As filed with the Securities and Exchange Commission on July 8, 2016
File No. 033-65137
File No. 811-07455
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under the SECURITIES ACT OF 1933
Pre-Effective Amendment No. | ¨ | |||
Post-Effective Amendment No. 87 | x |
and/or
REGISTRATION STATEMENT
Under the INVESTMENT COMPANY ACT OF 1940 |
¨ | |||
Amendment No. 86 | x |
(Check appropriate box or boxes)
Virtus Opportunities Trust
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (800) 243-1574
101 Munson Street
Greenfield, Massachusetts 01301
(Address of Principal Executive Offices)
Kevin J. Carr, Esq.
Counsel
Virtus Investment Partners, Inc.
100 Pearl St.
Hartford, Connecticut 06103
(Name and Address of Agent for Service)
Copies of All Correspondence to:
David C. Mahaffey, Esq.
Sullivan & Worcester LLP
1666 K Street, N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
¨ | immediately upon filing pursuant to paragraph (b) |
¨ | on pursuant to paragraph (b) of Rule 485 |
¨ | 60 days after filing pursuant to paragraph (a)(1) |
¨ | on or at such later date as the Commission shall order pursuant to paragraph (a)(2) |
¨ | 75 days after filing pursuant to paragraph (a)(2) |
x | on September 23, 2016 pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
¨ | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
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TICKER SYMBOL BY CLASS
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FUND
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A
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C
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I
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Class R6
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|
Virtus Emerging Markets Opportunities Fund | | |
HEMZX
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PICEX
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HIEMX
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VREMX
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Virtus Low Duration Income Fund | | |
HIMZX
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PCMZX
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HIBIX
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Virtus Tax-Exempt Bond Fund | | |
HXBZX
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PXCZX
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HXBIX
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| | | |
| TRUST NAME: | | |
SEPTEMBER __, 2016
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| VIRTUS OPPORTUNITIES TRUST | | | | |
| Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This prospectus contains important information that you should know before investing in Virtus Mutual Funds. Please read it carefully and retain it for future reference. | | |
Not FDIC Insured
No Bank Guarantee
May Lose Value
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| FUND SUMMARIES | | | | |
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| MORE INFORMATION ABOUT INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES | | | | |
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| MORE INFORMATION ABOUT RISKS RELATED TO PRINCIPAL INVESTMENT STRATEGIES | | | | |
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| RISKS ASSOCIATED WITH ADDITIONAL INVESTMENT TECHNIQUES AND FUND OPERATIONS | | | | |
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Shareholder Fees
(fees paid directly from your investment)
|
| | |
Class A
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Class C
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Class I
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Class R6
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Maximum Sales Charge (load) Imposed on Purchases (as a percentage of
offering price) |
| | | | | 5.75 | % | | | | | | | Non | e | | | | | | | Non | e | | | | | | | Non | e | | | |
| | Maximum Deferred Sales Charge (load) (as a percentage of the lesser of purchase price or redemption proceeds) | | | | | | Non | e | | | | | | | 1.00 | % (a) | | | | | | | Non | e | | | | | | | Non | e | | | |
| |
Annual Fund Operating Expenses
(expenses that you pay each year as a
percentage of the value of your investment) |
| | |
Class A
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Class C
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Class I
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Class R6
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| | Management Fees | | | | | | 0.95 | % | | | | | | | 0.95 | % | | | | | | | 0.95 | % | | | | | | | 0.95 | % | | | |
| | Distribution and Service (12b-1) Fees | | | | | | 0.25 | % | | | | | | | 1.00 | % | | | | | | | Non | e | | | | | | | Non | e | | | |
| | Other Expenses (b) | | | | | | 0.35 | % | | | | | | | 0.35 | % | | | | | | | 0.35 | % | | | | | | | 0.22 | % | | | |
| | Acquired Fund Fees and Expenses (b) | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | | | | | 0.01 | % | | | |
| | Total Annual Fund Operating Expenses (c) | | | | | | 1.56 | % | | | | | | | 2.31 | % | | | | | | | 1.31 | % | | | | | | | 1.18 | % | | | |
| | | | | |
Share Status
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1 Year
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3 Years
|
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5 Years
|
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10 Years
|
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| | Class A | | | |
Sold or Held
|
| | | | | $725 | | | | | | | $1,039 | | | | | | | $1,376 | | | | | | | $2,325 | | | | ||||
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Class C
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Sold
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| | | | | $334 | | | | | | | $721 | | | | | | | $1,235 | | | | | | | $2,646 | | | | ||||
|
Held
|
| | | | | $234 | | | | | | | $721 | | | | | | | $1,235 | | | | | | | $2,646 | | | | |||||||||
| | Class I | | | |
Sold or Held
|
| | | | | $133 | | | | | | | $415 | | | | | | | $718 | | | | | | | $1,579 | | | | ||||
| | Class R6 | | | |
Sold or Held
|
| | | | | $120 | | | | | | | $375 | | | | | | | $649 | | | | | | | $1,432 | | | |
| |
Best Quarter:
|
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Q2/2009:
|
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26.74%
|
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Worst Quarter:
|
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Q3/2008:
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-21.96%
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Year-to-date (6/30/16):
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8.53%
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1 Year
|
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5 Years
|
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10 Years
|
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Since
Inception Class C (6/26/06) |
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Since
Inception Class R6 (11/12/14) |
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| | Class I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Return Before Taxes
|
| | | | | -8.55 | % | | | | | | | 1.03 | % | | | | | | | 6.79 | % | | | | | | | | — | | | | | | | | — | | | |
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Return After Taxes on Distributions
|
| | | | | -8.62 | % | | | | | | | 0.84 | % | | | | | | | 5.18 | % | | | | | | | | — | | | | | | | | — | | | |
| |
Return After Taxes on Distributions and Sale of Fund Shares
|
| | | | | -4.54 | % | | | | | | | 0.92 | % | | | | | | | 5.73 | % | | | | | | | | — | | | | | | | | — | | | |
| | Class A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | -14.01 | % | | | | | | | -0.41 | % | | | | | | | 5.90 | % | | | | | | | | — | | | | | | | | — | | | |
| | Class C | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | -9.50 | | | | | | | 0.02 | % | | | | | | | | — | | | | | | | 6.09 | % | | | | | | | | — | | | | |
| | Class R6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Return Before Taxes
|
| | | | | -8.44 | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | -11.24 | % | | | | |
| |
MSCI Emerging Markets Index (net) (reflects no deduction for
fees, expenses or taxes) |
| | | | | -14.92 | % | | | | | | | -4.81 | % | | | | | | | 3.61 | % | | | | | | | 3.77 | % | | | | | | | -16.15 | % | | | |
| |
Shareholder Fees
(fees paid directly from your investment)
|
| | |
Class A
|
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Class C
|
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Class I
|
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Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)
|
| | | | | 2.25 | % | | | | | | | Non | e | | | | | | | Non | e | | | |
| |
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of purchase price
or redemption proceeds) |
| | | | | Non | e | | | | | | | 1.00 | % (a) | | | | | | | Non | e | | | |
| |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value
of your investment) |
| | |
Class A
|
| | |
Class C
|
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Class I
|
| | ||||||||||||
| | Management Fees | | | | | | 0.55 | % | | | | | | | 0.55 | % | | | | | | | 0.55 | % | | | |
| | Distribution and Service (12b-1) Fees | | | | | | 0.25 | % | | | | | | | 1.00 | % | | | | | | | Non | e | | | |
| | Other Expenses (b) | | | | | | 0.32 | % | | | | | | | 0.32 | % | | | | | | | 0.32 | % | | | |
| | Total Annual Fund Operating Expenses | | | | | | 1.12 | % | | | | | | | 1.87 | % | | | | | | | 0.87 | % | | | |
| | Less: Expense Reimbursement (c) | | | | | | (0.37 | %) | | | | | | | (0.37 | %) | | | | | | | (0.37 | %) | | | |
| | Total Annual Fund Operating Expenses After Expense Reimbursement (c) | | | | | | 0.75 | % | | | | | | | 1.50 | % | | | | | | | 0.50 | % | | | |
| | | | | |
Share Status
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1 Year
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3 Years
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5 Years
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10 Years
|
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| | Class A | | | |
Sold or Held
|
| | | | | $300 | | | | | | | $537 | | | | | | | $793 | | | | | | | $1,525 | | | | ||||
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Class C
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Sold
|
| | | | | $253 | | | | | | | $552 | | | | | | | $977 | | | | | | | $2,160 | | | | ||||
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Held
|
| | | | | $153 | | | | | | | $552 | | | | | | | $977 | | | | | | | $2,160 | | | | |||||||||
| | Class I | | | |
Sold or Held
|
| | | | | $51 | | | | | | | $241 | | | | | | | $446 | | | | | | | $1,038 | | | |
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Best Quarter:
|
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Q2/2009:
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5.42%
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Worst Quarter:
|
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Q3/2008:
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-3.18%
|
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Year-to-date (6/30/16):
|
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2.48%
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1 Year
|
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5 Years
|
| | |
10 Years
|
| | |
Since
Inception Class C (6/26/06) |
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| | Class I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | 1.24 | % | | | | | | | 2.78 | % | | | | | | | 4.03 | % | | | | | | | | — | | | |
| |
Return After Taxes on Distributions
|
| | | | | 0.38 | % | | | | | | | 1.84 | % | | | | | | | 2.78 | % | | | | | | | | — | | | |
| |
Return After Taxes on Distributions and Sale of Fund Shares
|
| | | | | 0.70 | % | | | | | | | 1.75 | % | | | | | | | 2.64 | % | | | | | | | | — | | | |
| | Class A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | -1.38 | % | | | | | | | 2.06 | % | | | | | | | 3.53 | % | | | | | | | | — | | | |
| | Class C | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | 0.13 | % | | | | | | | 1.76 | % | | | | | | | | — | | | | | | | 3.22 | % | | | |
| | Barclays U.S. Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) | | | | | | 0.55 | % | | | | | | | 3.25 | % | | | | | | | 4.52 | % | | | | | | | 4.90 | % | | | |
| | Barclays U.S. Intermediate Government/Credit Bond Index (reflects no deduction for fees, expenses or taxes) | | | | | | 1.07 | % | | | | | | | 2.58 | % | | | | | | | 4.04 | % | | | | | | | 4.32 | % | | | |
| |
Shareholder Fees
(fees paid directly from your investment)
|
| | |
Class A
|
| | |
Class C
|
| | |
Class I
|
| | ||||||||||||
| |
Maximum Sales Charge (load) Imposed on Purchases (as a percentage of offering price)
|
| | | | | 2.75 | % | | | | | | | Non | e | | | | | | | Non | e | | | |
| |
Maximum Deferred Sales Charge (load) (as a percentage of the lesser of purchase price
or redemption proceeds) |
| | | | | Non | e | | | | | | | 1.00 | % (a) | | | | | | | Non | e | | | |
| |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value
of your investment) |
| | |
Class A
|
| | |
Class C
|
| | |
Class I
|
| | ||||||||||||
| | Management Fees | | | | | | 0.45 | % | | | | | | | 0.45 | % | | | | | | | 0.45 | % | | | |
| | Distribution and Service (12b-1) Fees | | | | | | 0.25 | % | | | | | | | 1.00 | % | | | | | | | Non | e | | | |
| | Other Expenses (b) | | | | | | 0.30 | % | | | | | | | 0.30 | % | | | | | | | 0.30 | % | | | |
| | Total Annual Fund Operating Expenses | | | | | | 1.00 | % | | | | | | | 1.75 | % | | | | | | | 0.75 | % | | | |
| | Less: Expense Reimbursement (c) | | | | | | (0.15 | %) | | | | | | | (0.15 | %) | | | | | | | (0.15 | %) | | | |
| | Total Annual Fund Operating Expenses After Expense Reimbursement (c) | | | | | | 0.85 | % | | | | | | | 1.60 | % | | | | | | | 0.60 | % | | | |
| | | | | |
Share Status
|
| | |
1 Year
|
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3 Years
|
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5 Years
|
| | |
10 Years
|
| | ||||||||||||||||
| | Class A | | | |
Sold or Held
|
| | | | | $359 | | | | | | | $570 | | | | | | | $798 | | | | | | | $1,453 | | | | ||||
| |
Class C
|
| | |
Sold
|
| | | | | $263 | | | | | | | $536 | | | | | | | $935 | | | | | | | $2,050 | | | | ||||
|
Held
|
| | | | | $163 | | | | | | | $536 | | | | | | | $935 | | | | | | | $2,050 | | | | |||||||||
| | Class I | | | |
Sold or Held
|
| | | | | $61 | | | | | | | $225 | | | | | | | $402 | | | | | | | $916 | | | |
| |
Best Quarter:
|
| |
Q3/2009:
|
| |
10.03%
|
| |
Worst Quarter:
|
| |
Q3/2008:
|
| |
-5.64%
|
| |
Year-to-date (6/30/16):
|
| |
3.24%
|
| |
| | | | | |
1 Year
|
| | |
5 Years
|
| | |
10 Years
|
| | |
Since
Inception Class C (6/26/06) |
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| | Class I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | 2.64 | % | | | | | | | 5.21 | % | | | | | | | 4.78 | % | | | | | | | | — | | | |
| |
Return After Taxes on Distributions
|
| | | | | 2.62 | % | | | | | | | 5.20 | % | | | | | | | 4.72 | % | | | | | | | | — | | | |
| |
Return After Taxes on Distributions and Sale of Fund Shares
|
| | | | | 2.73 | % | | | | | | | 4.79 | % | | | | | | | 4.57 | % | | | | | | | | — | | | |
| | Class A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | -0.43 | % | | | | | | | 4.34 | % | | | | | | | 4.23 | % | | | | | | | | — | | | |
| | Class C | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Return Before Taxes
|
| | | | | 1.62 | % | | | | | | | 4.15 | % | | | | | | | | — | | | | | | | 3.97 | % | | | |
| | Barclays U.S. Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) | | | | | | 0.55 | % | | | | | | | 3.25 | % | | | | | | | 4.52 | % | | | | | | | 4.90 | % | | | |
| | Tax-Exempt Bond Linked Benchmark (reflects no deduction for fees, expenses or taxes) | | | | | | 3.07 | % | | | | | | | 5.11 | % | | | | | | | 4.60 | % | | | | | | | 4.82 | % | | | |
| | | | | |
Class A Shares
|
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Class C Shares
|
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Class I Shares
|
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Through Date
|
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| | Virtus Low Duration Income Fund | | | | | | 0.75 | % | | | | | | | 1.50 | % | | | | | | | 0.50 | % | | | | |
September [__], 2017
|
| |
| | Virtus Tax-Exempt Bond Fund | | | | | | 0.85 | % | | | | | | | 1.60 | % | | | | | | | 0.60 | % | | | | |
September [__], 2017
|
| |
| | | | | |
Class A Shares
|
| | |
Class C Shares
|
| | |
Class I Shares
|
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Class R6 Shares
|
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| | Virtus Low Duration Income Fund | | | | | | 0.75 | % | | | | | | | 1.50 | % | | | | | | | 0.50 | % | | | | | | | N/A | | | | |
| | Virtus Tax-Exempt Bond Fund | | | | | | 0.85 | % | | | | | | | 1.60 | % | | | | | | | 0.60 | % | | | | | | | N/A | | | |
| |
Risks
|
| | |
Virtus Emerging Markets Opportunities Fund
|
| | |
Virtus Low Duration Income Fund
|
| | |
Virtus Tax-Exempt Bond Fund
|
| |
| | Debt Securities | | | | | | | |
X
|
| | |
X
|
| |
| |
Call
|
| | | | | | |
X
|
| | |
X
|
| |
| |
Credit
|
| | | | | | |
X
|
| | |
X
|
| |
| |
Interest Rate
|
| | | | | | |
X
|
| | |
X
|
| |
| | Equity Securities | | | |
X
|
| | | | | | | | | |
| |
Large Market Capitalization Companies
|
| | |
X
|
| | | | | | | | | |
| |
Small and Medium Market Capitalization Companies
|
| | |
X
|
| | | | | | | | | |
| | Foreign Investing | | | |
X
|
| | |
X
|
| | | | | |
| |
Currency Rate
|
| | |
X
|
| | |
X
|
| | | | | |
| |
Emerging Market Investing
|
| | |
X
|
| | |
X
|
| | | | | |
| |
Equity-Linked Instruments
|
| | |
X
|
| | | | | | | | | |
| | Geographic Concentration | | | |
X
|
| | | | | | | | | |
| |
High-Yield/High-Risk Fixed Income Securities (Junk Bonds)
|
| | | | | | |
X
|
| | |
X
|
| |
| | Income | | | | | | | |
X
|
| | |
X
|
| |
| | Market Volatility | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | Mortgage-Backed and Asset-Backed Securities | | | | | | | |
X
|
| | | | | |
| | Municipal Bond Market | | | | | | | | | | | |
X
|
| |
| | Tax-Exempt Securities | | | | | | | | | | | |
X
|
| |
| | Tax Liability | | | | | | | | | | | |
X
|
| |
| | Virtus Emerging Markets Opportunities Fund | | | | Vontobel Asset Management, Inc. (“Vontobel”) | | |
| | Virtus Low Duration Income Fund | | | | Newfleet Asset Management, LLC (“Newfleet”) | | |
| | Virtus Tax-Exempt Bond Fund | | | | Newfleet | | |
| | Virtus Tax-Exempt Bond Fund | | | | | | 0.45 % | | | |
| | | | | |
First $1 billion
|
| | |
$1+ billion
|
| | ||||||
| | Virtus Emerging Markets Opportunities Fund | | | | | | 1.00 % | | | | | | | 0.95 % | | | |
| | | | | |
First $1 billion
|
| | |
$1+ billion
through $2 billion |
| | |
$2+ billion
|
| | |||||||||
| | Virtus Low Duration Income Fund | | | | | | 0.55 % | | | | | | | 0.50 % | | | | | | | 0.45 % | | | |
| | Virtus Emerging Markets Opportunities Fund | | | | | | 0.95 % | | | |
| | Virtus Low Duration Income Fund | | | | | | 0.55 % | | | |
| | Virtus Tax-Exempt Bond Fund | | | | | | 0.45 % | | | |
| | Virtus Emerging Markets Opportunities Fund | | | | 50% of net investment management fee | | |
| | Virtus Low Duration Income Fund | | | | 50% of net investment management fee | | |
| | Virtus Tax-Exempt Bond Fund | | | | 50% of net investment management fee | | |
| | Virtus Low Duration Income Fund | | | |
David L. Albrycht, CFA (since May 2012)
Benjamin Caron, CFA (since May 2012)
Christopher J. Kelleher, CFA, CPA (since October 2012)
|
| |
| | Virtus Tax-Exempt Bond Fund | | | |
Timothy M. Heaney, CFA
Lisa H. Leonard
(both since June 2012)
|
| |
| | Virtus Emerging Markets Opportunities Fund | | | |
Brian Bandsma (since June 2016)
Matthew Benkendorf (since March 2016)
Jin Zhang, CFA (since June 2016)
|
| |
| |
Investment Techniques and Risks
|
| | |
Virtus Emerging Markets Opportunities Fund
|
| | |
Virtus Low Duration Income Fund
|
| | |
Virtus Tax-Exempt Bond Fund
|
| |
| | Convertible Securities | | | | | | | |
X
|
| | | | | |
| | Counterparty | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | Cybersecurity | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | Debt Securities | | | |
X
|
| | | | | | | | | |
| |
Call
|
| | |
X
|
| | | | | | | | | |
| |
Credit
|
| | |
X
|
| | | | | | | | | |
| |
Interest Rate
|
| | |
X
|
| | | | | | | | | |
| | Derivatives | | | | | | | |
X
|
| | | | | |
| | Equity Securities | | | | | | | |
X
|
| | | | | |
| | Illiquid and Restricted Securities | | | | | | | |
X
|
| | | | | |
| | Leverage | | | | | | | |
X
|
| | |
X
|
| |
| | Loan Participation Agreements | | | | | | | |
X
|
| | | | | |
| | Mutual Fund Investing | | | | | | | |
X
|
| | | | | |
| | Operational | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | Repurchase Agreements | | | | | | | |
X
|
| | | | | |
| | Securities Lending | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | Short-Term Investments | | | | | | | |
X
|
| | | | | |
| | Unrated Fixed Income Securities | | | | | | | |
X
|
| | | | | |
| | When-Issued and Delayed Delivery Securities | | | | | | | |
X
|
| | | | | |
| |
Zero Coupon, Step Coupon, Deferred Coupon and PIK Bonds
|
| | | | | | |
X
|
| | | | | |
| |
Fund
|
| | |
Class A
|
| | |
Class C
|
| | |
Class I
|
| | |
Class R6
|
| | ||||||||||||
| | Virtus Emerging Markets Opportunities Fund | | | | | | 0.25 % | | | | | | | 1.00 % | | | | | | | None | | | | | | | None | | | |
| | Virtus Low Duration Income Fund | | | | | | 0.25 % | | | | | | | 1.00 % | | | | | | | None | | | | | | | N/A | | | |
| | Virtus Tax-Exempt Bond Fund | | | | | | 0.25 % | | | | | | | 1.00 % | | | | | | | None | | | | | | | N/A | | | |
| | |
Sales Charge as a Percentage of
|
| |||||||||
Amount of Transaction at Offering Price
|
| |
Offering Price
|
| |
Net Amount Invested
|
| ||||||
Under $50,000 | | | | | 5.75 % | | | | | | 6.10 % | | |
$50,000 but under $100,000 | | | | | 4.75 | | | | | | 4.99 | | |
$100,000 but under $250,000 | | | | | 3.75 | | | | | | 3.90 | | |
$250,000 but under $500,000 | | | | | 2.75 | | | | | | 2.83 | | |
$500,000 but under $1,000,000 | | | | | 2.00 | | | | | | 2.04 | | |
$1,000,000 or more | | | | | None | | | | | | None | | |
| | |
Sales Charge as a Percentage of
|
| |||||||||
Amount of Transaction at Offering Price
|
| |
Offering Price
|
| |
Amount Invested
|
| ||||||
Under $50,000 | | | | | 2.75 % | | | | | | 2.83 % | | |
$50,000 but under $100,000 | | | | | 2.25 | | | | | | 2.30 | | |
$100,000 but under $250,000 | | | | | 1.75 | | | | | | 1.78 | | |
$250,000 but under $500,000 | | | | | 1.25 | | | | | | 1.27 | | |
$500,000 but under $1,000,000 | | | | | 1.00 | | | | | | 1.00 | | |
$1,000,000 or more | | | | | None | | | | | | None | | |
| | |
Sales Charge as a Percentage of
|
| |||||||||
Amount of Transaction at Offering Price
|
| |
Offering Price
|
| |
Amount Invested
|
| ||||||
Under $50,000 | | | | | 2.25 % | | | | | | 2.30 % | | |
$50,000 but under $100,000 | | | | | 1.25 | | | | | | 1.27 | | |
$100,000 but under $500,000 | | | | | 1.00 | | | | | | 1.01 | | |
$500,000 but under $1,000,000 | | | | | 0.75 | | | | | | 0.76 | | |
$1,000,000 or more | | | | | None | | | | | | None | | |
Year
|
| |
1
|
| |
2+
|
| | | | | | | | | | | | | | | | ||||||
CDSC | | | | | 1 % | | | | | | 0 % | | | | | | | | | | | | | | | | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge as a
Percentage of Offering Price |
| |
Sales Charge as a
Percentage of Amount Invested |
| |
Dealer Discount as a
Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 5.75 % | | | | | | 6.10 % | | | | | | 5.00 % | | |
$50,000 but under $100,000 | | | | | 4.75 | | | | | | 4.99 | | | | | | 4.25 | | |
$100,000 but under $250,000 | | | | | 3.75 | | | | | | 3.90 | | | | | | 3.25 | | |
$250,000 but under $500,000 | | | | | 2.75 | | | | | | 2.83 | | | | | | 2.25 | | |
$500,000 but under $1,000,000 | | | | | 2.00 | | | | | | 2.04 | | | | | | 1.75 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge as a
Percentage of Offering Price |
| |
Sales Charge as a
Percentage of Amount Invested |
| |
Dealer Discount as a
Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 2.75 % | | | | | | 2.83 % | | | | | | 2.25 % | | |
$50,000 but under $100,000 | | | | | 2.25 | | | | | | 2.30 | | | | | | 2.00 | | |
$100,000 but under $250,000 | | | | | 1.75 | | | | | | 1.78 | | | | | | 1.50 | | |
$250,000 but under $500,000 | | | | | 1.25 | | | | | | 1.27 | | | | | | 1.00 | | |
$500,000 but under $1,000,000 | | | | | 1.00 | | | | | | 1.01 | | | | | | 1.00 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge as a
Percentage of Offering Price |
| |
Sales Charge as a
Percentage of Amount Invested |
| |
Dealer Discount as a
Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 2.25 % | | | | | | 2.30 % | | | | | | 2.00 % | | |
$50,000 but under $100,000 | | | | | 1.25 | | | | | | 1.27 | | | | | | 1.00 | | |
$100,000 but under $500,000 | | | | | 1.00 | | | | | | 1.01 | | | | | | 1.00 | | |
$500,000 but under $1,000,000 | | | | | 0.75 | | | | | | 0.76 | | | | | | 0.75 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
| | | | | |
To Open An Account
|
| |
| | Through a financial advisor | | | | Contact your advisor. Some advisors may charge a fee and may set different minimum investments or limitations on buying shares. | | |
| | Through the mail | | | | Complete a new account application and send it with a check payable to the fund. Mail them to: Virtus Mutual Funds, P.O. Box 9874, Providence, RI 02940-8074. | | |
| | Through express delivery | | | | Complete a new account application and send it with a check payable to the fund. Send them to: Virtus Mutual Funds, 4400 Computer Drive, Westborough, MA 01581-1722. | | |
| | By Federal Funds wire | | | | Call us at 800-243-1574 (press 1, then 0). | | |
| | By Systematic Purchase | | | | Complete the appropriate section on the application and send it with your initial investment payable to the fund. Mail them to: Virtus Mutual Funds, P.O. Box 9874, Providence, RI 02940-8074. | | |
| | By telephone exchange | | | | Call us at 800-243-1574 (press 1, then 0). | | |
| | | | | |
To Sell Shares
|
| |
| | Through a financial advisor | | | | Contact your advisor. Some advisors may charge a fee and may set different minimums on redemptions of accounts. | | |
| | Through the mail | | | | Send a letter of instruction to: Virtus Mutual Funds, P.O. Box 9874, Providence, RI 02940-8074. Be sure to include the registered owner’s name, fund and account number and number of shares or dollar value you wish to sell. | | |
| | Through express delivery | | | | Send a letter of instruction to: Virtus Mutual Funds, 4400 Computer Drive, Westborough, MA 01581-1722. Be sure to include the registered owner’s name, fund and account number and number of shares or dollar value you wish to sell. | | |
| | By telephone | | | | For sales up to $50,000, requests can be made by calling 800-243-1574. | | |
| | By telephone exchange | | | | Call us at 800-243-1574 (press 1, then 0). | | |
| | By check (certain fixed income funds only) | | | | If you selected the checkwriting feature, you may write checks for amounts of $250 or more. Checks may not be used to close accounts. Please call us at 800-243-1743 for a listing of funds offering this feature. | | |
| |
Fund
|
| | |
Dividend Paid
|
| |
| | Virtus Emerging Markets Opportunities Fund | | | | Semiannually | | |
| | Low Duration Income Fund | | | | Monthly (1) | | |
| | Virtus Tax-Exempt Bond Fund | | | | Monthly | | |
| Investment Company Act File No. 811-7455 | | |
9-16
|
|
| 8020 | | | | |
| | |
TICKER SYMBOL BY CLASS
|
| | | | ||||||||||||
FUND
|
| |
A
|
| |
B
|
| |
C
|
| |
I
|
| |
R6
|
| |
T
|
|
Virtus Alternatives Diversifier Fund | | |
PDPAX
|
| | | | |
PDPCX
|
| |
VADIX
|
| | | | | | |
Virtus Bond Fund | | |
SAVAX
|
| |
SAVBX
|
| |
SAVCX
|
| |
SAVYX
|
| | | | | | |
Virtus CA Tax-Exempt Bond Fund | | |
CTESX
|
| | | | | | | |
CTXEX
|
| | | | |
|
|
Virtus Emerging Markets Debt Fund | | |
VEDAX
|
| | | | |
VEDCX
|
| |
VIEDX
|
| | | | | | |
Virtus Emerging Markets Equity Income Fund | | |
VEIAX
|
| | | | |
VEICX
|
| |
VEIIX
|
| | | | | | |
Virtus Emerging Markets Opportunities Fund | | |
HEMZX
|
| | | | |
PICEX
|
| |
HIEMX
|
| |
VREMX
|
| | | |
Virtus Emerging Markets Small-Cap Fund | | |
VAESX
|
| | | | |
VCESX
|
| |
VIESX
|
| | | | | | |
Virtus Equity Trend Fund | | |
VAPAX
|
| | | | |
VAPCX
|
| |
VAPIX
|
| |
VRPAX
|
| | | |
Virtus Essential Resources Fund | | |
VERAX
|
| | | | |
VERCX
|
| |
VERIX
|
| | | | | | |
Virtus Foreign Opportunities Fund | | |
JVIAX
|
| | | | |
JVICX
|
| |
JVXIX
|
| |
VFOPX
|
| | | |
Virtus Global Equity Trend Fund | | |
VGPAX
|
| | | | |
VGPCX
|
| |
VGPIX
|
| | | | | | |
Virtus Global Infrastructure Fund | | |
PGUAX
|
| | | | |
PGUCX
|
| |
PGIUX
|
| | | | | | |
Virtus Global Opportunities Fund | | |
NWWOX
|
| |
WWOBX
|
| |
WWOCX
|
| |
WWOIX
|
| | | | | | |
Virtus Global Real Estate Securities Fund | | |
VGSAX
|
| | | | |
VGSCX
|
| |
VGISX
|
| | | | | | |
Virtus Greater European Opportunities Fund | | |
VGEAX
|
| | | | |
VGECX
|
| |
VGEIX
|
| | | | | | |
Virtus Herzfeld Fund | | |
VHFAX
|
| | | | |
VHFCX
|
| |
VHFIX
|
| | | | | | |
Virtus High Yield Fund | | |
PHCHX
|
| |
PHCCX
|
| |
PGHCX
|
| |
PHCIX
|
| | | | | | |
Virtus International Equity Fund | | |
VIEAX
|
| | | | |
VIECX
|
| |
VIIEX
|
| | | | | | |
Virtus International Real Estate Securities Fund | | |
PXRAX
|
| | | | |
PXRCX
|
| |
PXRIX
|
| | | | | | |
Virtus International Small-Cap Fund | | |
VISAX
|
| | | | |
VCISX
|
| |
VIISX
|
| |
VRISX
|
| | | |
Virtus International Wealth Masters Fund | | |
VIWAX
|
| | | | |
VIWCX
|
| |
VWIIX
|
| | | | | | |
Virtus Low Duration Income Fund | | |
HIMZX
|
| | | | |
PCMZX
|
| |
HIBIX
|
| | | | | | |
Virtus Low Volatility Equity Fund | | |
VLVAX
|
| | | | |
VLVCX
|
| |
VLVIX
|
| | | | | | |
Virtus Multi-Asset Trend Fund | | |
VAAAX
|
| | | | |
VAACX
|
| |
VAISX
|
| | | | | | |
Virtus Multi-Sector Intermediate Bond Fund
|
| |
NAMFX
|
| |
NBMFX
|
| |
NCMFX
|
| |
VMFIX
|
| |
VMFRX
|
| | | |
Virtus Multi-Sector Short Term Bond Fund | | |
NARAX
|
| |
PBARX
|
| |
PSTCX
|
| |
PIMSX
|
| | | | |
PMSTX
|
|
Virtus Real Estate Securities Fund | | |
PHRAX
|
| |
PHRBX
|
| |
PHRCX
|
| |
PHRIX
|
| |
VRREX
|
| | | |
Virtus Sector Trend Fund | | |
PWBAX
|
| | | | |
PWBCX
|
| |
VARIX
|
| | | | | | |
Virtus Senior Floating Rate Fund | | |
PSFRX
|
| | | | |
PFSRX
|
| |
PSFIX
|
| | | | | | |
Virtus Tax-Exempt Bond Fund | | |
HXBZX
|
| | | | |
PXCZX
|
| |
HXBIX
|
| | | | | | |
Virtus Wealth Masters Fund | | |
VWMAX
|
| | | | |
VWMCX
|
| |
VWMIX
|
| | | | | | |
| | |
Page
|
| |||
Glossary | | | | | 4 | | |
| | | | 8 | | | |
| | | | 15 | | | |
| | | | 72 | | | |
| | | | 74 | | | |
| | | | 85 | | | |
| | | | 85 | | | |
| | | | 95 | | | |
| | | | 97 | | | |
| | | | 104 | | | |
| | | | 107 | | | |
| | | | 116 | | | |
| | | | 117 | | | |
| | | | 123 | | | |
| | | | 124 | | | |
| | | | 125 | | |
| 1933 Act | | | The Securities Act of 1933, as amended | |
| 1940 Act | | | The Investment Company Act of 1940, as amended | |
| ACH | | | Automated Clearing House, a nationwide electronic money transfer system that provides for the inter-bank clearing of credit and debit transactions and for the exchange of information among participating financial institutions | |
| Administrator | | | The Trust’s administrative agent, Virtus Fund Services, LLC | |
| ADRs | | | American Depositary Receipts | |
| ADSs | | | American Depositary Shares | |
| Adviser | | | The investment adviser to the Funds, Virtus Investment Advisers, Inc. | |
| Alternatives Diversifier Fund | | | Virtus Alternatives Diversifier Fund | |
| BNY Mellon | | | BNY Mellon Investment Servicing (US) Inc., the sub-administrative and accounting agent for the Funds | |
| Board | | | The Board of Trustees of Virtus Opportunities Trust (also referred to herein as the “Trustees”) | |
| Bond Fund | | | Virtus Bond Fund | |
| CA Tax-Exempt Bond Fund | | | Virtus CA Tax-Exempt Bond Fund | |
| CCO | | | Chief Compliance Officer | |
| CDRs | | | Continental Depositary Receipts (another name for EDRs) | |
| CDSC | | | Contingent Deferred Sales Charge | |
| CEA | | | Commodity Exchange Act, which is the U.S. law governing trading in commodity futures | |
| CFTC | | | Commodity Futures Trading Commission, which is the U.S. regulator governing trading in commodity futures | |
| Code | | | The Internal Revenue Code of 1986, as amended, which is the law governing U.S. federal taxes | |
| Custodian | | | The custodian of the Funds’ assets, JPMorgan Chase Bank, N.A. | |
| Distributor | | | The principal underwriter of shares of the Funds, VP Distributors, LLC | |
| Duff & Phelps | | | Duff & Phelps Investment Management Co. subadviser to the Global Infrastructure Fund, Global Real Estate Fund, International Real Estate Fund and Real Estate Fund | |
| EDRs | | | European Depositary Receipts (another name for CDRs) | |
| EM Debt Fund | | | Virtus Emerging Markets Debt Fund | |
| EM Equity Income Fund | | | Virtus Emerging Markets Equity Income Fund | |
| EM Opportunities Fund | | | Virtus Emerging Markets Opportunities Fund | |
| EM Small-Cap Fund | | | Virtus Emerging Markets Small-Cap Fund | |
| Equity Trend Fund | | | Virtus Equity Trend Fund | |
| Essential Resources Fund | | | Virtus Essential Resources Fund | |
| ETFs | | | Exchange-traded Funds | |
| Euclid | | | Euclid Advisors, LLC subadviser to Virtus Equity Trend Fund, Virtus Global Equity Trend Fund, Virtus Multi-Asset Trend Fund and Virtus Sector Trend Fund | |
| FHFA | | | Federal Housing Finance Agency, an independent Federal agency that regulates FNMA, FHLMC and the twelve Federal Home Loan Banks | |
| FHLMC | | | Federal Home Loan Mortgage Corporation, also known as “Freddie Mac”, which is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders | |
| FINRA | | | Financial Industry Regulatory Authority, a self-regulatory organization with authority over registered broker-dealers operating in the United States, including VP Distributors | |
| Fitch | | | Fitch Ratings, Inc. | |
| FNMA | | | Federal National Mortgage Association, also known as “Fannie Mae”, which is a government-sponsored corporation owned entirely by private stockholders and subject to general regulation by the Secretary of Housing and Urban Development | |
| Foreign Opportunities Fund | | | Virtus Foreign Opportunities Fund | |
| Fund Complex | | | The group of Funds sponsored by Virtus and managed by VIA, including the Funds, Virtus Variable Insurance Trust and certain other closed-end funds. | |
| Funds | | | The series of the Trust discussed in this SAI | |
| Funds of Funds | | | Collectively, Alternatives Diversifier Fund, Herzfeld Fund, Low Volatility Fund and Trend Funds | |
| GDRs | | | Global Depositary Receipts | |
| GICs | | | Guaranteed Investment Contracts | |
| Global Equity Trend Fund | | | Virtus Global Equity Trend Fund | |
| Global Infrastructure Fund | | | Virtus Global Infrastructure Fund | |
| Global Opportunities Fund | | | Virtus Global Opportunities Fund | |
| Global Real Estate Fund | | | Virtus Global Real Estate Securities Fund | |
| GNMA | | | Government National Mortgage Association, also known as “Ginnie Mae”, is a wholly-owned United States Government corporation within the Department of Housing and Urban Development | |
| Greater European Fund | | | Virtus Greater European Opportunities Fund | |
| Herzfeld | | | Thomas J. Herzfeld Advisors, Inc. subadviser to the Herzfeld Fund | |
| Herzfeld Fund | | | Virtus Herzfeld Fund | |
| High Yield Fund | | | Virtus High Yield Fund | |
| Horizon | | | Horizon Asset Management LLC subadviser to the International Wealth Masters Fund and the Wealth Masters Fund | |
| IMF | | | International Monetary Fund, an international organization seeking to promote international economic cooperation, international trade, employment and exchange rate stability, among other things | |
| Independent Trustees | | | Trustees who are not “interested persons” of the Trust, as that term is defined by the 1940 Act | |
| International Equity Fund | | | Virtus International Equity Fund | |
| International Real Estate Fund | | | Virtus International Real Estate Securities Fund | |
| International Small-Cap Fund | | | Virtus International Small-Cap Fund | |
| IRA | | | Individual Retirement Account | |
| IRS | | | The United States Internal Revenue Service, which is the arm of the U.S. government that administers and enforces the Code | |
| JPMorgan | | | JPMorgan Chase Bank, N.A. | |
| Kayne Anderson Rudnick | | | Kayne Anderson Rudnick Investment Management, LLC, subadviser to the EM Small-Cap Fund and International Small-Cap Fund | |
| KBII | | | Kleinwort Benson Investors International, Ltd. subadviser to the EM Equity Income Fund and Essential Resources Fund | |
| LIBOR | | | London Interbank Offering Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market | |
| Low Duration Income Fund | | | Virtus Low Duration Income Fund | |
| Low Volatility Fund | | | Virtus Low Volatility Equity Fund | |
| Moody’s | | | Moody’s Investors Service, Inc. | |
| Multi-Asset Trend Fund | | | Virtus Multi-Asset Trend Fund | |
|
Multi-Sector Intermediate Bond Fund
|
| | Virtus Multi-Sector Intermediate Bond Fund | |
| Multi-Sector Short Term Bond Fund | | | Virtus Multi-Sector Short Term Bond Fund | |
| NAV | | | Net Asset Value, which is the per-share price of a Fund | |
| Newfleet | | | Newfleet Asset Management, LLC subadviser to the Bond Fund, CA Tax-Exempt Bond Fund, EM Debt Fund, High Yield Fund, Low Duration Income Fund, Multi-Sector Intermediate Bond Fund, Multi-Sector Short Term Bond Fund, Senior Floating Rate Fund and Tax-Exempt Bond Fund | |
| NYSE | | | New York Stock Exchange | |
| OCC | | | Options Clearing Corporation, the world’s largest equity derivatives clearing corporation | |
| OECD | | | Organization for Economic Cooperation and Development, an international organization seeking to promote economic progress and world trade | |
| PERLS | | | Principal Exchange Rate Linked Securities | |
| PNX | | | Phoenix Life Insurance Company, which is the former parent company of Virtus Investment Partners, Inc., and certain of its corporate affiliates | |
| Prospectuses | | | The prospectuses for the Funds, as amended from time to time | |
| PwC | | | PricewaterhouseCoopers, LLP, the independent registered public accounting firm for the Trust | |
| Rampart | | | Rampart Investment Management Company, LLC subadviser to the Low Volatility Equity Fund | |
| Real Estate Fund | | | Virtus Real Estate Securities Fund | |
| Regulations | | | The Treasury Regulations promulgated under the Internal Revenue Code of 1986, as amended | |
| RIC | | | Regulated Investment Company, a designation under the Code indicating a U.S.-registered investment company meeting the specifications under the Code allowing the investment company to be exempt from paying U.S. federal income taxes | |
| S&P | | | Standard & Poor’s Corporation | |
| S&P 500 ® Index | | | The Standard & Poor’s 500 ® Index, which is a free-float market capitalization-weighted index of 500 of the largest U.S. companies, calculated on a total return basis with dividends reinvested | |
| SAI | | | This Statement of Additional Information | |
| SEC | | | U.S. Securities and Exchange Commission | |
| Sector Trend Fund | | | Virtus Sector Trend Fund | |
| Senior Floating Rate Fund | | | Virtus Senior Floating Rate Fund | |
| SIFMA | | | Securities Industry and Financial Markets Association (formerly, the Bond Market Association), a financial industry trade group consisting of broker-dealers and asset managers across the United States | |
| SMBS | | | Stripped Mortgage-backed Securities | |
| Tax-Exempt Bond Fund | | | Virtus Tax-Exempt Bond Fund | |
| Transfer Agent | | | The Trust’s transfer agent, Virtus Fund Services, LLC | |
| Trend Funds | | | Collectively, Virtus Equity Trend Fund, Virtus Global Equity Trend Fund, Virtus Multi-Asset Trend Fund and Virtus Sector Trend Fund | |
| VIA | | | Virtus Investment Advisers, Inc., the Adviser to the Funds | |
| Virtus | | | Virtus Investment Partners, Inc., which is the parent company of the Adviser, the Distributor, the Administrator/Transfer Agent, Duff & Phelps, Euclid, Kayne Anderson Rudnick, Newfleet and Rampart | |
| Virtus Mutual Funds | | | The family of funds consisting of the Funds, the series of Virtus Alternative Solutions Trust, the series of Virtus Equity Trust and the series of Virtus Retirement Trust | |
| Vontobel | | | Vontobel Asset Management, Inc., subadviser to the EM Opportunities Fund, Foreign Opportunities Fund, Global Opportunities Fund and Greater European Fund | |
| VP Distributors | | | VP Distributors, LLC , the Trust's Distributor | |
| VVIT | | | Virtus Variable Insurance Trust, a separate trust consisting of several series advised by VIA and distributed by VP Distributors | |
| Wealth Masters Fund | | | Virtus Wealth Masters Fund | |
| |
Fund Type
|
| | |
Fund
|
| | |
Investment Objective
|
| |
| | Alternatives | | | | Alternatives Diversifier Fund | | | | The fund has an investment objective of long-term capital appreciation. | | |
| | | | | | Global Infrastructure Fund * | | | | The fund has investment objectives of both capital appreciation and current income. | | |
| | | | | | Global Real Estate Fund | | | | The fund has a primary investment objective of long-term capital appreciation, with a secondary investment objective of income. | | |
| | | | | | Herzfeld Fund | | | | The fund has investment objectives of capital appreciation and current income. | | |
| | | | | | International Real Estate Fund * | | | | The fund has a primary investment objective of long-term capital appreciation, with a secondary investment objective of income. | | |
| | | | | | Real Estate Fund * | | | | The fund has investment objectives of capital appreciation and income with approximately equal emphasis. | | |
| | Asset Allocation | | | | Multi-Asset Trend Fund | | | | The fund has an investment objective of capital appreciation. In pursuing this objective, the fund maintains an emphasis on preservation of capital. | | |
| | Equity | | | | Equity Trend Fund | | | | The fund has an investment objective of long-term capital appreciation. | | |
| | | | | | Essential Resources Fund | | | | The fund has an investment objective of capital appreciation. | | |
| | | | | | Low Volatility Fund | | | | The fund has an investment objective of capital appreciation with lower volatility than the U.S. equity markets over a full market cycle. | | |
| | | | | | Sector Trend Fund * | | | | The fund has an investment objective of long-term capital appreciation. | | |
| | | | | | Wealth Masters Fund | | | | The fund has an investment objective of capital appreciation. | | |
| | Fixed Income | | | | Bond Fund * | | | | The fund has an investment objective of high total return from both current income and capital appreciation. | | |
| |
Fund Type
|
| | |
Fund
|
| | |
Investment Objective
|
| |
| | | | | | CA Tax-Exempt Bond Fund * | | | | The fund has an investment objective of obtaining a high level of current income exempt from California state and local income taxes, as well as federal income tax, consistent with the preservation of capital. | | |
| | | | | | EM Debt Fund | | | | The fund has an investment objective of total return from current income and capital appreciation. | | |
| | | | | | High Yield Fund * | | | | The fund has a primary investment objective of high current income and a secondary objective of capital growth. | | |
| | | | | | Low Duration Income Fund | | | | The fund has an investment objective of providing a high level of total return, including a competitive level of current income, while limiting fluctuations in net asset value due to changes in interest rates. | | |
| | | | | | Multi-Sector Intermediate Bond Fund * | | | | The fund has an investment objective of maximizing current income while preserving capital. | | |
| | | | | |
Multi-Sector Short Term Bond Fund
*
|
| | | The fund has an investment objective of providing high current income while attempting to limit changes in the fund’s net asset value per share caused by interest rate changes. | | |
| | | | | | Senior Floating Rate Fund * | | | | The fund has an investment objective of high total return from both current income and capital appreciation. | | |
| | | | | | Tax-Exempt Bond Fund | | | | The fund has an investment objective of providing a high level of current income that is exempt from federal income tax. | | |
| | International/Global | | | | EM Equity Income Fund | | | | The fund has investment objectives of seeking capital appreciation and income. | | |
| | | | | | EM Opportunities Fund | | | | The fund has an investment objective of capital appreciation. | | |
| | | | | | EM Small-Cap Fund * | | | | The fund has an investment objective of capital appreciation. | | |
| | | | | | Foreign Opportunities Fund * | | | | The fund has an investment objective of long-term capital appreciation. | | |
| | | | | | Global Equity Trend Fund | | | | The fund has an investment objective of capital appreciation. In pursuing this objective, the fund maintains an emphasis on preservation of capital. | | |
| | | | | | Global Opportunities Fund * | | | | The fund has an investment objective of capital appreciation. | | |
| | | | | | Greater European Fund | | | | The fund has an investment objective of long-term capital appreciation. | | |
| | | | | | International Equity Fund | | | | The fund has an investment objective of long-term capital appreciation. | | |
| |
Fund Type
|
| | |
Fund
|
| | |
Investment Objective
|
| |
| | | | | | International Small-Cap Fund | | | | The fund has an investment objective of capital appreciation. | | |
| | | | | | International Wealth Masters Fund | | | | The fund has an investment objective of capital appreciation. | | |
| Bond Fund | | | High Yield Fund | |
| CA Tax-Exempt Bond Fund | | | International Equity Fund | |
| EM Debt Fund | | | International Real Estate Fund | |
| EM Equity Income Fund | | | International Small-Cap Fund | |
| EM Opportunities Fund | | | Low Duration Income Fund | |
| EM Small-Cap Fund | | | Low Volatility Fund | |
| Essential Resources Fund | | | Multi-Sector Intermediate Bond Fund | |
| Foreign Opportunities Fund | | | Multi-Sector Short-Term Bond Fund | |
| Global Infrastructure Fund | | | Real Estate Fund | |
| Global Real Estate Fund | | | Senior Floating Rate Fund | |
| Greater European Fund | | | Tax-Exempt Bond Fund | |
| |
Type of Service Provider
|
| | |
Name of Service Provider
|
| | |
Timing of Release of Portfolio Holdings
Information |
| |
| | Adviser | | | | Virtus Investment Advisers, Inc. | | | | Daily with no delay | | |
| | Subadviser (Global Infrastructure Fund, Global Real Estate Fund, International Real Estate Fund and Real Estate Fund) | | | | Duff & Phelps Investment Management Co. | | | | Daily with no delay | | |
| | Subadviser (Alternatives Diversifier Fund, Equity Trend Fund, Global Equity Trend Fund, International Equity Fund, Multi-Asset Trend Fund and Sector Trend Fund) | | | | Euclid Advisors LLC | | | | Daily with no delay | | |
| | Subadviser (Herzfeld Fund) | | | | Thomas J. Herzfeld Advisors, Inc. | | | | Daily with no delay | | |
| | Subadviser (International Wealth Masters Fund and Wealth Masters Fund) | | | | Horizon Asset Management LLC | | | | Daily with no delay | | |
| | Subadviser (EM Small-Cap Fund and International Small-Cap Fund) | | | | Kayne Anderson Rudnick Investment Management, LLC | | | | Daily with no delay | | |
| | Subadviser (EM Equity Income Fund and Essential Resources Fund) | | | | Kleinwort Benson Investors International, Ltd. | | | | Daily with no delay | | |
| | Subadviser (Bond Fund, CA Tax-Exempt Bond Fund, EM Debt Fund, High Yield Fund, Low Duration Income Fund, Multi-Sector Intermediate Bond Fund, Multi-Sector Short Term Bond Fund, Senior Floating Rate Fund and Tax-Exempt Bond Fund) | | | | Newfleet Asset Management, LLC | | | | Daily with no delay | | |
| | Subadviser (Low Volatility Fund) | | | | Rampart Investment Management Company, LLC | | | | Daily with no delay | | |
| | Subadviser (EM Opportunities Fund, Foreign Opportunities Fund, Global Opportunities Fund and Greater European Fund) | | | | Vontobel Asset Management, Inc. | | | | Daily with no delay | | |
| | Subadviser Trading Support (EM Opportunities Fund, Foreign Opportunities Fund, Global Opportunities Fund and Greater European Fund) | | | | Northern Trust Corporation | | | | Daily with no delay | | |
| | Administrator | | | | Virtus Fund Services, LLC | | | | Daily with no delay | | |
| | Distributor | | | | VP Distributors, LLC | | | | Daily with no delay | | |
| |
Type of Service Provider
|
| | |
Name of Service Provider
|
| | |
Timing of Release of Portfolio Holdings
Information |
| |
| | Custodian | | | | JPMorgan Chase Bank, N.A. | | | | Daily with no delay | | |
| | Class Action Service Provider | | | | Battea | | | | Daily with no delay | | |
| | Sub-Financial Agent | | | | BNY Mellon Investment Servicing (US) Inc. | | | | Daily with no delay | | |
| | Consultant (EM Opportunities Fund, Low Duration Income Fund and Tax-Exempt Bond Fund) | | | | Vestek | | | | Fiscal quarter with 20 day delay | | |
| | Consultant (Foreign Opportunities Fund) | | | | Rogercasey | | | | Monthly with four day delay | | |
| | Reconciliation Firm for Subadviser (Kayne Anderson Rudnick) (EM Small-Cap Fund and International Small-Cap Fund) | | | | Fiserve, Inc. | | | | Daily with no delay | | |
| | Middle Office for Subadviser (Duff & Phelps) (Global Infrastructure Fund, Global Real Estate Fund, International Real Estate Fund and Real Estate Fund), (Kayne Anderson Rudnick) (EM Small-Cap Fund and International Small-Cap Fund), (Rampart) (Low Volatility Fund) | | | | SS&C, Inc. | | | | Daily with no delay | | |
| | Distributor (EM Opportunities Fund, Foreign Opportunities Fund, Real Estate Fund, Multi-Sector Short Term Bond Fund) | | | | Morgan Stanley Smith Barney LLC | | | | Monthly with four day delay | | |
| | Portfolio Redistribution Firm (Foreign Opportunities Fund) | | | | Thomson Financial LLC | | | | Fiscal quarter with 20 day delay | | |
| | Independent Registered Public Accounting Firm | | | | PricewaterhouseCoopers LLP | | | | Annually, within 15 business days of end of fiscal year. | | |
| | Performance Analytics Firm | | | | FactSet Research Systems, Inc. | | | | Daily with no delay | | |
| | Back-end Compliance Monitoring System | | | | Financial Tracking Technologies, LLC | | | | Daily with no delay | | |
| | Typesetting and Printing firm for Financial Reports | | | | R.R. Donnelley & Sons Co. | | | | Quarterly, within 15 days of end of reporting period. | | |
| | Security Lending (as applicable) | | | | Brown Brothers Harriman & Co. | | | | Daily with no delay | | |
| | Proxy Voting Service | | | | Institutional Shareholder Services | | | | Daily, weekly, monthly, quarterly depending on subadviser | | |
| | Intermediary Selling Shares of the Fund | | | | Merrill Lynch | | | | Quarterly within 10 days of quarter end | | |
| | Portfolio Redistribution Firms | | | | Bloomberg, Standard & Poor’s and Thompson Reuters | | | | Various frequencies depending on the fund, which includes, but is not limited to: Monthly with 30-day delay or fiscal quarter with a 15-,30-, or 60-day delay. | | |
| | Rating Agencies | | | | Lipper Inc. and Morningstar | | | | Various frequencies depending on the fund, which includes, but is not limited to: Monthly with 30-day delay or fiscal quarter with a 15-,30-, or 60-day delay. | | |
| | Virtus Public Web site | | | | Virtus Investment Partners, Inc. | | | | Various frequencies depending on the fund, which includes, but is not limited to: Monthly with 30-day delay or fiscal quarter with a 15-,30-, or 60-day delay. | | |
| | | | | | | | | |
Class/Shares
|
| | | | | | ||||||||||||
| |
Trust
|
| | |
Fund
|
| | |
A
|
| | |
B
|
| | |
C
|
| | |
I
|
| | |
R6
|
| |
| | Virtus Alternative Solutions Trust | | | | Credit Opportunities Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | | | | | Multi-Strategy Target Return Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Select MLP and Energy Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Strategic Income Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | Virtus Equity Trust | | | | Balanced Fund | | | |
X
|
| | |
X
|
| | |
X
|
| | | | | | | | | |
| | | | | | Contrarian Value Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | |
X
|
| |
| | | | | | Growth & Income Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Mid-Cap Core Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Mid-Cap Growth Fund | | | |
X
|
| | |
X
|
| | |
X
|
| | |
X
|
| | | | | |
| | | | | | Quality Large-Cap Value Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Quality Small-Cap Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Small-Cap Core Fund | | | |
X
|
| | |
X
|
| | |
X
|
| | |
X
|
| | |
X
|
| |
| | | | | | Small-Cap Sustainable Growth Fund | | | |
X
|
| | | | | | |
X
|
| | |
X
|
| | | | | |
| | | | | | Strategic Growth Fund | | | |
X
|
| | |
X
|
| | |
X
|
| | |
X
|
| | | | | |
| | | | | | Tactical Allocation Fund | | | |
X
|
| | |
X
|
| | |
X
|
| | | | | | | | | |
| |
Virtus Retirement Trust
|
| | |
DFA 2015 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | |
|
| | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2020 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2025 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | |
|
| | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2030 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | |
|
| | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2035 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2040 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2045 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2050 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2055 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
| | | | | |
DFA 2060 Target Date Retirement Income Fund
|
| | |
X
|
| | | | | | | | | | |
X
|
| | |
X
|
| |
Investment Technique
|
| |
Description and Risks
|
| |
Fund-Specific Limitations
|
|
Commodities-Related Investing
|
| |
Commodity-related companies may underperform the stock market as a whole. The value of securities issued by commodity-related companies may be affected by factors affecting a particular industry or commodity. The operations and financial performance of commodity-related companies may be directly affected by commodity prices, especially those commodity-related companies that own the underlying commodity. The stock prices of such companies may also experience greater price volatility than other types of common stocks. Securities issued by commodity-related companies are sensitive to changes in the supply and demand for, and thus the prices of, commodities. Volatility of commodity prices, which may lead to a reduction in production or supply, may also negatively impact the performance of commodity and natural resources companies that are solely involved in the transportation, processing, storing, distribution or marketing of commodities. Volatility of commodity prices may also make it more difficult for commodity-related companies to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity prices.
Certain types of commodities instruments (such as commodity-linked notes) are subject to the risk that the counterparty to the instrument will not perform or will be unable to perform in accordance with the terms of the instrument.
Exposure to commodities and commodities markets may subject the Fund to greater volatility than investments in traditional securities. No active trading market may exist for certain commodities investments, which may impair the ability of the Fund to sell or to realize the full value of such investments in the event of the need to liquidate such investments. In addition, adverse market conditions may impair the liquidity of actively traded commodities investments.
|
| | | |
Debt Investing
|
| |
Each Fund may invest in debt, or fixed income, securities. Debt, or fixed income, securities (which include corporate bonds, commercial paper, debentures, notes, government securities, municipal obligations, state- or state agency-issued obligations, obligations of foreign issuers, asset- or mortgage-backed securities, and other obligations) are used by issuers to borrow money and thus are debt obligations of the issuer. Holders of debt securities are creditors of the issuer, normally ranking ahead of holders of both common and preferred stock as to dividends or upon liquidation. The issuer usually pays a fixed, variable, or floating rate of interest and must repay the amount borrowed at the security’s maturity. Some debt securities, such as zero-coupon securities (discussed below), do not pay interest but may be sold at a deep discount from their face value.
Yields on debt securities depend on a variety of factors, including the general conditions of the money, bond, and note markets, the size of a particular offering, the maturity date of the obligation, and the rating of the issue. Debt securities with longer maturities tend to produce higher yields and are generally subject to greater price fluctuations in response to changes in market conditions than obligations with shorter maturities. An increase in interest rates generally will reduce the market value of portfolio debt securities, while a decline in interest rates generally will increase the value of the same securities. The achievement of a Fund’s investment objective depends in part on the continuing ability of the issuers of the debt securities in which the Fund invests to meet their obligations for the payment of principal and
|
| | | |
Investment Technique
|
| |
Description and Risks
|
| |
Fund-Specific Limitations
|
|
| | |
interest when due. Obligations of issuers of debt securities are subject to the provisions of bankruptcy, insolvency, sovereign immunity, and other laws that affect the rights and remedies of creditors. There is also the possibility that, as a result of litigation or other conditions, the ability of an issuer to pay, when due, the principal of and interest on its debt securities may be materially affected.
|
| | | |
Convertible Securities
|
| |
A convertible security is a bond, debenture, note, or other security that entitles the holder to acquire common stock or other equity securities of the same or a different issuer within a particular period of time at a specific price or formula. It generally entitles the holder to receive interest paid or accrued until the security matures or is redeemed, converted, or exchanged. Convertible securities may have several unique investment characteristics such as (1) higher yields than common stocks, but lower yields than comparable nonconvertible securities, (2) a lesser degree of fluctuation in value than the underlying stock since they have fixed income characteristics and (3) the potential for capital appreciation if the market price of the underlying common stock increases.
Before conversion, convertible securities have characteristics similar to nonconvertible debt securities. Convertible securities often rank senior to common stock in a corporation’s capital structure and, therefore, are often viewed as entailing less risk than the corporation’s common stock, although the extent to which this is true depends in large measure on the degree to which the convertible security sells above its value as a fixed income security. However, because convertible securities are often viewed by the issuer as future common stock, they are often subordinated to other senior securities and therefore are rated one category lower than the issuer’s nonconvertible debt obligations or preferred stock.
A convertible security may be subject to redemption or conversion at the option of the issuer at a predetermined price. If a convertible security held by the Fund is called for redemption, the Fund could be required to permit the issuer to redeem the security and convert it to the underlying common stock. The Fund generally would invest in convertible securities for their favorable price characteristics and total return potential, and would normally not exercise an option to convert. The Fund might be more willing to convert such securities to common stock.
A Fund’s subadviser will select only those convertible securities for which it believes (a) the underlying common stock is a suitable investment for the Fund and (b) a greater potential for total return exists by purchasing the convertible security because of its higher yield and/or favorable market valuation. However, the Fund may invest in convertible debt securities rated less than investment grade. Debt securities rated less than investment grade are commonly referred to as “junk bonds.” (For information about debt securities rated less than investment grade, see “High-Yield/High-Risk Fixed Income Securities (Junk Bonds)” under “Debt Investing” in this section of the SAI; for additional information about ratings on debt obligations, see Appendix A to this SAI.)
|
| | | |
Corporate Debt Securities
|
| |
Each Fund may invest in debt securities issued by corporations, limited partnerships and other similar entities. A Fund’s investments in debt securities of domestic or foreign corporate issuers include bonds, debentures, notes and other similar corporate debt instruments, including convertible securities that meet the Fund’s minimum ratings criteria or if unrated are, in the Fund’s subadviser’s opinion, comparable in quality to corporate debt securities that meet those criteria. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of exchange rates
|
| | | |
Investment Technique
|
| |
Description and Risks
|
| |
Fund-Specific Limitations
|
|
| | | between the U.S. dollar and a foreign currency or currencies or to the value of commodities, such as gold. | | | | |
Dollar-denominated Foreign Debt Securities (“Yankee Bonds”)
|
| |
Each Fund may invest in “Yankee bonds”, which are dollar-denominated instruments issued in the U.S. market by foreign branches of U.S. banks and U.S. branches of foreign banks. Since these instruments are dollar-denominated, they are not affected by variations in currency exchange rates. They are influenced primarily by interest rate levels in the United States and by the financial condition of the issuer, or of the issuer’s foreign parent. However, investing in these instruments may present a greater degree of risk than investing in domestic securities, due to less publicly available information, less securities regulation, war or expropriation. Special considerations may include higher brokerage costs and thinner trading markets. Investments in foreign countries could be affected by other factors including extended settlement periods. (See “Foreign Investing” in this section of the SAI for additional information about investing in foreign countries.)
|
| | | |
Duration
|
| |
Duration is a time measure of a bond’s interest-rate sensitivity, based on the weighted average of the time periods over which a bond’s cash flows accrue to the bondholder. Time periods are weighted by multiplying by the present value of its cash flow divided by the bond’s price. (A bond’s cash flows consist of coupon payments and repayment of capital.) A bond’s duration will almost always be shorter than its maturity, with the exception of zero-coupon bonds, for which maturity and duration are equal.
|
| | | |
Exchange-Traded Notes (ETNs)
|
| |
Generally, ETNs are senior, unsecured, unsubordinated debt securities whose returns are linked to the performance of a particular market benchmark or strategy minus applicable fees. ETNs are traded on an exchange during normal trading hours. However, investors can also hold the ETN until maturity. At maturity, the issuer pays to the investor a cash amount equal to the principal amount, subject to the day’s market benchmark or strategy factor.
ETNs do not make periodic coupon payments or provide principal protection. ETNs are subject to credit risk, and the value of the ETN may drop due to a downgrade in the issuer’s credit rating, despite the underlying market benchmark or strategy remaining unchanged. The value of an ETN may also be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in underlying assets, changes in the applicable interest rates, changes in the issuer’s credit rating, and economic, legal, political, or geographic events that affect the referenced underlying asset. When a Fund invests in ETNs it will bear its proportionate share of any fees and expenses borne by the ETN. The Fund’s decision to sell its ETN holdings may be limited by the availability of a secondary market. In addition, although an ETN may be listed on an exchange, the issuer may not be required to maintain the listing, and there can be no assurance that a secondary market will exist for an ETN.
ETNs are also subject to tax risk. No assurance can be given that the IRS will accept, or a court will uphold, how a Fund characterizes and treats ETNs for tax purposes. Further, the IRS and Congress are considering proposals that would change the timing and character of income and gains from ETNs.
An ETN that is tied to a specific market benchmark or strategy may not be able to replicate and maintain exactly the composition and relative weighting of securities, commodities or other components in the applicable market benchmark or strategy. Some ETNs that use leverage can, at times, be relatively illiquid and, thus, they may be difficult to purchase or sell at a fair price. Leveraged ETNs are subject to the same risks as other instruments that use leverage in any form.
|
| | | |
Investment Technique
|
| |
Description and Risks
|
| |
Fund-Specific Limitations
|
|
| | |
The market value of ETNs may differ from that of their market benchmark or strategy. This difference in price may be due to the fact that the supply and demand in the market for ETNs at any point in time is not always identical to the supply and demand in the market for the securities, commodities or other components underlying the market benchmark or strategy that the ETN seeks to track. As a result, there may be times when an ETN trades at a premium or discount to its market benchmark or strategy.
|
| | | |
High-Yield/High-Risk Fixed Income Securities (“Junk Bonds”)
|
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Investments in securities rated “BB” or below by S&P or Fitch, or “Ba” or below by Moody’s generally provide greater income (leading to the name “high-yield” securities) and opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility, liquidity, and principal and income risk. These securities are regarded as predominantly speculative as to the issuer’s continuing ability to meet principal and interest payment obligations. Analysis of the creditworthiness of issuers of lower-quality debt securities may be more complex than for issuers of higher-quality debt securities.
Interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of low-rated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Low-rated securities also tend to be more sensitive to economic conditions than higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of low-rated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer’s ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer’s inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of low-rated securities is generally considered to be significantly greater than issuers of higher-rated securities because such securities are usually unsecured and are often subordinated to other creditors. Further, if the issuer of a low-rated security defaulted, the applicable Fund might incur additional expenses in seeking recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of low-rated securities and thus in the applicable Fund’s NAV.
Low-rated securities often contain redemption, call or prepayment provisions which permit the issuer of the securities containing such provisions to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of low-rated securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities or otherwise redeem them, the applicable Fund may have to replace the securities with a lower yielding security which would result in lower returns for the Fund.
A Fund may have difficulty disposing of certain low-rated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all low-rated securities, there is no established retail secondary market for many of these securities. The Funds anticipate that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market
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price of the security, and accordingly, the NAV of a particular Fund and its ability to dispose of particular securities when necessary to meet its liquidity needs, or in response to a specific economic event, or an event such as a deterioration in the creditworthiness of the issuer. The lack of a liquid secondary market for certain securities may also make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing its respective portfolio. Market quotations are generally available on many low-rated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of low-rated securities, especially in a thinly-traded market. If a Fund experiences unexpected net redemptions, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of low-rated securities, the Fund may be forced to liquidate these securities at a substantial discount. Any such liquidation would reduce the Fund’s asset base over which expenses could be allocated and could result in a reduced rate of return for the Fund.
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Interest Rate Environment Risk
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In the wake of the financial crisis that began in 2007, the Federal Reserve System attempted to stabilize the U.S. economy and support the U.S. economic recovery by keeping the federal funds rate at or near zero percent. In addition, the Federal Reserve has purchased large quantities of securities issued or guaranteed by the U.S. government, its agencies or instrumentalities on the open market (the “quantitative easing program”). The Federal Reserve has since increased the federal funds rate as of December 2015, however, the United States continues to experience historically low interest rate levels. A low interest rate environment may have an adverse impact on each Fund’s ability to provide a positive yield to its shareholders and pay expenses out of Fund assets because of the low yields from the Fund’s portfolio investments.
However, continued economic recovery and the cessation of the quantitative easing program increase the risk that interest rates will rise in the near future and that the Funds will face a heightened level of interest rate risk. Federal Reserve policy changes may expose fixed-income and related markets to heightened volatility and may reduce liquidity for certain Fund investments, which could cause the value of a Fund’s investments and a Fund’s share price to decline or create difficulties for the Fund in disposing of investments. A Fund that invests in derivatives tied to fixed-income markets may be more substantially exposed to these risks than a Fund that does not invest in derivatives. A Fund could also be forced to liquidate its investments at disadvantageous times or prices, thereby adversely affecting the Fund. To the extent a Fund experiences high redemptions because of these policy changes, the Fund may experience increased portfolio turnover, which will increase the costs that the Fund incurs and lower the Fund’s performance.
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Inverse Floating Rate Obligations
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Certain variable rate securities pay interest at a rate that varies inversely to prevailing short-term interest rates (sometimes referred to as inverse floaters). For example, upon reset the interest rate payable on a security may go down when the underlying index has risen. During periods when short-term interest rates are relatively low as compared to long-term interest rates, the Fund may attempt to enhance its yield by purchasing inverse floaters. Certain inverse floaters may have an interest rate reset mechanism that multiplies the effects of changes in the underlying index. While this form of leverage may increase the security’s yield, it may also increase the volatility of the security’s market value.
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| | No Fund will invest more than 5% of its assets in inverse floaters. | |
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Similar to other variable and floating rate obligations, effective use of inverse floaters requires skills different from those needed to select most portfolio securities. If movements in interest rates are incorrectly anticipated, a Fund holding these instruments could lose money and its NAV could decline.
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Letters of Credit
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Debt obligations, including municipal obligations, certificates of participation, commercial paper and other short-term obligations, may be backed by an irrevocable letter of credit of a bank that assumes the obligation for payment of principal and interest in the event of default by the issuer. Only banks that, in the opinion of the relevant Fund’s subadviser, are of investment quality comparable to other permitted investments of the Fund may be used for Letter of Credit-backed investments.
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Loan and Debt Participations and Assignments
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A loan participation agreement involves the purchase of a share of a loan made by a bank to a company in return for a corresponding share of the borrower’s principal and interest payments. Loan participations of the type in which the Fund may invest include interests in both secured and unsecured corporate loans. When a Fund purchases loan assignments from lenders, it will acquire direct rights against the borrower, but these rights and the Fund’s obligations may differ from, and be more limited than, those held by the assignment lender. The principal credit risk associated with acquiring loan participation and assignment interests is the credit risk associated with the underlying corporate borrower. There is also a risk that there may not be a readily available market for participation loan interests and, in some cases, this could result in the Fund disposing of such securities at a substantial discount from face value or holding such securities until maturity.
There is typically a limited amount of public information available about loans because loans normally are not registered with the SEC or any state securities commission or listed on any securities exchange. Certain of the loans in which a Fund may invest may not be considered “securities,” and therefore the Fund may not be entitled to rely on the anti-fraud protections of the federal securities laws with respect to those loans in the event of fraud or misrepresentation by a borrower. A Fund may come into possession of material, non-public information about a borrower as a result of the Fund’s ownership of a loan or other floating-rate instrument of the borrower. Because of prohibitions on trading in securities of issuers while in possession of material, non-public information, the Fund might be unable to enter into a transaction in a publicly-traded security of the borrower when it would otherwise be advantageous to do so.
Loans trade in an unregulated inter-dealer or inter-bank secondary market. Purchases and sales of loans are generally subject to contractual restrictions that must be satisfied before a loan can be bought or sold. These restrictions may (i) impede the Fund’s ability to buy or sell loans; (ii) negatively affect the transaction price; (iii) affect the counterparty credit risk borne by the Fund; (iv) impede the Fund’s ability to timely vote or otherwise act with respect to loans; and (v) expose the Fund to adverse tax or regulatory consequences.
In the event that a corporate borrower failed to pay its scheduled interest or principal payments on participations held by the Fund, the market value of the affected participation would decline, resulting in a loss of value of such investment to the Fund. Accordingly, such participations are speculative and may result in the income level and net assets of the Fund being reduced. Moreover, loan participation agreements generally limit the right of a participant to resell its interest in the loan to a third party and, as a result, loan participations may be deemed by the Fund to be illiquid investments. A Fund will invest only
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| | The Tax-Exempt Bond Fund may not invest in loan participations and assignments. | |
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in participations with respect to borrowers whose creditworthiness is, or is determined by the Fund’s subadviser to be, substantially equivalent to that of issuers whose senior unsubordinated debt securities are rated B or higher by Moody’s or S&P. For the purposes of diversification and/or concentration calculations, both the borrower and issuer will be considered an “issuer.”
The Funds may purchase from banks participation interests in all or part of specific holdings of debt obligations. Each participation interest is backed by an irrevocable letter of credit or guarantee of the selling bank that the relevant Fund’s subadviser has determined meets the prescribed quality standards of the Fund. Thus, even if the credit of the issuer of the debt obligation does not meet the quality standards of the Fund, the credit of the selling bank will.
Loan participations and assignments may be illiquid and therefore subject to the Funds’ limitations on investments in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.)
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Municipal Securities and Related Investments
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Tax-exempt municipal securities are debt obligations issued by the various states and their subdivisions (e.g., cities, counties, towns, and school districts) to raise funds, generally for various public improvements requiring long-term capital investment. Purposes for which tax-exempt bonds are issued include flood control, airports, bridges and highways, housing, medical facilities, schools, mass transportation and power, water or sewage plants, as well as others. Tax-exempt bonds also are occasionally issued to retire outstanding obligations, to obtain funds for operating expenses or to loan to other public or, in some cases, private sector organizations or to individuals.
Yields on municipal securities are dependent on a variety of factors, including the general conditions of the money market and the municipal bond market, the size of a particular offering, the maturity of the obligations and the rating of the issue. Municipal securities with longer maturities tend to produce higher yields and are generally subject to potentially greater capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market prices of municipal securities usually vary, depending upon available yields. An increase in interest rates will generally reduce the value of portfolio investments, and a decline in interest rates will generally increase the value of portfolio investments. The ability of the Fund to achieve its investment objective is also dependent on the continuing ability of the issuers of municipal securities in which the Fund invests to meet their obligations for the payment of interest and principal when due. The ratings of Moody’s and S&P represent their opinions as to the quality of municipal securities which they undertake to rate. Ratings are not absolute standards of quality; consequently, municipal securities with the same maturity, coupon, and rating may have different yields. There are variations in municipal securities, both within a particular classification and between classifications, depending on numerous factors. It should also be pointed out that, unlike other types of investments, municipal securities have traditionally not been subject to regulation by, or registration with, the SEC, although there have been proposals which would provide for such regulation in the future.
The federal bankruptcy statutes relating to the debts of political subdivisions and authorities of states of the United States provide that, in certain circumstances, such subdivisions or authorities may be authorized to initiate bankruptcy proceedings without prior notice to or consent of creditors, which proceedings could result in material and adverse changes in the rights of holders of their obligations.
Lawsuits challenging the validity under state constitutions of present systems of financing public education have been initiated or adjusted in a number of states, and legislation has been introduced to effect
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changes in public school financing in some states. In other instances there have been lawsuits challenging the issuance of pollution control revenue bonds or the validity of their issuance under state or federal law which could ultimately affect the validity of those municipal securities or the tax-free nature of the interest thereon.
Descriptions of some of the municipal securities and related investment types most commonly acquired by the Funds are provided below. In addition to those shown, other types of municipal investments are, or may become, available for investment by the Funds. For the purpose of each Fund’s investment restrictions set forth in this SAI, the identification of the “issuer” of a municipal security which is not a general obligation bond is made by the applicable Fund’s subadviser on the basis of the characteristics of the obligation, the most significant of which is the source of funds for the payment of principal and interest on such security.
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Municipal Bonds
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Municipal bonds, which meet longer-term capital needs and generally have maturities of more than one year when issued, have two principal classifications: general obligation bonds and revenue bonds. Another type of municipal bond is referred to as an industrial development bond.
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General Obligation Bonds | | |
Issuers of general obligation bonds include states, counties, cities, towns, and regional districts. The proceeds of these obligations are used to fund a wide range of public projects, including construction or improvement of schools, highways and roads, and water and sewer systems. The basic security behind general obligation bonds is the issuer’s pledge of its full faith and credit and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to the rate or amount of special assessments.
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Industrial Development Bonds | | |
Industrial development bonds, which are considered municipal bonds if the interest paid is exempt from Federal income tax, are issued by or on behalf of public authorities to raise money to finance various privately operated facilities for business and manufacturing, housing, sports arenas and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports and parking. The payment of the principal and interest on such bonds is dependent solely on the ability of the facility’s user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment.
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Revenue Bonds | | |
The principal security for a revenue bond is generally the net revenues derived from a particular facility, group of facilities, or, in some cases, the proceeds of a special excise or other specific revenue source. Revenue bonds are issued to finance a wide variety of capital projects including: electric, gas, water and sewer systems; highways, bridges, and tunnels; port and airport facilities; colleges and universities; and hospitals. Although the principal security behind these bonds may vary, many provide additional security in the form of a debt service reserve fund whose money may be used to make principal and interest payments on the issuer’s obligations. Housing finance authorities have a wide range of security; including partially or fully insured mortgages, rent subsidized and/or collateralized mortgages, and/or the net revenues from housing or other public projects. Some authorities provide further security in the form of a state’s ability (without obligation) to make up deficiencies in the debt service reserve fund.
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Municipal Leases
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Each Fund may acquire participations in lease obligations or installment purchase contract obligations (hereinafter collectively called “lease obligations”) of municipal authorities or entities. Although
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lease obligations do not constitute general obligations of the municipality for which the municipality’s taxing power is pledged, a lease obligation may be backed by the municipality’s covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain lease obligations contain “non-appropriation” clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In addition to the “non-appropriation” risk, these securities represent a relatively new type of financing that has not yet developed the depth of marketability associated with more conventional bonds. In the case of a “non-appropriation” lease, the Fund’s ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property in the event foreclosure might prove difficult. The Fund’s subadviser will evaluate the credit quality of a municipal lease and whether it will be considered liquid. (See “Illiquid and Restricted Investments” in this section of the SAI for information regarding the implications of these investments being considered illiquid.)
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Municipal Notes
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Municipal notes generally are used to provide for short-term working capital needs and generally have maturities of one year or less. Municipal notes include bond anticipation notes, construction loan notes, revenue anticipation notes and tax anticipation notes.
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Bond Anticipation Notes | | |
Bond anticipation notes are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the notes.
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Construction Loan Notes | | |
Construction loan notes are sold to provide construction financing. After successful completion and acceptance, many projects receive permanent financing through FNMA or GNMA.
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Revenue Anticipation Notes | | |
Revenue anticipation notes are issued in expectation of receipt of other types of revenue, such as Federal revenues available under Federal revenue sharing programs.
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Tax Anticipation Notes
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Tax anticipation notes are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenue, such as income, sales, use and business taxes, and are payable from these specific future taxes.
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Tax-Exempt Commercial Paper
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Tax-exempt commercial paper is a short-term obligation with a stated maturity of 365 days or less. It is issued by state and local governments or their agencies to finance seasonal working capital needs or as short-term financing in anticipation of longer-term financing.
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Participation on Creditors’ Committees
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While the Funds do not invest in securities to exercise control over the securities’ issuers, each Fund may, from time to time, participate on committees formed by creditors to negotiate with the management of financially troubled issuers of securities held by the Fund. Such participation may subject the relevant Fund to expenses such as legal fees and may deem the Fund an “insider” of the issuer for purposes of the Federal securities laws, and expose the Fund to material non-public information of the issuer, and therefore may restrict the Fund’s ability to purchase or sell a particular security when it might otherwise desire to do so. Participation by a Fund on such committees also may expose the Fund to potential liabilities under the federal bankruptcy laws or other laws governing the rights of creditors and debtors. A Fund will participate on such committees only when the Fund’s subadviser believes that such participation is necessary or desirable to enforce the Fund’s rights as a creditor or to protect the value of securities held by the Fund.
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Payable in Kind (“PIK”) Bonds
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PIK bonds are obligations which provide that the issuer thereof may, at its option, pay interest on such bonds in cash or “in kind”, which means in the form of additional debt securities. Such securities benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract investors who are willing to defer receipt of such cash. The Funds will accrue income on such investments for tax and accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the Funds’ distribution obligations. The market prices of PIK bonds generally are more volatile than the market prices of securities that pay interest periodically, and they are likely to respond to changes in interest rates to a greater degree than would otherwise similar bonds on which regular cash payments of interest are being made.
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Ratings
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The rating or quality of a debt security refers to a rating agency’s assessment of the issuer’s creditworthiness, i.e., its ability to pay principal and interest when due. Higher ratings indicate better credit quality, as rated by independent rating organizations such as Moody’s, S&P or Fitch, which publish their ratings on a regular basis. Appendix A provides a description of the various ratings provided for bonds (including convertible bonds), municipal bonds, and commercial paper.
After a Fund purchases a debt security, the rating of that security may be reduced below the minimum rating acceptable for purchase by the Fund. A subsequent downgrade does not require the sale of the security, but the Fund’s subadviser will consider such an event in determining whether to continue to hold the obligation. To the extent that ratings established by Moody’s or S&P may change as a result of changes in such organizations or their rating systems, a Fund will invest in securities which are deemed by the Fund’s subadviser to be of comparable quality to securities whose current ratings render them eligible for purchase by the Fund.
Credit ratings issued by credit rating agencies evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market-value risk and therefore may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality.
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Sovereign Debt
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Each Fund may invest in “sovereign debt,” which is issued or guaranteed by foreign governments (including countries, provinces and municipalities) or their agencies and instrumentalities. Sovereign debt may trade at a substantial discount from face value. The Funds may hold and trade sovereign debt of foreign countries in appropriate circumstances to participate in debt conversion programs. Emerging-market country sovereign debt involves a higher degree of risk than that of developed markets, is generally lower-quality debt, and is considered speculative in nature due, in part, to the extreme and volatile nature of debt burdens in such countries and because emerging market governments can be relatively unstable. The issuer or governmental authorities that control sovereign-debt repayment (“sovereign debtors”) may be unable or unwilling to repay principal or interest when due in accordance with the terms of the debt. A sovereign debtor’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash-flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the
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sovereign debtor’s policy towards the IMF, and the political constraints to which the sovereign debtor may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies and others abroad to reduce principal and interest arrearage on their debt. The commitment of these third parties to make such disbursements may be conditioned on the sovereign debtor’s implementation of economic reforms or economic performance and the timely service of the debtor’s obligations. The sovereign debtor’s failure to meet these conditions may cause these third parties to cancel their commitments to provide funds to the sovereign debtor, which may further impair the debtor’s ability or willingness to timely service its debts. In certain instances, the Funds may invest in sovereign debt that is in default as to payments of principal or interest. In the event that the Funds hold non-performing sovereign debt, the Funds may incur additional expenses in connection with any restructuring of the issuer’s obligations or in otherwise enforcing their rights thereunder.
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Brady Bonds
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Each Fund may invest a portion of its assets in certain sovereign debt obligations known as “Brady Bonds.” Brady Bonds are issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external indebtedness. The Brady Plan contemplates, among other things, the debtor nation’s adoption of certain economic reforms and the exchange of commercial bank debt for newly issued bonds. In restructuring its external debt under the Brady Plan framework, a debtor nation negotiates with its existing bank lenders as well as the World Bank or the IMF. The World Bank or IMF supports the restructuring by providing funds pursuant to loan agreements or other arrangements that enable the debtor nation to collateralize the new Brady Bonds or to replenish reserves used to reduce outstanding bank debt. Under these loan agreements or other arrangements with the World Bank or IMF, debtor nations have been required to agree to implement certain domestic monetary and fiscal reforms. The Brady Plan sets forth only general guiding principles for economic reform and debt reduction, emphasizing that solutions must be negotiated on a case-by-case basis between debtor nations and their creditors.
Brady Bonds are often viewed as having three or four valuation components: (i) the collateralized repayment of principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the “residual risk”). In light of the residual risk of Brady Bonds and, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds can be viewed as speculative.
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Stand-by Commitments
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Each Fund may purchase securities together with the right to resell them to the seller or a third party at an agreed-upon price or yield within specified periods prior to their maturity dates. Such a right to resell is commonly known as a stand-by commitment, and the aggregate price which a Fund pays for securities with a stand-by commitment may increase the cost, and thereby reduce the yield, of the security. The primary purpose of this practice is to permit the Fund to be as fully invested as practicable in municipal securities while preserving the necessary flexibility and liquidity to meet unanticipated redemptions. Stand-by commitments acquired by a Fund are valued at zero in determining the Fund’s NAV. Stand-by commitments involve certain expenses and risks, including the inability of the issuer of the commitment to pay for the securities at the time the commitment is exercised, non-marketability of the commitment, and differences
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| | | between the maturity of the underlying security and the maturity of the commitment. | | | | |
Strip Bonds
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Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity.
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Tender Option Bonds
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Tender option bonds are relatively long-term bonds that are coupled with the option to tender the securities to a bank, broker-dealer or other financial institution at periodic intervals and receive the face value of the bond. This investment structure is commonly used as a means of enhancing a security’s liquidity.
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Variable and Floating Rate Obligations
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Each Fund may purchase securities having a floating or variable rate of interest. These securities pay interest at rates that are adjusted periodically according to a specific formula, usually with reference to some interest rate index or market interest rate (the “underlying index”). The floating rate tends to decrease the security’s price sensitivity to changes in interest rates. These securities may carry demand features permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less than for fixed-rate obligations.
In order to most effectively use these investments, a Fund’s subadviser must correctly assess probable movements in interest rates. This involves different skills than those used to select most other portfolio securities. If the Fund’s subadviser incorrectly forecasts such movements, the Fund could be adversely affected by the use of variable or floating rate obligations.
The floating and variable rate obligations that the Funds may purchase include variable rate demand securities. Variable rate demand securities are variable rate securities that have demand features entitling the purchaser to resell the securities to the issuer at an amount approximately equal to amortized cost or the principal amount thereof plus accrued interest, which may be more or less than the price that the Fund paid for them. The interest rate on variable rate demand securities also varies either according to some objective standard, such as an index of short-term, tax-exempt rates, or according to rates set by or on behalf of the issuer.
When a Fund purchases a floating or variable rate demand instrument, the Fund’s subadviser will monitor, on an ongoing basis, the ability of the issuer to pay principal and interest on demand. The Fund’s right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument to make payment when due, except when such demand instrument permits same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Funds’ custodian subject to a sub-custodian agreement between the bank and the Funds’ custodian.
The floating and variable rate obligations that the Funds may purchase also include certificates of participation in such obligations purchased from banks. A certificate of participation gives the Fund an undivided interest in the underlying obligations in the proportion that the Fund’s interest bears to the total principal amount of the obligation. Certain certificates of participation may carry a demand
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feature that would permit the holder to tender them back to the issuer prior to maturity.
The income received on certificates of participation in tax-exempt municipal obligations constitutes interest from tax-exempt obligations.
Each Fund will limit its purchases of floating and variable rate obligations to those of the same quality as it otherwise is allowed to purchase. Similar to fixed rate debt instruments, variable and floating rate instruments are subject to changes in value based on changes in prevailing market interest rates or changes in the issuer’s creditworthiness.
A floating or variable rate instrument may be subject to a Fund’s percentage limitation on illiquid securities if there is no reliable trading market for the instrument or if the Fund may not demand payment of the principal amount within seven days. (See “Illiquid and Restricted Securities” in this section of the SAI.)
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Zero and Deferred Coupon Debt Securities
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Each Fund may invest in debt obligations that do not make any interest payments for a specified period of time prior to maturity (“deferred coupon” bonds) or until maturity (“zero coupon” bonds). The nonpayment of interest on a current basis may result from the bond’s having no stated interest rate, in which case the bond pays only principal at maturity and is normally initially issued at a discount from face value. Alternatively, the bond may provide for a stated rate of interest, but provide that such interest is not payable until maturity, in which case the bond may initially be issued at par. The value to the investor of these types of bonds is represented by the economic accretion either of the difference between the purchase price and the nominal principal amount (if no interest is stated to accrue) or of accrued, unpaid interest during the bond’s life or payment deferral period.
Because deferred and zero coupon bonds do not make interest payments for a certain period of time, they are generally purchased by a Fund at a deep discount and their value fluctuates more in response to interest rate changes than does the value of debt obligations that make current interest payments. The degree of fluctuation with interest rate changes is greater when the deferred period is longer. Therefore, when a Fund invests in zero or deferred coupon bonds, there is a risk that the value of the Fund’s shares may decline more as a result of an increase in interest rates than would be the case if the Fund did not invest in such bonds.
Even though zero and deferred coupon bonds may not pay current interest in cash, each Fund is required to accrue interest income on such investments and to distribute such amounts to shareholders. Thus, a Fund would not be able to purchase income-producing securities to the extent cash is used to pay such distributions, and, therefore, the Fund’s current income could be less than it otherwise would have been. Instead of using cash, the Fund might liquidate investments in order to satisfy these distribution requirements.
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Derivative Investments
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Each Fund may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. Each Fund may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives.
Each Fund may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or in pursuit of its investment objective(s) and policies (to
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Equity-linked Derivatives
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Each Fund may invest in equity-linked derivative products, the performance of which is designed to correspond generally to the performance of a specified stock index or “basket” of stocks, or to a single stock. Investments in equity-linked derivatives involve the same risks associated with a direct investment in the types of securities such products are designed to track. There can be no assurance that the trading price of the equity-linked derivatives will equal the underlying value of the securities purchased to replicate a particular investment or that such basket will replicate the investment.
Investments in equity-linked derivatives may constitute investments in other investment companies. (See “Mutual Fund Investing” in this section of the SAI for information regarding the implications of a Fund investing in other investment companies.)
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Eurodollar Instruments
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The Funds may invest in Eurodollar instruments. Eurodollar instruments are dollar-denominated certificates of deposit and time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might use Eurodollar instruments to hedge against changes in interest rates or to enhance returns.
Eurodollar obligations are subject to the same risks that pertain to domestic issuers, most notably income risk (and, to a lesser extent, credit risk, market risk, and liquidity risk). Additionally, Eurodollar obligations are subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across its borders. Other risks include adverse political and economic developments, the extent and quality of government regulation of financial markets and institutions, the imposition of foreign withholding taxes, and expropriation or nationalization of foreign issuers. However, Eurodollar obligations will undergo the same type of credit analysis as domestic issuers in which a Fund invests.
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| | The Tax-Exempt Bond Fund may not invest in Eurodollar instruments. | |
Foreign Currency Forward Contracts, Futures and Options
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Each Fund may engage in certain derivative foreign currency exchange and option transactions involving investment risks and transaction costs to which the Fund would not be subject absent the use of these strategies. If a Fund’s subadviser’s predictions of movements in the direction of securities prices or currency exchange rates are inaccurate, the adverse consequences to the Fund may leave the Fund in a worse position than if it had not used such strategies. Risks inherent in the use of option and foreign currency forward and futures contracts include: (1) dependence on the Fund’s subadviser’s ability to correctly predict movements in the direction of securities prices and currency exchange rates; (2) imperfect correlation between the price of options and futures contracts and movements in the prices of the securities or currencies being hedged; (3) the fact that the skills needed to use these strategies are different from those needed to select portfolio securities; (4) the possible absence of a liquid secondary market for any particular instrument at any time; and (5) the possible need to defer closing out certain hedged positions to avoid adverse tax consequences. The Fund’s ability to enter into futures contracts is also limited by the requirements of the Code for qualification as a regulated investment company. (See the “Dividends, Distributions and Taxes” section of this SAI.)
A Fund may engage in currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. In addition, a Fund may write covered put and call options on foreign currencies for the purpose of increasing its return.
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| | The Tax-Exempt Bond Fund may not invest in foreign currency forward contracts, futures and options. | |
Investment Technique
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A Fund may enter into contracts to purchase or sell foreign currencies at a future date (“forward contracts”) and purchase and sell foreign currency futures contracts. For certain hedging purposes, the Fund may also purchase exchange-listed and over-the-counter put and call options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the Fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the Fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the Fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the Fund the right to purchase the currency at the exercise price until the expiration of the option.
When engaging in position hedging, a Fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the values of currency for securities which the Fund expects to purchase, when the Fund holds cash or short-term investments). In connection with position hedging, the Fund may purchase put or call options on foreign currency and on foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. (A Fund may also purchase or sell foreign currency on a spot basis, as discussed in “Foreign Currency Transactions” under “Foreign Investing” in this section of the SAI.)
The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the dates the currency exchange transactions are entered into and the dates they mature. It is also impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the Fund is obligated to deliver.
Hedging techniques do not eliminate fluctuations in the underlying prices of the securities which a Fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they also tend to limit any potential gain which might result from the increase in value of such currency.
A Fund may seek to increase its return or to offset some of the costs of hedging against fluctuations in currency exchange rates by writing covered put options and covered call options on foreign currencies. In that case, the Fund receives a premium from writing a put or call option, which increases the Fund’s current return if the option expires unexercised or is closed out at a net profit. A Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written.
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A Fund’s currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. A Fund’s subadviser will engage in such “cross hedging” activities when it believes that such transactions provide significant hedging opportunities for the Fund. Cross hedging transactions by a Fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.
Foreign currency forward contracts, futures and options may be traded on foreign exchanges. Such transactions may not be regulated as effectively as similar transactions in the United States; may not involve a clearing mechanism and related guarantees; and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political, legal and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii) delays in the relevant Fund’s ability to act upon economic events occurring in foreign markets during non-business hours in the United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (v) lesser trading volume.
The types of derivative foreign currency exchange transactions most commonly employed by the Funds are discussed below, although each Fund is also permitted to engage in other similar transactions to the extent consistent with the Fund’s investment limitations and restrictions.
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Foreign Currency Forward Contracts
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A foreign currency forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (“term”) from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders (usually large commercial banks) and their customers.
A Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily in an amount not less than the value of the Fund’s total assets committed to forward foreign currency exchange contracts entered into for the purchase of a foreign currency. If the value of the securities specifically designated declines, additional cash or securities will be added so that the specifically designated amount is not less than the amount of the Fund’s commitments with respect to such contracts.
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Foreign Currency Futures Transactions
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Each Fund may use foreign currency futures contracts and options on such futures contracts. Through the purchase or sale of such contracts, a Fund may be able to achieve many of the same objectives attainable through the use of foreign currency forward contracts, but more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures contracts and options on foreign currency futures contracts are standardized as to amount and delivery period and are traded on boards of trade and commodities exchanges. It is anticipated that such contracts may provide greater liquidity and lower cost than forward foreign currency exchange contracts.
Purchasers and sellers of foreign currency futures contracts are subject to the same risks that apply to the buying and selling of futures generally. In addition, there are risks associated with foreign currency
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futures contracts similar to those associated with options on foreign currencies. (See “Foreign Currency Options” and “Futures Contracts and Options on Futures Contracts”, each in this sub-section of the SAI.) The Fund must accept or make delivery of the underlying foreign currency, through banking arrangements, in accordance with any U.S. or foreign restrictions or regulations regarding the maintenance of foreign banking arrangements by U.S. residents and may be required to pay any fees, taxes or charges associated with such delivery which are assessed in the issuing country.
To the extent required to comply with SEC Release No. IC-10666, when entering into a futures contract or an option transaction, a Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily equal to the net amount of the Fund’s obligation. For foreign currency futures transactions, the prescribed amount will generally be the daily value of the futures contract, marked to market.
Futures contracts are designed by boards of trade which are designated “contracts markets” by the CFTC. Futures contracts trade on contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee performance of the contracts. As of the date of this SAI, the Funds may invest in futures contracts under specified conditions without being regulated as commodity pools. However, under recently amended CFTC rules the Funds’ ability to maintain the exclusions/exemptions from the definition of commodity pool may be limited. (See “Commodity Interests” in this section of the SAI.)
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Foreign Currency Options
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A foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise price at a specified date or during the option period. A call option gives its owner the right, but not the obligation, to buy the currency, while a put option gives its owner the right, but not the obligation, to sell the currency. The option seller (writer) is obligated to fulfill the terms of the option sold if it is exercised. However, either seller or buyer may close its position during the option period for such options any time prior to expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put rises in value if the underlying currency depreciates. While purchasing a foreign currency option can protect a Fund against an adverse movement in the value of a foreign currency, it does not limit the gain which might result from a favorable movement in the value of such currency. For example, if the Fund were holding securities denominated in an appreciating foreign currency and had purchased a foreign currency put to hedge against a decline in the value of the currency, it would not have to exercise its put. Similarly, if the Fund had entered into a contract to purchase a security denominated in a foreign currency and had purchased a foreign currency call to hedge against a rise in the value of the currency but instead the currency had depreciated in value between the date of purchase and the settlement date, the Fund would not have to exercise its call but could acquire in the spot market the amount of foreign currency needed for settlement.
The value of a foreign currency option depends upon the value of the underlying currency relative to the other referenced currency. As a result, the price of the option position may vary with changes in the value of either or both currencies and have no relationship to the investment merits of a foreign security, including foreign securities held in a “hedged” investment portfolio. Because foreign currency transactions occurring in the interbank market involve substantially
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larger amounts than those that may be involved in the use of foreign currency options, the Funds may be disadvantaged by having to deal in an odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.
As in the case of other kinds of options, the use of foreign currency options constitutes only a partial hedge, and a Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on a foreign currency may not necessarily constitute an effective hedge against fluctuations in exchange rates and, in the event of rate movements adverse to the Fund’s position, the Fund may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies written or purchased by a Fund may be traded on U.S. or foreign exchanges or over the counter. There is no systematic reporting of last sale information for foreign currencies traded over the counter or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information available is generally representative of very large transactions in the interbank market and thus may not reflect relatively smaller transactions (i.e., less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that the options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that are not reflected in the options market.
For additional information about options transactions, see “Options” under “Derivative Investments” in this section of the SAI.
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Foreign Currency Warrants
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Foreign currency warrants such as currency exchange warrants are warrants that entitle the holder to receive from the issuer an amount of cash (generally, for warrants issued in the United States, in U.S. dollars) that is calculated pursuant to a predetermined formula and based on the exchange rate between two specified currencies as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time.
Foreign currency warrants may be used to reduce the currency exchange risk assumed by purchasers of a security by, for example, providing for a supplemental payment in the event the U.S. dollar depreciates against the value of a major foreign currency such as the Japanese Yen or Euro. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (e.g., unless the U.S. dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed).
Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. Upon exercise of warrants, there may be a delay between the time the holder gives instructions to exercise and the time the exchange rate relating to exercise is determined, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be
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suspended permanently, which would result in the loss of any remaining “time value” of the warrants (i.e., the difference between the current market value and the exercise value of the warrants), and, if the warrants were “out-of-the-money,” in a total loss of the purchase price of the warrants.
Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the OCC. Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants could be considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.
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Performance Indexed Paper
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Performance indexed paper is commercial paper the yield of which is linked to certain currency exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the designated currencies as of or about the time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.
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Principal Exchange Rate Linked Securities (“PERLS”)
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PERLS are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the particular currencies at or about that time. The return on “standard” principal exchange rate linked securities is enhanced if the currency to which the security is linked appreciates against the base currency, and is adversely affected by increases in the exchange value of the base currency. “Reverse” PERLS are like the “standard” securities, except that their return is enhanced by increases in the value of the base currency and adversely impacted by increases in the value of other currency. Interest payments on the securities are generally made at rates that reflect the degree of currency risk assumed or given up by the purchaser of the notes (i.e., at relatively higher interest rates if the purchaser has assumed some of the currency exchange risk, or relatively lower interest rates if the issuer has assumed some of the currency exchange risk, based on the expectations of the current market). PERLS may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.
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Futures Contracts and Options on Futures Contracts
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Each Fund may use interest rate, foreign currency, dividend, volatility or index futures contracts. An interest rate, foreign currency, dividend, volatility or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, foreign currency, dividend basket or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value
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| | Each of EM Opportunities Fund, Low Duration Income Fund and Tax-Exempt Bond Fund will sell index futures only if the amount resulting from the multiplication of the then-current level of the indices upon which its futures | |
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of certain specified securities, no physical delivery of these securities is made. A public market exists in futures contracts covering several indexes as well as a number of financial instruments and foreign currencies, and it is expected that other futures contracts will be developed and traded in the future. Interest rate and volatility futures contracts currently are traded in the United States primarily on the floors of the Chicago Board of Trade and the International Monetary Market of the Chicago Mercantile Exchange. Interest rate futures also are traded on foreign exchanges such as the London International Financial Futures Exchange and the Singapore International Monetary Exchange. Interest rate futures also are traded on foreign exchanges such as the London International Financial Futures Exchange and the Singapore International Monetary Exchange. Volatility futures also are traded on foreign exchanges such as Eurex. Dividend futures are also traded on foreign exchanges such as Eurex, NYSE Euronext Liffe, London Stock Exchange and the Singapore International Monetary Exchange.
A Fund may purchase and write call and put options on futures. Futures options possess many of the same characteristics as options on securities and indexes discussed above. A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true.
Except as otherwise described in this SAI, the Funds will limit their use of futures contracts and futures options to hedging transactions and in an attempt to increase total return, in accordance with Federal regulations. The costs of, and possible losses incurred from, futures contracts and options thereon may reduce the Fund’s current income and involve a loss of principal. Any incremental return earned by the Fund resulting from these transactions would be expected to offset anticipated losses or a portion thereof.
The Funds will only enter into futures contracts and futures options which are standardized and traded on a U.S. or foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of cash or U.S. Government securities (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. The Funds expect to earn interest income on their initial margin deposits. A futures contract held by a Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily NAV, the Fund will mark to market its open futures positions.
The Funds are also required to deposit and maintain margin with respect to put and call options on futures contracts written by them. Such margin deposits will vary depending on the nature of the
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| | contracts which would be outstanding do not exceed one-third of the value of the Fund’s net assets. Also, these Funds may not purchase or sell index futures if, immediately thereafter, the sum of the premiums paid for unexpired options on futures contracts and margin deposits on the Fund’s outstanding futures contracts would exceed 5% of the market value of the Fund’s total assets. Each of EM Opportunities Fund, Low Duration Income Fund and Tax-Exempt Bond Fund is limited to investing no more than 25% of its net assets in index futures and options on index futures. These Funds may not purchase or sell futures contracts or purchase options on futures contracts if, immediately thereafter, more than one-third of the applicable Fund’s net assets would be hedged, or the sum of the amount of margin deposits on the Fund’s existing futures contracts and premiums paid for options would exceed 5% of the value of the Fund’s total assets. | |
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underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the relevant Fund.
To the extent required to comply with SEC Release No. IC-10666, when entering into a futures contract or an option on a futures contract, a Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily equal to the prescribed amount. Generally, for cash-settled futures contracts the prescribed amount is the net amount of the Fund’s obligation, and for non-cash-settled futures contracts the prescribed about is the notional value of the reference obligation.
Futures contracts are designed by boards of trade which are designated “contracts markets” by the CFTC. Futures contracts trade on contracts markets in a manner that is similar to the way a stock trades on a stock exchange and the boards of trade, through their clearing corporations, guarantee performance of the contracts. A Fund’s ability to claim an exclusion or exemption from the definition of a commodity pool may be limited when the Fund invests in futures contracts. (See “Commodity Interests” in this SAI.)
The requirements of the Code for qualification as a regulated investment company also may limit the extent to which a Fund may enter into futures, futures options or forward contracts. (See the “Dividends, Distributions and Taxes” section of this SAI.)
Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sales price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs must also be included in these calculations.
Positions in futures contracts and related options may be closed out only on an exchange which provides a secondary market for such contracts or options. The Fund will enter into an option or futures position only if there appears to be a liquid secondary market. However, there can be no assurance that a liquid secondary market will exist for any particular option or futures contract at any specific time. Thus, it may not be possible to close out a futures or related option position. In the case of a futures position, in the event of adverse price movements the Fund would continue to be required to make daily margin payments. In this situation, if the Fund has insufficient cash to meet daily margin requirements it may have to sell portfolio securities to meet its margin obligations at a time when it may be disadvantageous to do so. In addition, the Fund may be required to take or make delivery of the securities underlying the futures contracts it holds. The inability to close out futures positions also could have an adverse impact on the Fund’s ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as a hedging device. While hedging can provide protection against an adverse movement in market prices, it can also limit a hedger’s opportunity to benefit fully from a favorable market movement. In addition, investing in futures contracts and options on futures contracts will cause the Fund to incur additional brokerage commissions and may cause an increase in the Fund’s portfolio turnover rate.
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The successful use of futures contracts and related options may also depend on the ability of the relevant Fund’s subadviser to forecast correctly the direction and extent of market movements, interest rates and other market factors within a given time frame. To the extent market prices remain stable during the period a futures contract or option is held by a Fund or such prices move in a direction opposite to that anticipated, the Fund may realize a loss on the transaction which is not offset by an increase in the value of its portfolio securities. Options and futures may also fail as a hedging technique in cases where the movements of the securities underlying the options and futures do not follow the price movements of the hedged portfolio securities. As a result, the Fund’s total return for the period may be less than if it had not engaged in the hedging transaction. The loss from investing in futures transactions is potentially unlimited.
Utilization of futures contracts by a Fund involves the risk of imperfect correlation in movements in the price of futures contracts and movements in the price of the securities which are being hedged. If the price of the futures contract moves more or less than the price of the securities being hedged, the Fund will experience a gain or loss which will not be completely offset by movements in the price of the securities. It is possible that, where a Fund has sold futures contracts to hedge its portfolio against a decline in the market, the market may advance and the value of securities held in the Fund’s portfolio may decline. If this occurred, the Fund would lose money on the futures contract and would also experience a decline in value in its portfolio securities. Where futures are purchased to hedge against a possible increase in the prices of securities before the Fund is able to invest its cash (or cash equivalents) in securities (or options) in an orderly fashion, it is possible that the market may decline; if the Fund then determines not to invest in securities (or options) at that time because of concern as to possible further market decline or for other reasons, the Fund will realize a loss on the futures that would not be offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in the futures market elect to close out their contracts through off-setting transactions rather than to meet margin deposit requirements. In such case, distortions in the normal relationship between the cash and futures markets could result. Price distortions could also result if investors in futures contracts opt to make or take delivery of the underlying securities rather than to engage in closing transactions because such action would reduce the liquidity of the futures market. In addition, from the point of view of speculators, because the deposit requirements in the futures markets are less onerous than margin requirements in the cash market, increased participation by speculators in the futures market could cause temporary price distortions. Due to the possibility of price distortions in the futures market and because of the imperfect correlation between movements in the prices of securities and movements in the prices of futures contracts, a correct forecast of market trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or call options on futures contracts involves less potential risk for the Fund because the maximum amount at risk is the premium paid for the options plus transaction costs. However, there may be circumstances when the purchase of an option on a futures contract would result in a loss to the Fund while the purchase or sale of the futures contract would not have resulted in a loss, such as when there is no movement in the price of the underlying securities.
For additional information about options transactions, see “Options” under “Derivative Investments” in this section of the SAI.
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Mortgage-Related and Other Asset-Backed Securities
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Each Fund may purchase mortgage-related and other asset-backed securities, which collectively are securities backed by mortgages, installment contracts, credit card receivables or other financial assets. Asset-backed securities represent interests in “pools” of assets in which payments of both interest and principal on the securities are made periodically, thus in effect “passing through” such payments made by the individual borrowers on the assets that underlie the securities, net of any fees paid to the issuer or guarantor of the securities. The average life of asset-backed securities varies with the maturities of the underlying instruments, and the average life of a mortgage-backed instrument, in particular, is likely to be less than the original maturity of the mortgage pools underlying the securities as a result of mortgage prepayments, where applicable. For this and other reasons, an asset-backed security’s stated maturity may be different, and the security’s total return may be difficult to predict precisely.
If an asset-backed security is purchased at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity. Conversely, if an asset-backed security is purchased at a discount, faster than expected prepayments will increase yield to maturity, while slower than expected prepayments will decrease yield to maturity.
Prepayments of principal of mortgage-related securities by mortgagors or mortgage foreclosures affect the average life of the mortgage-related securities in the Fund’s portfolio. Mortgage prepayments are affected by the level of interest rates and other factors, including general economic conditions and the underlying location and age of the mortgage. In periods of rising interest rates, the prepayment rate tends to decrease, lengthening the average life of a pool of mortgage-related securities. The longer the remaining maturity of a security the greater the effect of interest rate changes will be. Changes in the ability of an issuer to make payments of interest and principal and in the market’s perception of its creditworthiness also affect the market value of that issuer’s debt securities.
In periods of falling interest rates, the prepayment rate tends to increase, shortening the average life of a pool. Because prepayments of principal generally occur when interest rates are declining, it is likely that the Fund, to the extent that it retains the same percentage of debt securities, may have to reinvest the proceeds of prepayments at lower interest rates than those of its previous investments. If this occurs, that Fund’s yield will correspondingly decline. Thus, mortgage-related securities may have less potential for capital appreciation in periods of falling interest rates than other fixed income securities of comparable duration, although they may have a comparable risk of decline in market value in periods of rising interest rates. To the extent that the Fund purchases mortgage-related securities at a premium, unscheduled prepayments, which are made at par, result in a loss equal to any unamortized premium.
Duration is one of the fundamental tools used by a Fund's subadviser in managing interest rate risks including prepayment risks. Traditionally, a debt security’s “term to maturity” characterizes a security’s sensitivity to changes in interest rates. “Term to maturity,” however, measures only the time until a debt security provides its final payment, taking no account of prematurity payments. Most debt securities provide interest (“coupon”) payments in addition to a final (“par”) payment at maturity, and some securities have call provisions allowing the issuer to repay the instrument in full before maturity date, each of which affect the security’s response to interest rate changes. “Duration” therefore is generally considered a more precise measure of interest rate risk than “term to maturity.” Determining duration may
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| | The Tax-Exempt Bond Fund may not invest in mortgage-backed securities. | |
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involve a subadviser’s estimates of future economic parameters, which may vary from actual future values. Generally, fixed income securities with longer effective durations are more responsive to interest rate fluctuations than those with shorter effective durations. For example, if interest rates rise by 1%, the value of securities having an effective duration of three years will generally decrease by approximately 3%.
Descriptions of some of the different types of mortgage-related and other asset-backed securities most commonly acquired by the Funds are provided below. In addition to those shown, other types of mortgage-related and asset-backed investments are, or may become, available for investment by the Funds.
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Collateralized Mortgage Obligations (“CMOs”)
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CMOs are hybrid instruments with characteristics of both mortgage-backed and mortgage pass-through securities. Interest and prepaid principal on a CMO are paid, in most cases, monthly. CMOs may be collateralized by whole mortgage loans but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by entities such as GNMA, FHLMC, or FNMA, and their income streams.
CMOs are typically structured in multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes typically receive principal only after the first class has been retired. An investor may be partially guarded against a sooner than desired return of principal because of the sequential payments.
FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates and are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. The amount of principal payable on each monthly payment date is determined in accordance with FHLMC’s mandatory sinking fund schedule. Sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payments of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC’s minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking-fund payments. Because of the “pass-through” nature of all principal payments received on the collateral pool in excess of FHLMC’s minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date. If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC’s minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.
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CMO Residuals
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CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans. As described above, the cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The “residual” in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the
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related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and, in particular, the prepayment experience on the mortgage assets. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. In certain circumstances a Fund may fail to recoup fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market currently may not have the liquidity of other more established securities trading in other markets. CMO residuals may be subject to certain restrictions on transferability, may be deemed illiquid and therefore subject to the Funds’ limitations on investment in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.)
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Mortgage Pass-through Securities
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Mortgage pass-through securities are interests in pools of mortgage loans, assembled and issued by various governmental, government-related, and private organizations. Unlike other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates, these securities provide a monthly payment consisting of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs. “Modified pass-through” securities (such as securities issued by GNMA) entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
The principal governmental guarantor of U.S. mortgage-related securities is GNMA. GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration insured or Veterans Administration guaranteed mortgages. Government-related guarantors whose obligations are not backed by the full faith and credit of the United States Government include FNMA and FHLMC. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. FHLMC issues Participation Certificates that represent interests in conventional mortgages from FHLMC’s national portfolio. FNMA and FHLMC guarantee the timely payment of interest and ultimate collection of principal on securities they issue, but the securities they issue are neither issued nor guaranteed by the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/ or servicers of the underlying mortgage loans as well as the
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guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments for such securities. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Fund’s investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. A Fund may buy mortgage-related securities without insurance or guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, the Fund’s subadviser determines that the securities meet the Fund’s quality standards. Securities issued by certain private organizations may not be readily marketable and may therefore be subject to the Funds’ limitations on investments in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.)
Mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are not subject to the Funds’ industry concentration restrictions set forth in the “Investment Restrictions” section of this SAI by virtue of the exclusion from the test available to all U.S. Government securities. The Funds will take the position that privately-issued, mortgage-related securities, and other asset-backed securities, do not represent interests in any particular “industry” or group of industries. The assets underlying such securities may be represented by a portfolio of first lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in turn be insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs. In the case of private issue mortgage-related securities whose underlying assets are neither U.S. Government securities nor U.S. Government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of principal and interest on the underlying mortgages.
It is possible that the availability and the marketability (that is, liquidity) of the securities discussed in this section could be adversely affected by the actions of the U.S. Government to tighten the availability of its credit. On September 7, 2008, the FHFA, an agency of the U.S. Government, placed FNMA and FHLMC into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate FNMA and FHLMC until they are stabilized. The conservatorship is still in effect as of the date of this SAI and has no specified termination date. There can be no assurance as to when or how the conservatorship will be terminated or whether FNMA or FHLMC will continue to exist following the conservatorship or what their respective business structures will be during or following the conservatorship. FHFA, as conservator, has the power to repudiate any contract entered into by FNMA or FHLMC prior to its appointment if it determines that performance of the contract is burdensome and repudiation of the contract promotes the orderly administration of
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FNMA’s or FHLMC’s affairs. Furthermore, FHFA has the right to transfer or sell any asset or liability of FNMA or FHLMC without any approval, assignment or consent. If FHFA were to transfer any such guarantee obligation to another party, holders of FNMA or FHLMC mortgage-backed securities would have to rely on that party for satisfaction of the guarantee obligation and would be exposed to the credit risk of that party.
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Other Asset-Backed Securities
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Through trusts and other special purpose entities, various types of securities based on financial assets other than mortgage loans are increasingly available, in both pass-through structures similar to mortgage pass-through securities described above and in other structures more like CMOs. As with mortgage-related securities, these asset-backed securities are often backed by a pool of financial assets representing the obligations of a number of different parties. They often include credit-enhancement features similar to mortgage-related securities.
Financial assets on which these securities are based include automobile receivables; credit card receivables; loans to finance boats, recreational vehicles, and mobile homes; computer, copier, railcar, and medical equipment leases; and trade, healthcare, and franchise receivables. In general, the obligations supporting these asset-backed securities are of shorter maturities than mortgage loans and are less likely to experience substantial prepayments. However, obligations such as credit card receivables are generally unsecured and the obligors are often entitled to protection under a number of consumer credit laws granting, among other things, rights to set off certain amounts owed on the credit cards, thus reducing the balance due. Other obligations that are secured, such as automobile receivables, may present issuers with difficulties in perfecting and executing on the security interests, particularly where the issuer allows the servicers of the receivables to retain possession of the underlying obligations, thus increasing the risk that recoveries on defaulted obligations may not be adequate to support payments on the securities.
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Stripped Mortgage-backed Securities (“SMBS”)
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SMBS are derivative multi-class mortgage securities. They may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on an IO class security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully its initial investment in these securities even if the security is in one of the highest rating categories. The market value of the PO class generally is unusually volatile in response to changes in interest rates.
Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed illiquid and therefore subject to the
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Funds’ limitations on investment in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.)
Each Fund may invest in other mortgage-related securities with features similar to those described above, to the extent consistent with the relevant Fund’s investment objectives and policies.
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Options
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Each Fund may purchase or sell put and call options on securities, indices and other financial instruments. Options may relate to particular securities, foreign and domestic securities indices, financial instruments, volatility, credit default, foreign currencies or the yield differential between two securities. Such options may or may not be listed on a domestic or foreign securities exchange and may or may not be issued by the OCC.
A call option for a particular security gives the purchaser of the option the right to buy, and a writer the obligation to sell, the underlying security at the stated exercise price before the expiration of the option, regardless of the market price of the security. A premium is paid to the writer by the purchaser in consideration for undertaking the obligation under the option contract. A put option for a particular security gives the purchaser the right to sell and a writer the obligation to buy the security at the stated exercise price before the expiration date of the option, regardless of the market price of the security.
To the extent required to comply with SEC Release No. IC-10666, options written by a Fund will be covered and will remain covered as long as the Fund is obligated as a writer. A call option is “covered” if the Fund owns the underlying security or its equivalent covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration if such cash is segregated) upon conversion or exchange of other securities held in its portfolio. A call option is also covered if the Fund holds on a share-for-share or equal principal amount basis a call on the same security as the call written where the exercise price of the call held is equal to or less than the exercise price of the call written or greater than the exercise price of the call written if appropriate liquid assets representing the difference are segregated by the Fund. A put option is “covered” if the Fund maintains appropriate liquid securities with a value equal to the exercise price, or owns on a share-for-share or equal principal amount basis a put on the same security as the put written where the exercise price of the put held is equal to or greater than the exercise price of the put written.
A Fund’s obligation to sell an instrument subject to a covered call option written by it, or to purchase an instrument subject to a secured put option written by it, may be terminated before the expiration of the option by the Fund’s execution of a closing purchase transaction. This means that a Fund buys an option of the same series (i.e., same underlying instrument, exercise price and expiration date) as the option previously written. Such a purchase does not result in the ownership of an option. A closing purchase transaction will ordinarily be effected to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. The cost of such a closing purchase plus related transaction costs may be greater than the premium received upon the original option, in which event the Fund will experience a loss. There is no assurance that a liquid secondary market will exist for any particular option. A Fund that has written an option and is unable to effect a closing purchase transaction will not be able to sell the underlying instrument (in the case of a covered call option) or liquidate the segregated assets (in the case of a secured put option) until the option expires or the
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| | Options written by the Low Volatility Fund will not be required to be covered as described herein, except to the extent required to comply with SEC Release No. IC-10666. | |
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its obligation to pay the premium at the termination of the option. Conversely, where a Fund purchases a reset option, it could be required to pay a higher premium than would have been the case at the initiation of the option.
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Swaptions
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A Fund may enter into swaption contracts, which give the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. Over-the-counter swaptions, although providing greater flexibility, may involve greater credit risk than exchange-traded options as they are not backed by the clearing organization of the exchanges where they are traded, and as such, there is a risk that the seller will not settle as agreed. A Fund’s financial liability associated with swaptions is linked to the marked-to-market value of the notional underlying investments. Purchased swaption contracts are exposed to a maximum loss equal to the price paid for the option/swaption (the premium) and no further liability. Written swaptions, however, give the right of potential exercise to a third party, and the maximum loss to the Fund in the case of an uncovered swaption is unlimited.
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Swap Agreements
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Each Fund may enter into swap agreements on, among other things, interest rates, indices, securities and currency exchange rates. A Fund’s subadviser may use swaps in an attempt to obtain for the Fund a particular desired return at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods typically ranging from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index. The “notional amount” of the swap agreement is only a fictive basis on which to calculate the obligations the parties to a swap agreement have agreed to exchange. A Fund’s obligations (or rights) under a swap agreement will generally be equal only to the amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). A Fund’s obligations under a swap agreement will be accrued daily on the Fund’s accounting records (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by specifically designating on the accounting records of the Fund liquid assets to avoid leveraging of the Fund’s portfolio.
Because swap agreements are two-party contracts and may have terms of greater than seven days, they may be considered to be illiquid and therefore subject to the Funds’ limitations on investment in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.) Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A Fund’s subadviser will cause the Fund to enter into swap agreements only with counterparties that would be eligible for consideration as repurchase agreement counterparties under the Funds’ repurchase agreement guidelines. (See “Repurchase Agreements” in this section of the SAI.) Certain restrictions imposed on the Funds by the Code may limit the Funds’ ability to use swap agreements. (See the “Dividends, Distributions and Taxes” section of this SAI.) The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential
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government regulation, could adversely affect a Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Certain swap agreements are exempt from most provisions of the CEA and, therefore, are not regulated as futures or commodity option transactions under the CEA, pursuant to regulations of the CFTC. To qualify for this exemption, a swap agreement must be entered into by eligible participants and must meet certain conditions (each pursuant to the CEA and regulations of the CFTC). However, recent CFTC rule amendments dictate that certain swap agreements be considered commodity interests for purposes of the CEA. (See “Commodity Interests” in this section of the SAI for additional information regarding the implications of investments being considered commodity interests under the CEA.)
Recently, the SEC and the CFTC have developed rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act to create a new, comprehensive regulatory framework for swap transactions. Under the new regulations, certain swap transactions will be required to be executed on a regulated trading platform and cleared through a derivatives clearing organization. Additionally, the new regulations impose other requirements on the parties entering into swap transactions, including requirements relating to posting margin, and reporting and documenting swap transactions. A Fund engaging in swap transactions may incur additional expenses as a result of these new regulatory requirements. The Adviser is continuing to monitor the implementation of the new regulations and to assess their impact on the Funds.
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Credit Default Swap Agreements
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Each Fund may enter into credit default swap agreements. A credit default swap is a bilateral financial contract in which one party (the protection buyer) pays a periodic fee in return for a contingent payment by the protection seller following a credit event of a reference issuer. The protection buyer must either sell particular obligations issued by the reference issuer for its par value (or some other designated reference or strike price) when a credit event occurs or receive a cash settlement based on the difference between the market price and such reference price. A credit event is commonly defined as bankruptcy, insolvency, receivership, material adverse restructuring of debt, or failure to meet payment obligations when due. A Fund may be either the buyer or seller in the transaction. If a Fund is a buyer and no event of default occurs, the Fund loses its investment and recovers nothing; however, if an event of default occurs, the Fund receives full notional value for a reference obligation that may have little or no value. As a seller, a Fund receives a periodic fee throughout the term of the contract, provided there is no default event; if an event of default occurs, the Fund must pay the buyer the full notional value of the reference obligation. The value of the reference obligation received by the Fund as a seller, coupled with the periodic payments previously received, may be less than the full notional value the Fund pays to the buyer, resulting in a loss of value to the Fund.
As with other swaps, when a Fund enters into a credit default swap agreement, to the extent required by applicable law and regulation the Fund will specifically designate on its accounting records any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily, equal to the Fund’s net exposure under the swap (the “Segregated Assets”). Generally, the minimum cover amount for a swap agreement is the amount owed by the Fund, if any, on a daily mark-to-market basis. With respect to swap contracts that provide for the netting of payments, the net amount of the excess, if any, of the Fund’s obligations over its entitlements with respect to each swap contract will be accrued on a daily basis and an amount of Segregated Assets
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having an aggregate market value at least equal to the accrued excess will be maintained to cover the transactions in accordance with SEC positions. With respect to swap contracts that do not provide for the netting of payments by the counterparties, the full notional amount for which the Fund is obligated under the swap contract with respect to each swap contract will be accrued on a daily basis and an amount of Segregated Assets having an aggregate market value at least equal to the accrued full notional value will be maintained to cover the transactions in accordance with SEC positions. When the Fund sells protection on an individual credit default swap, upon a credit event, the Fund may be obligated to pay the cash equivalent value of the asset. Therefore, the cover amount will be the notional value of the underlying credit. With regard to selling protection on an index (CDX), as a practical matter, the Fund would not be required to pay the full notional amount of the index; therefore, only the amount owed by the Fund, if any, on a daily mark-to-market basis is required as cover.
Credit default swaps involve greater risks than if the Fund had invested in the reference obligation directly. In addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risks. A Fund will enter into swap agreements only with counterparties deemed creditworthy by the Fund’s subadviser.
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Dividend Swap Agreements
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A dividend swap agreement is a financial instrument where two parties contract to exchange a set of future cash flows at set dates in the future. One party agrees to pay the other the future dividend flow on a stock or basket of stocks in an index, in return for which the other party gives the first call options. Dividend swaps generally are traded over the counter rather than on an exchange.
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Inflation Swap Agreements
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Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (e.g., the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), while the other pays a compounded fixed rate. Inflation swap agreements may be used by a Fund to hedge the inflation risk associated with non-inflation indexed investments, thereby creating “synthetic” inflation-indexed investments. One factor that may lead to changes in the values of inflation swap agreements is a change in real interest rates, which are tied to the relationship between nominal interest rates and the rate of inflation. If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, which may lead to a decrease in value of an inflation swap agreement.
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Total Return Swap Agreements
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“Total return swap” is the generic name for any non-traditional swap where one party agrees to pay the other the “total return” of a defined underlying asset, usually in return for receiving a stream of cash flows based upon an agreed rate. A total return swap may be applied to any underlying asset but is most commonly used with equity indices, single stocks, bonds and defined portfolios of loans and mortgages. A total return swap is a mechanism for the user to accept the economic benefits of asset ownership without utilizing the balance sheet. The other leg of the swap, which is often LIBOR, is spread to reflect the non-balance sheet nature of the product. Total return swaps can be designed with any underlying asset agreed between the two parties. No notional amounts are exchanged with total return swaps.
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Variance and Correlation Swap Agreements
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Variance swap agreements are contracts in which two parties agree to exchange cash payments based on the difference between the stated level of variance and the actual variance realized on an underlying asset or index. “Actual variance” as used here is defined as the sum of the square of the returns on the reference asset or index
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(which in effect is a measure of its “volatility”) over the length of the contract term. In other words, the parties to a variance swap can be said to exchange actual volatility for a contractually stated rate of volatility. Correlation swap agreements are contracts in which two parties agree to exchange cash payments based on the differences between the stated and the actual correlation realized on the underlying equity securities within a given equity index. “Correlation” as used here is defined as the weighted average of the correlations between the daily returns of each pair of securities within a given equity index. If two assets are said to be closely correlated, it means that their daily returns vary in similar proportions or along similar trajectories. A Fund may enter into variance or correlation swaps in an attempt to hedge equity market risk or adjust exposure to the equity markets.
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Equity Securities
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The Funds may invest in equity securities. Equity securities include common stocks, preferred stocks and preference stocks; securities such as bonds, warrants or rights that are convertible into stocks; and depositary receipts for those securities.
Common stockholders are the owners of the company issuing the stock and, accordingly, usually have the right to vote on various corporate governance matters such as mergers. They are not creditors of the company, but rather, in the event of liquidation of the company, would be entitled to their pro rata shares of the company’s assets after creditors (including fixed income security holders) and, if applicable, preferred stockholders are paid. Preferred stock is a class of stock having a preference over common stock as to dividends or upon liquidation. A preferred stockholder is a shareholder in the company and not a creditor of the company as is a holder of the company’s fixed income securities. Dividends paid to common and preferred stockholders are distributions of the earnings or other surplus of the company and not interest payments, which are expenses of the company. Equity securities owned by the Fund may be traded in the over-the-counter market or on a securities exchange and may not be traded every day or in the volume typical of securities traded on a major U.S. national securities exchange. As a result, disposition by the Fund of a portfolio security to meet redemptions by shareholders or otherwise may require the Fund to sell the security at less than the reported value of the security, to sell during periods when disposition is not desirable, or to make many small sales over a lengthy period of time. The market value of all securities, including equity securities, is based upon the market’s perception of value and not necessarily the book value of an issuer or other objective measure of a company’s worth.
Stock values may fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. Historically, common stocks have provided greater long-term returns and have entailed greater short-term risks than other types of securities. Smaller or newer issuers may be more likely to realize more substantial growth or suffer more significant losses. Investments in these companies can be both more volatile and more speculative. Fluctuations in the value of equity securities in which a Fund invests will cause the NAV of the Fund to fluctuate.
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Securities of Small and Mid Capitalization Companies
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While small and medium-sized issuers in which a Fund invests may offer greater opportunities for capital appreciation than larger market capitalization issuers, investments in such companies may involve greater risks and thus may be considered speculative. For example, smaller companies may have limited product lines, markets or financial resources, or they may be dependent on a limited management group. In addition, many small and mid-capitalization company stocks trade less frequently and in smaller volume, and may
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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be subject to more abrupt or erratic price movements, than stocks of larger companies. The securities of small and mid-capitalization companies may also be more sensitive to market changes than the securities of larger companies. When a Fund invests in small or mid-capitalization companies, these factors may result in above-average fluctuations in the NAV of the Fund’s shares. Therefore, a Fund investing in such securities should be considered as a long-term investment and not as a vehicle for seeking short-term profits. Similarly, an investment in a Fund solely investing in such securities should not be considered a complete investment program.
Market capitalizations of companies in which the Funds invest are determined at the time of purchase.
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Unseasoned Companies
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As a matter of operating policy, each Fund may invest to a limited extent in securities of unseasoned companies and new issues. The Adviser regards a company as unseasoned when, for example, it is relatively new to, or not yet well established in, its primary line of business. Such companies generally are smaller and younger than companies whose shares are traded on the major stock exchanges. Accordingly, their shares are often traded over-the-counter and their share prices may be more volatile than those of larger, exchange-listed companies. Generally a Fund will not invest more than 5% of its total assets in securities of any one company with a record of fewer than three years’ continuous operation (including that of predecessors).
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Foreign Investing
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The Funds may invest in a broad range of securities of foreign issuers, including equity, debt and convertible securities and foreign government securities. The Funds may purchase the securities of issuers from various countries, including countries commonly referred to as “emerging markets.” The Funds may also invest in domestic securities denominated in foreign currencies.
Investing in the securities of foreign companies involves special risks and considerations not typically associated with investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, generally higher commission rates on foreign portfolio transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions on the flow of international capital. Foreign issuers may become subject to sanctions imposed by the United States or another country, which could result in the immediate freeze of the foreign issuers’ assets or securities. The imposition of such sanctions could impair the market value of the securities of such foreign issuers and limit a Fund’s ability to buy, sell, receive or deliver the securities. Additionally, dividends payable on foreign securities may be subject to foreign taxes withheld prior to distribution. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Changes in foreign exchange rates will affect the value of those securities which are denominated or quoted in currencies other than the U.S. dollar. Many of the foreign securities held by a Fund will not be registered with, nor will the issuers thereof be subject to the reporting requirements of, the SEC. Accordingly, there may be less publicly available information about the securities and about the foreign company or government issuing them than is available about a domestic company or government entity. Moreover, individual foreign economies may differ favorably or unfavorably from the United States economy in such respects as growth of Gross National Product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payment positions. Finally, the Funds may
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| | The Emerging Markets Opportunities Fund may invest up to 10% of its total assets in dollar-denominated foreign equity and debt securities. The Low Duration Income Fund (with respect to 20% of its total assets) may invest in non-convertible and convertible debt of foreign banks, foreign corporations and foreign governments which obligations are denominated in and pay interest in U.S. dollars. | |
Investment Technique
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Description and Risks
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Fund-Specific Limitations
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encounter difficulty in obtaining and enforcing judgments against issuers of foreign securities.
Securities of U.S. issuers denominated in foreign currencies may be less liquid and their prices more volatile than securities issued by domestic issuers and denominated in U.S. dollars. In addition, investing in securities denominated in foreign currencies often entails costs not associated with investment in U.S. dollar-denominated securities of U.S. issuers, such as the cost of converting foreign currency to U.S. dollars, higher brokerage commissions, custodial expenses and other fees. Non-U.S. dollar denominated securities may be subject to certain withholding and other taxes of the relevant jurisdiction, which may reduce the yield on the securities to the Funds and which may not be recoverable by the Funds or their investors.
The Trust may use an eligible foreign custodian in connection with its purchases of foreign securities and may maintain cash and cash equivalents in the care of a foreign custodian. The amount of cash or cash equivalents maintained in the care of eligible foreign custodians will be limited to an amount reasonably necessary to effect the Trust’s foreign securities transactions. The use of a foreign custodian invokes considerations which are not ordinarily associated with domestic custodians. These considerations include the possibility of expropriations, restricted access to books and records of the foreign custodian, inability to recover assets that are lost while under the control of the foreign custodian, and the impact of political, social or diplomatic developments.
Settlement procedures relating to the Funds’ investments in foreign securities and to the Funds’ foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the Funds’ domestic investments. For example, settlement of transactions involving foreign securities or foreign currency may occur within a foreign country, and a Fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. Settlement procedures in many foreign countries are less established than those in the United States, and some foreign country settlement periods can be significantly longer than those in the United States.
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Depositary Receipts
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Each Fund permitted to hold foreign securities may also hold ADRs, ADSs, GDRs and EDRs. ADRs and ADSs typically are issued by an American bank or trust company and evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as CDRs, are issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. GDRs are similar to EDRs and are designed for use in several international financial markets. Generally, ADRs and ADSs in registered form are designed for use in United States securities markets and EDRs in bearer form are designed for use in European securities markets. For purposes of a Fund’s investment policies, its investments in ADRs, ADSs, GDRs and EDRs will be deemed to be investments in the underlying foreign securities.
Depositary Receipts may be issued pursuant to sponsored or unsponsored programs. In sponsored programs, an issuer has made arrangements to have its securities traded in the form of Depositary Receipts. In unsponsored programs, the issuer may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored programs
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| | The Tax-Exempt Bond Fund may not invest in Depositary Receipts. | |
Investment Technique
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Description and Risks
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Fund-Specific Limitations
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are generally similar, in some cases it may be easier to obtain financial information from an issuer that has participated in the creation of a sponsored program. Accordingly, there may be less information available regarding issuers of securities underlying unsponsored programs and there may not be a correlation between such information and the market value of the Depositary Receipts. For purposes of the Fund’s investment policies, investments in Depositary Receipts will be deemed to be investments in the underlying securities. Thus, a Depositary Receipt representing ownership of common stock will be treated as common stock.
Depositary Receipts are generally subject to the same sort of risks as direct investments in a foreign country, such as currency risk, political and economic risk, and market risk, because their values generally depend on the performance of a foreign security denominated in its home currency. (The risks of foreign investing are addressed above in this section of the SAI under the heading “Foreign Investing.”) In addition to risks associated with the underlying portfolio of securities, receipt holders also must consider credit standings of the custodians and broker/dealer sponsors. The receipts are not registered with the SEC and qualify as Rule 144A securities which may make them more difficult and costly to sell. (For information about Rule 144A securities, see “Illiquid and Restricted Securities” in this section of the SAI.)
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Emerging Market Securities
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The Funds may invest in countries or regions with relatively low gross national product per capita compared to the world’s major economies, and in countries or regions with the potential for rapid economic growth (emerging markets). Emerging markets will include any country: (i) having an “emerging stock market” as defined by the International Finance Corporation; (ii) with low-to-middle-income economies according to the World Bank; (iii) listed in World Bank publications as developing; or (iv) determined by the adviser to be an emerging market as defined above.
Certain emerging market countries are either comparatively underdeveloped or are in the process of becoming developed and may consequently be economically dependent on a relatively few or closely interdependent industries. A high proportion of the securities of many emerging market issuers may also be held by a limited number of large investors trading significant blocks of securities. While a Fund’s subadviser will strive to be sensitive to publicized reversals of economic conditions, political unrest and adverse changes in trading status, unanticipated political and social developments may affect the values of the Fund’s investments in such countries and the availability of additional investments in such countries.
The risks of investing in foreign securities may be intensified in the case of investments in emerging markets. Securities of many issuers in emerging markets may be less liquid and more volatile than securities of comparable domestic issuers. Emerging markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets of a Fund is uninvested and no return is earned thereon. The inability of a Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of portfolio securities or, if a Fund has entered into a contract to sell the security, in possible liability to the purchaser. Securities prices in emerging markets can be significantly more volatile than in the more developed nations of the world, reflecting the greater uncertainties of
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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investing in less established markets and economies. In particular, countries with emerging markets may have relatively unstable governments, present the risk of nationalization of businesses, restrictions on foreign ownership, or prohibitions of repatriation of assets, and may have less protection of property rights than more developed countries.
Certain emerging markets may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, a country could impose temporary restrictions on foreign capital remittances, whether because deterioration occurs in an emerging market’s balance of payments or for other reasons. The Funds could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Funds of any restrictions on investments.
Investments in certain foreign emerging market debt obligations may be restricted or controlled to varying degrees. These restrictions or controls may at times preclude investment in certain foreign emerging market debt obligations and increase the expenses of the Funds.
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Foreign Currency Transactions
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When investing in securities denominated in foreign currencies, the Funds will be subject to the additional risk of currency fluctuations. An adverse change in the value of a particular foreign currency as against the U.S. dollar, to the extent that such change is not offset by a gain in other foreign currencies, will result in a decrease in the Fund’s assets. Any such change may also have the effect of decreasing or limiting the income available for distribution. Foreign currencies may be affected by revaluation, adverse political and economic developments, and governmental restrictions. Further, no assurance can be given that currency exchange controls will not be imposed on any particular currency at a later date.
As a result of its investments in foreign securities, a Fund may receive interest or dividend payments, or the proceeds of the sale or redemption of such securities, in the foreign currencies in which such securities are denominated. In that event, the Fund may convert such currencies into dollars at the then current exchange rate. Under certain circumstances, however, such as where the Fund’s subadviser believes that the applicable rate is unfavorable at the time the currencies are received or the Fund’s subadviser anticipates, for any other reason, that the exchange rate will improve, the Fund may hold such currencies for an indefinite period of time.
In addition, a Fund may be required to receive delivery of the foreign currency underlying forward foreign currency contracts it has entered into. This could occur, for example, if an option written by the Fund is exercised or the Fund is unable to close out a forward contract. A Fund may hold foreign currency in anticipation of purchasing foreign securities.
A Fund may also elect to take delivery of the currencies’ underlying options or forward contracts if, in the judgment of the Fund’s subadviser, it is in the best interest of the Fund to do so. In such instances as well, the Fund may convert the foreign currencies to dollars at the then current exchange rate, or may hold such currencies for an indefinite period of time.
While the holding of currencies will permit a Fund to take advantage of favorable movements in the applicable exchange rate, it also exposes the Fund to risk of loss if such rates move in a direction adverse to the Fund’s position. Such losses could reduce any profits or increase any losses sustained by the Fund from the sale or redemption of securities, and could reduce the dollar value of interest or dividend payments received. In addition, the holding of currencies could
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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adversely affect the Fund’s profit or loss on currency options or forward contracts, as well as its hedging strategies.
When a Fund effects foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange market, the Fund incurs expenses in converting assets from one currency to another. A Fund may also effect other types of foreign currency exchange transactions, which have their own risks and costs. For information about such transactions, please see “Foreign Currency Forward Contracts, Futures and Options” under “Derivatives” in this section of the SAI.
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Foreign Investment Companies
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Some of the countries in which the Funds may invest may not permit, or may place economic restrictions on, direct investment by outside investors. Investments in such countries may be permitted only through foreign government-approved or -authorized investment vehicles, which may include other investment companies. These funds may also invest in other investment companies that invest in foreign securities. Investing through such vehicles may involve frequent or layered fees or expenses and may also be subject to limitation under the 1940 Act. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of the other investment company’s expenses, including advisory fees. Those expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations. For additional information, see “Mutual Fund Investing” in this section of the SAI.
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Privatizations
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The governments of some foreign countries have been engaged in programs of selling part or all of their stakes in government owned or controlled enterprises (“privatizations”). Privatizations may offer opportunities for significant capital appreciation. In certain foreign countries, the ability of foreign entities such as the Funds to participate in privatizations may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can be no assurance that foreign governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful.
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Funding Agreements
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Each Fund may invest in funding agreements, which are insurance contracts between an investor and the issuing insurance company. For the issuer, they represent senior obligations under an insurance product. For the investor, and from a regulatory perspective, these agreements are treated as securities. These agreements, like other insurance products, are backed by claims on the general assets of the issuing entity and rank on the same priority level as other policy holder claims. Funding agreements typically are issued with a one-year final maturity and a variable interest rate, which may adjust weekly, monthly, or quarterly. Some agreements carry a seven-day put feature. A funding agreement without this feature is considered illiquid and will therefore be subject to the Funds’ limitations on investments in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.) Funding agreements are regulated by the state insurance board of the state where they are executed.
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Guaranteed Investment Contracts
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Each Fund may invest in GICs issued by U.S. and Canadian insurance companies. A GIC requires the investor to make cash contributions to a deposit fund of an insurance company’s general account. The insurance company then makes payments to the investor based on negotiated, floating or fixed interest rates. A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the insurance company, and the contract is paid
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| | The Tax-Exempt Bond Fund may not invest in guaranteed investment contracts. | |
Investment Technique
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Description and Risks
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Fund-Specific Limitations
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from the insurance company’s general assets. Generally, a GIC is not assignable or transferable without the permission of the issuing insurance company, and an active secondary market in GICs does not currently exist. Therefore, these investments may be deemed to be illiquid, in which case they will be subject to the Funds’ limitations on investments in illiquid securities. (See “Illiquid and Restricted Securities” in this section of the SAI.)
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Illiquid and Restricted Securities
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Each Fund may invest up to 15% of its net assets in securities that are considered illiquid. Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the 1933 Act (“restricted securities”), securities that are otherwise not readily marketable, such as over-the-counter options, and repurchase agreements not entitling the holder to payment of principal in seven days. Such securities may offer higher yields than comparable publicly traded securities, and they also may incur higher risks.
Repurchase agreements, reverse repurchase agreements and time deposits that do not provide for payment to the Fund within seven days after notice or which have a term greater than seven days are deemed illiquid securities for this purpose unless such securities are variable amount master demand notes with maturities of nine months or less or unless the Fund’s subadviser has determined that an adequate trading market exists for such securities or that market quotations are readily available.
The Funds may purchase Rule 144A securities sold to institutional investors without registration under the 1933 Act and commercial paper issued in reliance upon the exemption in Section 4(a)(2) of the 1933 Act, for which an institutional market has developed. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on the issuer’s ability to honor a demand for repayment of the unregistered security.
Although the securities described in this section generally will be considered illiquid, a security’s contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of the security and therefore these securities may be determined to be liquid in accordance with guidelines established by the Board. The Trustees have delegated to each Fund’s subadviser the day-to-day determination of the liquidity of such securities in the respective Fund’s portfolio, although they have retained oversight and ultimate responsibility for such determinations. Although no definite quality criteria are used, the Trustees have directed the subadvisers to consider such factors as (i) the nature of the market for a security (including the institutional private resale markets); (ii) the terms of these securities or other instruments allowing for the disposition to a third party or the issuer thereof (e.g. certain repurchase obligations and demand instruments); (iii) availability of market quotations; and (iv) other permissible factors. The Trustees monitor implementation of the guidelines on a periodic basis.
If illiquid securities exceed 15% of a Fund’s net assets after the time of purchase, the Fund will take steps to reduce in an orderly fashion its holdings of illiquid securities. Because illiquid securities may not be readily marketable, the relevant Fund’s subadviser may not be able to dispose of them in a timely manner. As a result, the Fund may be forced to hold illiquid securities while their price depreciates. Depreciation in the price of illiquid securities may cause the NAV of the Fund holding them to decline. A security that is determined by a Fund’s subadviser to be liquid may subsequently revert to being illiquid if not enough buyer interest exists.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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Restricted securities ordinarily can be sold by the Fund in secondary market transactions to certain qualified investors pursuant to rules established by the SEC, in privately negotiated transactions to a limited number of purchasers or in a public offering made pursuant to an effective registration statement under the 1933 Act. When registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable time may elapse between the decision to sell and the sale date. If, during such period, adverse market conditions were to develop, the Fund might obtain a less favorable price than the price which prevailed when it decided to sell.
Restricted securities will be priced at fair value as determined in good faith by the Trustees or their delegate.
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Leverage
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Each Fund may employ investment techniques that create leverage, either by using borrowed capital to increase the amount invested, or investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies that involve leverage can result in losses that greatly exceed the amount originally invested.
The SEC takes the position that transactions that have a leveraging effect on the capital structure of a mutual fund or are economically equivalent to borrowing can be viewed as constituting a form of borrowing by the fund for purposes of the 1940 Act. These transactions can include buying and selling certain derivatives (such as futures contracts); selling (or writing) put and call options; engaging in sale-buybacks; entering into firm-commitment and stand-by commitment agreements; engaging in when-issued, delayed-delivery, or forward-commitment transactions; and other similar trading practices (additional discussion about a number of these transactions can be found throughout this section of the SAI). As a result, when a Fund enters into such transactions the transactions may be subject to the same requirements and restrictions as borrowing. (See “Borrowing” below for additional information.)
The following are some of the Funds’ permitted investment techniques that are generally viewed as creating leverage for the Funds.
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Borrowing
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A Fund’s ability to borrow money is limited by its investment policies and limitations, by the 1940 Act, and by applicable exemptions, no-action letters, interpretations, and other pronouncements issued from time to time by the SEC and its staff or any other regulatory authority with jurisdiction. Under the 1940 Act, a Fund is required to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowings not in excess of 5% of the Fund’s total assets made for temporary or emergency purposes. Any borrowings for temporary purposes in excess of 5% of the Fund’s total assets must maintain continuous asset coverage. If the 300% asset coverage should decline as a result of market fluctuations or for other reasons, a Fund may be required to sell some of its portfolio holdings within three days (excluding Sundays and holidays) to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time.
Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a Fund’s portfolio. Money borrowed will be subject to interest costs that may or may not be recovered by earnings on the securities purchased. A Fund also may be required to maintain minimum average balances in connection with a borrowing or to pay a commitment or other fee to maintain a line of
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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credit; either of these requirements would increase the cost of borrowing over the stated interest rate.
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Mortgage “Dollar-Roll” Transactions
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Each Fund may enter into mortgage “dollar-roll” transactions pursuant to which it sells mortgage-backed securities for delivery in the future and simultaneously contracts to repurchase substantially similar securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the mortgage-backed securities. The Fund is compensated for the lost interest by the difference between the current sales price and the lower price for the future purchase (often referred to as the “drop”) as well as by the interest earned on, and gains from, the investment of the cash proceeds of the initial sale. The Fund may also be compensated by receipt of a commitment fee. If the income and capital gains from the Fund’s investment of the cash from the initial sale do not exceed the income, capital appreciation and gain or loss that would have been realized on the securities sold as part of the dollar roll, the use of this technique will diminish the investment performance of the Fund compared with what the performance would have been without the use of the dollar roll.
Dollar-roll transactions involve the risk that the market value of the securities the Fund is required to purchase may decline below the agreed upon repurchase price of those securities. If the broker-dealer to whom the Fund sells securities becomes insolvent, the Fund’s right to purchase or repurchase securities may be restricted. Successful use of dollar rolls may depend upon the Fund’s subadviser’s ability to correctly predict interest rates and prepayments. There is no assurance that dollar rolls can be successfully employed.
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Reverse Repurchase Agreements
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Reverse repurchase agreements are transactions in which the Fund sells a security and simultaneously commits to repurchase that security from the buyer, such as a bank or broker-dealer, at an agreed-upon price on an agreed-upon future date. The resale price in a reverse repurchase agreement reflects a market rate of interest that is not related to the coupon rate or maturity of the sold security. For certain demand agreements, there is no agreed-upon repurchase date and interest payments are calculated daily, often based upon the prevailing overnight repurchase rate.
Generally, a reverse repurchase agreement enables the Fund to recover for the term of the reverse repurchase agreement all or most of the cash invested in the portfolio securities sold and to keep the interest income associated with those portfolio securities. Such transactions are only advantageous if the interest cost to the Fund of the reverse repurchase transaction is less than the cost of obtaining the cash otherwise. In addition, interest costs on the money received in a reverse repurchase agreement may exceed the return received on the investments made by the Fund with those monies. Using reverse repurchase agreements to earn additional income involves the risk that the interest earned on the invested proceeds is less than the expense of the reverse repurchase agreement transaction.
Because reverse repurchase agreements are considered borrowing under the 1940 Act, while a reverse repurchase agreement is outstanding, the Fund will maintain cash and appropriate liquid assets in a segregated custodial account to cover its obligation under the agreement. A Fund will enter into reverse repurchase agreements only with parties that the Fund’s subadviser deems creditworthy, but such investments are still subject to the risks of leverage discussed above.
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Master Limited Partnerships
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An investment in MLP units involves some risks that differ from an investment in the common stock of a corporation. Holders of MLP units have limited control on matters affecting the partnership.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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Conflicts of interest exist between common unit holders and the general partner, including those arising from incentive distribution payments. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The fees that MLPs charge for transportation of oil and gas products through their pipelines are subject to government regulation, which could negatively impact the revenue stream. Investing in MLPs also involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. These include the risk of environmental incidents, terrorist attacks, demand destruction from high commodity prices, proliferation of alternative energy sources, inadequate supply of external capital, and conflicts of interest with the general partner. There are also certain tax risks associated with investment in MLPs. The benefit derived from a Fund’s investment in MLPs is somewhat dependent on the MLP being treated as a partnership for federal income tax purposes, so any change to this status would adversely affect the price of MLP units. Historically, a substantial portion of the gross taxable income of MLPs has been offset by tax losses and deductions reducing gross income received by investors, and any change to these tax rules would adversely affect the price of an MLP unit. Certain MLPs may trade less frequently than other securities, and those with limited trading volumes may display volatile or erratic price movements.
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Money Market Instruments
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Each Fund may invest in money market instruments, which are high-quality short-term investments. The types of money market instruments most commonly acquired by the Funds are discussed below, although each Fund is also permitted to invest in other types of money market instruments to the extent consistent with the Fund’s investment limitations and restrictions.
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Banker's Acceptances
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A banker's acceptance is a time draft drawn on a commercial bank by a borrower usually in connection with an international commercial transaction (to finance the import, export, transfer or storage of goods). The borrower, as well as the bank, is liable for payment, and the bank unconditionally guarantees to pay the draft at its face amount on the maturity date. Most acceptances have maturities of six months or less and are traded in secondary markets prior to maturity.
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Certificates of Deposit
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Certificates of deposit are generally short-term, interest-bearing negotiable certificates issued by banks or savings and loan associations against funds deposited in the issuing institution. They generally may be withdrawn on demand but may be subject to early withdrawal penalties which could reduce the Fund’s yield. Deposits subject to early withdrawal penalties or that mature in more than seven days are treated as illiquid securities if there is no readily available market for the securities.
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Commercial Paper
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Commercial paper refers to short-term, unsecured promissory notes issued by corporations to finance short-term credit needs. Commercial paper is usually sold on a discount basis and has a maturity at the time of issuance not exceeding nine months.
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Obligations of Foreign Banks and Foreign Branches of U.S. Banks
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The money market instruments in which the Funds may invest include negotiable certificates of deposit, bankers’ acceptances and time deposits of foreign branches of U.S. banks, foreign banks and their non-U.S. branches (Eurodollars), U.S. branches and agencies of foreign banks (Yankee dollars), and wholly-owned banking-related subsidiaries of foreign banks. For the purposes of each Fund’s investment policies with respect to money market instruments, obligations of foreign branches of U.S. banks and of foreign banks are obligations of the issuing bank and may be general obligations of the
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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parent bank. Such obligations, however, may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject a Fund to investment risks that are different in some respects from those of investments in obligations of domestic issuers.
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Time Deposits
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Time deposits are deposits in a bank or other financial institution for a specified period of time at a fixed interest rate for which a negotiable certificate is not received.
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U.S. Government Obligations
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Securities issued or guaranteed as to principal and interest by the United States Government include a variety of Treasury securities, which differ only in their interest rates, maturities, and times of issuance. Treasury bills have maturities of one year or less. Treasury notes have maturities of one to ten years, and Treasury bonds generally have maturities of greater than ten years.
Agencies of the United States Government which issue or guarantee obligations include, among others, Export-Import Bank of the United States, Farmers Home Administration, Federal Housing Administration, GNMA, Maritime Administration, Small Business Administration and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued or guaranteed by, among others, FNMA, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks, Banks for Cooperatives, and the U.S. Postal Service. Some of these securities are supported by the full faith and credit of the U.S. Government, others are supported by the right of the issuer to borrow from the Treasury, while still others are supported only by the credit of the instrumentality. There is no guarantee that the U.S. Government will provide financial support to its agencies or instrumentalities, now or in the future, if it is not obligated to do so by law. Accordingly, although these securities have historically involved little risk of loss of principal if held to maturity, they may involve more risk than securities backed by the full faith and credit of the U.S. Government because the Fund must look principally to the agency or instrumentality issuing or guaranteeing the securities for repayment and may not be able to assert a claim against the United States if the agency or instrumentality does not meet its commitment.
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Mutual Fund Investing
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Each Fund is authorized to invest in the securities of other investment companies subject to the limitations contained in the 1940 Act.
Investment companies in which the Fund may invest may include ETFs. An ETF is an investment company classified as an open-end investment company or unit investment trust that is traded similarly to a publicly traded company. Most ETFs seek to achieve the same return as a particular market index. That type of ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An index-based ETF will invest in all of the securities included in the index, a representative sample of the securities included in the index, or other investments expected to produce returns substantially similar to that of the index. Other types of ETFs include leveraged or inverse ETFs, which are ETFs that seek to achieve a daily return that is a multiple or an inverse multiple of the daily return of a securities index. An important characteristic of these ETFs is that they seek to achieve their stated objectives on a daily basis, and their performance over longer periods of time can differ significantly from the multiple or inverse multiple of the index performance over those longer periods of time. ETFs also include actively managed ETFs that pursue active management strategies and publish their portfolio holdings on a frequent basis.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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shareholders if it complies with several requirements relating to its organization, ownership, assets, and income and a requirement that it distribute to its shareholders at least 90% of its taxable income (other than net capital gains) for each taxable year.
REITs can generally be classified as follows:
•
Equity REITs, which invest the majority of their assets directly in real property and derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value.
•
Mortgage REITs, which invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments.
•
Hybrid REITs, which combine the characteristics of both equity REITs and mortgage REITs.
REITs are structured similarly to closed-end investment companies in that they are essentially holding companies. An investor should realize that by investing in REITs indirectly through the Fund, he will bear not only his proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the underlying REITs. (See “Mutual Fund Investing” in this section of the SAI.)
Selecting REITs requires an evaluation of the merits of each type of asset a particular REIT owns, as well as regional and local economics. Due to the proliferation of REITs in recent years and the relative lack of sophistication of certain REIT managers, the quality of REIT assets has varied significantly. The risks associated with REITs are similar to those associated with the direct ownership of real estate. These include declines in the value of real estate, risks related to general and local economic conditions, dependence on management skill, cash flow dependence, possible lack of availability of long-term mortgage funds, over-building, extended vacancies of properties, decreased occupancy rates and increased competition, increases in property taxes and operating expenses, changes in neighborhood values and the appeal of the properties to tenants and changes in interest rates.
Equity REITs may be affected by changes in the value of the underlying properties they own, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally are not diversified. Equity and mortgage REITs are also subject to potential defaults by borrowers, self-liquidation, and the possibility of failing to qualify for tax-free status of income under the Code and failing to maintain exemption from the 1940 Act. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. In addition, investment in REITs could cause the Fund to possibly fail to qualify as a regulated investment company. (See the “Dividends, Distributions and Taxes” section of the SAI.)
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Repurchase Agreements
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Each Fund may enter into repurchase agreements by which the Fund purchases portfolio securities subject to the seller’s agreement to repurchase them at a mutually agreed-upon time and price. The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase price may be the same, with interest payable to the Fund at a stated rate together with the repurchase price on repurchase. In either case, the income to the Fund is unrelated to the interest rate on the security.
A repurchase agreement must be collateralized by obligations that could otherwise be purchased by the Fund (except with respect to maturity), and these must be maintained by the seller in a segregated account for the Fund. The value of such collateral will be monitored
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| | Repurchase agreements of more than seven days’ duration are subject to each Fund’s limitation on investments in illiquid securities, which means that no more than 15% of the market value of a Fund’s total assets may be invested in | |
Investment Technique
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Description and Risks
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Fund-Specific Limitations
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throughout the term of the repurchase agreement in an attempt to ensure that the market value of the collateral always equals or exceeds the repurchase price (including accrued interest). If the value of the collateral dips below such repurchase price, additional collateral will be requested and, when received, added to the account to maintain full collateralization.
Repurchase agreements will be entered into with commercial banks, brokers and dealers considered by the relevant Fund’s subadviser to be creditworthy. However, the use of repurchase agreements involves certain risks such as default by, or insolvency of, the other party to the transaction. The Fund also might incur disposition costs in connection with liquidating the underlying securities or enforcing its rights.
Typically, repurchase agreements are in effect for one week or less, but they may be in effect for longer periods of time.
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| | repurchase agreements with a maturity of more than seven days and in other illiquid securities. | |
Securities Lending
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Subject to certain investment restrictions, each Fund may, subject to the Trustees’ and Trust Treasurer’s approval, lend securities from its portfolio to brokers, dealers and financial institutions deemed creditworthy and receive, as collateral, cash or cash equivalents which at all times while the loan is outstanding will be maintained in amounts equal to at least 100% of the current market value of the loaned securities. Any cash collateral will be invested in short-term securities that will increase the current income of the Fund lending its securities.
A Fund will have the right to regain record ownership of loaned securities to exercise beneficial rights such as voting rights and subscription rights. While a securities loan is outstanding, the Fund is to receive an amount equal to any dividends, interest or other distributions with respect to the loaned securities. A Fund may pay reasonable fees to persons unaffiliated with the Trust for services in arranging such loans.
Even though securities lending usually does not impose market risks on the lending Fund, as with any extension of credit, there are risks of delay in recovery of the loaned securities and in some cases loss of rights in the collateral should the borrower of the securities fail financially. In addition, the value of the collateral taken as security for the securities loaned may decline in value or may be difficult to convert to cash in the event that a Fund must rely on the collateral to recover the value of the securities. Moreover, if the borrower of the securities is insolvent, under current bankruptcy law, the Fund could be ordered by a court not to liquidate the collateral for an indeterminate period of time. If the borrower is the subject of insolvency proceedings and the collateral held might not be liquidated, the result could be a material adverse impact on the liquidity of the lending Fund.
No Fund will lend securities having a value in excess of 33 1/3% of its assets, including collateral received for loaned securities (valued at the time of any loan).
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Short Sales
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Each Fund may sell securities short as part of its overall portfolio management strategies involving the use of derivative instruments and to offset potential declines in long positions in similar securities. A short sale is a transaction in which a Fund sells a security it does not own or have the right to acquire, or that it owns but does not wish to deliver, in anticipation that the market price of that security will decline. A short sale is “against the box” to the extent the Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short. All other short sales are commonly referred to as “naked” short sales.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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When a Fund makes a short sale, the broker-dealer through which the short sale is made must borrow the security sold short and deliver it to the party purchasing the security. The Fund is required to make a margin deposit in connection with such short sales; the Fund may have to pay a fee to borrow particular securities and will often be obligated to pay over any dividends and accrued interest on borrowed securities. If the price of the security sold short increases between the time of the short sale and the time the Fund covers its short position, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.
If a Fund sells securities short against the box, it may protect unrealized gains, but will lose the opportunity to profit on such securities if the price rises. If a Fund engages in naked short sales, the Fund’s risk of loss could be as much as the maximum attainable price of the security (which could be limitless) less the price paid by the Fund for the security at the time it was borrowed.
When a Fund sells securities short, to the extent required by applicable law and regulation the Fund will “cover” the short sale, which generally means that the Fund will segregate any asset, including equity securities and non-investment-grade debt so long as the asset is liquid, unencumbered and marked to market daily, equal to the market value of the securities sold short, reduced by any amount deposited as margin. Alternatively, the Fund may “cover” a short sale by (a) owning the underlying securities, (b) owning securities currently convertible into the underlying securities at an exercise price equal to or less than the current market price of the underlying securities, or (c) owning a purchased call option on the underlying securities with an exercise price equal to or less than the price at which the underlying securities were sold short.
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Special Situations
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Each Fund may invest in special situations that the Fund’s subadviser believes present opportunities for capital growth. Such situations most typically include corporate restructurings, mergers, and tender offers.
A special situation arises when, in the opinion of the Fund’s subadviser, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development particularly or uniquely applicable to that company and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others, the following: liquidations, reorganizations, recapitalizations, mergers, or tender offers; material litigation or resolution thereof; technological breakthroughs; and new management or management policies. Although large and well-known companies may be involved, special situations often involve much greater risk than is inherent in ordinary investment securities.
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Temporary Investments
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When business or financial conditions warrant, each Fund may assume a temporary defensive position by investing in money-market instruments, including obligations of the U.S. Government and its agencies and instrumentalities, obligations of foreign sovereigns, other debt securities, commercial paper including bank obligations, certificates of deposit (including Eurodollar certificates of deposit) and repurchase agreements. (See “Money Market Instruments” in this section of the SAI for more information about these types of investments.)
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| | In the case of the Emerging Markets Opportunities Fund, the short-term and medium-term debt securities it may employ on a temporary basis consist of (a) obligations of | |
Investment Technique
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Description and Risks
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Fund-Specific Limitations
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For temporary defensive purposes, during periods in which a Fund’s subadviser believes adverse changes in economic, financial or political conditions make it advisable, the Fund may reduce its holdings in equity and other securities and may invest up to 100% of its assets in certain short-term (less than twelve months to maturity) and medium-term (not greater than five years to maturity) debt securities and in cash (U.S. dollars, foreign currencies, or multicurrency units). The short-term and medium-term debt securities in which a Fund may invest for temporary defensive purposes will be those that the Fund’s subadviser believes to be of high quality (i.e., subject to relatively low risk of loss of interest or principal). If rated, these securities will be rated in one of the three highest rating categories by rating services such as Moody’s or S&P (i.e., rated at least A).
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| | governments, agencies or instrumentalities of any member state of the OECD; (b) bank deposits and bank obligations (including certificates of deposit, time deposits and bankers’ acceptances) of banks organized under the laws of any member state of the OECD, denominated in any currency; (c) floating rate securities and other instruments denominated in any currency issued by international development agencies; (d) finance company and corporate commercial paper and other short-term corporate debt obligations of corporations organized under the laws of any member state of the OECD meeting the Fund’s credit quality standards; and (e) repurchase agreements with banks and broker-dealers covering any of the foregoing securities. | |
Warrants or Rights to Purchase Securities
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Each Fund may invest in or acquire warrants or rights to purchase equity or fixed income securities at a specified price during a specific period of time. A Fund will make such investments only if the underlying securities are deemed appropriate by the Fund’s subadviser for inclusion in the Fund’s portfolio. Included are warrants and rights whose underlying securities are not traded on principal domestic or foreign exchanges. Warrants and stock rights are almost identical to call options in their nature, use and effect except that they are issued by the issuer of the underlying security, rather than an option writer, and they generally have longer expiration dates than call options. (See “Options” in this section of the SAI for information about call options.)
Bonds with warrants attached to purchase equity securities have many characteristics of convertible bonds and their prices may, to some degree, reflect the performance of the underlying stock. However, unlike convertible securities and preferred stocks, warrants do not pay a fixed dividend. Bonds also may be issued with warrants attached to purchase additional fixed income securities at the same coupon rate. A decline in interest rates would permit a Fund holding such warrants to buy additional bonds at the favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants would generally expire with no value.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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A Fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices (“index warrants”). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If a Fund were not to exercise an index warrant prior to its expiration, then the Fund would lose the amount of the purchase price paid by it for the warrant.
A Fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the Fund’s use of index warrants are generally similar to those relating to its use of index options. (See “Options” in this section of the SAI for information about index options.) Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although a Fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit a Fund’s ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do.
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When-Issued and Delayed Delivery Transactions
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Each Fund may purchase securities on a when-issued or forward commitment basis. These transactions are also known as delayed delivery transactions. (The phrase “delayed delivery” is not intended to include purchases where a delay in delivery involves only a brief period required by the selling party solely to locate appropriate certificates and prepare them for submission for clearance and settlement in the customary way.) Delayed delivery transactions involve a commitment by the Fund to purchase or sell securities at a future date (ordinarily up to 90 days later). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitments are negotiated directly with the selling party.
When-issued purchases and forward commitments enable the Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. For example, in periods of rising interest rates and falling bond prices, the Fund might sell debt securities it owns on a forward commitment basis to limit its exposure to falling prices. In periods of falling interest rates and rising prices, the Fund might sell securities it owns and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher yields. The Fund will not enter into such transactions for the purpose of leverage.
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Investment Technique
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Description and Risks
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Fund-Specific Limitations
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The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value will be reflected in the Fund’s NAV starting on the first business day after the date of the agreement to purchase the securities. The Fund will be subject to the rights and risks of ownership of the securities on the agreement date. However, the Fund will not earn interest on securities it has committed to purchase until they are paid for and received. A seller’s failure to deliver securities to the Fund could prevent the Fund from realizing a price or yield considered to be advantageous and could cause the Fund to incur expenses associated with unwinding the transaction.
When a Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement will be included in the Fund’s assets. Fluctuations in the market value of the underlying securities will not be reflected in the Fund’s NAV as long as the commitment to sell remains in effect. Settlement of when-issued purchases and forward commitment transactions generally takes place up to 90 days after the date of the transaction, but the Fund may agree to a longer settlement period.
The Funds will make commitments to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or renegotiate a commitment after it is entered into. A Fund also may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Fund may realize a capital gain or loss in connection with these transactions.
When a Fund purchases securities on a when-issued or forward-commitment basis, the Fund will specifically designate on its accounting records securities having a value (determined daily) at least equal to the amount of the Fund’s purchase commitments. These procedures are designed to ensure that each Fund will maintain sufficient assets at all times to cover its obligations under when-issued purchases and forward commitments.
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|
Name and Year of Birth
|
| |
Length of
Time Served |
| |
Number of
Portfolios in Fund Complex Overseen by Trustee |
| |
Principal Occupation(s) During Past
5 Years |
| |
Other Directorships Held by Trustee
During Past 5 Years |
|
| Brown, Thomas J. YOB: 1945 | | |
Served since 2016.
|
| |
61
|
| | Retired | | | Trustee (since 2016), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2011), Virtus Variable Insurance Trust (9 portfolios); Director (since 2005), VALIC Company Funds (49 portfolios); and Director (since 2010), D’Youville Senior Care Center. | |
|
Name and Year of Birth
|
| |
Length of
Time Served |
| |
Number of
Portfolios in Fund Complex Overseen by Trustee |
| |
Principal Occupation(s) During Past
5 Years |
| |
Other Directorships Held by Trustee
During Past 5 Years |
|
| Burke, Donald C. YOB: 1961 | | |
Served since 2016.
|
| |
65
|
| | Retired. | | | Trustee (since 2016), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2016), Virtus Variable Insurance Trust (9 portfolios); Director (since 2014) closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); Director, Avista Corp. (energy company) (since 2011); Trustee, Goldman Sachs Fund Complex (2010 to 2014); Director, BlackRock Luxembourg and Cayman Funds (2006 to 2010). | |
| Gelfenbien, Roger A. YOB: 1943 | | |
Served since 2016.
|
| |
61
|
| | Retired. | | | Trustee (since 2016), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2000), Virtus Variable Insurance Trust (9 portfolios); and Director (since 1999), USAllianz Variable Insurance Product Trust (42 portfolios). | |
| Mallin, John R. YOB: 1950 | | |
Served since 2016.
|
| |
61
|
| | Partner/ Attorney (since 2003), McCarter & English LLP Real Property Practice Group and Member (since 2014), Counselors of Real Estate. | | | Trustee (since 2016), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 1999), Virtus Variable Insurance Trust (9 portfolios); Director (since 2013), Horizons, Inc. (non-profit). | |
| McClellan, Hassell H. YOB: 1945 | | |
Served since 2015.
|
| |
61
|
| | Retired. Professor (1984 to 2013), Wallace E. Carroll School of Management, Boston College. | | | Trustee (since 2015), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2008), Virtus Variable Insurance Trust (9 portfolios); Trustee (since 2000), John Hancock Fund Complex (collectively, 228 portfolios); and Director (since 2010), Barnes Group, Inc. (diversified global components manufacturer and logistical services company). | |
|
Name and Year of Birth
|
| |
Length of
Time Served |
| |
Number of
Portfolios in Fund Complex Overseen by Trustee |
| |
Principal Occupation(s) During Past
5 Years |
| |
Other Directorships Held by Trustee
During Past 5 Years |
|
|
McLoughlin, Philip
Chairman
YOB: 1946
|
| |
Served since 1999.
|
| |
72
|
| | Retired | | | Chairman (since 2002) and Trustee (since 1989), Virtus Mutual Fund Complex (52 portfolios); Chairman and Trustee (since 2003), Virtus Variable Insurance Trust (9 portfolios); Trustee/Director and Chairman (since 2011), Virtus Closed-End Funds (3 portfolios); Trustee and Chairman (since 2013), Virtus Alternative Solutions Trust (4 portfolios); Director (since 1995), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios); and Director (since 1991) and Chairman (since 2010), World Trust Fund (closed-end investment firm in Luxembourg). | |
|
McNamara, Geraldine M.
YOB: 1951
|
| |
Served since 2001.
|
| |
65
|
| | Retired. | | | Trustee (since 2001), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2015), Virtus Variable Insurance Trust (9 portfolios); and Director (since 2003), closed-end funds managed by Duff & Phelps Investment Management Co. (4 portfolios). | |
|
Oates, James M.
YOB: 1946
|
| |
Served since 2000.
|
| |
68
|
| | Managing Director (since 1994), Wydown Group (consulting firm). | | | Trustee (since 1987), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2016) Virtus Variable Insurance Trust (9 portfolios); Trustee (since 2013), Virtus Closed-End Funds (3 portfolios); Trustee (since 2013), Virtus Alternative Solutions Trust (4 portfolios); Director (since 1996), Stifel Financial; Chairman and Director (1999 to 2014), Connecticut River Bank; Director (2002 to 2014), New Hampshire Trust Company; Chairman and Trustee (since 2005), John Hancock Fund Complex (228 portfolios); and Non-Executive Chairman (2000 to 2014), Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services). | |
|
Name and Year of Birth
|
| |
Length of
Time Served |
| |
Number of
Portfolios in Fund Complex Overseen by Trustee |
| |
Principal Occupation(s) During Past
5 Years |
| |
Other Directorships Held by Trustee
During Past 5 Years |
|
|
Segerson, Richard E.
YOB: 1946
|
| |
Served since 2000.
|
| |
61
|
| | Retired. | | | Trustee (since 1983), Virtus Mutual Fund Complex (52 portfolios); Trustee (since 2016) Virtus Variable Insurance Trust (9 portfolios); and Managing Director (1998 to 2013), Northway Management Company. | |
|
Verdonck, Ferdinand L.J.
YOB: 1942
|
| |
Served since 2004.5
|
| |
61
|
| | Director (1998 to July 2015), The J.P. Morgan Continental European Investment Trust; Director (2005 to 2013), Galapagos N.V. (biotechnology); Director (1998 to 2015) Groupe SNEF; Vice Chairman (since 2014), Affirmed Therapeutics (biotechnology); and Mr. Verdonck is also a director of several non-U.S. companies. | | | Trustee (since 2002), Virtus Mutual Fund Complex (52 portfolios); and Trustee (since 2016) Virtus Variable Insurance Trust (9 portfolios). | |
|
Name and Year of Birth
|
| |
Length of
Time Served |
| |
Number of
Portfolios in Fund Complex Overseen by Trustee |
| |
Principal Occupation(s) During Past
5 Years |
| |
Other Directorships Held by Trustee
During Past 5 Years |
|
|
Aylward, George R.
YOB: 1964
|
| |
Served since 2006.
|
| |
70
|
| | Director, President and Chief Executive Officer (since 2008), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; and various senior officer positions with Virtus affiliates (since 2005). | | | Trustee (since 2006), Virtus Mutual Funds (52 portfolios); Chairman, President and Chief Executive Officer (since 2006), The Zweig Closed-End Funds (2 portfolios); Trustee (since 2012) and President (since 2010), Virtus Variable Insurance Trust (9 portfolios); Trustee and President (since 2011), Virtus Closed-End Funds (3 portfolios); Director (since 2013), Virtus Global Funds, PLC (2 portfolios); Trustee (since 2013), Virtus Alternative Solutions Trust (4 portfolios); and Chairman and Trustee (since 2015), Virtus ETF Trust II. | |
|
Name, Address and Year of
Birth |
| |
Position(s) Held with the
Trust and Length of Time Served |
| |
Principal Occupation(s) During Past 5 Years
|
|
|
Bradley, W. Patrick
YOB: 1972
|
| | Executive Vice President (since 2016), Senior Vice President (2013 to 2016), Vice President (2011 to 2013), and Chief Financial Officer and Treasurer (since 2006), Virtus Mutual Fund Complex. | | | Executive Vice President, Fund Services (since 2016), and Senior Vice President, Fund Services (2010 to 2016), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2016), Senior Vice President (2013 to 2016), Vice President (2011 to 2013), and Chief Financial Officer and Treasurer (since 2004), Virtus Variable Insurance Trust; Executive Vice President (since 2016), Senior Vice President (2013 to 2016), Vice President (2012 to 2013) and Treasurer (Chief Financial Officer) (since 2007), The Zweig Closed-End Funds; Executive Vice President (since 2016), Senior Vice President (2013 to 2016), Vice President (2011 to 2013), and Chief Financial Officer and Treasurer (since 2011), Virtus Closed-End Funds; Vice President and Assistant Treasurer (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Director (since 2013), Virtus Global Funds, PLC; and Executive Vice President (since 2016), Senior Vice President, and Chief Financial Officer and Treasurer (since 2013), Virtus Alternative Solutions Trust. | |
|
Carr, Kevin J.
YOB: 1954
|
| | Senior Vice President (since 2013), Vice President (2005 to 2013), and Chief Legal Officer, Counsel and Secretary (since 2005), Virtus Mutual Fund Complex. | | | Senior Vice President (since 2009), and Vice President, Counsel and Secretary (2008 to 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2005) with Virtus affiliates; Senior Vice President (2013 to 2014), Vice President (2012 to 2013), Assistant Secretary (since 2012), and Secretary and Chief Legal Officer (2005 to 2012), The Zweig Closed-End Funds; Assistant Secretary (since 2013), and Vice President, Chief Legal Officer, Counsel and Secretary (2010 to 2013), Virtus Variable Insurance Trust; Vice President and Assistant Secretary (since 2011), Duff & Phelps Global Utility Income Fund Inc.; Senior Vice President and Assistant Secretary (2013 to 2014), Vice President and Assistant Secretary (2012 to 2013), and Vice President, Chief Legal Officer, Counsel and Secretary (2011 to 2012), Virtus Closed-End Funds (3 portfolios); and Assistant Secretary (since 2013), Virtus Alternative Solutions Trust. | |
|
Engberg, Nancy J.
YOB: 1956
|
| | Vice President and Chief Compliance Officer (since 2011), Virtus Mutual Fund Complex. | | | Vice President (since 2008) and Chief Compliance Officer (2008 to 2011 and since 2016), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various officer positions (since 2003) with Virtus affiliates; Vice President (since 2010) and Chief Compliance Officer (since 2011), Virtus Variable Insurance Trust; Vice President and Chief Compliance Officer (since 2011), Virtus Closed-End Funds; Vice President and Chief Compliance Officer (since 2012), The Zweig Closed-End Funds; Vice President and Chief Compliance Officer (since 2013), Virtus Alternative Solutions Trust; Chief Compliance Officer (since 2015), ETFis Series Trust I; and Chief Compliance Officer (since 2015), Virtus ETF Trust II. | |
|
Waltman, Francis G.
YOB: 1962
|
| | Executive Vice President (since 2013), and Senior Vice President (2008 to 2013), Virtus Mutual Fund Complex. | | | Executive Vice President, Product Development (since 2009), Virtus Investment Partners, Inc. and/or certain of its subsidiaries; various senior officer positions (since 2006) with Virtus affiliates; Executive Vice President (since 2013), and Senior Vice President (2010 to 2013), Virtus Variable Insurance Trust; Executive Vice President (since 2013), and Senior Vice President (2011 to 2013), Virtus Closed-End Funds; Director (since 2013), Virtus Global Funds PLC; and Executive Vice President (since 2013), Virtus Alternative Solutions Trust. | |
Independent Trustees
|
| |
Dollar Range of Equity Securities in a Fund of the Trust
(1)
|
| |
Aggregate Dollar Range of
Trustee Ownership in all Funds Overseen by Trustee in Family of Investment Companies (1) |
|
Thomas J Brown (2) | | |
None
|
| |
None
|
|
Donald C. Burke (2) | | |
None
|
| |
Over $100,000
|
|
Roger A. Gelfenbien (2) | | |
None
|
| |
None
|
|
John R. Mallin (2) | | |
None
|
| |
None
|
|
Hassell H. McClellan | | |
None
|
| |
None
|
|
Independent Trustees
|
| |
Dollar Range of Equity Securities in a Fund of the Trust
(1)
|
| |
Aggregate Dollar Range of
Trustee Ownership in all Funds Overseen by Trustee in Family of Investment Companies (1) |
|
Philip McLoughlin | | |
EM Debt Fund – $10,001-$50,000
EM Equity Income Fund – $10,001-$50,000
EM Opportunities Fund – Over $100,000
Equity Trend Fund – $10,001-$50,000
Foreign Opportunities Fund – $10,001-$50,000
Global Infrastructure Fund – $50,001-$100,000
Herzfeld Fund – $10,001-$50,000
International Real Estate Fund – $1-$10,000
International Wealth Masters Fund – $10,001-$50,000
Multi-Sector Short Term Bond Fund – $10,001-$50,000
Real Estate Fund – $50,001-$100,000
Sector Trend Fund – $10,001-$50,000
Senior Floating Rate Fund – $1-$10,000
|
| |
Over $100,000
|
|
Geraldine M. McNamara | | |
EM Opportunities Fund – $10,001-$50,000
Foreign Opportunities Fund – $50,001-$100,000
Global Infrastructure Fund – Over $100,000
Low Duration Income Fund – Over $100,000
Multi-Sector Short Term Bond Fund – over $100,000
Real Estate Fund – $50,001-$100,000
Senior Floating Rate Fund – $10,001-$50,000
|
| |
Over $100,000
|
|
James M. Oates | | |
EM Opportunities Fund – $50,001-$100,000
Foreign Opportunities Fund – Over $100,000
Global Infrastructure Fund – $10,001-$50,000
Global Opportunities Fund – Over $100,000
Herzfeld Fund – Over $100,000
International Equity Fund – $10,001-$50,000
Wealth Masters Fund – $10,001-$50,000
|
| |
Over $100,000
|
|
Richard E. Segerson | | |
Equity Trend Fund – $10,001-$50,000
Foreign Opportunities Fund – $10,001-$50,000
Multi-Sector Short Term Bond Fund – $10,001-$50,000
Real Estate Fund – $10,001-$50,000
|
| |
Over $100,000
|
|
Ferdinand L.J. Verdonck | | |
EM Opportunities Fund $10,001-$50,000
Foreign Opportunities Fund – $10,001-$50,000
Global Infrastructure Fund – $10,001-$50,000
Multi-Sector Intermediate Bond Fund – $10,001-$50,000
Real Estate Fund – $1-$10,000
|
| |
Over $100,000
|
|
| |
Interested Trustee
|
| | | | | | |
George R. Aylward | | |
Alternatives Diversifier Fund – $1-$10,000
Equity Trend Fund – $10,001-$50,000
Foreign Opportunities Fund – $1-$10,000
Herzfeld Fund – $10,001-$50,000
Multi-Sector Short Term Bond Fund – Over $100,000
|
| |
Over $100,000
|
|
| | |
Aggregate Compensation from Trust
|
| |
Total Compensation From Trust and Fund
Complex Paid to Trustees |
|
Independent Trustees | | | | ||||
Hassell H. McClellan | | |
$154,561
|
| |
$314,000 (55 Funds)
|
|
Philip R. McLoughlin | | |
$244,427
|
| |
$722,000 (69 funds)
|
|
Geraldine M. McNamara | | |
$168,352
|
| |
$389,406 (59 funds)
|
|
James M. Oates | | |
$172,706
|
| |
$374,500 (56 funds)
|
|
Richard E. Segerson | | |
$168,352
|
| |
$243,000 (46 funds)
|
|
Ferdinand L.J. Verdonck | | |
$168,352
|
| |
$243,000 (46 funds)
|
|
Interested Trustee | | | | ||||
George R. Aylward | | |
None
|
| |
None
|
|
Fund
|
| |
Investment Advisory Fee
|
| |||||||||
Alternatives Diversifier | | |
0.00%
|
| | | | | | | | | |
Essential Resources Fund | | |
1.10%
|
| | | | | | | | | |
Tax-Exempt Bond Fund | | |
0.45%
|
| | | | | | | | | |
Fund
|
| |
Investment Advisory Fee
|
| ||||||||||||||||||
| | |
1
st
$1 Billion
|
| |
$1+ Billion through $2
Billion |
| |
$2+ Billion
|
| | | | | | | ||||||
CA Tax-Exempt Bond Fund | | |
0.45%
|
| | | | 0.40 % | | | | | | 0.35 % | | | | | | | | |
Global Infrastructure Fund | | |
0.65%
|
| | | | 0.60 % | | | | | | 0.55 % | | | | | | | | |
Global Opportunities Fund | | |
0.85%
|
| | | | 0.80 % | | | | | | 0.75 % | | | | | | | | |
Global Real Estate Fund | | |
0.85%
|
| | | | 0.80 % | | | | | | 0.75 % | | | | | | | | |
High Yield Fund | | |
0.65%
|
| | | | 0.60 % | | | | | | 0.55 % | | | | | | | | |
International Real Estate Fund
|
| |
1.00%
|
| | | | 0.95 % | | | | | | 0.90 % | | | | | | | | |
Low Duration Income Fund | | |
0.55%
|
| | | | 0.50 % | | | | | | 0.45 % | | | | | | | | |
Multi-Sector Intermediate Bond
Fund |
| |
0.55%
|
| | | | 0.50 % | | | | | | 0.45 % | | | | | | | | |
Real Estate Fund | | |
0.75%
|
| | | | 0.70 % | | | | | | 0.65 % | | | | | | | | |
Senior Floating Rate Fund | | |
0.60%
|
| | | | 0.55 % | | | | | | 0.50 % | | | | | | | | |
| | |
1
st
$2 Billion
|
| |
$2+ Billion through $4
Billion |
| |
$4+ Billion
|
| | | | | | | ||||||
Foreign Opportunities Fund | | |
0.85%
|
| | | | 0.80 % | | | | | | 0.75 % | | | | | | | | |
Global Equity Trend Fund | | |
1.00%
|
| | | | 0.95 % | | | | | | 0.90 % | | | | | | | | |
International Equity Fund | | |
0.85%
|
| | | | 0.80 % | | | | | | 0.75 % | | | | | | | | |
Low Volatility Fund | | |
0.95%
|
| | | | 0.90 % | | | | | | 0.85 % | | | | | | | | |
Multi-Asset Trend Fund | | |
1.00%
|
| | | | 0.95 % | | | | | | 0.90 % | | | | | | | | |
| | | | | |
1
st
$1 Billion
|
| |
$1+ Billion
|
| | | | | | | ||||||
Bond Fund | | | | | | | | 0.45 % | | | | | | 0.40 % | | | | | | | | |
EM Debt Fund | | | | | | | | 0.75 % | | | | | | 0.70 % | | | | | | | | |
EM Equity Income Fund | | | | | | | | 1.05 % | | | | | | 1.00 % | | | | | | | | |
EM Opportunities Fund | | | | | | | | 1.00 % | | | | | | 0.95 % | | | | | | | | |
EM Small-Cap Fund | | | | | | | | 1.20 % | | | | | | 1.15 % | | | | | | | | |
Greater European Fund | | | | | | | | 0.85 % | | | | | | 0.80 % | | | | | | | | |
Herzfeld Fund | | | | | | | | 1.00 % | | | | | | 0.95 % | | | | | | | | |
International Small-Cap Fund | | | | | | | | 1.00 % | | | | | | 0.95 % | | | | | | | | |
International Wealth Masters Fund | | | | | | | | 0.90 % | | | | | | 0.85 % | | | | | | | | |
Sector Trend Fund | | | | | | | | 0.45 % | | | | | | 0.40 % | | | | | | | | |
Wealth Masters Fund | | | | | | | | 0.85 % | | | | | | 0.80 % | | | | | | | | |
| | |
1
st
$10 Billion
|
| |
$10+ Billion
|
| | | | | | | | | | | | | |||
Equity Trend Fund | | |
1.00%
|
| | | | 0.95 % | | | | | | | | | | | | | | |
| | |
1
st
$1 Billion
|
| |
$1+ Billion through $2
Billion |
| |
$2+ Billion through $10 Billion
|
| |
$10+ Billion
|
| |||||||||
Multi-Sector Short Term Bond
Fund |
| |
0.55%
|
| | | | 0.50 % | | | | | | 0.45 % | | | | | | 0.425 % | | |
| | |
Class A
|
| |
Class B
|
| |
Class C
|
| |
Class I
|
| |
Class R6
|
| |
Class T
|
| |||||||||||||||
Bond Fund | | |
0.85%
|
| | | | 1.60 % | | | | | | 1.60 % | | | | | | 0.60 % | | | | | | N/A | | | | | | N/A | | |
CA Tax-Exempt Bond Fund | | |
0.85%
|
| | | | N/A | | | | | | N/A | | | | | | 0.60 % | | | | | | N/A | | | | | | N/A | | |
EM Debt Fund | | |
1.35%
|
| | | | N/A | | | | | | 2.10 % | | | | | | 1.10 % | | | | | | N/A | | | | | | N/A | | |
EM Equity Income Fund | | |
1.75%
|
| | | | N/A | | | | | | 2.50 % | | | | | | 1.50 % | | | | | | N/A | | | | | | N/A | | |
EM Small-Cap Fund | | |
1.85%
|
| | | | N/A | | | | | | 2.60 % | | | | | | 1.60 % | | | | | | N/A | | | | | | N/A | | |
Equity Trend Fund | | |
1.70%
|
| | | | N/A | | | | | | 2.45 % | | | | | | 1.45 % | | | | | | 1.38 % | | | | | | N/A | | |
Essential Resources Fund | | |
1.65%
|
| | | | N/A | | | | | | 2.40 % | | | | | | 1.40 % | | | | | | N/A | | | | | | N/A | | |
Global Equity Trend Fund | | |
1.75%
|
| | | | N/A | | | | | | 2.50 % | | | | | | 1.50 % | | | | | | N/A | | | | | | N/A | | |
Global Opportunities Fund | | |
1.55%
|
| | | | 2.30 % | | | | | | 2.30 % | | | | | | 1.30 % | | | | | | N/A | | | | | | N/A | | |
| | |
Class A
|
| |
Class B
|
| |
Class C
|
| |
Class I
|
| |
Class R6
|
| |
Class T
|
| |||||||||||||||
Global Real Estate Fund | | |
1.40%
|
| | | | N/A | | | | | | 2.15 % | | | | | | 1.15 % | | | | | | N/A | | | | | | N/A | | |
Greater European Fund | | |
1.45%
|
| | | | N/A | | | | | | 2.20 % | | | | | | 1.20 % | | | | | | N/A | | | | | | N/A | | |
Herzfeld Fund | | |
1.60%
|
| | | | N/A | | | | | | 2.35 % | | | | | | 1.35 % | | | | | | N/A | | | | | | N/A | | |
High Yield Fund | | |
1.15%
|
| | | | 1.90 % | | | | | | 1.90 % | | | | | | 0.90 % | | | | | | N/A | | | | | | N/A | | |
International Equity Fund | | |
1.50%
|
| | | | N/A | | | | | | 2.25 % | | | | | | 1.25 % | | | | | | N/A | | | | | | N/A | | |
International Real Estate Fund | | |
1.50%
|
| | | | N/A | | | | | | 2.25 % | | | | | | 1.25 % | | | | | | N/A | | | | | | N/A | | |
International Small-Cap Fund | | |
1.60%
|
| | | | N/A | | | | | | 2.35 % | | | | | | 1.35 % | | | | | | 1.26 % | | | | | | N/A | | |
International Wealth Masters Fund | | |
1.55%
|
| | | | N/A | | | | | | 2.30 % | | | | | | 1.30 % | | | | | | N/A | | | | | | N/A | | |
Low Duration Income Fund | | |
0.75%
|
| | | | N/A | | | | | | 1.50 % | | | | | | N/A | | | | | | 0.50 % | | | | | | N/A | | |
Low Volatility Equity Fund | | |
1.55%
|
| | | | N/A | | | | | | 2.30 % | | | | | | 1.30 % | | | | | | N/A | | | | | | N/A | | |
Multi-Asset Trend Fund | | |
1.75%
|
| | | | N/A | | | | | | 2.50 % | | | | | | 1.50 % | | | | | | N/A | | | | | | N/A | | |
Multi-Sector Short Term Bond Fund | | |
1.10%
|
| | | | 1.60 % | | | | | | 1.35 % | | | | | | 0.85 % | | | | | | N/A | | | | | | 1.85 % | | |
Senior Floating Rate Fund (1) | | |
1.20%
|
| | | | N/A | | | | | | 1.95 % | | | | | | 0.95 % | | | | | | N/A | | | | | | N/A | | |
Tax-Exempt Bond Fund | | |
0.85%
|
| | | | N/A | | | | | | 1.60 % | | | | | | N/A | | | | | | 0.60 % | | | | | | N/A | | |
Wealth Masters Fund | | |
1.45%
|
| | | | N/A | | | | | | 2.20 % | | | | | | 1.20 % | | | | | | N/A | | | | | | N/A | | |
Fund
|
| |
Subadvisory Fee
|
|
Alternatives Diversifier Fund | | | 0.00% of net assets | |
Equity Trend Fund | | | 20% of the net advisory fee | |
Global Equity Trend Fund | | | 20% of the net advisory fee | |
International Equity Fund | | | 50% of the net advisor fee | |
Multi-Asset Trend Fund | | | 20% of the net advisory fee | |
Sector Fund | | | 20% of the net advisory fee | |
| First $15 billion | | | 0.10% | |
| $15+ billion to $30 billion | | | 0.095% | |
| $30+ billion to $50 billion | | | 0.09% | |
| Greater than $50 billion | | | 0.085% | |
| First $15 billion | | | 0.0325% | |
| $15+ billion to $30 billion | | | 0.0225% | |
| $30+ billion to $50 billion | | | 0.0075% | |
| Greater than $50 billion | | | 0.005% | |
| | |
Aggregate Underwriting
Commissions($) |
| |
Amount Retained by the
Distributors($) |
| |
Amount Reallowed($)
|
| |||||||||||||||||||||||||||||||||||||||||||||
| | |
2013
|
| |
2014
|
| |
2015
|
| |
2013
|
| |
2014
|
| |
2015
|
| |
2013
|
| |
2014
|
| |
2015
|
| |||||||||||||||||||||||||||
Alternatives Diversifier Fund | | | | | 59,290 | | | | | | 201,493 | | | | | | 2,901 | | | | | | 8,765 | | | | | | 4,494 | | | | | | 519 | | | | | | 50,525 | | | | | | 196,999 | | | | | | 2,382 | | |
Bond Fund | | | | | 56,262 | | | | | | 323,276 | | | | | | 29,835 | | | | | | 10,332 | | | | | | 6,669 | | | | | | 3,882 | | | | | | 45,930 | | | | | | 316,607 | | | | | | 25,953 | | |
CA Tax-Exempt Bond Fund | | | | | 12,990 | | | | | | 25,766 | | | | | | 5,342 | | | | | | 11,846 | | | | | | 158 | | | | | | 1,012 | | | | | | 1,144 | | | | | | 25,608 | | | | | | 4,330 | | |
EM Debt Fund | | | | | 20,522 | | | | | | 55,746 | | | | | | 276,847 | | | | | | 2,410 | | | | | | 1,211 | | | | | | 120 | | | | | | 18,112 | | | | | | 54,535 | | | | | | 276,727 | | |
EM Equity Fund | | | | | 12,200 | | | | | | 38,326 | | | | | | 2,198 | | | | | | 1,121 | | | | | | 827 | | | | | | 244 | | | | | | 11,079 | | | | | | 37,499 | | | | | | 1,954 | | |
EM Small-Cap Fund | | | | | — | | | | | | 3.508 | | | | | | 8,925 | | | | | | — | | | | | | 472 | | | | | | 1,432 | | | | | | — | | | | | | 3,036 | | | | | | 7,493 | | |
Equity Trend Fund | | | | | 7,244,089 | | | | | | 1,688,404 | | | | | | 1,950,241 | | | | | | 1,049,773 | | | | | | 1,655,594 | | | | | | 220,097 | | | | | | 6,194,316 | | | | | | 32,810 | | | | | | 1,730,144 | | |
Essential Resources Fund | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Foreign Opportunities Fund | | | | | 1,018,212 | | | | | | 8,953,742 | | | | | | 217,102 | | | | | | 111,080 | | | | | | 75,881 | | | | | | 21,309 | | | | | | 907,132 | | | | | | 8,877,861 | | | | | | 195,793 | | |
Global Equity Trend Fund | | | | | 202,827 | | | | | | 47,748 | | | | | | 17,703 | | | | | | 28,950 | | | | | | 38,912 | | | | | | 2,078 | | | | | | 173,877 | | | | | | 8,836 | | | | | | 15,625 | | |
Global Infrastructure Fund | | | | | 421,103 | | | | | | 34,511 | | | | | | 291,179 | | | | | | 51,890 | | | | | | 33,365 | | | | | | 31,907 | | | | | | 369,213 | | | | | | 1,146 | | | | | | 259,272 | | |
Global Opportunities Fund | | | | | 52,930 | | | | | | 11,736 | | | | | | 60,678 | | | | | | 7,144 | | | | | | 6,586 | | | | | | 4,662 | | | | | | 45,786 | | | | | | 5,150 | | | | | | 56,016 | | |
Global Real Estate Fund | | | | | 55,289 | | | | | | 31,894 | | | | | | 75,556 | | | | | | 7,811 | | | | | | 8,981 | | | | | | 8,492 | | | | | | 47,478 | | | | | | 22,913 | | | | | | 67,064 | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge
as Percentage of Offering Price |
| |
Sales Charge
as Percentage of Net Amount Invested |
| |
Dealer Discount
or Agency Fee as Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 2.25 % | | | | | | 2.30 % | | | | | | 2.00 % | | |
$50,000 but under $100,000 | | | | | 1.25 | | | | | | 1.27 | | | | | | 1.00 | | |
$100,000 but under $500,000 | | | | | 1.00 | | | | | | 1.01 | | | | | | 1.00 | | |
$500,000 but under $1,000,000 | | | | | 0.75 | | | | | | 0.76 | | | | | | 0.75 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge
as Percentage of Offering Price |
| |
Sales Charge
as Percentage of Amount Invested |
| |
Dealer Discount
or Agency Fee as Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 2.75 % | | | | | | 2.83 % | | | | | | 2.25 % | | |
$50,000 but under $100,000 | | | | | 2.25 | | | | | | 2.30 | | | | | | 2.00 | | |
$100,000 but under $250,000 | | | | | 1.75 | | | | | | 1.78 | | | | | | 1.50 | | |
$250,000 but under $500,000 | | | | | 1.25 | | | | | | 1.27 | | | | | | 1.00 | | |
$500,000 but under $1,000,000 | | | | | 1.00 | | | | | | 1.01 | | | | | | 1.00 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge
as Percentage of Offering Price |
| |
Sales Charge
as Percentage of Amount Invested |
| |
Dealer Discount
or Agency Fee as Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 3.75 % | | | | | | 3.90 % | | | | | | 3.25 % | | |
$50,000 but under $100,000 | | | | | 3.50 | | | | | | 3.63 | | | | | | 3.00 | | |
$100,000 but under $250,000 | | | | | 3.25 | | | | | | 3.36 | | | | | | 2.75 | | |
$250,000 but under $500,000 | | | | | 2.25 | | | | | | 2.30 | | | | | | 2.00 | | |
$500,000 but under $1,000,000 | | | | | 1.75 | | | | | | 1.78 | | | | | | 1.50 | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge
as Percentage of Offering Price |
| |
Sales Charge
as Percentage of Amount Invested |
| |
Dealer Discount
or Agency Fee as Percentage of Offering Price |
| |||||||||
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Amount of Transaction at Offering Price
|
| |
Sales Charge
as Percentage of Offering Price |
| |
Sales Charge
as Percentage of Amount Invested |
| |
Dealer Discount
or Agency Fee as Percentage of Offering Price |
| |||||||||
Under $50,000 | | | | | 5.75 % | | | | | | 6.10 % | | | | | | 5.00 % | | |
$50,000 but under $100,000 | | | | | 4.75 | | | | | | 4.99 | | | | | | 4.25 | | |
$100,000 but under $250,000 | | | | | 3.75 | | | | | | 3.90 | | | | | | 3.25 | | |
$250,000 but under $500,000 | | | | | 2.75 | | | | | | 2.83 | | | | | | 2.25 | | |
$500,000 but under $1,000,000 | | | | | 2.00 | | | | | | 2.04 | | | | | | 1.75 | | |
$1,000,000 or more | | | | | None | | | | | | None | | | | | | None | | |
Fund
|
| |
Rule 12b-1 Fees Paid ($)
|
| |
Rule 12b-1 Fees Waived ($)
|
|
Alternitives Diversifier Fund | | |
166,738
|
| |
N/A
|
|
Bond Fund | | |
148,766
|
| |
N/A
|
|
CA Tax-Exempt Bond Fund | | |
56,441
|
| |
N/A
|
|
EM Debt Fund | | |
38,850
|
| |
N/A
|
|
EM Equity Income Fund | | |
4,536
|
| |
N/A
|
|
EM Small-Cap Fund | | |
1,069
|
| |
N/A
|
|
Fund
|
| |
Rule 12b-1 Fees Paid ($)
|
| |
Rule 12b-1 Fees Waived ($)
|
|
Equity Trend Fund | | |
6,504,647
|
| |
N/A
|
|
Essential Resources Fund | | |
265
|
| |
N/A
|
|
Foreign Opportunities Fund | | |
1,503,122
|
| |
N/A
|
|
Global Equity Trend Fund | | |
215,657
|
| |
(6,771)
|
|
Global Infrastructure Fund | | |
283,959
|
| |
N/A
|
|
Global Opportunities Fund | | |
85,765
|
| |
N/A
|
|
Global Real Estate Fund | | |
100,350
|
| |
N/A
|
|
Greater European Fund | | |
36,590
|
| |
N/A
|
|
Herzfeld Fund | | |
55,294
|
| |
N/A
|
|
High Yield Fund | | |
203,106
|
| |
N/A
|
|
International Equity Fund | | |
10,487
|
| |
N/A
|
|
International Real Estate Fund | | |
36,777
|
| |
N/A
|
|
International Small-Cap Fund | | |
7,848
|
| |
N/A
|
|
International Wealth Masters Fund | | |
524
|
| |
N/A
|
|
Low Volatility Equity Fund | | |
7,389
|
| |
N/A
|
|
Multi-Asset Trend Fund | | |
848,215
|
| |
(19,458)
|
|
Multi-Sector Intermediate Bond Fund | | |
537,006
|
| |
N/A
|
|
Multi-Sector Short Term Bond Fund | | |
10,021,629
|
| |
N/A
|
|
Real Estate Fund | | |
2,132,334
|
| |
N/A
|
|
Sector Trend Fund | | |
1,353,758
|
| |
N/A
|
|
Senior Floating Rate Fund | | |
1,087,647
|
| |
N/A
|
|
Wealth Masters Fund | | |
250,199
|
| |
N/A
|
|
Fund
|
| |
Portfolio Manager(s)
|
|
Alternatives Diversifier Fund | | |
David Dickerson
Carlton Neel
|
|
Bond Fund | | |
David L. Albrycht
Christopher J. Kelleher
|
|
CA Tax-Exempt Bond Fund | | | Timothy M. Heaney | |
EM Debt Fund | | |
David L. Albrycht
Stephen H. Hooker
Daniel P. Senecal
|
|
Fund
|
| |
Portfolio Manager(s)
|
|
EM Equity Income Fund | | |
James Collery
David Hogarty
John Looby
Ian Madden
Gareth Maher
Massimiliano Tondi
|
|
EM Opportunities Fund | | |
Brian Bandsma
Matthew Benkendorf
Jin Zhang
|
|
EM Small-Cap Fund | | | Craig Thrasher | |
Equity Trend Fund | | |
Warun Kumar
Amy Robinson
|
|
Essential Resources Fund | | |
Andros Florides
Colm O'Connor
Noel O'Halloran
|
|
Foreign Opportunities Fund | | |
Matthew Benkendorf
Daniel Kranson
David Souccar
|
|
Global Equity Trend Fund | | |
Warun Kumar
Amy Robinson
|
|
Global Infrastructure Fund | | |
Connie M. Luecke
Randle L. Smith
|
|
Global Opportunities Fund | | |
Matthew Benkendorf
Ramiz Chelat
|
|
Global Real Estate Fund | | |
Geoffrey P. Dybas
Frank J. Haggerty
|
|
Greater European Fund | | | Daniel Kranson | |
Herzfeld Fund | | |
Erik M. Herzfeld
Thomas J. Herzfeld
|
|
High Yield Fund | | |
David L. Albrycht
Kyle A. Jennings
Francesco Ossino
Jonathan R. Stanley
|
|
International Equity Fund | | | Frederick A. Brimberg | |
International Real Estate Securities Fund | | |
Geoffrey P. Dybas
Frank J. Haggerty
|
|
International Small-Cap Fund | | |
Craig Stone
Craig Thrasher
|
|
International Wealth Masters Fund | | |
Matthew Houk
Murray Stahl
|
|
Low Duration Income Fund | | |
David L. Albrycht
Benjamin Caron
Christopher J. Kelleher
|
|
Low Volatility Fund | | |
Brendan R. Finneran
Robert F. Hofeman, Jr.
|
|
Multi-Asset Trend Fund | | |
Warun Kumar
Amy Robinson
|
|
Multi-Sector Intermediate Bond Fund | | | David L. Albrycht | |
Fund
|
| |
Portfolio Manager(s)
|
|
Multi-Sector Short Term Bond Fund | | | David L. Albrycht | |
Real Estate Fund | | |
Geoffrey P. Dybas
Frank J. Haggerty
|
|
Sector Trend Fund | | |
Warun Kumar
Amy Robinson
|
|
Senior Floating Rate Fund | | |
David L. Albrycht
Kyle A. Jennings
Francesco Ossino
|
|
Virtus Tax-Exempt Bond Fund | | |
Timothy M. Heaney
Lisa H. Leonard
|
|
Wealth Masters Fund | | |
Matthew Houk
Murray Stahl
|
|
| | |
Registered Investment Companies
|
| |
Other Pooled Investment Vehicles
(PIVs) |
| |
Other Accounts
|
| |||||||||
Portfolio Manager
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
|
David L. Albrycht | | |
13
|
| |
$1.7 billion
|
| |
1
|
| |
$22 million
|
| |
0
|
| |
$0
|
|
Brian Bandsma * | | |
3
|
| |
$8.6 billion
|
| |
8
|
| |
$10.7 billion
|
| |
19
|
| |
$5.2 billion
|
|
Matthew Benkendorf | | |
1
|
| |
$14 million
|
| |
12
|
| |
$5.4 billion
|
| |
17
|
| |
$3.1 billion
|
|
Frederick Brimberg | | |
2
|
| |
$104 million
|
| |
0
|
| |
$0
|
| |
742
|
| |
$168 million
|
|
Ramiz Chelat * | | |
2
|
| |
$194 million
|
| |
11
|
| |
$4.6 billion
|
| |
22
|
| |
$4.0 billion
|
|
James Collery | | |
9
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$ 1.8 billion
|
|
David Dickerson | | |
6
|
| |
$1.2 billion
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Geoffrey Dybas | | |
1
|
| |
$86.9 million
|
| |
1
|
| |
$24.2 million
|
| |
11
|
| |
$588 million
|
|
Brendan R. Finneran | | |
1
|
| |
$145 million
|
| |
0
|
| |
$0
|
| |
120
|
| |
$448 million
|
|
Andros Florides | | |
0
|
| |
$0
|
| |
2
|
| |
$60.1 million
|
| |
4
|
| |
$80.7 million
|
|
Frank J. Haggerty, Jr. | | |
1
|
| |
$86.9 million
|
| |
1
|
| |
$24.2 million
|
| |
11
|
| |
$588 million
|
|
Timothy M. Heaney | | |
1
|
| |
$192 million
|
| |
0
|
| |
$0
|
| |
16
|
| |
$200 million
|
|
Erik Herzfeld | | |
1
|
| |
$37 million
|
| |
0
|
| |
$0
|
| |
286
|
| |
$200 million
|
|
Thomas J. Herzfeld | | |
1
|
| |
$37 million
|
| |
0
|
| |
$0
|
| |
286
|
| |
$200 million
|
|
Robert F. Hofeman, Jr. | | |
1
|
| |
$145 million
|
| |
0
|
| |
$0
|
| |
120
|
| |
$448 million
|
|
| | |
Registered Investment Companies
|
| |
Other Pooled Investment Vehicles
(PIVs) |
| |
Other Accounts
|
| |||||||||
Portfolio Manager
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
|
David Hogarty | | |
9
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$1.8 billion
|
|
Stephen H. Hooker | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Matthew Houk | | |
2
|
| |
$328 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Kyle A. Jennings | | |
2
|
| |
$255 million
|
| |
1
|
| |
$5 million
|
| |
0
|
| |
$0
|
|
Christopher J. Kelleher | | |
4
|
| |
$702 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Daniel Kranson | | |
0
|
| |
$0
|
| |
2
|
| |
$955 million
|
| |
0
|
| |
$0
|
|
Warun Kumar | | |
8
|
| |
$3.5 billion
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
John Looby | | |
9
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$1.8 billion
|
|
Connie M. Luecke | | |
1
|
| |
$101 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Ian Madden | | |
9
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$1.8 billion
|
|
Gareth Maher | | |
9
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$1.8 billion
|
|
Carlton Neel | | |
6
|
| |
$1.2 billion
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Colm O'Connor | | |
1
|
| |
$81.2 million
|
| |
2
|
| |
$99.9 million
|
| |
3
|
| |
$78.4 million
|
|
Noel O'Halloran | | |
1
|
| |
$4.0 million
|
| |
13
|
| |
$769 million
|
| |
0
|
| |
$0
|
|
Francesco Ossino | | |
2
|
| |
$272 million
|
| |
1
|
| |
$5 million
|
| |
0
|
| |
$0
|
|
Amy Robinson | | |
8
|
| |
$3.5 billion
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Daniel Senecal | | |
1
|
| |
$218 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Randle L. Smith | | |
1
|
| |
$101 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
David Souccar * | | |
5
|
| |
$2.4 billion
|
| |
9
|
| |
$3.4 billion
|
| |
5
|
| |
$933 million
|
|
Murray Stahl | | |
9
|
| |
$1.4 billion
|
| |
1
|
| |
$102 million
|
| |
1036
|
| |
$1.3 billion
|
|
Jonathan R. Stanley | | |
3
|
| |
$490 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Craig Stone | | |
6
|
| |
$549 million
|
| |
0
|
| |
$0
|
| |
406
|
| |
$2 billion
|
|
Craig Thrasher | | |
1
|
| |
$44 million
|
| |
0
|
| |
$0
|
| |
2
|
| |
$7 million
|
|
Massimiliano Tondi | | |
1
|
| |
$2.0 billion
|
| |
14
|
| |
$1.5 billion
|
| |
15
|
| |
$1.8 billion
|
|
Jin Zhang * | | |
3
|
| |
$8.6 billion
|
| |
7
|
| |
$9.9 billion
|
| |
19
|
| |
$5.2 billion
|
|
| | |
Registered Investment Companies
|
| |
Other Pooled Investment Vehicles
(PIVs) |
| |
Other Accounts
|
| |||||||||
Portfolio Manager
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
| |
Number of
Accounts |
| |
Total Assets
|
|
David Albrycht | | |
1
|
| |
$89 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Brian Bandsma * | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
1
|
| |
$69.2 million
|
|
Matthew Benkendorf | | |
0
|
| |
$0
|
| |
1
|
| |
$271 million
|
| |
0
|
| |
$0
|
|
Ramiz Chelat * | | |
0
|
| |
$0
|
| |
1
|
| |
$291 million
|
| |
0
|
| |
$0
|
|
James Collery | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
David Hogarty | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
Kyle A. Jennings | | |
1
|
| |
$89 million
|
| |
1
|
| |
$59 million
|
| |
0
|
| |
$0
|
|
Warun Kumar | | |
1
|
| |
$612 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
John Looby | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
Ian Madden | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
Gareth Maher | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
Francesco Ossino | | |
1
|
| |
$89 million
|
| |
1
|
| |
$59 million
|
| |
0
|
| |
$0
|
|
Amy Robinson | | |
1
|
| |
$612 million
|
| |
0
|
| |
$0
|
| |
0
|
| |
$0
|
|
Murray Stahl | | |
0
|
| |
$0
|
| |
19
|
| |
$385 million
|
| |
6
|
| |
$262 million
|
|
Massimiliano Tondi | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
2
|
| |
$349 million
|
|
Jin Zhang * | | |
0
|
| |
$0
|
| |
0
|
| |
$0
|
| |
1
|
| |
$69.2 million
|
|
Fund
|
| |
Benchmark(s) and/or Peer Group
|
|
Bond Fund | | | Barclays U.S. Aggregate Bond Index | |
CA Tax-Exempt Bond Fund | | | Lipper California Municipal Debt Universe | |
EM Debt Fund | | | Lipper Emerging Markets Debt | |
Global Infrastructure Fund | | | MSCI World Infrastructure Sector Capped Index | |
Global Real Estate Fund | | | FTSE EPRA NAREIT Developed Rental Index | |
High Yield Fund | | | Barclays Capital U.S. High-Yield 2% Issuer Capped Bond Index | |
International Real Estate Fund | | | FTSE Global Rental x U.S. Index | |
International Small-Cap Fund | | | MSCI ACWI ex U.S. Small Cap Index | |
Low Duration Income Fund | | | Lipper Short-Intermediate Investment Grade Funds | |
Low Volatility Equity Fund | | | Strategic Insights Alternative US Option Hedge Strategy Fund | |
Multi-Sector Intermediate Bond Fund | | | Lipper Multi-Sector Income Funds | |
Multi-Sector Short Term Bond Fund | | | Lipper Short Investment Grade Debt Funds | |
Real Estate Fund | | | FTSE NAREIT Equity REITs Index | |
Senior Floating Rate Fund | | | Lipper Loan Participation Funds | |
Tax-Exempt Bond Fund | | | Lipper General Municipal Debt Funds | |
Portfolio Manager
|
| |
Dollar Range of Equity Securities Beneficially Owned in Fund Managed
|
| |||
David L. Albrycht | | | Bond Fund | | |
None
|
|
| | | EM Debt Fund | | |
None
|
|
| | | High Yield Fund | | |
None
|
|
| | | Multi-Sector Intermediate Bond Fund | | |
$10,001 - $100,000
|
|
| | |
Multi-Sector Short Term Bond Fund
|
| |
$10,001 - $100,000
|
|
| | | Senior Floating Rate Fund | | |
None
|
|
Brian Bandsma * | | | EM Opportunities Fund | | |
[___]
|
|
Matthew Benkendorf ** | | | EM Opportunities Fund | | |
None
|
|
| | | Foreign Opportunities Fund | | |
None
|
|
| | Global Opportunities Fund | | |
Over $1,000,000
|
| |
Frederick A. Brimberg | | | International Equity Fund | | |
$100,001 - $500,000
|
|
Ramiz Chelat * | | | EM Opportunities Fund | | |
[___]
|
|
James Collery | | | EM Equity Income Fund | | |
None
|
|
David Dickerson | | | Alternatives Diversifier Fund | | |
$10,001 - $100,000
|
|
Geoffrey Dybas | | | Global Real Estate Fund | | |
$100,001 - $500,000
|
|
| | | International Real Estate Fund | | |
$10,001 - $100,000
|
|
| | | Real Estate Fund | | |
$100,001- $500,000
|
|
Brendan R. Finneran | | | Low Volatility Fund | | |
$10,001 - $100,000
|
|
Andros Florides | | | Essential Resources Fund | | |
None
|
|
Frank J. Haggerty, Jr. | | | Global Real Estate Fund | | |
None
|
|
| | | International Real Estate Fund | | |
$10,001 - $100,000
|
|
| | | Real Estate Fund | | |
$10,001 - $100,000
|
|
Timothy M. Heaney | | | CA Tax-Exempt Bond Fund | | |
None
|
|
Erik M. Herzfeld | | | Herzfeld Fund | | |
$500,001 - $1,000,000
|
|
Thomas J. Herzfeld | | | Herzfeld Fund | | |
$100,001 - $500,000
|
|
Robert F. Hofeman, Jr. | | | Low Volatility Fund | | |
$10,001 - $100,000
|
|
David Hogarty | | | EM Equity Income Fund | | |
None
|
|
Stephen H. Hooker | | | EM Debt Fund | | |
None
|
|
Matthew Houk | | | International Wealth Masters Fund | | |
None
|
|
| | | Wealth Masters Fund | | |
$1 - $10,000
|
|
Kyle A. Jennings | | | High Yield Fund | | |
None
|
|
| | | Senior Floating Rate Fund | | |
None
|
|
Christopher J. Kelleher | | | Bond Fund | | |
None
|
|
Daniel Kranson, CFA | | | Greater European Fund | | |
$10,001 - $100,000
|
|
Warun Kumar | | |
Equity Trend Fund
Global Equity Trend Fund
Multi-Asset Trend Fund
Sector Trend Fund
|
| |
None
None
None
None
|
|
John Looby | | | EM Equity Income Fund | | |
None
|
|
Connie M. Luecke | | | Global Infrastructure Fund | | |
$500,001 - $1,000,000
|
|
Ian Madden | | | EM Equity Income Fund | | |
None
|
|
Gareth Maher | | | EM Equity Income Fund | | |
None
|
|
Carlton Neel | | | Alternatives Diversifier Fund | | |
$10,001 - $100,000
|
|
Colm O'Connor | | | Essential Resources Fund | | |
None
|
|
Noel O'Halloran | | | Essential Resources Fund | | |
None
|
|
Francesco Ossino | | | High Yield Fund | | |
None
|
|
| | | Senior Floating Rate Fund | | |
$100,001 - $500,000
|
|
Amy Robinson | | | Equity Trend Fund | | |
None
|
|
| | | Global Equity Trend Fund | | |
None
|
|
| | | Multi-Asset Trend Fund | | |
None
|
|
Portfolio Manager
|
| |
Dollar Range of Equity Securities Beneficially Owned in Fund Managed
|
| |||
| | | Sector Trend Fund | | |
None
|
|
Daniel P. Senecal | | | EM Debt Fund | | |
$1 - $10,000
|
|
Randle L. Smith | | | Global Infrastructure Fund | | |
$100,001 - $500,000
|
|
Murray Stahl | | | International Wealth Masters Fund | | |
None
|
|
| | | Wealth Masters Fund | | |
None
|
|
David Souccar * | | | Foreign Opportunities Fund | | |
[___]
|
|
Jonathan R. Stanley | | | High Yield Fund | | |
None
|
|
Craig Stone | | | International Small-Cap Fund | | |
$100,001 - $500,000
|
|
Craig Thrasher | | | International Small-Cap Fund | | |
$10,001 - $100,000
|
|
| | | EM Small-Cap Fund | | |
None
|
|
Massimiliano Tondi | | | EM Equity Income Fund | | |
None
|
|
Jin Zhang * | | | EM Opportunities Fund | | |
[___]
|
|
| | |
Aggregate Amount of Brokerage Commissions ($)
|
| |||||||||||||||
Fund
|
| |
2013
|
| |
2014
|
| |
2015
|
| |||||||||
Alternatives Diversifier Fund | | | | | 7,257 | | | | | | 11,270 | | | | | | 13,236 | | |
Bond Fund | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
CA Tax-Exempt Bond Fund | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
EM Debt Fund | | | | | N/A | | | | | | N/A | | | | | | 53 | | |
EM Equity Income Fund | | | | | 9,150 | | | | | | 74,774 | | | | | | 59,583 | | |
EM Small Cap Fund | | | | | N/A | | | | | | 10,679 | | | | | | 8,475 | | |
Equity Trend Fund | | | | | 1,523,912 | | | | | | 2,889,384 | | | | | | 3,924,639 | | |
Essential Resources | | | | | N/A | | | | | | N/A | | | | | | 5,760 | | |
Foreign Opportunities Fund | | | | | 1,065,828 | | | | | | 891,751 | | | | | | 842,609 | | |
Global Equity Trend Fund | | | | | 59,109 | | | | | | 110,452 | | | | | | 176,400 | | |
Global Infrastructure Fund | | | | | 38,887 | | | | | | 40,777 | | | | | | 53,947 | | |
Global Opportunities Fund | | | | | 72,906 | | | | | | 51,842 | | | | | | 53,540 | | |
Global Real Estate Fund | | | | | 17,488 | | | | | | 19,218 | | | | | | 32,660 | | |
Greater European Fund | | | | | 12,493 | | | | | | 12,960 | | | | | | 11,731 | | |
Herzfeld Fund | | | | | 6,161 | | | | | | 12,362 | | | | | | 26,360 | | |
High Yield Fund | | | | | N/A | | | | | | 970 | | | | | | 1,970 | | |
International Equity Fund | | | | | 206,822* | | | | | | 18,477 | | | | | | 17,112 | | |
| | |
Aggregate Amount of Brokerage Commissions ($)
|
| |||||||||||||||
Fund
|
| |
2013
|
| |
2014
|
| |
2015
|
| |||||||||
International Real Estate Fund | | | | | 15,378 | | | | | | 21,160 | | | | | | 16,014 | | |
International Small-Cap Fund | | | | | 17,947 | | | | | | 78,348 | | | | | | 100,236 | | |
International Wealth Masters Fund | | | | | N/A | | | | | | N/A | | | | | | 5,612 | | |
Low Volatility Equity Fund | | | | | 212 | | | | | | 743 | | | | | | 562 | | |
Multi-Asset Trend Fund | | | | | 208,135 | | | | | | 380,978 | | | | | | 461,360 | | |
Multi-Sector Intermediate Bond Fund | | | | | 47 | | | | | | 697 | | | | | | N/A | | |
Multi-Sector Short Term Bond Fund | | | | | 6,800 | | | | | | 570 | | | | | | N/A | | |
Real Estate Fund | | | | | 469,702 | | | | | | 449,837 | | | | | | 408,884 | | |
Sector Trend Fund | | | | | 161,114 | | | | | | 198,890 | | | | | | 509,691 | | |
Senior Floating Rate Fund | | | | | 152 | | | | | | 2,010 | | | | | | N/A | | |
Wealth Masters Fund | | | | | 17,491 | | | | | | 69,382 | | | | | | 8,475 | | |
|
Fund
|
| |
Broker/Dealer
|
| |
Value ($)
|
| |||
| Bond Fund | | | Bank of America LLC | | | | $ | 1,221 | | |
| | | | Citicorp Securities Services LLC | | | | | 370 | | |
| | | | JPMorgan Chase & Co. | | | | | 1,871 | | |
| | | | Morgan Stanley | | | | | 3,351 | | |
| | | | Jefferies & Company, Inc. | | | | | 190 | | |
| | | | Goldman Sachs & Co. | | | | | 1,667 | | |
| | | | Barclays Bank PLC | | | | | 270 | | |
| | | | Citigroup Global Markets, Inc. | | | | | 368 | | |
| | | | Deutsche Bank Securities, Inc. | | | | | 192 | | |
| | | | Wells Fargo & Co. | | | | | 760 | | |
|
Fund
|
| |
Broker/Dealer
|
| |
Value ($)
|
| |||
| Foreign Opportunities Fund | | | UBS AG | | | | | 33,420 | | |
| High Yield Fund | | | Citicorp Securities Services LLC | | | | | 123 | | |
| | | | Goldman Sachs & Co. | | | | | 479 | | |
| | | | JPMorgan Chase & Co. | | | | | 243 | | |
|
Multi-Sector Intermediate
Bond Fund
|
| | Credit Suisse First Boston Corp. | | | | | 955 | | |
| | | | Wells Fargo & Co. | | | | | 2,943 | | |
| | | | Bank of America LLC | | | | | 7,383 | | |
| | | | JPMorgan Chase & Co. | | | | | 4,965 | | |
| | | | Morgan Stanley | | | | | 2,496 | | |
| | | | Barclays Bank PLC | | | | | 483 | | |
| | | | Goldman Sachs & Co. | | | | | 2,995 | | |
| | | | Jefferies & Company, Inc. | | | | | 1,157 | | |
| | | | Citicorp Securities Services LLC | | | | | 3,567 | | |
| | | | Deutsche Bank Securities, Inc. | | | | | 918 | | |
|
Multi-Sector Short-Term Bond
Fund
|
| | Goldman Sachs & Co. | | | | | 57,853 | | |
| | | | Wells Fargo & Co. | | | | | 233,181 | | |
| | | | JPMorgan Chase & Co. | | | | | 364,827 | | |
| | | | Barclays Bank PLC | | | | | 57,865 | | |
| | | | Morgan Stanley | | | | | 111,445 | | |
| | | | Bank of America LLC | | | | | 191,495 | | |
| | | | Citicorp Securities Services LLC | | | | | 143,174 | | |
| | | | Jefferies & Company, Inc. | | | | | 28,549 | | |
| | | | Credit Suisse First Boston Corp. | | | | | 97,124 | | |
| | | | Deutsche Bank Securities, Inc. | | | | | 6,733 | | |
| Global Opportunities Fund | | | Wells Fargo & Co. | | | | | 5,004 | | |
| | | | JPMorgan Chase & Co. | | | | | 2,013 | | |
VIRTUS OPPORTUNITIES TRUST
PART C—OTHER INFORMATION
Item 28. Exhibits
(a) | Amended Declaration of Trust. |
1. | Amended and Restated Agreement and Declaration of Trust dated March 1, 2001, filed via EDGAR (as Exhibit a) with Post-Effective Amendment No. 12 (File No. 033-65137) on January 25, 2002 and incorporated herein by reference. |
2. | Amendment to the Declaration of Trust of Virtus Opportunities Trust (“VOT” or the “Registrant”), dated November 16, 2006, filed via EDGAR (as Exhibit a.2) with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference. |
3. | Amendment to the Declaration of Trust of VOT, dated August 20, 2015, filed via EDGAR (as Exhibit a.3) with Post-Effective Amendment No. 85 (File No. 033-65137) on January 27, 2016 and incorporated herein by reference. |
(b) | Bylaws. |
1. | Amended and Restated By-Laws dated November 16, 2005, filed via EDGAR (as Exhibit b.1) with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference. | |
2. | Amendment No. 1 to the Amended and Restated By-Laws of the Registrant, dated August 23, 2006, filed via EDGAR (as Exhibit b.2) with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference. |
3. | Amendment No. 2 to the Amended and Restated By-Laws of the Registrant, dated August November 17, 2011, filed via EDGAR (as Exhibit b.3) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
(c) | See Articles III, V, VI and VIII of Registrant’s Agreement and Declaration of Trust and Articles II and VII of Registrant’s Bylaws, each as amended. |
(d) | Investment Advisory Contracts. |
1. | Amended and Restated Investment Advisory Agreement between the Registrant, on behalf of Bond Fund, and Virtus Investment Advisers, Inc. (“VIA”) effective November 20, 2002, filed via EDGAR (as Exhibit d.1) with Post-Effective Amendment No. 14 (File No. 033-65137) on January 29, 2004 and incorporated herein by reference. |
a) | Amendment to Amended and Restated Investment Advisory Agreement between Registrant and VIA dated June 8, 2006, filed via EDGAR (as Exhibit d.6) with Post-Effective Amendment No. 22 (File No. 033-65137) on June 9, 2006 and incorporated herein by reference. |
b) | Second Amendment to Amended and Restated Investment Advisory Agreement between Registrant and VIA, dated June 27, 2007, on behalf of CA-Tax Exempt Bond Fund, Global Dividend Fund (formerly Global Infrastructure Fund), High Yield Fund, Market Neutral Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Real Estate Securities Fund, filed via EDGAR (as Exhibit d.7) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
c) | Third Amendment to Amended and Restated Investment Advisory Agreement between Registrant and VIA dated September 24, 2007, on behalf of Alternatives Diversifier Fund, Foreign Opportunities Fund, Global Opportunities Fund, International Real Estate Securities Fund, AlphaSector Rotation Fund (now known as Virtus Sector Trend Fund) and AlphaSector Allocation Fund, filed via EDGAR (as Exhibit d.10) with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference. |
d) | Fourth Amendment to Amended and Restated Investment Advisory Agreement, between the Registrant and VIA on behalf of Senior Floating Rate Fund effective as of January 31, 2008, filed via EDGAR (as Exhibit |
d.13) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
e) | Fifth Amendment to Amended and Restated Investment Advisory Agreement, by and between the Registrant and VIA effective as of October 1, 2008, filed via EDGAR (as Exhibit d.14) with Post-Effective Amendment No. 32 (File No. 033-65137) on January 28, 2009 and incorporated herein by reference. |
f) | Sixth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA on behalf of Global Real Estate Securities Fund, Greater Asia ex Japan Opportunities Fund and Greater European Opportunities Fund effective as of March 2, 2009, filed via EDGAR (as Exhibit d.17) with Post-Effective Amendment No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
g) | Seventh Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of May 29, 2009, filed via EDGAR (as Exhibit d.18) with Post-Effective Amendment No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
h) | Eighth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of September 29, 2009, filed via EDGAR (as Exhibit d.22) with Post-Effective Amendment No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
i) | Ninth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of January 1, 2010, filed via EDGAR (as Exhibit d.26) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
j) | Tenth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of June 30, 2010, filed via EDGAR (as Exhibit d.27) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
k) | Eleventh Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of September 14, 2010, filed via EDGAR (as Exhibit d.28) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
l) | Twelfth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of January 1, 2011, filed via EDGAR (as Exhibit d.29) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
m) | Thirteenth Amendment to Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of March 15, 2011, filed via EDGAR (as Exhibit d.30) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
n) | Fourteenth Amendment to Amended and Restated Investment Advisory Agreement between Registrant and VIA effective as of February 6, 2012, on behalf of Dynamic Trend Fund (formerly Dynamic AlphaSector Fund and Market Neutral Fund), filed via EDGAR (as Exhibit d.15) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
o) | Fifteenth Amendment to the Amended and Restated Investment Advisory Agreement between Registrant and VIA effective as of August 28, 2012, on behalf of Emerging Markets Debt Fund, Emerging Markets Equity Income Fund, Herzfeld Fund, International Small-Cap Fund and Wealth Masters Fund, filed via EDGAR (as Exhibit d.16) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
p) | Sixteenth Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of December 18, 2012, on behalf of Disciplined Equity Style Fund, Disciplined Select Bond Fund and Disciplined Select Country Fund, filed via EDGAR (as Exhibit d.17) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
q) | Seventeenth Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of June 10, 2013, on behalf of Low Volatility Equity Fund, filed via |
EDGAR (as Exhibit d.18) with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
r) | Eighteenth Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of December 18, 2013, on behalf of Emerging Markets Small Cap Fund, filed via EDGAR (as Exhibit d.1.r) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
s) | Nineteenth Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of November 13, 2014, on behalf of International Wealth Masters Fund filed via EDGAR (as Exhibit d.1.s) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
t) | Twentieth Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of January 6, 2015, filed via EDGAR (as Exhibit d.1.t) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
u) | Twenty-First Amendment to the Amended and Restated Investment Advisory Agreement, by and between Registrant and VIA effective as of March 19, 2015, on behalf of Virtus Essential Resources Fund, filed via EDGAR (as Exhibit d.1.u) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
v) | Twenty-Second Amendment to the Amended and Restated Investment Advisory Agreement, by and between the Registrant and VIA effective as of May 11, 2015, on behalf of Virtus Multi-Asset Trend Fund, Virtus Sector Trend Fund, Virtus Dynamic Trend Fund, Virtus Global Equity Trend Fund and Virtus Equity Trend Fund, filed via EDGAR (as Exhibit d.1.v) with Post-Effective Amendment No. 85 (File No. 033-65137) on January 27, 2016 and incorporated herein by reference. |
w) | Twenty-Third Amendment to this Amended and Restated Investment Advisory Agreement, by and between the Registrant and VIA effective as of [September 23, 2016], on behalf of Emerging Markets Opportunities Fund, Low Duration Income Fund and Tax-Exempt Bond Fund, to be filed by amendment. |
2. | Subadvisory Agreement between VIA and Duff & Phelps Investment Management Co. (“Duff & Phelps”), dated June 27, 2007, on behalf of Global Dividend Fund and Real Estate Securities Fund, filed via EDGAR (as Exhibit d.9) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
a) | First Amendment to Subadvisory Agreement between VIA and Duff & Phelps dated September 24, 2007, on behalf of International Real Estate Securities Fund, filed via EDGAR (as Exhibit d.11) with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference. |
b) | Second Amendment to Subadvisory Agreement between VIA and Duff & Phelps on behalf of Global Real Estate Securities Fund dated March 2, 2009, filed via EDGAR (as Exhibit d.20) with Post-Effective Amendment No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
c) | Third Amendment to Subadvisory Agreement between VIA and Duff & Phelps on behalf of Global Dividend Fund, Global Real Estate Securities Fund, International Real Estate Securities Fund and Real Estate Securities Fund dated January 1, 2010, filed via EDGAR (as Exhibit d.31) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
3. | Subadvisory Agreement between VIA and Euclid Advisors LLC (“Euclid”) on behalf of Alternatives Diversifier Fund, Sector Trend Fund (formerly AlphaSector Rotation Fund), Multi-Asset Trend Fund (formerly Allocator Premium AlphaSector Fund), Global Equity Trend Fund (formerly Global Premium AlphaSector Fund), and Equity Trend Fund (formerly Premium AlphaSector Fund) dated September 30, 2011, filed via EDGAR (as Exhibit d.32) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
4. | Subadvisory Agreement between VIA and Euclid on behalf of Dynamic Trend Fund (formerly Dynamic AlphaSector Fund) dated February 6, 2012, filed via EDGAR (as Exhibit d.22) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
5. | Subadvisory Agreement between VIA and Euclid on behalf of International Equity Fund dated July 23, 2013, filed via EDGAR (as Exhibit d.7) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
6. | Subadvisory Agreement between VIA and Thomas J. Herzfeld Advisors, Inc. (“Herzfeld”) on behalf of Herzfeld Fund dated August 28, 2012, filed via EDGAR (as Exhibit d.32) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
7. | Subadvisory Agreement between VIA and Horizon Asset Management LLC (“Horizon”) on behalf of Wealth Masters Fund dated August 28, 2012, filed via EDGAR (as Exhibit d.25) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
8. | Subadvisory Agreement between VIA and Horizon on behalf of International Wealth Masters Fund dated November 13, 2014, filed via EDGAR (as Exhibit d.13) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
9. | Subadvisory Agreement between VIA and Kayne Anderson Rudnick Investment Management, LLC (“Kayne Anderson Rudnick”) on behalf of International Small-Cap Equity Fund dated August 28, 2012, filed via EDGAR (as Exhibit d.26) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
a) | Amendment to Subadvisory Agreement between VIA and Kayne Anderson Rudnick dated December 18, 2013, on behalf of Emerging Markets Small-Cap Fund, filed via EDGAR (as Exhibit d.11.a) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
10. | Subadvisory Agreement between VIA and Kleinwort Benson Investors International, Ltd. (“KBI”) on behalf of Emerging Markets Equity Income Fund dated August 28, 2012, filed via EDGAR (as Exhibit d.27) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
11. | Subadvisory Agreement between VIA and KBI on behalf of Virtus Essential Resources Fund dated March 19, 2015, filed via EDGAR (as Exhibit d.16) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
12. | Subadvisory Agreement between VIA and Newfleet Asset Management, LLC (formerly SCM Advisors LLC) (“Newfleet”) dated July 1, 1998, filed via EDGAR (as Exhibit d.2) with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference. |
a) | Investment Subadvisory Agreement Amendment between VIA and Newfleet effective July 1, 1998 for the purpose of amending the Subadvisory Agreement of the same date in order to correct a typographical error in such Subadvisory Agreement, filed via EDGAR (as Exhibit d.3) with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference. |
b) | Amendment to Subadvisory Agreement between VIA and Newfleet dated November 20, 2002, filed via EDGAR (as Exhibit d.4) with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference. |
c) | Third Amendment to Subadvisory Agreement between VIA and Newfleet dated September 1, 2006, filed via EDGAR (as Exhibit d.5) with Post-Effective Amendment No. 23 (File No. 033-65137) on January 30, 2007 and incorporated herein by reference. |
d) | Fourth Amendment to Subadvisory Agreement between VIA and Newfleet, on behalf of High Yield Fund, dated June 27, 2007, filed via EDGAR (as Exhibit d.9) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
e) | Fifth Amendment to Subadvisory Agreement between VIA and Newfleet, on behalf of Bond Fund and High Yield Fund, dated January 1, 2010, filed via EDGAR (as Exhibit d.23) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
f) | Sixth Amendment to Subadvisory Agreement between VIA and Newfleet on behalf of Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund and Senior Floating Rate Fund dated June 2, 2011, filed via EDGAR (as Exhibit d.38) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
g) | Seventh Amendment to Subadvisory Agreement between VIA and Newfleet on behalf of CA Tax-Exempt Bond Fund dated September 30, 2011, filed via EDGAR (as Exhibit d.39) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
h) | Eighth Amendment to Subadvisory Agreement between VIA and Newfleet, on behalf of Low Duration Income Fund and Tax-Exempt Bond Fund, dated [September 23, 2016], to be filed by amendment. |
13. | Subadvisory Agreement between VIA and Newfleet on behalf of Emerging Markets Debt Fund dated August 28, 2012, filed via EDGAR (as Exhibit d.29) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
14. | Subadvisory Agreement between VIA and Rampart Investment Management Company, LLC (“Rampart”) on behalf of Low Volatility Equity Fund dated June 10, 2013, filed via EDGAR with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
15. | Subadvisory Agreement between VIA and Vontobel Asset Management, Inc. (“Vontobel”) dated September 24, 2007, on behalf of Foreign Opportunities Fund, filed via EDGAR (as Exhibit d.12) with Post-Effective Amendment No. 28 (File No. 033-65137) on November 14, 2007 and incorporated herein by reference. |
a) | First Amendment to Subadvisory Agreement between VIA and Vontobel dated January 1, 2009, filed via EDGAR (as Exhibit d.15) with Post-Effective Amendment No. 33 (File No. 033-65137) on March 2, 2009 and incorporated by reference. |
b) | Second Amendment to Subadvisory Agreement between VIA and Vontobel on behalf of Global Opportunities Fund dated January 28, 2009, filed via EDGAR (as Exhibit d.16) with Post-Effective Amendment No. 33 (File No. 033-65137) on March 2, 2009 and incorporated by reference. |
c) | Third Amendment to Subadvisory Agreement between VIA and Vontobel on behalf of Greater Asia ex Japan Opportunities Fund and Greater European Opportunities Fund dated April 21, 2009, filed via EDGAR (as Exhibit d.19) with Post-Effective Amendment No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
d) | Fourth Amendment to Subadvisory Agreement between VIA and Vontobel on behalf of Foreign Opportunities Fund, Global Opportunities Fund, Greater Asia ex Japan Opportunities Fund and Greater European Opportunities Fund dated January 1, 2010, filed via EDGAR (as Exhibit d.24) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
e) | Fifth Amendment to Subadvisory Agreement between VIA and Vontobel, on behalf of Emerging Markets Opportunities Fund, dated [September 23, 2016], to be filed by amendment. |
(e) | Underwriting Agreement. |
1. | Underwriting Agreement between VP Distributors, LLC (formerly VP Distributors, Inc.) (“VP Distributors”) and Registrant dated July 1, 1998 and filed via EDGAR (as Exhibit e.1) with Post-Effective Amendment No. 15 (File No. 033-65137) on January 25, 2005 and incorporated herein by reference. |
2. | Form of Sales Agreement between VP Distributors and dealers, effective January, 2016, filed via EDGAR (as Exhibit e.2) with Post-effective Amendment No. 35 to the Registration Statement of Virtus Retirement Trust (“VRT”; formerly known as Virtus Institutional Trust) (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
(f) | None. |
(g) | Custodian Agreement. |
1. | Master Global Custody Agreement between each of Registrant, Virtus Equity Trust (“VET”) and Virtus Insight Trust (“VIT”)(collectively, “Virtus Mutual Funds”), and JPMorgan Chase Bank, N.A., dated March 1, 2013, filed via EDGAR (as Exhibit g.1) with Post-Effective Amendment No. 56 to the Registration Statement of VIT (File No. 033-64915) on April 29, 2013 and incorporated herein by reference. |
a) | Amendment to Master Global Custody Agreement, containing a revised Schedule A, by and among Registrant, VET, VIT, VAST, VRT and JPMorgan Chase Bank, N.A., effective as of [September 23, 2016], to be filed by amendment. |
(h) | Other Material Contracts. |
1. | Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services, LLC (“Virtus Fund Services”)) dated January 1, 2010, filed via EDGAR (as Exhibit h.2) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
a) | Amendment to Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services) effective as of April 14, 2010, filed via EDGAR (as Exhibit h.2) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
b) | Second Amendment to Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services) effective as of March 15, 2011, filed via EDGAR (as Exhibit h.3) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
c) | Third Amendment to Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds, VRT and Virtus Fund Services effective as of January 1, 2013, filed via EDGAR (as Exhibit h.1.c) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
d) | Fourth Amendment to Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of January 1, 2015, filed via EDGAR (as Exhibit h.1.d) with Post-effective Amendment No. 104 to VET’s Registration Statement (File No. 002-16590) on July 28, 2015, and incorporated herein by reference. |
e) | Fifth Amendment to Amended and Restated Transfer Agency and Service Agreement between Virtus Mutual Funds, VRT, and Virtus Fund Services, dated January 8, 2016, filed via EDGAR (as Exhibit h.1.e) with Post-effective Amendment No. 35 to the Registration Statement of VRT (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
2. | Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon”), dated April 15, 2011, filed via EDGAR (as Exhibit h.6) with Post-Effective Amendment No. 54 to the Registration Statement of VIT (File No. 033-64915) on April 27, 2012 and incorporated herein by reference. |
a) | Adoption and Amendment Agreement among Virtus Mutual Funds, Virtus Alternative Solutions Trust (“VAST”), Virtus Fund Services and BNY Mellon dated as of March 21, 2014, filed via EDGAR (as Exhibit h.2.b) with Pre-effective Amendment No. 4 to VAST’s Registration Statement (File No. 333-191940) on April 4, 2014, and incorporated herein by reference. |
b) | Amendment to Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VAST, Virtus Fund Services and BNY Mellon dated as of March 21, 2014, filed via EDGAR (as Exhibit h.2.a) with Post-effective Amendment No. 4 to VAST’s Registration Statement (File No. 333-191940) on September 8, 2014, and incorporated herein by reference. |
c) | Amendment to Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VAST, Virtus Fund Services and BNY Mellon dated as of November 12, 2014, filed via EDGAR (as Exhibit h.2.c) with Post-effective Amendment No. 80 (File No. 033-65137) on January 27, 2015, and incorporated herein by reference. |
d) | Amendment to Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VAST, Virtus Fund Services and BNY Mellon dated as of May 28, 2015, filed via EDGAR (as Exhibit h.2.d) with Post-effective Amendment No. 18 to VAST’s Registration Statement (File No. 333-191940) on June 5, 2015, and incorporated herein by reference. |
e) | Amendment to Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VAST, VRT, Virtus Fund Services and BNY Mellon dated as of December 10, 2015, filed via EDGAR (as Exhibit h.2.e) with Post-effective Amendment No. 35 to the Registration Statement of VRT (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
f) | Amendment to Sub-Transfer Agency and Shareholder Services Agreement among Virtus Mutual Funds, VAST, VRT, Virtus Fund Services and BNY Mellon dated [September 23, 2016], to be filed by amendment. |
3. | Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of January 1, 2010, filed via EDGAR (as Exhibit h.4) with PEA No. 36 (File No. 033-65137) on January 28, 2010 and incorporated herein by reference. |
a) | First Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of April 14, 2010, filed via EDGAR (as Exhibit h.5) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
b) | Second Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of June 30, 2010, filed via EDGAR (as Exhibit h.6) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
c) | Third Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of September 14, 2010, filed via EDGAR (as Exhibit h.7) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
d) | Fourth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of January 1, 2011, filed via EDGAR (as Exhibit h.8) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
e) | Fifth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of March 15, 2011, filed via EDGAR (as Exhibit h.9) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
f) | Sixth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and VP Distributors (since assigned to Virtus Fund Services), effective as of August 28, 2012, filed via EDGAR (as Exhibit h.2.f) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
g) | Seventh Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and VP Distributors (since assigned to Virtus Fund Services), effective as of December 18, 2012, filed via EDGAR (as Exhibit h.2.g) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
h) | Eighth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of June 10, 2013, filed via EDGAR with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
i) | Ninth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of December 18, 2013, filed via EDGAR (as Exhibit h.3.i) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
j) | Tenth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of November 13, 2014, filed via EDGAR (as Exhibit h.3.j) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
k) | Eleventh Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of January 1, 2015, filed via EDGAR (as Exhibit h.3.k) with Post-effective Amendment No. 80 (File No. 033-65137) on January 27, 2015, and incorporated herein by reference. |
l) | Twelfth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds and Virtus Fund Services, effective as of March 19, 2015, filed via EDGAR (as Exhibit h.3.l) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
m) | Thirteenth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and Virtus Fund Services, effective as of January 8, 2016, filed via EDGAR (as Exhibit h.3.m) with Post-effective Amendment No. 35 to the Registration Statement of VRT (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
n) | Fourteenth Amendment to Amended and Restated Administration Agreement between Virtus Mutual Funds, VRT and Virtus Fund Services, effective as of [September 23, 2016], to be filed by amendment. |
4. | Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of January 1, 2010, filed via EDGAR (as Exhibit h.5) with Post-Effective Amendment No. 50 to the Registration Statement of VIT (File No. 033-64915) on February 25, 2010 and incorporated herein by reference. |
a) | First Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of June 30, 2010 filed via EDGAR (as Exhibit h.13.) with Post-Effective Amendment No. 52 to the Registration Statement of VIT (File No. 033-64915) on April 28, 2011 and incorporated herein by reference. |
b) | Second Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of September 14, 2010 filed via EDGAR (as Exhibit h.14.) with Post-Effective Amendment No. 52 to the Registration Statement of VIT (File No. 033-64915) on April 28, 2011 and incorporated herein by reference. |
c) | Third Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of March 15, 2011 filed via EDGAR (as Exhibit h.15.) with Post-Effective Amendment No. 52 to the Registration Statement of VIT (File No. 033-64915) on April 28, 2011 and incorporated herein by reference. |
d) | Fourth Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of August 28, 2012, filed via EDGAR (as Exhibit h.4.d) with Post-Effective Amendment No. 56 to the Registration Statement of VIT (File No. 033-64915) on April 29, 2013 and incorporated herein by reference. |
e) | Fifth Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VP Distributors (since assigned to Virtus Fund Services) and BNY Mellon, effective as of December 18, 2012, filed via EDGAR (as Exhibit h.4.e) with Post-Effective Amendment No. 56 to the Registration Statement of VIT (File No. 033-64915) on April 29, 2013 and incorporated herein by reference. |
f) | Sixth Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, Virtus Fund Services and BNY Mellon, effective as of June 10, 2013, filed via EDGAR (as Exhibit h.4.f) with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
g) | Seventh Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, Virtus Fund Services and BNY Mellon, effective as of December 18, 2013, filed via EDGAR (as Exhibit h.4.g) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
h) | Joinder Agreement and Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VAST, Virtus Variable Insurance Trust (“VVIT”), VATS Offshore Fund, |
Ltd. (“VATS”), Virtus Fund Services and BNY Mellon dated February 24, 2014, filed via EDGAR (as Exhibit h.4.h) with Pre-Effective Amendment No. 3 to VAST’s Registration Statement (File No. 333-191940) on March 28, 2014, and incorporated herein by reference. |
i) | Joinder Agreement to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VVIT, VAST, VATS, Virtus Fund Services and BNY Mellon dated December 10, 2015, filed via EDGAR (as Exhibit h.4.i) with Post-effective Amendment No. 35 to the Registration Statement of VRT (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
j) | Amendment to Sub-Administration and Accounting Services Agreement among Virtus Mutual Funds, VRT, VVIT, VAST, VATS, Virtus Fund Services and BNY Mellon dated [September 23, 2016], to be filed by amendment. |
5. | Twenty-Fifth Amended and Restated Expense Limitation Agreement between Registrant and VIA, effective as of [September 23, 2016], to be filed by amendment. |
6. | Second Amended and Restated Fee Waiver Agreement between Registrant and VP Distributors, dated as of March 17, 2011, filed via EDGAR (as Exhibit h.6) with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
7. | Form of Indemnification Agreement with Trustees George R. Aylward, Leroy Keith, Jr., Hassell H. McClellan, Philip R. McLoughlin, Geraldine M. McNamara, James M. Oates, Richard E. Segerson and Ferdinand L.J. Verdonck, effective as of January 21, 2015, filed via EDGAR (as Exhibit h.8) with Post-Effective Amendment No. 104 to the Registration Statement of VET (File No. 002-16590) on July 28, 2015, and incorporated herein by reference. |
8. | *Form of Indemnification Agreement with Trustees Thomas J. Brown, Donald C. Burke, Roger A. Gelfenbien and John R. Mallin, effective as of May 26, 2016, filed via EDGAR (as Exhibit h.8) herewith. |
(i) | Legal Opinion. |
1. | Opinion and consent of Morris, Nichols, Arsht & Tunnell, filed via EDGAR with Pre-Effective Amendment No. 2 (File No. 033-65137) on February 29, 1996 and incorporated herein by reference. |
2. | Opinion of Counsel as to legality of shares dated March 13, 2015, filed via EDGAR (as Exhibit i.2) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
3. | Opinion of Counsel as to legality of shares dated [September 23, 2016], to be filed by amendment. |
4. | Consent of Sullivan & Worcester, to be filed by amendment. |
(j) | Other Opinions. |
1. | Consent of Independent Registered Public Accounting Firm, to be filed by amendment |
(k) | Not applicable. |
(l) | Share Purchase Agreement (the “Share Purchase Agreement”) between Registrant and GMG/Seneca Capital Management, L.P., filed via EDGAR with Pre-Effective Amendment No. 2 (File No. 033-65137) on February 29, 1996 and incorporated herein by reference. |
(m) | Rule 12b-1 Plans. |
1. | Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), effective March 1, 2007, filed via EDGAR (as Exhibit m.1.) with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference. |
a) | Amendment to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 27, 2007, filed via EDGAR (as Exhibit m.4) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
b) | Amendment No. 2 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective September 24, 2007, filed via EDGAR (as Exhibit m.8) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
c) | Amendment No. 3 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective October 1, 2007, filed via EDGAR (as Exhibit m.11) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
d) | Amendment No. 4 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective January 31, 2008, filed via EDGAR (as Exhibit m.13) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
e) | Amendment No. 5 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective March 2, 2009, filed via EDGAR (as Exhibit m.15) with Post-Effective No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
f) | Amendment No. 6 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective April 21, 2009, filed via EDGAR (as Exhibit m.16) with Post-Effective No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
g) | Amendment No. 7 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 30, 2010, filed via EDGAR (as Exhibit m.19) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
h) | Amendment No. 8 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective September 14, 2010, filed via EDGAR (as Exhibit m.21) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
i) | Amendment No. 9 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective March 15, 2011, filed via EDGAR (as Exhibit m.23) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
j) | Amendment No. 10 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective August 28, 2012, filed via EDGAR (as Exhibit m.1.j) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
k) | Amendment No. 11 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective December 18, 2012, filed via EDGAR (as Exhibit m.1.k) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
l) | Amendment No. 12 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 10, 2013, filed via EDGAR with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
m) | Amendment No. 13 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective December 18, 2013, on behalf of Emerging Markets Small-Cap Fund, filed via EDGAR (as Exhibit m.1.m) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
n) | Amendment No. 14 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective November 13, 2014, filed via EDGAR (as Exhibit m.1.n) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
o) | Amendment No. 15 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective March 19, 2015, filed via EDGAR (as Exhibit m.1.o) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
p) | Amendment No. 16 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective [September 23, 2016], to be filed by amendment. |
2. | Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective March 1, 2007, filed via EDGAR (as Exhibit m.2) with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference. |
a) | Amendment to Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 27, 2007, filed via EDGAR (as Exhibit m.5) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
b) | Amendment No. 2 to Class B Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective September 24, 2007, filed via EDGAR (as Exhibit m.9) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
3. | Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective March 1, 2007, filed via EDGAR (as Exhibit m.3) with Post-Effective Amendment No. 25 (File No. 033-65137) on June 27, 2007 and incorporated herein by reference. |
a) | Amendment to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 27, 2007, filed via EDGAR (as Exhibit m.6) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
b) | Amendment No. 2 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective September 24, 2007, filed via EDGAR (as Exhibit m.10) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
c) | Amendment No. 3 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective October 1, 2007, filed via EDGAR (as Exhibit m.12) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
d) | Amendment No. 4 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective January 31, 2008, filed via EDGAR (as Exhibit m.14) with Post-Effective Amendment No. 29 (File No. 033-65137) on January 28, 2008 and incorporated herein by reference. |
e) | Amendment No. 5 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective March 2, 2009, filed via EDGAR (as Exhibit m.17) with Post-Effective No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
f) | Amendment No. 6 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective April 21, 2009, filed via EDGAR (as Exhibit m.18) with Post-Effective No. 34 (File No. 033-65137) on October 1, 2009 and incorporated herein by reference. |
g) | Amendment No. 7 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective June 30, 2010, filed via EDGAR (as Exhibit m.20) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
h) | Amendment No. 8 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective September 14, 2010, filed via EDGAR (as Exhibit m.22) with Post-Effective Amendment No. 44 (File No. 033-65137) on January 27, 2011 and incorporated herein by reference. |
i) | Amendment No. 9 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective March 15, 2011, filed via EDGAR (as Exhibit m.24) with Post-Effective Amendment No. 51 (File No. 033-65137) on January 27, 2012 and incorporated herein by reference. |
j) | Amendment No. 10 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective August 28, 2012, filed via EDGAR (as Exhibit m.3.j) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
k) | Amendment No. 11 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act effective December 18, 2012, filed via EDGAR (as Exhibit m.3.k) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
l) | Amendment No. 12 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 10, 2013, filed via EDGAR (as Exhibit m.3.l) with Post-Effective Amendment No. 64 (File No. 033-65137) on June 10, 2013, and incorporated herein by reference. |
m) | Amendment No. 13 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective December 18, 2013, filed via EDGAR (as Exhibit m.3.m) with Post-Effective Amendment No. 70 (File No. 033-65137) on January 27, 2014, and incorporated herein by reference. |
n) | Amendment No. 14 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective November 13, 2014, filed via EDGAR (as Exhibit m.3.n) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
o) | Amendment No. 15 to Class C Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective March 19, 2015, filed via EDGAR (as Exhibit m.3.o) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
p) | Amendment No. 16 to Class A Shares Amended and Restated Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective [September 23, 2016], to be filed by amendment. |
4. | Class T Shares Distribution Plan Pursuant to Rule 12b-1 under the 1940 Act, effective June 27, 2007, filed via EDGAR (as Exhibit m.7) with Post-Effective Amendment No. 27 (File No. 033-65137) on September 24, 2007 and incorporated herein by reference. |
(n) | Rule 18f-3 Plans. |
1. | Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act, effective as of August 21, 2014, filed via EDGAR (as Exhibit n.1) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
a) | First Amendment to Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act, effective as of November 13, 2014, filed via EDGAR (as Exhibit n.1.a) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
b) | Second Amendment to Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act, effective as of March 19, 2015, filed via EDGAR (as Exhibit n.1.b) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
c) | Third Amendment to Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act, effective as of January 8, 2016, filed via EDGAR (as Exhibit n.1.c) with Post-effective Amendment No. 35 to the Registration Statement of VRT (File No. 033-80057) on January 8, 2016, and incorporated herein by reference. |
d) | Fourth Amendment to Amended and Restated Plan Pursuant to Rule 18f-3 under the 1940 Act, effective as of [September 23, 2016], to be filed by amendment. |
(o) | Reserved. |
(p) | Code of Ethics. |
1. | Amended and Restated Code of Ethics of the Virtus Mutual Funds effective August 2015, filed via EDGAR (as Exhibit p.1) with Post-effective Amendment No. 22 to VAST’s Registration Statement (File No. 333-191940) on September 8, 2015, and incorporated herein by reference. |
2. | Amended and Restated Code of Ethics of VIA, VP Distributors and other Virtus Affiliates dated October 26, 2015, filed via EDGAR (as Exhibit p.2) with Post-Effective Amendment No. 85 (File No. 033-65137) on January 27, 2016 and incorporated herein by reference. |
3. | Code of Ethics of Subadviser Vontobel dated February 2, 2012, filed via EDGAR (as Exhibit p.5) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
4. | Code of Ethics of Subadviser Herzfeld dated May 23, 2012, filed via EDGAR (as Exhibit p.8) with Post-Effective Amendment No. 61 (File No. 033-65137) on January 25, 2013 and incorporated herein by reference. |
5. | Code of Ethics of Subadviser Horizon dated April 2014, filed via EDGAR (as Exhibit p.8) with Post-Effective Amendment No. 75 (File No. 033-65137) on November 12, 2014 and incorporated herein by reference. |
6. | Code of Ethics of Subadviser KBI dated March 2015, filed via EDGAR (as Exhibit p.6) with Post-Effective Amendment No. 85 (File No. 033-65137) on January 27, 2016 and incorporated herein by reference. |
(q) | Powers of Attorney |
1. | Power of Attorney for all Trustees, dated June 2, 2010, filed via EDGAR (as Exhibit q) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
2. | Power of Attorney for Trustee Hassell H. McClellan, dated January 21, 2015, filed via EDGAR (as Exhibit r) with Post-Effective Amendment No. 82 (File No. 033-65137) on March 13, 2015, and incorporated herein by reference. |
3. | *Power of Attorney for Trustees Thomas J. Brown, Donald C. Burke, Roger A. Gelfenbien and John R. Mallin, dated June 30, 2016, filed via EDGAR (as Exhibit q.3) herewith. |
* Filed herewith
Item 29. | Persons Controlled by or Under Common Control with the Fund |
None.
Item 30. | Indemnification |
The indemnification of Registrant’s principal underwriter against certain losses is provided for in Section 18 of the Underwriting Agreement incorporated herein by reference to Exhibit e.1 of the Registrant’s Registration Statement filed on January 25, 2005. Indemnification of Registrant’s Custodian is provided for in Section 7 of the Master Global Custody Agreement incorporated herein by reference to Exhibit G.1 of the Registration Statement of VIT (File No. 033-64915) filed April 29, 2013. The indemnification of Registrant’s Transfer Agent is provided for in Article 6 of the Amended and Restated Transfer Agency and Service Agreement incorporated herein by reference to Exhibit h.6 of the Registration Statement of VIT (File No. 033-64915) filed on February 25, 2010. The Trust has entered into Indemnification Agreements with each trustee, the form of which is incorporated herein by reference to Exhibit H.8 of VET’s Registration Statement filed on July 28, 2015, whereby the Registrant shall indemnify the trustee for expenses incurred in any proceeding in connection with the trustee’s service to the Registrant subject to certain limited exceptions.
In addition, Article VII sections 2 and 3 of the Registrant’s Agreement and Declaration of Trust incorporated herein by reference to Exhibit A of the Registrant’s Registration Statement filed on January 25, 2002, provides in relevant part as follows:
“A Trustee, when acting in such capacity, shall not be personally liable to any Person, other than the Trust or a Shareholder to the extent provided in this Article VII, for any act, omission or obligation of the Trust, of such Trustee or of any other Trustee. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, Manager or Principal Underwriter of the Trust. The Trust (i) may indemnify an agent of the Trust or any Person who is serving or has served at the Trust’s request as an agent of another organization in which the Trust has any interest as a shareholder, creditor or otherwise and (ii) shall indemnify each Person who is, or has been, a Trustee, officer or employee of the Trust and any Person who is serving or has served at the Trust’s request as a director, officer, trustee, or employee of another organization in which the Trust has any interest as a shareholder, creditor or otherwise, in the case of (i) and (ii), to the fullest extent consistent with the Investment Company Act of 1940, as amended (the “1940 Act”) and in the manner provided in the By-Laws; provided that such indemnification shall not be available to any of the foregoing Persons in connection with a claim, suit or other proceeding by any such Person against the Trust or a Series (or Class) thereof.
All persons extending credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the appropriate Series (or Class thereof if the Trustees have included a Class limitation on liability in the agreement with such person as provided below), or, if the Trustees have yet to establish Series, of the Trust for payment under such credit, contract or claim; and neither the Trustees nor the Shareholders, nor any of the Trust’s officers, employees or agents, whether past, present or future, shall be personally liable therefor.
Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees by any of them in connection with the Trust shall conclusively be deemed to have been executed or done only in or with respect to his or their capacity as Trustee or Trustees, and such Trustee or Trustees shall not be personally liable thereon. …
… A Trustee shall be liable to the Trust and to any Shareholder solely for her or his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice nor for failing to follow such advice.”
In addition, Article III section 7 of such Agreement and Declaration of Trust provides for the indemnification of shareholders of the Registrant as follows: “If any Shareholder or former Shareholder shall be exposed to liability by reason of a claim or demand relating to such Person being or having been a Shareholder, and not because of such Person's acts or omissions, the Shareholder or former Shareholder (or such Person's heirs, executors, administrators, or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified out of the assets of the Trust against all cost and expense reasonably incurred in connection with such claim or demand, but only out of the assets held with respect to the particular Series of Shares of which such Person is or was a Shareholder and from or in relation to which such liability arose. The Trust may, at its option and shall, upon request by the Shareholder, assume the defense of any claim made against the Shareholder for any act or obligation of the Trust and satisfy any judgment thereon from the assets held with respect to the particular series.”
Article VI Section 2 of the Registrant’s Bylaws incorporated herein by reference to Exhibit B.1 of the Registrant’s Registration Statement filed on January 30, 2007, provides in relevant part, subject to certain exceptions and limitations, “every agent shall be indemnified by the Trust to the fullest extent permitted by law against all liabilities and against all expenses reasonably incurred or paid by him or her in connection with any proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been an agent.” Such indemnification would not apply in the case of any liability to which the Registrant would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person’s duties. The Investment Advisory Agreement, Subadvisory Agreements, Master Global Custody Agreement, Sub-Administration Agreement and Sub-Transfer Agency and Service Agreement, each as amended, respectively provide that the Registrant will indemnify the other party (or parties, as the case may be) to the agreement for certain losses. Similar indemnities to those listed above may appear in other agreements to which the Registrant is a party.
The Registrant, in conjunction with VIA, the Registrant’s Trustees, and other registered investment management companies managed by VIA, maintains insurance on behalf of any person who is or was a Trustee, officer, employee, or agent of the Registrant, or who is or was serving at the request of the Registrant as a trustee, director, officer, employee or agent of another trust or corporation, against any liability asserted against such person and incurred by him or arising out of his position. However, in no event will Registrant maintain insurance to indemnify any such person for any act for which the Registrant itself is not permitted to indemnify him.
Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the “Act”), may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 31. | Business and Other Connections of Investment Adviser and Subadvisers |
See “Management of the Funds” in the Prospectus and “Investment Advisory and Other Services” and “Management of the Trust” in the Statement of Additional Information which is included in this Post-Effective Amendment. For information as to the business, profession, vocation or employment of a substantial nature of directors and officers of the Adviser and Subadvisers, reference is made to the Adviser’s and each Subadviser’s current Form ADV filed under the Investment Advisers Act of 1940, and incorporated herein by reference.
Adviser | SEC File No.: |
VIA | 801-5995 |
Duff & Phelps | 801-14813 |
Euclid | 801-54263 |
Herzfeld | 801-20866 |
Horizon | 801-47515 |
Kayne Anderson | 801-24241 |
KBI | 801-60358 |
Newfleet | 801-51559 |
Rampart | 801-77244 |
Vontobel | 801-21953 |
Item 32. | Principal Underwriter |
(a) | VP Distributors, LLC serves as the principal underwriter for the following registrants: |
Virtus Alternative Solutions Trust, Virtus Equity Trust, Virtus Insight Trust, Virtus Opportunities Trust Virtus Variable Insurance Trust and Virtus Retirement Trust.
(b) | Directors and executive officers of VP Distributors, 100 Pearl Street, Hartford, CT 06103 are as follows: |
Name and Principal
Business Address |
Positions and Offices with Distributor |
Positions and Offices
with Registrant |
||
George R. Aylward | Executive Vice President | President and Trustee | ||
Kevin J. Carr | Vice President, Counsel and Secretary | Senior Vice President, Chief Legal Officer, Counsel and Secretary | ||
Nancy J. Engberg | Vice President and Assistant Secretary | Vice President and Chief Compliance Officer | ||
David Hanley | Vice President and Treasurer | None | ||
Barry Mandinach | President | None | ||
David C. Martin | Vice President and Chief Compliance Officer | None | ||
Francis G. Waltman | Executive Vice President | Executive Vice President |
(c) | To the best of the Registrant’s knowledge, no commissions or other compensation was received by any principal underwriter who is not an affiliated person of the Registrant or an affiliated person of such affiliated person, directly or indirectly, from the Registrant during the Registrant’s last fiscal year. |
Item 33. | Location of Accounts and Records |
Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules promulgated thereunder include:
Secretary of the Trust: | Principal Underwriter: | |
Kevin J. Carr, Esq. 100 Pearl Street Hartford, CT 06103 |
VP Distributors, LLC 100 Pearl Street Hartford, CT 06103 |
|
Investment Adviser: | Custodian: | |
Virtus Investment Advisers, Inc. 100 Pearl Street Hartford, CT 06103 |
JPMorgan Chase Bank, National Association One Chase Manhattan Plaza, 19 th Floor New York, NY 10005 |
|
Administrator & Transfer Agent: | ||
Virtus Fund Services, LLC 100 Pearl Street Hartford, CT 06103 |
||
Fund Accountant, Sub-Administrator, Sub-Transfer Agent and Dividend Dispersing Agent: | ||
BNY Mellon Investment Servicing (US) Inc. 301 Bellevue Parkway Wilmington, DE 19809 |
||
Subadviser to: Global Infrastructure Fund, Global Real Estate Securities Fund, International Real Estate Securities Fund and Real Estate Securities Fund | Subadviser to: Alternatives Diversifier Fund, Sector Trend Fund, Dynamic Trend Fund, Multi-Asset Trend Fund, Global Equity Trend Fund, International Equity Fund, and Equity Trend Fund | |
Duff & Phelps Investment Management Co. 200 South Wacker Drive, Suite 500 Chicago, IL 60606 |
Euclid Advisors, LLC 100 Pearl Street Hartford, CT 06103 |
|
Subadviser to: Herzfeld Fund | Subadviser to: International Wealth Masters Fund and Wealth Masters Fund | |
Thomas J. Herzfeld Advisors, Inc. 119 Washington Avenue, Suite 504 Miami Beach, FL 33139 |
Horizon Asset Management LLC 470 Park Avenue South New York, NY 10016 |
|
Subadviser to: Emerging Markets Small-Cap Fund and International Small-Cap Equity Fund | Subadviser to: Emerging Markets Equity Income Fund and Essential Resources Fund | |
Kayne Anderson Rudnick Investment Management, LLC 1800 Avenue of the Stars, 2nd Floor Los Angeles, CA 90067 |
Kleinwort Benson Investors International, Ltd. 3 rd Floor, 2 Harbourmaster Place IFSC, Dublin 1, Ireland |
|
Subadviser to: CA Tax-Exempt Bond Fund, Bond Fund, Emerging Markets Debt Fund, High Yield Fund, Low Duration Income Fund, Multi-Sector Fixed Income Fund, Multi-Sector Short Term Bond Fund, Senior Floating Rate Fund and Tax-Exempt Bond Fund | ||
Newfleet Asset Management, LLC 100 Pearl Street Hartford, CT 06103 |
||
Subadviser to: Low Volatility Equity Fund | Subadviser to: Emerging Markets Opportunities Fund, Foreign Opportunities Fund, Global Opportunities Fund, and Greater European Opportunities Fund | |
Rampart Investment Management Company, LLC One International Place, 14th Floor Boston, MA 02110
|
Vontobel Asset Management, Inc. 1540 Broadway, 38th Floor New York, NY 10036 |
Item 34. | Management Services |
None.
Item 35. | Undertakings |
None.
Item 28. | Exhibits |
h.8 | Form of Indemnification Agreement with Trustees Thomas J. Brown, Donald C. Burke, Roger A. Gelfenbien and John R. Mallin |
q.3 | Power of Attorney for Trustees Thomas J. Brown, Donald C. Burke, Roger A. Gelfenbien and John R. Mallin |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Hartford and the State of Connecticut on the 8 th day of July, 2016.
VIRTUS OPPORTUNITIES TRUST | ||
By: | /s/ George R. Aylward | |
George R. Aylward | ||
President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the registration statement has been signed below by the following persons in the capacities indicated on the 8 th day of July, 2016.
Signature | Title | ||
/s/ George R. Aylward | |||
George R. Aylward | Trustee and President (principal executive officer) | ||
/s/ W. Patrick Bradley | |||
W. Patrick Bradley |
Chief Financial Officer and Treasurer (principal financial and accounting officer) |
||
/s/ Thomas J. Brown | |||
Thomas J. Brown* | Trustee | ||
/s/ Donald C. Burke | |||
Donald C. Burke* | Trustee | ||
/s/ Roger A. Gelfenbien | |||
Roger A. Gelfenbien* | Trustee | ||
/s/ John R. Mallin | |||
John R. Mallin* | Trustee | ||
/s/ Hassell H. McClellan | |||
Hassell H. McClellan* | Trustee | ||
/s/ Philip R. McLoughlin | |||
Philip R. McLoughlin* | Trustee and Chairman | ||
/s/ Geraldine M. McNamara | |||
Geraldine M. McNamara* | Trustee | ||
/s/ James M. Oates | |||
James M. Oates* | Trustee | ||
/s/ Richard E. Segerson | |||
Richard E. Segerson* | Trustee | ||
/s/ Ferdinand L.J. Verdonck | |||
Ferdinand L.J. Verdonck* | Trustee |
*By:
/s/ George R. Aylward | ||
*George R. Aylward, Attorney-in-Fact, pursuant to a power of attorney |
Exhibit h.8
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this “Agreement”) is effective as of May 26, 2016 by and between (i) each trust whose name is set forth on the signature page (each such trust hereafter referred to as the “Trust”), acting on behalf of itself and each of its portfolio series, whether existing on the date hereof (as listed on Appendix A hereto) or subsequently established (the “Series”) and (ii) the trustee of the Trust whose name is set forth on the signature page (the “Trustee”).
WHEREAS, the Trustee is a trustee of the Trust, and the Trust wishes the Trustee to continue to serve in that capacity;
WHEREAS, the agreement and declaration of trust of the Trust (the “Declaration of Trust”) provides that the business of the Trust shall be managed by the Trustees and they shall have all powers necessary to carry out that responsibility, does not limit any rights to indemnification that the Trustee may be entitled to by contract or otherwise under law and the Trustees have duly authorized this Agreement; and
WHEREAS, to induce the Trustee to continue to provide services to the Trust as a trustee of the Trust and to provide the Trustee with contractual assurance that indemnification will be available to the Trustee, the Trust desires to provide the Trustee with protection against personal liability and delineate certain procedural aspects relating to indemnification and advancement of expenses, as more fully set forth herein,
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements set forth herein, the parties hereby agree as set forth below.
1. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
(a) “ Disabling Conduct ” shall mean the Trustee’s willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
(b) “ Expenses ” shall include without limitation all judgments, penalties, fines, amounts paid in settlement or compromise, prohibited transaction excise taxes, liabilities, losses, interest, expenses of investigation, attorneys’ fees, accountants’ fees, retainers, court costs, transcript costs, fees of experts and witnesses, expenses of preparing for and attending depositions and other proceedings, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other costs, disbursements or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or acting as a witness in a Proceeding.
(c) “ Final Adjudication ” shall mean a final decision on the merits by court order or judgment of the court or other body before which a matter was brought, from which no further right of appeal or review exists.
(d) “ Non-Party Trustee ” shall mean a trustee of the Trust who is not (i) an “interested person” of the Trust as defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended, (ii) a party to the Proceeding with respect to which indemnification or advances are sought or (iii) a party to any other Proceeding based on the same or similar grounds that is then or has been pending.
(e) The term “ Proceeding ” shall include without limitation any threatened, pending or completed claim, demand, discovery request, request for testimony or information, action, suit, arbitration, alternative dispute mechanism, investigation, hearing or other proceeding, including any appeal from any of the foregoing, whether civil, criminal, administrative, legislative or investigative and, except as otherwise provided herein, shall also include any proceeding brought by or in the right of the Trust or any Series and any proceeding brought by a Trustee against the Trust or any Series.
(f) The Trustee’s “ service to the relevant Series ” shall include without limitation the Trustee’s service as a trustee or advisory trustee of the Trust and his or her service at the request of the Trust or the Series as a trustee, director, officer, employee, agent or representative of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.
(g) “ Special Counsel ” shall mean a law firm, or a member of a law firm, that is experienced in matters of investment company law and neither at the time of designation is, nor in the five years immediately preceding such designation was, retained to represent (i) the Trust or the Trustee (except that a majority of the Non-Party Trustees may determine, in their sole discretion, that any prior representation of the Trust or Trustee shall not disqualify such law firm or a member of a law firm from representation, if the prior representation is not related to the issue in dispute) or (ii) any other party to the Proceeding (or any party reasonably expected to become a party to the Proceeding) giving rise to a claim for indemnification or advancements hereunder. Notwithstanding the foregoing, however, the term “ Special Counsel ” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Trust or the Trustee in an action to determine the Trustee’s rights pursuant to this Agreement, regardless of when the Trustee’s act or failure to act occurred.
2. Indemnification . The Trust on behalf of each Series severally shall indemnify and hold harmless the Trustee against any and all Expenses actually incurred or paid by the Trustee in any Proceeding in connection with the Trustee’s service to the relevant Series, subject to the provisions of the following sentence and the provisions of Section 3 and paragraph (i) of Section 6 of this Agreement, provided that in any Proceeding initiated by the Trustee, other than one instituted pursuant to Section 6(e) or 6(g), the initiation of the Proceeding by the Trustee was approved in advance by a majority of the Non-Party Trustees. The Trustee shall be indemnified pursuant to this Section 2 against any and all Expenses unless (i) the Trustee is subject to such Expenses by reason of the Trustee’s not having acted in good faith in the reasonable belief that his or her action was in or not opposed to the best interests of the Series, (ii) the Trustee is liable to the Series or its shareholders by reason of the Trustee’s Disabling Conduct or (iii) in the case of a criminal proceeding, the Trustee had reasonable cause to believe that his or her conduct was unlawful, and with respect to each of (i), (ii) and (iii), there has been a Final Adjudication in the relevant Proceeding that the Trustee’s conduct fell within (i), (ii) or (iii).
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3. Advancement of Expenses . Expenses, including accountants’ and counsel fees incurred by the Trustee (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust, on behalf of a Series to which the conduct in question related, in advance of the final disposition of a Proceeding in connection with the Trustee’s service to a Series, upon receipt by the Trust of an undertaking by or on behalf of the Trustee to repay amounts so paid to the Trust if it is ultimately determined that the Trustee is not entitled to indemnification of such Expenses under this Agreement, provided, that (a) the Trustee shall provide a surety bond or some other appropriate security for his or her undertaking, (b) the Trust shall be insured against losses arising by reason of the Trustee’s failure to fulfill his or her undertaking, or (c) a majority of a quorum of the Non-Party Trustees (provided that a majority of such Non-Party Trustees then in office act on the matter) or Special Counsel in a written opinion shall determine, based on a review of readily available facts (but not a full trial-type inquiry), that there is reason to believe the Trustee ultimately will be entitled to indemnification.
4. Presumptions . For purposes of the determination or opinion referred to in clause (c) of Section 3 or clauses (y)(i) or (y)(ii) of subsection (i) of Section 6 of this Agreement, the Non-Party Trustees or Special Counsel, as the case may be, shall be entitled to rely upon a rebuttable presumption that the Trustee has not engaged in Disabling Conduct.
5. Witness Expenses . To the extent the Trustee is, by reason of the Trustee’s service to the relevant Series, a witness for any reason in any Proceeding to which such Trustee is not a party, such Trustee shall be indemnified against any and all Expenses actually incurred by or on behalf of such Trustee in connection therewith.
6. Procedure for Determination of Entitlement to Indemnification and Advancements . A request by the Trustee for indemnification or advancement of Expenses shall be made in writing and shall be accompanied by such relevant documentation and information as is reasonably available to the Trustee. The Secretary of the Trust shall promptly advise the trustees of the Trust of such request.
(a) Methods of Determination . Upon the Trustee’s request for indemnification or advancement of Expenses, a determination with respect to the Trustee’s entitlement thereto shall be made in a manner consistent with the terms of this Agreement and the Declaration of Trust. The Trustee shall cooperate with the person or persons making such determination, including without limitation providing to such person or persons upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and is reasonably available to the Trustee and reasonably necessary to such determination. Any failure by the Trustee to cooperate with the person or persons making such determination shall extend as necessary and appropriate the period or periods described in paragraph (c) of this Section 6 regarding determinations deemed to have been made. Any Expenses incurred by the Trustee in so cooperating shall be borne by the relevant Series, irrespective of the determination as to the Trustee’s entitlement to indemnification or advancement of Expenses.
(b) Determinations Regarding Indemnification . A determination that the Covered Person is entitled to indemnification may be made by: (i) a Final Adjudication that the Trustee was not liable by reason of Disabling Conduct, (ii) dismissal of a court action or an
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administrative proceeding against the Trustee for insufficiency of evidence of Disabling Conduct, (iii) a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that the indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of the Non-Party Trustees or (b) a Special Counsel in a written opinion, or (iv) a vote of a majority of the shares of beneficial interest of the Trust outstanding and entitled to vote (excluding such shares owned of record or beneficially by the Trustee).
(c) Special Counsel . If the determination of entitlement to indemnification or advancement of Expenses is to be made by Special Counsel, the Special Counsel shall be selected by a majority of the Non-Party Trustees of the Trust (or, if there are no Non-Party Trustees with respect to the matter in question, by a majority of the Trustees of the Trust who are not “interested persons” of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “Independent Trustees”)), and the Trust shall give written notice to the Trustee advising the Trustee of the identity of the Special Counsel selected. The Trustee may, within five (5) days after receipt of such written notice, deliver to the Trust a written objection to such selection. Such objection may be asserted only on the ground that the Special Counsel so selected does not meet the requirements set forth in Section 1 and shall set forth with particularity the factual basis of such assertion. The Non-Party Trustees (or Independent Trustees, as the case may be) of the Trust shall determine the merits of the objection and, in their discretion, either determine that the proposed Special Counsel shall, despite the objection, act as such hereunder or select another Special Counsel who shall act as such hereunder.
If within fourteen (14) days after submission by the Trustee of a written request for indemnification or advancement of Expenses no such Special Counsel shall have been finally selected as provided in the previous paragraph, then either the Trust or the Trustee may petition an appropriate court of the State of Delaware or any other court of competent jurisdiction for the appointment as Special Counsel of a person selected by the court or by such other person as the court shall designate, and the person so appointed shall act as Special Counsel.
The relevant Series shall pay all reasonable fees and Expenses charged or incurred by Special Counsel in connection with his, her or its determinations pursuant to this Agreement and shall pay all reasonable fees and Expenses incident to the procedures described in this paragraph, regardless of the manner in which such Special Counsel was selected or appointed.
(d) Failure to Make Timely Determination . Subject to paragraph (a) of this Section 6, if the person or persons empowered or selected to determine whether the Trustee is entitled to indemnification or advancement of Expenses (other than determinations that are made or to be made by a court) shall not have made such determination within thirty (30) days after receipt by the Trust of the request therefor, the requisite determination of entitlement to indemnification or advancement of Expenses shall be deemed to have been made, and the Trustee shall be entitled to such indemnification or advancement, absent (i) an intentional misstatement by the Trustee of a material fact, or an intentional omission of a material fact necessary to make the Trustee’s statement not materially misleading, in connection with the request for indemnification or advancement of Expenses, (ii) a prohibition of such indemnification or advancements under applicable law or the Declaration of Trust or the Trust’s by-laws, (iii) a requirement under the Investment Company Act of 1940, as amended, for insurance or security, which has not been
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satisfied, or (iv) a subsequent Final Adjudication or, in a matter disposed of without a Final Adjudication, determination pursuant to subsection (h) of Section 6, that the Trustee is not entitled to indemnification under this Agreement; provided , however , that such period may be extended for a reasonable period of time, not to exceed an additional thirty (30) days, if the person or persons making the determination in good faith require such additional time to obtain or evaluate documentation or information relating thereto. Any assertion under clauses (i), (ii), or (iii) of this Section 6(c) shall be made in writing, specify the basis for the assertion, and be delivered to the Trustee within thirty (30) days after receipt by the Trust of the request for indemnification or advancement of Expenses (or any extension of such period provided under this Section 6(c)). The Trustee shall be entitled to adjudication of such assertion in an appropriate court of the State of Delaware or any other court of competent jurisdiction.
(e) Payment upon Determination of Entitlement . If a determination is made pursuant to Section 2 or Section 3 (or is deemed to be made pursuant to paragraph (c) of this Section 6 and, in the case of advancement of Expenses, the other conditions are satisfied) that the Trustee is entitled to indemnification or advancement of Expenses, payment of any indemnification amounts or advancements owing to the Trustee shall be made within ten (10) days after such determination (and, in the case of advancements of further Expenses, within ten (10) days after submission of supporting information, including the required undertaking and evidence of any required security). If such payment is not made when due, the Trustee shall be entitled to adjudication of the Trustee’s entitlement to such indemnification or advancements in an appropriate court of the State of Delaware or any other court of competent jurisdiction. The Trustee shall commence any proceeding seeking adjudication within 60 days following the date on which he or she first has the right to commence such proceeding pursuant to this paragraph (d). In any such proceeding, the Trust and the relevant Series shall be bound by the determination that the Trustee is entitled to indemnification or advancements, absent (i) an intentional misstatement by the Trustee of a material fact, or an intentional omission of a material fact necessary to make his or her statement not materially misleading, in connection with the request for indemnification or advancements, (ii) a prohibition of such indemnification or advancements under applicable law or (iii) a requirement under the Investment Company Act of 1940, as amended, for insurance or security, which has not been satisfied.
(f) Appeal of Adverse Determination . If a determination is made that the Trustee is not entitled to indemnification or advancements (other than determinations that are made by a court), the Trustee shall be entitled to adjudication of such matter in an appropriate court of the State of Delaware or any other court of competent jurisdiction. Alternatively, the Trustee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Trustee shall commence such proceeding or arbitration within 60 days following the date on which the adverse determination is made. Any such judicial proceeding or arbitration shall be conducted in all respects as a de novo trial or arbitration on the merits, and the Trustee shall not be prejudiced by reason of such prior adverse determination.
(g) Expenses of Appeal . If the Trustee seeks arbitration or a judicial adjudication to determine or enforce his or her rights under, or to recover damages for breach of, the indemnification or Expense advancement provisions of this Agreement, the Trustee shall be entitled to recover from the relevant Series, and shall be indemnified by the relevant Series
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against, any and all Expenses actually incurred by the Trustee in such arbitration or judicial adjudication, but only if the Trustee prevails therein. If it shall be determined in such arbitration or judicial adjudication that the Trustee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Trustee in connection with such arbitration or judicial adjudication shall be appropriately prorated.
(h) Validity of Agreement . In any arbitration or judicial proceeding commenced pursuant to this Section 6, the Trust shall be precluded from asserting that the procedures and presumptions set forth in this Agreement are not valid, binding and enforceable against the Trust or relevant Series and shall stipulate in any such court or before any such arbitrator that the Trust is bound by all the provisions of this Agreement.
(i) Lack of Adjudication . Notwithstanding any provision herein to the contrary, as to any matter disposed of (whether by compromise payment, pursuant to a consent decree or otherwise) without a Final Adjudication by a court, or by any other body before which the Proceeding was brought, that the Trustee either (a) did not act in good faith in the reasonable belief that the Trustee’s action was in or not opposed to the best interests of the Series or (b) is liable to the Series or its shareholders by reason of Disabling Conduct, indemnification shall be provided if (x) there has been a determination that the Trustee did not engage in Disabling Conduct by the court or other body approving any settlement or other disposition of the matter or (y) there has been a reasonable determination, based upon a review of readily available facts (but not a full trial-type inquiry), that the Trustee acted in good faith in the reasonable belief that the Trustee’s action was in or not opposed to the best interests of the Series and is not liable to the Trust and the relevant Series or its shareholders by reason of Disabling Conduct, by (i) the vote of a majority of the Non-Party Trustees (provided that a majority of such Non-Party Trustees then in office act on the matter) or (ii) Special Counsel in a written opinion.
7. General Provisions .
(a) Non-Exclusive Rights . The provisions for indemnification of, and advancement of Expenses to, the Trustee set forth in this Agreement shall not be deemed exclusive of any other rights to which the Trustee may otherwise be entitled, including any other rights to be indemnified or have Expenses advanced by the Trust. The Trust shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Trustee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise, if such payment is not recoverable from the Trustee.
(b) Continuation of Provisions . This Agreement shall be binding upon all successors of the Trust, including without limitation any transferee of all or substantially all assets of a Series and any successor by merger, consolidation or operation of law and shall inure to the benefit of the Trustee’s spouse, heirs, assigns, devisees, executors, administrators and legal representatives. The provisions of this Agreement shall continue with respect to the Trust until the later of (i) ten (10) years after the Trustee has ceased to provide any service to the Trust or any Series and (ii) the final termination of all Proceedings in respect of which the Trustee has asserted, is entitled to assert or has been granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by the Trustee pursuant to Section 6 relating thereto. No amendment of the Declaration of Trust or by-laws of the Trust shall limit or
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eliminate the right of the Trustee to indemnification and advancement of Expenses set forth in this Agreement. The Trustee’s right of indemnification and advancement of Expenses set forth in this Agreement shall survive the Trustee’s death, disability, retirement or resignation as a Trustee.
(c) Selection of Counsel . The Trust shall be entitled to assume the defense of any Proceeding for which the Trustee seeks indemnification or advancement of Expenses under this Agreement. However, counsel selected by the Trustee shall conduct the defense of the Trustee to the extent reasonably determined by such counsel to be necessary to protect the interests of the Trustee, and the relevant Series shall indemnify the Trustee therefor to the extent otherwise permitted under this Agreement, if (i) the Trustee reasonably determines that there may be a conflict in the Proceeding between the positions of the Trustee and the positions of the Trust or the other parties to the Proceeding that are indemnified by the Trust and not represented by separate counsel, or the Trustee otherwise reasonably concludes that representation of both the Trustee, the Trust and such other parties by the same counsel would not be appropriate, or (ii) the Proceeding involves the Trustee but neither the Trust nor any such other party who is indemnified by the Trust and the Trustee reasonably withholds consent to being represented by counsel selected by the Trust. If the Trust shall not have elected to assume the defense of any such Proceeding for the Trustee within thirty (30) days after receiving written notice thereof from the Trustee, the Trust shall be deemed to have waived any right it might otherwise have to assume such defense. If the Trust does not assume or conduct the defense of any Proceeding, the Trustee shall not consent to a settlement or any other disposition not involving a Final Adjudication without the prior written consent of the Trust.
(d) D&O Insurance . To the extent the Trust maintains an insurance policy or policies providing liability insurance to its trustees or its trustees who are not “interested persons” of the Trust as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, the Trustee shall be covered by such policy or policies at all times when serving as a trustee of the Trust, in accordance with its or their terms, to the maximum extent of the coverage available for any similarly situated trustee of the Trust. For a period of six (6) years after the Trustee has ceased to serve as a trustee of the Trust, whether through resignation, death or otherwise, and to the extent insurance as provided in the previous sentence does not continue to cover the Trustee even though he or she is no longer serving as a trustee of the Trust, the Trust shall purchase and maintain in effect, through “tail” or other appropriate coverage, one or more policies of insurance on behalf of the Trustee to the maximum extent of the coverage provided to then serving trustees of the Trust (or, if the Trust has been terminated, the coverage in effect immediately prior to such termination), unless the purchase of such insurance by the Trust is not permitted by applicable law, including for these purposes any fiduciary duties applicable to the persons then constituting the trustees of the Trust, such insurance is not generally available, or in the reasonable business judgment of the persons then constituting the trustees of the Trust, the premium for such insurance is substantially disproportionate to the amount of coverage afforded. In the event of liquidation of the Trust, the Trust shall, prior to such liquidation, establish one or more reserves in amounts reasonably necessary to meet its obligations under this Agreement, including, without limitation, amounts reasonably necessary to pay insurance premiums, to pay deductibles, or to meet claims for indemnification or defense costs that are not reasonably likely to be recovered under applicable insurance policies.
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(e) Subrogation . In the event of any payment by any Series pursuant to this Agreement, the Series shall be subrogated to the extent of such payment to all of the rights of recovery of the Trustee, who shall, upon reasonable written request by the Trust on behalf of the Series and at the Series’ expense, execute all such documents and take all such reasonable actions as are necessary to enable the Trust to enforce such rights. Nothing in this Agreement shall be deemed to diminish or otherwise restrict the right of the Trust or the Trustee to proceed or collect against any insurers or to give such insurers any rights against the Trust under or with respect to this Agreement, including without limitation any right to be subrogated to the Trustee’s rights hereunder, unless otherwise expressly agreed to by the Trust in writing, and the obligation of such insurers to the Trust and the Trustee shall not be deemed to be reduced or impaired in any respect by virtue of the provisions of this Agreement.
(f) Notice of Proceedings . The Trustee shall promptly notify the Trust in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding that may be subject to indemnification or advancement of Expenses pursuant to this Agreement, but no delay in providing such notice shall in any way limit or affect the Trustee’s rights or the Trust’s obligations under this Agreement.
(g) Notices . All notices, requests, demands and other communications to a party pursuant to this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally (with a written receipt by the addressee) or two (2) days after being sent (i) by certified or registered mail, postage prepaid, return receipt requested or (ii) by nationally recognized overnight courier service to 100 Pearl Street, Hartford, CT 06103 (if addressed to the Trust), the address specified on the signature page of this Agreement (if addressed to the Trustee) or such other address as may have been furnished by such party by notice in accordance with this paragraph.
(h) Separate Agreements . Each Trust is entering into this Agreement on behalf of itself and its Series individually, and no Trust or its Series shall be deemed to bear any responsibility hereunder for the obligations of any other Trust or any other Trust’s Series.
(i) Severability . If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, in whole or in part, for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any provision that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the remaining provisions of this Agreement shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
(j) Modification and Waiver . This Agreement supersedes any existing or prior agreement between the Trust and the Trustee pertaining to the subject matter of indemnification and advancement of Expenses, other than the Declaration of Trust, the by-laws of the Trust and the terms of any liability insurance policies, which shall not be modified or amended by this Agreement. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties or their respective successors or legal representatives; provided , however , that any supplements, modifications or amendments to the Declaration of
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Trust, by-laws or the terms of the liability insurance policy or policies of the Trust shall not be deemed to constitute supplements, modifications or amendments to this Agreement. Any waiver by either party of any breach by the other party of any provision contained in this Agreement to be performed by the other party must be in writing and signed by the waiving party or such party’s successor or legal representative, and no such waiver shall be deemed a waiver of similar or other provisions at the same or any prior or subsequent time.
(k) Joinder of New Series . In the event that additional Series are created and added to the Trust from time to time, Appendix A listing each Series of the Trust covered by this Agreement may be amended to add the additional Series by the Trust’s execution and delivery to the Trustee of an amended Appendix A . Irrespective of whether the Trust executes and delivers to the Trustee an amended Appendix A , the additional Series shall be deemed a “Series” for all purposes of this Agreement as of the date that it is created and added to the Trust.
(l) Headings . The headings of the Sections of this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
(m) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be an original, and all of which when taken together shall constitute one document.
(n) Applicable Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without reference to principles of conflict of laws.
(o) WAIVER OF RIGHT TO JURY TRIAL. BY EXECUTING THIS AGREEMENT, THE PARTIES KNOWINGLY AND WILLINGLY WAIVE ANY RIGHT THEY HAVE UNDER APPLICABLE LAW TO A TRIAL BY JURY IN ANY DISPUTE ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE ISSUES RAISED BY THAT DISPUTE.
(p) Miscellaneous . Copies of the Certificate of Trust of each Trust are on file with the Secretary of State of the State of Delaware. The obligations of or arising out of this Agreement are not binding upon any of the Trust’s trustees, officers, employees, agents or shareholders individually, but are binding solely upon the assets and property of the respective Series in accordance with their proportionate interests hereunder. The assets and liabilities of each Trust and each Series are separate and distinct, and the obligations of or arising out of this instrument are binding solely upon the assets or property of the respective Trust and Series.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name and on its behalf on the date set forth above.
Virtus EQUITY Trust
,
on behalf of Itself and each of its Series listed on Appendix A attached hereto |
||
Virtus
OPPORTUNITIES Trust
,
Virtus
RETIREMENT Trust
,
|
TRUSTEE | ||||
Name: | George R. Aylward | Name: | ||
Title: | President | |||
Address for Notices: |
APPENDIX A
TO
INDEMNIFICATION AGREEMENT
RELATING TO TRUSTEES OF
EACH VIRTUS DELAWARE STATUTORY TRUST
Virtus Equity Trust, on behalf of each of:
Virtus Balanced Fund
Virtus Contrarian Value Fund
Virtus Growth & Income Fund
Virtus Mid-Cap Core Fund
Virtus Mid-Cap Growth Fund
Virtus Quality Large-Cap Value Fund
Virtus Quality Small-Cap Fund
Virtus Small-Cap Core Fund
Virtus Small-Cap Sustainable Growth Fund
Virtus Strategic Growth Fund
Virtus Tactical Allocation Fund
Virtus Opportunities Trust, on behalf of each of:
Virtus Alternatives Diversifier Fund
Virtus Bond Fund
Virtus CA Tax-Exempt Bond Fund
Virtus Emerging Markets Debt Fund
Virtus Emerging Markets Equity Income Fund
Virtus Emerging Markets Small Cap Fund
Virtus Equity Trend Fund
Virtus Essential Resources Fund
Virtus Foreign Opportunities Fund
Virtus Global Equity Trend Fund
Virtus Global Infrastructure Fund
Virtus Global Opportunities Fund
Virtus Global Real Estate Securities Fund
Virtus Greater European Opportunities Fund
Virtus Herzfeld Fund
Virtus High Yield Fund
Virtus International Equity Fund
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Virtus International Real Estate Securities Fund
Virtus International Small-Cap Fund
Virtus International Wealth Masters Fund
Virtus Low Volatility Equity Fund
Virtus Multi-Asset Trend Fund
Virtus Multi-Sector Intermediate Bond Fund
Virtus Multi-Sector Short Term Bond Fund
Virtus Real Estate Securities Fund
Virtus Sector Trend Fund
Virtus Senior Floating Rate Fund
Virtus Wealth Masters Fund
Virtus Retirement Trust, on behalf of each of:
Virtus DFA 2015 Target Date Retirement Income Fund
Virtus DFA 2020 Target Date Retirement Income Fund
Virtus DFA 2025 Target Date Retirement Income Fund
Virtus DFA 2030 Target Date Retirement Income Fund
Virtus DFA 2035 Target Date Retirement Income Fund
Virtus DFA 2040 Target Date Retirement Income Fund
Virtus DFA 2045 Target Date Retirement Income Fund
Virtus DFA 2050 Target Date Retirement Income Fund
Virtus DFA 2055 Target Date Retirement Income Fund
Virtus DFA 2060 Target Date Retirement Income Fund
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Exhibit q.3
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of the below-named trusts, with their respective file numbers under the Securities Act of 1933 noted, hereby constitute and appoint George R. Aylward, Kevin J. Carr and Jennifer Fromm, or any of them, as my true and lawful attorneys and agents with full power to sign for me in the capacity indicated below, any or all registration statements on Form N-1A, amendments thereto, and such other filings as may be appropriate, with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940 relating to each of said mutual funds, and hereby ratify and confirm my signature as it may be signed by said attorneys and agents.
Virtus Equity Trust | (002-16590) |
Virtus Insight Trust | (033-64915) |
Virtus Opportunities Trust | (033-65137) |
Virtus Retirement Trust | (033-80057) |
I hereby declare that a photostatic, xerographic or other similar copy of this original instrument shall be as effective as the original.
IN WITNESS WHEREOF, this 30 th day of June, 2016.
/s/ Thomas J. Brown | /s/ Donald C. Burke | |
Thomas J. Brown, Trustee | Donald C. Burke, Trustee | |
/s/ Roger A. Gelfenbien | /s/ John R. Mallin | |
Roger A. Gelfenbien, Trustee | John R. Mallin, Trustee |
All signatures need not appear on the same copy of this Power of Attorney.