natixis Distribution Corporation, Natixis Advisors, L.P. and Natixis Distribution, L.P.; formerly, Vice President and Counsel, Natixis Investment Managers, L.P.

 

1 

Each officer of the Trusts serves for an indefinite term in accordance with the Trusts’ current by-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified.

 

2 

Each person listed above, except as noted, holds the same position(s) with the Fund Complex. Previous positions during the past five years with Natixis Distribution, L.P., Natixis Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from an officer’s current position with such entity.

 

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Item 2.

Code of Ethics.

The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer and persons performing similar functions. There have been no amendments or waivers of the Registrant’s code of ethics during the period.

 

Item 3.

Audit Committee Financial Expert.

The Board of Trustees of the Registrant has established an audit committee. Mr. Edmond J. English, Mr. Richard A. Goglia, Mr. Martin T. Meehan, Mr. Erik R. Sirri and Ms. Cynthia L. Walker are members of the audit committee and have been designated as “audit committee financial experts” by the Board of Trustees. Each of these individuals is also an Independent Trustee of the Registrant.

 

Item 4.

Principal Accountant Fees and Services.

Fees billed by the Principal Accountant for services rendered to the Registrant.

The table below sets forth fees billed by the principal accountant, PricewaterhouseCoopers LLP, for the past two fiscal years for professional services rendered in connection with a) the audit of the Registrant’s annual financial statements and services provided in connection with regulatory filings; b) audit-related services (including services that are reasonably related to the performance of the audit of the Registrant’s financial statements but not reported under “Audit Fees”); c) tax compliance, tax advice and tax planning and d) all other fees billed for professional services rendered by the principal accountant to the Registrant, other than the services provided as reported as a part of (a) through (c) of this Item.

 

     Audit fees      Audit-related fees1      Tax fees2      All other fees  
     1/1/17-12/31/17        1/1/18-12/31/18        1/1/17-12/31/17        1/1/18-12/31/18        1/1/17-12/31/17        1/1/18-12/31/18        1/1/17-12/31/17        1/1/18-12/31/18  

Natixis Funds Trust II

    $ 381,148      $ 391,761      $ 11,149      $ 1,250      $ 83,774      $ 84,610      $  —        $  —    

 

  1.

Audit-related fees consist of:

2017 & 2018 – performance of agreed-upon procedures related to the Registrant’s deferred compensation.

2017 – prospectus consent

 

  2.

Tax fees consist of:

2017 & 2018 – review of Registrant’s tax returns and tax consulting services.

Aggregate fees billed to the Registrant for non-audit services during 2017 and 2018 were $94,923 and $85,860 respectively.

Fees billed by the Principal Accountant for services rendered to the Adviser and Control Affiliates.

The following table sets forth the fees billed by the Registrant’s principal accountant for non-audit services rendered to AlphaSimplex Group, LLC (“ASG”), Loomis, Sayles & Company, L.P. (“Loomis”), Natixis Advisors, L.P. (“Natixis Advisors”), and entities controlling, controlled by or under common control with ASG, Loomis, and Natixis Advisors(“Control Affiliates”) that provide ongoing services to the Registrant, for engagements that related directly to the operations and financial reporting of the Registrant for the last two fiscal years.

 

     Audit-related fees      Tax fees      All other fees  
     1/1/17-12/31/17        1/1/18-12/31/18        1/1/17-12/31/17        1/1/18-12/31/18        1/1/17-12/31/17        1/1/18-12/31/18  

Control Affiliates

    $  —        $  —        $  —        $  —        $ —        $ —    

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The following table sets forth the aggregate fees billed by the Registrant’s principal accountant for non-audit services rendered to ASG, Loomis, Natixis Advisors and Control Affiliates that provide ongoing services to the Registrant, for the last two fiscal years, including the fees disclosed in the table above.

 

     Aggregate Non-Audit Fees  
     1/1/17-12/31/17        1/1/18-12/31/18  

Control Affiliates

    $ 210,798      $ 237,200  

None of the services described above were approved pursuant to (c)(7)(i)(C) of Regulation S-X.

Audit Committee Pre Approval Policies.

Annually, the Registrant’s Audit Committee reviews the audit, audit-related, tax and other non-audit services together with the projected fees, for services proposed to be rendered to the Trust and/or other entities for which pre-approval is required during the upcoming year. Any subsequent revisions to already pre-approved services or fees (including fee increases) and requests for pre-approval of new services would be presented for consideration quarterly as needed. If, in the opinion of management, a proposed engagement by the Registrant’s independent accountants needs to commence before the next regularly scheduled Audit Committee meeting, any member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement, but only for engagements to provide audit, audit related and tax services. This approval is subject to review of the full Audit Committee at its next quarterly meeting. All other engagements require the approval of all the members of the Audit Committee.

 

Item 5.

Audit Committee of Listed Registrants.

Not applicable.

 

Item 6.

Schedule of Investments.

Included as part of the Report to Shareholders filed as Item 1 herewith.

 

Item 7.

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

 

Item 8.

Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

 

Item 9.

Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.

Not applicable.

 

Item 10.

Submission of Matters to a Vote of Securities Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.

 

Item 11.

Controls and Procedures.

The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

There were no changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

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Item 12.

Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

 

Item 13.

Exhibits.

 

         (a)    (1)    Code of Ethics required by Item 2 hereof, filed herewith as Exhibit (a)(1).
  (a)    (2)    Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 [17 CFR 270.30a-2(a)], filed herewith as Exhibits (a)(2)(1)and (a)(2)(2), respectively.
  (a)    (3)    Not applicable.
  (b)       Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 filed herewith as Exhibit (b).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Natixis Funds Trust II
By:  

/s/ David L. Giunta

Name: David L. Giunta
Title:   President and Chief Executive Officer
Date:   February 21, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By:  

/s/ David L. Giunta

Name: David L. Giunta
Title:   President and Chief Executive Officer
Date:   February 21, 2019
By:  

/s/ Michael C. Kardok

Name:  Michael C. Kardok
Title:    Treasurer
Date:    February 21, 2019