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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: 811-22099
Gateway Trust
(Exact name of Registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
NGAM Distribution, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Registrant’s telephone number, including area code: (617) 449-2810
Date of fiscal year end: December 31
Date of reporting period: December 31, 2015
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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:
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ANNUAL REPORT
December 31, 2015
Gateway Fund
TABLE OF CONTENTS
Portfolio of Investments page 7
Notes to Financial Statements page 24
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Managers | Symbols | |
Michael T. Buckius, CFA® | Class A GATEX | |
Paul R. Stewart, CFA® | Class C GTECX | |
Kenneth H. Toft, CFA® | Class Y GTEYX | |
Gateway Investment Advisers, LLC |
Objective
The fund seeks to capture the majority of returns associated with equity market investments, while exposing investors to less risk than other equity investments.
Market Conditions
2015 was a year dominated by monetary policy concerns. After more than a year of managing the market’s expectations on the timing, the Federal Reserve (the Fed) delivered an on time “liftoff”, ending its zero-interest-rate policy at its final meeting of the year. As the Fed monitored economic data that it believed supported a slow transition to a new policy stance, other events were in play: Greece’s bailout was restructured for the third time, other major central banks of the world expanded and extended their monetary easing programs, and the value of the U.S. dollar relative to other major currencies rose to levels not seen in more than 10 years. Fundamentally, domestic equity market conditions were mixed. Quarter to quarter, a large percentage of companies beat earnings estimates, yet fourth quarter earnings estimates indicate that aggregate earnings for the S&P 500® Index will likely show the first year-over-year decline since 2008. Overall, these factors led to an increase in uncertainty that was evidenced by increased market volatility as the year ended.
Implied volatility, as measured by the Chicago Board Options Exchange Volatility Index (the VIX), averaged 16.67% for the year and realized volatility for the S&P 500® Index was 15.74% (as measured by its annualized standard deviation of daily returns). Both measures were the highest since 2011. Until mid-August the volatility environment in 2015 was very similar to the conditions that had existed since mid-2012, with the VIX rarely above 20 and most often below 15. As concerns about China intensified and the S&P 500® Index neared its low-point for the year, on August 24th, the VIX spiked and reached an intra-day high for the year of 53.29, its highest point since January 2009. From late August to year-end, the VIX spent nearly half of its trading sessions above 20 and never closed below 14.
Performance Results
For the 12 months ended December 31, 2015, Class A shares of the Gateway Fund returned 2.34% at net asset value. The Fund outperformed its benchmark, the S&P 500® Index, which returned 1.38%.
Explanation of Fund Performance
The Fund seeks to generate returns by writing at-the-money index call options, which substitute a less variable option premium for market price appreciation, and uses some of the cash flow to mitigate sudden and severe price declines in the portfolio by purchasing out-of-the-money index
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put options. An index option is described as being at-the-money when the price of the underlying index is the same as the option’s strike price. Additionally, an index put option is described as being out-of-the money when the price of the underlying index is above the put option’s strike price. It is the net premium-to-earn from selling index call options less the price of protective put options that is a significant factor affecting the Fund’s performance.
More specifically, the Fund’s return over the S&P 500® Index during the year was attributable to the higher stock market volatility environment throughout much of 2015 which increased the Fund’s net index option premiums received. Unlike in prior years, volatility did not quickly contract after each spike. For example, after the intra-day spike to 53.29 in late August, the VIX spent the entire month of September in a range between 20 and 30 and did not decline under 20 until early October.
Gateway Fund’s equity portfolio returned 1.31% for the year, a performance differential of negative 7 basis points versus the S&P 500® Index, which was consistent with expectations and objectives for the Fund. The selling of index call options contributed a positive 3.77% to the performance of the Fund for 2015. This was partially offset by the protective puts, which reduced overall performance by 1.71% for the year. However, during the third quarter, when the market experienced a severe decline, the protective puts were additive to performance by 1.07%. Index put options were an important contributor to the Fund’s ability to record a loss that was 635 basis points less than the S&P 500® Index from July 20th to August 25th. As the market generally advanced from late August to year-end, index put options contributed modest losses in the each of the final four months of the year. Consistent with its objective, the measured risk of the Fund was low relative to the S&P 500® Index, as its standard deviation for 2015 was 7.48% versus 15.74% for the Index.
Outlook
2015 was a challenging year for many investors with many major equity indexes generating low to negative returns. Moreover, diversification was limited as investment grade bonds failed to deliver attractive returns while riskier assets slipped. High yield bond indexes had negative returns and key commodity classes like energy and precious metals had large losses.
Looking forward, there appears to be good reason for investors to temper their optimism. Volatility is on the rise in equity markets and the bull market in domestic equities is getting long in the tooth. The current bull market is already a year longer than the average in the post-World War II era, though the longest bull market (starting in 1987) extended more than five years longer than this one.
The Barclays U.S. Aggregate Bond Index returned just 0.55% in 2015 and generated a trailing three-year annualized return of 1.44%. As the Fed recently initiated its plan to tighten monetary policy by increasing short-term interest rates, the environment for investment grade bonds seems likely to be challenging for some time. With the Fed tightening monetary policy while other key central banks remain accommodative, U.S. dollar strength could be a headwind for the returns of non-U.S. dollar denominated assets and a possible impediment to a recovery in commodity prices as well.
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GATEWAY FUND
Gateway’s investment philosophy maintains that the U.S. equity market is the most reliable source of attractive long-term returns, despite its high volatility and tendency to periodically deliver significant losses over shorter periods of time. Our investment philosophy also holds that consistency is the key to long-term investment success and that generating cash flow, rather than seeking to forecast the rise and fall of the market, can be a lower-risk means to participate in equity markets. By staying true to this philosophy and continuing to manage the Fund consistently with the firm’s historical approach, we strive to assist investors in managing risk while pursuing long-term return in this challenging and uncertain environment.
Growth of $10,000 Investment in Class A Shares1,5
December 31, 2005 through December 31, 2015
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Average Annual Total Returns — December 31, 20155
1 Year | 5 Years | 10 Years | ||||||||||
Class A (Inception 12/07/1977)1 | ||||||||||||
NAV | 2.34 | % | 4.29 | % | 3.50 | % | ||||||
With 5.75% Maximum Sales Charge | -3.53 | 3.06 | 2.88 | |||||||||
Class C (Inception 2/19/2008)1 | ||||||||||||
NAV | 1.54 | 3.50 | 2.72 | |||||||||
With CDSC2 | 0.54 | 3.50 | 2.72 | |||||||||
Class Y (Inception 2/19/2008)1 | ||||||||||||
NAV | 2.59 | 4.54 | 3.69 | |||||||||
Comparative Performance | ||||||||||||
S&P 500® Index3 | 1.38 | 12.57 | 7.31 | |||||||||
Barclays U.S. Aggregate Bond Index4 | 0.55 | 3.25 | 4.51 |
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. 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. Unlike a fund, an index is not managed and does not reflect fees and expenses. It is not possible to invest directly in an index.
1 | As of the close of business on February 15, 2008, the Fund acquired the assets and liabilities of Gateway Fund (the “Predecessor Fund”), a series of The Gateway Trust, an Ohio business trust. The Fund is the successor to the Predecessor Fund. Prior to 2/15/08 performance of Class A shares is that of the Predecessor Fund, restated to reflect the sales load of Class A shares. Prior to the inception of Class C shares (2/19/08), performance is that of the Predecessor Fund, restated to reflect the higher net expenses and sales loads of Class C shares. Prior to the inception of Class Y shares (2/19/08), performance is that of the Predecessor Fund. |
2 | Performance for Class C shares assumes a 1% contingent deferred sales charge (“CDSC”) applied when you sell shares within one year of purchase. |
3 | 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. |
4 | 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. |
5 | Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower. |
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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.
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 Global Asset Management or any of its related or affiliated companies (collectively “NGAM”) and does not sponsor, endorse or participate in the provision of any NGAM services, funds or other financial products.
The index information contained 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 Fund’s proxy voting policies and procedures is available without charge, upon request, by calling Natixis Funds at 800-225-5478; on Natixis Fund’s website at ngam.natixis.com; and on the Securities and Exchange Commission’s (SEC) website at www.sec.gov. Information regarding how Natixis Fund voted proxies relating to portfolio securities during the 12-months ended June 30, 2015 is available from Natixis Fund’s website and the SEC’s website.
QUARTERLY PORTFOLIO SCHEDULES
Natixis Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s 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 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 Fund’s prospectus. The following examples are intended to help you understand the ongoing costs of investing in the Fund 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, 2015 through December 31, 2015. 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 below for your class.
The second line in the table for each class of 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 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.
GATEWAY FUND | BEGINNING ACCOUNT VALUE 7/1/2015 | ENDING ACCOUNT VALUE 12/31/2015 | EXPENSES PAID DURING PERIOD* 7/1/2015 – 12/31/2015 | |||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $1,003.00 | $4.75 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.47 | $4.79 | |||||||||
Class C | ||||||||||||
Actual | $1,000.00 | $999.10 | $8.57 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,016.64 | $8.64 | |||||||||
Class Y | ||||||||||||
Actual | $1,000.00 | $1,004.30 | $3.54 | |||||||||
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): 0.94%, 1.70% and 0.70% 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, 2015
Gateway Fund
Shares | Description | Value (†) | ||||||
Common Stocks — 97.7% of Net Assets | ||||||||
Aerospace & Defense — 2.4% | ||||||||
379,984 | Boeing Co. (The)(b) | $ | 54,941,886 | |||||
552,760 | Honeywell International, Inc.(b) | 57,249,353 | ||||||
230,066 | Raytheon Co.(c) | 28,650,119 | ||||||
56,180 | TransDigm Group, Inc.(c)(d) | 12,834,321 | ||||||
446,366 | United Technologies Corp.(c) | 42,882,382 | ||||||
|
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196,558,061 | ||||||||
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Air Freight & Logistics — 0.7% | ||||||||
571,103 | United Parcel Service, Inc., Class B(b) | 54,957,242 | ||||||
|
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Airlines — 0.7% | ||||||||
580,702 | American Airlines Group, Inc.(b) | 24,592,729 | ||||||
254,618 | JetBlue Airways Corp.(c)(d) | 5,767,098 | ||||||
438,036 | United Continental Holdings, Inc.(b)(d) | 25,099,463 | ||||||
|
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55,459,290 | ||||||||
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Auto Components — 0.3% | ||||||||
127,250 | Autoliv, Inc.(c) | 15,876,982 | ||||||
160,289 | Cooper Tire & Rubber Co.(b) | 6,066,939 | ||||||
|
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21,943,921 | ||||||||
|
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Automobiles — 0.4% | ||||||||
2,051,938 | Ford Motor Co.(b) | 28,911,806 | ||||||
32,003 | Tesla Motors, Inc.(b)(d) | 7,681,040 | ||||||
|
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36,592,846 | ||||||||
|
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Banks — 6.1% | ||||||||
451,697 | Associated Banc-Corp(c) | 8,469,319 | ||||||
5,442,095 | Bank of America Corp.(c) | 91,590,459 | ||||||
1,480,317 | Citigroup, Inc.(b) | 76,606,405 | ||||||
210,638 | FirstMerit Corp.(c) | 3,928,399 | ||||||
1,824,188 | JPMorgan Chase & Co.(c) | 120,451,133 | ||||||
125,404 | Old National Bancorp(b) | 1,700,478 | ||||||
1,607,287 | U.S. Bancorp(b) | 68,582,936 | ||||||
2,386,994 | Wells Fargo & Co.(c) | 129,756,994 | ||||||
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501,086,123 | ||||||||
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Beverages — 2.3% | ||||||||
1,799,974 | Coca-Cola Co. (The)(b) | 77,326,883 | ||||||
129,018 | Monster Beverage Corp.(c)(d) | 19,218,521 | ||||||
921,919 | PepsiCo, Inc.(b) | 92,118,147 | ||||||
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188,663,551 | ||||||||
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Biotechnology — 3.9% | ||||||||
756,595 | AbbVie, Inc.(c) | 44,820,688 | ||||||
132,021 | Alexion Pharmaceuticals, Inc.(b)(d) | 25,183,006 | ||||||
369,529 | Amgen, Inc.(c) | 59,985,643 | ||||||
278,252 | Baxalta, Inc.(b) | 10,860,176 | ||||||
118,600 | Biogen, Inc.(c)(d) | 36,333,110 | ||||||
450,827 | Celgene Corp.(b)(d) | 53,991,041 |
See accompanying notes to financial statements.
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Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Biotechnology — continued | ||||||||
736,102 | Gilead Sciences, Inc.(c) | $ | 74,486,161 | |||||
130,287 | Vertex Pharmaceuticals, Inc.(b)(d) | 16,394,013 | ||||||
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322,053,838 | ||||||||
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Capital Markets — 1.9% | ||||||||
122,017 | Affiliated Managers Group, Inc.(b)(d) | 19,493,436 | ||||||
996,813 | Charles Schwab Corp. (The)(b) | 32,825,052 | ||||||
323,178 | Eaton Vance Corp.(b) | 10,480,663 | ||||||
224,819 | Goldman Sachs Group, Inc. (The)(c) | 40,519,128 | ||||||
304,950 | Legg Mason, Inc.(b) | 11,963,188 | ||||||
894,591 | Morgan Stanley(b) | 28,456,940 | ||||||
364,682 | TD Ameritrade Holding Corp.(b) | 12,658,112 | ||||||
127,185 | Waddell & Reed Financial, Inc., Class A(b) | 3,645,122 | ||||||
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160,041,641 | ||||||||
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Chemicals — 2.0% | ||||||||
107,063 | Ashland, Inc.(c) | 10,995,370 | ||||||
112,430 | Chemours Co. (The)(b) | 602,625 | ||||||
725,945 | Dow Chemical Co. (The)(c) | 37,371,649 | ||||||
515,531 | E.I. du Pont de Nemours & Co.(c) | 34,334,365 | ||||||
205,664 | Eastman Chemical Co.(b) | 13,884,377 | ||||||
295,609 | LyondellBasell Industries NV, Class A(b) | 25,688,422 | ||||||
320,882 | Monsanto Co.(b) | 31,613,295 | ||||||
130,109 | Olin Corp.(b) | 2,245,681 | ||||||
81,544 | Potash Corp. of Saskatchewan, Inc. | 1,396,033 | ||||||
240,740 | RPM International, Inc.(b) | 10,607,004 | ||||||
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168,738,821 | ||||||||
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Commercial Services & Supplies — 0.5% | ||||||||
218,729 | ADT Corp. (The)(c) | 7,213,683 | ||||||
546,127 | Tyco International PLC(b) | 17,415,990 | ||||||
345,036 | Waste Management, Inc.(b) | 18,414,571 | ||||||
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43,044,244 | ||||||||
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Communications Equipment — 1.6% | ||||||||
2,576,225 | Cisco Systems, Inc.(c) | 69,957,390 | ||||||
202,531 | Motorola Solutions, Inc.(b) | 13,863,247 | ||||||
58,211 | Palo Alto Networks, Inc.(b)(d) | 10,253,286 | ||||||
789,643 | QUALCOMM, Inc.(b) | 39,470,305 | ||||||
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133,544,228 | ||||||||
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Consumer Finance — 0.7% | ||||||||
469,383 | American Express Co.(b) | 32,645,588 | ||||||
409,775 | Discover Financial Services(c) | 21,972,135 | ||||||
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54,617,723 | ||||||||
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Containers & Packaging — 0.4% | ||||||||
254,187 | Avery Dennison Corp.(c) | 15,927,358 | ||||||
149,246 | Sonoco Products Co.(c) | 6,099,684 | ||||||
257,118 | WestRock Co.(b) | 11,729,723 | ||||||
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33,756,765 | ||||||||
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See accompanying notes to financial statements.
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Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Distributors — 0.3% | ||||||||
257,573 | Genuine Parts Co.(b) | $ | 22,122,945 | |||||
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Diversified Financial Services — 2.1% | ||||||||
972,596 | Berkshire Hathaway, Inc., Class B(b)(d) | 128,421,576 | ||||||
226,095 | CME Group, Inc.(b) | 20,484,207 | ||||||
96,510 | Intercontinental Exchange, Inc.(c) | 24,731,652 | ||||||
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173,637,435 | ||||||||
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Diversified Telecommunication Services — 2.1% | ||||||||
2,632,674 | AT&T, Inc.(b) | 90,590,312 | ||||||
911,718 | Frontier Communications Corp.(b) | 4,257,723 | ||||||
1,766,540 | Verizon Communications, Inc.(b) | 81,649,479 | ||||||
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176,497,514 | ||||||||
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Electric Utilities — 1.4% | ||||||||
789,369 | American Electric Power Co., Inc.(c) | 45,996,532 | ||||||
664,576 | Duke Energy Corp.(b) | 47,444,081 | ||||||
101,854 | Hawaiian Electric Industries, Inc.(b) | 2,948,673 | ||||||
446,651 | OGE Energy Corp.(b) | 11,742,455 | ||||||
413,543 | Pepco Holdings, Inc.(b) | 10,756,253 | ||||||
|
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118,887,994 | ||||||||
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Electrical Equipment — 0.5% | ||||||||
232,905 | Eaton Corp. PLC(b) | 12,120,376 | ||||||
413,090 | Emerson Electric Co.(c) | 19,758,095 | ||||||
85,173 | Hubbell, Inc.(b) | 8,605,880 | ||||||
|
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40,484,351 | ||||||||
|
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Electronic Equipment, Instruments & Components — 0.4% | ||||||||
741,474 | Corning, Inc.(b) | 13,554,145 | ||||||
311,816 | TE Connectivity Ltd.(c) | 20,146,432 | ||||||
|
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33,700,577 | ||||||||
|
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Energy Equipment & Services — 1.3% | ||||||||
423,801 | Baker Hughes, Inc.(b) | 19,558,416 | ||||||
787,501 | Halliburton Co.(c) | 26,806,534 | ||||||
367,116 | Patterson-UTI Energy, Inc.(c) | 5,536,109 | ||||||
754,525 | Schlumberger Ltd.(c) | 52,628,119 | ||||||
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104,529,178 | ||||||||
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Food & Staples Retailing — 2.1% | ||||||||
832,158 | CVS Health Corp.(b) | 81,360,088 | ||||||
787,031 | Wal-Mart Stores, Inc.(b) | 48,245,000 | ||||||
545,030 | Walgreens Boots Alliance, Inc.(b) | 46,412,030 | ||||||
|
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176,017,118 | ||||||||
|
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Food Products — 1.3% | ||||||||
115,204 | Bunge Ltd.(c) | 7,866,129 | ||||||
493,431 | ConAgra Foods, Inc.(b) | 20,803,051 | ||||||
379,510 | Kraft Heinz Co. (The)(b) | 27,613,148 | ||||||
1,156,499 | Mondelez International, Inc., Class A(b) | 51,857,415 | ||||||
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108,139,743 | ||||||||
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See accompanying notes to financial statements.
9 |
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Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Gas Utilities — 0.3% | ||||||||
89,411 | AGL Resources, Inc.(b) | $ | 5,705,316 | |||||
135,628 | National Fuel Gas Co.(b) | 5,798,097 | ||||||
36,602 | ONE Gas, Inc.(b) | 1,836,322 | ||||||
120,361 | WGL Holdings, Inc.(b) | 7,581,540 | ||||||
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20,921,275 | ||||||||
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Health Care Equipment & Supplies — 2.1% | ||||||||
953,531 | Abbott Laboratories(b) | 42,823,077 | ||||||
343,949 | Baxter International, Inc.(b) | 13,121,654 | ||||||
1,344,471 | Boston Scientific Corp.(b)(d) | 24,792,045 | ||||||
28,610 | Intuitive Surgical, Inc.(b)(d) | 15,625,638 | ||||||
966,218 | Medtronic PLC(b) | 74,321,489 | ||||||
99,429 | ResMed, Inc.(c) | 5,338,343 | ||||||
|
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176,022,246 | ||||||||
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Health Care Providers & Services — 2.7% | ||||||||
296,177 | Aetna, Inc.(b) | 32,022,657 | ||||||
178,299 | Anthem, Inc.(b) | 24,862,012 | ||||||
467,280 | Express Scripts Holding Co.(c)(d) | 40,844,945 | ||||||
279,401 | HCA Holdings, Inc.(c)(d) | 18,895,890 | ||||||
255,661 | Patterson Cos., Inc.(c) | 11,558,434 | ||||||
219,928 | Quest Diagnostics, Inc.(c) | 15,645,678 | ||||||
553,041 | UnitedHealth Group, Inc.(b) | 65,059,743 | ||||||
149,076 | Universal Health Services, Inc., Class B(b) | 17,813,091 | ||||||
|
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226,702,450 | ||||||||
|
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Hotels, Restaurants & Leisure — 1.5% | ||||||||
578,611 | Hilton Worldwide Holdings, Inc.(b) | 12,382,275 | ||||||
84,742 | Las Vegas Sands Corp.(b) | 3,715,089 | ||||||
643,070 | McDonald’s Corp.(b) | 75,972,290 | ||||||
126,971 | Melco Crown Entertainment Ltd., Sponsored ADR | 2,133,113 | ||||||
373,937 | MGM Resorts International(b)(d) | 8,495,849 | ||||||
185,226 | Restaurant Brands International, Inc.(b) | 6,920,043 | ||||||
991,048 | Wendy’s Co. (The)(b) | 10,673,587 | ||||||
|
| |||||||
120,292,246 | ||||||||
|
| |||||||
Household Durables — 0.9% | ||||||||
372,401 | Leggett & Platt, Inc.(b) | 15,648,290 | ||||||
669,000 | Newell Rubbermaid, Inc.(b) | 29,489,520 | ||||||
507,630 | Toll Brothers, Inc.(b)(d) | 16,904,079 | ||||||
64,737 | Tupperware Brands Corp.(b) | 3,602,614 | ||||||
88,921 | Whirlpool Corp.(c) | 13,059,827 | ||||||
|
| |||||||
78,704,330 | ||||||||
|
| |||||||
Household Products — 1.9% | ||||||||
106,938 | Church & Dwight Co., Inc.(b) | 9,076,897 | ||||||
536,232 | Colgate-Palmolive Co.(b) | 35,723,776 | ||||||
198,563 | Kimberly-Clark Corp.(b) | 25,277,070 | ||||||
1,078,983 | Procter & Gamble Co. (The)(c) | 85,682,040 | ||||||
|
| |||||||
155,759,783 | ||||||||
|
|
See accompanying notes to financial statements.
| 10
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Industrial Conglomerates — 2.5% | ||||||||
450,619 | 3M Co.(b) | $ | 67,881,246 | |||||
4,521,164 | General Electric Co.(b) | 140,834,259 | ||||||
|
| |||||||
208,715,505 | ||||||||
|
| |||||||
Insurance — 2.8% | ||||||||
263,481 | Aflac, Inc.(b) | 15,782,512 | ||||||
359,798 | Allstate Corp. (The)(b) | 22,339,858 | ||||||
682,554 | American International Group, Inc.(c) | 42,297,871 | ||||||
251,380 | Aon PLC(b) | 23,179,750 | ||||||
190,218 | Arthur J. Gallagher & Co.(b) | 7,787,525 | ||||||
212,174 | FNF Group(b) | 7,356,072 | ||||||
482,431 | Lincoln National Corp.(c) | 24,246,982 | ||||||
660,202 | Marsh & McLennan Cos., Inc.(b) | 36,608,201 | ||||||
295,246 | Principal Financial Group, Inc.(b) | 13,280,165 | ||||||
272,194 | Travelers Cos., Inc. (The)(c) | 30,719,815 | ||||||
285,694 | XL Group PLC(c) | 11,193,491 | ||||||
|
| |||||||
234,792,242 | ||||||||
|
| |||||||
Internet & Catalog Retail — 2.1% | ||||||||
194,863 | Amazon.com, Inc.(c)(d) | 131,705,953 | ||||||
32,021 | Priceline Group, Inc. (The)(b)(d) | 40,825,174 | ||||||
|
| |||||||
172,531,127 | ||||||||
|
| |||||||
Internet Software & Services — 5.1% | ||||||||
223,783 | Akamai Technologies, Inc.(b)(d) | 11,777,699 | ||||||
166,812 | Alphabet, Inc., Class A(b)(d) | 129,781,404 | ||||||
114,449 | Alphabet, Inc., Class C(c)(d) | 86,853,057 | ||||||
22,763 | Baidu, Inc., Sponsored ADR(b)(d) | 4,303,117 | ||||||
859,893 | eBay, Inc.(c)(d) | 23,629,860 | ||||||
1,156,827 | Facebook, Inc., Class A(c)(d) | 121,073,514 | ||||||
18,883 | LinkedIn Corp., Class A(b)(d) | 4,250,186 | ||||||
236,066 | VeriSign, Inc.(b)(d) | 20,622,726 | ||||||
479,180 | Yahoo!, Inc.(b)(d) | 15,937,527 | ||||||
|
| |||||||
418,229,090 | ||||||||
|
| |||||||
IT Services — 3.5% | ||||||||
413,979 | Automatic Data Processing, Inc.(b) | 35,072,301 | ||||||
232,977 | Broadridge Financial Solutions, Inc.(b) | 12,517,854 | ||||||
428,883 | Cognizant Technology Solutions Corp., Class A(b)(d) | 25,741,558 | ||||||
315,326 | Fidelity National Information Services, Inc.(b) | 19,108,756 | ||||||
38,532 | FleetCor Technologies, Inc.(b)(d) | 5,507,379 | ||||||
388,057 | International Business Machines Corp.(c) | 53,404,404 | ||||||
436,886 | Paychex, Inc.(b) | 23,106,900 | ||||||
664,736 | PayPal Holdings, Inc.(b)(d) | 24,063,443 | ||||||
1,060,704 | Visa, Inc., Class A(c) | 82,257,595 | ||||||
524,767 | Western Union Co. (The)(b) | 9,398,577 | ||||||
|
| |||||||
290,178,767 | ||||||||
|
| |||||||
Leisure Products — 0.1% | ||||||||
374,554 | Mattel, Inc.(b) | 10,176,632 | ||||||
|
|
See accompanying notes to financial statements.
11 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Life Sciences Tools & Services — 0.2% | ||||||||
106,932 | Illumina, Inc.(b)(d) | $ | 20,525,063 | |||||
|
| |||||||
Machinery — 1.7% | ||||||||
365,662 | Caterpillar, Inc.(b) | 24,850,389 | ||||||
176,963 | Cummins, Inc.(b) | 15,574,514 | ||||||
210,570 | Deere & Co.(b) | 16,060,174 | ||||||
179,724 | Parker Hannifin Corp.(b) | 17,429,634 | ||||||
150,936 | Pentair PLC(b) | 7,475,860 | ||||||
163,012 | Snap-on, Inc.(b) | 27,945,147 | ||||||
53,108 | SPX FLOW, Inc.(b)(d) | 1,482,244 | ||||||
246,205 | Stanley Black & Decker, Inc.(c) | 26,277,460 | ||||||
121,002 | Timken Co. (The)(b) | 3,459,447 | ||||||
|
| |||||||
140,554,869 | ||||||||
|
| |||||||
Media — 3.1% | ||||||||
1,315,453 | Comcast Corp., Class A(b) | 74,231,013 | ||||||
86,979 | Liberty Global PLC, Class A(b)(d) | 3,684,430 | ||||||
76,955 | Liberty Global PLC, Series C(b)(d) | 3,137,455 | ||||||
385,134 | News Corp., Class B(b) | 5,376,471 | ||||||
203,199 | Omnicom Group, Inc.(b) | 15,374,036 | ||||||
2,945,723 | Sirius XM Holdings, Inc.(b)(d) | 11,989,093 | ||||||
152,251 | Time Warner Cable, Inc.(c) | 28,256,263 | ||||||
453,067 | Time Warner, Inc.(b) | 29,299,843 | ||||||
78,462 | Time, Inc.(b) | 1,229,499 | ||||||
832,908 | Walt Disney Co. (The)(b) | 87,521,973 | ||||||
|
| |||||||
260,100,076 | ||||||||
|
| |||||||
Metals & Mining — 0.3% | ||||||||
643,287 | Freeport-McMoRan, Inc.(b) | 4,355,053 | ||||||
188,013 | Southern Copper Corp.(b) | 4,910,899 | ||||||
538,162 | Steel Dynamics, Inc.(c) | 9,616,955 | ||||||
80,178 | Worthington Industries, Inc.(b) | 2,416,565 | ||||||
|
| |||||||
21,299,472 | ||||||||
|
| |||||||
Multi-Utilities — 1.6% | ||||||||
185,916 | Alliant Energy Corp.(c) | 11,610,454 | ||||||
574,960 | Ameren Corp.(b) | 24,855,521 | ||||||
902,825 | CenterPoint Energy, Inc.(b) | 16,575,867 | ||||||
451,293 | Consolidated Edison, Inc.(b) | 29,004,601 | ||||||
742,811 | Public Service Enterprise Group, Inc.(b) | 28,739,358 | ||||||
377,972 | WEC Energy Group, Inc.(c) | 19,393,743 | ||||||
|
| |||||||
130,179,544 | ||||||||
|
| |||||||
Multiline Retail — 0.6% | ||||||||
293,642 | Macy’s, Inc.(b) | 10,271,597 | ||||||
279,529 | Nordstrom, Inc.(b) | 13,923,339 | ||||||
58,617 | Sears Holdings Corp.(b)(d) | 1,205,166 | ||||||
380,057 | Target Corp.(b) | 27,595,939 | ||||||
|
| |||||||
52,996,041 | ||||||||
|
|
See accompanying notes to financial statements.
| 12
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Oil, Gas & Consumable Fuels — 5.0% | ||||||||
175,037 | Cheniere Energy, Inc.(b)(d) | $ | 6,520,128 | |||||
977,698 | Chevron Corp.(b) | 87,953,712 | ||||||
192,055 | Concho Resources, Inc.(b)(d) | 17,834,227 | ||||||
808,767 | ConocoPhillips(b) | 37,761,331 | ||||||
330,022 | CONSOL Energy, Inc.(b) | 2,607,174 | ||||||
401,207 | Continental Resources, Inc.(c)(d) | 9,219,737 | ||||||
2,003,943 | Exxon Mobil Corp.(c) | 156,207,357 | ||||||
256,070 | Gulfport Energy Corp.(b)(d) | 6,291,640 | ||||||
543,940 | Occidental Petroleum Corp.(b) | 36,775,783 | ||||||
202,485 | ONEOK, Inc.(b) | 4,993,280 | ||||||
493,008 | Phillips 66(b) | 40,328,055 | ||||||
681,851 | Southwestern Energy Co.(b)(d) | 4,847,961 | ||||||
|
| |||||||
411,340,385 | ||||||||
|
| |||||||
Personal Products — 0.0% | ||||||||
36,064 | Herbalife Ltd.(b)(d) | 1,933,752 | ||||||
|
| |||||||
Pharmaceuticals — 5.6% | ||||||||
217,098 | Allergan PLC(b)(d) | 67,843,125 | ||||||
838,620 | Bristol-Myers Squibb Co.(b) | 57,688,670 | ||||||
530,237 | Eli Lilly & Co.(c) | 44,677,770 | ||||||
1,262,824 | Johnson & Johnson(c) | 129,717,281 | ||||||
1,333,355 | Merck & Co., Inc.(c) | 70,427,811 | ||||||
2,887,040 | Pfizer, Inc.(c) | 93,193,651 | ||||||
|
| |||||||
463,548,308 | ||||||||
|
| |||||||
Professional Services — 0.3% | ||||||||
81,727 | Dun & Bradstreet Corp. (The)(b) | 8,493,887 | ||||||
190,403 | Verisk Analytics, Inc.(b)(d) | 14,638,183 | ||||||
|
| |||||||
23,132,070 | ||||||||
|
| |||||||
Real Estate Management & Development — 0.0% | ||||||||
7,667 | RMR Group Inc. (The), Class A(b)(d) | 110,481 | ||||||
|
| |||||||
REITs – Apartments — 0.1% | ||||||||
133,939 | UDR, Inc.(c) | 5,032,088 | ||||||
|
| |||||||
REITs – Diversified — 0.4% | ||||||||
59,491 | Digital Realty Trust, Inc.(c) | 4,498,710 | ||||||
1,043,920 | Duke Realty Corp.(b) | 21,943,198 | ||||||
304,696 | Liberty Property Trust(b) | 9,460,811 | ||||||
|
| |||||||
35,902,719 | ||||||||
|
| |||||||
REITs – Health Care — 0.7% | ||||||||
199,003 | Care Capital Properties, Inc.(b) | 6,083,522 | ||||||
282,265 | Healthcare Realty Trust, Inc.(b) | 7,993,745 | ||||||
690,806 | Senior Housing Properties Trust(b) | 10,251,561 | ||||||
538,624 | Ventas, Inc.(b) | 30,394,552 | ||||||
|
| |||||||
54,723,380 | ||||||||
|
|
See accompanying notes to financial statements.
13 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
REITs – Mortgage — 0.4% | ||||||||
691,356 | American Capital Agency Corp.(b) | $ | 11,988,113 | |||||
1,924,604 | Annaly Capital Management, Inc.(c) | 18,052,786 | ||||||
296,730 | Hatteras Financial Corp.(b) | 3,901,999 | ||||||
|
| |||||||
33,942,898 | ||||||||
|
| |||||||
REITs – Office Property — 0.1% | ||||||||
217,378 | Mack-Cali Realty Corp.(b) | 5,075,776 | ||||||
|
| |||||||
REITs – Storage – 0.1% | ||||||||
60,360 | Extra Space Storage, Inc.(c) | 5,324,356 | ||||||
|
| |||||||
Road & Rail — 0.6% | ||||||||
171,939 | Avis Budget Group, Inc.(b)(d) | 6,239,666 | ||||||
92,015 | Canadian Pacific Railway Ltd.(b) | 11,741,114 | ||||||
1,053,776 | CSX Corp.(b) | 27,345,487 | ||||||
362,307 | Hertz Global Holdings, Inc.(b)(d) | 5,155,629 | ||||||
|
| |||||||
50,481,896 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment — 2.5% | ||||||||
235,522 | Advanced Micro Devices, Inc.(b)(d) | 675,948 | ||||||
267,673 | Analog Devices, Inc.(b) | 14,807,670 | ||||||
795,677 | Applied Materials, Inc.(b) | 14,855,290 | ||||||
2,188,701 | Intel Corp.(c) | 75,400,749 | ||||||
442,936 | Linear Technology Corp.(c) | 18,811,492 | ||||||
177,644 | Microchip Technology, Inc.(b) | 8,267,552 | ||||||
452,237 | NVIDIA Corp.(b) | 14,905,731 | ||||||
169,836 | Skyworks Solutions, Inc.(b) | 13,048,500 | ||||||
650,634 | Texas Instruments, Inc.(c) | 35,661,250 | ||||||
235,414 | Xilinx, Inc.(b) | 11,057,396 | ||||||
|
| |||||||
207,491,578 | ||||||||
|
| |||||||
Software — 4.4% | ||||||||
514,131 | Activision Blizzard, Inc.(b) | 19,902,011 | ||||||
405,907 | Adobe Systems, Inc.(b)(d) | 38,130,904 | ||||||
136,393 | ANSYS, Inc.(c)(d) | 12,616,352 | ||||||
230,761 | Autodesk, Inc.(b)(d) | 14,060,268 | ||||||
3,735,070 | Microsoft Corp.(c) | 207,221,684 | ||||||
260,985 | Nuance Communications, Inc.(b)(d) | 5,190,992 | ||||||
1,547,882 | Oracle Corp.(c) | 56,544,129 | ||||||
532,001 | Symantec Corp.(b) | 11,172,021 | ||||||
|
| |||||||
364,838,361 | ||||||||
|
| |||||||
Specialty Retail — 3.0% | ||||||||
239,159 | American Eagle Outfitters, Inc.(b) | 3,706,964 | ||||||
219,595 | Foot Locker, Inc.(b) | 14,293,439 | ||||||
213,861 | Gap, Inc. (The)(b) | 5,282,367 | ||||||
782,653 | Home Depot, Inc. (The)(b) | 103,505,859 | ||||||
196,492 | L Brands, Inc.(b) | 18,827,863 | ||||||
720,598 | Lowe’s Cos., Inc.(b) | 54,794,272 | ||||||
172,917 | Tiffany & Co.(b) | 13,191,838 | ||||||
470,359 | TJX Cos., Inc. (The)(b) | 33,353,157 | ||||||
|
| |||||||
246,955,759 | ||||||||
|
|
See accompanying notes to financial statements.
| 14
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Shares | Description | Value (†) | ||||||
Technology Hardware, Storage & Peripherals — 3.7% | ||||||||
2,623,740 | Apple, Inc.(b) | $ | 276,174,872 | |||||
1,064,970 | EMC Corp.(b) | 27,348,430 | ||||||
|
| |||||||
303,523,302 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods — 0.4% | ||||||||
319,937 | Michael Kors Holdings Ltd.(b)(d) | 12,816,676 | ||||||
252,161 | Under Armour, Inc., Class A(b)(d) | 20,326,698 | ||||||
|
| |||||||
33,143,374 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance — 0.1% | ||||||||
488,844 | New York Community Bancorp, Inc.(b) | 7,977,934 | ||||||
|
| |||||||
Tobacco — 1.7% | ||||||||
1,009,250 | Altria Group, Inc.(c) | 58,748,443 | ||||||
639,661 | Philip Morris International, Inc.(c) | 56,232,599 | ||||||
508,415 | Reynolds American, Inc.(b) | 23,463,352 | ||||||
194,294 | Vector Group Ltd.(b) | 4,583,395 | ||||||
|
| |||||||
143,027,789 | ||||||||
|
| |||||||
Trading Companies & Distributors — 0.1% | ||||||||
107,177 | GATX Corp.(b) | 4,560,381 | ||||||
|
| |||||||
Wireless Telecommunication Services — 0.1% | ||||||||
60,504 | SBA Communications Corp., Class A(b)(d) | 6,357,155 | ||||||
|
| |||||||
Total Common Stocks (Identified Cost $5,441,507,238) | 8,072,179,649 | |||||||
|
| |||||||
Contracts | ||||||||
Purchased Options — 0.3% | ||||||||
Index Options — 0.3% | ||||||||
6,024 | On S&P 500® Index, Put expiring January 15, 2016 at 1800 | 481,920 | ||||||
5,247 | On S&P 500® Index, Put expiring January 15, 2016 at 1825 | 524,700 | ||||||
5,951 | On S&P 500® Index, Put expiring January 15, 2016 at 1900 | 1,517,505 | ||||||
4,068 | On S&P 500® Index, Put expiring January 15, 2016 at 1925 | 1,505,160 | ||||||
5,330 | On S&P 500® Index, Put expiring February 19, 2016 at 1800 | 3,731,000 | ||||||
6,609 | On S&P 500® Index, Put expiring February 19, 2016 at 1875 | 8,327,340 | ||||||
5,921 | On S&P 500® Index, Put expiring March 18, 2016 at 1850 | 11,782,790 | ||||||
|
| |||||||
Total Purchased Options (Identified Cost $60,691,939) | 27,870,415 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investments — 2.9% | ||||||||
$ | 235,320,522 | Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2015 at 0.030% to be repurchased at $235,321,306 on 1/04/2016 collateralized by $242,150,000 U.S. Treasury Note, 1.750% due 2/28/2022 valued at $240,031,188 including accrued interest (Note 2 of Notes to Financial Statements) (Identified Cost $235,320,522) | 235,320,522 | |||||
|
| |||||||
Total Investments — 100.9% (Identified Cost $5,737,519,699)(a) | 8,335,370,586 | |||||||
Other assets less liabilities — (0.9)% | (71,031,588 | ) | ||||||
|
| |||||||
Net Assets — 100.0% | $ | 8,264,338,998 | ||||||
|
|
See accompanying notes to financial statements.
15 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Contracts | Description | Value (†) | ||||||
Written Options — (1.2%) | ||||||||
Index Options — (1.2%) | ||||||||
4,419 | On S&P 500® Index, Call expiring January 08, 2016 at 2050 | $ | (6,672,690 | ) | ||||
4,426 | On S&P 500® Index, Call expiring January 15, 2016 at 2000 | (24,276,610 | ) | |||||
8,802 | On S&P 500® Index, Call expiring January 15, 2016 at 2050 | (18,352,170 | ) | |||||
4,368 | On S&P 500® Index, Call expiring January 15, 2016 at 2075 | (4,105,920 | ) | |||||
4,514 | On S&P 500® Index, Call expiring January 15, 2016 at 2100 | (1,444,480 | ) | |||||
4,098 | On S&P 500® Index, Call expiring January 22, 2016 at 2075 | (5,491,320 | ) | |||||
4,137 | On S&P 500® Index, Call expiring February 19, 2016 at 2025 | (22,898,295 | ) | |||||
4,386 | On S&P 500® Index, Call expiring February 19, 2016 at 2050 | (17,478,210 | ) | |||||
|
| |||||||
Total Written Options (Premiums Received $198,677,852) | $ | (100,719,695 | ) | |||||
|
| |||||||
(†) | See Note 2 of Notes to Financial Statements. | |||||||
(a) | Federal Tax Information: | |||||||
At December 31, 2015, the net unrealized appreciation on investments based on a cost of $5,729,247,020 for federal income tax purposes was as follows: | ||||||||
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost | $ | 2,950,449,374 | ||||||
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value | (344,325,808 | ) | ||||||
|
| |||||||
Net unrealized appreciation | $ | 2,606,123,566 | ||||||
|
| |||||||
(b) | All of this security has been pledged as collateral for outstanding call options. | |||||||
(c) | A portion of this security has been pledged as collateral for outstanding call options. | |||||||
(d) | 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. | |||||||
REITs | Real Estate Investment Trusts |
See accompanying notes to financial statements.
| 16
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Fund – (continued)
Industry Summary at December 31, 2015
Banks | 6.1 | % | ||
Pharmaceuticals | 5.6 | |||
Internet Software & Services | 5.1 | |||
Oil, Gas & Consumable Fuels | 5.0 | |||
Software | 4.4 | |||
Biotechnology | 3.9 | |||
Technology Hardware, Storage & Peripherals | 3.7 | |||
IT Services | 3.5 | |||
Media | 3.1 | |||
Specialty Retail | 3.0 | |||
Insurance | 2.8 | |||
Health Care Providers & Services | 2.7 | |||
Industrial Conglomerates | 2.5 | |||
Semiconductors & Semiconductor Equipment | 2.5 | |||
Aerospace & Defense | 2.4 | |||
Beverages | 2.3 | |||
Diversified Telecommunication Services | 2.1 | |||
Health Care Equipment & Supplies | 2.1 | |||
Food & Staples Retailing | 2.1 | |||
Diversified Financial Services | 2.1 | |||
Internet & Catalog Retail | 2.1 | |||
Chemicals | 2.0 | |||
Other Investments, less than 2% each | 26.9 | |||
Short-Term Investments | 2.9 | |||
|
| |||
Total Investments | 100.9 | |||
Other assets less liabilities (including open written options) | (0.9 | ) | ||
|
| |||
Net Assets | 100.0 | % | ||
|
|
See accompanying notes to financial statements.
17 |
Table of Contents
Statement of Assets and Liabilities
December 31, 2015
ASSETS | ||||
Investments at cost | $ | 5,737,519,699 | ||
Net unrealized appreciation | 2,597,850,887 | |||
|
| |||
Investments at value | 8,335,370,586 | |||
Cash | 52,925 | |||
Receivable for Fund shares sold | 36,350,068 | |||
Dividends and interest receivable | 10,895,274 | |||
Tax reclaims receivable | 400 | |||
|
| |||
TOTAL ASSETS | 8,382,669,253 | |||
|
| |||
LIABILITIES | ||||
Options written, at value (premiums received $198,677,852) (Note 2) | 100,719,695 | |||
Payable for Fund shares redeemed | 12,288,546 | |||
Management fees payable (Note 6) | 4,014,970 | |||
Deferred Trustees’ fees (Note 6) | 451,091 | |||
Administrative fees payable (Note 6) | 305,204 | |||
Payable to distributor (Note 6d) | 60,563 | |||
Other accounts payable and accrued expenses | 490,186 | |||
|
| |||
TOTAL LIABILITIES | 118,330,255 | |||
|
| |||
NET ASSETS | $ | 8,264,338,998 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 7,086,908,747 | ||
Undistributed net investment income | 7,806,629 | |||
Accumulated net realized loss on investments, options written and foreign currency transactions | (1,526,185,413 | ) | ||
Net unrealized appreciation on investments, options written and foreign currency translations | 2,695,809,035 | |||
|
| |||
NET ASSETS | $ | 8,264,338,998 | ||
|
| |||
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: | ||||
Class A shares: | ||||
Net assets | $ | 1,864,117,759 | ||
|
| |||
Shares of beneficial interest | 62,727,199 | |||
|
| |||
Net asset value and redemption price per share | $ | 29.72 | ||
|
| |||
Offering price per share (100/94.25 of net asset value) (Note 1) | $ | 31.53 | ||
|
| |||
Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1) | ||||
Net assets | $ | 387,234,710 | ||
|
| |||
Shares of beneficial interest | 13,079,447 | |||
|
| |||
Net asset value and offering price per share | $ | 29.61 | ||
|
| |||
Class Y shares: | ||||
Net assets | $ | 6,012,986,529 | ||
|
| |||
Shares of beneficial interest | 202,412,829 | |||
|
| |||
Net asset value, offering and redemption price per share | $ | 29.71 | ||
|
|
See accompanying notes to financial statements.
| 18
Table of Contents
Statement of Operations
For the Year Ended December 31, 2015
INVESTMENT INCOME | ||||
Dividends | $ | 230,321,988 | (a) | |
Interest | 24,600 | |||
Less net foreign taxes withheld | (48,849 | ) | ||
|
| |||
230,297,739 | ||||
|
| |||
Expenses | ||||
Management fees (Note 6) | 50,839,542 | |||
Service and distribution fees (Note 6) | 8,295,662 | |||
Administrative fees (Note 6) | 3,449,821 | |||
Trustees’ fees and expenses (Note 6) | 134,691 | |||
Transfer agent fees and expenses (Note 6) | 5,737,956 | |||
Audit and tax services fees | 50,251 | |||
Custodian fees and expenses | 377,637 | |||
Legal fees | 139,961 | |||
Registration fees | 67,177 | |||
Shareholder reporting expenses | 408,601 | |||
Miscellaneous expenses | 154,484 | |||
|
| |||
Total expenses | 69,655,783 | |||
Less waiver and/or expense reimbursement (Note 6) | (5,151,077 | ) | ||
|
| |||
Net expenses | 64,504,706 | |||
|
| |||
Net investment income | 165,793,033 | |||
|
| |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS WRITTEN AND FOREIGN CURRENCY TRANSACTIONS | ||||
Net realized gain (loss) on: | ||||
Investments | 209,561,067 | |||
Options written | 210,395,572 | |||
Foreign currency transactions | (3,688 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (479,797,413 | ) | ||
Options written | 92,430,228 | |||
Foreign currency translations | (32 | ) | ||
|
| |||
Net realized and unrealized gain on investments, options written and foreign currency transactions | 32,585,734 | |||
|
| |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 198,378,767 | ||
|
|
(a) | Includes a non-recurring dividend of $52,592,170 recognized as part of a merger transaction involving two of the Fund’s portfolio securities. The Fund’s cost basis in the new securities received in the merger was increased by this amount. There was no impact to the Fund’s net asset value. |
See accompanying notes to financial statements.
19 |
Table of Contents
Statement of Changes in Net Assets
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||
FROM OPERATIONS: | ||||||||
Net investment income | $ | 165,793,033 | $ | 119,166,733 | ||||
Net realized gain on investments, options written and foreign currency transactions | 419,952,951 | 257,030,658 | ||||||
Net change in unrealized appreciation (depreciation) on investments, options written and foreign currency translations | (387,367,217 | ) | (99,795,230 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 198,378,767 | 276,402,161 | ||||||
|
|
|
| |||||
FROM DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
Net investment income | ||||||||
Class A | (34,030,868 | ) | (28,283,705 | ) | ||||
Class C | (3,900,980 | ) | (1,910,281 | ) | ||||
Class Y | (121,203,310 | ) | (86,158,870 | ) | ||||
|
|
|
| |||||
Total distributions | (159,135,158 | ) | (116,352,856 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 10) | 80,398,347 | (218,608,215 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets | 119,641,956 | (58,558,910 | ) | |||||
NET ASSETS | ||||||||
Beginning of the year | 8,144,697,042 | 8,203,255,952 | ||||||
|
|
|
| |||||
End of the year | $ | 8,264,338,998 | $ | 8,144,697,042 | ||||
|
|
|
| |||||
UNDISTRIBUTED NET INVESTMENT INCOME | $ | 7,806,629 | $ | 6,386,818 | ||||
|
|
|
|
See accompanying notes to financial statements.
| 20
Table of Contents
Financial Highlights
For a share outstanding throughout each period.
Class A | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 29.58 | $ | 29.00 | $ | 27.13 | $ | 26.40 | $ | 26.06 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.57 | (b) | 0.39 | 0.43 | 0.48 | 0.44 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.12 | 0.57 | 1.82 | 0.72 | 0.33 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | 0.69 | 0.96 | 2.25 | 1.20 | 0.77 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.55 | ) | (0.38 | ) | (0.38 | ) | (0.47 | ) | (0.43 | ) | ||||||||||
Net realized capital gains | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Distributions | (0.55 | ) | (0.38 | ) | (0.38 | ) | (0.47 | ) | (0.43 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 29.72 | $ | 29.58 | $ | 29.00 | $ | 27.13 | $ | 26.40 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return(c)(d) | 2.34 | % | 3.33 | % | 8.39 | % | 4.51 | % | 2.99 | % | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 1,864,118 | $ | 1,976,457 | $ | 2,351,788 | $ | 2,066,522 | $ | 2,208,167 | ||||||||||
Net expenses(e) | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | 0.94 | % | ||||||||||
Gross expenses | 1.01 | % | 1.02 | % | 1.03 | % | 1.03 | % | 1.04 | % | ||||||||||
Net investment income | 1.91 | %(b) | 1.33 | % | 1.51 | % | 1.79 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 10 | % | 13 | % | 10 | % | 8 | % | 3 | % |
(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 $0.37 and the ratio of net investment income to average net assets would have been 1.24%. |
(c) | Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) | A sales charge for Class A shares is not reflected in total return calculations. |
(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. |
See accompanying notes to financial statements.
21 |
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Class C | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 29.48 | $ | 28.90 | $ | 27.04 | $ | 26.32 | $ | 25.98 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.34 | (b) | 0.17 | 0.21 | 0.28 | 0.24 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.12 | 0.57 | 1.82 | 0.71 | 0.33 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | 0.46 | 0.74 | 2.03 | 0.99 | 0.57 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.33 | ) | (0.16 | ) | (0.17 | ) | (0.27 | ) | (0.23 | ) | ||||||||||
Net realized capital gains | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Distributions | (0.33 | ) | (0.16 | ) | (0.17 | ) | (0.27 | ) | (0.23 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 29.61 | $ | 29.48 | $ | 28.90 | $ | 27.04 | $ | 26.32 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return(c)(d) | 1.54 | % | 2.58 | % | 7.58 | % | 3.71 | % | 2.21 | % | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 387,235 | $ | 353,339 | $ | 331,465 | $ | 286,602 | $ | 258,509 | ||||||||||
Net expenses(e) | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | ||||||||||
Gross expenses | 1.76 | % | 1.77 | % | 1.78 | % | 1.78 | % | 1.79 | % | ||||||||||
Net investment income | 1.15 | %(b) | 0.57 | % | 0.75 | % | 1.04 | % | 0.91 | % | ||||||||||
Portfolio turnover rate | 10 | % | 13 | % | 10 | % | 8 | % | 3 | % |
(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 $0.15 and the ratio of net investment income to average net assets would have been 0.51%. |
(c) | Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) | A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(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. |
See accompanying notes to financial statements.
| 22
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Class Y | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 29.57 | $ | 28.99 | $ | 27.12 | $ | 26.39 | $ | 26.06 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.64 | (b) | 0.46 | 0.50 | 0.56 | 0.50 | ||||||||||||||
Net realized and unrealized gain (loss) | 0.12 | 0.57 | 1.82 | 0.70 | 0.32 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | 0.76 | 1.03 | 2.32 | 1.26 | 0.82 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.62 | ) | (0.45 | ) | (0.45 | ) | (0.53 | ) | (0.49 | ) | ||||||||||
Net realized capital gains | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Distributions | (0.62 | ) | (0.45 | ) | (0.45 | ) | (0.53 | ) | (0.49 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 29.71 | $ | 29.57 | $ | 28.99 | $ | 27.12 | $ | 26.39 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return(c) | 2.59 | % | 3.58 | % | 8.65 | % | 4.76 | % | 3.20 | % | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 6,012,987 | $ | 5,814,900 | $ | 5,520,003 | $ | 4,654,553 | $ | 2,915,647 | ||||||||||
Net expenses(d) | 0.70 | % | 0.70 | % | 0.70 | % | 0.70 | % | 0.70 | % | ||||||||||
Gross expenses | 0.76 | % | 0.77 | % | 0.78 | % | 0.78 | % | 0.79 | % | ||||||||||
Net investment income | 2.16 | %(b) | 1.57 | % | 1.76 | % | 2.08 | % | 1.92 | % | ||||||||||
Portfolio turnover rate | 10 | % | 13 | % | 10 | % | 8 | % | 3 | % |
(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 $0.45 and the ratio of net investment income to average net assets would have been 1.51%. |
(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. |
See accompanying notes to financial statements.
23 |
Table of Contents
December 31, 2015
1. Organization. Gateway Trust (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. Information presented in these financial statements pertains to Gateway Fund (the “Fund”).
The Fund is a diversified investment company.
The Fund offers Class A, Class C and Class Y 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 ongoing Rule 12b-1 fees than 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 Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. Class Y shares are generally intended for institutional investors with a minimum initial investment of $100,000, though some categories of investors are exempted from the minimum investment amount as outlined in the 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, Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”). Expenses of the Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees). 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 the 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 the Fund in the preparation of its financial statements. The Fund’s 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 Fund’s financial statements.
| 24
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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 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:
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. 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. 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. 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. 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”).
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. Option contracts for which the average of the closing bid and ask quotations are not considered to reflect option contract values as of the close of the New York Stock Exchange (“NYSE”) are valued at fair value as determined in good faith by the adviser pursuant to procedures approved by the Board of Trustees. On the last business day of the month, the Fund will fair value S&P 500® Index options using the closing rotation values published by the CBOE. The Fund may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign market but prior to the close of the NYSE. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuer’s security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). When fair valuing its securities or other investments,
25 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
the Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities or other market activity and/or significant events that occur after the close of the foreign market and before the time the Fund’s 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, 2015, purchased options were fair valued at $27,870,415, representing 0.3% of net assets, and written options were fair valued at $(100,719,695), representing (1.2%) of net assets, using the closing rotation values published by the CBOE.
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 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. 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 Fund 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 Statement of Operations.
| 26
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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 Statement 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.
The Fund 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. Option Contracts. The Fund’s investment strategy makes use of exchange-traded options. Exchange-traded options are standardized contracts and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Fund are reduced. The Fund writes (sells) index call options and purchases index put options.
When the Fund writes an index call 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 until the option expires or the Fund enters into a closing purchase transaction. When an index call option expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on effecting a closing purchase transaction, including commission, 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 an index call option, bears the risk of an unfavorable change in the market value of the index underlying the written option.
When the Fund purchases an index put option, it pays a premium and the index put option is subsequently marked-to-market to reflect current value until the option expires or the Fund enters into a closing sale transaction. Premiums paid for purchasing index put options which expire are treated as realized losses. When the 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 index put options is limited to the premium paid.
e. Federal and Foreign Income Taxes. The 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 the Fund’s tax positions for the open tax years as of December 31, 2015 and has concluded that no provisions for income tax are required. The Fund’s 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
27 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
amounts of any unrecognized tax benefits significantly increasing or decreasing for the Fund. 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.
The 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 Statement of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statement 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 Statement of Assets and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statement of Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statement 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 the Fund. Such amounts, if applicable, are reflected as foreign tax rebates receivable on the Statement of Assets and Liabilities and are recorded as a realized gain when received.
f. 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 foreign currency gains and losses, deferred Trustees’ fees and return of capital and capital gain distributions received. 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 Statement of Assets and Liabilities. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees’ fees, wash sales, return of capital distributions received and option contract 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 Fund’s fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions from net investment income and short-term capital gains are considered to be distributed from ordinary income for tax purposes.
| 28
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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, 2015 and 2014 were as follows:
2015 Distributions Paid From: | 2014 Distributions Paid From: | |||||||||||||||||||
Ordinary Income | Long-Term Capital Gains | Total | Ordinary Income | Long-Term Capital Gains | Total | |||||||||||||||
$159,135,158 | $ | — | $ | 159,135,158 | $ | 116,352,856 | $ | — | $ | 116,352,856 |
As of December 31, 2015, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income | $ | 8,257,719 | ||
Undistributed long-term capital gains | — | |||
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| |||
Total undistributed earnings | 8,257,719 | |||
|
| |||
Capital loss carryforward: | ||||
Short-term: | ||||
Expires | ||||
December 31, 2017 | (1,005,056,628 | ) | ||
December 31, 2018 | (393,591,402 | ) | ||
No expiration date | (70,673,429 | ) | ||
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| |||
Total capital loss carryforward | (1,469,321,459 | ) | ||
Unrealized appreciation | 2,638,945,081 | |||
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| |||
Total accumulated earnings | $ | 1,177,881,341 | ||
|
| |||
Capital loss carryforward utilized in the current year | $ | 503,052,205 | ||
|
|
Capital losses may be utilized to offset future capital gains until expiration. The Regulated Investment Company Modernization Act of 2010 (the “Act”) allows capital loss carryforwards to be carried forward indefinitely. Rules in effect previously limited the carryforward period to eight years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in years prior to the effective date of the Act; therefore, under certain circumstances, capital loss carryforwards available as of the report date may expire unused.
g. Repurchase Agreements. The Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, under which the Fund acquires securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. It is the 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
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Notes to Financial Statements (continued)
December 31, 2015
the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty, including possible delays or restrictions upon the Fund’s ability to dispose of the underlying securities. As of December 31, 2015, the Fund had an investment in a repurchase agreement 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 Statement of Assets and Liabilities for financial reporting purposes.
h. 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 Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
3. Fair Value Measurements. In accordance with accounting standards related to fair value measurements and disclosures, the Fund has categorized the inputs utilized in determining the value of the 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 the 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 Fund’s investments as of December 31, 2015, at value:
Asset Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks(a) | $ | 8,072,179,649 | $ | — | $ | — | $ | 8,072,179,649 | ||||||||
Purchased Options(a) | — | 27,870,415 | — | 27,870,415 | ||||||||||||
Short-Term Investments | — | 235,320,522 | — | 235,320,522 | ||||||||||||
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| |||||||||
Total | $ | 8,072,179,649 | $ | 263,190,937 | $ | — | $ | 8,335,370,586 | ||||||||
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| 30
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Liability Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Written Options(a) | $ | — | $ | (100,719,695 | ) | $ | — | $ | (100,719,695 | ) | ||||||
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(a) | Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments. |
For the year ended December 31, 2015, 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 Fund used during the period include written index call options and purchased index put options.
The Fund seeks to capture the majority of the returns associated with equity market investments, while exposing investors to less risk than other equity investments. To meet this investment goal, the Fund invests in a broadly diversified portfolio of common stocks, while also writing index call options and purchasing index put options. Writing index call options can reduce the Fund’s volatility, provide a steady cash flow and be an important source of the Fund’s return, although it also may reduce the Fund’s ability to profit from increases in the value of its equity portfolio. The Fund also buys index put options, which can protect the Fund from a significant market decline that may occur over a short period of time. The value of an index put option generally increases as the prices of stocks constituting the index decrease and decreases as those stocks increase in price. The combination of the diversified stock portfolio, the steady cash flow from writing of index call options and the downside protection from purchased index put options is intended to provide the Fund with the majority of the returns associated with equity market investments while exposing investors to less risk than other equity investments. During the year ended December 31, 2015, written index call options and purchased index put options were used in accordance with this objective.
The following is a summary of derivative instruments for the Fund as of December 31, 2015, as reflected within the Statement of Assets and Liabilities:
Assets | Investments at value1 | |||
Exchange-traded/cleared asset derivatives | ||||
Equity contracts | $ | 27,870,415 | ||
Liabilities | Options written at value | |||
Exchange-traded/cleared liability derivatives | ||||
Equity contracts | $ | (100,719,695 | ) |
1 | Represents purchased options, at value. |
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Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Transactions in derivative instruments for the Fund during the year ended December 31, 2015, as reflected within the Statement of Operations were as follows:
Net Realized Gain (Loss) on: | Investments2 | Options written | ||||||
Equity contracts | $ | (124,609,061 | ) | $ | 210,395,572 | |||
Net Change in Unrealized Appreciation (Depreciation) on: | Investments2 | Options written | ||||||
Equity contracts | $ | (13,007,315 | ) | $ | 92,430,228 |
2 | Represents realized loss and change in unrealized appreciation (depreciation), respectively, for purchased options during the period. |
As the Fund values its derivatives at fair value and recognizes changes in fair value through the Statement 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 option contract activity as a percentage of investments in common stocks, based on month-end notional amounts outstanding during the period, at absolute value, was as follows for the year ended December 31, 2015:
Call Options | Put Options | |||||||
Average Notional Amount Outstanding | 99.08 | % | 95.09 | % | ||||
Highest Notional Amount Outstanding | 99.34 | % | 99.34 | % | ||||
Lowest Notional Amount Outstanding | 98.95 | % | 71.61 | % | ||||
Notional Amount Outstanding as of December 31, 2015 | 99.13 | % | 99.13 | % |
* | Notional amounts outstanding are determined by multiplying option contracts by the contract multiplier by the price of the option’s underlying index, the S&P 500® Index. |
Notional amounts outstanding at the end of the prior period are included in the averages above.
The following is a summary of the Fund’s written option activity:
Number of | Premiums | |||||||
Outstanding at December 31, 2014 | 38,900 | $ | 171,210,559 | |||||
Options written | 455,534 | 1,607,991,376 | ||||||
Options terminated in closing purchase transactions | (448,994 | ) | (1,570,725,378 | ) | ||||
Options expired | (6,290 | ) | (9,798,705 | ) | ||||
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| |||||
Outstanding at December 31, 2015 | 39,150 | $ | 198,677,852 | |||||
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| 32
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
5. Purchases and Sales of Securities. For the year ended December 31, 2015, purchases and sales of securities (excluding short-term investments and option contracts) were $878,388,081 and $803,185,667, respectively.
6. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Gateway Investment Advisers, LLC (“Gateway Advisers”) serves as investment adviser to the Fund. Gateway Advisers is a subsidiary of Natixis Global Asset Management, L.P. (“Natixis US”), which is part of Natixis Global Asset Management, an international asset management group based in Paris, France. Under the terms of the management agreement, the Fund pays a management fee at an annual rate of 0.65% for the first $5 billion, 0.60% for the next $5 billion and 0.58% thereafter, calculated daily and payable monthly, based on the Fund’s average daily net assets.
Gateway Advisers has given a binding undertaking to the Fund to waive management fees and/or reimburse certain expenses to limit the Fund’s operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes, organizational and extraordinary expenses such as litigation and indemnification expenses. This undertaking is in effect until April 30, 2016, may be terminated before then only with the consent of the Fund’s Board of Trustees, and is reevaluated on an annual basis. Management fees payable, as reflected on the Statement of Assets and Liabilities, is net of waivers and/or expense reimbursements, if any, pursuant to these undertakings.
For the year ended December 31, 2015, the expense limits as a percentage of average daily net assets under the expense limitation agreement were as follows:
Expense Limit as a Percentage of Average Daily Net Assets | ||||
Class A | Class C | Class Y | ||
0.94% | 1.70% | 0.70% |
Gateway Advisers shall be permitted to recover expenses it has borne under the expense limitation agreement (whether through waiver of its management fee 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, 2015, the management fees and waiver of management fees for the Fund were as follows:
Gross Management Fees | Waiver of Management Fees1 | Net Management Fees | Percentage of Average Daily Net Assets | |||||
Gross | Net | |||||||
$50,839,542 | $4,963,474 | $45,876,068 | 0.63% | 0.57% |
1 | Management fee waiver is subject to possible recovery until December 31, 2016. |
33 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
For the year ended December 31, 2015, Class A expenses have been reimbursed in the amount of $187,603. This expense reimbursement is subject to possible recovery until December 31, 2016.
No expenses were recovered during the year ended December 31, 2015 under the terms of the expense limitation agreement.
b. Service and Distribution Fees. NGAM Distribution, L.P. (“NGAM Distribution”), which is a wholly-owned subsidiary of Natixis US, has entered into a distribution agreement with the Trust. Pursuant to this agreement, NGAM Distribution serves as principal underwriter of the Fund.
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service Plan relating to the Fund’s Class A shares (the “Class A Plan”) and a Distribution and Service Plan relating to the Fund’s Class C shares (the “Class C Plan”).
Under the Class A Plan, the Fund pays NGAM 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 NGAM Distribution in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts.
Under the Class C Plan, the Fund pays NGAM 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 NGAM Distribution in providing personal services to investors in Class C shares and/or the maintenance of shareholder accounts.
Also under the Class C Plan, the Fund pays NGAM Distribution a monthly distribution fee at an 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 NGAM Distribution in connection with the marketing or sale of Class C shares.
For the year ended December 31, 2015, the service and distribution fees for the Fund were as follows:
Service Fees | Distribution Fees | |||||
Class A | Class C | Class C | ||||
$4,690,081 | $ | 901,395 | $2,704,186 |
c. Administrative Fees. NGAM Advisors provides certain administrative services for the Fund and contracts with State Street Bank and Trust Company (“State Street Bank”) to serve as sub-administrator. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts and NGAM Advisors, the Fund pays NGAM 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 and Loomis Sayles
| 34
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Funds Trusts, 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 and Loomis Sayles Funds Trusts of $10 million, which is reevaluated on an annual basis.
For the year ended December 31, 2015, the administrative fees for the Fund were $3,449,821.
d. Sub-Transfer Agent Fees. NGAM 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 Fund and has agreed to compensate the intermediaries for providing those services. Intermediaries transact with the Fund primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Fund. These services would have been provided by the Fund’s transfer agent and other service providers if the shareholders’ accounts were maintained directly at the Fund’s transfer agent. Accordingly, the Fund has agreed to reimburse NGAM Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts (sub-transfer agent fees) paid to NGAM Distribution are subject to a current per-account equivalent fee limit approved by the Fund’s Board, which is based on fees for similar services paid to the Fund’s transfer agent and other service providers.
For the year ended December 31, 2015, the sub-transfer agent fees (which are reflected in transfer agent fees and expenses in the Statement of Operations) for the Fund were $4,611,738.
As of December 31, 2015, the Fund owes NGAM Distribution $60,563 in reimbursements for sub-transfer agent fees (which are reflected in the Statement of Assets and Liabilities as payable to distributor).
e. Commissions. Commissions (including CDSCs) on Fund shares retained by NGAM Distribution during the year ended December 31, 2015 amounted to $167,708.
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 NGAM Advisors, NGAM Distribution, Natixis US or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $300,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that she attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $130,000. 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
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Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Committee each receive an additional retainer fee at the annual rate of $17,500. The chairperson of the Governance Committee receives an additional retainer fee at the annual rate of $5,000. 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 and Loomis Sayles Funds Trusts 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, 2016, the Chairperson of the Board will receive a retainer fee at the annual rate of $325,000 and each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $155,000. The chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $10,000. 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 Fund 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 and Loomis Sayles Funds Trusts 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 and Loomis Sayles Funds Trusts, and are normally reflected as Trustees’ fees and expenses in the Statement of Operations. The portions of the accrued obligations allocated to the Fund under the Plan are reflected as Deferred Trustees’ fees in the Statement of Assets and Liabilities.
7. Line of Credit. Effective April 16, 2015, the Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, participates in a $150,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to the full $150,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate do not exceed the $150,000,000 limit at any time). Interest is charged to each participating Fund based on its borrowings at a rate per annum equal to the greater of the Federal Funds rate or overnight LIBOR, plus 1.25%. 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.
For the year ended December 31, 2015, the Fund had no borrowings under this agreement.
| 36
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Prior to April 16, 2015, the committed unsecured line of credit was $200,000,000 with an individual limit of $125,000,000 for each Fund that participated in the line of credit. In addition, the commitment fee was 0.10% per annum, payable at the end of each calendar quarter.
8. Broker Commission Recapture. The Fund has 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 Fund under such agreements and are included in realized gains in the Statement of Operations.
For the year ended December 31, 2015, the Fund had no amounts rebated under these agreements.
9. 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 Fund. As of December 31, 2015, based on management’s evaluation of the shareholder account base, the Fund had accounts representing controlling ownership of more than 5% of the Fund’s 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 | Percentage of Non-Affiliated | ||||||
Gateway Fund | 2 | 21.77 | % |
Omnibus shareholder accounts for which NGAM 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 Fund does 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.
10. Capital Shares. The 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, 2015 | | | Year Ended December 31, 2014 | | |||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A | ||||||||||||||||
Issued from the sale of shares | 17,271,312 | $ | 514,256,789 | 19,526,816 | $ | 570,258,621 | ||||||||||
Issued in connection with the reinvestment of distributions | 1,036,346 | 30,800,314 | 877,005 | 25,694,338 | ||||||||||||
Redeemed | (22,393,060 | ) | (667,070,045 | ) | (34,699,272 | ) | (1,017,930,563 | ) | ||||||||
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| |||||||||
Net change | (4,085,402 | ) | $ | (122,012,942 | ) | (14,295,451 | ) | $ | (421,977,604 | ) | ||||||
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37 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
10. Capital Shares (continued).
| Year Ended December 31, 2015 | | | Year Ended December 31, 2014 | | |||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class C | ||||||||||||||||
Issued from the sale of shares | 3,110,967 | $ | 92,271,622 | 2,529,459 | $ | 73,611,116 | ||||||||||
Issued in connection with the reinvestment of distributions | 99,793 | 2,968,203 | 48,694 | 1,419,075 | ||||||||||||
Redeemed | (2,118,858 | ) | (62,895,497 | ) | (2,060,975 | ) | (59,998,261 | ) | ||||||||
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|
| |||||||||
Net change | 1,091,902 | $ | 32,344,328 | 517,178 | $ | 15,031,930 | ||||||||||
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| |||||||||
Class Y | ||||||||||||||||
Issued from the sale of shares | 66,871,753 | $ | 1,991,168,273 | 69,449,619 | $ | 2,032,455,522 | ||||||||||
Issued in connection with the reinvestment of distributions | 2,623,863 | 77,852,732 | 1,743,714 | 51,146,687 | ||||||||||||
Redeemed | (63,717,476 | ) | (1,898,954,044 | ) | (64,987,476 | ) | (1,895,264,750 | ) | ||||||||
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| |||||||||
Net change | 5,778,140 | $ | 170,066,961 | 6,205,857 | $ | 188,337,459 | ||||||||||
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| |||||||||
Increase (decrease) from capital share transactions | 2,784,640 | $ | 80,398,347 | (7,572,416 | ) | $ | (218,608,215 | ) | ||||||||
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11. Potential Loss Contingency. The Fund has been named as a defendant, along with other financial institutions and individuals, in an action brought by a trustee of a trust created under a bankruptcy plan seeking to recover as intentional and constructive fraudulent transfers amounts the Fund, and others, received in connection with a merger involving a company formerly held in the Fund’s portfolio of investments. The Fund received $9,525,600 in connection with the merger. On November 18, 2015, the Bankruptcy Court granted the Fund’s (and other defendants’) motion to dismiss the Plaintiff’s intentional fraudulent transfer claim, dismissing such claim with prejudice. The Bankruptcy Court denied the motion to dismiss Plaintiff’s constructive fraudulent transfer claim. That claim remains pending. The Fund also is potentially an unnamed member of a putative defendant class in a separate action brought by a different trustee appointed under the same bankruptcy plan seeking to recover the same alleged fraudulent transfers as an intentional fraudulent transfer. On November 18, 2015, the Bankruptcy Court granted the Fund’s (and other defendants’) motion to dismiss the Plaintiff’s intentional fraudulent transfer claim, dismissing this separate action with prejudice. The Plaintiff has appealed the Court’s ruling to the District Court and that appeal is pending. The Plaintiff in that separate action had previously moved to certify a defendant class, but the Court denied that motion without prejudice. It is reasonably possible that an outcome unfavorable to the Fund could result from either or both of these cases; however, a reasonable estimate of the amount of potential loss to the Fund cannot be made at this time.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustees of Gateway Trust and Shareholders of Gateway Fund:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Gateway Fund, a series of Gateway Trust (the “Fund”), at December 31, 2015, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2016
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Table of Contents
2015 U.S. Tax Distribution Information to Shareholders (Unaudited)
Qualified Dividend Income. For the fiscal year ended December 31, 2015, 100% of the ordinary income dividends paid by the Gateway 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. Complete information will be reported in conjunction with Form 1099-DIV.
Corporate Dividends Received Deduction. For the fiscal year ended December 31, 2015, 100% of dividends distributed by the Gateway Fund qualify for the dividends received deduction for corporate shareholders.
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Table of Contents
Trustee and Officer Information
The tables below provide certain information regarding the trustees and officers of Gateway Trust (the “Trust”). Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116. The Fund’s 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 of Office1 | Principal 5 Years | Number of and Other 5 Years | Experience, Membership | ||||
INDEPENDENT TRUSTEES | ||||||||
Kenneth A. Drucker (1945) | Trustee since 2008 Chairperson of the Audit Committee and Governance Committee Member | Retired | 42 None | Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation) | ||||
Edmond J. English (1953) | Trustee since 2013 Audit Committee Member | Chief Executive Officer of Bob’s Discount Furniture (retail) | 42 Formerly, Director, BJ’s Wholesale Club (retail) | Experience on the Board and significant experience on the boards of other business organizations (including at a retail company 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 of Office1 | Principal 5 Years | Number of and Other 5 Years | Experience, Membership | ||||
INDEPENDENT TRUSTEES continued | ||||||||
Richard A. Goglia (1951) | Trustee since 2015 Audit Committee Member | Retired; formerly Vice President and Treasurer of Raytheon Company (defense) | 42 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) | 42 Director, Eastern Bank (bank); Director, The Hanover Insurance Group (property and casualty insurance) | Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a research and consulting company) |
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Trustee and Officer Information
Name and Year of Birth | Position(s) Held of Office1 | Principal 5 Years | Number of and Other 5 Years | Experience, Membership | ||||
INDEPENDENT TRUSTEES continued | ||||||||
Martin T. Meehan (1956) | Trustee since 2012 Contract Review Committee Member | President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell | 42 None | Experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience | ||||
Sandra O. Moose (1942) | Chairperson of the Board of Trustees since November 2005 Trustee since 2007 Ex Officio member of the Audit Committee, the Contract Review Committee and the Governance Committee | President, Strategic Advisory Services (management consulting) | 42 Formerly, Director, AES Corporation (international power company); formerly, Director, Verizon Communications (telecommunications company) | Significant experience on the Board and on the boards of other business organizations (including at a telecommunications company, an international power company and a specialty chemicals corporation); executive experience (including at a management consulting company) |
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Trustee and Officer Information
Name and Year of Birth | Position(s) Held of Office1 | Principal 5 Years | Number of and Other 5 Years | Experience, Membership | ||||
INDEPENDENT TRUSTEES continued | ||||||||
Erik R. Sirri (1958) | Trustee since 2009 Audit Committee Member | Professor of Finance at Babson College | 42 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 | 42 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 2007 Chairperson of the Governance Committee and Contract Review Committee Member | Deputy Dean for Finance and Administration, Yale University School of Medicine | 42 None | Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration) |
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Trustee and Officer Information
Name and Year of Birth | Position(s) Held of Office1 | Principal 5 Years | Number of and Other 5 Years | Experience, Membership | ||||
INTERESTED TRUSTEES | ||||||||
Kevin P. Charleston3 (1965) One Financial Center Boston, MA 02111 | Trustee since 2015 | President, Chief Executive Officer and Director; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P. | 42 None | Continuing service as President, Chief Executive Officer and Director of Loomis, Sayles & Company, L.P. | ||||
David L. Giunta4 (1965) | Trustee since 2011 President and Chief Executive Officer since 2008 | President and Chief Executive Officer, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | 42 None | Significant experience on the Board; continuing experience as President and Chief Executive Officer of NGAM Advisors, L.P. | ||||
John T. Hailer5 (1960) | Trustee since 2007 | President and Chief Executive Officer – U.S. and Asia, Natixis Global Asset Management, L.P. | 42 None | Significant experience on the Board; continuing experience as President and Chief Executive Officer – U.S. and Asia, Natixis Global Asset Management, L.P. |
1 | Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term. Ms. Moose was appointed to serve an additional three-year term as the Chairperson of the Board on December 13, 2013. |
2 | The trustees of the Trust serve as trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (collectively, the “Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (collectively, the “Loomis Sayles Funds Trusts”) (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 and Chief Executive Officer of Loomis, Sayles & Company, L.P. |
4 | Mr. Giunta is deemed an “interested person” of the Trust because he holds the following positions with an affiliated person of the Trust: President and Chief Executive Officer of NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
5 | Mr. Hailer is deemed an “interested person” of the Trust because he holds the following positions with an affiliated person of the Trust: President and Chief Executive Officer – U.S. and Asia, Natixis Global Asset Management, L.P. |
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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 | ||||||
Coleen Downs Dinneen (1960) | Secretary, Clerk and Chief Legal Officer | Since September 2004 | Executive Vice President, General Counsel, Secretary and Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | |||
Russell L. Kane (1969) | Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer | Chief Compliance Officer since May 2006; Assistant Secretary since June 2004; and Anti-Money Laundering Officer since April 2007 | Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | |||
Michael C. Kardok (1959) | Treasurer, Principal Financial and Accounting Officer | Since October 2004 | Senior Vice President, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
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 NGAM Distribution, L.P., NGAM Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from a trustee’s or officer’s current position with such entity. |
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ANNUAL REPORT
December 31, 2015
Gateway Equity Call Premium Fund
Loomis Sayles Strategic Alpha Fund
Portfolio Review page 1
Portfolio of Investments page 12
Financial Statements page 45
Notes to Financial Statements page 55
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GATEWAY EQUITY CALL PREMIUM FUND
Managers | Symbols | |
Daniel M. Ashcraft, CFA® | Class A GCPAX | |
Michael T. Buckius, CFA® | Class C GCPCX | |
Kenneth H. Toft, CFA® | Class Y GCPYX | |
Gateway Investment Advisers, LLC |
Objective
The Fund seeks total return with less risk than U.S. equity markets.
Market Conditions
2015 was a year dominated by monetary policy concerns. After more than a year of managing the market’s expectations on the timing, the Federal Reserve (the Fed) delivered an on time “liftoff”, ending its zero-interest-rate policy at its final meeting of the year. As the Fed monitored economic data that it believed supported a slow transition to a new policy stance, other events were in play: Greece’s bailout was restructured for the third time, other major central banks of the world expanded and extended their monetary easing programs, and the value of the U.S. dollar relative to other major currencies rose to levels not seen in more than 10 years. Fundamentally, domestic equity market conditions were mixed. Quarter to quarter, a large percentage of companies beat earnings estimates — yet fourth quarter earnings estimates indicate that aggregate earnings for the S&P 500® Index will likely show the first year-over-year decline since 2008. Overall, these factors led to an increase in uncertainty that was evidenced by increased market volatility as the year ended.
Implied volatility, as measured by the Chicago Board Options Exchange Volatility Index (the VIX), averaged 16.67 for the year and realized volatility for the S&P 500® Index was 15.74% (as measured by its annualized standard deviation of daily returns). Both measures were the highest since 2011. Until mid-August the volatility environment in 2015 was very similar to the conditions that had existed since mid-2012, with the VIX rarely above 20 and most often below 15. As concerns about China intensified and the S&P 500® Index neared its low-point for the year, on August 24th the VIX spiked and reached an intra-day high for the year of 53.29, its highest point since January 2009. From late August to year-end, the VIX spent nearly half of its trading sessions above 20 and never fell below 14.
Performance Results
For the 12 months ended December 31, 2015, Class A shares of Gateway Equity Call Premium Fund returned 3.90% at net asset value. The Fund underperformed its benchmark, the CBOE S&P 500 BuyWrite Index (BXMSM), which returned 5.24%.
Explanation of Fund Performance
The Fund seeks to generate returns by writing at- and near-the-money index call options against the full value of its underlying equity portfolio. The steady cash flow from call option writing is intended to be an important source of the Fund’s return, although it reduces the Fund’s ability to profit from increases in the value of its equity portfolio. The
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index call options written by the Fund often have similar characteristics to the index call option present in the BXM at any given time. However, unlike the BXM, the Fund employs an active strategy that gives its management team discretion to diversify expiration dates and strike prices across a portfolio of index call options, and to opportunistically pursue attractive call premiums while maintaining a relatively consistent risk profile.
Though collecting premiums from writing index call options will allow the Fund to generate a return when the S&P 500® Index advances, call option positions that expire or are closed out when the Index is well above the option’s strike price may generate realized losses. Index call options contributed positively to the Fund’s return over the course of the year, though they did generate realized losses in February, July and October when the market advanced sharply. As the market plummeted in mid-August, the management team focused on index call option decisions that would add significant cash flow potential and maintain diversification of expiration dates while not deviating significantly from the Fund’s typical risk profile.
The Fund outperformed its BXM benchmark in the first quarter, underperformed in the second and third quarter and matched the return of the benchmark in the fourth quarter. Most of the underperformance for the year came in July when the equity market advanced and the BXM had a return of 2.80% versus 1.86% for the Fund. The BXM’s July index call option had a higher strike price than the weighted-average strike price of the Fund’s index call option portfolio, giving the BXM more exposure to the market’s advance than the Fund. The Fund declined 9.00% from the market peak on July 20th to its bottom on August 25th. The index option management decisions during this period contributed to the Fund’s outperformance of 57 basis points relative to the BXM over the same period.
The Fund’s equity portfolio returned 0.64% for the year, a performance differential of negative 74 basis points versus the S&P 500® Index, which was consistent with expectations and objectives for the Fund. Index call options contributed 4.08% to the overall return for the year. Consistent with its objective, the measured risk of the Fund was lower than that of the benchmark, as its standard deviation for 2015 was 9.89% versus 11.93% for the BXM.
Outlook
2015 was a challenging year for investors with many major equity indexes generating low to negative returns. Moreover, diversification was limited as investment grade bonds failed to deliver attractive returns while riskier assets slipped. High yield bond indexes had negative returns and key commodity classes like energy and precious metals had large losses.
Looking forward, there appears to be good reason for investors to temper their optimism. Volatility is on the rise in equity markets and the bull market in domestic equities is getting long in the tooth. The current bull market is already a year longer than the average in the post-World War II era, though the longest bull market (starting in 1987) extended more than five years longer than this one.
The Barclays U.S. Aggregate Bond Index returned just 0.55% in 2015 and generated a trailing three-year annualized return of 1.44%. As the Fed recently initiated its plan to
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GATEWAY EQUITY CALL PREMIUM FUND
tighten monetary policy by increasing short-term interest rates, the environment for investment grade bonds seems likely to be challenging for some time. With the Fed tightening monetary policy while other key central banks remain accommodative, U.S. dollar strength could be a headwind for the returns of non-U.S. dollar denominated assets and a possible impediment to a recovery in commodity prices as well.
Gateway’s investment philosophy maintains that the U.S. equity market is the most reliable source of attractive long-term returns, despite its high volatility and tendency to periodically deliver significant losses over shorter periods of time. Our investment philosophy also holds that consistency is the key to long-term investment success and that generating cashflow, rather than seeking to forecast the rise and fall of the market, can be a lower-risk means to participate in equity markets. By staying true to this philosophy and continuing to manage the Fund consistently with the firm’s historical approach, we strive to assist the Fund’s shareholders in managing risk while pursuing long-term return in this challenging and uncertain environment.
Growth of $10,000 Investment in Class A Shares4
September 30, 2014 (inception) through December 31, 2015
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Average Annual Total Returns — December 31, 20154
1 Year | Life of Fund | |||||||
Class A (Inception 9/30/14) | ||||||||
NAV | 3.90 | % | 3.10 | % | ||||
With 5.75% Maximum Sales Charge | -2.09 | -1.66 | ||||||
Class C (Inception 9/30/14) | ||||||||
NAV | 3.07 | 2.35 | ||||||
With CDSC1 | 2.07 | 2.35 | ||||||
Class Y (Inception 9/30/14) | ||||||||
NAV | 4.03 | 3.32 | ||||||
Comparative Performance | ||||||||
CBOE S&P 500 BuyWrite Index (BXMSM)2 | 5.24 | 3.48 | ||||||
S&P 500® Index3 | 1.38 | 5.07 |
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. 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. Unlike a fund, an index is not managed and does not reflect fees and expenses. It is not possible to invest directly in an index.
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 CBOE S&P 500 BuyWrite Index (BXMSM) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500® Index. The BXM is a passive total return index based on (1) buying an S&P 500 stock index portfolio, and (2) “writing” (or selling) the near-term S&P 500 Index (SPXSM) “covered” call option, generally on the third Friday of each month. The SPX call written will have about one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The SPX call is held until expiration and cash settled, at which time a new one-month, near-the-money call is written. |
3 | 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. |
4 | Fund performance has been increased by fee waivers and/or expense reimbursements, if any, without which performance would have been lower. |
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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 Y LASYX | |
Loomis, Sayles & Company, L.P. |
Objective
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
Falling commodity prices and a strengthening U.S. dollar characterized the reporting period. Commodity prices declined significantly, with oil falling approximately 40%. The U.S. dollar generally advanced versus most currencies due to global divergence of economic growth and central bank policy. Most emerging market currencies declined versus their developed market counterparts, and commodity exporters were hit the hardest. Meanwhile, U.S. high yield corporates struggled as falling crude oil and commodity prices hampered the energy and materials sectors.
In the second half of the period, the world’s two largest economies — the United States and China — dominated the landscape. Contrary to investor expectations, the U.S. Federal Reserve (the Fed) opted to delay a rate hike in September due to global economic and market turbulence triggered by China’s economic slowdown. The market interpreted the Fed’s decision as confirmation of global growth risks, which further strained commodities, emerging markets and other risk assets. In December, the Fed responded to stronger U.S. economic conditions and hiked rates for the first time in nearly 10 years.
Performance Results
For the 12 months ended December 31, 2015, Class A Shares of the Loomis Sayles Strategic Alpha Fund returned -1.68% at net asset value. The Fund underperformed its benchmark, the 3-month London Interbank Offered Rate (LIBOR), which returned 0.23%. The Fund follows an absolute return strategy and is not managed to an index.
Explanation of Fund Performance
The Fund’s weak performance was mostly due to positions in high yield corporate bonds and convertibles. Global credit, emerging markets and the cost of some risk management tools also weighed on absolute return. Gains from our securitized, currency, bank loan and investment grade positions were not enough to offset the losses. Overall, the Fund’s higher-quality securities outperformed lower-quality positions.
The Fund’s exposure to convertibles weighed on performance, given the ongoing volatility in global equity markets. Global growth concerns and continued weakness in commodity
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prices sparked the volatility. Holdings in the energy, basic materials and technology industries were the main detractors. High yield corporate bonds also detracted from performance, as spreads (the difference in yield between Treasury and non-Treasury securities of similar maturity) widened, causing U.S. and European bond returns to decline. Following a solid first-half of the year, performance began to unravel mid-year, tracking the increase in volatility and global growth fears. Declining corporate profitability and uncertainty about the path of Fed rate hikes created additional headwinds. Selected holdings in energy and basic materials were the main detractors. Heightened third-quarter volatility also caused positions in global credit and emerging markets to decline.
To a lesser extent, the Fund’s risk management tools, including the use of credit default swaps on indexes and options, weighed on performance. Specifically, volatility temporarily declined at the beginning of the fourth quarter and caused our short emerging market exposure to detract.
The Fund’s securitized holdings, particularly non-agency residential mortgage-backed securities (RMBS) and asset-backed securities (ABS), generated positive returns. Home price gains, which were significantly stronger in 2015 than in recent years, and the yield advantages these securities attained in the past couple of years aided return. In addition, the Fund’s currency positioning contributed to performance, as the U.S. dollar continued to strengthen amid monetary policy divergence between the U.S. and Europe and Japan. Persistent weakness in oil and other commodity prices also pressured the currencies of commodity exporters. As a result, some of the Fund’s short currency positions, namely in the euro, South African rand and Brazilian real, aided performance. Meanwhile, the Fund’s highly diversified group of bank loans contributed to return. The floating-rate nature of bank loans and their senior position in the capital structure appealed to investors. Selected holdings in the consumer cyclical, capital goods and communication industries drove performance.
Outlook
We believe the Fed will remain data dependent, watching for a pick up in inflation before hiking rates again. We do not believe rates will rise materially during the year given weaker global growth expectations.
The United States has moved closer to the later stages of the credit cycle, a cyclical pattern that follows credit availability and corporate health, with high yield revenue growth weakening and corporate health showing early signs of deterioration. The world is adjusting to a slower, less commodity-intensive China and tightening U.S. monetary policy. The adjustment also includes a new regime of slowing global growth, slowing credit growth across emerging markets, and a stronger U.S. dollar. Emerging market debt fundamentals have been deteriorating due to lower growth expectations and weakening fiscal situations in individual countries. External balances are mixed as a country’s fate is determined by its status as a commodity importer or exporter. Meanwhile, European corporate fundamentals remain decent as revenues and earnings are poised to improve slightly on the back of recovering economies.
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Growth of $10,000 Investment in Class A Shares4
December 15, 2010 (inception) through December 31, 2015
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Average Annual Total Returns — December 31, 20154
1 Year | 5 Years | Life of Fund | ||||||||||
Class A (Inception 12/15/10) | ||||||||||||
NAV | -1.68 | % | 1.82 | % | 1.89 | % | ||||||
With 4.25% Maximum Sales Charge | -5.84 | 0.93 | 1.02 | |||||||||
Class C (Inception 12/15/10) | ||||||||||||
NAV | -2.44 | 1.05 | 1.11 | |||||||||
With CDSC1 | -3.38 | 1.05 | 1.11 | |||||||||
Class Y (Inception 12/15/10) | ||||||||||||
NAV | -1.43 | 2.06 | 2.13 | |||||||||
Comparative Performance | ||||||||||||
3-Month LIBOR2 | 0.23 | 0.31 | 0.31 | |||||||||
3-Month LIBOR + 300 basis points3 | 3.28 | 3.36 | 3.36 |
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. The table(s) do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. 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. Unlike a fund, an index is not managed and does not reflect fees and expenses. It is not possible to invest directly in an index.
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. |
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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.
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 Global Asset Management or any of its related or affiliated companies (collectively “NGAM”) and does not sponsor, endorse or participate in the provision of any NGAM services, funds or other financial products.
The index information contained herein is derived form 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 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 ngam.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 12-months ended June 30, 2015 is available on Natixis Fund’s 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.
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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 Fund’s prospectus. The following examples are intended to help you understand the ongoing costs of investing in the Fund and help you compare these with the ongoing costs of investing in other mutual funds.
The first line in the table for each class shows the actual account values and actual Fund expenses you would have paid on a $1,000 investment in the Fund from July 1, 2015 through December 31, 2015. 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 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.
GATEWAY EQUITY CALL PREMIUM FUND | BEGINNING ACCOUNT VALUE 7/1/2015 | ENDING ACCOUNT VALUE 12/31/2015 | EXPENSES PAID DURING PERIOD* 7/1/2015 – 12/31/2015 | |||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $1,002.70 | $6.06 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.16 | $6.11 | |||||||||
Class C | ||||||||||||
Actual | $1,000.00 | $997.70 | $9.82 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,015.38 | $9.91 | |||||||||
Class Y | ||||||||||||
Actual | $1,000.00 | $1,003.00 | $4.80 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.42 | $4.84 |
* | Expenses are equal to the Fund’s annualized expense ratio (after waiver/reimbursement): 1.20%, 1.95% and 0.95% 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 half-year (184), divided by 365 (to reflect the half-year period). |
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LOOMIS SAYLES STRATEGIC ALPHA FUND | BEGINNING ACCOUNT VALUE 7/1/2015 | ENDING ACCOUNT VALUE 12/31/2015 | EXPENSES PAID DURING PERIOD* 7/1/2015 – 12/31/2015 | |||||||||
Class A | ||||||||||||
Actual | $1,000.00 | $970.20 | $5.41 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.71 | $5.55 | |||||||||
Class C | ||||||||||||
Actual | $1,000.00 | $967.30 | $9.12 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,015.93 | $9.35 | |||||||||
Class Y | ||||||||||||
Actual | $1,000.00 | $971.50 | $4.17 | |||||||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.97 | $4.28 |
* | Expenses are equal to the Fund’s annualized expense ratio: 1.09%, 1.84% and 0.84% 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, 2015
Gateway Equity Call Premium Fund
Shares | Description | Value (†) | ||||||
Common Stocks — 95.9% of Net Assets | ||||||||
Aerospace & Defense — 2.8% | ||||||||
2,344 | Boeing Co. (The)(b) | $ | 338,919 | |||||
839 | General Dynamics Corp.(b) | 115,245 | ||||||
3,488 | Honeywell International, Inc.(b) | 361,252 | ||||||
468 | Huntington Ingalls Industries, Inc.(b) | 59,366 | ||||||
1,081 | KLX, Inc.(c)(d) | 33,284 | ||||||
766 | Lockheed Martin Corp.(b) | 166,337 | ||||||
536 | Precision Castparts Corp.(b) | 124,357 | ||||||
3,158 | United Technologies Corp.(b) | 303,389 | ||||||
|
| |||||||
1,502,149 | ||||||||
|
| |||||||
Air Freight & Logistics — 0.9% | ||||||||
1,070 | FedEx Corp.(b) | 159,419 | ||||||
3,485 | United Parcel Service, Inc., Class B(b) | 335,362 | ||||||
|
| |||||||
494,781 | ||||||||
|
| |||||||
Airlines — 0.6% | ||||||||
3,846 | Delta Air Lines, Inc.(b) | 194,954 | ||||||
1,466 | JetBlue Airways Corp.(b)(c) | 33,205 | ||||||
1,729 | United Continental Holdings, Inc.(b)(c) | 99,071 | ||||||
|
| |||||||
327,230 | ||||||||
|
| |||||||
Auto Components — 0.5% | ||||||||
3,995 | Johnson Controls, Inc.(b) | 157,763 | ||||||
833 | Lear Corp.(b) | 102,317 | ||||||
|
| |||||||
260,080 | ||||||||
|
| |||||||
Automobiles — 0.4% | ||||||||
5,572 | General Motors Co.(b) | 189,504 | ||||||
146 | Tesla Motors, Inc.(c) | 35,041 | ||||||
|
| |||||||
224,545 | ||||||||
|
| |||||||
Banks — 5.9% | ||||||||
32,756 | Bank of America Corp.(b) | 551,283 | ||||||
8,985 | Citigroup, Inc.(b) | 464,974 | ||||||
3,958 | Comerica, Inc.(b) | 165,563 | ||||||
1,712 | East West Bancorp, Inc.(b) | 71,151 | ||||||
4,018 | Fifth Third Bancorp(b) | 80,762 | ||||||
888 | First Republic Bank(b) | 58,661 | ||||||
12,632 | Huntington Bancshares, Inc.(b) | 139,710 | ||||||
11,014 | JPMorgan Chase & Co.(b) | 727,254 | ||||||
348 | Signature Bank(b)(c) | 53,373 | ||||||
1,946 | SunTrust Banks, Inc.(d) | 83,367 | ||||||
602 | SVB Financial Group(b)(c) | 71,578 | ||||||
13,795 | Wells Fargo & Co.(b) | 749,896 | ||||||
|
| |||||||
3,217,572 | ||||||||
|
| |||||||
Beverages — 2.0% | ||||||||
11,984 | Coca-Cola Co. (The)(b) | 514,833 | ||||||
5,873 | PepsiCo, Inc.(b) | 586,830 | ||||||
|
| |||||||
1,101,663 | ||||||||
|
|
See accompanying notes to financial statements.
| 12
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Biotechnology — 3.8% | ||||||||
4,709 | AbbVie, Inc.(b) | $ | 278,961 | |||||
713 | Alexion Pharmaceuticals, Inc.(b)(c) | 136,005 | ||||||
602 | Alkermes PLC(b)(c) | 47,787 | ||||||
676 | Alnylam Pharmaceuticals, Inc.(b)(c) | 63,639 | ||||||
2,818 | Amgen, Inc.(b) | 457,446 | ||||||
715 | Biogen, Inc.(b)(c) | 219,040 | ||||||
303 | BioMarin Pharmaceutical, Inc.(c) | 31,742 | ||||||
2,402 | Celgene Corp.(c)(d) | 287,663 | ||||||
4,499 | Gilead Sciences, Inc.(b) | 455,254 | ||||||
299 | Incyte Corp.(c)(d) | 32,427 | ||||||
253 | United Therapeutics Corp.(b)(c) | 39,622 | ||||||
|
| |||||||
2,049,586 | ||||||||
|
| |||||||
Building Products — 0.3% | ||||||||
832 | A.O. Smith Corp.(b) | 63,740 | ||||||
1,437 | Fortune Brands Home & Security, Inc.(b) | 79,753 | ||||||
|
| |||||||
143,493 | ||||||||
|
| |||||||
Capital Markets — 2.2% | ||||||||
5,777 | Bank of New York Mellon Corp. (The)(b) | 238,128 | ||||||
727 | BlackRock, Inc.(b) | 247,558 | ||||||
1,543 | Goldman Sachs Group, Inc. (The)(b) | 278,095 | ||||||
9,254 | Morgan Stanley(b) | 294,370 | ||||||
1,905 | Raymond James Financial, Inc.(b) | 110,433 | ||||||
906 | SEI Investments Co.(b) | 47,474 | ||||||
|
| |||||||
1,216,058 | ||||||||
|
| |||||||
Chemicals — 2.1% | ||||||||
110 | Agrium, Inc. | 9,827 | ||||||
1,129 | Air Products & Chemicals, Inc.(b) | 146,894 | ||||||
1,303 | Albemarle Corp.(b) | 72,981 | ||||||
454 | Ashland, Inc.(b) | 46,626 | ||||||
1,035 | Celanese Corp., Series A(b) | 69,687 | ||||||
6,005 | Huntsman Corp.(b) | 68,277 | ||||||
522 | International Flavors & Fragrances, Inc.(d) | 62,452 | ||||||
1,852 | Monsanto Co.(b) | 182,459 | ||||||
2,039 | PPG Industries, Inc.(b) | 201,494 | ||||||
1,970 | Praxair, Inc.(b) | 201,728 | ||||||
1,175 | Valspar Corp. (The)(b) | 97,466 | ||||||
|
| |||||||
1,159,891 | ||||||||
|
| |||||||
Commercial Services & Supplies — 0.2% | ||||||||
2,223 | Waste Management, Inc.(b) | 118,642 | ||||||
|
| |||||||
Communications Equipment — 1.6% | ||||||||
16,929 | Cisco Systems, Inc.(b) | 459,707 | ||||||
162 | Palo Alto Networks, Inc.(b)(c) | 28,535 | ||||||
7,635 | QUALCOMM, Inc.(b) | 381,635 | ||||||
|
| |||||||
869,877 | ||||||||
|
|
See accompanying notes to financial statements.
13 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Construction & Engineering — 0.1% | ||||||||
1,230 | Chicago Bridge & Iron Co.(d) | $ | 47,958 | |||||
|
| |||||||
Consumer Finance — 1.0% | ||||||||
3,272 | American Express Co.(b) | 227,568 | ||||||
2,082 | Capital One Financial Corp.(b) | 150,279 | ||||||
2,317 | Discover Financial Services(b) | 124,237 | ||||||
2,175 | Synchrony Financial(b)(c) | 66,142 | ||||||
|
| |||||||
568,226 | ||||||||
|
| |||||||
Containers & Packaging — 0.5% | ||||||||
1,600 | Crown Holdings, Inc.(b)(c) | 81,120 | ||||||
3,105 | International Paper Co.(b) | 117,059 | ||||||
963 | Packaging Corp. of America(d) | 60,717 | ||||||
|
| |||||||
258,896 | ||||||||
|
| |||||||
Diversified Financial Services — 1.3% | ||||||||
4,971 | Berkshire Hathaway, Inc., Class B(b)(c) | 656,371 | ||||||
661 | MSCI, Inc.(b) | 47,678 | ||||||
|
| |||||||
704,049 | ||||||||
|
| |||||||
Diversified Telecommunication Services — 2.3% | ||||||||
18,660 | AT&T, Inc.(d) | 642,090 | ||||||
13,121 | Verizon Communications, Inc.(b) | 606,453 | ||||||
|
| |||||||
1,248,543 | ||||||||
|
| |||||||
Electric Utilities — 1.7% | ||||||||
5,154 | American Electric Power Co., Inc.(b) | 300,324 | ||||||
1,876 | Pepco Holdings, Inc.(b) | 48,795 | ||||||
6,388 | PPL Corp.(b) | 218,022 | ||||||
3,760 | Southern Co. (The)(b) | 175,930 | ||||||
4,347 | Westar Energy, Inc.(b) | 184,356 | ||||||
|
| |||||||
927,427 | ||||||||
|
| |||||||
Electrical Equipment — 0.6% | ||||||||
299 | Acuity Brands, Inc.(b) | 69,906 | ||||||
3,147 | Emerson Electric Co.(d) | 150,521 | ||||||
1,951 | Sensata Technologies Holding NV(b)(c) | 89,863 | ||||||
|
| |||||||
310,290 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components — 0.5% | ||||||||
1,595 | Arrow Electronics, Inc.(b)(c) | 86,417 | ||||||
2,947 | Avnet, Inc.(b) | 126,250 | ||||||
3,429 | Flextronics International Ltd.(b)(c) | 38,439 | ||||||
|
| |||||||
251,106 | ||||||||
|
| |||||||
Energy Equipment & Services — 0.9% | ||||||||
2,857 | National Oilwell Varco, Inc.(b) | 95,681 | ||||||
1,541 | Oceaneering International, Inc.(b) | 57,818 | ||||||
4,759 | Schlumberger Ltd.(b) | 331,940 | ||||||
|
| |||||||
485,439 | ||||||||
|
|
See accompanying notes to financial statements.
| 14
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Food & Staples Retailing — 2.3% | ||||||||
1,364 | Costco Wholesale Corp.(b) | $ | 220,286 | |||||
3,995 | CVS Health Corp.(b) | 390,591 | ||||||
2,067 | Sysco Corp.(b) | 84,747 | ||||||
4,659 | Wal-Mart Stores, Inc.(b) | 285,597 | ||||||
2,862 | Walgreens Boots Alliance, Inc.(b) | 243,713 | ||||||
|
| |||||||
1,224,934 | ||||||||
|
| |||||||
Food Products — 1.7% | ||||||||
3,472 | General Mills, Inc.(b) | 200,195 | ||||||
859 | Hain Celestial Group, Inc. (The)(b)(c) | 34,695 | ||||||
387 | Ingredion, Inc.(b) | 37,090 | ||||||
2,622 | Kellogg Co.(b) | 189,492 | ||||||
2,522 | Kraft Heinz Co. (The)(d) | 183,501 | ||||||
5,934 | Mondelez International, Inc., Class A(b) | 266,081 | ||||||
|
| |||||||
911,054 | ||||||||
|
| |||||||
Gas Utilities — 0.2% | ||||||||
1,374 | Atmos Energy Corp.(b) | 86,617 | ||||||
1,194 | UGI Corp.(b) | 40,309 | ||||||
|
| |||||||
126,926 | ||||||||
|
| |||||||
Health Care Equipment & Supplies — 1.8% | ||||||||
6,618 | Abbott Laboratories(b) | 297,214 | ||||||
362 | Cooper Cos., Inc. (The)(b) | 48,580 | ||||||
1,650 | Hologic, Inc.(b)(c) | 63,839 | ||||||
692 | IDEXX Laboratories, Inc.(b)(c) | 50,461 | ||||||
3,654 | Medtronic PLC(b) | 281,066 | ||||||
1,216 | ResMed, Inc.(b) | 65,287 | ||||||
769 | Sirona Dental Systems, Inc.(b)(c) | 84,259 | ||||||
516 | Teleflex, Inc.(b) | 67,828 | ||||||
|
| |||||||
958,534 | ||||||||
|
| |||||||
Health Care Providers & Services — 2.7% | ||||||||
1,727 | Anthem, Inc.(b) | 240,813 | ||||||
1,901 | Community Health Systems, Inc.(c)(d) | 50,433 | ||||||
3,178 | Express Scripts Holding Co.(b)(c) | 277,789 | ||||||
1,084 | Health Net, Inc.(b)(c) | 74,211 | ||||||
1,147 | McKesson Corp.(b) | 226,223 | ||||||
779 | MEDNAX, Inc.(b)(c) | 55,823 | ||||||
4,405 | UnitedHealth Group, Inc.(b) | 518,204 | ||||||
|
| |||||||
1,443,496 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure — 2.0% | ||||||||
271 | Domino’s Pizza, Inc.(b) | 30,149 | ||||||
3,715 | Hilton Worldwide Holdings, Inc.(b) | 79,501 | ||||||
1,127 | Las Vegas Sands Corp.(b) | 49,408 | ||||||
2,902 | McDonald’s Corp.(b) | 342,842 | ||||||
3,508 | MGM Resorts International(c)(d) | 79,702 | ||||||
850 | Norwegian Cruise Line Holdings Ltd.(b)(c) | 49,810 | ||||||
4,551 | Starbucks Corp.(d) | 273,196 |
See accompanying notes to financial statements.
15 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Hotels, Restaurants & Leisure — continued | ||||||||
2,183 | Yum! Brands, Inc.(b) | $ | 159,468 | |||||
|
| |||||||
1,064,076 | ||||||||
|
| |||||||
Household Durables — 0.4% | ||||||||
1,664 | Jarden Corp.(b)(c) | 95,048 | ||||||
1,246 | Leggett & Platt, Inc.(b) | 52,357 | ||||||
2,333 | Toll Brothers, Inc.(b)(c) | 77,689 | ||||||
|
| |||||||
225,094 | ||||||||
|
| |||||||
Household Products — 1.9% | ||||||||
559 | Church & Dwight Co., Inc.(b) | 47,448 | ||||||
1,573 | Clorox Co. (The)(b) | 199,504 | ||||||
1,299 | Kimberly-Clark Corp.(b) | 165,363 | ||||||
8,106 | Procter & Gamble Co. (The)(b) | 643,697 | ||||||
|
| |||||||
1,056,012 | ||||||||
|
| |||||||
Industrial Conglomerates — 2.6% | ||||||||
3,105 | 3M Co.(b) | 467,737 | ||||||
29,821 | General Electric Co.(b) | 928,924 | ||||||
|
| |||||||
1,396,661 | ||||||||
|
| |||||||
Insurance — 2.3% | ||||||||
2,241 | ACE Ltd.(b) | 261,861 | ||||||
2,099 | Arch Capital Group Ltd.(b)(c) | 146,405 | ||||||
974 | Chubb Corp. (The)(b) | 129,191 | ||||||
2,022 | Cincinnati Financial Corp.(b) | 119,642 | ||||||
5,325 | Lincoln National Corp.(b) | 267,635 | ||||||
3,815 | Prudential Financial, Inc.(d) | 310,579 | ||||||
|
| |||||||
1,235,313 | ||||||||
|
| |||||||
Internet & Catalog Retail — 2.4% | ||||||||
1,140 | Amazon.com, Inc.(b)(c) | 770,515 | ||||||
3,732 | Liberty Interactive Corp./QVC Group, Class A(b)(c) | 101,958 | ||||||
1,823 | Liberty Ventures, Series A(b)(c) | 82,235 | ||||||
1,235 | Netflix, Inc.(b)(c) | 141,259 | ||||||
166 | Priceline Group, Inc. (The)(b)(c) | 211,642 | ||||||
|
| |||||||
1,307,609 | ||||||||
|
| |||||||
Internet Software & Services — 4.2% | ||||||||
554 | Alibaba Group Holding Ltd., Sponsored ADR(b)(c) | 45,024 | ||||||
898 | Alphabet, Inc., Class A(b)(c) | 698,653 | ||||||
881 | Alphabet, Inc., Class C(b)(c) | 668,573 | ||||||
7,189 | Facebook, Inc., Class A(b)(c) | 752,401 | ||||||
3,408 | Yahoo!, Inc.(b)(c) | 113,350 | ||||||
|
| |||||||
2,278,001 | ||||||||
|
| |||||||
IT Services — 3.1% | ||||||||
2,281 | Accenture PLC, Class A(b) | 238,365 | ||||||
1,086 | Global Payments, Inc.(d) | 70,058 | ||||||
2,834 | International Business Machines Corp.(b) | 390,015 | ||||||
3,490 | MasterCard, Inc., Class A(d) | 339,787 |
See accompanying notes to financial statements.
| 16
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
IT Services — continued | ||||||||
2,951 | Paychex, Inc.(b) | $ | 156,078 | |||||
6,417 | Visa, Inc., Class A(b) | 497,638 | ||||||
|
| |||||||
1,691,941 | ||||||||
|
| |||||||
Leisure Products — 0.1% | ||||||||
500 | Polaris Industries, Inc.(b) | 42,975 | ||||||
|
| |||||||
Life Sciences Tools & Services — 0.5% | ||||||||
452 | Illumina, Inc.(b)(c) | 86,759 | ||||||
1,196 | Thermo Fisher Scientific, Inc.(b) | 169,653 | ||||||
|
| |||||||
256,412 | ||||||||
|
| |||||||
Machinery — 0.9% | ||||||||
3,478 | Caterpillar, Inc.(b) | 236,365 | ||||||
1,770 | Cummins, Inc.(b) | 155,778 | ||||||
1,012 | WABCO Holdings, Inc.(c)(d) | 103,487 | ||||||
|
| |||||||
495,630 | ||||||||
|
| |||||||
Media — 2.9% | ||||||||
293 | Charter Communications, Inc., Series A(b)(c) | 53,648 | ||||||
7,797 | Comcast Corp., Class A(b) | 439,985 | ||||||
10,472 | Sirius XM Holdings, Inc.(c) | 42,621 | ||||||
819 | Time Warner Cable, Inc.(b) | 151,998 | ||||||
3,559 | Time Warner, Inc.(d) | 230,160 | ||||||
5,460 | Twenty-First Century Fox, Inc., Class A(b) | 148,294 | ||||||
170 | Twenty-First Century Fox, Inc., Class B | 4,629 | ||||||
4,550 | Walt Disney Co. (The)(b) | 478,114 | ||||||
|
| |||||||
1,549,449 | ||||||||
|
| |||||||
Multi-Utilities — 0.7% | ||||||||
2,285 | Alliant Energy Corp.(b) | 142,698 | ||||||
2,567 | PG&E Corp.(b) | 136,539 | ||||||
3,122 | Public Service Enterprise Group, Inc.(b) | 120,790 | ||||||
|
| |||||||
400,027 | ||||||||
|
| |||||||
Multiline Retail — 0.6% | ||||||||
2,679 | Nordstrom, Inc.(d) | 133,441 | ||||||
2,590 | Target Corp.(b) | 188,060 | ||||||
|
| |||||||
321,501 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels — 5.5% | ||||||||
3,208 | Apache Corp.(b) | 142,660 | ||||||
1,608 | Cheniere Energy, Inc.(b)(c) | 59,898 | ||||||
5,809 | Chevron Corp.(d) | 522,578 | ||||||
723 | Concho Resources, Inc.(b)(c) | 67,138 | ||||||
6,897 | Devon Energy Corp.(b) | 220,704 | ||||||
12,790 | Exxon Mobil Corp.(b) | 996,981 | ||||||
1,180 | HollyFrontier Corp.(b) | 47,070 | ||||||
3,085 | Noble Energy, Inc.(b) | 101,589 | ||||||
3,231 | Occidental Petroleum Corp.(b) | 218,448 | ||||||
2,584 | Phillips 66(b) | 211,371 |
See accompanying notes to financial statements.
17 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Oil, Gas & Consumable Fuels — continued | ||||||||
1,219 | Pioneer Natural Resources Co.(b) | $ | 152,838 | |||||
8,593 | Spectra Energy Corp.(b) | 205,716 | ||||||
3,928 | Whiting Petroleum Corp.(b)(c) | 37,080 | ||||||
|
| |||||||
2,984,071 | ||||||||
|
| |||||||
Pharmaceuticals — 5.6% | ||||||||
1,313 | Allergan PLC(b)(c) | 410,313 | ||||||
5,393 | Bristol-Myers Squibb Co.(b) | 370,984 | ||||||
3,382 | Eli Lilly & Co.(b) | 284,967 | ||||||
333 | Jazz Pharmaceuticals PLC(b)(c) | 46,807 | ||||||
7,985 | Johnson & Johnson(b) | 820,219 | ||||||
8,665 | Merck & Co., Inc.(b) | 457,685 | ||||||
19,440 | Pfizer, Inc.(d) | 627,523 | ||||||
|
| |||||||
3,018,498 | ||||||||
|
| |||||||
Professional Services — 0.3% | ||||||||
504 | Manpowergroup, Inc.(b) | 42,482 | ||||||
427 | Towers Watson & Co., Class A(b) | 54,852 | ||||||
769 | Verisk Analytics, Inc.(b)(c) | 59,121 | ||||||
|
| |||||||
156,455 | ||||||||
|
| |||||||
REITs – Apartments — 0.5% | ||||||||
655 | Essex Property Trust, Inc.(d) | 156,814 | ||||||
3,750 | UDR, Inc.(b) | 140,887 | ||||||
|
| |||||||
297,701 | ||||||||
|
| |||||||
REITs – Diversified — 0.6% | ||||||||
1,476 | Crown Castle International Corp.(d) | 127,600 | ||||||
741 | Digital Realty Trust, Inc.(b) | 56,035 | ||||||
5,547 | Duke Realty Corp.(b) | 116,598 | ||||||
|
| |||||||
300,233 | ||||||||
|
| |||||||
REITs – Mortgage — 0.3% | ||||||||
4,192 | American Capital Agency Corp.(d) | 72,689 | ||||||
10,778 | Annaly Capital Management, Inc.(b) | 101,098 | ||||||
|
| |||||||
173,787 | ||||||||
|
| |||||||
REITs – Office Property — 0.4% | ||||||||
1,986 | SL Green Realty Corp.(b) | 224,378 | ||||||
|
| |||||||
REITs – Shopping Centers — 0.3% | ||||||||
10,987 | DDR Corp.(d) | 185,021 | ||||||
|
| |||||||
REITs – Single Tenant — 0.2% | ||||||||
2,036 | Realty Income Corp.(b) | 105,119 | ||||||
|
| |||||||
REITs – Storage — 0.3% | ||||||||
1,567 | Extra Space Storage, Inc.(b) | 138,225 | ||||||
|
| |||||||
Road & Rail — 0.8% | ||||||||
1,415 | Norfolk Southern Corp.(b) | 119,695 | ||||||
1,619 | Old Dominion Freight Line, Inc.(b)(c) | 95,634 | ||||||
2,846 | Union Pacific Corp.(b) | 222,557 | ||||||
|
| |||||||
437,886 | ||||||||
|
|
See accompanying notes to financial statements.
| 18
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Semiconductors & Semiconductor Equipment — 2.3% | ||||||||
10,734 | Applied Materials, Inc.(d) | $ | 200,404 | |||||
16,119 | Intel Corp.(b) | 555,299 | ||||||
2,134 | Maxim Integrated Products, Inc.(b) | 81,092 | ||||||
6,392 | Micron Technology, Inc.(b)(c) | 90,511 | ||||||
367 | NXP Semiconductors NV(b)(c) | 30,920 | ||||||
5,462 | Texas Instruments, Inc.(b) | 299,372 | ||||||
|
| |||||||
1,257,598 | ||||||||
|
| |||||||
Software — 4.3% | ||||||||
2,301 | Activision Blizzard, Inc.(b) | 89,072 | ||||||
1,605 | Adobe Systems, Inc.(b)(c) | 150,774 | ||||||
313 | ANSYS, Inc.(b)(c) | 28,952 | ||||||
1,993 | Cadence Design Systems, Inc.(b)(c) | 41,474 | ||||||
420 | CDK Global, Inc. | 19,937 | ||||||
411 | Check Point Software Technologies Ltd.(b)(c) | 33,447 | ||||||
23,915 | Microsoft Corp.(b) | 1,326,804 | ||||||
10,628 | Oracle Corp.(d) | 388,241 | ||||||
2,254 | Salesforce.com, Inc.(b)(c) | 176,714 | ||||||
314 | ServiceNow, Inc.(c)(d) | 27,180 | ||||||
897 | Synopsys, Inc.(b)(c) | 40,912 | ||||||
115 | Ultimate Software Group, Inc. (The)(b)(c) | 22,484 | ||||||
|
| |||||||
2,345,991 | ||||||||
|
| |||||||
Specialty Retail — 2.5% | ||||||||
647 | Advance Auto Parts, Inc.(b) | 97,380 | ||||||
1,138 | Foot Locker, Inc.(b) | 74,072 | ||||||
4,042 | Home Depot, Inc. (The)(b) | 534,554 | ||||||
3,543 | Lowe’s Cos., Inc.(b) | 269,410 | ||||||
504 | Signet Jewelers Ltd.(b) | 62,340 | ||||||
3,414 | TJX Cos., Inc. (The)(b) | 242,087 | ||||||
233 | Ulta Salon, Cosmetics & Fragrance, Inc.(b)(c) | 43,105 | ||||||
219 | Williams-Sonoma, Inc. | 12,792 | ||||||
|
| |||||||
1,335,740 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals — 3.9% | ||||||||
16,663 | Apple, Inc.(b) | 1,753,947 | ||||||
6,701 | EMC Corp.(b) | 172,082 | ||||||
6,521 | Hewlett Packard Enterprise Co.(b) | 99,119 | ||||||
8,007 | HP, Inc.(b) | 94,803 | ||||||
|
| |||||||
2,119,951 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods — 0.9% | ||||||||
3,267 | Hanesbrands, Inc.(b) | 96,148 | ||||||
6,032 | NIKE, Inc., Class B(b) | 377,000 | ||||||
|
| |||||||
473,148 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance — 0.0% | ||||||||
1,109 | New York Community Bancorp, Inc. | 18,099 | ||||||
|
| |||||||
Tobacco — 1.6% | ||||||||
7,245 | Altria Group, Inc.(b) | 421,732 |
See accompanying notes to financial statements.
19 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Shares | Description | Value (†) | ||||||
Tobacco — continued | ||||||||
5,186 | Philip Morris International, Inc.(b) | $ | 455,901 | |||||
|
| |||||||
877,633 | ||||||||
|
| |||||||
Water Utilities — 0.1% | ||||||||
1,078 | American Water Works Co., Inc.(b) | 64,411 | ||||||
|
| |||||||
Total Common Stocks (Identified Cost $50,316,339) | 51,987,091 | |||||||
|
| |||||||
Total Investments — 95.9% (Identified Cost $50,316,339)(a) | 51,987,091 | |||||||
Other assets less liabilities — 4.1% | 2,238,316 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 54,225,407 | ||||||
|
| |||||||
Contracts | ||||||||
Written Options — (1.2%) | ||||||||
Index Options — (1.2%) | ||||||||
29 | On S&P 500® Index, Call expiring January 08, 2016 at 2050 | $ | (43,790 | ) | ||||
27 | On S&P 500® Index, Call expiring January 15, 2016 at 2000 | (148,095 | ) | |||||
59 | On S&P 500® Index, Call expiring January 15, 2016 at 2050 | (123,015 | ) | |||||
27 | On S&P 500® Index, Call expiring January 15, 2016 at 2075 | (25,380 | ) | |||||
33 | On S&P 500® Index, Call expiring January 15, 2016 at 2100 | (10,560 | ) | |||||
25 | On S&P 500® Index, Call expiring January 22, 2016 at 2075 | (33,500 | ) | |||||
22 | On S&P 500® Index, Call expiring February 19, 2016 at 2025 | (121,770 | ) | |||||
30 | On S&P 500® Index, Call expiring February 19, 2016 at 2050 | (119,550 | ) | |||||
|
| |||||||
Total Written Options (Premiums Received $1,260,695) | $ | (625,660 | ) | |||||
|
| |||||||
(†) | See Note 2 of Notes to Financial Statements. | |||||||
(a) | Federal Tax Information: | |||||||
At December 31, 2015, the net unrealized appreciation on investments based on a cost of $50,335,524 for federal income tax purposes was as follows: | ||||||||
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost | $ | 3,383,192 | ||||||
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value | (1,731,625 | ) | ||||||
|
| |||||||
Net unrealized appreciation | $ | 1,651,567 | ||||||
|
| |||||||
(b) | All of this security has been pledged as collateral for outstanding options. | |||||||
(c) | Non-income producing security. | |||||||
(d) | A portion of this security has been pledged as collateral for outstanding options. | |||||||
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. | |||||||
REITs | Real Estate Investment Trusts |
See accompanying notes to financial statements.
| 20
Table of Contents
Portfolio of Investments – as of December 31, 2015
Gateway Equity Call Premium Fund – (continued)
Industry Summary at December 31, 2015
Banks | 5.9 | % | ||
Pharmaceuticals | 5.6 | |||
Oil, Gas & Consumable Fuels | 5.5 | |||
Software | 4.3 | |||
Internet Software & Services | 4.2 | |||
Technology Hardware, Storage & Peripherals | 3.9 | |||
Biotechnology | 3.8 | |||
IT Services | 3.1 | |||
Media | 2.9 | |||
Aerospace & Defense | 2.8 | |||
Health Care Providers & Services | 2.7 | |||
Industrial Conglomerates | 2.6 | |||
Specialty Retail | 2.5 | |||
Internet & Catalog Retail | 2.4 | |||
Semiconductors & Semiconductor Equipment | 2.3 | |||
Diversified Telecommunication Services | 2.3 | |||
Insurance | 2.3 | |||
Food & Staples Retailing | 2.3 | |||
Capital Markets | 2.2 | |||
Chemicals | 2.1 | |||
Beverages | 2.0 | |||
Hotels, Restaurants & Leisure | 2.0 | |||
Other Investments, less than 2% each | 26.2 | |||
|
| |||
Total Investments | 95.9 | |||
Other assets less liabilities (including open written options) | 4.1 | |||
|
| |||
Net Assets | 100.0 | % | ||
|
|
See accompanying notes to financial statements.
21 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund
Principal Amount (‡) | Description | Value (†) | ||||||
Bonds and Notes — 80.5% of Net Assets | ||||||||
Non-Convertible Bonds — 78.4% | ||||||||
ABS Car Loan — 1.6% | ||||||||
$ | 804,000 | AmeriCredit Automobile Receivables Trust, Series 2013-4, Class D, 3.310%, 10/08/2019 | $ | 817,175 | ||||
1,455,000 | AmeriCredit Automobile Receivables Trust, Series 2015-4, Class D, 3.720%, 12/08/2021 | 1,450,765 | ||||||
2,450,000 | Flagship Credit Auto Trust, Series 2015-2, Class D, 5.980%, 8/15/2022, 144A | 2,372,972 | ||||||
2,280,000 | Ford Credit Auto Owner Trust, Series 2014-C, Class A3, 1.060%, 5/15/2019(b) | 2,274,601 | ||||||
2,810,000 | Ford Credit Auto Owner Trust, Series 2015-A, Class A3, 1.280%, 9/15/2019(b) | 2,805,465 | ||||||
3,350,000 | Ford Credit Auto Owner Trust, Series 2015-C, Class A3, 1.410%, 2/15/2020 | 3,334,843 | ||||||
2,455,000 | Honda Auto Receivables Owner Trust, Series 2014-4, Class A3, 0.990%, 9/17/2018(b) | 2,446,863 | ||||||
3,385,000 | Honda Auto Receivables Owner Trust, Series 2015-3, Class A3, 1.270%, 4/18/2019 | 3,369,083 | ||||||
3,215,000 | Toyota Auto Receivables Owner Trust, Series 2015-C, Class A3, 1.340%, 6/17/2019 | 3,207,212 | ||||||
|
| |||||||
22,078,979 | ||||||||
|
| |||||||
ABS Credit Card — 4.9% | ||||||||
3,145,000 | American Express Credit Account Master Trust, Series 2013-1, Class A, 0.751%, 2/16/2021(b)(c) | 3,144,343 | ||||||
1,860,000 | American Express Credit Account Master Trust, Series 2013-3, Class A, 0.980%, 5/15/2019(b) | 1,858,346 | ||||||
1,015,000 | American Express Credit Account Master Trust, Series 2014-3, Class A, 1.490%, 4/15/2020(b) | 1,015,360 | ||||||
2,695,000 | American Express Credit Account Master Trust, Series 2014-4, Class A, 1.430%, 6/15/2020(b) | 2,690,305 | ||||||
2,295,000 | American Express Credit Account Master Trust, Series 2014-5, Class A, 0.621%, 5/15/2020(b)(c) | 2,290,463 | ||||||
2,050,000 | BA Credit Card Trust, Series 2014-A1, Class A, 0.711%, 6/15/2021(b)(c) | 2,046,455 | ||||||
3,600,000 | Capital One Multi-Asset Execution Trust, Series 2004-A7, Class A7, 1.450%, 8/16/2021 | 3,568,369 | ||||||
3,075,000 | Capital One Multi-Asset Execution Trust, Series 2013-A3, Class A3, 0.960%, 9/16/2019(b) | 3,070,567 | ||||||
6,600,000 | Chase Issuance Trust, Series 2013-A8, Class A8, 1.010%, 10/15/2018(b) | 6,594,093 | ||||||
6,640,000 | Chase Issuance Trust, Series 2014-A7, Class A, 1.380%, 11/15/2019(b) | 6,621,018 | ||||||
3,780,000 | Chase Issuance Trust, Series 2014-A8, Class A, 0.581%, 11/15/2018(b)(c) | 3,778,707 | ||||||
3,560,000 | Chase Issuance Trust, Series 2015-A1, Class A, 0.651%, 2/18/2020(b)(c) | 3,553,255 | ||||||
4,230,000 | Chase Issuance Trust, Series 2015-A2, Class A, 1.590%, 2/18/2020(b) | 4,229,411 | ||||||
3,500,000 | Chase Issuance Trust, Series 2015-A4, Class A, 1.840%, 4/15/2022(b) | 3,456,087 | ||||||
3,165,000 | Citibank Credit Card Issuance Trust, Series 2013-A6, Class A6, 1.320%, 9/07/2018(b) | 3,171,173 | ||||||
5,825,000 | Citibank Credit Card Issuance Trust, Series 2013-A7, Class A7, 0.723%, 9/10/2020(b)(c) | 5,819,936 |
See accompanying notes to financial statements.
| 22
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Credit Card — continued | ||||||||
$ | 3,000,000 | Citibank Credit Card Issuance Trust, Series 2014-A4, Class A4, 1.230%, 4/24/2019(b) | $ | 2,998,888 | ||||
3,045,000 | Citibank Credit Card Issuance Trust, Series 2014-A8, Class A8, 1.730%, 4/09/2020(b) | 3,052,125 | ||||||
3,600,000 | World Financial Network Credit Card Master Trust, Series 2015-C, Class A, 1.260%, 3/15/2021 | 3,580,408 | ||||||
|
| |||||||
66,539,309 | ||||||||
|
| |||||||
ABS Home Equity — 11.4% | ||||||||
860,660 | Adjustable Rate Mortgage Trust, Series 2004-4, Class 3A1, 2.897%, 3/25/2035(b)(c) | 843,332 | ||||||
1,030,988 | Adjustable Rate Mortgage Trust, Series 2004-5, Class 5A1, 2.709%, 4/25/2035(b)(c) | 996,907 | ||||||
733,701 | Alternative Loan Trust, Series 2003-9T1, Class A7, 5.500%, 7/25/2033 | 738,191 | ||||||
914,300 | Alternative Loan Trust, Series 2003-20CB, Class 2A1, 5.750%, 10/25/2033(b) | 951,092 | ||||||
552,447 | Alternative Loan Trust, Series 2004-28CB, Class 5A1, 5.750%, 1/25/2035 | 557,748 | ||||||
1,620,305 | Alternative Loan Trust, Series 2005-J1, Class 2A1, 5.500%, 2/25/2025 | 1,662,542 | ||||||
1,500,000 | American Homes 4 Rent, Series 2014-SFR1, Class E, 2.851%, 6/17/2031, 144A(c) | 1,437,636 | ||||||
300,000 | American Homes 4 Rent, Series 2014-SFR2, Class D, 5.149%, 10/17/2036, 144A | 299,291 | ||||||
1,980,000 | American Homes 4 Rent, Series 2014-SFR2, Class E, 6.231%, 10/17/2036, 144A | 1,996,348 | ||||||
1,200,000 | American Homes 4 Rent, Series 2014-SFR3, Class E, 6.418%, 12/17/2036, 144A | 1,224,356 | ||||||
1,065,479 | Banc of America Alternative Loan Trust, Series 2003-8, Class 1CB1, 5.500%, 10/25/2033 | 1,114,123 | ||||||
1,217,683 | Banc of America Alternative Loan Trust, Series 2003-10, Class 1A1, 5.500%, 12/25/2033(b) | 1,251,248 | ||||||
1,726,136 | Banc of America Alternative Loan Trust, Series 2003-10, Class 3A1, 5.500%, 12/25/2033 | 1,764,976 | ||||||
1,358,728 | Banc of America Alternative Loan Trust, Series 2005-6, Class CB7, 5.250%, 7/25/2035 | 1,245,422 | ||||||
923,565 | Banc of America Funding Corp., Series 2007-4, Class 5A1, 5.500%, 11/25/2034 | 937,620 | ||||||
1,891,669 | Banc of America Funding Trust, Series 2004-B, Class 4A2, 2.769%, 11/20/2034(c) | 1,833,268 | ||||||
699,119 | Banc of America Funding Trust, Series 2005-5, Class A1, 5.500%, 9/25/2035(b) | 728,754 | ||||||
1,282,897 | Banc of America Funding Trust, Series 2005-7, Class 3A1, 5.750%, 11/25/2035 | 1,314,287 | ||||||
2,735,663 | Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-6, Class 2A1, 2.920%, 9/25/2034(c) | 2,635,925 | ||||||
1,454,802 | Bear Stearns Adjustable Rate Mortgage Trust, Series 2005-12, Class 11A1, 2.702%, 2/25/2036(c) | 1,150,070 | ||||||
1,224,457 | Citicorp Mortgage Securities Trust, Series 2006-4, Class 1A2, 6.000%, 8/25/2036 | 1,236,172 |
See accompanying notes to financial statements.
23 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Home Equity — continued | ||||||||
$ | 826,671 | Citigroup Mortgage Loan Trust, Inc., Series 2005-2, Class 1A4, 2.626%, 5/25/2035(c) | $ | 775,920 | ||||
3,184,484 | Citigroup Mortgage Loan Trust, Inc., Series 2005-3, Class 2A3, 2.745%, 8/25/2035(c) | 2,965,963 | ||||||
3,478,238 | Citigroup Mortgage Loan Trust, Inc., Series 2014-11, Class 2A1, 0.361%, 8/25/2036, 144A(c) | 3,134,836 | ||||||
3,133,280 | Citigroup Mortgage Loan Trust, Inc., Series 2015-2, Class 1A1, 0.421%, 6/25/2047, 144A(b)(c) | 2,901,756 | ||||||
2,407,582 | CitiMortgage Alternative Loan Trust, Series 2006-A4, Class 1A1, 6.000%, 9/25/2036 | 2,158,765 | ||||||
2,200,000 | Colony American Finance Ltd., Series 2015-1, Class D, 5.649%, 10/15/2047, 144A | 2,148,161 | ||||||
1,855,000 | Colony American Homes, Series 2014-1A, Class C, 2.201%, 5/17/2031, 144A(b)(c) | 1,800,398 | ||||||
400,000 | Colony American Homes, Series 2014-2A, Class E, 3.620%, 7/17/2031, 144A(c) | 386,443 | ||||||
1,630,000 | Colony American Homes, Series 2015-1A, Class D, 2.501%, 7/17/2032, 144A(b)(c) | 1,562,297 | ||||||
982,785 | Countrywide Alternative Loan Trust, Series 2004-14T2, Class A11, 5.500%, 8/25/2034 | 1,038,117 | ||||||
960,600 | Countrywide Alternative Loan Trust, Series 2004-J3, Class 1A1, 5.500%, 4/25/2034(b) | 990,617 | ||||||
26,930 | Countrywide Alternative Loan Trust, Series 2004-J7, Class 1A5, 5.380%, 8/25/2034(c)(d) | 26,435 | ||||||
1,085,914 | Countrywide Alternative Loan Trust, Series 2005-14, Class 2A1, 0.632%, 5/25/2035(c) | 896,985 | ||||||
686,165 | Countrywide Alternative Loan Trust, Series 2007-4, Class 1A7, 5.750%, 4/25/2037 | 618,522 | ||||||
1,132,400 | Countrywide Home Loan Mortgage Pass Through Trust, Series 2004-12, Class 8A1, 2.881%, 8/25/2034(c) | 995,341 | ||||||
173,754 | Countrywide Home Loan Mortgage Pass Through Trust, Series 2004-HYB4, Class 2A1, 2.581%, 9/20/2034(c) | 165,799 | ||||||
419,744 | Countrywide Home Loan Mortgage Pass Through Trust, Series 2005-11, Class 4A1, 0.692%, 4/25/2035(c) | 336,439 | ||||||
1,208,163 | Countrywide Home Loan Mortgage Pass Through Trust, Series 2005-21, Class A17, 5.500%, 10/25/2035 | 1,128,631 | ||||||
851,353 | Credit Suisse First Boston Mortgage Securities Corp., Series 2003-AR26, Class 7A1, 2.713%, 11/25/2033(b)(c) | 818,325 | ||||||
545,053 | Credit Suisse First Boston Mortgage Securities Corp., Series 2003-AR28, Class 4A1, 2.792%, 12/25/2033(c)(d) | 534,675 | ||||||
2,271,106 | Credit Suisse First Boston Mortgage Securities Corp., Series 2004-AR3, Class 3A1, 2.711%, 5/25/2034(b)(c) | 1,952,238 | ||||||
999,883 | Credit Suisse First Boston Mortgage Securities Corp., Series 2005-10, Class 5A4, 5.500%, 11/25/2035 | 908,153 | ||||||
515,259 | Credit Suisse Mortgage Capital Certificates, Series 2006-8, Class 4A1, 6.500%, 10/25/2021 | 434,309 | ||||||
377,027 | Deutsche Alternative Mortgage Loan Trust Securities, Inc., Series 2005-3, Class 4A4, 5.250%, 6/25/2035 | 378,177 |
See accompanying notes to financial statements.
| 24
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Home Equity — continued | ||||||||
$ | 907,405 | Deutsche Alternative Mortgage Loan Trust Securities, Inc., Series 2005-5, Class 1A4, 5.500%, 11/25/2035(c) | $ | 866,872 | ||||
294,420 | FDIC Trust, Series 2013-N1, Class A, 4.500%, 10/25/2018, 144A | 294,604 | ||||||
500,000 | Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2013-DN2, Class M2, 4.672%, 11/25/2023(c) | 495,321 | ||||||
2,015,000 | Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2014-DN1, Class M2, 2.622%, 2/25/2024(b)(c) | 2,008,244 | ||||||
1,785,000 | Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2014-DN2, Class M2, 1.871%, 4/25/2024(b)(c) | 1,754,332 | ||||||
2,585,000 | Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2015-DNA1, Class M2, 2.272%, 10/25/2027(c) | 2,549,613 | ||||||
1,706,629 | GMAC Mortgage Corp. Loan Trust, Series 2005-AR3, Class 2A1, 2.915%, 6/19/2035(c) | 1,653,980 | ||||||
654,773 | GMAC Mortgage Corp. Loan Trust, Series 2005-AR4, Class 3A1, 3.197%, 7/19/2035(c) | 617,821 | ||||||
256,626 | GSR Mortgage Loan Trust, Series 2004-14, Class 3A1, 3.129%, 12/25/2034(c) | 247,590 | ||||||
1,322,574 | GSR Mortgage Loan Trust, Series 2004-14, Class 5A1, 2.868%, 12/25/2034(b)(c) | 1,311,618 | ||||||
605,478 | GSR Mortgage Loan Trust, Series 2005-AR4, Class 4A1, 2.589%, 7/25/2035(c) | 572,241 | ||||||
1,313,951 | GSR Mortgage Loan Trust, Series 2006-8F, Class 4A17, 6.000%, 9/25/2036 | 1,075,997 | ||||||
1,110,623 | IndyMac Index Mortgage Loan Trust, Series 2004-AR12, Class A1, 1.202%, 12/25/2034(c) | 940,795 | ||||||
2,277,043 | IndyMac Index Mortgage Loan Trust, Series 2005-16IP, Class A1, 1.062%, 7/25/2045(c) | 1,969,476 | ||||||
3,035,000 | Invitation Homes Trust, Series 2014-SFR1, Class B, 1.851%, 6/17/2031, 144A(b)(c) | 2,976,778 | ||||||
860,000 | Invitation Homes Trust, Series 2015-SFR1, Class E, 4.551%, 3/17/2032, 144A(c) | 854,049 | ||||||
2,688,564 | JPMorgan Alternative Loan Trust, Series 2006-A1, Class 3A1, 2.542%, 3/25/2036(c) | 2,344,377 | ||||||
949,075 | JPMorgan Mortgage Trust, Series 2003-A2, Class 3A1, 2.104%, 11/25/2033(b)(c) | 920,451 | ||||||
2,678,265 | JPMorgan Mortgage Trust, Series 2004-S1, Class 2A1, 6.000%, 9/25/2034 | 2,744,904 | ||||||
2,011,369 | JPMorgan Mortgage Trust, Series 2005-A2, Class 3A2, 2.377%, 4/25/2035(c) | 1,943,581 | ||||||
692,357 | JPMorgan Mortgage Trust, Series 2005-A3, Class 4A1, 2.812%, 6/25/2035(b)(c) | 699,484 | ||||||
2,423,303 | JPMorgan Mortgage Trust, Series 2005-S3, Class 1A9, 6.000%, 1/25/2036 | 2,057,101 | ||||||
1,522,926 | JPMorgan Mortgage Trust, Series 2006-A1, Class 1A2, 2.654%, 2/25/2036(c) | 1,346,675 | ||||||
3,014,531 | JPMorgan Mortgage Trust, Series 2006-A7, Class 2A4, 2.919%, 1/25/2037(c) | 2,646,661 | ||||||
2,361,496 | JPMorgan Mortgage Trust, Series 2007-S1, Class 2A22, 5.750%, 3/25/2037 | 1,939,288 | ||||||
2,262,319 | Lehman XS Trust, Series 2006-4N, Class A2A, 0.642%, 4/25/2046(c) | 1,590,140 | ||||||
444,191 | MASTR Adjustable Rate Mortgages Trust, Series 2004-4, Class 5A1, 2.599%, 5/25/2034(c)(d) | 427,677 |
See accompanying notes to financial statements.
25 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Home Equity — continued | ||||||||
$ | 2,209,826 | MASTR Adjustable Rate Mortgages Trust, Series 2004-7, Class 3A1, 2.609%, 7/25/2034(c) | $ | 2,143,492 | ||||
533,453 | MASTR Adjustable Rate Mortgages Trust, Series 2006-2, Class 1A1, 2.751%, 4/25/2036(c) | 512,792 | ||||||
760,253 | MASTR Alternative Loan Trust, Series 2003-9, Class 4A1, 5.250%, 11/25/2033(b) | 788,225 | ||||||
786,919 | MASTR Alternative Loan Trust, Series 2004-5, Class 1A1, 5.500%, 6/25/2034(b) | 818,452 | ||||||
964,225 | MASTR Alternative Loan Trust, Series 2004-5, Class 2A1, 6.000%, 6/25/2034(b) | 998,810 | ||||||
2,385,040 | MASTR Alternative Loan Trust, Series 2004-8, Class 2A1, 6.000%, 9/25/2034 | 2,500,687 | ||||||
140,489 | MASTR Alternative Loan Trust, Series 2004-12, Class 6A2, 5.250%, 12/25/2034(d) | 138,908 | ||||||
1,623,340 | Merrill Lynch Alternative Note Asset Trust, Series 2007-F1, Class 2A8, 6.000%, 3/25/2037 | 1,203,811 | ||||||
323,464 | MLCC Mortgage Investors, Inc., Series 2006-2, Class 2A, 2.218%, 5/25/2036(c) | 320,436 | ||||||
891,692 | Morgan Stanley Mortgage Loan Trust, Series 2005-7, Class 4A2, 5.500%, 11/25/2035(d) | 833,682 | ||||||
1,850,640 | Morgan Stanley Mortgage Loan Trust, Series 2005-7, Class 7A5, 5.500%, 11/25/2035 | 1,880,553 | ||||||
2,619,850 | National City Mortgage Capital Trust, Series 2008-1, Class 2A1, 6.000%, 3/25/2038 | 2,741,665 | ||||||
1,977,121 | Oak Hill Advisors Residential Loan Trust, Series 15-NPL2 Class A1, 3.721%, 7/25/2055, 144A(c) | 1,957,740 | ||||||
3,618,699 | RCO Mortgage LLC, Series 2015-2A, Class A, 4.500%, 9/25/2054, 144A(c) | 3,602,247 | ||||||
2,034,173 | Residential Asset Securitization Trust, Series 2005-A8CB, Class A9, 5.375%, 7/25/2035 | 1,812,787 | ||||||
764,852 | Residential Funding Mortgage Securities, Series 2006-S1, Class 1A3, 5.750%, 1/25/2036 | 759,417 | ||||||
1,436,529 | Structured Adjustable Rate Mortgage Loan Trust, Series 2004-6, Class 1A, 2.444%, 6/25/2034(b)(c) | 1,396,311 | ||||||
904,003 | Structured Adjustable Rate Mortgage Loan Trust, Series 2004-12, Class 6A, 2.756%, 9/25/2034(b)(c) | 894,614 | ||||||
5,134,074 | Structured Adjustable Rate Mortgage Loan Trust, Series 2004-16, Class 2A, 2.595%, 11/25/2034(b)(c) | 5,049,153 | ||||||
633,436 | Structured Adjustable Rate Mortgage Loan Trust, Series 2005-14, Class A1, 0.732%, 7/25/2035(c) | 456,070 | ||||||
1,091,698 | Structured Asset Securities Corp. Mortgage Pass Through Certificates, Series 2004-20, Class 8A7, 5.750%, 11/25/2034(b) | 1,138,092 | ||||||
553,492 | Structured Asset Securities Corp. Trust, Series 2005-1, Class 7A7, 5.500%, 2/25/2035 | 564,298 | ||||||
2,638,680 | U.S. Residential Opportunity Fund Trust, Series 2015-1III, Class A, 3.721%, 1/27/2035, 144A(b) | 2,621,537 | ||||||
2,115,780 | U.S. Residential Opportunity Fund Trust, Series 2015-1IV, Class A, 3.721%, 2/27/2035, 144A(b) | 2,101,188 | ||||||
5,509,293 | VOLT XXII LLC, Series 2015-NPL4, Class A1, 3.500%, 2/25/2055, 144A(b)(c) | 5,434,742 |
See accompanying notes to financial statements.
| 26
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Home Equity — continued | ||||||||
$ | 1,916,566 | VOLT XXX LLC, Series 2015-NPL1, Class A1, 3.625%, 10/25/2057, 144A(b)(c) | $ | 1,910,309 | ||||
1,480,293 | VOLT XXXI LLC, Series 2015-NPL2, Class A1, 3.375%, 2/25/2055, 144A(b)(c) | 1,459,591 | ||||||
548,430 | WaMu Mortgage Pass Through Certificates, Series 2004-CB2, Class 2A, 5.500%, 7/25/2034(b) | 569,458 | ||||||
3,425,356 | WaMu Mortgage Pass Through Certificates, Series 2005-AR10, Class 1A3, 2.495%, 9/25/2035(c) | 3,307,996 | ||||||
1,190,304 | WaMu Mortgage Pass Through Certificates, Series 2006-AR11, Class 2A, 2.151%, 9/25/2046(c) | 1,082,171 | ||||||
3,391,044 | WaMu Mortgage Pass Through Certificates, Series 2006-AR19, Class 2A, 1.901%, 1/25/2047(c) | 3,051,190 | ||||||
2,231,556 | WaMu Mortgage Pass Through Certificates, Series 2007-HY5, Class 2A3, 2.075%, 5/25/2037(c) | 1,935,626 | ||||||
302,316 | Wells Fargo Mortgage Backed Securities Trust, Series 2003-J, Class 1A9, 2.735%, 10/25/2033(c) | 303,989 | ||||||
1,017,005 | Wells Fargo Mortgage Backed Securities Trust, Series 2004-A, Class A1, 2.796%, 2/25/2034(b)(c) | 1,017,258 | ||||||
550,150 | Wells Fargo Mortgage Backed Securities Trust, Series 2004-O, Class A1, 2.743%, 8/25/2034(b)(c) | 548,245 | ||||||
369,692 | Wells Fargo Mortgage Backed Securities Trust, Series 2005-11, Class 2A3, 5.500%, 11/25/2035 | 383,473 | ||||||
444,004 | Wells Fargo Mortgage Backed Securities Trust, Series 2005-12, Class 1A2, 5.500%, 11/25/2035 | 452,372 | ||||||
1,433,928 | Wells Fargo Mortgage Backed Securities Trust, Series 2005-16, Class A18, 6.000%, 1/25/2036 | 1,461,444 | ||||||
733,082 | Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR10, Class 2A4, 2.738%, 6/25/2035(b)(c) | 737,628 | ||||||
|
| |||||||
154,716,739 | ||||||||
|
| |||||||
ABS Other — 3.3% | ||||||||
4,584,821 | AIM Aviation Finance Ltd., Series 2015-1A, Class B1, 5.072%, 2/15/2040, 144A(b)(c) | 4,452,687 | ||||||
3,210,648 | Cronos Containers Program I Ltd., 3.270%, 11/18/2029, 144A(b) | 3,131,754 | ||||||
806,632 | Diamond Resorts Owner Trust, Series 2011-1, Class A, 4.000%, 3/20/2023, 144A(b) | 814,713 | ||||||
2,033,571 | GCA2014 Holdings Ltd., Series 2014-1, Class C, 6.000%, 1/05/2030, 144A(d)(e) | 2,033,571 | ||||||
738,690 | GCA2014 Holdings Ltd., Series 2014-1, Class D, 7.500%, 1/05/2030, 144A(d)(e) | 716,530 | ||||||
3,410,000 | GCA2014 Holdings Ltd., Series 2014-1, Class E, Zero Coupon, 1/05/2030, 144A(d)(e)(f) | 1,875,500 | ||||||
5,700,000 | GE Accounts Receivable Funding, 6.992%, 8/24/2017, 144A(d)(e) | 5,700,000 | ||||||
1,436,121 | Global Container Assets Ltd., Series 2015-1A, Class B, 4.500%, 2/05/2030, 144A(b) | 1,445,704 | ||||||
3,120,000 | OneMain Financial Issuance Trust, 4.160%, 11/20/2028, 144A | 3,113,136 | ||||||
1,495,000 | OneMain Financial Issuance Trust, Series 2014-1A, Class A, 2.430%, 6/18/2024, 144A(b) | 1,489,842 |
See accompanying notes to financial statements.
27 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
ABS Other — continued | ||||||||
$ | 730,000 | OneMain Financial Issuance Trust, Series 2014-2A, Class A, 2.470%, 9/18/2024, 144A(b) | $ | 728,562 | ||||
745,000 | OneMain Financial Issuance Trust, Series 2014-2A, Class B, 3.020%, 9/18/2024, 144A(b) | 741,454 | ||||||
6,475,000 | OneMain Financial Issuance Trust, Series 2014-2A, Class D, 5.310%, 9/18/2024, 144A | 6,387,996 | ||||||
1,265,000 | OneMain Financial Issuance Trust, Series 2015-1A, Class A, 3.190%, 3/18/2026, 144A(b) | 1,257,157 | ||||||
3,592,335 | Shenton Aircraft Investment I Ltd., Series 2015-1A, Class A, 4.750%, 10/15/2042, 144A | 3,556,411 | ||||||
237,498 | Sierra Timeshare Receivables Funding LLC, Series 2012-1A, Class A, 2.840%, 11/20/2028, 144A | 238,549 | ||||||
938,923 | Sierra Timeshare Receivables Funding LLC, Series 2013-1A, Class A, 1.590%, 11/20/2029, 144A(b) | 923,368 | ||||||
1,908,063 | Sierra Timeshare Receivables Funding LLC, Series 2013-3A, Class A, 2.200%, 10/20/2030, 144A(b) | 1,896,651 | ||||||
1,895,000 | Springleaf Funding Trust, Series 2014-AA, Class A, 2.410%, 12/15/2022, 144A(b) | 1,889,617 | ||||||
2,937,083 | TAL Advantage V LLC, Series 2013-2A, Class A, 3.550%, 11/20/2038, 144A(b) | 2,905,450 | ||||||
|
| |||||||
45,298,652 | ||||||||
|
| |||||||
ABS Student Loan — 0.2% | ||||||||
445,943 | SoFi Professional Loan Program LLC, Series 2014-B, Class A1, 1.672%, 8/25/2032, 144A(b)(c) | 440,872 | ||||||
2,244,800 | SoFi Professional Loan Program LLC, Series 2015-A, Class A1, 1.622%, 3/25/2033, 144A(b)(c) | 2,214,379 | ||||||
|
| |||||||
2,655,251 | ||||||||
|
| |||||||
Aerospace & Defense — 0.9% | ||||||||
2,340,000 | KLX, Inc., 5.875%, 12/01/2022, 144A | 2,223,000 | ||||||
6,003,000 | Meccanica Holdings USA, Inc., 6.250%, 1/15/2040, 144A | 5,552,775 | ||||||
825,000 | Rockwell Collins, Inc., 0.862%, 12/15/2016(b)(c) | 823,478 | ||||||
5,905,000 | Textron Financial Corp., (fixed rate to 2/15/2017, variable rate thereafter), 6.000%, 2/15/2067, 144A | 4,192,550 | ||||||
|
| |||||||
12,791,803 | ||||||||
|
| |||||||
Airlines — 2.6% | ||||||||
8,490,000 | Air Canada Pass Through Trust, Series 2015-2, Class B, 5.000%, 6/15/2025, 144A | 8,458,672 | ||||||
28,340,000 | Latam Airlines Pass Through Trust, Series 2015-1, Class B, 4.500%, 8/15/2025, 144A(b) | 26,435,835 | ||||||
|
| |||||||
34,894,507 | ||||||||
|
| |||||||
Automotive — 3.5% | ||||||||
3,700,000 | American Honda Finance Corp., Series MTN, 1.020%, 9/20/2017(c) | 3,695,871 | ||||||
6,590,000 | Daimler Finance North America LLC, 1.009%, 8/01/2016, 144A(b)(c) | 6,586,705 | ||||||
5,250,000 | Ford Motor Credit Co. LLC, 1.594%, 5/09/2016(b)(c) | 5,257,151 | ||||||
6,100,000 | Hyundai Capital Services, Inc., 1.333%, 3/18/2017, 144A(b)(c) | 6,082,328 |
See accompanying notes to financial statements.
| 28
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Automotive — continued | ||||||||
$ | 5,960,000 | Nissan Motor Acceptance Corp., 0.972%, 3/03/2017, 144A(b)(c) | $ | 5,944,784 | ||||
6,640,000 | Nissan Motor Acceptance Corp., 1.303%, 9/26/2016, 144A(b)(c) | 6,638,665 | ||||||
10,650,000 | Toyota Motor Credit Corp., 0.654%, 5/17/2016(b)(c) | 10,652,726 | ||||||
3,210,000 | Volkswagen International Finance NV, 0.804%, 11/18/2016, 144A(b)(c) | 3,162,566 | ||||||
|
| |||||||
48,020,796 | ||||||||
|
| |||||||
Banking — 7.1% | ||||||||
3,310,000 | Bank of America Corp., 1.361%, 1/15/2019(b)(c) | 3,322,151 | ||||||
6,825,000 | Bank of America Corp., MTN, 4.200%, 8/26/2024(b) | 6,771,615 | ||||||
3,080,000 | Bank of America Corp., Series L, MTN, 3.950%, 4/21/2025(b) | 2,999,209 | ||||||
7,260,000 | Bank of Tokyo-Mitsubishi UFJ Ltd. (The), 1.522%, 9/14/2018, 144A(c) | 7,279,130 | ||||||
5,800,000 | Credit Agricole S.A., (fixed rate to 1/23/2024, variable rate thereafter), 7.875%, 144A(g) | 5,930,500 | ||||||
3,800,000 | Deutsche Bank AG, 4.500%, 4/01/2025 | 3,495,654 | ||||||
12,955,000 | Intesa Sanpaolo SpA, 5.017%, 6/26/2024, 144A(b) | 12,745,764 | ||||||
7,200,000 | Morgan Stanley, 4.350%, 9/08/2026(b) | 7,223,537 | ||||||
3,075,000 | Royal Bank of Scotland Group PLC, 6.125%, 12/15/2022 | 3,347,746 | ||||||
11,195,000 | Royal Bank of Scotland Group PLC, (fixed rate to 8/10/2025, variable rate thereafter), 8.000%(g) | 11,796,731 | ||||||
12,840,000 | Santander Holdings USA, Inc., 4.500%, 7/17/2025(b) | 13,070,427 | ||||||
3,000,000 | Santander UK Group Holdings PLC, 4.750%, 9/15/2025, 144A | 2,960,421 | ||||||
6,935,000 | Societe Generale S.A., (fixed rate to 12/18/2023, variable rate thereafter), 7.875%(g) | 6,909,340 | ||||||
8,400,000 | Societe Generale S.A., (fixed rate to 12/18/2023, variable rate thereafter), 7.875%, 144A(g) | 8,368,920 | ||||||
|
| |||||||
96,221,145 | ||||||||
|
| |||||||
Building Materials — 0.8% | ||||||||
2,420,000 | Atrium Windows & Doors, Inc., 7.750%, 5/01/2019, 144A | 1,790,800 | ||||||
7,285,000 | Cemex SAB de CV, 6.125%, 5/05/2025, 144A | 6,228,675 | ||||||
890,000 | NCI Building Systems, Inc., 8.250%, 1/15/2023, 144A | 934,500 | ||||||
1,790,000 | Owens Corning, 4.200%, 12/01/2024(b) | 1,742,117 | ||||||
|
| |||||||
10,696,092 | ||||||||
|
| |||||||
Cable Satellite — 2.4% | ||||||||
3,600,000 | Cablevision Systems Corp., 7.750%, 4/15/2018 | 3,744,000 | ||||||
2,885,000 | Cablevision Systems Corp., 8.625%, 9/15/2017 | 3,036,462 | ||||||
4,045,000 | CCO Holdings LLC/CCO Holdings Capital Corp., 5.125%, 5/01/2023, 144A | 4,045,000 | ||||||
4,035,000 | CCO Safari II LLC, 6.484%, 10/23/2045, 144A | 4,041,613 | ||||||
1,230,000 | CSC Holdings LLC, 5.250%, 6/01/2024 | 1,079,325 | ||||||
2,320,000 | CSC Holdings LLC, 6.750%, 11/15/2021 | 2,279,400 | ||||||
3,440,000 | DISH DBS Corp., 5.875%, 7/15/2022 | 3,207,800 | ||||||
5,650,000 | DISH DBS Corp., 5.875%, 11/15/2024 | 5,028,500 | ||||||
3,080,000 | DISH DBS Corp., 6.750%, 6/01/2021 | 3,103,100 | ||||||
1,225,000 | Neptune Finco Corp., 10.125%, 1/15/2023, 144A | 1,277,063 | ||||||
860,000 | Neptune Finco Corp., 10.875%, 10/15/2025, 144A | 901,925 | ||||||
2,065,000 | Time Warner Cable, Inc., 4.500%, 9/15/2042(b) | 1,620,575 | ||||||
|
| |||||||
33,364,763 | ||||||||
|
|
See accompanying notes to financial statements.
29 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Chemicals — 0.5% | ||||||||
$ | 2,596,000 | Albemarle Corp., 4.150%, 12/01/2024(b) | $ | 2,480,924 | ||||
3,170,000 | Hercules, Inc., 6.500%, 6/30/2029 | 2,678,650 | ||||||
2,300,000 | Solvay Finance (America) LLC, 4.450%, 12/03/2025, 144A | 2,269,162 | ||||||
|
| |||||||
7,428,736 | ||||||||
|
| |||||||
Collateralized Mortgage Obligations — 0.6% | ||||||||
1,014,561 | Chase Mortgage Finance Trust, Series 2007-A1, Class 11M1, 2.466%, 3/25/2037(c) | 944,940 | ||||||
61,079,167 | Government National Mortgage Association, Series 2012-135, Class IO, 0.688%, 1/16/2053(b)(c)(h) | 3,362,292 | ||||||
4,145,021 | Merrill Lynch Mortgage Investors Trust, Series 2006-1, Class 1A, 2.502%, 2/25/2036(c) | 4,044,081 | ||||||
|
| |||||||
8,351,313 | ||||||||
|
| |||||||
Construction Machinery — 1.3% | ||||||||
17,660,000 | Caterpillar Financial Services Corp., MTN, 0.642%, 2/26/2016(b)(c) | 17,655,038 | ||||||
|
| |||||||
Consumer Cyclical Services — 0.2% | ||||||||
3,185,000 | Interval Acquisition Corp., 5.625%, 4/15/2023, 144A | 3,161,112 | ||||||
|
| |||||||
Electric — 1.3% | ||||||||
4,205,000 | Cia de Eletricidade do Estado da Bahia, 11.750%, 4/27/2016, 144A, (BRL)(b) | 1,009,731 | ||||||
3,190,000 | EDP Finance BV, 4.125%, 1/15/2020, 144A | 3,197,337 | ||||||
12,170,000 | Enel SpA, (fixed rate to 9/24/2023, variable rate thereafter), 8.750%, 9/24/2073, 144A(b) | 13,858,588 | ||||||
|
| |||||||
18,065,656 | ||||||||
|
| |||||||
Finance Companies — 2.6% | ||||||||
2,300,000 | Air Lease Corp., 3.750%, 2/01/2022(b) | 2,259,113 | ||||||
8,365,000 | Air Lease Corp., 4.250%, 9/15/2024(b) | 8,197,700 | ||||||
2,510,000 | Aircastle Ltd., 5.500%, 2/15/2022 | 2,572,750 | ||||||
3,005,000 | iStar, Inc., 4.000%, 11/01/2017 | 2,946,403 | ||||||
10,810,000 | Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp., 5.875%, 8/01/2021, 144A | 9,837,100 | ||||||
10,575,000 | Quicken Loans, Inc., 5.750%, 5/01/2025, 144A | 10,072,687 | ||||||
|
| |||||||
35,885,753 | ||||||||
|
| |||||||
Financial Other — 0.5% | ||||||||
6,780,000 | Rialto Holdings LLC/Rialto Corp., 7.000%, 12/01/2018, 144A | 6,881,700 | ||||||
|
| |||||||
Food & Beverage — 1.0% | ||||||||
10,800,000 | BRF S.A., 7.750%, 5/22/2018, 144A, (BRL)(b) | 2,273,971 | ||||||
2,300,000 | Cosan Luxembourg S.A., 9.500%, 3/14/2018, 144A, (BRL) | 457,820 | ||||||
3,500,000 | General Mills, Inc., 0.624%, 1/29/2016(b)(c) | 3,499,545 | ||||||
6,980,000 | PepsiCo, Inc., 0.565%, 7/17/2017(c) | 6,974,207 | ||||||
|
| |||||||
13,205,543 | ||||||||
|
| |||||||
Gaming — 0.7% | ||||||||
10,215,000 | MGM Resorts International, 6.000%, 3/15/2023 | 10,138,387 | ||||||
|
|
See accompanying notes to financial statements.
| 30
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Government Owned – No Guarantee — 1.8% | ||||||||
$ | 630,000 | Corporacion Financiera de Desarrollo S.A., 3.250%, 7/15/2019, 144A(b) | $ | 627,638 | ||||
1,240,000 | Corporacion Financiera de Desarrollo S.A., (fixed rate to 7/15/2024, variable rate thereafter), 5.250%, 7/15/2029, 144A(b) | 1,218,300 | ||||||
18,670,000,000 | Financiera de Desarrollo Territorial S.A. Findeter, 7.875%, 8/12/2024, 144A, (COP)(b) | 5,161,183 | ||||||
13,230,000 | Petrobras Global Finance BV, 5.625%, 5/20/2043 | 8,037,225 | ||||||
3,080,000 | Petrobras Global Finance BV, 6.750%, 1/27/2041 | 1,971,200 | ||||||
4,695,000 | Petrobras Global Finance BV, 6.875%, 1/20/2040 | 3,051,750 | ||||||
225,000 | Petrobras Global Finance BV, 7.250%, 3/17/2044 | 151,875 | ||||||
700,000(††) | Petroleos Mexicanos, 7.650%, 11/24/2021, 144A, (MXN)(i) | 3,967,553 | ||||||
|
| |||||||
24,186,724 | ||||||||
|
| |||||||
Healthcare — 0.5% | ||||||||
5,965,000 | Greatbatch Ltd., 9.125%, 11/01/2023, 144A | 5,905,350 | ||||||
560,000 | MEDNAX, Inc., 5.250%, 12/01/2023, 144A | 562,800 | ||||||
|
| |||||||
6,468,150 | ||||||||
|
| |||||||
Independent Energy — 3.4% | ||||||||
1,095,000 | Antero Resources Corp., 5.125%, 12/01/2022 | 832,200 | ||||||
275,000 | Antero Resources Corp., 5.375%, 11/01/2021 | 220,000 | ||||||
150,000 | Baytex Energy Corp., 5.125%, 6/01/2021, 144A | 100,875 | ||||||
665,000 | Baytex Energy Corp., 5.625%, 6/01/2024, 144A | 445,550 | ||||||
905,000 | Bonanza Creek Energy, Inc., 5.750%, 2/01/2023 | 470,600 | ||||||
240,000 | Bonanza Creek Energy, Inc., 6.750%, 4/15/2021 | 145,200 | ||||||
700,000 | California Resources Corp., 5.500%, 9/15/2021 | 220,500 | ||||||
4,235,000 | California Resources Corp., 6.000%, 11/15/2024 | 1,291,675 | ||||||
1,095,000 | California Resources Corp., 8.000%, 12/15/2022, 144A | 576,244 | ||||||
2,905,000 | Chesapeake Energy Corp., 4.875%, 4/15/2022 | 806,312 | ||||||
110,000 | Chesapeake Energy Corp., 6.125%, 2/15/2021 | 31,020 | ||||||
140,000 | Chesapeake Energy Corp., 6.625%, 8/15/2020 | 40,600 | ||||||
800,000 | Concho Resources, Inc., 5.500%, 10/01/2022 | 728,000 | ||||||
4,455,000 | Concho Resources, Inc., 5.500%, 4/01/2023 | 4,120,875 | ||||||
295,000 | Continental Resources, Inc., 3.800%, 6/01/2024 | 207,806 | ||||||
210,000 | Continental Resources, Inc., 4.500%, 4/15/2023 | 150,876 | ||||||
11,465,000 | Continental Resources, Inc., 5.000%, 9/15/2022(b) | 8,455,437 | ||||||
3,415,000 | Diamondback Energy, Inc., 7.625%, 10/01/2021 | 3,449,150 | ||||||
1,195,000 | Halcon Resources Corp., 8.625%, 2/01/2020, 144A | 824,550 | ||||||
4,519,000 | Matador Resources Co., 6.875%, 4/15/2023 | 4,202,670 | ||||||
925,000 | MEG Energy Corp., 6.375%, 1/30/2023, 144A | 633,625 | ||||||
180,000 | MEG Energy Corp., 6.500%, 3/15/2021, 144A | 126,000 | ||||||
1,630,000 | MEG Energy Corp., 7.000%, 3/31/2024, 144A | 1,157,300 | ||||||
2,350,000 | Noble Energy, Inc., 5.625%, 5/01/2021 | 2,298,739 | ||||||
1,285,000 | Noble Energy, Inc., 5.875%, 6/01/2022 | 1,222,421 | ||||||
310,000 | Noble Energy, Inc., 5.875%, 6/01/2024 | 296,634 | ||||||
1,260,000 | Oasis Petroleum, Inc., 6.875%, 3/15/2022 | 806,400 | ||||||
7,460,000 | OGX Austria GmbH, 8.375%, 4/01/2022, 144A(d)(j) | — | ||||||
4,420,000 | OGX Austria GmbH, 8.500%, 6/01/2018, 144A(d)(j) | — | ||||||
4,430,000 | RSP Permian, Inc., 6.625%, 10/01/2022, 144A | 4,075,600 |
See accompanying notes to financial statements.
31 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Independent Energy — continued | ||||||||
$ | 3,135,000 | RSP Permian, Inc., 6.625%, 10/01/2022 | $ | 2,884,200 | ||||
1,055,000 | SM Energy Co., 5.000%, 1/15/2024 | 685,750 | ||||||
1,750,000 | SM Energy Co., 6.125%, 11/15/2022 | 1,286,250 | ||||||
575,000 | Ultra Petroleum Corp., 6.125%, 10/01/2024, 144A | 130,813 | ||||||
400,000 | Whiting Petroleum Corp., 5.000%, 3/15/2019 | 302,000 | ||||||
3,255,000 | Whiting Petroleum Corp., 6.500%, 10/01/2018 | 2,465,663 | ||||||
|
| |||||||
45,691,535 | ||||||||
|
| |||||||
Industrial Other — 0.2% | ||||||||
2,200,000 | Alfa SAB de CV, 6.875%, 3/25/2044, 144A(b) | 2,040,500 | ||||||
|
| |||||||
Integrated Energy — 1.1% | ||||||||
2,935,000 | BP Capital Markets PLC, 0.764%, 11/07/2016(b)(c) | 2,930,885 | ||||||
6,595,000 | Chevron Corp., 0.532%, 11/15/2017(b)(c) | 6,564,175 | ||||||
7,020,000 | Pacific Exploration and Production Corp., 5.125%, 3/28/2023, 144A | 1,404,000 | ||||||
2,090,000 | Pacific Exploration and Production Corp., 5.375%, 1/26/2019, 144A | 397,100 | ||||||
3,310,000 | Shell International Finance BV, 0.572%, 11/15/2016(b)(c) | 3,307,537 | ||||||
|
| |||||||
14,603,697 | ||||||||
|
| |||||||
Life Insurance — 0.8% | ||||||||
8,600,000 | Assicurazioni Generali SpA, EMTN, (fixed rate to 12/12/2022, variable rate thereafter), 7.750%, 12/12/2042, (EUR)(b) | 11,400,310 | ||||||
|
| |||||||
Lodging — 0.4% | ||||||||
4,900,000 | Wyndham Worldwide Corp., 5.100%, 10/01/2025 | 4,949,235 | ||||||
|
| |||||||
Media Entertainment — 0.1% | ||||||||
27,290,000 | Grupo Televisa SAB, EMTN, 7.250%, 5/14/2043, (MXN)(b) | 1,319,517 | ||||||
|
| |||||||
Metals & Mining — 0.1% | ||||||||
1,928,000 | ArcelorMittal, 8.000%, 10/15/2039 | 1,315,860 | ||||||
|
| |||||||
Midstream — 2.2% | ||||||||
4,345,000 | Energy Transfer Partners LP, 6.125%, 12/15/2045 | 3,535,118 | ||||||
630,000 | Enterprise Products Operating LLC, 3.700%, 2/15/2026 | 565,111 | ||||||
595,000 | Kinder Morgan Energy Partners LP, 3.450%, 2/15/2023 | 494,124 | ||||||
835,000 | Kinder Morgan Energy Partners LP, 3.500%, 9/01/2023 | 692,311 | ||||||
915,000 | Kinder Morgan Energy Partners LP, 4.700%, 11/01/2042 | 643,843 | ||||||
255,000 | Kinder Morgan Energy Partners LP, 5.000%, 3/01/2043 | 188,905 | ||||||
5,065,000 | MPLX LP, 4.875%, 12/01/2024, 144A | 4,545,838 | ||||||
785,000 | NGL Energy Partners LP/NGL Energy Finance Corp., 5.125%, 7/15/2019 | 620,150 | ||||||
1,710,000 | Regency Energy Partners LP/Regency Energy Finance Corp., 5.750%, 9/01/2020(b) | 1,670,516 | ||||||
5,055,000 | Sabine Pass Liquefaction LLC, 5.625%, 3/01/2025, 144A | 4,277,794 | ||||||
180,000 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., 4.250%, 11/15/2023 | 138,600 | ||||||
2,395,000 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.000%, 1/15/2018, 144A | 2,215,375 | ||||||
690,000 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.250%, 5/01/2023 | 558,900 | ||||||
1,120,000 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., 6.375%, 8/01/2022 | 966,000 |
See accompanying notes to financial statements.
| 32
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Midstream — continued | ||||||||
$ | 6,015,000 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., 6.750%, 3/15/2024, 144A | $ | 5,127,787 | ||||
1,310,000 | Western Refining Logistics LP/WNRL Finance Corp., 7.500%, 2/15/2023 | 1,251,050 | ||||||
4,195,000 | Williams Partners LP, 4.000%, 9/15/2025 | 3,141,052 | ||||||
|
| |||||||
30,632,474 | ||||||||
|
| |||||||
Non-Agency Commercial Mortgage-Backed Securities — 5.1% | ||||||||
1,600,000 | BLCP Hotel Trust, Series 2014-CLRN, Class D, 2.831%, 8/15/2029, 144A(b)(c) | 1,565,374 | ||||||
1,600,000 | BLCP Hotel Trust, Series 2014-CLRN, Class E, 4.001%, 8/15/2029, 144A(c) | 1,601,290 | ||||||
3,442,048 | BXHTL Mortgage Trust, Series 2015-DRMZ, Class M, 8.476%, 5/15/2018, 144A(c)(e) | 3,442,048 | ||||||
4,565,000 | CFCRE Commercial Mortgage Trust, Series 2011-C1, Class D, 5.871%, 4/15/2044, 144A(b)(c) | 4,719,457 | ||||||
2,135,000 | Commercial Mortgage Trust, Series 2014-FL5, Class SV4, 4.481%, 10/15/2031, 144A(c)(e) | 2,131,055 | ||||||
462,434 | Commercial Mortgage Trust, Series 2014-SAVA, Class A, 1.481%, 6/15/2034, 144A(b)(c) | 461,331 | ||||||
855,000 | Commercial Mortgage Trust, Series 2014-SAVA, Class B, 2.081%, 6/15/2034, 144A(b)(c) | 852,311 | ||||||
1,605,000 | Commercial Mortgage Trust, Series 2014-SAVA, Class C, 2.731%, 6/15/2034, 144A(b)(c) | 1,598,428 | ||||||
3,700,000 | Credit Suisse Mortgage Capital Certificates, Series 2015-TOWN, Class A, 1.581%, 3/15/2017, 144A(b)(c) | 3,687,124 | ||||||
2,552,340 | DBUBS Mortgage Trust, Series 2011-LC1A, Class E, 5.663%, 11/10/2046, 144A(b)(c) | 2,688,837 | ||||||
1,300,000 | Del Coronado Trust, Series 2013-HDMZ, Class M, 5.331%, 3/15/2018, 144A(c)(e) | 1,297,660 | ||||||
7,430,000 | Extended Stay America Trust, Series 2013-ESH7, Class D7, 5.053%, 12/05/2031, 144A(b)(c) | 7,439,796 | ||||||
6,295,000 | GS Mortgage Securities Trust, Series 2007-GG10, Class AM, 5.795%, 8/10/2045(c) | 6,196,624 | ||||||
1,915,000 | Hilton USA Trust, Series 2013-HLT, Class CFX, 3.714%, 11/05/2030, 144A(b) | 1,916,421 | ||||||
1,460,000 | Hilton USA Trust, Series 2013-HLT, Class DFX, 4.407%, 11/05/2030, 144A(b) | 1,461,080 | ||||||
1,580,000 | Hilton USA Trust, Series 2013-HLT, Class EFX, 4.453%, 11/05/2030, 144A(c) | 1,579,377 | ||||||
1,520,000 | JPMorgan Chase Commercial Mortgage Securities Trust, Series 2007-LDPX, Class AM, 5.464%, 1/15/2049(b)(c) | 1,548,361 | ||||||
3,090,000 | JPMorgan Chase Commercial Mortgage Securities Trust, Series 2015-SGP, Class D, 4.831%, 7/15/2036, 144A(c) | 3,089,564 | ||||||
1,325,000 | Morgan Stanley Capital I Trust, Series 2007-HQ12, Class AM, 5.723%, 4/12/2049(b)(c) | 1,372,932 | ||||||
1,570,000 | Morgan Stanley Capital I Trust, Series 2011-C2, Class D, 5.303%, 6/15/2044, 144A(b)(c) | 1,634,467 | ||||||
2,125,000 | Morgan Stanley Capital I Trust, Series 2011-C2, Class E, 5.303%, 6/15/2044, 144A(b)(c) | 2,158,506 | ||||||
9,847,009 | Motel 6 Trust, Series 2015-M6MZ, Class M, 8.230%, 2/05/2020, 144A(e) | 9,722,937 | ||||||
2,280,000 | SCG Trust, Series 2013-SRP1, Class B, 2.831%, 11/15/2026, 144A(b)(c) | 2,280,332 | ||||||
2,200,000 | SCG Trust, Series 2013-SRP1, Class C, 3.581%, 11/15/2026, 144A(b)(c) | 2,205,844 |
See accompanying notes to financial statements.
33 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Non-Agency Commercial Mortgage-Backed Securities — continued | ||||||||
$ | 700,000 | SCG Trust, Series 2013-SRP1, Class D, 3.674%, 11/15/2026, 144A(b)(c) | $ | 687,808 | ||||
2,587,500 | WFRBS Commercial Mortgage Trust, Series 2011-C2, Class D, 5.541%, 2/15/2044, 144A(b)(c) | 2,717,954 | ||||||
|
| |||||||
70,056,918 | ||||||||
|
| |||||||
Oil Field Services — 0.1% | ||||||||
1,125,000 | Diamond Offshore Drilling, Inc., 4.875%, 11/01/2043 | 682,974 | ||||||
1,280,000 | Noble Holding International Ltd., 5.250%, 3/15/2042 | 709,708 | ||||||
|
| |||||||
1,392,682 | ||||||||
|
| |||||||
Packaging — 0.2% | ||||||||
2,120,000 | Beverage Packaging Holdings Luxembourg II S.A./Beverage Packaging Holdings II Issuer, Inc., 6.000%, 6/15/2017, 144A | 2,051,100 | ||||||
|
| |||||||
Pharmaceuticals — 2.8% | ||||||||
7,500,000 | AbbVie, Inc., 3.600%, 5/14/2025(b) | 7,402,012 | ||||||
3,070,000 | Johnson & Johnson, 0.482%, 11/28/2016(b)(c) | 3,068,950 | ||||||
5,570,000 | Merck & Co., Inc., 0.466%, 2/10/2017(b)(c) | 5,565,951 | ||||||
3,175,000 | Valeant Pharmaceuticals International, Inc., 5.500%, 3/01/2023, 144A | 2,794,000 | ||||||
883,000 | Valeant Pharmaceuticals International, Inc., 5.625%, 12/01/2021, 144A | 812,360 | ||||||
11,056,000 | Valeant Pharmaceuticals International, Inc., 5.875%, 5/15/2023, 144A | 9,867,480 | ||||||
9,025,000 | VRX Escrow Corp., 4.500%, 5/15/2023, 144A, (EUR) | 8,508,368 | ||||||
|
| |||||||
38,019,121 | ||||||||
|
| |||||||
Property & Casualty Insurance — 0.4% | ||||||||
5,435,000 | Old Republic International Corp., 4.875%, 10/01/2024(b) | 5,569,598 | ||||||
|
| |||||||
REITs – Health Care — 0.2% | ||||||||
2,510,000 | Healthcare Realty Trust, Inc., 3.875%, 5/01/2025(b) | 2,427,687 | ||||||
|
| |||||||
REITs – Hotels — 0.2% | ||||||||
2,105,000 | Host Hotels & Resorts LP, 5.250%, 3/15/2022(b) | 2,259,579 | ||||||
|
| |||||||
REITs – Shopping Centers — 0.2% | ||||||||
3,225,000 | Brixmor Operating Partnership LP, 3.850%, 2/01/2025(b) | 3,133,355 | ||||||
|
| |||||||
Retailers — 0.5% | ||||||||
5,490,000 | Lowe’s Cos., Inc., 1.102%, 9/14/2018(c) | 5,505,987 | ||||||
1,080,000 | Phillips-Van Heusen Corp., 7.750%, 11/15/2023(b) | 1,220,400 | ||||||
|
| |||||||
6,726,387 | ||||||||
|
| |||||||
Technology — 4.1% | ||||||||
3,935,000 | Alcatel-Lucent USA, Inc., 6.450%, 3/15/2029 | 3,984,188 | ||||||
1,542,000 | Alcatel-Lucent USA, Inc., 6.500%, 1/15/2028 | 1,549,710 | ||||||
1,955,000 | Alcatel-Lucent USA, Inc., 6.750%, 11/15/2020, 144A | 2,060,081 | ||||||
2,415,000 | Flextronics International Ltd., 4.750%, 6/15/2025, 144A | 2,351,606 | ||||||
11,225,000 | Hewlett Packard Enterprise Co., 4.900%, 10/15/2025, 144A(b) | 11,007,392 | ||||||
10,955,000 | Keysight Technologies, Inc., 4.550%, 10/30/2024 | 10,531,217 | ||||||
7,847,000 | KLA-Tencor Corp., 4.650%, 11/01/2024(b) | 7,895,290 | ||||||
3,565,000 | Micron Technology, Inc., 5.250%, 1/15/2024, 144A | 3,137,200 | ||||||
4,165,000 | Micron Technology, Inc., 5.625%, 1/15/2026, 144A | 3,602,725 | ||||||
3,890,000 | Open Text Corp., 5.625%, 1/15/2023, 144A | 3,851,100 |
See accompanying notes to financial statements.
| 34
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Technology — continued | ||||||||
$ | 6,125,000 | Verisk Analytics, Inc., 5.500%, 6/15/2045(b) | $ | 5,847,930 | ||||
|
| |||||||
55,818,439 | ||||||||
|
| |||||||
Treasuries — 5.9% | ||||||||
80,915,242 | U.S. Treasury Inflation Indexed Note, 0.125%, 4/15/2020(k) | 79,883,815 | ||||||
|
| |||||||
Wireless — 0.3% | ||||||||
4,295,000 | Sprint Communications, Inc., 6.000%, 12/01/2016 | 4,286,947 | ||||||
|
| |||||||
Wirelines — 0.4% | ||||||||
4,280,000 | Frontier Communications Corp., 11.000%, 9/15/2025, 144A | 4,237,200 | ||||||
10,085,000 | Oi S.A., 9.750%, 9/15/2016, 144A, (BRL) | 1,789,490 | ||||||
|
| |||||||
6,026,690 | ||||||||
|
| |||||||
Total Non-Convertible Bonds (Identified Cost $1,131,965,917) | 1,068,311,594 | |||||||
|
| |||||||
Convertible Bonds — 2.1% | ||||||||
Building Materials — 0.0% | ||||||||
485,000 | CalAtlantic Group, Inc., 0.250%, 6/01/2019 | 433,772 | ||||||
|
| |||||||
Consumer Cyclical Services — 0.3% | ||||||||
2,860,000 | Jarden Corp., 1.125%, 3/15/2034 | 3,508,862 | ||||||
|
| |||||||
Consumer Products — 0.1% | ||||||||
2,020,000 | Iconix Brand Group, Inc., 1.500%, 3/15/2018 | 994,850 | ||||||
|
| |||||||
Diversified Operations — 0.0% | ||||||||
290,000 | RWT Holdings, Inc., 5.625%, 11/15/2019 | 267,888 | ||||||
|
| |||||||
Leisure — 0.3% | ||||||||
4,950,000 | Rovi Corp., 0.500%, 3/01/2020, 144A | 4,325,062 | ||||||
|
| |||||||
Metals & Mining — 0.3% | ||||||||
3,140,000 | RTI International Metals, Inc., 1.625%, 10/15/2019 | 3,212,613 | ||||||
|
| |||||||
Midstream — 0.7% | ||||||||
4,385,000 | Chesapeake Energy Corp., 2.500%, 5/15/2037 | 2,060,950 | ||||||
11,350,000 | Whiting Petroleum Corp., 1.250%, 4/01/2020, 144A | 7,718,000 | ||||||
|
| |||||||
9,778,950 | ||||||||
|
| |||||||
Pharmaceuticals — 0.1% | ||||||||
1,265,000 | BioMarin Pharmaceutical, Inc., 1.500%, 10/15/2020 | 1,690,356 | ||||||
|
| |||||||
REITs – Mortgage — 0.1% | ||||||||
940,000 | Redwood Trust, Inc., 4.625%, 4/15/2018 | 875,375 | ||||||
|
| |||||||
Technology — 0.2% | ||||||||
1,125,000 | Novellus Systems, Inc., 2.625%, 5/15/2041(b) | 2,647,266 | ||||||
|
| |||||||
Total Convertible Bonds (Identified Cost $33,640,668) | 27,734,994 | |||||||
|
| |||||||
Total Bonds and Notes (Identified Cost $1,165,606,585) | 1,096,046,588 | |||||||
|
| |||||||
See accompanying notes to financial statements.
35 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Senior Loans — 8.6% | ||||||||
Aerospace & Defense — 0.5% | ||||||||
$ | 2,704,670 | Transdigm, Inc., 2015 Term Loan E, 3.500%, 5/14/2022(c) | $ | 2,613,874 | ||||
1,631,709 | Transdigm, Inc., Term Loan C, 3.750%, 2/28/2020(c) | 1,589,334 | ||||||
2,967,761 | Transdigm, Inc., Term Loan D, 3.750%, 6/04/2021(c) | 2,886,148 | ||||||
|
| |||||||
7,089,356 | ||||||||
|
| |||||||
Automotive — 0.4% | ||||||||
1,627,400 | Gates Global, Inc., Term Loan B, 4.250%, 7/05/2021(c) | 1,522,775 | ||||||
2,351,994 | IBC Capital Ltd., 1st Lien Term Loan, 4.750%, 9/09/2021(c) | 2,116,794 | ||||||
1,974,018 | Visteon Corp., Delayed Draw Term Loan B, 3.500%, 4/09/2021(c) | 1,956,133 | ||||||
|
| |||||||
5,595,702 | ||||||||
|
| |||||||
Building Materials — 0.7% | ||||||||
1,352,974 | ABC Supply Co., Inc., Term Loan, 3.500%, 4/16/2020(c) | 1,339,864 | ||||||
2,032,274 | Continental Building Products LLC, 1st Lien Term Loan, 4.000%, 8/28/2020(c) | 1,985,287 | ||||||
1,359,702 | HD Supply, Inc., 2015 Term Loan B, 3.750%, 8/13/2021(c) | 1,324,581 | ||||||
1,417,108 | Ply Gem Industries, Inc., Term Loan, 4.000%, 2/01/2021(c) | 1,388,766 | ||||||
3,278,963 | Quikrete Holdings, Inc., 1st Lien Term Loan, 4.000%, 9/28/2020(c) | 3,236,959 | ||||||
|
| |||||||
9,275,457 | ||||||||
|
| |||||||
Cable Satellite — 0.2% | ||||||||
2,218,593 | Virgin Media Investment Holdings Ltd., USD Term Loan F, 3.500%, 6/30/2023(c) | 2,169,718 | ||||||
|
| |||||||
Chemicals — 0.1% | ||||||||
429,408 | Emerald Performance Materials LLC, New 1st Lien Term Loan, 4.500%, 8/01/2021(c) | 419,480 | ||||||
1,170,000 | MacDermid, Inc., USD 1st Lien Term Loan, 5.500%, 6/07/2020(c) | 1,131,250 | ||||||
2,057 | Royal Holdings, Inc., 2015 1st Lien Term Loan, 4.500%, 6/19/2022(c) | 2,017 | ||||||
|
| |||||||
1,552,747 | ||||||||
|
| |||||||
Consumer Cyclical Services — 0.5% | ||||||||
6,331,511 | ServiceMaster Co., 2014 Term Loan B, 4.250%, 7/01/2021(c) | 6,252,367 | ||||||
|
| |||||||
Consumer Products — 0.1% | ||||||||
2,005,371 | SRAM LLC, New Term Loan B, 4.016%, 4/10/2020(l) | 1,652,767 | ||||||
|
| |||||||
Diversified Manufacturing — 0.1% | ||||||||
832,552 | Entegris, Inc., Term Loan B, 3.500%, 4/30/2021(c) | 822,145 | ||||||
92,368 | WESCO Distribution, Inc., Term Loan B, 3.750%, 12/12/2019(c) | 91,444 | ||||||
|
| |||||||
913,589 | ||||||||
|
| |||||||
Electric — 0.1% | ||||||||
1,804,725 | Calpine Construction Finance Co. LP, Original Term Loan B1, 3.000%, 5/03/2020(c) | 1,694,186 | ||||||
|
| |||||||
Financial Other — 0.1% | ||||||||
1,207,967 | Grosvenor Capital Management Holdings LLP, New Term Loan B, 3.750%, 1/04/2021(c) | 1,161,666 | ||||||
532,227 | Harbourvest Partners LLC, New Term Loan, 3.250%, 2/04/2021(c) | 524,243 | ||||||
|
| |||||||
1,685,909 | ||||||||
|
|
See accompanying notes to financial statements.
| 36
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Health Insurance — 0.2% | ||||||||
$ | 2,970,777 | Sedgwick Claims Management Services, Inc., 1st Lien Term Loan, 3.750%, 3/01/2021(c) | $ | 2,844,519 | ||||
|
| |||||||
Healthcare — 0.1% | ||||||||
1,477,500 | Ortho-Clinical Diagnostics, Inc., Term Loan B, 4.750%, 6/30/2021(c) | 1,246,641 | ||||||
|
| |||||||
Industrial Other — 1.0% | ||||||||
1,078,041 | Brickman Group Ltd. LLC, 1st Lien Term Loan, 4.000%, 12/18/2020(c) | 1,041,905 | ||||||
2,292,220 | Crosby U.S. Acquisition Corp., 1st Lien Term Loan, 4.000%, 11/23/2020(c) | 1,787,932 | ||||||
5,248,329 | Generac Power Systems, Inc., Term Loan B, 3.500%, 5/31/2020(c) | 5,134,598 | ||||||
1,910,837 | Pinnacle Operating Corp., Term Loan, 4.750%, 11/15/2018(c) | 1,815,295 | ||||||
1,226,925 | Sterigenics-Nordion Holdings LLC, 2015 Term Loan B, 4.250%, 5/15/2022(c) | 1,190,117 | ||||||
2,970,000 | USAGM HoldCo LLC, 2015 Term Loan, 4.750%, 7/28/2022(c) | 2,825,212 | ||||||
|
| |||||||
13,795,059 | ||||||||
|
| |||||||
Midstream — 0.2% | ||||||||
1,002,817 | Energy Transfer Equity LP, 2015 Term Loan, 4.000%, 12/02/2019(c) | 897,521 | ||||||
1,598,385 | Energy Transfer Equity LP, New Term Loan, 3.250%, 12/02/2019(c) | 1,427,134 | ||||||
|
| |||||||
2,324,655 | ||||||||
|
| |||||||
Natural Gas — 0.1% | ||||||||
965,201 | Southcross Energy Partners LP, 1st Lien Term Loan, 5.250%, 8/04/2021(c) | 728,727 | ||||||
|
| |||||||
Other Utility — 0.2% | ||||||||
3,160,323 | PowerTeam Services LLC, 1st Lien Term Loan, 4.250%, 5/06/2020(c) | 3,068,137 | ||||||
|
| |||||||
Packaging — 0.1% | ||||||||
1,757,540 | Signode Industrial Group U.S., Inc., USD Term Loan B, 3.750%, 5/01/2021(c) | 1,691,633 | ||||||
|
| |||||||
Pharmaceuticals — 0.4% | ||||||||
2,225,372 | Amneal Pharmaceuticals LLC, New Term Loan, 4.501%, 11/01/2019(l) | 2,179,752 | ||||||
3,915,325 | Jaguar Holding Co. II, 2015 Term Loan B, 4.250%, 8/18/2022(c) | 3,797,865 | ||||||
|
| |||||||
5,977,617 | ||||||||
|
| |||||||
Property & Casualty Insurance — 0.5% | ||||||||
3,038,873 | HUB International Ltd., Term Loan B, 4.000%, 10/02/2020(c) | 2,860,339 | ||||||
1,478,825 | Hyperion Insurance Group Ltd., 2015 Term Loan B, 5.500%, 4/29/2022(c) | 1,456,642 | ||||||
3,319,468 | Vertafore, Inc., 1st Lien Term Loan, 4.250%, 10/03/2019(c) | 3,281,427 | ||||||
|
| |||||||
7,598,408 | ||||||||
|
| |||||||
Refining — 0.2% | ||||||||
2,534,605 | Western Refining, Inc., Term Loan B, 4.250%, 11/12/2020(c) | 2,445,894 | ||||||
|
| |||||||
Retailers — 0.4% | ||||||||
319,365 | Hillman Group, Inc. (The), Term Loan B, 4.500%, 6/30/2021(c) | 307,989 | ||||||
3,146,570 | PetSmart, Inc., Term Loan B, 4.250%, 3/11/2022(c) | 3,059,252 | ||||||
1,886,955 | Talbots, Inc. (The), 1st Lien Term Loan, 5.500%, 3/19/2020(c) | 1,773,738 | ||||||
|
| |||||||
5,140,979 | ||||||||
|
| |||||||
Technology — 1.3% | ||||||||
2,839,425 | Aptean, Inc., 1st Lien Term Loan, 5.250%, 2/26/2020(c) | 2,768,439 | ||||||
3,635,000 | Avago Technologies Cayman Ltd., USD 2015 Term Loan B, 11/06/2022(m) | 3,591,853 |
See accompanying notes to financial statements.
37 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Principal Amount (‡) | Description | Value (†) | ||||||
Technology — continued | ||||||||
$ | 1,223,850 | Dell International LLC, USD Term Loan B2, 4.000%, 4/29/2020(c) | $ | 1,214,010 | ||||
600,000 | Equinix, Inc., USD Term Loan, 11/20/2022(m) | 601,500 | ||||||
3,030,045 | Infor (U.S.), Inc., USD Term Loan B5, 3.750%, 6/03/2020(c) | 2,838,152 | ||||||
3,251,462 | IQOR U.S., Inc., Term Loan B, 6.000%, 4/01/2021(c) | 2,563,225 | ||||||
2,518,411 | MA FinanceCo. LLC, Term Loan B, 5.250%, 11/19/2021(c) | 2,492,447 | ||||||
1,432,038 | NXP BV, Term Loan D, 3.250%, 1/11/2020(c) | 1,411,989 | ||||||
|
| |||||||
17,481,615 | ||||||||
|
| |||||||
Transportation Services — 0.1% | ||||||||
775,139 | FPC Holdings, Inc., 1st Lien Term Loan, 5.250%, 11/19/2019(c) | 623,987 | ||||||
515,305 | OSG Bulk Ships, Inc., Exit Term Loan, 5.250%, 8/05/2019(c) | 493,404 | ||||||
|
| |||||||
1,117,391 | ||||||||
|
| |||||||
Wireless — 0.1% | ||||||||
1,349,450 | SBA Senior Finance II LLC, Term Loan B1, 3.250%, 3/24/2021(c) | 1,319,087 | ||||||
|
| |||||||
Wirelines — 0.9% | ||||||||
2,840,725 | Communications Sales & Leasing, Inc., Term Loan B, 5.000%, 10/24/2022(c) | 2,617,899 | ||||||
3,513,450 | Integra Telecom, Inc., 2015 1st Lien Term Loan, 5.250%, 8/14/2020(c) | 3,390,479 | ||||||
1,082,801 | Level 3 Financing, Inc., 2015 Term Loan B2, 3.500%, 5/31/2022(c) | 1,064,664 | ||||||
1,986,567 | LTS Buyer LLC, 1st Lien Term Loan, 4.000%, 4/13/2020(c) | 1,929,950 | ||||||
1,600,000 | Sable International Finance Ltd., Term Loan B1, 11/23/2022(m) | 1,564,496 | ||||||
1,310,000 | Sable International Finance Ltd., Term Loan B2, 11/23/2022(m) | 1,280,931 | ||||||
1,077,278 | Zayo Group LLC, Term Loan B, 3.750%, 5/06/2021(c) | 1,057,844 | ||||||
|
| |||||||
12,906,263 | ||||||||
|
| |||||||
Total Senior Loans (Identified Cost $122,535,013) | 117,568,423 | |||||||
|
| |||||||
Loan Participations — 0.2% | ||||||||
ABS Other — 0.2% | ||||||||
2,470,313 | Rise Ltd., Series 2014-1, Class A, 4.750%, 2/15/2039 (c)(e) (Identified Cost $2,488,840) | 2,445,609 | ||||||
|
| |||||||
Shares | ||||||||
Preferred Stocks — 0.5% | ||||||||
Non-Convertible Preferred Stock — 0.3% | ||||||||
Cable Satellite — 0.3% | ||||||||
4,040,000 | NBCUniversal Enterprise, Inc., 5.250%, 144A(b) (Identified Cost $4,040,000) | 4,282,400 | ||||||
|
| |||||||
Convertible Preferred Stocks — 0.2% | ||||||||
Electric — 0.2% | ||||||||
17,432 | Dominion Resources, Inc., 6.375%(b) | 838,131 | ||||||
11,055 | Dominion Resources, Inc., Series A, 6.125%(b) | 586,799 |
See accompanying notes to financial statements.
| 38
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Shares | Description | Value (†) | ||||||
Electric — continued | ||||||||
9,938 | Dominion Resources, Inc., Series B, 6.000%(b) | $ | 533,372 | |||||
|
| |||||||
1,958,302 | ||||||||
|
| |||||||
Total Convertible Preferred Stocks (Identified Cost $1,953,555) | 1,958,302 | |||||||
|
| |||||||
Total Preferred Stocks (Identified Cost $5,993,555) | 6,240,702 | |||||||
|
| |||||||
Common Stocks — 0.1% | ||||||||
Energy Equipment & Services — 0.1% | ||||||||
35,206 | Halliburton Co. | 1,198,412 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels — 0.0% | ||||||||
188,463 | OGX Petroleo e Gas S.A., Sponsored ADR(d)(e)(f) | — | ||||||
|
| |||||||
Total Common Stocks (Identified Cost $1,500,770) | 1,198,412 | |||||||
|
| |||||||
Exchange-Traded Funds — 1.3% | ||||||||
221,313 | iShares® iBoxx $ High Yield Corporate Bond ETF (Identified Cost $17,516,117) | 17,833,402 | ||||||
|
| |||||||
Other Investments — 0.6% | ||||||||
Aircraft ABS — 0.6% | ||||||||
900 | ECAF I Blocker Ltd.(d)(e) (Identified Cost $9,000,000) | 8,820,000 | ||||||
|
| |||||||
Shares/ Units of Currency(†††) | ||||||||
Purchased Options — 0.0% | ||||||||
Options on Securities — 0.0% | ||||||||
247,200 | SPDR® S&P 500® ETF Trust, Call expiring February 19, 2016 at 209 (Identified Cost $566,685) | 540,132 | ||||||
|
| |||||||
Over-the-Counter Options on Currency — 0.0% | ||||||||
64,050,000 | CNH Call, expiring January 19, 2016 at 6.2123(n) (Identified Cost $163,968) | 769 | ||||||
|
| |||||||
Total Purchased Options (Identified Cost $730,653) | 540,901 | |||||||
|
| |||||||
Notional Amount (†††) | ||||||||
Purchased Swaptions — 0.2% | ||||||||
Interest Rate Swaptions — 0.2% | ||||||||
$ | 336,950,000 | 1-year Interest Rate Swap Put, expiring 08/16/2016, Pay 28-day TIIE, Receive MXN 4.900%(o) | 101,573 |
See accompanying notes to financial statements.
39 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Notional Amount (†††) | Description | Value (†) | ||||||
Interest Rate Swaptions — continued | ||||||||
$ | 1,225,000,000 | 1-year Interest Rate Swap Put, expiring 08/17/2016, Pay 28-day TIIE, Receive MXN 4.890%(p) | $ | 363,893 | ||||
1,570,000,000 | 1-year Interest Rate Swap Put, expiring 9/12/2016, Pay 28-day TIIE, Receive MXN 4.910%(n) | 460,209 | ||||||
130,200,000 | 10-year Interest Rate Swap Call, expiring 9/19/2016, Pay 2.570%, Receive 3-month LIBOR(n) | 1,930,358 | ||||||
|
| |||||||
Total Purchased Swaptions (Identified Cost $4,923,772) | 2,856,033 | |||||||
|
| |||||||
Principal Amount (‡) | ||||||||
Short-Term Investments — 6.0% | ||||||||
325,344 | Repurchase Agreement with State Street Bank and Trust Company, dated 12/31/2015 at 0.000% to be repurchased at $325,344 on 1/04/2016 collateralized by $328,100 U.S. Treasury Note, 1.500% due 8/31/2018 valued at $331,928 including accrued interest (Note 2 of Notes to Financial Statements) | 325,344 | ||||||
72,344,720 | Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/31/2015 at 0.030% to be repurchased at $72,344,961 on 1/04/2016 collateralized by $39,000,000 Federal Home Loan Mortgage, 2.375% due 6/10/2022 valued at $39,273,388; $730,000 U.S. Treasury Note, 1.750% due 12/31/2020 valued at $729,088; $24,395,000 U.S. Treasury Note, 1.750% due 3/31/2022 valued at $24,090,063; $9,230,000 U.S. Treasury Note, 2.750% due 2/15/2024 valued at $9,703,038 including accrued interest (Note 2 of Notes to Financial Statements) | 72,344,720 | ||||||
9,400,000 | U.S. Treasury Bills, 0.130%, 1/14/2016(q)(r) | 9,399,709 | ||||||
|
| |||||||
Total Short-Term Investments (Identified Cost $82,069,623) | 82,069,773 | |||||||
|
| |||||||
Total Investments — 98.0% (Identified Cost $1,412,364,928)(a) | 1,335,619,843 | |||||||
Other assets less liabilities — 2.0% | 26,611,419 | |||||||
|
| |||||||
Net Assets — 100.0% | $ | 1,362,231,262 | ||||||
|
| |||||||
Notional Amount(†††) | ||||||||
Written Swaptions — (0.0%) | ||||||||
Interest Rate Swaptions — (0.0%) | ||||||||
$ | 130,200,000 | 10-year Interest Rate Swap Call, expiring 9/19/2016, Pay 3-month LIBOR, Receive 3.070% (n) (Premiums Received $1,783,740) | $ | (578,804 | ) | |||
|
| |||||||
(‡) | 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 100. | |||||||
(†††) | Interest rate swaptions are expressed as notional amount. Options on currency are expressed as units of currency. Options on securities are expressed as shares. |
See accompanying notes to financial statements.
| 40
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
(a) | Federal Tax Information: | |||||||
At December 31, 2015, the net unrealized depreciation on investments based on a cost of $1,412,738,023 for federal income tax purposes was as follows: | ||||||||
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost | $ | 9,450,237 | ||||||
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value | (86,568,417 | ) | ||||||
|
| |||||||
Net unrealized depreciation | $ | (77,118,180 | ) | |||||
|
| |||||||
(b) | All of this security has been designated to cover the Fund’s obligations under open forward foreign currency contracts, futures contracts, swap agreements or swaptions. | |||||||
(c) | Variable rate security. Rate as of December 31, 2015 is disclosed. | |||||||
(d) | Fair valued by the Fund’s adviser. At December 31, 2015, the value of these securities amounted to $21,106,978 or 1.5% of net assets. See Note 2 of Notes to Financial Statements. | |||||||
(e) | Illiquid security. At December 31, 2015, the value of these securities amounted to $38,184,910 or 2.8% of net assets. Illiquid securities are deemed to be fair valued pursuant to the Fund’s pricing policies and procedures. See Note 2 of Notes to Financial Statements. | |||||||
(f) | Non-income producing security. | |||||||
(g) | Perpetual bond with no specified maturity date. | |||||||
(h) | 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. | |||||||
(i) | A portion of this security has been designated to cover the Fund’s obligations under open forward foreign currency contracts, futures contracts, swap agreements or swaptions. | |||||||
(j) | The issuer is in default with respect to interest and/or principal payments. Income is not being accrued. | |||||||
(k) | Treasury Inflation Protected Security (TIPS). | |||||||
(l) | Variable rate security. Rate shown represents the weighted average rate of underlying contracts at December 31, 2015. | |||||||
(m) | Position is unsettled. Contract rate was not determined at December 31, 2015 and does not take effect until settlement date. Maturity date is not finalized until settlement date. | |||||||
(n) | Counterparty is Bank of America, N.A. | |||||||
(o) | Counterparty is JPMorgan Chase Bank, N.A. | |||||||
(p) | Counterparty is Deutsche Bank AG. | |||||||
(q) | Interest rate represents discount rate at time of purchase; not a coupon rate. | |||||||
(r) | All of this security has been pledged as initial margin for open futures contracts. | |||||||
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, 2015, the value of Rule 144A holdings amounted to $454,088,921 or 33.3% of net assets. | |||||||
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. | |||||||
EMTN | Euro Medium Term Note | |||||||
ETF | Exchange-Traded Fund | |||||||
LIBOR | London Interbank Offered Rate | |||||||
MTN | Medium Term Note | |||||||
REITs | Real Estate Investment Trusts | |||||||
TIIE | Tasa de Interes de Equilibrio — Equilibrium Interbank Interest Rate |
See accompanying notes to financial statements.
41 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
BRL | Brazilian Real | |||||
CNH | Chinese Yuan Renminbi Offshore | |||||
COP | Colombian Peso | |||||
EUR | Euro | |||||
MXN | Mexican Peso | |||||
USD | U.S. Dollar | |||||
ZAR | South African Rand |
At December 31, 2015, the Fund had the following open bilateral credit default swap agreements:
Buy Protection | ||||||||||||||||||||||||
Counterparty | Reference Obligation | (Pay)/ Receive Fixed Rate | Expiration Date | Notional Value(‡) | Unamortized Up Front Premium Paid/ (Received) | Market Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||
Barclays Bank PLC | CDX.EM* Series 24, 5-Year | (1.00%) | 12/20/2020 | $ | 1,318,000 | $ | 170,600 | $ | 146,795 | $ | (23,805 | ) | ||||||||||||
Barclays Bank PLC | Republic of Turkey | (1.00%) | 9/20/2020 | 7,300,000 | 552,595 | 508,722 | (43,873 | ) | ||||||||||||||||
Deutsche Bank AG | CDX.EM* Series 24, 5-Year | (1.00%) | 12/20/2020 | 27,146,000 | 3,500,831 | 3,023,443 | (477,388 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total | $ | 3,678,960 | $ | (545,066 | ) | |||||||||||||||||||
|
|
|
|
(‡) | Notional value stated in U.S. dollars unless otherwise noted. |
* | CDX.EM is an index composed of emerging market credit default swaps. |
At December 31, 2015, the Fund had the following open bilateral interest rate swap agreements:
Counterparty | Notional Value | Currency | Expiration Date | Fund Pays | Fund Receives | Market Value1 | ||||||||||||||
Bank of America, N.A. | 36,000,000 | ZAR | 05/8/2025 | 7.950 | % | 3-month SAFEX-JIBAR | $ | 215,169 | ||||||||||||
Barclays Bank PLC | 291,000,000 | ZAR | 05/5/2025 | 7.950 | % | 3-month SAFEX-JIBAR | 1,738,028 | |||||||||||||
JPMorgan Chase Bank, N.A. | 57,120,000 | ZAR | 04/17/2025 | 7.720 | % | 3-month SAFEX-JIBAR | 392,629 | |||||||||||||
|
| |||||||||||||||||||
Total | $ | 2,345,826 | ||||||||||||||||||
|
|
1 There are no up front payments on interest rate swap agreements; therefore unrealized appreciation (depreciation) is equal to market value.
JIBAR | Johannesburg Interbank Agreed Rate | |||||
SAFEX | South African Futures Exchange |
See accompanying notes to financial statements.
| 42
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
At December 31, 2015, the Fund had the following open forward foreign currency contracts:
Contract to Buy/Sell | Delivery Date | Currency | Units of Currency | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Sell1 | 1/11/2016 | Brazilian Real | 27,700,000 | $ | 6,987,274 | $ | 262,137 | |||||||||||
Sell1 | 2/02/2016 | Brazilian Real | 85,675,000 | 21,442,672 | 315,506 | |||||||||||||
Buy1 | 2/01/2016 | Chilean Peso | 15,300,000,000 | 21,524,285 | (435,126 | ) | ||||||||||||
Buy2 | 1/29/2016 | Colombian Peso | 46,000,000,000 | 14,455,222 | 629,991 | |||||||||||||
Sell2 | 1/22/2016 | Colombian Peso | 18,400,000,000 | 5,786,196 | (312,124 | ) | ||||||||||||
Buy1 | 1/04/2016 | Euro | 26,000,000 | 28,255,495 | (170,045 | ) | ||||||||||||
Sell1 | 1/04/2016 | Euro | 26,000,000 | 28,255,495 | (713,435 | ) | ||||||||||||
Sell3 | 1/25/2016 | Euro | 8,389,000 | 9,121,284 | 25,914 | |||||||||||||
Sell2 | 1/29/2016 | Euro | 9,845,000 | 10,705,413 | 109,004 | |||||||||||||
Sell1 | 2/01/2016 | Euro | 26,000,000 | 28,274,344 | 169,527 | |||||||||||||
Buy1 | 2/01/2016 | Hungarian Forint | 7,777,600,000 | 26,785,579 | (420,242 | ) | ||||||||||||
Sell2 | 1/19/2016 | Indonesian Rupiah | 196,800,000,000 | 14,233,430 | (305,617 | ) | ||||||||||||
Buy1 | 1/29/2016 | Mexican Peso | 159,000,000 | 9,209,694 | 13,627 | |||||||||||||
Sell4 | 1/25/2016 | Mexican Peso | 11,230,986 | 650,714 | 6,369 | |||||||||||||
Sell1 | 1/21/2016 | New Taiwan Dollar | 1,192,000,000 | 36,291,880 | (82,889 | ) | ||||||||||||
Sell1 | 1/14/2016 | South Korean Won | 25,000,000,000 | 21,315,705 | (147,203 | ) | ||||||||||||
Sell1 | 9/19/2016 | Yuan Renminbi | 235,000,000 | 35,711,175 | (83,522 | ) | ||||||||||||
|
| |||||||||||||||||
Total | $ | (1,138,128 | ) | |||||||||||||||
|
|
1 Counterparty is Bank of America, N.A.
2 Counterparty is Credit Suisse International
3 Counterparty is Deutsche Bank AG
4 Counterparty is Morgan Stanley & Co.
At December 31, 2015, open short futures contracts were as follows:
Financial Futures | Expiration Date | Contracts | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||
E-mini S&P 500® | 3/18/2016 | 417 | $ | 42,440,175 | $ | (475,182 | ) | |||||||||
Eurodollar | 12/19/2016 | 1,398 | 345,201,150 | (336,288 | ) | |||||||||||
Eurodollar | 12/18/2017 | 1,420 | 348,698,750 | (387,728 | ) | |||||||||||
|
| |||||||||||||||
Total | $ | (1,199,198 | ) | |||||||||||||
|
|
See accompanying notes to financial statements.
43 |
Table of Contents
Portfolio of Investments – as of December 31, 2015
Loomis Sayles Strategic Alpha Fund – (continued)
Industry Summary at December 31, 2015
ABS Home Equity | 11.4 | % | ||
Banking | 7.1 | |||
Treasuries | 5.9 | |||
Technology | 5.6 | |||
Non-Agency Commercial Mortgage-Backed Securities | 5.1 | |||
ABS Credit Card | 4.9 | |||
Automotive | 3.9 | |||
ABS Other | 3.5 | |||
Independent Energy | 3.4 | |||
Pharmaceuticals | 3.3 | |||
Midstream | 3.1 | |||
Cable Satellite | 2.9 | |||
Finance Companies | 2.6 | |||
Airlines | 2.6 | |||
Other Investments, less than 2% each | 26.7 | |||
Short-Term Investments | 6.0 | |||
|
| |||
Total Investments | 98.0 | |||
Other assets less liabilities (including open written swaptions, swap agreements, forward foreign currency contracts and futures contracts) | 2.0 | |||
|
| |||
Net Assets | 100.0 | % | ||
|
|
See accompanying notes to financial statements.
| 44
Table of Contents
Statements of Assets and Liabilities
December 31, 2015
Gateway Equity Call Premium Fund | Loomis Sayles Strategic Alpha Fund | |||||||
ASSETS | ||||||||
Investments at cost | $ | 50,316,339 | $ | 1,412,364,928 | ||||
Net unrealized appreciation (depreciation) | 1,670,752 | (76,745,085 | ) | |||||
|
|
|
| |||||
Investments at value | 51,987,091 | 1,335,619,843 | ||||||
Cash | 2,374,448 | 292,939 | ||||||
Due from brokers (Note 2) | — | 4,970,000 | ||||||
Foreign currency at value (identified cost $0 and $10,005,923, respectively) | — | 9,977,573 | ||||||
Receivable for Fund shares sold | 578,258 | 9,284,811 | ||||||
Receivable for securities sold | — | 5,078,591 | ||||||
Collateral received for open forward foreign currency contracts, options, swaptions or swap agreements (Notes 2 and 4) | — | 10,266,796 | ||||||
Dividends and interest receivable | 68,290 | 8,324,654 | ||||||
Unrealized appreciation on bilateral swap agreements (Note 2) | — | 2,345,826 | ||||||
Unrealized appreciation on forward foreign currency contracts (Note 2) | — | 1,532,075 | ||||||
Tax reclaims receivable | — | 11,192 | ||||||
Receivable for variation margin on futures contracts (Note 2) | — | 274,987 | ||||||
Unamortized upfront premiums paid on bilateral swap agreements (Note 2) | — | 4,224,026 | ||||||
Fees receivable on swap agreements (Note 2) | — | 271,052 | ||||||
|
|
|
| |||||
TOTAL ASSETS | 55,008,087 | 1,392,474,365 | ||||||
|
|
|
| |||||
LIABILITIES | ||||||||
Options/swaptions written, at value (premiums received $1,260,695 and $1,783,740, respectively) (Note 2) | 625,660 | 578,804 | ||||||
Payable for securities purchased | — | 7,778,484 | ||||||
Unrealized depreciation on bilateral swap agreements (Note 2) | — | 545,066 | ||||||
Payable for Fund shares redeemed | 51,717 | 6,917,005 | ||||||
Unrealized depreciation on forward foreign currency contracts (Note 2) | — | 2,670,203 | ||||||
Due to brokers (Note 2) | — | 10,266,796 | ||||||
Fees payable on swap agreements (Note 2) | — | 346,134 | ||||||
Management fees payable (Note 6) | 10,093 | 837,945 | ||||||
Deferred Trustees’ fees (Note 6) | 13,232 | 72,617 | ||||||
Administrative fees payable (Note 6) | 1,929 | 52,711 | ||||||
Payable to distributor (Note 6d) | 294 | 9,362 | ||||||
Other accounts payable and accrued expenses | 79,755 | 167,976 | ||||||
|
|
|
| |||||
TOTAL LIABILITIES | 782,680 | 30,243,103 | ||||||
|
|
|
| |||||
NET ASSETS | $ | 54,225,407 | $ | 1,362,231,262 | ||||
|
|
|
| |||||
NET ASSETS CONSIST OF: | ||||||||
Paid-in capital | $ | 53,728,774 | $ | 1,486,904,050 | ||||
Undistributed (Distributions in excess of) net investment income | (7,362 | ) | 517,945 | |||||
Accumulated net realized loss on investments, futures contracts, options/swaptions written, swap agreements and foreign currency transactions | (1,801,792 | ) | (49,003,321 | ) | ||||
Net unrealized appreciation (depreciation) on investments, futures contracts, options/swaptions written, swap agreements and foreign currency translations | 2,305,787 | (76,187,412 | ) | |||||
|
|
|
| |||||
NET ASSETS | $ | 54,225,407 | $ | 1,362,231,262 | ||||
|
|
|
|
See accompanying notes to financial statements.
45 |
Table of Contents
Statements of Assets and Liabilities (continued)
December 31, 2015
Gateway Equity Call Premium Fund | Loomis Sayles Strategic Alpha Fund | |||||||
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: | ||||||||
Class A shares: | ||||||||
Net assets | $ | 3,854,766 | $ | 116,054,948 | ||||
|
|
|
| |||||
Shares of beneficial interest | 377,249 | 12,279,607 | ||||||
|
|
|
| |||||
Net asset value and redemption price per share | $ | 10.22 | $ | 9.45 | ||||
|
|
|
| |||||
Offering price per share (100/[100-maximum sales charge] of net asset value) (Note 1) | $ | 10.84 | $ | 9.87 | ||||
|
|
|
| |||||
Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1) | ||||||||
Net assets | $ | 36,797 | $ | 62,453,328 | ||||
|
|
|
| |||||
Shares of beneficial interest | 3,599 | 6,631,073 | ||||||
|
|
|
| |||||
Net asset value and offering price per share | $ | 10.22 | $ | 9.42 | ||||
|
|
|
| |||||
Class Y shares: | ||||||||
Net assets | $ | 50,333,844 | $ | 1,183,722,986 | ||||
|
|
|
| |||||
Shares of beneficial interest | 4,924,072 | 125,402,405 | ||||||
|
|
|
| |||||
Net asset value, offering and redemption price per share | $ | 10.22 | $ | 9.44 | ||||
|
|
|
|
See accompanying notes to financial statements.
| 46
Table of Contents
Statements of Operations
For the Year Ended December 31, 2015
Gateway Equity Call Premium Fund | Loomis Sayles Strategic Alpha Fund | |||||||
INVESTMENT INCOME | ||||||||
Interest | $ | 186 | $ | 51,134,804 | ||||
Dividends | 913,527 | (a) | 2,786,837 | |||||
Less net foreign taxes withheld | (294 | ) | (7,412 | ) | ||||
|
|
|
| |||||
913,419 | 53,914,229 | |||||||
|
|
|
| |||||
Expenses | ||||||||
Management fees (Note 6) | 232,300 | 10,040,921 | ||||||
Service and distribution fees (Note 6) | 7,606 | 950,528 | ||||||
Administrative fees (Note 6) | 15,344 | 614,244 | ||||||
Trustees’ fees and expenses (Note 6) | 18,362 | 39,486 | ||||||
Transfer agent fees and expenses (Note 6) | 21,945 | 991,625 | ||||||
Audit and tax services fees | 50,087 | 86,834 | ||||||
Custodian fees and expenses | 120,613 | 173,116 | ||||||
Legal fees | 417 | 21,617 | ||||||
Registration fees | 48,502 | 102,092 | ||||||
Shareholder reporting expenses | 995 | 65,066 | ||||||
Miscellaneous expenses | 10,525 | 60,476 | ||||||
|
|
|
| |||||
Total expenses | 526,696 | 13,146,005 | ||||||
Less waiver and/or expense reimbursement (Note 6) | (178,854 | ) | — | |||||
|
|
|
| |||||
Net expenses | 347,842 | 13,146,005 | ||||||
|
|
|
| |||||
Net investment income | 565,577 | 40,768,224 | ||||||
|
|
|
| |||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS, OPTIONS/SWAPTIONS WRITTEN, SWAP AGREEMENTS AND FOREIGN CURRENCY TRANSACTIONS | ||||||||
Net realized gain (loss) on: | ||||||||
Investments | (1,953,636 | ) | (6,674,958 | ) | ||||
Futures contracts | — | (410,585 | ) | |||||
Options/swaptions written | 648,630 | 2,330,871 | ||||||
Swap agreements | — | (927,858 | ) | |||||
Foreign currency transactions | (4 | ) | 15,049,641 | |||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments | 1,243,992 | (72,780,106 | ) | |||||
Futures contracts | — | 2,165,697 | ||||||
Options/swaptions written | 568,295 | 931,000 | ||||||
Swap agreements | — | 1,589,679 | ||||||
Foreign currency translations | — | (5,246,777 | ) | |||||
|
|
|
| |||||
Net realized and unrealized gain (loss) on investments, futures contracts, options/swaptions written, swap agreements and foreign currency transactions | 507,277 | (63,973,396 | ) | |||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,072,854 | $ | (23,205,172 | ) | |||
|
|
|
|
(a) | Includes a non-recurring dividend of $144,050 recognized as part of a merger transaction involving two of the Fund’s portfolio securities. The Fund’s cost basis in the new securities received in the merger was increased by this amount. There was no impact to the Fund’s net asset value. |
See accompanying notes to financial statements.
47 |
Table of Contents
Statements of Changes in Net Assets
Gateway Equity Call Premium Fund | Loomis Sayles Strategic Alpha Fund | |||||||||||||||
Year Ended December 31, 2015 | Period Ended December 31, 2014(a) | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||
FROM OPERATIONS: | ||||||||||||||||
Net investment income | $ | 565,577 | $ | 30,945 | $ | 40,768,224 | $ | 38,148,683 | ||||||||
Net realized gain (loss) on investments, futures contracts, options/swaptions written, swap agreements and foreign currency transactions | (1,305,010 | ) | (507,890 | ) | 9,367,111 | (1,418,567 | ) | |||||||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts, options/swaptions written, swap agreements and foreign currency translations | 1,812,287 | 493,500 | (73,340,507 | ) | (7,982,537 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | 1,072,854 | 16,555 | (23,205,172 | ) | 28,747,579 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
FROM DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||||||
Net investment income | ||||||||||||||||
Class A | (39,013 | ) | (379 | ) | (4,059,682 | ) | (4,068,797 | ) | ||||||||
Class C | (187 | ) | (2 | ) | (1,842,482 | ) | (1,878,950 | ) | ||||||||
Class Y | (520,001 | ) | (54,347 | ) | (47,419,979 | ) | (37,780,827 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (559,201 | ) | (54,728 | ) | (53,322,143 | ) | (43,728,574 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 10) | 32,799,930 | 20,949,997 | 74,883,671 | 139,284,341 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | 33,313,583 | 20,911,824 | (1,643,644 | ) | 124,303,346 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of the year | 20,911,824 | — | 1,363,874,906 | 1,239,571,560 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of the year | $ | 54,225,407 | $ | 20,911,824 | $ | 1,362,231,262 | $ | 1,363,874,906 | ||||||||
|
|
|
|
|
|
|
| |||||||||
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME | $ | (7,362 | ) | $ | (2,278 | ) | $ | 517,945 | $ | 6,428,340 | ||||||
|
|
|
|
|
|
|
|
(a) | From commencement of operations on September 30, 2014 through December 31, 2014. |
See accompanying notes to financial statements.
| 48
Table of Contents
Financial Highlights
For a share outstanding throughout each period.
Gateway Equity Call Premium Fund—Class A | ||||||||
Year Ended December 31, 2015 | Period Ended December 31, 2014* | |||||||
Net asset value, beginning of the period | $ | 9.96 | $ | 10.00 | ||||
|
|
|
| |||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 0.15 | (b) | 0.02 | |||||
Net realized and unrealized gain (loss) | 0.24 | (0.02 | ) | |||||
|
|
|
| |||||
Total from Investment Operations | 0.39 | 0.00 | (c) | |||||
|
|
|
| |||||
LESS DISTRIBUTIONS FROM: | ||||||||
Net investment income | (0.13 | ) | (0.04 | ) | ||||
Net realized capital gains | — | — | ||||||
|
|
|
| |||||
Total Distributions | (0.13 | ) | (0.04 | ) | ||||
|
|
|
| |||||
Net asset value, end of the period | $ | 10.22 | $ | 9.96 | ||||
|
|
|
| |||||
Total return(d)(e) | 3.90 | % | 0.00 | %(f) | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Net assets, end of the period (000’s) | $ | 3,855 | $ | 96 | ||||
Net expenses(g) | 1.20 | % | 1.20 | %(h) | ||||
Gross expenses | 1.70 | % | 3.69 | %(h) | ||||
Net investment income | 1.47 | %(b) | 0.84 | %(h) | ||||
Portfolio turnover rate | 38 | % | 7 | % |
* | From commencement of operations on September 30, 2014 through December 31, 2014. |
(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 $0.10 and the ratio of net investment income to average net assets would have been 0.98%. |
(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. |
(e) | Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(f) | Periods less than one year are not annualized. |
(g) | 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. |
(h) | Computed on an annualized basis for periods less than one year. |
See accompanying notes to financial statements.
49 |
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Gateway Equity Call Premium Fund—Class C | ||||||||
Year Ended December 31, 2015 | Period Ended December 31, 2014* | |||||||
Net asset value, beginning of the period | $ | 9.97 | $ | 10.00 | ||||
|
|
|
| |||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 0.09 | (b) | 0.00 | (c) | ||||
Net realized and unrealized gain (loss) | 0.22 | (0.01 | ) | |||||
|
|
|
| |||||
Total from Investment Operations | 0.31 | (0.01 | ) | |||||
|
|
|
| |||||
LESS DISTRIBUTIONS FROM: | ||||||||
Net investment income | (0.06 | ) | (0.02 | ) | ||||
Net realized capital gains | — | — | ||||||
|
|
|
| |||||
Total Distributions | (0.06 | ) | (0.02 | ) | ||||
|
|
|
| |||||
Net asset value, end of the period | $ | 10.22 | $ | 9.97 | ||||
|
|
|
| |||||
Total return(d)(e) | 3.07 | % | (0.12 | )%(f) | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Net assets, end of the period (000’s) | $ | 37 | $ | 1 | ||||
Net expenses(g) | 1.95 | % | 1.95 | %(h) | ||||
Gross expenses | 2.40 | % | 4.37 | %(h) | ||||
Net investment income | 0.85 | %(b) | 0.01 | %(h) | ||||
Portfolio turnover rate | 38 | % | 7 | % |
* | From commencement of operations on September 30, 2014 through December 31, 2014. |
(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 $0.07 and the ratio of net investment income to average net assets would have been 0.72%. |
(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. |
(e) | Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(f) | Periods less than one year are not annualized. |
(g) | 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. |
(h) | Computed on an annualized basis for periods less than one year. |
See accompanying notes to financial statements.
| 50
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Gateway Equity Call Premium Fund—Class Y | ||||||||
Year Ended December 31, 2015 | Period Ended December 31, 2014* | |||||||
Net asset value, beginning of the period | $ | 9.97 | $ | 10.00 | ||||
|
|
|
| |||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 0.16 | (b) | 0.02 | |||||
Net realized and unrealized gain (loss) | 0.24 | (0.01 | ) | |||||
|
|
|
| |||||
Total from Investment Operations | 0.40 | 0.01 | ||||||
|
|
|
| |||||
LESS DISTRIBUTIONS FROM: | ||||||||
Net investment income | (0.15 | ) | (0.04 | ) | ||||
Net realized capital gains | — | — | ||||||
|
|
|
| |||||
Total Distributions | (0.15 | ) | (0.04 | ) | ||||
|
|
|
| |||||
Net asset value, end of the period | $ | 10.22 | $ | 9.97 | ||||
|
|
|
| |||||
Total return(c) | 4.03 | % | 0.13 | %(d) | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Net assets, end of the period (000’s) | $ | 50,334 | $ | 20,815 | ||||
Net expenses(e) | 0.95 | % | 0.95 | %(f) | ||||
Gross expenses | 1.45 | % | 3.54 | %(f) | ||||
Net investment income | 1.59 | %(b) | 0.99 | %(f) | ||||
Portfolio turnover rate | 38 | % | 7 | % |
* | From commencement of operations on September 30, 2014 through December 31, 2014. |
(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 $0.12 and the ratio of net investment income to average net assets would have been 1.20%. |
(c) | Had certain expenses not been waived/reimbursed during the period, total returns would have been lower. |
(d) | Periods less than one year are not annualized. |
(e) | The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this waiver/reimbursement, expenses would have been higher. |
(f) | Computed on an annualized basis for periods less than one year. |
See accompanying notes to financial statements.
51 |
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Loomis Sayles Strategic Alpha Fund—Class A | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 9.96 | $ | 10.06 | $ | 10.20 | $ | 9.34 | $ | 10.06 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.26 | 0.29 | (b) | 0.37 | 0.37 | 0.34 | ||||||||||||||
Net realized and unrealized gain (loss) | (0.42 | ) | (0.07 | ) | (0.28 | ) | 0.77 | (0.75 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | (0.16 | ) | 0.22 | 0.09 | 1.14 | (0.41 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.35 | ) | (0.32 | ) | (0.23 | ) | (0.28 | ) | (0.31 | ) | ||||||||||
Net realized capital gains | — | — | — | — | (0.00 | )(c) | ||||||||||||||
|
|
|
|
|
|
| �� |
|
| |||||||||||
Total Distributions | (0.35 | ) | (0.32 | ) | (0.23 | ) | (0.28 | ) | (0.31 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 9.45 | $ | 9.96 | $ | 10.06 | $ | 10.20 | $ | 9.34 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return(d) | (1.68 | )% | 2.24 | %(b) | 0.96 | % | 12.24 | % | (3.90 | )% | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 116,055 | $ | 104,056 | $ | 177,339 | $ | 80,704 | $ | 130,662 | ||||||||||
Net expenses | 1.10 | % | 1.10 | % | 1.11 | % | 1.12 | % | 1.15 | %(e) | ||||||||||
Gross expenses | 1.10 | % | 1.10 | % | 1.11 | % | 1.12 | % | 1.15 | %(e) | ||||||||||
Net investment income | 2.66 | % | 2.90 | %(b) | 3.68 | % | 3.77 | % | 3.50 | % | ||||||||||
Portfolio turnover rate | 72 | % | 87 | % | 115 | % | 116 | % | 141 | % |
(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) | Amount rounds to less than $0.01 per share. |
(d) | A sales charge for Class A shares is not reflected in total return calculations. |
(e) | Includes fee/expense recovery of less than 0.01%. |
See accompanying notes to financial statements.
| 52
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Loomis Sayles Strategic Alpha Fund—Class C | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 9.93 | $ | 10.03 | $ | 10.16 | $ | 9.31 | $ | 10.05 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.19 | 0.21 | (b) | 0.30 | 0.30 | 0.28 | ||||||||||||||
Net realized and unrealized gain (loss) | (0.43 | ) | (0.06 | ) | (0.28 | ) | 0.76 | (0.77 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | (0.24 | ) | 0.15 | 0.02 | 1.06 | (0.49 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.25 | ) | (0.15 | ) | (0.21 | ) | (0.25 | ) | ||||||||||
Net realized capital gains | — | — | — | — | (0.00 | )(c) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Distributions | (0.27 | ) | (0.25 | ) | (0.15 | ) | (0.21 | ) | (0.25 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 9.42 | $ | 9.93 | $ | 10.03 | $ | 10.16 | $ | 9.31 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return(d) | (2.44 | )% | 1.47 | %(b) | 0.22 | % | 11.44 | % | (4.69 | )% | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 62,453 | $ | 71,215 | $ | 91,694 | $ | 67,748 | $ | 77,398 | ||||||||||
Net expenses | 1.85 | % | 1.85 | % | 1.86 | % | 1.87 | % | 1.89 | %(e) | ||||||||||
Gross expenses | 1.85 | % | 1.85 | % | 1.86 | % | 1.87 | % | 1.89 | %(e) | ||||||||||
Net investment income | 1.91 | % | 2.13 | %(b) | 2.96 | % | 3.05 | % | 2.82 | % | ||||||||||
Portfolio turnover rate | 72 | % | 87 | % | 115 | % | 116 | % | 141 | % |
(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) | A contingent deferred sales charge for Class C shares is not reflected in total return calculations. |
(e) | Includes fee/expense recovery of less than 0.01%. |
See accompanying notes to financial statements.
53 |
Table of Contents
Financial Highlights (continued)
For a share outstanding throughout each period.
Loomis Sayles Strategic Alpha Fund—Class Y | ||||||||||||||||||||
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | ||||||||||||||||
Net asset value, beginning of the period | $ | 9.95 | $ | 10.05 | $ | 10.19 | $ | 9.33 | $ | 10.05 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.29 | 0.31 | (b) | 0.40 | 0.41 | 0.37 | ||||||||||||||
Net realized and unrealized gain (loss) | (0.43 | ) | (0.06 | ) | (0.29 | ) | 0.76 | (0.75 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from Investment Operations | (0.14 | ) | 0.25 | 0.11 | 1.17 | (0.38 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
LESS DISTRIBUTIONS FROM: | ||||||||||||||||||||
Net investment income | (0.37 | ) | (0.35 | ) | (0.25 | ) | (0.31 | ) | (0.34 | ) | ||||||||||
Net realized capital gains | — | — | — | — | (0.00 | )(c) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Distributions | (0.37 | ) | (0.35 | ) | (0.25 | ) | (0.31 | ) | (0.34 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of the period | $ | 9.44 | $ | 9.95 | $ | 10.05 | $ | 10.19 | $ | 9.33 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return | (1.43 | )% | 2.52 | %(b) | 1.19 | % | 12.57 | % | (3.78 | )% | ||||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Net assets, end of the period (000’s) | $ | 1,183,723 | $ | 1,188,605 | $ | 970,539 | $ | 497,648 | $ | 273,335 | ||||||||||
Net expenses | 0.85 | % | 0.85 | % | 0.86 | % | 0.87 | % | 0.90 | %(d) | ||||||||||
Gross expenses | 0.85 | % | 0.85 | % | 0.86 | % | 0.87 | % | 0.90 | %(d) | ||||||||||
Net investment income | 2.91 | % | 3.10 | %(b) | 3.92 | % | 4.09 | % | 3.81 | % | ||||||||||
Portfolio turnover rate | 72 | % | 87 | % | 115 | % | 116 | % | 141 | % |
(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) | Amount rounds to less than $0.01 per share. |
(d) | Includes fee/expense recovery of less than 0.01%. |
See accompanying notes to financial statements.
| 54
Table of Contents
December 31, 2015
1. Organization. Gateway Trust 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:
Gateway Trust:
Gateway Equity Call Premium Fund
Natixis Funds Trust II:
Loomis Sayles Strategic Alpha Fund (the “Strategic Alpha Fund”)
The Gateway Equity Call Premium Fund is a diversified investment company. The Strategic Alpha Fund is a non-diversified investment company.
Each Fund offers Class A, Class C and Class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.75% for Gateway Equity Call Premium Fund and 4.25% (4.50% prior to November 2, 2015) for Strategic Alpha Fund. Class C shares do not pay a front-end sales charge, do not convert to any other class of shares, pay higher Rule 12b-1 fees than 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 Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. Class Y shares are intended for institutional investors with a minimum initial investment of $100,000, though some categories of investors are exempted from the minimum investment amount as outlined in the 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, Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (“Loomis Sayles Funds Trusts”). 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 (including the Rule 12b-1 service and distribution fees). 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
55 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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 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:
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. 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 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 clearinghouse 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
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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. Option contracts for which the average of the closing bid and ask quotations are not considered to reflect option contract values as of the close of the New York Stock Exchange (“NYSE”) are valued at fair value as determined in good faith by the adviser pursuant to procedures approved by the Board of Trustees. On the last business day of the month, the Fund will fair value S&P 500® index options using the closing rotation values published by the CBOE. The Fund may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign market but prior to the close of the NYSE. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuer’s security from the primary market on which it has traded) as well as events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). When fair valuing its securities or other investments, the Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities or other market activity and/or significant events that occur after the close of the foreign market and before the time the Fund’s 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 the Fund’s NAV may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in adjustments to the prices of securities held by the Fund.
As of December 31, 2015, written options held by Gateway Equity Call Premium Fund were fair valued at $(625,660), representing (1.2%) of net assets, using the closing rotation values published by the CBOE.
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As of December 31, 2015, securities held by Strategic Alpha Fund included in net assets (reflected at absolute value) were fair valued as follows:
Illiquid | Percentage of Net Assets | Other fair valued | Percentage of | |||
$38,184,910 | 2.8% | $21,106,978 | 1.5% |
1 | Illiquid securities are deemed to be fair valued pursuant to the Fund’s pricing policies and procedures. |
2 | Fair valued by the Fund’s adviser. |
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 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. Periodic principal adjustments for inflation-protected securities are recorded to interest income. 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
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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 Strategic Alpha Fund’s 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 Fund has net losses, reduce the amount of income available to be distributed by the Fund.
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 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
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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 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
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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 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.
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
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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.
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
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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, swaptions, 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, swaptions and bilateral swap agreements and as initial margin for futures contracts. 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, interest rate swaptions and 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. 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, 2015 and has concluded that no provisions for income tax are required. The Funds’ federal tax returns for the prior three fiscal years, where applicable, 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
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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.
k. 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, return of capital and capital gain distributions received, interest rate swaps, treasury inflation-protected bonds, foreign currency gains and losses, deferred Trustees’ fees, convertible bonds, contingent payment debt instruments 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, contingent payment debt instruments, defaulted and/or non-income producing securities, swap payable/receivable, wash sales, return of capital distributions received, convertible bonds, treasury inflation-protected securities and forward foreign currency, options 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 short-term capital gains are considered to be distributed from ordinary income for tax purposes.
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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, 2015 and 2014 were as follows:
2015 Distributions Paid From: | 2014 Distributions Paid From: | |||||||||||||||||||||||
Fund | Ordinary | Long-Term | Total | Ordinary | Long-Term | Total | ||||||||||||||||||
Gateway Equity Call Premium Fund | $ | 559,201 | $ | — | $ | 559,201 | $ | 54,728 | $ | — | $ | 54,728 | ||||||||||||
Strategic Alpha Fund | 53,322,143 | — | 53,322,143 | 43,728,574 | — | 43,728,574 |
As of December 31, 2015, the components of distributable earnings on a tax basis were as follows:
Gateway | Strategic | |||||||
Undistributed ordinary income | $ | 5,870 | $ | 717,308 | ||||
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Total undistributed earnings | 5,870 | 717,308 | ||||||
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Capital loss carryforward: | ||||||||
Short-term: | ||||||||
No expiration date | (1,147,572 | ) | (44,704,672 | ) | ||||
Long-term: | ||||||||
No expiration date | — | (5,507,048 | ) | |||||
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| |||||
Total capital loss carryforward | (1,147,572 | ) | (50,211,720 | ) | ||||
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Unrealized appreciation (depreciation) | ||||||||
Investments | 1,651,567 | (60,137,254 | ) | |||||
Foreign currency translations | — | (14,458,596 | ) | |||||
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Total unrealized appreciation (depreciation) | 1,651,567 | (74,595,850 | ) | |||||
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Total accumulated earnings (losses) | $ | 509,865 | $ | (124,090,262 | ) | |||
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Capital loss carryforward utilized in the current year | $ | — | $ | 4,089,798 | ||||
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l. 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.
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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.
m. 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, 2015, 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.
n. Securities Lending. The Strategic Alpha Fund has entered into an agreement with State Street Bank and Trust Company (“State Street Bank”), as agent of the Fund, 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 Fund may bear the risk of loss with respect to the investment of the collateral. The Fund invests cash collateral in short-term investments, a portion of
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the income from which is remitted to the borrowers and the remainder allocated between the Fund and State Street Bank as lending agent.
For the year ended December 31, 2015, the Fund did not loan securities under this agreement.
o. 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.
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 Fund’s 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 Fund 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 Fund does not have knowledge of the inputs used by the broker-dealer are categorized in 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
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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 Fund’s 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, 2015, at value:
Gateway Equity Call Premium Fund
Asset Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks(a) | $ | 51,987,091 | $ | — | $ | — | $ | 51,987,091 | ||||||||
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Liability Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Written Options(a) | $ | — | $ | (625,660 | ) | $ | — | $ | (625,660 | ) | ||||||
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(a) | Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments. |
For the year ended December 31, 2015, there were no transfers among Levels 1, 2 and 3.
Strategic Alpha Fund
Asset Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Bonds and Notes | ||||||||||||||||
Non-Convertible Bonds | ||||||||||||||||
ABS Home Equity | $ | — | $ | 152,755,362 | $ | 1,961,377 | (b) | $ | 154,716,739 | |||||||
ABS Other | — | 31,859,915 | 13,438,737 | (c) | 45,298,652 | |||||||||||
Non-Agency Commercial Mortgage-Backed Securities | — | 53,463,218 | 16,593,700 | (d) | 70,056,918 | |||||||||||
All Other Non-Convertible Bonds(a) | — | 798,239,285 | — | 798,239,285 | ||||||||||||
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Total Non-Convertible Bonds | — | 1,036,317,780 | 31,993,814 | 1,068,311,594 | ||||||||||||
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Convertible Bonds(a) | — | 27,734,994 | — | 27,734,994 | ||||||||||||
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Total Bonds and Notes | — | 1,064,052,774 | 31,993,814 | 1,096,046,588 | ||||||||||||
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Senior Loans(a) | — | 117,568,423 | — | 117,568,423 | ||||||||||||
Loan Participations(a) | — | — | 2,445,609 | (d) | 2,445,609 |
| 68
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Strategic Alpha Fund (continued)
Asset Valuation Inputs (continued)
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Preferred Stocks | ||||||||||||||||
Non-Convertible Preferred Stock(a) | — | 4,282,400 | — | 4,282,400 | ||||||||||||
Convertible Preferred Stocks(a) | 1,958,302 | — | — | 1,958,302 | ||||||||||||
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Total Preferred Stocks | 1,958,302 | 4,282,400 | — | 6,240,702 | ||||||||||||
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Common Stocks | ||||||||||||||||
Energy Equipment & Services | 1,198,412 | — | — | 1,198,412 | ||||||||||||
Oil, Gas & Consumable Fuels | — | — | — | (e) | — | |||||||||||
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Total Common Stocks | 1,198,412 | — | — | 1,198,412 | ||||||||||||
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Exchange-Traded Funds | 17,833,402 | — | — | 17,833,402 | ||||||||||||
Other Investments(a) | — | — | 8,820,000 | (f) | 8,820,000 | |||||||||||
Purchased Options | ||||||||||||||||
Options on Securities | 540,132 | — | — | 540,132 | ||||||||||||
Over-the-Counter Options on Currency | — | 769 | — | 769 | ||||||||||||
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Total Purchased Options | 540,132 | 769 | — | 540,901 | ||||||||||||
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Purchased Swaptions(a) | — | 2,856,033 | — | 2,856,033 | ||||||||||||
Short-Term Investments | — | 82,069,773 | — | 82,069,773 | ||||||||||||
Bilateral Interest Rate Swap Agreements (unrealized appreciation) | — | 2,345,826 | — | 2,345,826 | ||||||||||||
Forward Foreign Currency Contracts (unrealized appreciation) | — | 1,532,075 | — | 1,532,075 | ||||||||||||
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Total | $ | 21,530,248 | $ | 1,274,708,073 | $ | 43,259,423 | $ | 1,339,497,744 | ||||||||
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69 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Strategic Alpha Fund (continued)
Liability Valuation Inputs
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Written Swaptions(a) | $ | — | $ | (578,804 | ) | $ | — | $ | (578,804 | ) | ||||||
Bilateral Credit Default Swap Agreements (unrealized depreciation) | — | (545,066 | ) | — | (545,066 | ) | ||||||||||
Forward Foreign Currency Contracts (unrealized depreciation) | — | (2,670,203 | ) | — | (2,670,203 | ) | ||||||||||
Futures Contracts (unrealized depreciation) | (1,199,198 | ) | — | — | (1,199,198 | ) | ||||||||||
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Total | $ | (1,199,198 | ) | $ | (3,794,073 | ) | $ | — | $ | (4,993,271 | ) | |||||
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(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) | Valued using broker-dealer bid prices ($3,113,136), fair valued by the Fund’s adviser ($5,700,000), or fair valued by the Fund’s adviser using broker-dealer bid prices for which the inputs are unobservable to the Fund ($4,625,601). |
(d) | Valued using broker-dealer bid prices. |
(e) | Fair valued at zero using level 3 inputs. |
(f) | Fair valued by the Fund’s adviser using broker-dealer bid prices for which the inputs are unobservable to the Fund. |
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value as of December 31, 2014 and/or December 31, 2015:
Strategic Alpha Fund
Investments in Securities | Balance as of | Accrued | Realized | Change in | Purchases | |||||||||||||||
Bonds and Notes | ||||||||||||||||||||
Non-Convertible Bonds | ||||||||||||||||||||
ABS Home Equity | $ | 811,274 | $ | — | $ | 33,675 | $ | (17,393 | ) | $ | — | |||||||||
ABS Other | 20,098,815 | — | — | (870,165 | ) | 8,819,336 | ||||||||||||||
Independent Energy | — | 266,527 | — | (345,862 | ) | — | ||||||||||||||
Non-Agency Commercial Mortgage-Backed Securities | 4,387,394 | — | (11,816 | ) | (125,671 | ) | 13,327,048 | |||||||||||||
Common Stocks | ||||||||||||||||||||
Oil, Gas & Consumable Fuels | — | — | — | — | — | |||||||||||||||
Loan Participations | 2,657,911 | — | (1,308 | ) | (36,619 | ) | — | |||||||||||||
Other Investments | ||||||||||||||||||||
Aircraft ABS | — | — | — | (180,000 | ) | 9,000,000 | ||||||||||||||
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Total | $ | 27,955,394 | $ | 266,527 | $ | 20,551 | $ | (1,575,710 | ) | $ | 31,146,384 | |||||||||
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| 70
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Strategic Alpha Fund (continued)
Investments in Securities | Sales | Transfers | Transfers | Balance as of | Change in | |||||||||||||||
Bonds and Notes | ||||||||||||||||||||
Non-Convertible Bonds | ||||||||||||||||||||
ABS Home Equity | $ | (619,380 | ) | $ | 1,753,201 | $ | — | $ | 1,961,377 | $ | (18,195 | ) | ||||||||
ABS Other | (801,287 | ) | — | (13,807,962 | ) | 13,438,737 | (1,253,713 | ) | ||||||||||||
Independent Energy | — | 79,335 | — | — | — | |||||||||||||||
Non-Agency Commercial Mortgage-Backed Securities | (983,255 | ) | — | — | 16,593,700 | (137,205 | ) | |||||||||||||
Common Stocks | ||||||||||||||||||||
Oil, Gas & Consumable Fuels | — | — | — | — | — | |||||||||||||||
Loan Participations | (174,375 | ) | — | — | 2,445,609 | (37,055 | ) | |||||||||||||
Other Investments | ||||||||||||||||||||
Aircraft ABS | — | — | — | 8,820,000 | (180,000 | ) | ||||||||||||||
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Total | $ | (2,578,297 | ) | $ | 1,832,536 | $ | (13,807,962 | ) | $ | 43,259,423 | $ | (1,626,168 | ) | |||||||
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Debt securities valued at $1,832,536 were transferred from Level 2 to Level 3 during the period ended December 31, 2015. At December 31, 2014, 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. At December 31, 2015, these securities were valued at fair value as determined in good faith by the Fund’s adviser as an independent pricing service was unable to price the securities.
Debt securities valued at $13,807,962 were transferred from Level 3 to Level 2 during the period ended December 31, 2015. At December 31, 2014, 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, 2015, 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.
71 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Gateway Equity Call Premium Fund seeks to capture the majority of the returns associated with equity market investments, while exposing investors to less risk than other equity investments. To meet this investment goal, the Fund invests in a broadly diversified portfolio of common stocks, while also writing index call options. Writing index call options can reduce the Fund’s volatility, provide a steady cash flow and be an important source of the Fund’s return, although it also may reduce the Fund’s ability to profit from increases in the value of its equity portfolio. The combination of the diversified stock portfolio and the steady cash flow from writing of index call options is intended to moderate the volatility of returns relative to an all-equity portfolio. During the year ended December 31, 2015, written index call options were used in accordance with this objective.
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, 2015, the Fund used forward foreign currency, futures, and 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, 2015, the Fund engaged in futures contracts and interest rate swap agreements to manage duration and 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, 2015, the Fund engaged in forward foreign currency and option contracts for hedging purposes.
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, 2015, the Fund engaged in credit default swap transactions (as a protection buyer) to hedge its credit exposure.
| 72
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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, 2015, the Fund engaged in futures and option contracts for hedging purposes.
The following is a summary of derivative instruments for Gateway Equity Call Premium Fund as of December 31, 2015, as reflected within the Statements of Assets and Liabilities:
Liabilities | Options written | |
Exchange-traded/cleared liability derivatives | ||
Equity contracts | $(625,660) |
Transactions in derivative instruments for Gateway Equity Call Premium Fund during the year ended December 31, 2015, as reflected within the Statements of Operations, were as follows:
Net Realized Gain (Loss) on: | Options written | |
Equity contracts | $648,630 |
Net Change in Unrealized Appreciation | Options written | |
Equity contracts | $568,295 |
The following is a summary of derivative instruments for Strategic Alpha Fund as of December 31, 2015, as reflected within the Statements of Assets and Liabilities:
Assets | Investments | Unrealized | Swap | Total | ||||||||||||
Over-the-counter asset derivatives | ||||||||||||||||
Interest rate contracts | $ | 2,856,033 | $ | — | $ | 2,345,826 | $ | 5,201,859 | ||||||||
Foreign exchange contracts | 769 | 1,532,075 | — | 1,532,844 | ||||||||||||
Credit contracts | — | — | 3,678,960 | 3,678,960 | ||||||||||||
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Total over-the-counter asset derivatives | $ | 2,856,802 | $ | 1,532,075 | $ | 6,024,786 | $ | 10,413,663 | ||||||||
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Exchange-traded/ cleared asset derivatives | ||||||||||||||||
Equity contracts | $ | 540,132 | $ | — | $ | — | $ | 540,132 | ||||||||
Total exchange-traded/cleared asset derivatives | $ | 540,132 | $ | — | $ | — | $ | 540,132 | ||||||||
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Total asset derivatives | $ | 3,396,934 | $ | 1,532,075 | $ | 6,024,786 | $ | 10,953,795 | ||||||||
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73 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
Liabilities | Swaptions | Unrealized | Unrealized | Total | ||||||||||||
Over-the-counter liability derivatives | ||||||||||||||||
Interest rate contracts | $ | (578,804 | ) | $ | — | $ | — | $ | (578,804 | ) | ||||||
Foreign exchange contracts | — | (2,670,203 | ) | — | (2,670,203 | ) | ||||||||||
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Total over-the-counter liability derivatives | $ | (578,804 | ) | $ | (2,670,203 | ) | $ | — | $ | (3,249,007 | ) | |||||
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Exchange-traded/cleared liability derivatives | ||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | (724,016 | ) | $ | (724,016 | ) | ||||||
Equity contracts | — | — | (475,182 | ) | (475,182 | ) | ||||||||||
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Total exchange-traded/cleared liability derivatives | $ | — | $ | — | $ | (1,199,198 | ) | $ | (1,199,198 | ) | ||||||
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Total liability derivatives | $ | (578,804 | ) | $ | (2,670,203 | ) | $ | (1,199,198 | ) | $ | (4,448,205 | ) | ||||
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1 | Represents purchased options/swaptions, at value. |
2 | 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) are reported within the Statements of Assets and Liabilities. |
3 | 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. |
Transactions in derivative instruments for Strategic Alpha Fund during the year ended December 31, 2015, as reflected in the Statements of Operations were as follows:
Net Realized Gain (Loss) on: | Investments4 | Futures contracts | Options/ swaptions | Swap agreements | Foreign currency transactions5 | |||||||||||||||
Interest rate contracts | $ | (78,186 | ) | $ | (1,166,448 | ) | $ | 88,030 | $ | 1,101,118 | $ | — | ||||||||
Foreign exchange contracts | 3,845,387 | — | 271,852 | — | 15,750,462 | |||||||||||||||
Credit contracts | — | — | — | (2,028,976 | ) | — | ||||||||||||||
Equity contracts | (5,889,287 | ) | 755,863 | 1,970,989 | — | — | ||||||||||||||
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Total | $ | (2,122,086 | ) | $ | (410,585 | ) | $ | 2,330,871 | $ | (927,858 | ) | $ | 15,750,462 | |||||||
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Net Change in Unrealized | Investments4 | Futures contracts | Options/ swaptions | Swap agreements | Foreign currency translations5 | |||||||||||||||
Interest rate contracts | $ | (1,331,646 | ) | $ | (724,016 | ) | $ | 1,204,936 | $ | 2,345,826 | $ | — | ||||||||
Foreign exchange contracts | (1,797,691 | ) | — | (263,760 | ) | — | (5,301,947 | ) | ||||||||||||
Credit contracts | — | — | — | (756,147 | ) | — | ||||||||||||||
Equity contracts | 831,157 | 2,889,713 | (10,176 | ) | — | — | ||||||||||||||
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Total | $ | (2,298,180 | ) | $ | 2,165,697 | $ | 931,000 | $ | 1,589,679 | $ | (5,301,947 | ) | ||||||||
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4 | Represents realized gain (loss) and change in unrealized appreciation (depreciation), respectively, for purchased options/swaptions during the period. |
| 74
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
5 | Represents realized gain and change in unrealized appreciation (depreciation), respectively, for forward foreign currency contracts during the period. Does not include other foreign currency gains or losses included in the Statement of Operations. |
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 option contract activity, as a percentage of investments in common stocks, for Gateway Equity Call Premium Fund, based on month-end notional amounts outstanding during the period, at absolute value, was as follows for the year ended December 31, 2015:
Gateway Equity Call Premium Fund | Call Options | |||
Average Notional Amount Outstanding | 98.98 | % | ||
Highest Notional Amount Outstanding | 99.25 | % | ||
Lowest Notional Amount Outstanding | 98.62 | % | ||
Notional Amount Outstanding as of December 31, 2015 | 99.08 | % |
* | Notional amounts outstanding are determined by multiplying option contracts by the contract multiplier by the price of the option’s underlying index, the S&P 500® Index. |
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, 2015:
Strategic Alpha Fund | Forwards | Futures | Credit Default Swaps | Interest Rate Swaps | ||||||||||||
Average Notional Amount Outstanding | 25.80 | % | 48.87 | % | 4.30 | % | 1.91 | % | ||||||||
Highest Notional Amount Outstanding | 45.78 | % | 62.45 | % | 7.12 | % | 4.98 | % | ||||||||
Lowest Notional Amount Outstanding | 15.17 | % | 47.55 | % | 2.00 | % | 0.00 | % | ||||||||
Notional Amount Outstanding as of December 31, 2015 | 23.42 | % | 54.05 | % | 2.63 | % | 1.82 | % |
Notional amounts outstanding at the end of the prior period, if applicable, are included in the averages above.
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.
75 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
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, 2015:
Strategic Alpha Fund | Call Options | Put Options Purchased* | Call Options Written* | Put Options Written* | ||||||||||||
Average Market Value of Underlying Instruments | 6.66 | % | 6.77 | % | 0.25 | % | 4.69 | % | ||||||||
Highest Market Value of Underlying Instruments | 8.15 | % | 10.53 | % | 1.28 | % | 10.67 | % | ||||||||
Lowest Market Value of Underlying Instruments | 3.91 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Market Value of Underlying Instruments as of December 31, 2015 | 8.15 | % | 0.00 | % | 0.00 | % | 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, 2015:
Strategic Alpha Fund | Interest Rate Put Purchased | Interest Rate Call Purchased | Interest Rate Put Written | Interest Rate Call Written | ||||||||||||
Average Premium Paid/Received | 0.05 | % | 0.15 | % | 0.00 | % | 0.04 | % | ||||||||
Highest Premium Paid/Received | 0.09 | % | 0.29 | % | 0.01 | % | 0.13 | % | ||||||||
Lowest Premium Paid/Received | 0.03 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Premium Paid/Received as of December 31, 2015 | 0.07 | % | 0.29 | % | 0.00 | % | 0.13 | % |
| 76
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
The following is a summary of Gateway Equity Call Premium Fund’s written option activity:
Gateway Equity Call Premium Fund | Number of | Premiums | ||||||
Outstanding at December 31, 2014 | 96 | $ | 424,650 | |||||
Options written | 2,151 | 7,675,441 | ||||||
Options terminated in closing purchase transactions | (1,960 | ) | (6,786,798 | ) | ||||
Options expired | (35 | ) | (52,598 | ) | ||||
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Outstanding at December 31, 2015 | 252 | $ | 1,260,695 | |||||
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The following is a summary of Strategic Alpha Fund’s written option activity (excluding foreign currency options and interest rate swaptions):
Strategic Alpha Fund | Number of | Premiums | ||||||
Outstanding at December 31, 2014 | 12,259 | $ | 177,011 | |||||
Options written | 27,899 | 2,070,231 | ||||||
Options terminated in closing purchase transactions | (20,138 | ) | (426,477 | ) | ||||
Options expired | (19,661 | ) | (1,795,021 | ) | ||||
Options assigned | (359 | ) | (25,744 | ) | ||||
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Outstanding at December 31, 2015 | — | $ | — | |||||
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The following is a summary of Strategic Alpha Fund’s foreign currency written option activity:
Strategic Alpha Fund | Units of | Premiums | ||||||
Outstanding at December 31, 2014 | 70,000,000 | $ | 266,000 | |||||
Options written | 61,600,000 | 980,364 | ||||||
Options terminated in closing purchase transactions | (131,600,000 | ) | (1,246,364 | ) | ||||
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Outstanding at December 31, 2015 | — | $ | — | |||||
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The following is a summary of Strategic Alpha Fund’s written interest rate swaption activity:
Strategic Alpha Fund | Notional | Premiums | ||||||
Outstanding at December 31, 2014 | $ | — | $ | — | ||||
Swaptions written | 130,200,000 | 1,783,740 | ||||||
Swaptions terminated in closing purchase transactions | — | — | ||||||
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Outstanding at December 31, 2015 | $ | 130,200,000 | $ | 1,783,740 | ||||
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77 |
Table of Contents
Notes to Financial Statements (continued)
December 31, 2015
OTC derivatives, including forward foreign currency contracts, options, interest rate swaptions 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 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, 2015, gross amounts of OTC 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 | Offset | Net | Collateral | Net | |||||||||||||||
Bank of America, N.A. | $ | 3,367,302 | $ | (2,631,266 | ) | $ | 736,036 | $ | (736,036 | ) | $ | — | ||||||||
Barclays Bank PLC | 2,393,545 | — | 2,393,545 | (2,053,073 | ) | 340,472 | ||||||||||||||
Credit Suisse International | 738,995 | (617,741 | ) | 121,254 | — | 121,254 | ||||||||||||||
Deutsche Bank AG | 3,413,250 | — | 3,413,250 | (3,413,250 | ) | — | ||||||||||||||
JPMorgan Chase Bank, N.A. | 494,202 | — | 494,202 | (450,000 | ) | 44,202 | ||||||||||||||
Morgan Stanley & Co. | 6,369 | — | 6,369 | (6,369 | ) | — | ||||||||||||||
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| |||||||||||
$ | 10,413,663 | $ | (3,249,007 | ) | $ | 7,164,656 | $ | (6,658,728 | ) | $ | 505,928 | |||||||||
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Counterparty | Gross Amounts | Offset | Net | Collateral | Net | |||||||||||||||
Bank of America, N.A. | $ | (2,631,266 | ) | $ | 2,631,266 | $ | — | $ | — | $ | — | |||||||||
Credit Suisse International | (617,741 | ) | 617,741 | — | — | — | ||||||||||||||
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| |||||||||||
$ | (3,249,007 | ) | $ | 3,249,007 | $ | — | $ | — | $ | — | ||||||||||
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Notes to Financial Statements (continued)
December 31, 2015
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 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 clearinghouse, 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 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, 2015:
Fund | Maximum Amount of Loss - Gross | Maximum Amount of Loss - Net | ||||||
Strategic Alpha Fund | $ | 25,060,430 | $ | 14,492,695 |
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Notes to Financial Statements (continued)
December 31, 2015
These amounts include cash and U.S. government and agency securities received as collateral of $10,266,796. U.S. government and agency securities received as collateral are valued in accordance with the Fund’s valuation policies and are recorded on the Statements of Assets and Liabilities.
5. Purchases and Sales of Securities. For the year ended December 31, 2015, 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 | ||||||||||||
Gateway Equity Call Premium Fund | $ | — | $ | — | $ | 46,157,150 | $ | 13,499,154 | ||||||||
Strategic Alpha Fund | 80,399,614 | — | 917,546,503 | 897,022,914 |
6. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Gateway Investment Advisers, LLC (“Gateway Advisers”) serves as investment adviser to Gateway Equity Call Premium Fund. Gateway Advisers is a subsidiary of Natixis Global Asset Management, L.P. (“Natixis US”), which is part of Natixis Global Asset Management, an international asset management group based in Paris, France. Under the terms of the management agreement, the Fund pays a management fee at the annual rate of 0.65%, calculated daily and payable monthly, based on the Fund’s average daily net assets.
Loomis, Sayles & Company, L.P. (“Loomis Sayles”) is the investment adviser to Strategic Alpha Fund. Loomis Sayles’ general partner is indirectly owned by Natixis US. Under the terms of the management agreement, the Fund pays a management fee at the annual rate of 0.70% of the Fund’s average daily net assets, calculated daily and payable monthly.
Gateway Advisers 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, 2016, 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.
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December 31, 2015
For the year ended December 31, 2015, 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 Y | |||||||||
Gateway Equity Call Premium Fund | 1.20 | % | 1.95 | % | 0.95 | % | ||||||
Strategic Alpha Fund | 1.30 | % | 2.05 | % | 1.05 | % |
Gateway Advisers and Loomis Sayles shall be permitted to recover expenses they have borne under the expense limitation agreements (whether through waiver of its 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, 2015, the management fees and waivers of management fees for each Fund were as follows:
Gross | Waivers of | Net | Percentage of Average Daily Net Assets | |||||||||||||||||
Fund | Gross | Net | ||||||||||||||||||
Gateway Equity Call Premium Fund | $ | 232,300 | $ | 178,854 | $ | 53,446 | 0.65 | % | 0.15 | % | ||||||||||
Strategic Alpha Fund | 10,040,921 | — | 10,040,921 | 0.70 | % | 0.70 | % |
1 | Management fee waivers are subject to possible recovery until December 31, 2016. |
No expenses were recovered for either Fund during the year ended December 31, 2015 under the terms of the expense limitation agreements.
b. Service and Distribution Fees. NGAM Distribution, L.P. (“NGAM Distribution”), which is a wholly-owned subsidiary of Natixis US, has entered into a distribution agreement with the Trusts. Pursuant to this agreement, NGAM 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 NGAM Distribution a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the
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Notes to Financial Statements (continued)
December 31, 2015
Fund’s Class A shares, as reimbursement for expenses incurred by NGAM 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 NGAM 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 NGAM 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 NGAM 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 NGAM Distribution in connection with the marketing or sale of Class C shares.
For the year ended December 31, 2015, the service and distribution fees for each Fund were as follows:
Service Fees | Distribution Fees | |||||||||||
Fund | Class A | Class C | Class C | |||||||||
Gateway Equity Call Premium Fund | $ | 7,319 | $ | 72 | $ | 215 | ||||||
Strategic Alpha Fund | 285,243 | 166,321 | 498,964 |
c. Administrative Fees. NGAM 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 and NGAM Advisors, each Fund pays NGAM 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 and Loomis Sayles Funds Trusts, 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 and Loomis Sayles Funds Trusts of $10 million, which is reevaluated on an annual basis.
For the year ended December 31, 2015, the administrative fees for each Fund were as follows:
Fund | Administrative | |||
Gateway Equity Call Premium Fund | $ | 15,344 | ||
Strategic Alpha Fund | 614,244 |
d. Sub-Transfer Agent Fees. NGAM 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
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Notes to Financial Statements (continued)
December 31, 2015
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 NGAM Distribution for all or a portion of the servicing fees paid to these intermediaries. The reimbursement amounts (sub-transfer agent fees) paid to NGAM Distribution are subject to a current per-account equivalent fee limit approved by the Funds’ Board, which is based on fees for similar services paid to the Funds’ transfer agent and other service providers.
For the year ended December 31, 2015, 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 | |||
Gateway Equity Call Premium Fund | $ | 15,238 | ||
Strategic Alpha Fund | 951,882 |
As of December 31, 2015, the Funds owe NGAM 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 | |||
Gateway Equity Call Premium Fund | $ | 294 | ||
Strategic Alpha Fund | 9,362 |
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 NGAM Distribution during the year ended December 31, 2015 were as follows:
Fund | Commissions | |||
Strategic Alpha Fund | $ | 26,117 |
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 NGAM Advisors, NGAM Distribution, Natixis US or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $300,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that she attends. Each Independent Trustee (other than the Chairperson)
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Notes to Financial Statements (continued)
December 31, 2015
receives, in the aggregate, a retainer fee at the annual rate of $130,000. 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 $17,500. The chairperson of the Governance Committee receives an additional retainer fee at the annual rate of $5,000. 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 and Loomis Sayles Funds Trusts 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, 2016, the Chairperson of the Board will receive a retainer fee at the annual rate of $325,000 and each Independent Trustee (other than the Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $155,000. The chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $10,000. 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 and Loomis Sayles Funds Trusts 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 and Loomis Sayles Funds Trusts, 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.
g. Affiliated Ownership. As of December 31, 2015, Loomis Sayles Employees’ Profit Sharing Retirement Plan held shares of Strategic Alpha Fund representing 0.05% of the Fund’s net assets.
h. Payment by Affiliates. For the year ended December 31, 2015, Loomis Sayles reimbursed Strategic Alpha Fund $128,535 for losses incurred in connection with a trading error.
7. Line of Credit. Effective April 16, 2015, each Fund, together with certain other funds of Natixis Funds Trusts and Loomis Sayles Funds Trusts, participates in a $150,000,000
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Notes to Financial Statements (continued)
December 31, 2015
committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to the full $150,000,000 under the line of credit (as long as all borrowings by all Funds in the aggregate do not exceed the $150,000,000 limit at any time). Interest is charged to each participating Fund based on its borrowings at a rate per annum equal to the greater of the Federal Funds rate or overnight LIBOR, plus 1.25%. 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.
For the year ended December 31, 2015, none of the Funds had borrowings under this agreement.
Prior to April 16, 2015, the committed unsecured line of credit was $200,000,000 with an individual limit of $125,000,000 for each Fund that participated in the line of credit. In addition, the commitment fee was 0.10% per annum, payable at the end of each calendar quarter.
8. Concentration of Risk. The Funds’ 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.
9. 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, 2015, based on management’s evaluation of the shareholder account base, the Funds had accounts representing controlling ownership of more than 5% of the Fund’s 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% | Percentage of | Percentage of | Total | ||||||||||||
Gateway Equity Call Premium Fund | 2 | 79.68 | % | — | 79.68 | % | ||||||||||
Strategic Alpha Fund | 3 | 37.94 | % | 0.05 | % | 37.99 | % |
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Notes to Financial Statements (continued)
December 31, 2015
Omnibus shareholder accounts for which NGAM 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.
10. Capital Shares. The 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, 2015 | | | Period Ended December 31, 2014(a) | | |||||||||||
Gateway Equity Call Premium Fund | Shares | Amount | Shares | Amount | ||||||||||||
Class A | ||||||||||||||||
Issued from the sale of shares | 449,589 | $ | 4,570,382 | 9,653 | $ | 95,980 | ||||||||||
Issued in connection with the reinvestment of distributions | 3,514 | 35,722 | 38 | 379 | ||||||||||||
Redeemed | (85,447 | ) | (858,858 | ) | (98 | ) | (980 | ) | ||||||||
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|
|
|
|
|
| |||||||||
Net change | 367,656 | $ | 3,747,246 | 9,593 | $ | 95,379 | ||||||||||
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|
|
|
|
|
|
| |||||||||
Class C | ||||||||||||||||
Issued from the sale of shares | 3,581 | $ | 36,310 | 101 | $ | 1,011 | ||||||||||
Issued in connection with the reinvestment of distributions | 18 | 187 | – | (b) | 2 | |||||||||||
Redeemed | (100 | ) | (1,028 | ) | (1 | ) | (10 | ) | ||||||||
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|
|
|
|
| |||||||||
Net change | 3,499 | $ | 35,469 | 100 | $ | 1,003 | ||||||||||
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Class Y | ||||||||||||||||
Issued from the sale of shares | 4,210,869 | $ | 43,166,037 | 2,437,927 | $ | 24,313,859 | ||||||||||
Issued in connection with the reinvestment of distributions | 27,812 | 281,744 | 4,090 | 40,780 | ||||||||||||
Redeemed | (1,402,243 | ) | (14,430,566 | ) | (354,383 | ) | (3,501,024 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net change | 2,836,438 | $ | 29,017,215 | 2,087,634 | $ | 20,853,615 | ||||||||||
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|
|
|
| |||||||||
Increase (decrease) from capital share transactions | 3,207,593 | $ | 32,799,930 | 2,097,327 | $ | 20,949,997 | ||||||||||
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(a) | From commencement of operations on September 30, 2014 through December 31, 2014. |
(b) | Amount rounds to less than one share. |
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Notes to Financial Statements (continued)
December 31, 2015
10. Capital Shares (continued).
| Year Ended December 31, 2015 | | | Year Ended December 31, 2014 | | |||||||||||
Strategic Alpha Fund | Shares | Amount | Shares | Amount | ||||||||||||
Class A | ||||||||||||||||
Issued from the sale of shares | 6,366,120 | $ | 62,543,457 | 3,289,877 | $ | 33,285,385 | ||||||||||
Issued in connection with the reinvestment of distributions | 318,954 | 3,111,420 | 314,559 | 3,151,241 | ||||||||||||
Redeemed | (4,852,855 | ) | (47,380,866 | ) | (10,780,235 | ) | (109,403,574 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net change | 1,832,219 | $ | 18,274,011 | (7,175,799 | ) | $ | (72,966,948 | ) | ||||||||
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|
| |||||||||
Class C | ||||||||||||||||
Issued from the sale of shares | 1,290,714 | $ | 12,573,109 | 652,702 | $ | 6,559,344 | ||||||||||
Issued in connection with the reinvestment of distributions | 122,269 | 1,191,265 | 120,066 | 1,196,499 | ||||||||||||
Redeemed | (1,956,904 | ) | (19,229,282 | ) | (2,740,650 | ) | (27,590,387 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net change | (543,921 | ) | $ | (5,464,908 | ) | (1,967,882 | ) | $ | (19,834,544 | ) | ||||||
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|
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| |||||||||
Class Y | ||||||||||||||||
Issued from the sale of shares | 44,468,853 | $ | 439,028,093 | 53,741,784 | $ | 543,162,597 | ||||||||||
Issued in connection with the reinvestment of distributions | 3,252,297 | 31,686,738 | 2,470,530 | 24,696,717 | ||||||||||||
Redeemed | (41,791,361 | ) | (408,640,263 | ) | (33,268,929 | ) | (335,773,481 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net change | 5,929,789 | $ | 62,074,568 | 22,943,385 | $ | 232,085,833 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Increase (decrease) from capital share transactions | 7,218,087 | $ | 74,883,671 | 13,799,704 | $ | 139,284,341 | ||||||||||
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Gateway Trust and Natixis Funds Trust II and Shareholders of Gateway Equity Call Premium Fund and Loomis Sayles Strategic Alpha Fund:
In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Gateway Equity Call Premium Fund, a series of Gateway Trust, and Loomis Sayles Strategic Alpha Fund, a series of Natixis Funds Trust II (collectively, the “Funds”) at December 31, 2015, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2015 by correspondence with the custodian, agent banks and brokers, and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2016
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2015 U.S. Tax Distribution Information to Shareholders (Unaudited)
Corporate Dividends Received Deduction. For the fiscal year ended December 31, 2015, 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 | |||
Gateway Equity Call Premium | 100.00 | % | ||
Strategic Alpha | 4.62 | % |
Qualified Dividend Income. A percentage of dividends distributed by the Funds during the fiscal year ended December 31, 2015 are considered qualified dividend income, and are eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. These percentages are noted below:
Fund | Qualifying | |||
Gateway Equity Call Premium | 100.00 | % | ||
Strategic Alpha | 4.83 | % |
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Trustee and Officer Information
The tables below provide certain information regarding the trustees and officers of Natixis Funds Trust II and Gateway Trust (the “Trusts”). Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116. 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 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) | Trustee since 2008 Chairperson of the Audit Committee and Governance Committee Member | Retired | 42 None | Significant experience on the Board and on the boards of other business organizations (including at investment companies); executive experience (including as treasurer of an aerospace, automotive, and metal manufacturing corporation) | ||||
Edmond J. English (1953) | Trustee since 2013 Audit Committee Member | Chief Executive Officer of Bob’s Discount Furniture (retail) | 42 Formerly, Director, BJ’s Wholesale Club (retail) | Experience on the Board and significant experience on the boards of other business organizations (including at a retail company 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) | 42 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) | 42 Director, Eastern Bank (bank); Director, The Hanover Insurance Group (property and casualty insurance) | Significant experience on the Board and on the boards of other business organizations (including at a bank and at a property and casualty insurance firm); executive experience (including roles as president and chief executive officer of a 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 Contract Review Committee Member | President, University of Massachusetts; formerly, Chancellor and faculty member, University of Massachusetts Lowell | 42 None | Experience on the Board and on the boards of other business organizations; experience as President of the University of Massachusetts; government experience (including as a member of the U.S. House of Representatives); academic experience | ||||
Sandra O. Moose (1942) | Chairperson of the Board of Trustees since November 2005 Trustee since 1993 for Natixis Funds Trust II and since 2007 for Gateway Trust Ex Officio member of the Audit Committee, the Contract Review Committee and the Governance Committee | President, Strategic Advisory Services (management consulting) | 42 Formerly, Director, AES Corporation (international power company); formerly, Director, Verizon Communications (telecommunications company) | Significant experience on the Board and on the boards of other business organizations (including at a telecommunications company, an international power company and a specialty chemicals corporation); executive experience (including at a management consulting company) |
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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 | ||||||||
Erik R. Sirri (1958) | Trustee since 2009 Audit Committee Member | Professor of Finance at Babson College | 42 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 | 42 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 for Natixis Funds Trust II and since 2007 for Gateway Trust Chairperson of the Governance Committee and Contract Review Committee Member | Deputy Dean for Finance and Administration, Yale University School of Medicine | 42 None | Significant experience on the Board; executive experience in a variety of academic organizations (including roles as dean for finance and administration) |
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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 | ||||||||
Kevin P. Charleston3 (1965) One Financial Center Boston, MA 02111 | Trustee since 2015 | President, Chief Executive Officer and Director; formerly, Chief Financial Officer, Loomis, Sayles & Company, L.P. | 42 None | Continuing service as President, Chief Executive Officer and Director of Loomis, Sayles & Company, L.P. | ||||
David L. Giunta4 (1965) | Trustee since 2011 President and Chief Executive Officer since 2008 | President and Chief Executive Officer, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | 42 None | Significant experience on the Board; continuing experience as President and Chief Executive Officer of NGAM Advisors, L.P. | ||||
John T. Hailer5 (1960) | Trustee since 2000 for Natixis Funds Trust II and since 2007 for Gateway Trust | President and Chief Executive Officer – U.S. and Asia, Natixis Global Asset Management, L.P. | 42 None | Significant experience on the Board; continuing experience as President and Chief Executive Officer – U.S. and Asia, Natixis Global Asset Management, L.P. |
1 | Each trustee serves until retirement, resignation or removal from the Board. The current retirement age is 75. The position of Chairperson of the Board is appointed for a three-year term. Ms. Moose was appointed to serve an additional three-year term as the Chairperson of the Board on December 13, 2013. |
2 | The trustees of the Trusts serve as trustees of a fund complex that includes all series of the Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (collectively, the “Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II (collectively, the “Loomis Sayles Funds Trusts”) (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 and Chief Executive Officer 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 of NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
5 | Mr. Hailer 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 – U.S. and Asia, Natixis Global Asset Management, L.P. |
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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 TRUST | ||||||
Coleen Downs Dinneen (1960) | Secretary, Clerk and Chief Legal Officer | Since September 2004 | Executive Vice President, General Counsel, Secretary and Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | |||
Russell L. Kane (1969) | Chief Compliance Officer, Assistant Secretary and Anti-Money Laundering Officer | Chief Compliance Officer since May 2006; Assistant Secretary since June 2004; and Anti-Money Laundering Officer since April 2007 | Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, NGAM Distribution Corporation, NGAM Advisors, L.P. and NGAM Distribution, L.P. | |||
Michael C. Kardok (1959) | Treasurer, Principal Financial and Accounting Officer | Since October 2004 | Senior Vice President, NGAM Advisors, L.P. and NGAM Distribution, L.P. |
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 NGAM Distribution, L.P., NGAM Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted, if not materially different from a trustee’s or 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. Kenneth A. Drucker, Mr. Edmond J. English, Mr. Richard A. Goglia, and Mr. Erik R. Sirri 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 | |||||||||||||||||||||||||||||
1/1/14- 12/31/14 | 1/1/15- 12/31/15 | 1/1/14- 12/31/14 | 1/1/15- 12/31/15 | 1/1/14- 12/31/14 | 1/1/15- 12/31/15 | 1/1/14- 12/31/14 | 1/1/15- 12/31/15 | |||||||||||||||||||||||||
Gateway Trust | $ | 72,444 | $ | 80,438 | $ | 1,238 | $ | 1,050 | $ | 16,978 | $ | 17,232 | $ | — | $ | — |
1. | Audit-related fees consist of: |
2014 & 2015– performance of agreed-upon procedures related to the Registrant’s deferred compensation plan.
2. | Tax fees consist of: |
2014 & 2015 – review of the Registrant’s tax returns.
Aggregate fees billed to the Registrant for non-audit services during 2014 and 2015 were $18,216 and $18,282 respectively.
Fees billed by the Principal Accountant for services rendered to the Adviser and Control Affiliates.
The following table sets forth fees billed by the Registrant’s principal accountant for non-audit services rendered to Gateway Investment Advisers, LLC and entities controlling, controlled by or under common control with Gateway Investment Advisers, LLC (“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 | ||||||||||||||||||||||
1/1/14- 12/31/14 | 1/1/15- 12/31/15 | 1/1/14- 12/31/14 | 1/1/15- 12/31/15 | 1/1/14- 12/31/14 | 1/1/15- 12/31/15 | |||||||||||||||||||
Control Affiliates | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
The following table sets forth the aggregate fees billed by the Registrant’s principal accountant for non-audit services rendered to Gateway Investment Advisers, LLC and Control Affiliates that provide ongoing services to the Registrant, for the last two fiscal years, including the fees disclosed in the table above.
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Aggregate Non-Audit Fees | ||||||||
1/1/14- 12/31/14 | 1/1/15- 12/31/15 | |||||||
Control Affiliates | $ | 90,546 | $ | 41,200 |
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 this 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. 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 are 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.
Gateway Trust | ||
By: | /s/ David L. Giunta | |
Name: | David L. Giunta | |
Title: | President and Chief Executive Officer | |
Date: | February 23, 2016 |
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 23, 2016 | |
By: | /s/ Michael C. Kardok | |
Name: | Michael C. Kardok | |
Title: | Treasurer | |
Date: | February 23, 2016 |