Financial Highlights (continued)
For a share outstanding throughout each period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natixis Seeyond International Minimum
Volatility ETF
|
|
|
|
|
Year Ended
December 31,
2019
|
|
|
Year Ended
December 31,
2018
|
|
|
Year Ended
December 31,
2017
|
|
|
Period Ended
December 31,
2016*
|
|
|
Net asset value, beginning of the period
|
|
$
|
39.43
|
|
|
$
|
44.38
|
|
|
$
|
38.47
|
|
|
$
|
39.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)
|
|
|
1.15
|
|
|
|
1.02
|
|
|
|
0.85
|
|
|
|
0.11
|
|
|
Net realized and unrealized gain (loss)
|
|
|
5.88
|
|
|
|
(3.75
|
)
|
|
|
7.66
|
|
|
|
(1.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from Investment Operations
|
|
|
7.03
|
|
|
|
(2.73
|
)
|
|
|
8.51
|
|
|
|
(1.32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS DISTRIBUTIONS FROM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(2.28
|
)
|
|
|
(1.01
|
)
|
|
|
(0.84
|
)
|
|
|
(0.12
|
)
|
|
Net realized capital gains
|
|
|
—
|
|
|
|
(1.21
|
)
|
|
|
(1.76
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions
|
|
|
(2.28
|
)
|
|
|
(2.22
|
)
|
|
|
(2.60
|
)
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of the period
|
|
$
|
44.18
|
|
|
$
|
39.43
|
|
|
$
|
44.38
|
|
|
$
|
38.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total return(b)
|
|
|
17.94
|
%
|
|
|
(6.17
|
)%
|
|
|
22.17
|
%
|
|
|
(3.31
|
)%(c)
|
|
RATIOS TO AVERAGE NET ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of the period (000’s)
|
|
$
|
17,673
|
|
|
$
|
21,686
|
|
|
$
|
17,751
|
|
|
$
|
13,464
|
|
|
Net expenses(d)
|
|
|
0.56
|
%(e)
|
|
|
0.55
|
%
|
|
|
0.55
|
%
|
|
|
0.55
|
%(f)
|
|
Gross expenses
|
|
|
1.26
|
%(e)
|
|
|
1.57
|
%
|
|
|
1.76
|
%
|
|
|
2.61
|
%(f)
|
|
Net investment income
|
|
|
2.66
|
%
|
|
|
2.32
|
%
|
|
|
1.96
|
%
|
|
|
1.49
|
%(f)
|
|
Portfolio turnover rate(g)
|
|
|
61
|
%
|
|
|
135
|
%
|
|
|
93
|
%
|
|
|
20
|
%
|
|
*
|
From commencement of operations on October 25, 2016 through December 31, 2016.
|
|
(a)
|
Per share net investment income has been calculated using the average shares outstanding during the period.
|
|
(b)
|
Total return is calculated at net asset value assuming reinvestment of dividends and capital gains, if any. Had certain expenses not been
waived/reimbursed during the period, total returns would have been lower.
|
|
(c)
|
Periods less than one year are not annualized.
|
|
(d)
|
The investment adviser agreed to waive its fees and/or reimburse a portion of the Fund’s expenses during the period. Without this
waiver/reimbursement, expenses would have been higher.
|
|
(e)
|
Includes interest expense. Without this expense the ratio of net expenses would have been 0.55% and the ratio of gross expenses would have been 1.25%.
|
|
(f)
|
Computed on an annualized basis for periods less than one year.
|
|
(g)
|
Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or
redemptions.
|
See accompanying notes to
financial statements.
| 34
Notes to Financial Statements
December 31, 2019
1. Organization. Natixis ETF Trust (the “Trust”)
is organized as a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The
Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of beneficial interest of the Funds. Shares of the Funds are listed for trading on the NYSE Arca, Inc. (the “NYSE Arca”) and
traded on other exchanges. The following funds (individually, a “Fund” and collectively, the “Funds”) are included in this report:
Natixis Loomis Sayles Short Duration Income ETF (the “Short Duration Income ETF”)
Natixis Seeyond International Minimum Volatility ETF (the “International Minimum Volatility ETF”)
Each Fund is a diversified investment company.
The Funds issue and
redeem shares on a continuous basis through ALPS Distributors, Inc. (“ALPS”). Each Fund may pay ALPS, an unaffiliated distributor, fees under a plan adopted pursuant to Rule 12b-1 under the 1940 Act
(the “12b-1 Plan”). Currently, no Rule 12b-1 fees are charged. Future payments may be made under the 12b-1 Plan without
further shareholder approval.
Most expenses can be directly attributed to a Fund. Expenses which cannot be directly attributed to a Fund are generally
apportioned based on the relative net assets of each of the funds in Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust IV and Gateway Trust (“Natixis Funds Trusts”), Loomis Sayles Funds I and Loomis Sayles Funds II
(“Loomis Sayles Funds Trusts”) and the Trust.
2. Significant Accounting Policies. The following is a summary of
significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds’ financial statements follow the accounting and reporting guidelines provided for investment companies and are prepared
in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from
those estimates. Management has evaluated the events and transactions subsequent to year-end through the date the financial statements were issued and has determined that there were no material events that
would require disclosure in the Funds’ financial statements.
a. Valuation. Fund securities and other investments are
valued at market value based on market quotations obtained or determined by independent pricing services recommended by the adviser or sub-adviser and approved by the Board of Trustees. Fund securities and
other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the adviser or
35 |
Notes to Financial Statements (continued)
December 31, 2019
sub-adviser pursuant to procedures approved by the Board of Trustees, as described below. Market value is determined as
follows:
Listed equity securities (including shares of closed-end investment companies and exchange-traded
funds) are valued at the last sale price quoted on the exchange where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an independent pricing service. Unlisted equity
securities (except unlisted preferred equity securities) are valued at the last sale price quoted in the market where they are traded most extensively or, if there is no reported sale during the day, the closing bid quotation as reported by an
independent pricing service. If there is no last sale price or closing bid quotation available, unlisted equity securities will be valued using evaluated bids furnished by an independent pricing service, if available. In some foreign markets, an
official close price and a last sale price may be available from the foreign exchange or market. In those cases, the official close price is used. Debt securities and unlisted preferred equity securities are valued based on evaluated bids furnished
to the Funds by an independent pricing service or bid prices obtained from broker-dealers. Broker-dealer bid prices may be used to value debt and unlisted equity securities where an independent pricing service is unable to price a security or where
an independent pricing service does not provide a reliable price for the security. Futures contracts are valued at the most recent settlement price on the exchange on which the adviser believes that, over time, they are traded most extensively.
Fund securities and other investments for which market quotations are not readily available are valued at fair value as determined in good faith by the
adviser pursuant to procedures approved by the Board of Trustees. The Funds may also value securities and other investments at fair value in other circumstances such as when extraordinary events occur after the close of a foreign market but prior to
the close of the New York Stock Exchange. This may include situations relating to a single issuer (such as a declaration of bankruptcy or a delisting of the issuer’s security from the primary market on which it has traded) as well as events
affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets). Fair value pricing may require subjective determinations about the value of a security, and fair values
used to determine a Fund’s net asset value (“NAV”) may differ from quoted or published prices, or from prices that are used by others, for the same securities. In addition, the use of fair value pricing may not always result in
adjustments to the prices of securities held by a Fund.
As of December 31, 2019, certain securities held by Short Duration Income ETF were fair valued
at $15,131, representing less than 0.1% of net assets.
b. Investment Transactions and Related Investment Income. Investment
transactions are accounted for on a trade date plus one day basis for daily NAV calculation. However, for financial reporting purposes, investment transactions are reported on trade date. Dividend income (including income reinvested) and foreign
withholding tax,
| 36
Notes to Financial Statements (continued)
December 31, 2019
if applicable, is recorded on the ex-dividend date, or in the case of certain foreign securities, as soon as a Fund is
notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium, if applicable. Distributions received from investments in securities that
represent a return of capital or capital gain are recorded as a reduction of cost of investments or as a realized gain, respectively. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified
cost basis.
c. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. The values
of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars, if any, are translated into U.S. dollars based upon the World Market or “WM11” foreign exchange rates supplied by an independent
pricing service. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars on the respective dates of such transactions.
Net realized foreign exchange gains or losses arise from sales of foreign currency, changes in exchange rates between the trade and settlement dates on securities transactions and the difference between the amounts
of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets
and liabilities, other than investment securities, as of the end of the fiscal period, resulting from changes in exchange rates. Net realized foreign exchange gains or losses and the net change in unrealized foreign exchange gains or losses are
disclosed in the Statements of Operations. For federal income tax purposes, net realized foreign exchange gains or losses are characterized as ordinary income and may, if the Funds have net losses, reduce the amount of income available to be
distributed by the Funds.
The values of investment securities are presented at the foreign exchange rates prevailing at the end of the period for
financial reporting purposes. Net realized and unrealized gains or losses on investments reported in the Statements of Operations reflect gains or losses resulting from changes in exchange rates and fluctuations which arise due to changes in market
prices of investment securities.
The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments.
Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts’ terms.
d. Futures Contracts. The Funds may enter into futures contracts. Futures contracts are agreements between two parties to buy and sell
a particular instrument or index for a specified price on a specified future date.
When a Fund enters into a futures contract, it is required to deposit
with (or for the benefit of) its broker an amount of cash or short-term high-quality securities as “initial
37 |
Notes to Financial Statements (continued)
December 31, 2019
margin.” As the value of the contract changes, the value of the futures contract position increases or declines. Subsequent payments, known as “variation
margin,” are made or received by a Fund, depending on the price fluctuations in the fair value of the contract and the value of cash or securities on deposit with the broker. The aggregate principal amounts of the contracts are not recorded in
the financial statements. Daily fluctuations in the value of the contracts are recorded in the Statements of Assets and Liabilities as a receivable (payable) and in the Statements of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized gains (losses). Realized gain or loss on a futures position is equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed,
minus brokerage commissions. When a Fund enters into a futures contract certain risks may arise, such as illiquidity in the futures market, which may limit a Fund’s ability to close out a futures contract prior to settlement date, and
unanticipated movements in the value of securities or interest rates.
Futures contracts are exchange-traded. Exchange-traded futures contracts are
standardized and are settled through a clearing house with fulfillment supported by the credit of the exchange. Therefore, counterparty credit risks to the Funds are reduced; however, in the event that a counterparty enters into bankruptcy, a
Fund’s claim against initial/variation margin on deposit with the counterparty may be subject to terms of a final settlement in bankruptcy court.
e. Federal and Foreign Income Taxes. The Trust treats each Fund as a separate entity for federal income tax purposes. Each Fund intends
to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least
annually. Management has performed an analysis of each Fund’s tax positions for the open tax years as of December 31, 2019 and has concluded that no provisions for income tax are required. The Funds’ federal tax return for the prior
fiscal years remain subject to examination by the Internal Revenue Service. Management is not aware of any events that are reasonably possible to occur in the next twelve months that would result in the amounts of any unrecognized tax benefits
significantly increasing or decreasing for the Funds. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws and
accounting regulations and interpretations thereof.
A Fund may be subject to foreign withholding taxes on investment income and taxes on capital gains
on investments that are accrued and paid based upon the Fund’s understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign withholding taxes on dividend and interest income are reflected on the
Statements of Operations as a reduction of investment income, net of amounts eligible to be reclaimed. Dividends and interest receivable on the Statements of Assets
| 38
Notes to Financial Statements (continued)
December 31, 2019
and Liabilities are net of foreign withholding taxes. Foreign withholding taxes where reclaims have been or will be filed are reflected on the Statements of Assets
and Liabilities as tax reclaims receivable. Capital gains taxes paid are included in net realized gain (loss) on investments in the Statements of
Operations. Accrued but unpaid capital gains taxes are reflected as foreign taxes payable on the Statements of Assets and Liabilities, if applicable, and reduce unrealized gains on investments. In the event that realized gains on investments are
subsequently offset by realized losses, taxes paid on realized gains may be returned to a Fund. Such amounts, if applicable, are reflected as foreign tax rebates receivable on the Statements of Assets and Liabilities and are recorded as a realized
gain when received.
f. Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as foreign currency gains and losses, redemptions in-kind,
distributions in excess of income and/or capital gain, paydown gains and losses, premium amortization and passive foreign investment company adjustments. Permanent book and tax basis differences relating to shareholder distributions, net investment
income and net realized gains will result in reclassifications to capital accounts reported on the Statements of Assets and Liabilities. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees’
fees, futures contract mark-to-market, passive foreign investment company adjustments, straddle loss deferrals, premium amortization and wash sales. Amounts of income
and capital gain available to be distributed on a tax basis are determined annually, and at other times during the Funds’ fiscal year as may be necessary to avoid knowingly declaring and paying a return of capital distribution. Distributions
from net investment income and net realized short-term capital gains are reported as distributed from ordinary income for tax purposes.
The tax
characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the years ended December 31, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Distributions Paid From:
|
|
|
2018 Distributions Paid From:
|
|
|
Fund
|
|
Ordinary
Income
|
|
|
Long-Term
Capital Gains
|
|
|
Total
|
|
|
Ordinary
Income
|
|
|
Long-Term
Capital Gains
|
|
|
Total
|
|
|
Short Duration Income ETF
|
|
$
|
779,880
|
|
|
$
|
—
|
|
|
$
|
779,880
|
|
|
$
|
620,940
|
|
|
$
|
—
|
|
|
$
|
620,940
|
|
|
International Minimum Volatility ETF
|
|
|
1,065,620
|
|
|
|
—
|
|
|
|
1,065,620
|
|
|
|
514,660
|
|
|
|
643,280
|
|
|
|
1,157,940
|
|
39 |
Notes to Financial Statements (continued)
December 31, 2019
Distributions paid to shareholders from net investment income and net realized capital gains, based on accounting principles generally accepted in the United States
of America, are consolidated and reported on the Statements of Changes in Net Assets as Distributions to Shareholders. Distributions paid to shareholders from net investment income and net realized capital gains expressed in per-share amounts, based on accounting principles generally accepted in the United States of America, are separately stated and reported within the Financial Highlights.
As of December 31, 2019, the components of distributable earnings on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
Duration
Income ETF
|
|
|
International
Minimum
Volatility ETF
|
|
|
Undistributed ordinary income
|
|
$
|
40,249
|
|
|
$
|
—
|
|
|
Capital loss carryforward:
|
|
|
|
|
|
|
|
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
No expiration date
|
|
|
—
|
|
|
|
(231,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Late-year ordinary and post-October capital loss deferrals*
|
|
|
—
|
|
|
|
(48,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation
|
|
|
307,896
|
|
|
|
1,321,706
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated earnings
|
|
$
|
348,145
|
|
|
$
|
1,042,001
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital loss carryforward utilized in the current year
|
|
$
|
142,529
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Under current tax law, capital losses, foreign currency losses, and losses on passive foreign investment companies and contingent payment debt
instruments after October 31 or December 31, as applicable, may be deferred and treated as occurring on the first day of the following taxable year. As of December 31, 2019, International Minimum Volatility ETF is deferring ordinary
losses due to passive foreign investment companies and currency losses.
|
As of December 31, 2019, the tax cost of investments
(including derivatives, if applicable) and unrealized appreciation (depreciation) on a federal tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
Duration
Income ETF
|
|
|
International
Minimum
Volatility ETF
|
|
|
Federal tax cost
|
|
$
|
29,893,569
|
|
|
$
|
16,332,351
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross tax appreciation
|
|
$
|
324,232
|
|
|
$
|
1,589,931
|
|
|
Gross tax depreciation
|
|
|
(16,336
|
)
|
|
|
(270,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net tax appreciation
|
|
$
|
307,896
|
|
|
$
|
1,319,838
|
|
|
|
|
|
|
|
|
|
|
|
| 40
Notes to Financial Statements (continued)
December 31, 2019
The difference between these amounts and those reported in the components of distributable earnings are primarily attributable to foreign currency mark-to-market.
g. Repurchase Agreements. Each
Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, under which each Fund acquires securities as collateral and agrees to resell the securities at an agreed upon time and at an agreed upon price. It is each
Fund’s policy that the market value of the collateral for repurchase agreements be at least equal to 102% of the repurchase price, including interest. Certain repurchase agreements are tri-party
arrangements whereby the collateral is held in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including
possible delays or restrictions upon the Fund’s ability to dispose of the underlying securities.
h. Due from
Brokers. Transactions and positions in certain futures contracts are maintained and cleared by registered U.S. broker/dealers pursuant to customer agreements between a Fund and the various broker/dealers. The due from brokers balance
in the Statements of Assets and Liabilities for Short Duration Income ETF represents cash pledged as initial margin for futures contracts. In certain circumstances a Fund’s use of cash and/or securities held at brokers is restricted by
regulation or broker mandated limits.
i. Indemnifications. Under the Trust’s organizational documents, its officers
and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general
indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk
of loss to be remote.
j. New Accounting Pronouncement. In August 2018, the Financial Accounting Standards Board issued
Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU
2018-13”). The update introduces new fair value disclosure requirements, eliminates some prior fair value disclosure requirements, and modifies certain existing fair value disclosure requirements. ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management has evaluated the impact of the adoption of ASU 2018-13 and will
incorporate required disclosure updates in the Funds’ semiannual financial statements as of June 30, 2020.
41 |
Notes to Financial Statements (continued)
December 31, 2019
3. Fair Value Measurements. In accordance with accounting standards related to fair value measurements and disclosures, the Funds have
categorized the inputs utilized in determining the value of each Fund’s assets or liabilities. These inputs are summarized in the three broad levels listed below:
|
|
•
|
|
Level 1 – quoted prices in active markets for identical assets or liabilities;
|
|
|
•
|
|
Level 2 – prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable
market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); and
|
|
|
•
|
|
Level 3 – prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little
or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available).
|
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Funds’ pricing policies and procedures are recommended by the adviser and approved by the Board of Trustees. Debt securities are valued based on evaluated
bids furnished to the Funds by an independent pricing service. Broker-dealer bid prices may be used if an independent pricing service either is unable to price a security or does not provide a reliable price for a security. Broker-dealer bid prices
for which the Funds do not have knowledge of the inputs used by the broker-dealer are categorized in Level 3. All security prices, including those obtained from an independent pricing service and broker-dealer bid prices, are reviewed on a
daily basis by the adviser, subject to oversight by Fund management and the Board of Trustees. If the adviser, in good faith, believes that the price provided by an independent pricing service is unreliable, broker-dealer bid prices may be used
until the price provided by the independent pricing service is considered to be reliable. Reliability of all security prices, including those obtained from an independent pricing service and broker-dealer bid prices, is tested in a variety of ways,
including comparison to recent transaction prices and daily fluctuations, amongst other validation procedures in place. Securities for which market quotations are not readily available are valued at fair value as
determined in good faith by the Funds’ adviser pursuant to procedures approved by the Board of Trustees. Fair valued securities may be categorized in
Level 3.
| 42
Notes to Financial Statements (continued)
December 31, 2019
The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2019, at value:
Short Duration Income ETF
Asset Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Bonds and Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations
|
|
$
|
—
|
|
|
$
|
1,227,697
|
|
|
$
|
15,131
|
(b)
|
|
$
|
1,242,828
|
|
|
All Other Bonds and Notes(a)
|
|
|
—
|
|
|
|
28,534,198
|
|
|
|
—
|
|
|
|
28,534,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Bonds and Notes
|
|
$
|
—
|
|
|
$
|
29,761,895
|
|
|
$
|
15,131
|
|
|
$
|
29,777,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
424,439
|
|
|
|
—
|
|
|
|
424,439
|
|
|
Futures Contracts (unrealized appreciation)
|
|
|
18,638
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,638
|
|
|
$
|
30,186,334
|
|
|
$
|
15,131
|
|
|
$
|
30,220,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Futures Contracts (unrealized depreciation)
|
|
$
|
(4,447
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$ (4,447)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.
|
|
(b)
|
Fair valued by the Fund’s adviser.
|
International Minimum Volatility ETF
Asset Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Common Stocks(a)
|
|
$
|
17,487,407
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,487,407
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
164,782
|
|
|
|
—
|
|
|
|
164,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,487,407
|
|
|
$
|
164,782
|
|
|
$
|
—
|
|
|
$
|
17,652,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Details of the major categories of the Fund’s investments are reflected within the Portfolio of Investments.
|
For the year ended December 31, 2019, there were no transfers among Levels 1, 2 and 3.
43 |
Notes to Financial Statements (continued)
December 31, 2019
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value as of December 31,
2018 and/or December 31, 2019:
Short Duration Income ETF
Asset Valuation Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
|
|
Balance as of
December 31,
2018
|
|
|
Accrued
Discounts
(Premiums)
|
|
|
Realized
Gain
(Loss)
|
|
|
Change in
Unrealized
Appreciation
(Depreciation)
|
|
|
Purchases
|
|
|
Bonds and Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(277
|
)
|
|
$
|
367
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Securities
|
|
Sales
|
|
|
Transfers
into Level 3
|
|
|
Transfers
out of
Level 3
|
|
|
Balance as of
December 31,
2019
|
|
|
Change
in
Unrealized
Appreciation
(Depreciation)
from
Investments
Still Held at
December 31,
2019
|
|
|
Bonds and Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations
|
|
$
|
(110,704
|
)
|
|
$
|
125,745
|
|
|
$
|
—
|
|
|
$
|
15,131
|
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities valued at $125,745 were transferred from Level 2 to Level 3 during the period ended December 31,
2019. At December 31, 2018, these securities were valued on the basis of evaluated bids furnished to the Fund by an independent pricing service in accordance with the Fund’s valuation policies. At December 31, 2019 these securities
were valued at fair value as determined in good faith by the Fund’s adviser as an independent pricing service did not provide a reliable price for the securities.
All transfers are recognized as of the beginning of the reporting period.
4. Derivatives. Derivative instruments are defined as financial instruments whose value and performance are based on the value and
performance of an underlying asset, reference rate or index. Derivative instruments that Short Duration Income ETF used during the period include futures contracts.
| 44
Notes to Financial Statements (continued)
December 31, 2019
The Fund is subject to the risk that changes in interest rates will affect the value of the Fund’s investments in fixed-income securities. The Fund will be
subject to increased interest rate risk to the extent that it invests in fixed-income securities with longer maturities or durations, as compared to investing in fixed-income securities with shorter maturities or durations. The Fund may use futures
contracts to hedge against changes in interest rates and to manage duration without having to buy or sell portfolio securities. During the year ended December 31, 2019, Short Duration Income ETF used futures contracts to manage duration.
The following is a summary of derivative instruments for Short Duration Income ETF as of December 31, 2019, as reflected within the Statements of
Assets and Liabilities:
|
|
|
|
|
|
|
Assets
|
|
Unrealized
appreciation on
futures contracts1
|
|
|
Exchange-traded asset derivatives
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
18,638
|
|
|
|
|
|
|
|
|
Liabilities
|
|
Unrealized
depreciation on
futures contracts1
|
|
|
Exchange-traded liability derivatives
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
(4,447
|
)
|
|
1
|
Represents cumulative unrealized appreciation (depreciation) on futures contracts. Only the current day’s variation margin on futures contracts is reported
within the Statements of Assets and Liabilities as receivable or payable for variation margin, as applicable.
|
Transactions in
derivative instruments for Short Duration Income ETF during the year ended December 31, 2019, as reflected within the Statements of Operations, were as follows:
|
|
|
|
|
|
|
Net Realized Gain (Loss) on:
|
|
Futures
contracts
|
|
|
Interest rate contracts
|
|
$
|
(106,762
|
)
|
|
|
|
|
|
|
|
Net Change in Unrealized
Appreciation (Depreciation) on:
|
|
Futures
contracts
|
|
|
Interest rate contracts
|
|
$
|
39,265
|
|
As the Fund values its derivatives at fair value and recognizes changes in fair value through the Statement of Operations, it does
not qualify for hedge accounting under authoritative guidance for derivative instruments. The Fund’s investments in derivatives may represent an economic hedge; however, they are considered to be
non-hedge transactions for the purpose of these disclosures.
45 |
Notes to Financial Statements (continued)
December 31, 2019
The volume of futures contract activity, as a percentage of net assets, based on gross month-end notional amounts
outstanding during the period, including long and short positions at absolute value, was as follows for the year ended December 31, 2019:
|
|
|
|
|
|
|
Short Duration Income ETF
|
|
Futures
|
|
|
Average Notional Amount Outstanding
|
|
|
34.50%
|
|
|
Highest Notional Amount Outstanding
|
|
|
38.02%
|
|
|
Lowest Notional Amount Outstanding
|
|
|
30.76%
|
|
|
Notional Amount Outstanding as of December 31, 2019
|
|
|
33.93%
|
|
Notional amounts outstanding at the end of the prior period, if applicable, are included in the averages above.
Unrealized gain and/or loss on open futures contracts is recorded in the Statements of Assets and Liabilities. The aggregate notional values of futures contracts
are not recorded in the Statements of Assets and Liabilities, and therefore are not included in the Funds’ net assets.
Counterparty risk is managed
based on policies and procedures established by each Fund’s adviser. Such policies and procedures may include, but are not limited to, minimum counterparty credit rating requirements, monitoring of counterparty credit default swap spreads and
posting of collateral. With exchange-traded derivatives, there is minimal counterparty credit risk to the Fund because the exchange’s clearing house, as counterparty to these instruments, stands between the buyer and the seller of the contract.
Credit risk still exists in exchange-traded derivatives with respect to initial and variation margin that is held in a broker’s customer accounts. While brokers are required to segregate customer margin from their own assets, in the event that
a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro rata basis across
all of the broker’s customers, potentially resulting in losses to the Fund. Based on balances reflected on each Fund’s Statement of Assets and Liabilities, the following table shows the maximum amount of loss due to credit risk that, based
on the gross fair value of the financial instrument, the applicable Fund would incur if parties to the relevant financial instruments failed completely to perform according to the terms of the contracts and the collateral or other security, if any,
for the amount due proved to be of no value to the Fund:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Maximum Amount
of Loss - Gross
|
|
|
Maximum Amount
of Loss - Net
|
|
|
Short Duration Income ETF
|
|
$
|
38,144
|
|
|
$
|
38,144
|
|
| 46
Notes to Financial Statements (continued)
December 31, 2019
5. Purchases and Sales of Securities. For the year ended December 31, 2019, purchases and sales of securities (excluding in-kind transactions and short-term investments and including paydowns) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government/Agency
Securities
|
|
|
Other Securities
|
|
|
Fund
|
|
Purchases
|
|
|
Sales
|
|
|
Purchases
|
|
|
Sales
|
|
|
Short Duration Income ETF
|
|
$
|
12,743,743
|
|
|
$
|
9,952,258
|
|
|
$
|
21,446,547
|
|
|
$
|
21,929,487
|
|
|
International Minimum Volatility ETF
|
|
|
—
|
|
|
|
—
|
|
|
|
14,216,006
|
|
|
|
14,783,466
|
|
For the year ended December 31, 2019, in-kind transactions were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
In-Kind
Purchases
|
|
|
In-Kind
Sales
|
|
|
International Minimum Volatility ETF
|
|
$
|
2,002,413
|
|
|
$
|
8,758,853
|
|
International Minimum Volatility ETF realized a gain of $1,004,069 on in-kind sales during the year ended December 31, 2019.
6. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Natixis Advisors, L.P. (“Natixis Advisors”) serves as investment adviser to each Fund. Natixis Advisors is a wholly-owned subsidiary of Natixis Investment
Managers, LLC (“Natixis”), which is part of Natixis Investment Managers, an international asset management group based in Paris, France. Under the terms of the management agreements, each Fund pays a management fee at the following annual
rates, calculated daily and payable monthly, based on each Fund’s average daily net assets:
|
|
|
|
|
|
|
Fund
|
|
Percentage of
Average
Daily Net Assets
|
|
|
Short Duration Income ETF
|
|
|
0.30
|
%
|
|
International Minimum Volatility ETF
|
|
|
0.50
|
%
|
Effective March 29, 2019, Natixis Advisors has entered into a personnel-sharing arrangement with Seeyond, a subsidiary of
Ostrum Asset Management which is part of Natixis Investment Managers. Pursuant to the personnel-sharing arrangement, certain employees of Seeyond, as “participating affiliates”, serve as “associated persons” of Natixis Advisors
and, in this capacity, may, on behalf of Natixis Advisors, provide discretionary investment management services (including acting as portfolio managers), research and related services to International Minimum Volatility ETF.
Natixis Advisors has entered into a subadvisory agreement for Short Duration Income ETF with Loomis, Sayles & Company, L.P. (“Loomis Sayles”).
47 |
Notes to Financial Statements (continued)
December 31, 2019
Loomis Sayles is a limited partnership whose sole general partner, Loomis, Sayles & Company, Inc., is indirectly owned by Natixis.
Under the terms of the subadvisory agreement, the Fund has agreed to pay Loomis Sayles a subadvisory fee at the annual rate of 0.15%, calculated daily and payable
monthly, based on the Fund’s average daily net assets.
Payments to Natixis Advisors are reduced by the amount of payments to Loomis Sayles.
Prior to March 29, 2019, Ostrum Asset Management U.S., LLC (“Ostrum US”), a subsidiary of Ostrum Asset Management, served as subadvisor
to International Minimum Volatility Fund. Under the terms of the subadvisory agreement, the Fund paid Ostrum US a subadvisory fee at the annual rate of 0.30%, calculated daily and payable monthly, based on the Fund’s average daily net assets.
Natixis Advisors has given a binding undertaking to the Funds to waive management fees and/or reimburse certain expenses to limit the Funds’
operating expenses, exclusive of acquired fund fees and expenses, brokerage expenses, interest expense, taxes, organizational and extraordinary expenses such as litigation and indemnification expenses. This undertaking is in effect until
April 30, 2021, may be terminated before then only with the consent of the Funds’ Board of Trustees, and is reevaluated on an annual basis. Management fees payable, as reflected on the Statements of Assets and Liabilities, is net of
waivers and/or expense reimbursements, if any, pursuant to these undertakings. Waivers/reimbursements that exceed management fees payable are reflected on the Statements of Assets and Liabilities as receivable from investment adviser.
For the year ended December 31, 2019, the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:
|
|
|
|
|
|
|
Fund
|
|
Expense Limit
as a Percentage
of
Average
Daily Net Assets
|
|
|
Short Duration Income ETF
|
|
|
0.38
|
%
|
|
International Minimum Volatility ETF
|
|
|
0.55
|
%
|
Natixis Advisors shall be permitted to recover expenses borne under the expense limitation agreements (whether through waiver of
management fees or otherwise) in later periods to the extent the annual operating expenses of a Fund fall below a Fund’s expense limits, provided, however, that a Fund is not obligated to pay such waived/reimbursed fees or expenses more than
one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed.
| 48
Notes to Financial Statements (continued)
December 31, 2019
For the year ended December 31, 2019, the management fees and waiver of management fees for each Fund were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Gross
Management
Fees
|
|
|
Contractual
Waivers of
Management
Fees1
|
|
|
Net
Management
Fees
|
|
|
Percentage of
Average Daily
Net Assets
|
|
|
|
Gross
|
|
|
Net
|
|
|
Short Duration Income ETF
|
|
$
|
85,883
|
|
|
$
|
85,883
|
|
|
$
|
—
|
|
|
|
0.30
|
%
|
|
|
—
|
%
|
|
International Minimum Volatility ETF
|
|
|
121,672
|
|
|
|
121,672
|
|
|
|
—
|
|
|
|
0.50
|
%
|
|
|
—
|
%
|
|
1
|
Management fee waiver is subject to possible recovery until December 31, 2020.
|
For the year ended December 31, 2019, expenses have been reimbursed as follows:
|
|
|
|
|
|
|
Fund
|
|
Reimbursements2
|
|
|
Short Duration Income ETF
|
|
$
|
76,478
|
|
|
International Minimum Volatility ETF
|
|
|
49,439
|
|
|
2
|
Expense reimbursement is subject to possible recovery until December 31, 2020.
|
No expenses were recovered during the year ended December 31, 2019 under the terms of the expense limitation agreement.
b. Administrative Fees. Natixis Advisors provides certain administrative services for the Funds and contracts with State Street Bank and Trust Company (“State Street Bank”) to
serve as sub-administrator. Pursuant to an agreement among Natixis Funds Trusts, Loomis Sayles Funds Trusts, the Trust and Natixis Advisors, effective July 1, 2019, each Fund pays Natixis Advisors monthly
its pro rata portion of fees equal to an annual rate of 0.0540% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust, 0.0500% of the next $15 billion, 0.0400%
of the next $30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust of
$10 million, which is reevaluated on an annual basis.
Prior to July 1, 2019, each Fund paid Natixis Advisors monthly its pro rata
portion of fees equal to an annual rate of 0.0575% of the first $15 billion of the average daily net assets of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust, 0.0500% of the next $15 billion, 0.0400% of the next
$30 billion, 0.0275% of the next $30 billion and 0.0225% of such assets in excess of $90 billion, subject to an annual aggregate minimum fee for the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust of $10 million.
Effective October 1, 2018, State Street Bank agreed to reduce the fees it receives from Natixis Advisors for serving as sub-administrator to the Funds. Also, effective
49 |
Notes to Financial Statements (continued)
December 31, 2019
October 1, 2018, Natixis Advisors agreed to voluntarily waive fees paid by the Funds in an amount equal to the reduction in
sub-administrative fees discussed above. The waiver was in effect through June 30, 2019.
For the year ended
December 31, 2019, the administrative fees for each Fund were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Gross
Administrative
Fees
|
|
|
Waiver of
Administrative
Fees
|
|
|
Net
Administrative
Fees
|
|
|
Short Duration Income ETF
|
|
$
|
12,603
|
|
|
$
|
143
|
|
|
$
|
12,460
|
|
|
International Minimum Volatility ETF
|
|
|
10,719
|
|
|
|
132
|
|
|
|
10,587
|
|
c. Trustees Fees and Expenses. The Trust does not pay any compensation directly to its officers or
Trustees who are directors, officers or employees of Natixis Advisors, Natixis Distribution, Natixis or their affiliates. The Chairperson of the Board of Trustees receives a retainer fee at the annual rate of $360,000. The Chairperson does not
receive any meeting attendance fees for Board of Trustees meetings or committee meetings that he attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $190,000. Each
Independent Trustee also receives a meeting attendance fee of $10,000 for each meeting of the Board of Trustees that he or she attends in person and $5,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition,
the chairperson of the Contract Review Committee and the chairperson of the Audit Committee each receive an additional retainer fee at the annual rate of $20,000. The chairperson of the Governance Committee receives an additional retainer fee at the
annual rate of $15,000. Each Contract Review Committee member is compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. Each Audit Committee member is
compensated $6,000 for each Committee meeting that he or she attends in person and $3,000 for each meeting that he or she attends telephonically. These fees are allocated among the funds in the Natixis Funds Trusts, Loomis Sayles Funds Trusts and
the Trust based on a formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings.
Effective January 1, 2020, the Chairperson of the Board will receive a retainer fee at the annual rate of $369,000, each Independent Trustee (other than the
Chairperson) will receive, in the aggregate, a retainer fee at the annual rate of $199,000, and the chairperson of the Governance Committee will receive an additional retainer fee at the annual rate of $20,000. All other Trustee fees will remain
unchanged.
A deferred compensation plan (the “Plan”) is available to the Trustees on a voluntary basis. Deferred amounts remain in the Funds
until distributed in accordance with the
| 50
Notes to Financial Statements (continued)
December 31, 2019
provisions of the Plan. The value of a participating Trustee’s deferral account is based on theoretical investments of deferred amounts, on the normal payment
dates, in certain funds of the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust as designated by the participating Trustees. Changes in the value of participants’ deferral accounts are allocated pro rata among the funds in
the Natixis Funds Trusts, Loomis Sayles Funds Trusts and the Trust, and are normally reflected as Trustees’ fees and expenses in the Statements of Operations. The portions of the accrued obligations allocated to the Funds under the Plan are
reflected as Deferred Trustees’ fees in the Statements of Assets and Liabilities.
Certain officers and employees of Natixis Advisors and Loomis
Sayles are also officers and/or Trustees of the Trust.
d. Affiliated Ownership. As of December 31, 2019, Natixis held
shares of the Short Duration Income ETF and International Minimum Volatility ETF representing 70.21% and 22.17%, respectively, of the Funds’ net assets. Investment activities of affiliated shareholders could have material impacts on the Funds.
7. Line of Credit. Each Fund, together with certain other funds of Natixis Funds Trusts, Loomis Sayles Funds Trusts and the
Trust, entered into a $400,000,000 committed unsecured line of credit provided by State Street Bank. Any one Fund may borrow up to $350,000,000 under the line of credit agreement (as long as all borrowings by all Funds in the aggregate do not exceed
the $400,000,000 limit at any time), subject to each Fund’s investment restrictions and its contractual obligations under the line of credit. Interest is charged to the Funds based upon the terms set forth in the agreement. In addition, a
commitment fee of 0.15% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. The Funds paid an arrangement fee, an upfront
fee, and certain other legal fees in connection with the line of credit agreement, which are being amortized over a period of 364 days and are reflected in legal fees and/or miscellaneous expenses on the Statements of Operations. The unamortized
balance is reflected as prepaid expenses on the Statements of Assets and Liabilities.
For the year ended December 31, 2019, neither Fund had
borrowings under this agreement.
8. Payable to Custodian Bank. The Funds’ custodian bank provides overdraft protection
to the Funds in the event of a cash shortfall. Cash overdrafts bear interest at a rate per annum equal to a flat rate between 2.75%-4.00%, depending on the foreign currency overdrawn. At December 31, 2019, the International Minimum Volatility
ETF had payables, at value, of $109,087 to the custodian bank for foreign currency overdrafts.
51 |
Notes to Financial Statements (continued)
December 31, 2019
9. Interest Expense. The Funds incur interest expense on cash overdrafts and foreign currency debit balances held at the custodian
bank. Interest expense incurred for the year ended December 31, 2019 is reflected on the Statements of Operations.
10. Risk. The Funds have exposure to certain types of risk as summarized below.
a. Authorized Participant Concentration Risk. Only an authorized participant (“Authorized Participant”) may engage in
creation or redemption transactions directly with the Funds. The Funds have a limited number of institutions that act as Authorized Participants, none of which are or will be obligated to engage in creation or redemption transactions. To the extent
that these institutions exit the business or are unable to proceed with creation and/or redemption orders with respect to the Funds and no other Authorized Participant is able to step forward to create or redeem Creation Units, Fund shares may trade
at a discount to NAV and possibly face trading halts and/or delisting.
b. Foreign Securities Risk. Investments in foreign
securities may be subject to greater political, economic, environmental, credit and information risks. The Funds’ investments in foreign securities also are subject to foreign currency fluctuations and other foreign currency-related risks.
Foreign securities may be subject to higher volatility than U.S. securities, varying degrees of regulation and limited liquidity. Foreign securities held by the Funds may trade on foreign exchanges that are closed when the securities exchange on
which the Funds’ shares trade is open, which may result in deviations between the current price of a foreign security and the last quoted price for that security (i.e., the Funds’ quote from the closed foreign market). This could result in
premiums or discounts to NAV that may be greater than those experienced by other ETFs.
c. Premium/Discount Risk. Shares of
the Funds are listed for trading on the NYSE Arca and are bought and sold in the secondary market at market prices that may differ from their most recent NAV. The market value of the Funds’ shares will fluctuate, in some cases materially, in
response to changes in the Funds’ NAV, the intraday value of the Funds’ holdings, and the relative supply and demand for the Funds’ shares on the exchange. Disruptions to creations and redemptions, the existence of extreme market
volatility or potential lack of an active trading market for shares may result in shares trading at a significant premium or discount to NAV and/or in a reduced liquidity of your investment. If a shareholder purchases shares at a time when the
market price is at a premium to the NAV or sells shares at a time when the market price is at a discount to the NAV, the shareholder may sustain losses.
d. Secondary Market Trading Risk. Investors buying or selling shares of the Funds in the secondary market will pay brokerage
commissions or other charges imposed by broker-dealers as determined by that broker. Brokerage commissions are often a fixed amount and may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of shares.
| 52
Notes to Financial Statements (continued)
December 31, 2019
e. Trading Issues Risk. Trading in shares on the NYSE Arca may be halted in certain circumstances. There can be no assurance that the
requirements of the NYSE Arca necessary to maintain the listing of the Funds will continue to be met.
11. Capital
Shares. Shares of the Funds may be acquired or redeemed directly from the Funds by Authorized Participants only in aggregations of 100,000 shares for Short Duration Income ETF and 50,000 shares for International Minimum Volatility ETF
(“Creation Units”), or multiples thereof. Each Authorized Participant enters into an Authorized Participant agreement with the Funds’ Distributor.
A creation transaction order, which is subject to acceptance by ALPS, generally takes place when an Authorized Participant deposits into the Funds a designated portfolio of securities and/or cash (including any
portion of such securities for which cash may be substituted) and a specified amount of cash approximating the holdings of the Funds in exchange for a specified number of Creation Units.
Similarly, shares can be redeemed only in Creation Units, generally for a designated portfolio of securities and/or cash (including any portion of such securities for which cash may be substituted) held by the
Funds and a specified amount of cash. Except when aggregated in Creation Units, shares are not redeemable directly with the Funds.
The prices at which
creations and redemptions occur are based on the next calculation of NAV after a creation or redemption order is received in an acceptable form under the Authorized Participant agreement. These prices may differ from the market price of the
Fund’s shares.
The Funds may impose a creation transaction fee and a redemption transaction fee to offset transfer and other transaction costs
associated with the issuance and redemption of Creation Units. Transaction fees are included in capital share transactions on the Statements of Changes in Net Assets.
Transactions in capital shares were as follows:
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Year Ended
December 31, 2019
|
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Year Ended
December 31, 2018
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Short Duration Income ETF
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Shares
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Amount
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Shares
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|
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Amount
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Issued from the sale of shares
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|
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100,000
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|
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$
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2,529,226
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|
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300,000
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|
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$
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7,452,078
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|
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|
|
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Increase from capital share transactions
|
|
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100,000
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|
|
$
|
2,529,226
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|
|
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300,000
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|
|
$
|
7,452,078
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Year Ended
December 31, 2019
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Year Ended
December 31, 2018
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International Minimum Volatility ETF
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Shares
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Amount
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Shares
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|
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Amount
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|
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Issued from the sale of shares
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50,000
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|
|
$
|
2,012,887
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|
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150,000
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|
|
$
|
6,445,786
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|
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Redeemed
|
|
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(200,000
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)
|
|
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(8,933,210
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)
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|
|
—
|
|
|
|
—
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Increase (decrease) from capital share transactions
|
|
|
(150,000
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)
|
|
$
|
(6,920,323
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)
|
|
|
150,000
|
|
|
$
|
6,445,786
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|
|
|
|
|
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53 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees
of Natixis ETF Trust and Shareholders of Natixis Loomis Sayles Short Duration Income ETF and Natixis Seeyond International Minimum Volatility ETF